<PAGE>
As filed with the Securities and Exchange Commission on April 19, 1999
Registration No. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
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 (Primary Standard (IRS Employer
Jurisdiction of Industrial Classification Identification No.)
Incorporation or Number)
Organization)
---------------
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. [_]
---------------
CALCULATION OF REGISTRATION FEE
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Title of each Class of Proposed Maximum Amount of
Securities to be Registered Aggregate Offering Price(a) Registration Fee
- ------------------------------------------------------------------------------
<S> <C> <C>
Class A Common Stock, $.01 par
value.......................... $150,000,000 $41,700
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(a) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(a) promulgated under the Securities Act of 1933. A
portion of the proposed maximum aggregate offering price represents shares
that are to be offered outside of the United States but that may be resold
from time to time in the United States. Such shares are not being
registered for the purpose of sales outside the United States.
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
[U.S. cover]
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities, and we are not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Subject to Completion, dated , 1999
PROSPECTUS
Shares
[LOGO OF SBA COMMUNICATIONS CORPORATION APPEARS HERE]
SBA Communications Corporation
Class A Common Stock
-------------
This is our initial public offering of shares of Class A common stock. We are
offering shares. Of the shares being offered, we are offering
shares in the United States and Canada and we are offering
shares outside the United States and Canada. The closing of the international
offering is a condition to the closing of the U.S. offering.
We expect the public offering price to be between $ and $ 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.
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price........................................... $ $
Underwriting discount........................................... $ $
Proceeds to SBA................................................. $ $
</TABLE>
We have granted the U.S. underwriters a 30-day option to purchase up to
additional shares of Class A common stock on the same terms and conditions as
set forth above solely to cover over-allotments, if any. The selling
shareholders of SBA have also granted the U.S. underwriters a 30-day option to
purchase up to additional shares of Class A common stock on the same
terms and conditions.
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 U.S. underwriters, expects to deliver the
shares on or about , 1999.
-------------
Lehman Brothers
BT Alex. Brown
Donaldson, Lufkin & Jenrette
Salomon Smith Barney
, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Where You Can Find More
Information........................ i
Prospectus Summary.................. 1
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.. 23
Management's Discussion and Analysis
of Financial Condition and Results
of Operations...................... 25
Industry Overview................... 34
</TABLE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Business............................ 39
Management.......................... 50
Certain Transactions................ 59
Principal and Selling Shareholders.. 60
Description of Capital Stock........ 63
Description of Existing Debt........ 67
Shares Eligible for Future Sale..... 69
Certain United States Federal Tax
Considerations to Non-U.S. Holders
................................... 71
Underwriting........................ 74
Legal Matters....................... 78
Independent Accountants............. 78
Index to Financial Statements....... F-1
</TABLE>
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 , 1999, all dealers selling shares of Class A common stock,
whether or not participating in the offerings, 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
<PAGE>
NOTE TO READER
This registration statement contains two separate prospectuses. The first
prospectus relates to a public offering in the United States and Canada of
shares of Class A common stock. The second prospectus relates to a
concurrent offering outside the United States and Canada of shares
of Class A common stock. The prospectuses for the U.S. offering and the
international offering will be identical with the exception of the following
alternate pages for the international offering: a front cover page and a back
cover page. These alternate pages appear in this registration statement
immediately following the complete prospectus for the U.S. offering.
ii
<PAGE>
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 gives effect
to a for one split of the common stock to be effected prior to consummation
of the offerings. Unless otherwise indicated, all information in this
prospectus also assumes that the U.S. 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 10,000 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 1, 1999, we owned 586 towers, had 33
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 revenues and Annualized tower cash flow for the year ended
December 31, 1998 were $59.1 million and $8.1 million, respectively.
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 180 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 308 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 grows as a result.
1
<PAGE>
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
<PAGE>
Recent Events
The Senior Credit Facility
In the first quarter of 1999, SBA Telecommunications, Inc., our wholly-owned
subsidiary, entered into a $175 million senior credit facility. Our use of the
facility was limited to $125 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 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 1, 1999, we entered into an agreement to acquire 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
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 will issue 300,000 shares of our Class
A common stock to the shareholders of Com-Net and assume working capital debt
of approximately $3.5 million. In addition, the shareholders of Com-Net may
receive up to $2.5 million in cash and 800,000 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 entered into a purchase
agreement with an affiliate of Com-Net that owns 18 completed towers located in
Texas, Ohio and Tennessee and over 30 additional tower sites in various stages
of development under build-to-suit programs. In accordance with the purchase
agreement, we will pay $1.0 million in cash and assume debt of approximately
$2.5 million to acquire the entity that owns these assets.
We will account for each of these acquisitions as a purchase. We anticipate
consummating both transactions in the second quarter of 1999. However, we
cannot assure you that these acquisitions will be consummated on the timetable
and terms currently contemplated or at all.
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
<PAGE>
The Offerings
Class A common stock
offered by SBA:
U.S. offering............. shares
International offering.... shares
------
Total.................... shares
======
Class A common stock
offered by the selling
shareholders:
U.S. offering............. shares
Common stock to be
outstanding after the
offerings and the pro
forma transactions
described on page 5........ shares of Class A common stock (a)
shares of Class B common stock
------
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 % of the total voting
power of both classes of the common stock after
the offerings. See "Principal and Selling
Shareholders." We use the term "common stock" to
mean both of these classes.
Other rights................ Each class of common stock has the same rights to
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
symbol...................... SBAC
Use of proceeds............. We estimate that the net proceeds to SBA from the
offerings will be approximately $138 million
($ million if the U.S. underwriters' over-
allotment option is exercised in full).
We expect to use these proceeds to pay
outstanding dividends on our Series A preferred
stock, redeem all outstanding shares of our
Series B preferred stock, repay borrowings under
our senior credit facility and finance
construction activities and future acquisitions.
We may also use the proceeds for general working
capital purposes. We will not receive any
proceeds from the sale of common stock by the
selling shareholders.
- --------
(a) Includes shares of Class A common stock to be issued to the holders of
Series A preferred stock upon the automatic conversion of the Series A
preferred stock that will occur at the closing of the offerings. 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." Also 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.
4
<PAGE>
Summary Unaudited Pro Forma Financial Data
The following table presents our summary unaudited pro forma financial and
other data as of and for the year ended December 31, 1998. The pro forma
summary operating data for the year ended December 31, 1998 give effect to the
SBA pro forma transactions, which are (1) all individually immaterial
acquisitions completed during 1998 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 period presented. The unaudited
pro forma balance sheet data as of December 31, 1998 have been prepared as if
the issuance of the 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.
<TABLE>
<CAPTION>
Year Ended December 31, 1998
(dollars in thousands except per share data)
--------------------------------------------
Operating Data:
<S> <C>
Revenues:
Site development revenue....... $ 46,705
Site leasing revenue........... 15,050
--------
Total revenues................... 61,755
--------
Cost of revenues (exclusive of
depreciation shown below)
Cost of site development
revenue....................... 36,500
Cost of site leasing revenue... 7,743
--------
Total cost of revenues........... 44,243
--------
Gross profit..................... 17,512
Selling, general and
administrative (a)(b)........... 18,302
Depreciation and amortization.... 7,773
--------
Operating loss................... (8,563)
Interest income.................. 4,080
Interest expense................. (2,180)
Non-cash amortization of original
issue discount and debt issuance
costs........................... (14,550)
Other............................ (37)
--------
Loss before income taxes......... (21,250)
Benefit for income taxes......... (1,454)
--------
Net loss......................... $(19,796)
========
Basic and diluted loss per common
share...........................
Basic and diluted weighted
average number of shares of
common stock....................
Other Data:
Adjusted EBITDA (d).............. (185)
Annualized Adjusted EBITDA (e)... 1,096
Annualized tower cash flow (f)... 8,588
<CAPTION>
As of December 31, 1998
Balance Sheet Data: --------------------------------------------
<S> <C>
Property, plant and equipment
(net)........................... $
Total assets.....................
Total debt (g)...................
Common stockholders' equity......
</TABLE>
- --------
(Footnotes on page 7)
5
<PAGE>
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 that 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 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.
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- ------- ---------
(dollars in thousands except per share
data)
<S> <C> <C> <C> <C> <C>
Operating Data:
Revenues:
Site development revenue....... $10,604 $22,700 $60,276 $48,241 $ 46,705
Site leasing revenue........... 896 2,758 4,530 6,759 12,396
------- ------- ------- ------- ---------
Total revenues.................. 11,500 25,458 64,806 55,000 59,101
------- ------- ------- ------- ---------
Cost of revenues (exclusive of
depreciation shown below):
Cost of site development
revenue....................... 7,358 13,993 39,822 31,470 36,500
Cost of site leasing revenue... 647 2,121 3,638 5,356 7,281
------- ------- ------- ------- ---------
Total cost of revenues.......... 8,005 16,114 43,460 36,826 43,781
------- ------- ------- ------- ---------
Gross profit.................... 3,495 9,344 21,346 18,174 15,320
Selling, general and
administrative(a)(b)........... 1,627 5,968 17,754 12,033 18,302
Depreciation and amortization... 5 73 160 514 5,802
------- ------- ------- ------- ---------
Operating income (loss)......... 1,863 3,303 3,432 5,627 (8,784)
Interest income................. 2 6 7 644 4,303
Interest expense................ (19) (11) (139) (407) (2,357)
Non cash amortization of
original issue discount and
debt issuance costs............ -- -- -- -- (14,550)
Other........................... -- -- -- -- (37)
------- ------- ------- ------- ---------
Income (loss) before income
taxes.......................... 1,846 3,298 3,300 5,863 (21,425)
Provision (benefit) for income
taxes(c)....................... 738 1,319 1,320 5,596 (1,524)
------- ------- ------- ------- ---------
Net income (loss)............... 1,108 1,979 1,980 267 (19,901)
Dividends on preferred stock ... -- -- -- 983 2,575
------- ------- ------- ------- ---------
Net income (loss) available to
common stockholders............ $ 1,108 $ 1,979 $ 1,980 $ (716) $ (22,476)
======= ======= ======= ======= =========
Basic and diluted loss per
common share................... $(2.64)
=========
Basic and diluted weighted
average number of shares of
common stock................... 8,526,052
=========
Other Data:
Adjusted EBITDA(d).............. $ 1,868 $ 3,376 $10,603 $ 7,155 $ (2,377)
Annualized Adjusted EBITDA(e)... 1,979 3,490 10,702 7,699 596
Annualized tower cash flow(f)... 344 752 991 1,947 8,088
Capital expenditures............ (51) (660) (145) (17,676) (138,124)
Net cash provided by (used in)
operating activities........... 873 (533) 1,215 7,829 7,471
Net cash used in investing
activities..................... (51) (660) (145) (17,676) (138,124)
Net cash provided by (used in)
financing activities........... (689) 1,298 (1,036) 15,645 151,286
Towers owned at the beginning of
period......................... -- -- -- -- 51
Towers constructed.............. -- -- -- 17 308
Towers acquired................. -- -- -- 34 135
Total towers at the end of
period......................... -- -- -- 51 494
</TABLE>
- --------
(Footnotes on following page)
6
<PAGE>
<TABLE>
<CAPTION>
As of December 31,
---------------------------------------
1994 1995 1996 1997 1998
------ ------ ------- ------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data (at end of
period):
Property, plant and equipment (net).. $ 61 $ 647 $ 632 $17,829 $150,946
Total assets......................... 2,610 7,429 18,060 44,797 214,573
Total debt(g)........................ 1 1,500 4,921 10,184 182,573
Redeemable preferred stock........... -- -- -- 30,983 33,558
Common stockholders' equity
(deficit)........................... 1,745 4,793 102 (4,344) (26,095)
</TABLE>
- --------
(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:
<TABLE>
<CAPTION>
Year Ended December 31, Pro Forma
----------------------------------------------------------------------- ---------
1994 1995 1996 1997 1998 1998
---- ---- ---- ---- ---- ----
(dollars in thousands)
----------------------
<S> <C> <C> <C> <C> <C>
$787 $2,627 $8,973 $6,668 $10,000 $10,000
</TABLE>
(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 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) Annualized Adjusted EBITDA for the years ended December 31, 1994, 1995,
1996, 1997 and 1998 is defined as the sum of (1) EBITDA for the last
calendar quarter of the period attributable to our site leasing business
multiplied by four and (2) Adjusted EBITDA, less all site leasing EBITDA
for all four calendar quarters of the period. For the purpose of
calculating Annualized Adjusted EBITDA, selling, general and administrative
expenses are allocated between our site leasing business and site
development business on a pro rata basis based on the revenues generated by
each of such businesses. Annualized Adjusted EBITDA is presented as
additional information because our management believes it to be a useful
indicator of our ability to meet debt service and capital expenditure
requirements and because some of our debt covenants use Annualized Adjusted
EBITDA to measure our financial performance. It is not, however, intended
as an alternative measure of operating results or cash flow from operations
as determined in accordance with generally accepted accounting principles.
Pro forma Annualized Adjusted EBITDA also includes the effect of fourth
quarter acquisitions as if each had occurred at the beginning of the period
presented.
(f) 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.
(g) 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
<PAGE>
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 revenues from the consulting segment declined in
fiscal 1997 and fiscal 1998, and we expect a further substantial decline in
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
<PAGE>
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 1, 1999, we had letters
of intent or definitive agreements with respect to the acquisition of 33
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
<PAGE>
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 offerings 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 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
<PAGE>
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 1, 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 revenues 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
<PAGE>
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:
<TABLE>
<CAPTION>
At December 31, 1998
----------------------
(dollars in thousands)
<S> <C>
Total indebtedness................................. $182,573
Stockholders' equity (deficit)..................... $(26,095)
</TABLE>
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
<PAGE>
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
<PAGE>
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."
Management controls 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. Mr. Bernstein and
other executive officers controlled, as of December 31, 1998, 50.3% of all
votes on a primary basis and 50.0% of all votes on a fully diluted basis.
Through his beneficial ownership of Class B common stock, Mr. Bernstein will
control approximately % of the total voting power of both classes of the
common stock after the offerings. As a result, executive management has the
ability to elect three out of five of our directors and the ability to control
the outcome of all matters determined by a vote of our common shareholders.
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
<PAGE>
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 offerings, 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 offerings, 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 offerings, we will have
shares of Class A common stock outstanding ( shares if the over-
allotment option is exercised in full). In addition, we have reserved for
issuance shares of Class A common stock upon exercise of
outstanding stock options, shares of Class A common stock upon
exercise of outstanding warrants and shares of Class A common
stock for the conversion of the outstanding Class B common stock. The
shares ( if the over-allotment option is exercised in
full) sold in the offerings 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. The remaining shares of
Class A common stock outstanding ( if the over-allotment option is
exercised in full) will be "restricted securities" as that term is defined in
Rule 144 and may only be sold pursuant to a registration statement under the
Securities Act or an applicable exemption from registration. Approximately
shares (approximately including shares issuable upon
conversion or exercise of outstanding securities) will be subject to demand and
piggyback registration rights. In addition, we estimate that upon the
expiration of the 180-day lock-up period described below, approximately
shares may be sold under Rule 144, subject to the volume
restrictions contained therein.
We intend to file a registration statement under the Securities Act after the
offerings 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 offerings and subject to certain exceptions, we, all
of our executive officers and directors and, with certain limited exceptions,
all of our existing shareholders will agree 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. In addition to certain typical
exceptions to such "lock-up" agreements, most of our employees will each be
permitted to sell during the 180-day period described above up to % of the
shares of Class A common stock beneficially owned or held by them as of the
date of this prospectus, subject to compliance with the registration
requirements of the Securities Act or pursuant to an exemption therefrom. See
"Underwriting."
The value of shares of Class A common stock purchased in the offerings will be
diluted.
Persons purchasing shares of Class A common stock in the offerings 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 offerings, 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 offerings or, if it does develop, that it
15
<PAGE>
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
U.S. underwriters and international managers, and may not be representative of
the price that will prevail in the open market after the offerings. 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 offerings 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 offerings, our articles of incorporation will allow
our Board of Directors to issue up to 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
<PAGE>
USE OF PROCEEDS
We estimate that the net proceeds to SBA from the offerings, after deduction
of the underwriting discount and estimated offering expenses, will be
approximately $138 million ($ million if the U.S. underwriters exercise
their over-allotment option in full). 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 offerings. We expect to
use approximately of the net proceeds from the offerings 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 $32.2 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 $25 million to repay the term loan and approximately $
million to repay revolving credit borrowings under our senior credit facility.
An affiliate of Lehman Brothers, one of the U.S. underwriters in the offerings,
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 the term loan outstanding under the senior credit facility was
8.437% at March 31, 1999. The weighted average interest rate of revolving
credit loans outstanding under the senior credit facility was 8.438% at March
31, 1999. 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.
We will not receive any proceeds from the sale of Class A common stock by the
selling shareholders.
17
<PAGE>
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 offerings. 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 December 31, 1998 was $ million or
$ per share. After giving effect to the receipt of approximately $
million of estimated net proceeds from the sale of shares of Class A common
stock in the offerings and to the conversion of our outstanding Series A
preferred stock that will occur automatically upon consummation of the
offerings, our pro forma net tangible book value at December 31, 1998 would
have been approximately $ million or $ per share. This represents an
immediate increase in pro forma net tangible book value of $ per share to
existing shareholders and an immediate dilution of $ per share to new
investors purchasing shares of Class A common stock in the offerings. The
following table illustrates the substantial and immediate per share dilution to
new investors:
<TABLE>
<CAPTION>
Per Share
---------
<S> <C>
Initial public offering price per share.............................
Pro forma net tangible book value before the offerings............
Increase per share attributable to new investors..................
Pro forma net tangible book value after the offerings...............
Dilution per share to new investors.................................
</TABLE>
The following table summarizes the difference among existing shareholders
(determined as if the offerings had occurred on December 31, 1998) 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.
<TABLE>
<CAPTION>
Total
Shares Purchased Consideration
----------------- ----------------- Average Price
Number Percentage Amount Percentage Per Share
------ ---------- ------ ---------- -------------
<S> <C> <C> <C> <C> <C>
New investors.................
Existing stockholders.........
---- ---- ---- ---- ----
Total.......................
==== ==== ==== ==== ====
</TABLE>
The above tables assume no exercise of options under the 1996 Stock Option
Plan or under the 1999 Equity Participation Plan and no exercise of warrants to
purchase shares of our Class A common stock issued at the time of the offering
of the Series A preferred stock. As of December 31, 1998, there were
shares of Class A common stock reserved for issuance under outstanding stock
options and shares of Class A common stock issuable upon the exercise of
outstanding warrants at exercise prices ranging from $ to $ 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
<PAGE>
CAPITALIZATION
The following table sets forth our consolidated capitalization as of December
31, 1998 on an historical basis and as adjusted for the offerings 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.
<TABLE>
<CAPTION>
As of December 31, 1998
---------------------------
Actual As Adjusted
----------- --------------
(in thousands)
<S> <C> <C>
Cash and cash equivalents............................ $ 26,743 $
=========== ===========
Long-term debt (less current maturities):
Senior Credit Facility(a).......................... $ 17,001 $
12% Senior Discount Notes due 2008................. 165,572
----------- -----------
Total long-term debt............................. 182,573
----------- -----------
Preferred stock ( shares authorized; shares
issued; 0 shares issued as adjusted)(b)
Series A preferred stock........................... 33,558 --
Stockholders' equity (deficit):
Class A common stock ( shares authorized;
shares issued; shares issued as
adjusted)(c)(d)................................... 9
Class B common stock ( shares authorized;
shares issued; shares issued as adjusted)..... 81
Warrants to purchase Class A common stock(c)....... --
Paid-in capital(d)................................. 716
Retained earnings.................................. (26,901)
----------- -----------
Total stockholders' equity (deficit)............. (26,095)
----------- -----------
Total capitalization $ 190,036 $
=========== ===========
</TABLE>
- --------
(a) Represents amount of revolving borrowings outstanding under our previous
credit facility.
(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) shares of Class A common
stock that have been reserved for issuance pursuant to options that have been
issued under the 1996 Stock Option Plan and the 1999 Equity Participation
Plan, (2) 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 and (3) shares of Class A common stock that
are reserved for issuance upon exercise of warrants 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 includes the 300,000 shares of Class A common
stock that we agreed to issue in connection with our 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."
19
<PAGE>
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 (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 period presented. The
unaudited pro forma consolidated balance sheet as of December 31, 1998 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 December 31, 1998. 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 the Consolidated Financial Statements and their
related notes included elsewhere in this prospectus and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."
20
<PAGE>
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of December 31, 1998
(dollars in thousands)
<TABLE>
<CAPTION>
Adjustments for Pro Forma
Historical Offerings as Adjusted
---------- --------------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....... $ 26,743 $88,816 (a)(b)(d) $115,559
Accounts receivable............. 12,513 -- 12,513
Prepaid and other current
assets......................... 5,981 -- 5,981
Cost and estimated earnings in
excess of billings on
uncompleted contracts.......... 599 -- 599
-------- ------- --------
Total current assets.......... 45,836 88,816 134,652
-------- ------- --------
Property and equipment, net...... 150,946 -- 150,946
Note receivable-stockholder...... 3,785 (3,785)(c) --
Intangible assets, net........... 6,932 -- 6,932
Deferred financing fees, net..... 6,564 -- 6,564
Other assets..................... 510 -- 510
-------- ------- --------
Total assets.................. $214,573 $85,031 $299,604
======== ======= ========
LIABILITIES AND
STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable................ $ 14,447 -- $ 14,447
Accrued expenses................ 2,247 -- 2,247
Accrued salaries and payroll
taxes.......................... 1,841 -- 1,841
Notes payable and lines of
credit......................... 17,001 (17,001)(d) --
Billings in excess of costs and
estimated earnings on
uncompleted contracts.......... 167 -- 167
Other current liabilities....... 2,049 -- 2,049
-------- ------- --------
Total current liabilities..... 37,752 (17,001) 20,751
-------- ------- --------
Other liabilities:
Deferred tax liabilities........ 3,371 -- 3,371
Senior discount notes payable... 165,572 -- 165,572
Other long-term liabilities..... 415 -- 415
-------- ------- --------
Total long-term liabilities... 169,358 -- 169,358
-------- ------- --------
Redeemable preferred stock....... 33,558 (33,558)(b) --
Stockholders' deficit:
Common stock--Class A............ 9 80 (a)(b) 89
Class B..................... 81 -- 81
Additional paid in capital...... 716 134,135 (a) 134,851
Accumulated deficit............. (26,901) 1,375 (b) (25,526)
-------- ------- --------
Total stockholders' equity
(deficit).................... (26,095) 135,590 109,495
-------- ------- --------
Total liabilities and
stockholders' equity
(deficit).................... $214,573 $85,031 $299,604
======== ======= ========
</TABLE>
- --------
(a) Reflects the estimated net proceeds from the offerings of approximately
$138.0 million, which is net of the estimated underwriting discounts and
offering expenses totaling approximately $12.0 million.
(b) Reflects use of proceeds from the offerings 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 $32.2
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 offerings.
(c) Reflects payment of a shareholder note in the amount of approximately $3.8
million. Upon consummation of the offerings, Steven E. Bernstein will repay
a loan made to him in 1997 by surrendering to SBA shares of Class B common
stock valued at the initial public offering price.
(d) Reflects use of proceeds from the offerings to repay approximately $17.0
million of bank borrowings, which represents all amounts then outstanding
under our previous credit facility.
21
<PAGE>
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1998
(dollars in thousands except per share data)
<TABLE>
<CAPTION>
Pro
Adjustments Pro Forma Adjustments Forma
for Completed for for as
Historical Acquisitions(a) Acquisitions Offerings Adjusted
---------- --------------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
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) $
========= ========
Basic and diluted
weighted average
number of shares of
common stock.......... 8,526,052
========= ========
</TABLE>
- --------
(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 offerings 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.
22
<PAGE>
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 that 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 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.
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- -------- ----------
(dollars in thousands except per share
data)
<S> <C> <C> <C> <C> <C>
Operating Data:
Revenues:
Site development revenue..... $10,604 $22,700 $60,276 $ 48,241 $ 46,705
Site leasing revenue......... 896 2,758 4,530 6,759 12,396
------- ------- ------- -------- ----------
Total revenues................ 11,500 25,458 64,806 55,000 59,101
Cost of revenues (exclusive of
depreciation shown below):
Cost of site development
revenue..................... 7,358 13,993 39,822 31,470 36,500
Cost of site leasing
revenue..................... 647 2,121 3,638 5,356 7,281
------- ------- ------- -------- ----------
Total cost of revenues........ 8,005 16,114 43,460 36,826 43,781
------- ------- ------- -------- ----------
Gross profit.................. 3,495 9,344 21,346 18,174 15,320
Selling, general and
administrative(a)(b)......... 1,627 5,968 17,754 12,033 18,302
Depreciation and
amortization................. 5 73 160 514 5,802
------- ------- ------- -------- ----------
Operating income (loss)....... 1,863 3,303 3,432 5,627 (8,784)
Interest income............... 2 6 7 644 4,303
Interest expense.............. (19) (11) (139) (407) (2,357)
Non cash amortization of
original issue discount and
debt issuance costs.......... -- -- -- -- (14,550)
Other......................... -- -- -- -- (37)
------- ------- ------- -------- ----------
Income (loss) before income
taxes........................ 1,846 3,298 3,300 5,863 (21,425)
Provision (benefit) for income
taxes(c)..................... 738 1,319 1,320 5,596 (1,524)
------- ------- ------- -------- ----------
Net income (loss)............. 1,108 1,979 1,980 267 (19,901)
Dividends on preferred stock.. -- -- -- 983 2,575
------- ------- ------- -------- ----------
Net income (loss) available to
common stockholders.......... $ 1,108 $ 1,979 $ 1,980 $ (716) $ (22,476)
======= ======= ======= ======== ==========
Basic and diluted loss per
common share................. $ (2.64)
==========
Basic and diluted weighted
average number of shares of
common stock................. 8,526,052
==========
Other Data:
Adjusted EBITDA(d)............ $ 1,868 $ 3,376 $10,603 $ 7,155 $ (2,377)
Annualized Adjusted
EBITDA(e).................... 1,979 3,490 10,702 7,699 596
Annualized tower cash
flow(f)...................... 344 752 991 1,947 8,088
Capital expenditures.......... (51) (660) (145) (17,676) (138,124)
Net cash provided by (used in)
operating activities......... 873 (533) 1,215 7,829 7,471
Net cash used in investing
activities................... (51) (660) (145) (17,676) (138,124)
Net cash provided by (used in)
financing activities......... (689) 1,298 (1,036) 15,645 151,286
Towers owned at the beginning
of period.................... -- -- -- -- 51
Towers constructed............ -- -- -- 17 308
Towers acquired............... -- -- -- 34 135
Total towers at the end of
period....................... -- -- -- 51 494
<CAPTION>
As of December 31,
-----------------------------------------------
1994 1995 1996 1997 1998
------- ------- ------- -------- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Balance Sheet Data (at end of
period):
Property, plant and equipment
(net)........................ $ 61 $ 647 $ 632 $ 17,829 $ 150,946
Total assets.................. 2,610 7,429 18,060 44,797 214,573
Total debt(g)................. 1 1,500 4,921 10,184 182,573
Redeemable preferred stock.... -- -- -- 30,983 33,558
Common stockholders' equity
(deficit).................... 1,745 4,793 102 (4,344) (26,095)
</TABLE>
(Footnotes on following page)
23
<PAGE>
- --------
(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:
<TABLE>
<CAPTION>
Year Ended December 31, Pro Forma
-------------------------------------------------------- ---------
1994 1995 1996 1997 1998 1998
---- ------ ------ ------ ------- ---------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
$787 $2,627 $8,973 $6,668 $10,000 $10,000
</TABLE>
(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 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) Annualized Adjusted EBITDA for the years ended December 31, 1994, 1995,
1996, 1997 and 1998 is defined as the sum of (1) EBITDA for the last
calendar quarter of the period attributable to our site leasing business
multiplied by four and (2) Adjusted EBITDA, less all site leasing EBITDA
for all four calendar quarters of the period. For the purpose of
calculating Annualized Adjusted EBITDA, selling, general and administrative
expenses are allocated between our site leasing business and site
development business on a pro rata basis based on the revenues generated by
each of such businesses. Annualized Adjusted EBITDA is presented as
additional information because our management believes it to be a useful
indicator of our ability to meet debt service and capital expenditure
requirements and because some of our debt covenants use Annualized Adjusted
EBITDA to measure our financial performance. It is not, however, intended
as an alternative measure of operating results or cash flow from operations
as determined in accordance with generally accepted accounting principles.
Pro forma Annualized Adjusted EBITDA also includes the effect of fourth
quarter acquisitions as if each had occurred at the beginning of the period
presented.
(f) 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.
(g) 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.
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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 revenues 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. 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 towers we owned as of April 1, 1999, 379 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 1, 1999, we had letters of intent or definitive
agreements to acquire 33 additional towers in a number of separate transactions
for an aggregate purchase price of approximately $7.6 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.
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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.
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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 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 announced the signing of agreements to acquire Com-Net and an
affiliated entity for $1.0 million in cash, $6.0 million of assumed debt and
300,000 shares of our Class A common stock. In addition, the shareholders of
Com-Net may receive up to $2.5 million in cash and 800,000 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. These acquisitions are currently scheduled to close in the
second quarter of 1999. Substantially all of Com-Net's revenues have been
derived from site development activities, primarily construction services. We
cannot assure you that these acquisitions will be consummated on the terms or
timetable currently contemplated or at all.
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.
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 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.
1998 Compared to 1997
Total revenues increased 7.5% to $59.1 million for 1998 from $55.0 million
for 1997. 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. 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
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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 site 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
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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.
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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 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 from financing
activities for 1998 was $151.1 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.
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.
Our balance sheet reflected positive working capital of $8.0 million and
$16,000 as of December 31, 1998 and December 31, 1997, respectively.
On March 2, 1998 we issued $269 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 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 million senior
credit facility, which replaced our prior $55 million credit facility, consists
of a $25 million term loan and a $150 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, pursuant to a schedule, matures December 31, 2004 and
amortization and reduced availability begins March 31, 2001. Borrowings under
the senior credit facility bear interest at the EURO rate plus a margin ranging
from 2.25% to 3.50% (determined by a leverage ratio) or
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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.
We currently estimate that we will make at least $160 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 offerings
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.
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 1.2
million additional shares of Class A common stock and to pay up to $2.5 million
to the former shareholders of Com-Net.
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 offerings 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 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 subject to interest rate risk on our variable rate bank borrowings and
any future financing at variable interest rates. Our fixed rate debt consists
primarily of the accreted balance of the senior discount notes.
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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 debt.
<TABLE>
<CAPTION>
1999 2000 2001 2002 2003 Thereafter
---- ---- ---- ---- ---- ----------
(dollars in thousands)
<S> <C> <C> <C> <C> <C> <C>
Liabilities:
Long-term debt.............................. -- -- -- -- -- $269,000
Fixed rate (12.0%)
</TABLE>
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.
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.
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<PAGE>
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, 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.
33
<PAGE>
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,
34
<PAGE>
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."
[DIAGRAM]
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.
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<PAGE>
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.
<TABLE>
<CAPTION>
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)
<S> <C> <C> <C> <C> <C>
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%
</TABLE>
- --------
(1) Data is from January 1999.
Source: Paul Kagan Associates, Inc. We cannot assure you that these projections
will prove to be accurate.
36
<PAGE>
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
37
<PAGE>
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.
38
<PAGE>
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 10,000 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 1, 1999, we owned 586 towers, had 33
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 revenues and Annualized tower cash flow for the year ended
December 31, 1998 were $59.1 million and $8.1 million, respectively.
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 grows as a result.
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<PAGE>
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 1, 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 308 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 1,
1999, we had letters of intent or definitive agreements with respect to
pending acquisitions for 33 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
40
<PAGE>
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 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 180 new towers) and also recently were
awarded a non-binding mandate from Sprint PCS to build approximately 100
towers in 1999.
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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
1, 1999:
<TABLE>
<CAPTION>
New
Location of Towers Acquired Builds Total % of Total
------------------ -------- ------ ----- ----------
<S> <C> <C> <C> <C>
South Carolina........................... 1 82 83 14%
Georgia.................................. 5 72 77 13%
Tennessee................................ 17 46 63 11%
Florida.................................. 42 10 52 9%
New York................................. 33 9 42 7%
Texas.................................... 10 29 39 7%
Wisconsin................................ 8 26 34 6%
Pennsylvania............................. 17 10 27 5%
Michigan................................. 0 19 19 3%
Minnesota................................ 16 3 19 3%
Oklahoma................................. 0 15 15 3%
Connecticut.............................. 1 9 10 2%
Iowa..................................... 8 2 10 2%
North Carolina........................... 2 8 10 2%
Kentucky................................. 4 5 9 2%
Louisiana................................ 9 0 9 2%
Ohio..................................... 0 8 8 1%
Delaware................................. 0 7 7 1%
Missouri................................. 1 5 6 1%
New Mexico............................... 6 0 6 1%
Nebraska................................. 1 4 5 1%
Virginia................................. 2 3 5 1%
Colorado................................. 4 0 4 1%
Indiana.................................. 3 1 4 1%
Maine.................................... 3 1 4 1%
Maryland................................. 0 4 4 1%
Mississippi.............................. 4 0 4 1%
South Dakota............................. 3 0 3 1%
California............................... 2 0 2 *
Illinois................................. 2 0 2 *
Alabama.................................. 1 0 1 *
Kansas................................... 1 0 1 *
New Jersey............................... 0 1 1 *
North Dakota............................. 1 0 1 *
--- --- ---
Total.................................. 207 379 586
=== === ===
</TABLE>
--------
* 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
42
<PAGE>
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
43
<PAGE>
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.
44
<PAGE>
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.
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<PAGE>
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 1, 1999, we entered into an agreement to acquire 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
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 will issue 300,000 shares of our Class
A common stock to the shareholders of Com-Net and assume working capital debt
of approximately $3.5 million. In addition, the shareholders of Com-Net may
receive up to $2.5 million in cash and 800,000 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 entered into a purchase
agreement with an affiliate of Com-Net that owns 18 completed towers located in
Texas, Ohio and Tennessee and over 30 additional tower sites in various stages
of development under build-to-suit programs. In accordance with the purchase
agreement, we will pay $1.0 million in cash and assume debt of approximately
$2.5 million dollars to acquire the entity that owns these assets.
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:
<TABLE>
<S> <C>
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
</TABLE>
46
<PAGE>
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.
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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
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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.
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MANAGEMENT
Executive Officers and Directors
Our executive officers and directors are as follows:
<TABLE>
<CAPTION>
Name Age Position
------------------------ --- ------------------------------------------------------------
<S> <C> <C>
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..... 39 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
</TABLE>
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.
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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 offerings, 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, Messrs. Hebb and
Miller will be Class II directors, and Mr. Bernstein will be a Class III
director. 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.
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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
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
------------
Number of
Annual Compensation Securities All
---------------------- Underlying Other
Name and Principal Options/ Compen-
Position Year Salary ($) Bonus ($) SARs (#) sation ($)(a)
------------------ ---- ---------- --------- ------------ ------------- --- ---
<S> <C> <C> <C> <C> <C> <C> <C>
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 -- -- -- --
</TABLE>
- --------
(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 $2.19 per share.
52
<PAGE>
Options/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
----------------------------------------------
Potential
Realizable
Value At
Assumed Annual
Rate of Stock
Number of % of Total Price
Securities Options/SARs Appreciation
Underlying Granted to Exercise for Option Term
Options/SARs Employees in Price Expiration ---------------
Name Granted 1998 Per Share Date 5%($) 10%($)
---- ------------ ------------ --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Steven E. Bernstein..... -- -- -- -- -- --
Ronald G. Bizick, II.... -- -- -- -- -- --
Robert M. Grobstein..... -- -- -- -- -- --
Michael N. Simkin....... 200,000(a) 25% $2.63 6/15/08 330,799 838,309
Jeffrey A. Stoops....... -- -- -- -- -- --
</TABLE>
- --------
(a) These options were granted to Mr. Simkin in 1998 as part of his employment
package. These options vest over three years from the date of grant.
Aggregated Option/SAR Exercises in Last Fiscal Year
and Year-end Option/SAR Values
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised In-
Shares Options/SARs the-Money Options/SARs
Acquired at December 31, 1998 at December 31, 1998($)
on Value -------------------------- -------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- --------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
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
</TABLE>
- --------
(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.
53
<PAGE>
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 offerings, 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 offerings, our 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
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 1,167,533 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.
54
<PAGE>
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.
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.
55
<PAGE>
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.
56
<PAGE>
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
57
<PAGE>
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.
58
<PAGE>
CERTAIN TRANSACTIONS
Steven M. Bernstein, our President and Chief Executive Officer, is indebted
to us in the amount of $3,784,768, including accrued interest as of December
31, 1998. The indebtedness was incurred in March 1997 in the principal amount
of $3.5 million, accrues interest at 5.83% 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 offerings, 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.
59
<PAGE>
PRINCIPAL AND SELLING 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;
(3) all directors and executive officers as a group; and (4) each of the
selling shareholders. 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).
<TABLE>
<CAPTION>
Beneficial Ownership
---------------------------------------------------------------
Percentage
of Total
Voting
Power of
Percentage of Class A
Total Voting Number of Common
Power of Class Number Shares to be Stock
Executive Officers Number of A Common of Shares Owned After After
and Directors(a) Title of Class Shares (b)** Stock(b)** to be Sold Offerings (c) Offerings
- ------------------ ------------------------- ------------ -------------- ---------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C>
Steven E. Bernstein(d).. Class B Common Stock 8,075,000 49.6%
Class A Common Stock 78,419 --
Ronald G. Bizick, II.... 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
C. Kevin Landry(i)...... Series A Preferred Stock+ 2,736,997 16.8
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)............ 15,463,905 86.8
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%
TA Associates, Inc.(m).. Series A Preferred Stock+ 2,736,997 16.8
The Hillman Company(n).. Series A Preferred Stock+ 1,169,808 7.2
Beneficial Owner(a)
- ------------------------
</TABLE>
* Less than 1%.
** This table does not give effect to a for one split of our common
stock.
+ 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 offerings. The Series B preferred stock will
be redeemed with a portion of the proceeds of the offerings. 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
60
<PAGE>
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) If the U.S. underwriters' over-allotment option is exercised in full,
, and will beneficially own %, %, and %, respectively,
of the Class A common stock after consummation of the offerings. Each
other selling shareholder listed in this table will beneficially own less
than 1% of the Class A common stock after consummation of the offerings.
(d) 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.
(e) All shares are in the form of an immediately exercisable option to
purchase Class A common stock at $.05 per share.
(f) This number includes currently exerciseable 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.
(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. 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. Also 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.
(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.
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(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 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.
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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, after giving effect to the stock split to be effected
prior to the consummation of the offerings, our outstanding capital stock
consisted of shares of Class A common stock, 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) 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) shares of Class A common
stock were reserved for issuance upon the exercise of outstanding stock options
granted under the 1999 Equity Participation Plan and shares were reserved
for issuance upon exercise of stock options available for future grant under
that plan, (3) shares of Series B preferred stock were reserved for
issuance upon conversion of the outstanding shares of Series A preferred stock,
(4) shares of Class A common stock were reserved for issuance upon
conversion of outstanding shares of Series A preferred stock, (5) shares
were reserved for issuance upon exercise of outstanding warrants granted to BT
Alex. Brown in connection with the offering of Series A preferred stock, and
(6) shares of Class A common stock were reserved for issuance upon
the exercise of stock options held by Mr. Grobstein.
In connection with the offerings, 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 offerings. See "Use of
Proceeds." Also in connection with the offerings, 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 offerings, 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 for a separate class vote in the event of any
amendment that alters the terms of a single class of 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, Messrs. Hebb and
Miller will be Class II directors, and Mr. Bernstein will be a Class III
director.
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
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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
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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.
Warrants
In connection with the sale of our Series A preferred stock in March 1997, we
issued warrants to acquire shares of Class A common stock to BT Alex. Brown.
Each warrant, when exercised, entitles its holder to receive one fully paid and
non-assessable share of Class A common stock at an exercise price of $3.73 per
share. The warrants entitle their holders to purchase in the aggregate
shares of our Class A common stock, or approximately % of our common stock
on a fully diluted basis as of the closing of the offerings. The warrants are
exercisable at any time on or before March 2002. The exercise and transfer of
the warrants are 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.
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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. 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 offerings. 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.
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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
offerings to repay the term loan and outstanding revolving credit loans. Once
we repay the term loan, we will not be able to reborrow it. 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
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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.
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SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the offerings, we will have outstanding shares of
Class A common stock ( shares if the over-allotment option is exercised
in full). In addition, we have reserved for issuance shares of Class A
common stock upon exercise of outstanding stock options, shares of Class A
common stock upon exercise of outstanding warrants and shares of Class A
common stock for the conversion of the outstanding Class B common stock. The
shares of Class A common stock ( if the over-allotment option
is exercised in full) sold in the offerings will be freely tradable without
restriction or further registration under the Securities Act, unless held by an
"affiliate" of ours as that term is defined in Rule 144 promulgated under the
Securities Act. These shares will be subject to the resale limitation of Rule
144. The remaining shares of Class A common stock ( if the
over-allotment option is exercised in full) have not been registered under the
Securities Act and may not be sold unless they are registered or unless an
exemption from registration, such as the exemption provided by Rule 144 or Rule
701 under the Securities Act is available. As a result of the contractual
restrictions described below and the provisions of Rule 144 and Rule 701,
approximately shares will be eligible for sale upon expiration of the
lock-up agreements 180 days after the date of this prospectus and approximately
shares will be eligible for sale upon expiration of their respective
one-year holding periods.
Along with our directors and executive officers and, with certain limited
exceptions, all of our other existing shareholders of Class A common stock, we
have agreed not to offer, sell, contract to sell or otherwise dispose of any
shares of Class A common stock or any securities that are convertible into or
exchangeable for, or that represent the right to receive, any shares of Class A
common stock or any such substantially similar securities, for a period of 180
days from the date of this prospectus, without the prior written consent of
Lehman Brothers.
We intend to file a registration statement under the Securities Act after the
offerings 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.
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
shares immediately after the offerings) 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 between 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
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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.
Approximately shares of Class A common stock (approximately
including shares issuable upon conversion of exercise of outstanding
securities) will be subject to demand and piggyback registration rights. In
addition, we estimate that upon the expiration of the 180-day lockup period
described above, approximately shares may be sold under Rule 144,
subject to the volume restrictions contained in that rule.
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."
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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
71
<PAGE>
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, 1999.
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 offerings 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
72
<PAGE>
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, 1999. 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.
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<PAGE>
UNDERWRITING
Under the U.S. underwriting agreement, which is filed as an exhibit to the
registration statement relating to this prospectus, the U.S. underwriters named
below, for whom Lehman Brothers Inc., BT Alex. Brown Incorporated, Donaldson,
Lufkin & Jenrette Securities Corporation and Salomon Smith Barney Inc. are
acting as U.S. representatives, have each agreed to purchase from us the
respective number of shares of Class A common stock shown opposite its name
below:
<TABLE>
<CAPTION>
Number of
Shares of Class A
U.S. Underwriters Common Stock
----------------- -----------------
<S> <C>
Lehman Brothers Inc........................................
BT Alex. Brown Incorporated................................
Donaldson, Lufkin & Jenrette Securities Corporation........
Salomon Smith Barney Inc...................................
Total....................................................
------
======
</TABLE>
Under the international underwriting agreement, which is filed as an exhibit
to the registration statement relating to this prospectus, the international
managers named below, for whom Lehman Brothers International (Europe), BT Alex.
Brown International, Donaldson, Lufkin & Jenrette International and Salomon
Brothers International Limited are acting as lead managers, have each agreed to
purchase from us the respective number of shares of Class A common stock shown
opposite its name below:
<TABLE>
<CAPTION>
Number of
Shares of Class A
International Managers Common Stock
---------------------- -----------------
<S> <C>
Lehman Brothers International (Europe).....................
BT Alex. Brown International...............................
Donaldson, Lufkin & Jenrette International.................
Salomon Brothers International Limited.....................
Total....................................................
-----
=====
</TABLE>
The U.S. and international underwriting agreements provide that the
obligations of the U.S. underwriters and the international managers to purchase
shares of Class A common stock depend on the satisfaction of the conditions
contained in the U.S. and international underwriting agreements, respectively,
and that if any of the shares of Class A common stock are purchased by the U.S.
underwriters under the U.S. underwriting agreement or by the international
managers under the international underwriting agreement, then all of the shares
of Class A common stock which the U.S. underwriters or the international
managers, as the case may be, have agreed to purchase under their respective
underwriting agreements, must be purchased. The conditions contained in each
underwriting agreement include the requirement that the representations and
warranties made by SBA to the U.S. underwriters or the international managers,
as the case may be, are true, that there is no material change in the financial
markets and SBA deliver to the U.S. underwriters or international managers, as
the case may be, customary closing documents.
The U.S. representatives and the lead managers have advised us that the U.S.
underwriters and the international managers propose to offer the shares of
Class A common stock directly to the public at the public offering price set
forth on the cover page of this prospectus, and to dealers, who may include the
U.S. underwriters and the international managers, at such public offering price
less a selling concession not in excess of $ per share. The U.S.
underwriters and international managers may allow, and the dealers may reallow,
a concession not in excess of $ per share to brokers and dealers. After the
offerings, the U.S. underwriters and the international managers may change the
offering price and other selling terms.
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<PAGE>
We have granted to the U.S. underwriters an option to purchase up to an
aggregate of additional shares of Class A common stock exercisable
solely to cover over-allotments, if any, at the public offering price less the
underwriting discounts and commissions shown on the cover page of this
prospectus. In addition, selling shareholders of SBA have also granted to the
U.S. underwriters an option to purchase up to an aggregate of
additional shares of Class A common stock exercisable solely to cover over-
allotments, if any, at the public offering price less the underwriting
discounts and commissions shown on the cover page of this prospectus. The U.S.
underwriters may exercise these options at any time until 30 days after the
date of the U.S. underwriting agreement. If these options are exercised, each
U.S. underwriter will be committed, so long as the conditions of the U.S.
underwriting agreement are satisfied, to purchase a number of additional shares
of Class A common stock proportionate to the underwriter's initial commitment
as indicated in the preceding tables and we, and the selling shareholders, will
be obligated, under the over allotment options, to sell the shares of Class A
common stock to the U.S. underwriters.
We have agreed that, without the prior consent of Lehman Brothers, we will
not directly or indirectly, offer, sell or otherwise dispose of 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 from the date of this prospectus. All of our executive
officers and directors and, with certain limited exceptions, all of our other
existing shareholders, have agreed under lock-up agreements that, without the
prior written consent of Lehman Brothers, they will not, directly or
indirectly, offer, sell or otherwise dispose of 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 the
period ending 180 days after the date of this prospectus. See "Shares Eligible
for Future Sale."
Under the agreement between U.S. underwriters and international managers,
each U.S. underwriter has agreed that it is not purchasing any shares of Class
A common stock for the account of anyone other than a U.S. person and that it
will not sell or offer to sell any shares of Class A common stock to anyone
other than a U.S. person. Under the agreement, each international manager has
also agreed that it is not purchasing any shares of Class A common stock for
the account of a U.S. person and that it will not sell or offer to sell any
shares of Class A common stock to a U.S. person. These limitations do not apply
to stabilization transactions or to certain other transactions specified in the
underwriting agreements and the agreement between U.S. underwriters and
international managers, including certain purchases and sales between the U.S.
underwriters and international managers, certain offers, sales or distributions
to persons exercising investment discretion, purchases, offers or sales by a
U.S. underwriter that is also acting as an international manager or by an
international manager that is also acting as a U.S. underwriter and other
transactions specifically approved by the U.S. representatives and the lead
managers.
Under the agreement between U.S. underwriters and international managers,
sales of the Class A common stock may be made between the U.S. underwriters and
the international managers. Unless the U.S. underwriters and the international
managers mutually agree otherwise, the price of the shares of Class A common
stock sold will be the initial public offering price less a concession not in
excess of $ share. If there are sales between the U.S. underwriters and the
international managers, the number of shares of the Class A common stock
available for sale by the U.S. underwriters or by the international managers
may be more or less than the amount set forth on the cover page of this
prospectus.
Prior to the offerings, there has been no public market for the shares of
Class A common stock. The initial public offering price will be negotiated
among the U.S. representatives, the lead managers and us. In determining the
initial public offering price of the Class A common stock, the U.S.
representatives and the lead managers will consider, among other things and in
addition to prevailing market conditions, our historical performance and
capital structure, estimates of our business potential and earning prospects,
an overall assessment of our management and the consideration of the above
factors in relation to market valuation of companies in related businesses.
Application has been made to list our Class A common stock on the Nasdaq
National Market under the symbol "SBAC."
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<PAGE>
We have agreed to indemnify the U.S. underwriters and international managers
against liabilities, including liabilities under the Securities Act and
liabilities arising from breaches of the representations and warranties
contained in the U.S. and international underwriting agreements, and to
contribute to payments that the U.S. underwriters and the international
managers may be required to make for these liabilities.
Until the distribution of the Class A common stock is completed, rules of the
Securities and Exchange Commission may limit the ability of the U.S.
underwriters and selling group members to bid for and purchase shares of Class
A common stock. As an exception to these rules, the U.S. representatives are
permitted to engage in transactions that stabilize the price of the Class A
common stock. These transactions may consist of bids or purchases for the
purposes of pegging, fixing or maintaining the price of the Class A common
stock.
The U.S. underwriters may create a short position in the Class A common stock
in connection with the offerings, which means that they may sell more shares
than are set forth on the cover page of this prospectus. If the U.S.
underwriters create a short position, then the U.S. representatives may reduce
that short position by purchasing Class A common stock in the open market. The
U.S. representatives also may elect to reduce any short position by exercising
all or part of the over-allotment options.
The U.S. representatives also may impose a penalty bid on U.S. underwriters
and selling group members. This means that if the U.S. representatives purchase
shares of Class A common stock in the open market to reduce the U.S.
underwriters' short position or to stabilize the price of the Class A common
stock, they may reclaim the amount of the selling concession from the U.S.
underwriters and selling group members who sold those shares as part of the
offerings.
In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
an offering.
Neither we nor any of the U.S. underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Class A common stock. In addition,
neither we nor any of the U.S. underwriters make any representation that the
U.S. representatives will engage in such transactions or that such
transactions, once commenced, will not be discontinued without notice
Each international manager has agreed not to offer or sell any shares of the
Class A common stock in the United Kingdom, except to persons whose ordinary
activities involve them in acquiring, holding, managing or disposing of
investments for the purposes of their business.
Any offers in Canada will be made only under an exemption from the
requirements to file a prospectus in the relevant province of Canada in which
such sale is made.
Purchasers of the shares of Class A common stock offered in this prospectus
may be required to pay stamp taxes and other charges under the laws and
practices of the country of purchase, in addition to the offering price listed
on the cover of this prospectus.
The U.S. representatives and the lead managers have informed us that they do
not intend to confirm the sales of shares of Class A common stock offered by
this prospectus to any accounts over which they exercise discretionary
authority without the prior written approval of the customer.
Certain of the U.S. representatives have from time to time provided
investment banking, financial advisory and other services to us for which such
U.S. 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 offerings 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
76
<PAGE>
Alex. Brown acted as placement agent in connection with the private placement
of shares of our Series A preferred stock in March of 1997. We granted BT Alex.
Brown a warrant to purchase up to shares of the 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 and Selling 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 offerings are being conducted in accordance with Rule
2720, which provides that, among other things, when an 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" 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 is a part. We, the selling shareholders and
the other U.S. underwriters and international managers have agreed to indemnify
Lehman Brothers in its capacity as QIU against certain liabilities, including
liabilities under the Securities Act.
77
<PAGE>
LEGAL MATTERS
Certain legal matters relating to the offerings 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 U.S. underwriters and
international managers 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.
78
<PAGE>
INDEX TO FINANCIAL STATEMENTS
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
<TABLE>
<S> <C>
AUDITED FINANCIAL STATEMENTS:
Report of Independent Certified Public Accountants...................... F-3
Consolidated Balance Sheets as of December 31, 1998 and December 31,
1997................................................................... F-4
Consolidated Statements of Operations for the years ended December 31,
1998,
1997 and 1996.......................................................... F-5
Consolidated Statements of Stockholders' Deficit for the years ended
December 31, 1998,
1997 and 1996.......................................................... F-6
Consolidated Statements of Cash Flows for the years ended December 31,
1998,
1997 and 1996.......................................................... F-7
Notes to Consolidated Financial Statements.............................. F-9
Report of Independent Certified Public Accountants on Schedule.......... F-24
Schedule of Valuation and Qualifying Accounts........................... F-25
CADDO TOWER COMPANY INC.
AUDITED FINANCIAL STATEMENTS:
Report of Independent Certified Public Accountants...................... F-26
Statement of Operations and Retained Earnings for the year ended July
31, 1998............................................................... F-27
Statement of Cash Flows for the year ended July 31, 1998................ F-28
Notes to Financial Statements........................................... F-29
PRIMECO TOWER OPERATIONS
AUDITED FINANCIAL STATEMENTS:
Report of Independent Certified Public Accountants...................... F-31
Statement of Operations and Retained Earnings for the year ended
December 31, 1997...................................................... F-32
Statement of Cash Flows for the year ended December 31, 1997............ F-33
Notes to Financial Statements........................................... F-34
NORTHWEST TOWER SERVICE, INC.
AUDITED FINANCIAL STATEMENTS:
Report of Independent Certified Public Accountants...................... F-36
Statement of Operations and Retained Earnings for the year ended
December 31, 1997...................................................... F-37
Statement of Cash Flows for the year ended December 31, 1997............ F-38
Notes to Financial Statements........................................... F-39
GENERAL COMMUNICATIONS PROPERTIES, INC. TOWER OPERATIONS
AUDITED FINANCIAL STATEMENTS:
Report of Independent Certified Public Accountants...................... F-41
Statement of Operations and Retained Earnings for the year ended
December 31, 1997...................................................... F-42
Statement of Cash Flows for the year ended December 31, 1997............ F-43
Notes to Financial Statements........................................... F-44
TRANSMISSION FACILITIES, INC.
AUDITED FINANCIAL STATEMENTS:
Independent Auditors' Report............................................ F-46
Statement of Income and Retained Earnings for the year ended December
31, 1997............................................................... F-47
Statement of Cash Flows for the year ended December 31, 1997............ F-48
Notes to Financial Statements........................................... F-49
</TABLE>
F-1
<PAGE>
LONG ISLAND WAVES, INC.
<TABLE>
<S> <C>
AUDITED FINANCIAL STATEMENTS:
Report of Independent Certified Public Accountants ..................... F-50
Statement of Income and Retained Earnings for the period from December
1, 1997 through September 30, 1998..................................... F-51
Statement of Cash Flows for the period from December 1, 1997 through
September 30, 1998..................................................... F-52
Notes to Financial Statements........................................... F-53
QUAD STATES TOWERS AND COMMUNICATIONS
AUDITED FINANCIAL STATEMENTS:
Independent Auditors' Report............................................ F-56
Statement of Income for the year ended June 30, 1998.................... F-57
Statement of Cash Flows for the year ended June 30, 1998................ F-58
Notes to Financial Statements........................................... F-59
</TABLE>
F-2
<PAGE>
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-3
<PAGE>
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1998 1997
------------ ------------
<S> <C> <C>
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
============ ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated balance sheets
F-4
<PAGE>
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the years ended December 31,
---------------------------------------
1998 1997 1996
------------- ----------- -----------
<S> <C> <C> <C>
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
============= =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements
F-5
<PAGE>
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
For the Years Ended December 31, 1998, 1997 and 1996
<TABLE>
<CAPTION>
Common Stock
-----------------------------------
Class A Class B
---------------- -----------------
Number Amount Number Amount
<S> <C> <C> <C> <C>
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
======= ======= ========= =======
</TABLE>
<TABLE>
<CAPTION>
Additional Retained
Paid In Earnings
Capital (Deficit) Total
---------- ------------ ------------
<S> <C> <C> <C>
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)
======== ============ ============
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements
F-6
<PAGE>
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the years ended December 31,
----------------------------------------
1998 1997 1996
------------- ------------ -----------
<S> <C> <C> <C>
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
============= ============ ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements
F-7
<PAGE>
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
<TABLE>
<CAPTION>
For the years ended December
31,
------------------------------
1998 1997 1996
---------- ---------- --------
<S> <C> <C> <C>
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 --
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these consolidated statements
F-8
<PAGE>
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-9
<PAGE>
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-10
<PAGE>
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-11
<PAGE>
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-12
<PAGE>
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.
<TABLE>
<CAPTION>
For the year ended December 31,
---------------------------------
1998 1997
---------------- ---------------
<S> <C> <C>
Unaudited Pro Forma Revenues.......... $ 61,754,775 $ 65,679,788
================ ===============
Unaudited Pro Forma Net Income
(loss)............................... $ (19,768,191) $ 775,002
================ ===============
</TABLE>
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:
<TABLE>
<CAPTION>
For the years ended December 31,
--------------------------------
1998 1997 1996
---------- ---------- ----------
(% of Revenue)
<S> <C> <C> <C>
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
</TABLE>
6. PROPERTY AND EQUIPMENT
Property and equipment, net consists of the following:
<TABLE>
<CAPTION>
Estimated
Useful Lives December 31,
------------ -------------------------
1998 1997
(years) ------------ -----------
<S> <C> <C> <C>
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
============ ===========
</TABLE>
F-13
<PAGE>
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:
<TABLE>
<CAPTION>
December 31,
----------------------
1998 1997
---------- ----------
<S> <C> <C>
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)
========== ==========
</TABLE>
This amount is included in the accompanying balance sheet under the following
captions:
<TABLE>
<CAPTION>
December 31,
---------------------
1998 1997
--------- ----------
<S> <C> <C>
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)
========= ==========
</TABLE>
8. CURRENT AND LONG TERM DEBT
Current and long term debt consists of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1998 1997
------------ -----------
<S> <C> <C>
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 $ --
============ ===========
</TABLE>
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-14
<PAGE>
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-15
<PAGE>
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-16
<PAGE>
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:
<TABLE>
<CAPTION>
For the Years Ended December 31
---------------------------------
1998 1997
---------------- ---------------
<S> <C> <C>
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
================ ==============
</TABLE>
F-17
<PAGE>
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:
<TABLE>
<CAPTION>
For the Years Ended December 31
---------------------------------
1998 1997
---------------- ---------------
<S> <C> <C>
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:
<CAPTION>
As of December 31
---------------------------------
1998 1997
---------------- ---------------
<S> <C> <C>
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
================ ===============
</TABLE>
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-18
<PAGE>
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:
<TABLE>
<S> <C>
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
===========
</TABLE>
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-19
<PAGE>
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-20
<PAGE>
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:
<TABLE>
<CAPTION>
1998 1997 1996
---------------- ---------------- ----------------
Shares Price Shares Price Shares Price
--------- ----- --------- ----- ---------- -----
<S> <C> <C> <C> <C> <C> <C>
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
===== ===== =====
</TABLE>
Option groups outstanding at December 31, 1998 and related weighted average
exercise price and life information are as follows:
<TABLE>
<CAPTION>
Wtd. Avg Remaining
Exercise Price Outstanding Contractual Life (Years) Exercisable
-------------- ----------- ----------------------- -----------
<S> <C> <C> <C>
$ .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
========= =======
</TABLE>
F-21
<PAGE>
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:
<TABLE>
<CAPTION>
For the Years Ended December 31
------------------------------------
1998 1997 1996
------------ ----------- -----------
<S> <C> <C> <C>
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
============ =========== ===========
</TABLE>
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-22
<PAGE>
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-23
<PAGE>
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-24
<PAGE>
SBA COMMUNICATIONS CORPORATION AND SUBSIDIARIES
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
Additions
Balance at Charged to Deduction
Beginning of Costs and From Balance at
Period Expenses Reserves End of Period
------------ ---------- --------- -------------
<S> <C> <C> <C> <C>
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
</TABLE>
F-25
<PAGE>
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-26
<PAGE>
CADDO TOWER COMPANY, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
For the Year Ended July 31, 1998
<TABLE>
<S> <C>
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
=========
</TABLE>
The accompanying notes to financial statements are an integral part of this
financial statement.
F-27
<PAGE>
CADDO TOWER COMPANY, INC.
STATEMENT OF CASH FLOWS
For the Year Ended July 31, 1998
<TABLE>
<S> <C>
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
========
</TABLE>
The accompanying notes to financial statements are an integral part of this
financial statement.
F-28
<PAGE>
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-29
<PAGE>
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:
<TABLE>
<CAPTION>
Year ended July 31,
-------------------
<S> <C>
1999................................................................ $210,989
2000................................................................ 148,726
2001................................................................ 62,631
2002................................................................ 25,205
2003................................................................ 3,268
--------
$450,819
========
</TABLE>
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-30
<PAGE>
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-31
<PAGE>
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
<TABLE>
<S> <C>
Revenues.......................................................... $ --
Tower operating expenses.......................................... 20,157
--------
Net loss........................................................ (20,157)
Retained earnings at December 31, 1996.......................... --
--------
Retained earnings at December 31, 1997.......................... $(20,157)
========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of this
financial statements.
F-32
<PAGE>
PRIMECO TOWER OPERATIONS
(A carve-out entity of PrimeCo Personal Communications, L.P.)
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1997
<TABLE>
<S> <C>
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....................................... $ --
========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of this
financial statements
F-33
<PAGE>
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-34
<PAGE>
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:
<TABLE>
<S> <C>
Year ended December 31,
1998................................................................... $ 80,070
1999................................................................... 133,130
2000................................................................... 138,455
2001................................................................... 143,993
2002................................................................... 149,753
Thereafter............................................................. 66,623
--------
$712,024
========
</TABLE>
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-35
<PAGE>
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-36
<PAGE>
NORTHWEST TOWER SERVICE, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
For the Year Ended December 31, 1997
<TABLE>
<S> <C>
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
=========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of this
financial statement.
F-37
<PAGE>
NORTHWEST TOWER SERVICE, INC.
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1997
<TABLE>
<S> <C>
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
========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of this
financial statement.
F-38
<PAGE>
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-39
<PAGE>
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.
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------
<S> <C>
1998............................................................ $ 307,457
1999............................................................ 311,480
2000............................................................ 202,769
2001............................................................ 124,887
2002............................................................ 70,282
Thereafter...................................................... 55,119
----------
$1,071,994
==========
</TABLE>
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-40
<PAGE>
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-41
<PAGE>
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
<TABLE>
<S> <C>
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)
========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of this
financial statement.
F-42
<PAGE>
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
<TABLE>
<S> <C>
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
========
</TABLE>
The accompanying Notes to Financial Statements are an integral part of this
financial statement.
F-43
<PAGE>
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-44
<PAGE>
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.
<TABLE>
<S> <C>
Year ended December 31,
1998............................................................... $ 85,818
1999............................................................... 91,214
2000............................................................... 37,015
2001............................................................... 6,018
2002............................................................... 1,545
--------
$221,610
========
</TABLE>
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-45
<PAGE>
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-46
<PAGE>
TRANSMISSION FACILITIES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
For the Year Ended December 31, 1997
<TABLE>
<S> <C>
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
---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-47
<PAGE>
TRANSMISSION FACILITIES, INC.
STATEMENT OF CASH FLOWS
For the Year Ended December 31, 1997
<TABLE>
<S> <C>
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:
</TABLE>
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-48
<PAGE>
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-49
<PAGE>
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-50
<PAGE>
LONG ISLAND WAVES, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
For the Period From December 1, 1997
Through September 30, 1998
<TABLE>
<S> <C>
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
========
</TABLE>
The accompanying notes are an integral part of the financial statements
presented.
F-51
<PAGE>
LONG ISLAND WAVES, INC.
STATEMENT OF CASH FLOWS
For the Period From December 1, 1997
Through September 30, 1998
<TABLE>
<S> <C>
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
=========
</TABLE>
The accompanying notes are an integral part of the financial statements
presented.
F-52
<PAGE>
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-53
<PAGE>
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:
<TABLE>
<S> <C>
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
========
</TABLE>
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.
<TABLE>
<S> <C>
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
==========
</TABLE>
F-54
<PAGE>
LONG ISLAND WAVES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
September 30, 1998
5. Subsequent Events
On September 30, 1998, the shareholder's 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-55
<PAGE>
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-56
<PAGE>
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
<TABLE>
<S> <C>
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
========
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-57
<PAGE>
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
<TABLE>
<S> <C>
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
</TABLE>
The accompanying notes are an integral part of this financial statement.
F-58
<PAGE>
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:
<TABLE>
<CAPTION>
Fiscal Year Ending June 30 Amount
-------------------------- --------
<S> <C>
1999............................................................ $149,872
2000............................................................ 106,031
2001............................................................ 94,817
2002............................................................ 54,557
2003............................................................ 18,354
Thereafter (2004-2019).......................................... 118,278
--------
$541,909
========
</TABLE>
F-59
<PAGE>
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:
<TABLE>
<S> <C>
Current
Federal.......................................................... $4,788
State............................................................ 3,915
------
Income tax expense............................................. $8,703
======
</TABLE>
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:
<TABLE>
<S> <C>
Federal tax expense at statutory rates............................ $4,788
State income tax.................................................. 3,128
Rate differentials and miscellaneous.............................. 787
------
$8,703
======
</TABLE>
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-60
<PAGE>
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:
<TABLE>
<CAPTION>
Fiscal Year Ending June 30 Amount
-------------------------- -------
<S> <C>
1999.............................................................. $8,885
2000.............................................................. 7,895
2001.............................................................. 4,925
2002.............................................................. 4,925
2003.............................................................. 3,875
Thereafter (2004-2023)............................................ 65,500
-------
$96,005
=======
</TABLE>
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-61
<PAGE>
Shares
SBA Communications Corporation
Class A Common Stock
-------------------------------------
PROSPECTUS
, 1999
-------------------------------------
Lehman Brothers
BT Alex. Brown
Donaldson, Lufkin & Jenrette
Salomon Smith Barney
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities, and we are not soliciting offers to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[International Cover]
Subject to Completion, dated , 1999
PROSPECTUS
Shares
SBA Communications Corporation
Class A Common Stock
- --------------------------------------------------------------------------------
This is our initial public offering of shares of Class A common stock. We are
offering shares. Of the shares being offered, we are offering
shares outside the United States and Canada and we are offering
shares in the United States and Canada. The closing of the U.S. offering is a
condition to the closing of the international offering.
We expect the public offering price to be between $ and $ 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.
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price........................................... $ $
Underwriting discount........................................... $ $
Proceeds to SBA................................................. $ $
</TABLE>
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 international managers, expects to deliver
the shares on or about , 1999.
- -------------------------------------------------------
Lehman Brothers
BT Alex. Brown International
Donaldson, Lufkin & Jenrette
Salomon Smith Barney International
, 1999
<PAGE>
Shares
SBA Communications Corporation
Class A Common Stock
-------------------------------------
PROSPECTUS
, 1999
-------------------------------------
Lehman Brothers
BT Alex. Brown International
Donaldson, Lufkin & Jenrette
Salomon Smith Barney International
<PAGE>
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:
<TABLE>
<S> <C>
SEC registration fee............................................ $41,700
-------
NASD filing fee.................................................
15,500
-------
Nasdaq listing fee.............................................. *
-------
Printing and engraving expenses................................. *
-------
Legal fees and expenses......................................... *
-------
Accounting fees and expenses.................................... *
-------
Transfer agent and registrar fees............................... *
-------
Miscellaneous................................................... *
-------
Total......................................................... $
=======
</TABLE>
- --------
* 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
<PAGE>
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
<PAGE>
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
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibits
------- -----------------------
<C> <S>
*1.1 --Form of U.S. Underwriting Agreement.
*1.2 --Form of International Underwriting Agreement.
**3.1 --Articles of Incorporation, as amended, of SBA Communications
Corporation.
**3.2 --Amended and Restated Statement of Designation of SBA Communications
Corporation.
**3.3 --By-Laws of SBA Communications Corporation.
*3.4 --Form of Restated Articles of Incorporation of SBA Communications
Corporation
*3.5 --Form of Restated By-Laws of SBA Communications Corporation.
**4.1 --Indenture, dated as of March 2, 1998, between SBA Communications
Corporation and State Street Bank and Trust Company, as trustee,
relating to $269,000,000 in aggregate principal amount at maturity of
12% Senior Discount Notes due 2008.
*4.2 --Specimen Certificate of 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.
**10.4 --$3,500,000 Promissory Note dated as of March 8, 1997 of Steven E.
Bernstein in favor of the Company.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description of Exhibits
------- -----------------------
<C> <S>
**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 --$125,000,000 Senior Secured Facilities dated as of February 5, 1999,
between the Company, Lehman Brothers Inc. General Electric Capital
Corporation and certain other lenders.
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.
10.9 --Purchase Agreement dated as of March 31, 1999, between the Company,
Com-Net Development Group, LLC., Daniel J. Eldridge and Tammy W.
Eldridge.
**10.10 --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.
*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.
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.
</TABLE>
- --------
* 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)
II-4
<PAGE>
(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
<PAGE>
Signatures
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Boca
Raton, State of Florida on April 19, 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
<PAGE>
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 19th day of April, 1999.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Steven E. Bernstein Chairman of the Board of April 19, 1999
------------------------------ Directors, President and Chief
Steven E. Bernstein Executive Officer (Principal
Executive Officer)
/s/ Jeffrey A. Stoops Chief Financial Officer April 19, 1999
------------------------------ (Principal Financial Officer)
Jeffrey A. Stoops
/s/ Robert M. Grobstein Chief Accounting Officer April 19, 1999
------------------------------ (Principal Accounting Officer)
Robert M. Grobstein
/s/ Donald B. Hebb, Jr. Director April 19, 1999
------------------------------
Donald B. Hebb, Jr.
/s/ C. Kevin Landry Director April 19, 1999
------------------------------
C. Kevin Landry
/s/ Richard W. Miller Director April 19, 1999
------------------------------
Richard W. Miller
/s/ Robert S. Picow Director April 19, 1999
------------------------------
Robert S. Picow
</TABLE>
II-7
<PAGE>
EXHIBIT 10.8
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
SBA COMMUNICATIONS CORPORATION,
A FLORIDA CORPORATION ("PARENT")
AND
SBA CONSTRUCTION SERVICES, INC.,
A FLORIDA CORPORATION ("SUBSIDIARY")
AND
COM-NET CONSTRUCTION SERVICES, INC.
A CALIFORNIA CORPORATION ("COM-NET")
AND
DANIEL J. ELDRIDGE, A RESIDENT OF
THE STATE OF TENNESSEE ("ELDRIDGE")
AND
ELDRIDGE FAMILY LIMITED PARTNERSHIP,
A TENNESSEE LIMITED PARTNERSHIP (THE "LIMITED PARTNERSHIP")
(COLLECTIVELY, THE "SHAREHOLDERS")
DATED AS OF MARCH 31, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
THE MERGER......................................................... 2
1.1 The Merger.................................................. 2
1.2 The Closing................................................. 2
1.3 Effective Time of the Merger................................ 2
1.4 Effect of the Merger........................................ 2
ARTICLE II
THE SURVIVING CORPORATION.......................................... 3
2.1 Certificate of Incorporation................................ 3
2.2 Bylaws...................................................... 3
2.3 Board of Directors and Officers............................. 3
ARTICLE III
MERGER CONSIDERATION AND PROCEDURES................................ 3
3.1 Consideration and Adjustments............................... 3
3.2 Exchange of Com-Net Common Stock Certificates............... 7
3.3 No Further Rights........................................... 7
3.4 Closing of Com-Net's Transfer Books......................... 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF COM-NET AND THE SHAREHOLDERS..... 8
4.1 Organization and Good Standing.............................. 8
4.2 Duly Authorized............................................. 8
4.3 No Subsidiaries............................................. 8
4.4 Enforceability.............................................. 8
4.5 No Conflicts................................................ 9
4.6 No Consents................................................. 9
4.7 Capitalization.............................................. 9
4.8 Title to and Issuance of Shares............................. 9
4.9 Financial Statements........................................ 10
4.10 Books and Records........................................... 10
4.11 No Undisclosed Liabilities.................................. 10
4.12 Taxes....................................................... 10
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
4.13 Employee Benefit Plans and Compliance with ERISA............ 11
4.14 Compliance with Legal Requirements and
Governmental Authorizations................................. 11
4.15 Legal Proceedings and Orders................................ 12
4.16 Absence of Certain Changes Since Date of Balance
Sheets...................................................... 12
4.17 Property.................................................... 13
4.18 Contracts................................................... 13
4.19 Hazardous Materials......................................... 16
4.20 Employees................................................... 16
4.21 Labor Relations; Compliance................................. 16
4.22 Certain Payments............................................ 16
4.23 Disclosure.................................................. 17
4.24 Related Party Transactions.................................. 17
4.25 Intentionally Deleted....................................... 17
4.26 Defects..................................................... 17
4.27 Utilities and Access........................................ 17
4.28 Liens....................................................... 18
4.29 Real Property Taxes and Assessments......................... 18
4.30 Condemnation................................................ 18
4.31 No Flood Hazard Area........................................ 18
4.32 Year 2000 Matters........................................... 18
4.33 Accredited Investor......................................... 19
4.34 Accurate Documents.......................................... 20
4.35 Accuracy of Representations and Warranties.................. 20
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SUBSIDIARY AND PARENT............ 20
5.1 Authority................................................... 20
5.2 Capitalization.............................................. 21
5.3 Reports and Financial Statements............................ 21
5.4 Merger Consideration........................................ 21
5.5 Accuracy of Representations and Warranties.................. 22
ARTICLE VI
COVENANTS OF THE SHAREHOLDERS AND COM-NET.......................... 22
6.1 Affirmative Covenants....................................... 22
6.2 Negative Covenants.......................................... 24
6.3 Lock-Up Agreement........................................... 27
ARTICLE VII
COVENANTS OF SUBSIDIARY AND PARENT................................. 27
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
7.1 Employment of Eldridge...................................... 27
7.2 Com-Net Account Receivable.................................. 30
7.3 Note Payable................................................ 30
ARTICLE VIII
CONDITIONS PRECEDENT TO SUBSIDIARY'S AND PARENT'S PERFORMANCE...... 31
8.1 Performance of Covenants and Accuracy of
Representations............................................. 31
8.2 No Legal Action Against Contemplated Transactions........... 31
8.3 No Claim Regarding Stock Ownership or Sale
Proceeds.................................................... 31
8.4 No Prohibitions............................................. 31
8.5 Estoppels................................................... 32
8.6 Title to Shares and Property................................ 32
8.7 Environmental Assets........................................ 32
8.8 Zoning and Land Use......................................... 32
8.9 FAA and FCC Matters......................................... 32
8.10 No Change in the Property................................... 33
8.11 Execution and Delivery of Documents......................... 33
8.12 Third Party Approvals....................................... 33
8.13 Opinions of Counsel......................................... 33
8.14 Subsidiary's Satisfaction................................... 33
8.15 HSR Act..................................................... 33
8.16 Completion of Audit; Reviewed Financials.................... 33
8.17 Release..................................................... 33
8.18 Approvals................................................... 34
8.19 Permits, Consents and Licenses.............................. 34
8.20 SBA/LLC Purchase Agreement.................................. 34
ARTICLE IX
CONDITIONS PRECEDENT TO SHAREHOLDERS' PERFORMANCE.................. 34
9.1 Performance of Covenants and Accuracy of
Representations............................................. 35
9.2 Execution and Delivery of Documents......................... 35
ARTICLE X
EXPENSES........................................................... 35
10.1 Attorneys' Fees............................................. 35
10.2 Transfer Taxes; Recording Costs............................. 36
10.3 Other Expenses.............................................. 36
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
ARTICLE XI
INDEMNIFICATION.................................................... 36
11.1 Survival; Right to Indemnity Not Affected by
Knowledge................................................... 36
11.2 Indemnification by the Shareholders and Com-Net............. 36
11.3 Indemnification by Subsidiary and Parent.................... 37
11.4 Procedure for Indemnification............................... 37
11.5 Right of Offset............................................. 38
ARTICLE XII
DEFAULT............................................................ 39
12.1 Subsidiary's or Parent's Default............................ 39
12.2 Com-Net or Shareholders' Default............................ 39
ARTICLE XIII
MISCELLANEOUS...................................................... 39
13.1 Brokers..................................................... 39
13.2 Interpretation.............................................. 39
13.3 Notices..................................................... 40
13.4 Enforcement Costs........................................... 40
13.5 Assignment.................................................. 40
13.6 Governing Law............................................... 40
13.7 Arbitration................................................. 40
13.8 Integration................................................. 41
13.9 Amendments.................................................. 41
13.10 Binding Effect.............................................. 41
13.11 Further Assurances.......................................... 41
13.12 Third Parties............................................... 41
13.13 Counterparts; Facsimile Delivery............................ 42
13.14 Severability................................................ 42
</TABLE>
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
----------------------------
AGREEMENT AND PLAN OF MERGER (this "Merger Agreement"), dated as of March
31, 1999, by and among SBA COMMUNICATIONS CORPORATION, a Florida corporation,
having an address at One Town Center Road, Third Floor, Boca Raton, Florida
33486, Attn: Jeffrey A. Stoops, Senior Vice President, Fax Number (561) 997-0343
("Parent"), SBA CONSTRUCTION SERVICES, INC., a Florida corporation and an
indirectly wholly owned subsidiary of Parent, having an address at One Town
Center Road, Third Floor, Boca Raton, Florida 33486, Attn: Jeffrey A. Stoops,
Senior Vice President, Fax Number (561) 997-0343 ("Subsidiary"), COM-NET
CONSTRUCTION SERVICES, INC., a California corporation, having an address at 121
Boone Ridge Drive, Johnson City, Tennessee 37615, Attn: Daniel J. Eldridge, Fax
Number (423) 952-0863 ("Com-Net"), DANIEL J. ELDRIDGE, an individual domiciled
in the State of Tennessee, having an address at 121 Boone Ridge Drive, Johnson
City, Tennessee 37615, Attn: Daniel J. Eldridge, Fax Number (423)952-0863
("Eldridge"), and ELDRIDGE FAMILY LIMITED PARTNERSHIP, a Tennessee limited
partnership, having an address at 121 Boone Ridge Drive, Johnson City,
Tennessee, Attn: Daniel J. Eldridge, Fax Number (423)952-0863 (the "Limited
Partnership," together with Eldridge, the "Shareholders"). Capitalized terms
used but not otherwise defined in this Merger Agreement shall have the meanings
set forth in Exhibit "1".
-----------
W I T N E S S E T H:
-------------------
WHEREAS, Parent, Subsidiary and Com-Net desire to merge Com-Net with and
into Subsidiary upon the terms and subject to the conditions set forth herein
(the "Merger");
WHEREAS, the Shareholders have approved the Merger, upon the terms and
subject to the conditions set forth herein;
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Sections 368(a)(1)(A)
and 368(a)(2)(D) of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, the parties to this Merger Agreement desire to adopt this Merger
Agreement as a Plan of Reorganization and to consummate the Merger in accordance
with Section 368(a) of the Code; and
WHEREAS, each of the parties to this Merger Agreement desire to make
certain representations, warranties and agreements in connection with the Merger
and also to prescribe various conditions thereto.
NOW, THEREFORE, in consideration of the foregoing premises and the
representations, warranties and agreements contained herein, the parties to this
Merger Agreement agree as follows:
<PAGE>
ARTICLE I
THE MERGER
1.1 THE MERGER. Upon the terms and subject to the conditions hereof, at
the Effective Time (as defined in Section 1.3), Com-Net shall be merged with and
into Subsidiary and the separate existence of Com-Net shall thereupon cease and
Subsidiary shall continue as the surviving corporation in the Merger (the
"Surviving Corporation") under the laws of the State of Florida under the name
set forth in the Certificate of Incorporation of the Surviving Corporation.
1.2 THE CLOSING. The closing of the Merger (the "Closing") will take
place at the offices of Com-Net located at 121 Boone Ridge Drive, Johnson City,
Tennessee, on the later of (i) April 30, 1999, or (ii) the Business Day
immediately following the date as of which each of the conditions set forth in
Articles VIII and IX have been fulfilled or waived or on such other date as the
parties hereto may mutually agree ("Closing Date"); provided, however, that in
-------- -------
any event the Closing Date shall be not later than September 30, 1999.
1.3 EFFECTIVE TIME OF THE MERGER. As soon as practicable on the Closing
Date, Com-Net and Subsidiary shall cause a Certificate of Merger to be filed
with the office of the Secretary of State of the State of California (the
"Certificate of Merger") in accordance with the provisions of the California
Corporations Codes, as amended, and shall cause a Certificate of Merger to be
filed with the office of the Secretary of State of the State of Florida (the
"Florida Filing") in accordance with the provisions of the Florida Business
Corporation Act, as amended (the "FBCA"). When used in this Merger Agreement,
the term "Effective Time" shall mean 12:01 a.m. on the Closing Date.
1.4 EFFECT OF THE MERGER. The Merger shall, from and after the
Effective Time, have all the effects provided by the FBCA. If at any time after
the Effective Time the Surviving Corporation shall consider or be advised that
any further deeds, conveyances, assignments or assurances in law or any other
acts are necessary, desirable or proper to vest, perfect or confirm, of record
or otherwise, in the Surviving Corporation, the title to any property or rights
of Subsidiary or Com-Net (the "Constituent Corporations") to be vested in the
Surviving Corporation, by reason of, or as a result of, the Merger, or otherwise
to carry out the purposes of this Merger Agreement, the Constituent Corporations
agree that the Surviving Corporation and its proper officers and directors shall
execute and deliver all such deeds, conveyances, assignments and assurances in
law and do all things necessary, desirable or proper to vest, perfect or confirm
title to such property or rights in the Surviving Corporation and otherwise to
carry out the purposes of this Merger Agreement, and that the proper officers
and directors of the Surviving Corporation are fully authorized in the name of
each of the Constituent Corporations or otherwise to take any and all such
action.
2
<PAGE>
ARTICLE II
THE SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation of
Subsidiary as in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation of the Surviving Corporation after the Effective
Time.
2.2 BYLAWS. The Bylaws of Subsidiary as in effect immediately prior to
the Effective Time shall be the Bylaws of the Surviving Corporation, until
thereafter changed or amended as provided therein or by applicable law.
2.3 BOARD OF DIRECTORS AND OFFICERS. The directors and officers (except
the President) of Subsidiary immediately prior to the Effective Time shall be
the directors and officers of the Surviving Corporation, in each case, until the
earlier of their respective resignations or the time that their respective
successors are duly elected or appointed and qualified. The Surviving
Corporation's Board of Directors shall, concurrently with the Merger, adopt an
action by written consent electing Eldridge as the President of the Surviving
Corporation.
ARTICLE III
MERGER CONSIDERATION AND PROCEDURES
3.1 CONSIDERATION AND ADJUSTMENTS. The consideration for the
Shareholders to enter into the Contemplated Transactions (collectively, the
"Merger Consideration") shall be as follows:
(a) Subsidiary shall deliver to the Shareholders the following sums
(the "Cash Consideration") by cashier's check, attorneys' trust account check or
bank wire transfer of immediately available funds to an account designated by
the applicable Shareholder:
(i) Subject to Section 7.1(f)(ii) and Section 11.5 below,
promptly following delivery to the Shareholders of the EBITDA Calculation (as
defined below) for the twelve (12) month period ended December 31, 1999,
$500,000 for each $250,000 (but not a portion thereof), if any, that the EBITDA
of the Surviving Corporation for the twelve (12) month period ended December 31,
1999 exceeds $2,000,000 but not to exceed a total of $2,500,000 (the A1999 Cash
Payment@), 66b% of which will be delivered to Eldridge and 33a% of which will be
delivered to the Limited Partnership; provided, however, at the option of Parent
-------- -------
and Subsidiary, in the event a Change in Control occurs on or before December
31, 1999, the obligations of Parent and Shareholder under this Section 3.1(a)(i)
and Section 3.1(a)(ii) below shall be satisfied by delivery of $2,500,000 upon
the occurrence of such Change in Control.
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(ii) Subject to Section 3.1(a)(i) above and Section 7.1(f)(ii)
and Section 11.5 below, promptly following delivery to the Shareholders of the
EBITDA Calculation for the twelve (12) month period ended December 31, 2000,
$500,000 for each $250,000 (but not a portion thereof), if any, that the EBITDA
of the Surviving Corporation for the twelve (12) month period ended December 31,
2000 exceeds $4,000,000 but not to exceed a total sum equal to the difference
between $2,500,000 and the 1999 Cash Payment (the A2000 Cash Payment@), 66b% of
which will be delivered to Eldridge and 33a% of which will be delivered to the
Limited Partnership; provided, however, (A) in the event a Change in Control
-------- -------
occurs on or before December 31, 1999, at the option of Parent and Subsidiary,
the obligations of Parent and Subsidiary under this Section 3.1(a)(ii) shall be
satisfied as provided in Section 3.1(a)(i) above and (B) in the event a Change
in Control occurs subsequent to December 31, 1999 but on or before December 31,
2000, at the option of Parent and Subsidiary, the obligations of Parent and
Subsidiary under this Section 3.1(a)(ii) shall be satisfied by delivery of a sum
equal to the difference between $2,500,000 and the 1999 Cash Payment upon the
occurrence of such Change in Control.
(b) By virtue of the Merger and without any action on the part of the
Shareholders, all of the Shares then issued and outstanding shall be converted
into, and become exchangeable for, shares (the "Conversion Shares") of Parent
Common Stock (the "Share Consideration") as follows:
(i) On the Closing Date, Three Hundred Thousand Conversion
Shares (the "Initial Conversion Shares"), 200,000 of which shall be issued to
Eldridge and 100,000 of which shall be issued to the Limited Partnership.
(ii) Subject to Section 7.1(f)(ii) and Section 11.5 below,
promptly following delivery to the Shareholders of the EBITDA Calculation for
the twelve (12) month period ended December 31, 1999, 160,000 Conversion Shares
for each $250,000 (but not a portion thereof), if any, that the EBITDA of the
Surviving Corporation for the twelve (12) month period ended December 31, 1999
exceeds $2,000,000 but not to exceed a total of 800,000 Conversion Shares (the
"1999 Conversion Shares"), 66b% of which will be issued to Eldridge and 33a% of
which will be issued to the Limited Partnership; provided, however, in the
-------- -------
event a Change in Control occurs on or before December 31, 1999, at the option
of Parent and Subsidiary, the obligations of Parent and Shareholder under this
Section 3.1(b)(ii) and Sections 3.1 (b)(iii) and (b)(iv) below shall be
satisfied by delivery of 800,000 Conversion Shares upon the occurrence of such
Change in Control.
(iii) Subject to Section 3.1(b)(ii) above and Section 7.1(f)(ii)
and Section 11.5 below, promptly following delivery to the Shareholders of the
EBITDA Calculation for the twelve (12) month period ended December 31, 2000,
100,000 Conversion Shares for each $250,000 (but not a portion thereof), if any,
that the EBITDA of the Surviving Corporation for the twelve (12) month period
ended December 31, 2000 exceeds $3,000,000 and is less than or equal to
$4,000,000 but not to exceed a total of 400,000 Conversion Shares (the "2000
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Conversion Shares"), 66b% of which will be issued to Eldridge and 33a% of which
will be issued to the Limited Partnership; provided, however, (A) in the event a
-------- -------
Change in Control occurs on or before December 31, 1999, at the option of Parent
and Subsidiary, the obligations of Parent and Subsidiary under this Section
3.1(b)(iii) shall be satisfied as provided in Section 3.1(b)(ii) above and (B)
in the event a Change in Control occurs subsequent to December 31, 1999 but on
or before December 31, 2000, at the option of Parent and Subsidiary, the
obligations of Parent and Shareholder under this Section 3.1(b)(iii) and Section
3.1(b)(iv) below shall be satisfied by delivery of 400,000 Conversion Shares
upon the occurrence of such Change in Control.
(iv) Subject to Sections 3.1(b)(ii) and (iii) above and Section
7.1(f)(vi) and Section 11.5 below, in addition to the 2000 Conversion Shares to
which the Shareholders may be entitled under Section 3.1(b)(iii) above, promptly
following delivery to the Shareholders of the EBITDA Calculation for the twelve
(12) month period ended December 31, 2000, 160,000 Conversion Shares for each
$250,000 (but not a portion thereof), if any, that the EBITDA of the Surviving
Corporation for the twelve (12) month period ended December 31, 2000 exceeds
$4,000,000 but not to exceed a total number of Conversion Shares equal to the
difference between 800,000 and the total number of 1999 Conversion Shares issued
to the Shareholders (the "Additional 2000 Shares"), 66b% of which will be issued
to Eldridge and 33a% of which will be issued to the Limited Partnership;
provided, however, (A) in the event a Change in Control occurs on or before
- -------- -------
December 31, 1999, at the option of Parent and Subsidiary, the obligations of
Parent and Subsidiary under this Section 3.1(b)(iv) shall be satisfied as
provided in Section 3.1(b)(ii) above and (B) in the event a Change in Control
occurs subsequent to December 31, 1999 but on or before December 31, 2000, at
the option of Parent and Subsidiary, the obligations of Parent and Subsidiary
under this Section 3.1(b)(iv) shall be satisfied as provided in Section
3.1(b)(iii) above.
(c) For the purposes of calculating the amounts of the 1999 Cash
Payment and/or 2000 Cash Payment, if any, and/or the number of 1999 Conversion
Shares, 2000 Conversion Shares and/or the Additional 2000 Conversion Shares, if
any, which the Shareholders may be entitled to under clauses Sections 3.1(a) and
(b) above, promptly following each of December 31, 1999 and December 31, 2000,
the Parent shall cause its accountants to calculate and deliver to the
Shareholders a report of the EBITDA of the Surviving Corporation for the twelve
(12) month period then ended (in each instance, an "EBITDA Calculation").
(d) Other than in connection with a Change in Control, for purposes
of Sections 3.1(a) and (b) above, Parent agrees to maintain the Surviving
Corporation as an independent subsidiary and not merge it with or otherwise
consolidate it into Parent or any Affiliate of Parent until December 31, 1999,
or until Eldridge and the Limited Partnership are no longer entitled to receive
Cash Consideration or Share Consideration pursuant to Sections 3.1(a) or (b)
above. If the Surviving Corporation is merged with or otherwise consolidated
into any Person (whether Parent or an Affiliate of Parent) after December 31,
1999, until Eldridge and the Limited Partnership are no longer entitled to
receive Cash Consideration or Share Consideration
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pursuant to Sections 3.1(a) or (b) above, Parent shall maintain (or cause its
successor or the successor of the Subsidiary to maintain) books and records so
as to permit the separate calculation of the EBITDA Calculation.
(e) The Conversion Shares to be delivered to each of the Shareholders
pursuant to the Merger in accordance with Section 3.1(b) hereof shall be subject
to the following restrictions on transfer:
"The securities represented hereby have not been
registered under the Securities Act of 1933, as
amended, or applicable state securities laws. These
securities have been acquired for investment and not
with a view to distribution or resale, and may not be
sold, pledged, hypothecated or otherwise transferred
without an effective registration statement for such
securities under the Securities Act of 1933, as
amended, and applicable state securities laws, or the
Company has received the written opinion of counsel
satisfactory to the Company to the effect that
registration is not required under such act and
applicable state securities laws.
The Company will furnish to the holder of this
certificate upon request and without charge a full
statement describing the Company'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 securities represented by this certificate are also
subject to additional restrictions on transfer
specified in the Agreement and Plan of Merger, dated as
of March 31, 1999, among the Company, SBA Construction
Services, Inc., a Florida corporation, Com-Net
Construction Services, Inc., a California corporation,
Daniel J. Eldridge, an individual, and Eldridge Family
Limited Partnership, a Tennessee limited partnership."
3.2 EXCHANGE OF COM-NET COMMON STOCK CERTIFICATES.
(a) The Initial Conversion Shares shall be deemed to have been issued
at the Effective Time. The 1999 Conversion Shares and/or the 2000 Conversion
Shares and/or the Additional 2000 Conversion Shares shall be deemed to have been
issued, if at all, at such time as the Shareholders become entitled to the same,
if at all, under Section 3.1(b) above.
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(b) From and after the Effective Time, Eldridge and the Limited
Partnership shall be entitled to receive in exchange for surrendering to
Subsidiary their certificates which, immediately prior to the Effective Time,
represented outstanding Shares (the "Com-Net Certificates"), certificates
representing 200,000 and 100,000 Initial Conversion Shares, respectively. From
and after the Effective Time, Subsidiary shall be entitled to treat each Com-
Net Certificate which has not yet been surrendered for exchange as evidencing
the ownership of the number of Initial Conversion Shares of Parent Common Stock
into which the Shares represented by such Com-Net Certificate shall have been
converted pursuant to Section 3.1 hereof, notwithstanding the failure of
Eldridge or the Limited Partnership to surrender such Com-Net Certificate.
However, notwithstanding any other provision of this Merger Agreement, until the
Shareholders or their transferees have surrendered their Com-Net Certificates
for exchange as provided herein, no dividends shall be paid with respect to any
shares represented by such Com-Net Certificate. Upon surrender of a Com-Net
Certificate, there shall be paid to the holder of such Com-Net Certificate the
amount of any dividends which theretofore became payable, but which were not
paid by reason of the foregoing. If any certificate for shares of Parent Common
Stock is to be issued in a name other than that in which Com-Net Certificate
surrendered in exchange therefor is registered, it shall be a condition of such
exchange that the person requesting such exchange shall pay any transfer or
other taxes required by reason of the issuance of certificates for such shares
of Parent Common Stock in a name other than that of the registered holder of any
such Com-Net Certificate surrendered.
3.3 NO FURTHER RIGHTS. From and after the Effective Time, holders of Com-
Net Certificates shall cease to have any rights as shareholders of Com-Net or
the Surviving Corporation, except as provided herein or by law.
3.4 CLOSING OF COM-NET'S TRANSFER BOOKS. At the Effective Time, the
stock transfer books of Com-Net shall be closed and no transfer of Com-Net
Common Stock shall be made thereafter. If after the Effective Time Com-Net
Certificates are presented to Subsidiary or the Surviving Corporation, they
shall be canceled and exchanged for Parent Common Stock as provided in Section
3.2.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
COM-NET AND THE SHAREHOLDERS
As a material inducement to Subsidiary and Parent to enter into this Merger
Agreement, Com-Net and each of the Shareholders represent and warrant to
Subsidiary and Parent as follows:
4.1 ORGANIZATION AND GOOD STANDING.
(a) COM-NET. Com-Net is a corporation duly organized, validly
existing, and in good standing under the laws of the state of its incorporation,
with full corporate power and
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authority to conduct its business as it is now being conducted, to own or use
the properties and assets that it purports to own or use, and to perform all its
obligations under the Office Leases, Construction Contracts, Ground Leases,
Easements, Tenant Leases and all other Contracts to which it is a party. Com-Net
is duly qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which either the
ownership or use of the properties owned or used by it, or the nature of the
activities conducted by it, requires such qualification.
(b) THE LIMITED PARTNERSHIP. The Limited Partnership is a limited
partnership duly organized, validly existing and in good standing under the laws
of the state of its organization, with full power and authority to conduct its
business as it is now being conducted.
4.2 DULY AUTHORIZED. Com-Net and each of the Shareholders has the
absolute and unrestricted right, power, authority (corporate or otherwise), and
capacity to execute and deliver this Merger Agreement and to perform their
obligations under this Merger Agreement and the Shareholders' Closing Documents
to which each of them is a party and to perform their obligations under this
Merger Agreement and the Shareholders' Closing Documents to which each of them
is a party. The execution and delivery of this Merger Agreement and each of the
Shareholders' Closing Documents, as well as the consummation of the Contemplated
Transactions, have been approved by the Board of Directors and each shareholder
of Com-Net, and no other corporate or other proceedings on the part of Com-Net
and the Limited Partnership (including, without limitation, obtaining approval
of Com-Net's shareholders or directors or the Limited Partnership's limited or
general partners) shall be necessary or required to authorize this Merger
Agreement, each of the Shareholders' Closing Documents or the Contemplated
Transactions.
4.3 NO SUBSIDIARIES. Com-Net does not own any Subsidiaries.
4.4 ENFORCEABILITY. This Merger Agreement constitutes the legal, valid,
and binding obligation of each Shareholder and Com-Net, enforceable against each
Shareholder and Com-Net in accordance with its terms. Upon the execution and
delivery by each Shareholder and Com-Net of each of the Shareholders' Closing
Documents to which it is a party, each of the Shareholders' Closing Documents
will constitute the legal, valid, and binding obligations of each Shareholder
and Com-Net, enforceable against them in accordance with its respective terms.
4.5 NO CONFLICTS. Neither the execution and delivery of this Merger
Agreement nor the consummation or performance of any of the transactions
contemplated by this Merger Agreement, each of the Shareholders' Closing
Documents, or any agreement, instrument or document contemplated thereby, will,
directly or indirectly (with or without notice or lapse of time or both) (a)
contravene, conflict with, or result in a violation of any provision of the
Organizational Documents of Com-Net, the Certificate of Limited Partnership of
the Limited Partnership or the Agreement of Limited Partnership of the Limited
Partnership, true, correct and complete copies of which are attached hereto as
Exhibit "4.5," or any resolution adopted by the
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board of directors or the shareholders of Com-Net, or by the general partner of
the Limited Partnership, (b) cause Subsidiary or Com-Net to become subject to,
or to become liable for the payment of, any tax, (c) except for the Com-Net
Stock Purchase Agreement, contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a default or
exercise any remedy under, any Legal Requirement or any Contract to which Com-
Net or either Shareholder is a party or any of the assets owned or used by Com-
Net may be subject, or (d) result in the imposition or creation of any
encumbrance upon or with respect to any of the assets owned or used by Com-Net.
4.6 NO CONSENTS. Except as otherwise provided in this Merger Agreement,
neither Com-Net nor either Shareholder shall be required to give any notice to
or obtain any consent or approval from any Person in connection with the
execution and delivery of this Merger Agreement or the consummation or
performance of any of the Contemplated Transactions (including, without
limitation, any Person who is a party to the Office Leases, Construction
Contracts, Ground Leases, Easements, Tenant Leases or any other Contract).
4.7 CAPITALIZATION. The correct and complete authorized capital stock of
Com-Net consists of (i) 100,000 shares of common stock, no par value per share,
of which 100 shares are issued and outstanding (collectively, the "Shares").
There are no Contracts relating to the issuance, delivery, sale, or transfer of
any equity securities or other securities of Com-Net.
4.8 TITLE TO AND ISSUANCE OF SHARES. The Shareholders are the record and
beneficial owners and holders of the Shares, free and clear of all encumbrances
other than the escrow provided for in the Com-Net Stock Purchase Agreement,
which escrow shall be released at or prior to the Closing Date. On the Closing
Date, the Shareholders will be the record and beneficial owners and holders of
the Shares, free and clear of all encumbrances. None of the Shares are subject
to pre-emptive or similar rights, either pursuant to any Organizational
Document, Legal Requirement or any Contract, and no Person has any pre-emptive
rights or similar rights to purchase or receive any equity securities or other
securities of Com-Net.
4.9 FINANCIAL STATEMENTS. Com-Net has delivered to Subsidiary audited
balance sheets of Com-Net at and as of December 31, 1996, December 31, 1997 and
December 31, 1998, the related audited statements of income, changes in
stockholders' equity, and cash flows for the fiscal year then ended, including
the notes thereto, together with the report thereon of Blackburn, Childers and
Steagall, PLC, independent certified public accountants. The Financial
Statements fairly present the financial condition and the results of operations,
changes in stockholders' equity, and cash flows of Com-Net at the respective
dates of and for the periods referred to in such Financial Statements, all in
accordance with GAAP. The Financial Statements referred to in this Section 4.9
reflect the consistent application of such accounting principles throughout the
periods involved. No financial statements of any Person other than Com-Net are
required by GAAP to be included in the Financial Statements.
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4.10 BOOKS AND RECORDS. The books of account, minute books, stock record
books, and other records of Com-Net, all of which have been made available to
Subsidiary, are true, complete and correct and have been maintained in
accordance with sound business practices. At the Closing, all such books and
records will be delivered to Subsidiary.
4.11 NO UNDISCLOSED LIABILITIES. Com-Net has no liabilities or obligations
of any nature (whether known or unknown and whether absolute, accrued,
contingent, or otherwise), except for liabilities or obligations reflected or
reserved against in the Balance Sheets and current liabilities incurred in the
Ordinary Course of Business since the respective dates thereof.
4.12 TAXES. Com-Net has filed or caused to be filed (on a timely basis
since January 1, 1992) all Tax Returns that are or were required to be filed by
or with respect to any of them, either separately or as a member of a group of
corporations, pursuant to applicable Legal Requirements. The Shareholders have
delivered or made available to Subsidiary copies of all such Tax Returns
relating to income or franchise taxes filed since January 1, 1992. Com-Net has
paid, or made provision for the payment of, all taxes that have or may have
become due pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by any Shareholder or Com-Net. Except for an audit
conducted by the Audit Division of the Internal Revenue Service of Com-Net's
U.S. Federal Tax Returns for the taxable year ending 1996 which determined that
less than $10,000 in additional taxes were due, none of the federal and state
income Tax Returns of Com-Net has been audited by the IRS or relevant state tax
authorities. Com-Net has delivered to Subsidiary and Parent a copy of the
documentation issued by the Internal Revenue Service in connection with the
closure of the 1996 audit indicating that less than $10,000 in additional taxes
were due. The charges, accruals, and reserves with respect to taxes on the
respective books of Com-Net are adequate (determined in accordance with GAAP)
and are at least equal to Com-Net's liability for taxes. There exists no
proposed tax assessment against Com-Net except as disclosed in the Balance
Sheets or in the Disclosure Letter. No consent to the application of Section
341(f)(2) of the Code has been filed with respect to any property or assets
held, acquired, or to be acquired by Com-Net. All taxes that Com-Net is or was
required by Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental
Authority or other Person. All Tax Returns filed by Com-Net are true, correct,
and complete. There is no tax sharing agreement that will require any payment
by Com-Net after the date of this Merger Agreement.
4.13 EMPLOYEE BENEFIT PLANS AND COMPLIANCE WITH ERISA. Except as set forth
on the Disclosure Letter, neither Com-Net nor any of its Affiliates has ever
established, sponsored, maintained, contributed to or otherwise participated in,
or had any obligation to establish, sponsor, maintain, contribute to or
otherwise participate in, any compensation, profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or other employee benefit
plan or arrangement which is or was governed by or subject to the Employee
Retirement Income Security Act of 1974, or any successor law, or any regulations
or rules issued pursuant to that Act or any successor law. Neither Com-Net nor
any of its Affiliates provide health or welfare benefits for any retired or
former employee or are obligated to provide health or welfare benefits
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to any active employee following such employee's retirement or other termination
of service. The consummation of the Contemplated Transactions will not result in
the payment, vesting, or acceleration of any benefit.
4.14 COMPLIANCE WITH LEGAL REQUIREMENTS AND GOVERNMENTAL AUTHORIZATIONS.
Com-Net is, and at all times has been, in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets. No event has
occurred or circumstance exists that (with or without notice or lapse of time or
both) may constitute or result in a violation by Com-Net of, or a failure on the
part of Com-Net to comply with, any Legal Requirement, or may give rise to any
obligation on the part of Com-Net to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature. Com-Net has not received any
notice or other communication (whether oral or written) from any Governmental
Authority or any other Person regarding any actual, alleged, possible, or
potential violation of, or failure to comply with, any Legal Requirement, or any
actual, alleged, possible, or potential obligation on the part of Com-Net to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature. The use, maintenance and operation of the Property by Com-Net,
Eldridge, the Tenants and, to the best knowledge of the Shareholders and Com-
Net, all other Persons, is in full compliance with all Legal Requirements,
Easements, restrictive covenants, reservations and similar matters of record.
There are no outstanding notices of violation currently in effect for the Com-
Net or Property. The Disclosure Letter contains a complete and accurate list of
each Governmental Authorization that is held by Com-Net or that otherwise
relates to the business of, or to any of the assets owned or used by, Com-Net.
Each Governmental Authorization listed or required to be listed in the
Disclosure Letter is valid and in full force and effect. Com-Net is, and at all
times has been, in full compliance with all of the terms and requirements of
each Governmental Authorization identified or required to be identified in the
Disclosure Letter. No event has occurred or circumstance exists that may (with
or without notice or lapse of time or both) constitute or result directly or
indirectly in a violation of or a failure to comply with any term or requirement
of any Governmental Authorization listed or required to be listed in the
Disclosure Letter, or result directly or indirectly in the revocation,
withdrawal, suspension, cancellation, or termination of, or any modification to,
any Governmental Authorization listed or required to be listed in the Disclosure
Letter. Com-Net has not received any notice or other communication (whether
oral or written) from any Governmental Authority or any other Person regarding
any actual, alleged, possible, or potential violation of or failure to comply
with any term or requirement of any Governmental Authorization, or any actual,
proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Governmental Authorization.
All applications required to have been filed for the renewal of the Governmental
Authorizations listed or required to be listed in the Disclosure Letter have
been duly filed on a timely basis with the appropriate Governmental Authorities,
and all other filings required to have been made with respect to such
Governmental Authorizations have been duly made on a timely basis with the
appropriate Governmental Bodies. The Governmental Authorizations listed in
Disclosure Letter collectively constitute all of the Governmental Authorizations
necessary to permit Com-Net to lawfully conduct and operate its businesses in
the manner it currently conducts and operates such
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businesses and to permit Com-Net to own and use its assets in the manner in
which it currently owns and uses such assets.
4.15 LEGAL PROCEEDINGS AND ORDERS. There is no pending Proceeding that has
been commenced by or against Com-Net or that otherwise relates to or may affect
the business of, or any of the assets owned or used by, Com-Net, or that
challenges, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions. To the
best knowledge of the Shareholders and Com-Net, no such Proceeding has been
threatened, and no event has occurred or circumstance exists that may give rise
to or serve as a basis for the commencement of any such Proceeding. Neither
Com-Net nor any Shareholder is subject to any Order that relates to the business
of, or any of the assets owned or used by, Com-Net. No officer, director,
agent, or employee of Com-Net is subject to any Order that prohibits such
officer, director, agent, or employee from engaging in or continuing any
conduct, activity, or practice relating to the business of Com-Net.
4.16 ABSENCE OF CERTAIN CHANGES SINCE DATE OF BALANCE SHEETS. Except as
set forth in the Disclosure Letter, since the date of the Balance Sheets, Com-
Net has conducted its business only in the Ordinary Course of Business and there
has not been any (a) change in Com-Net's authorized or issued capital stock,
other than the withdrawal of authorization of certain preferred stock; grant of
any stock option or right to purchase shares of capital stock of Com-Net;
issuance of any security convertible into such capital stock; grant of any
registration rights, purchase, redemption, retirement, or other acquisition by
Com-Net of any shares of any such capital stock; or declaration or payment of
any dividend or other distribution or payment in respect of shares of capital
stock, (b) amendment to the Organizational Documents of Com-Net other than in
connection with the withdrawal of authorization of certain preferred stock
referred to above, (c) payment or increase by Com-Net of any bonuses, salaries,
or other compensation to any stockholder, director, officer, or (except in the
Ordinary Course of Business) employee or entry into any employment, severance,
or similar Contract with any director, officer, or employee, (d) adoption of, or
increase in the payments to or benefits under, any profit sharing, bonus,
deferred compensation, savings, insurance, pension, retirement, or other
employee benefit plan for or with any employees of Com-Net, (e) damage to or
destruction or loss of any asset or property of Com-Net, whether or not covered
by insurance, materially and adversely affecting the properties, assets,
business, financial condition, or prospects of Com-Net, taken as a whole, (f)
entry into, termination of, or receipt of notice of termination of any Contract
or transaction involving a total remaining commitment by or to Com-Net of at
least $20,000, (g) sale, lease, or other disposition of any asset or property of
Com-Net or mortgage, pledge, or imposition of any lien or other encumbrance on
any material asset or property of Com-Net, (h) cancellation or waiver of any
claims or rights, (i) material change in the accounting methods used by Com-Net,
(j) material adverse change in the business, operations, properties, prospects,
assets, or condition of Com-Net, or event that may result in such a material
adverse change, (k) Indebtedness other than in the Ordinary Course of Business,
(l) guarantee or other endorsement of obligations of any Person by Com-Net, or
Contract by Com-Net to do any of the foregoing.
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4.17 PROPERTY. Com-Net has good title to the Appurtenant Property, the
Intangible Personal Property and the Tangible Personal Property (including,
without limitation, Towers, Improvements, equipment, vehicles and inventory),
free and clear of all liens and encumbrances, excepting only the Permitted
Exceptions. Com-Net has good and marketable fee simple title to the Owned Real
Property and the Improvements on the Owned Real Property, free and clear of all
liens and encumbrances, excepting only the Permitted Exceptions. The Disclosure
Letter lists all vehicles owned or leased by Com-Net. Notwithstanding the
forgoing, in accordance with Section 6.1(p) below, Com-Net shall assign and
transfer certain of the Property to the LLC at or prior to the Closing in
connection with substantial sums which are owed by the LLC for communication
tower development, the payment of which has been assured by the Ground Leases
and Tenant Leases having been entered into by Com-Net.
4.18 CONTRACTS. Upon delivery to Subsidiary, the Disclosure Letter shall
contain a complete and accurate list, and Eldridge and Com-Net shall have
delivered to Subsidiary true and complete copies, of:
(a) the Office Leases. Com-Net is the original lessee (or has validly
succeeded to the rights of the original lessee) under the Office Leases and
holds the leasehold interests created under the Office Leases. The Office
Leases are, and at Closing, shall be, free and clear of all liens and
encumbrances. Furthermore, Com-Net and the Shareholders, jointly and severally,
represent and warrant that (i) the Office Leases are in full force and effect
and have not been materially modified or amended except as set forth in the
Disclosure Letter, (ii) Com-Net is in actual possession of the leased premises
under the Office Leases, (iii) Com-Net has paid the rent set forth in the Office
Leases on a current basis and there are no past due amounts, (iv) except as
expressly set forth in the Office Leases, Com-Net is not obligated to pay any
additional rent or charges to the landlord under the Office Leases (the
"Landlords") for any period subsequent to the Closing Date, and (v) neither Com-
Net nor the Shareholders have received notice from or given notice to the
Landlords claiming that the Landlords or Com-Net are in default under the Office
Leases, and, to the best knowledge of Com-Net and the Shareholders, there is no
event which, with the giving of notice or the passage of time or both, would
constitute such a default;
(b) the Construction Contracts. The Construction Contracts are, and
at the Closing will be, free and clear of all liens and encumbrances. Except
for the rights of the Owners, as owners only, pursuant to the Construction
Contracts, and except for the rights of the other parties to each of the
Construction Contracts, if any, no Person other than Com-Net will on the Closing
Date have any right or claim with respect to the Construction Contracts. Com-
Net and the Shareholders, jointly and severally, represent and warrant that (i)
each Construction Contract is in full force and effect and has not been
materially modified or amended, (ii) Com-Net is collecting the progress
payments set forth in the Construction Contracts on a current basis and there
are no past due or prepaid amounts thereunder, (iii) Com-Net has not given
notice to any Owner claiming that the Owner is in default under its Construction
Contract, and, to the best knowledge of Com-Net and the Shareholders, there is
no event which, with the giving of notice
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or the passage of time or both, would constitute such a default, (iv) Com-Net
has not received notice from any Owner claiming that Com-Net is in default under
the Construction Contract, which default or defect remains in any manner
uncured, and (v) Com-Net has not received notice from any Owner asserting any
Claims, offsets or defenses of any nature whatsoever to the performance of its
obligations under the Construction Contracts and, to the best knowledge of Com-
Net and the Shareholders, there is no event which, with the giving of notice or
the passage of time or both, would constitute the basis of such Claim, offset or
defense;
(c) the Ground Leases. Com-Net is the original lessee (or has validly
succeeded to the rights of the original lessee) under each of the Ground Leases
with respect to the Leased Real Property, holds the leasehold interest created
under each of the Ground Leases, and is the sole owner of the Improvements
located on the Leased Real Property being leased thereunder. The Ground Leases
and the Improvements in connection therewith are, and at Closing, shall be, free
and clear of all liens and encumbrances, excepting only the Permitted
Exceptions. Furthermore, Com-Net and the Shareholders, jointly and severally,
represent and warrant that (i) each Ground Lease is in full force and effect and
has not been materially modified or amended, (ii) Com-Net is in actual
possession of the leased premises under each of the Ground Leases, (iii) Com-Net
has paid the rent set forth in each of the Ground Leases on a current basis and
there are no past due amounts, (iv) except as expressly set forth in the Ground
Leases, Com-Net is not obligated to pay any additional rent or charges to any of
the Ground Lessors for any period subsequent to the Closing Date, and (v)
neither Com-Net nor the Shareholders have received notice from or given notice
to any Ground Lessor claiming that such Ground Lessor or the Shareholders are in
default under any of the Ground Leases, and, to the best knowledge of Com-Net
and the Shareholders, there is no event which, with the giving of notice or the
passage of time or both, would constitute such a default. Notwithstanding the
foregoing, as contemplated in Section 4.17 above and in accordance with Section
6.1(p) below, Com-Net shall assign and transfer the Ground Leases to the LLC at
or prior to the Closing;
(d) the Tenant Leases. Com-Net is the original lessor (or has validly
succeeded to the rights of the original lessor) under each of the Tenant Leases.
The Tenant Leases are, and at the Closing will be, free and clear of all liens
and encumbrances, excepting only the Permitted Exceptions. Except for the
rights of the Tenants, as tenants only, pursuant to the Tenant Leases, and
except for the rights of the other parties to each of the Ground Leases, no
Person other than Com-Net will on the Closing Date be in, or have any right or
claim to, possession of any of the Property. Other than as may be provided by
the Ground Leases and the Tenant Leases, there are no leases, subleases,
licenses or other occupancy agreements (written or oral) which grant any
possessory interest in or to the Property or the Improvements thereon, or which
grant other rights with respect to the use of any of the Property. Com-Net and
the Shareholders, jointly and severally, represent and warrant that (i) each
Tenant Lease is in full force and effect and has not been materially modified or
amended, (ii) each Tenant has accepted possession of its premises under its
Tenant Lease, (iii) Com-Net is collecting the rent set forth in each Tenant
Lease on a current basis and there are no past due amounts thereunder in excess
of one month, (iv) except as expressly set forth in the Tenant Leases, no Tenant
is entitled to any
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rental concessions or abatements in rent for any period subsequent to the
Closing Date, (v) Com-Net has not given notice to any Tenant claiming that the
Tenant is in default under its Tenant Lease, and, to the best knowledge of Com-
Net and the Shareholders, there is no event which, with the giving of notice or
the passage of time or both, would constitute such a default, (vi) Com-Net has
not received notice from any Tenant claiming that Com-Net is in default under
the Lease, or claiming that there are defects in the Improvements, which default
or defect remains in any manner uncured, (vii) Com-Net has not received notice
from any Tenant asserting any Claims, offsets or defenses of any nature
whatsoever to the performance of its obligations under its Tenant Lease and, to
the best knowledge of the Shareholders and Com-Net, there is no event which,
with the giving of notice or the passage of time or both, would constitute the
basis of such Claim, offset or defense, and (viii) except as expressly set forth
in the Tenant Leases, there are no security deposits or prepaid rentals under
any of the Tenant Leases. Notwithstanding the foregoing, as contemplated in
Section 4.17 above and in accordance with Section 6.1(p) below, Com-Net shall
assign and transfer the Tenant Leases to the LLC at or prior to the Closing;
(e) the Easements. Com-Net is the original grantee (or has validly
succeeded to the rights of the original grantee) under each of the Easements,
has good title to the Easements, and is the sole owner of the Improvements
located on the easement areas thereunder. At Closing, the Easements and the
Improvements in connection therewith shall be free and clear of all liens and
encumbrances, excepting only the Permitted Exceptions. Com-Net and the
Shareholders, jointly and severally, represent and warrant that (i) each
Easement is in full force and effect and has not been materially modified or
amended, (ii) Com-Net is in actual possession of the easement area under each of
the Easements, (iii) except as set forth in the Ground Leases, Com-Net is not
obligated to pay any rent or charges under any of the Easements for any period
subsequent to the Closing Date, and (iv) Com-Net has not given notice to or
received notice from any Person claiming that the Person or Com-Net is in
default under any Easement, and, to the best knowledge of Com-Net and the
Shareholders, there is no event which, with the giving of notice or the passage
of time or both, would constitute such a default. Notwithstanding the
foregoing, as contemplated in Section 4.17 above and in accordance with Section
6.1(p) below, Com-Net shall assign and transfer the Easements to the LLC at or
prior to the Closing;
(f) any other Contract to which Com-Net is a party or by which any of
the Property is bound. Com-Net and the Shareholders, jointly and severally,
represent and warrant that (i) each such Contract is in full force and effect
and has not been modified or amended, (ii) Com-Net has paid all sums due
thereunder on a current basis and there are no past due amounts, and (iii)
neither Com-Net nor the Shareholders have received notice from or given notice
to any Person claiming that such Person, Com-Net or the Shareholders are in
default under any such Contract, and, to the best knowledge of Com-Net and the
Shareholders, there is no event which, with the giving of notice or the passage
of time or both, would constitute such a default under any such Contract.
4.19 HAZARDOUS MATERIALS. The Property has not in the past been used, and
is not presently being used, for the handling, storage, transportation, or
disposal of hazardous or toxic
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substances, materials, pollutants or waste (or similar items under applicable
environmental Legal Requirements). To the best knowledge of Eldridge and Com-
Net, there has been no release of any such items into the environment from the
Real Property or in, on or under the Real Property.
4.20 EMPLOYEES. The Disclosure Letter contains a complete and accurate
list of the following information for each employee or director of Com-Net,
including each employee on leave of absence or layoff status: employer; name;
job title; current compensation paid or payable and any change in compensation
since January 1, 1995; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under Com-Net's pension, retirement,
profit- sharing, thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including investment credit or
payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, or any other benefit plan. The Disclosure Letter also contains a
complete and accurate list of the following information for each retired
employee or director of Com-Net, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension benefit, pension
option election, retiree medical insurance coverage, retiree life insurance
coverage, and other benefits.
4.21 LABOR RELATIONS; COMPLIANCE. Since January 1, 1996, there has not
been, there is not presently pending or existing, and there is not threatened,
any Proceeding against or affecting Com-Net relating to the alleged violation of
any Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Authority, organizational activity, or other labor
or employment dispute against or affecting Com-Net or its premises. No event
has occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. Com-Net has complied in all respects with all
Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. Com-Net is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
4.22 CERTAIN PAYMENTS. Neither Com-Net nor any director, officer, agent,
or employee of Com-Net, the Shareholders or other Person associated with or
acting for or on behalf of Com-Net or the Shareholders, has directly or
indirectly made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback, or other payment to any Person, private or public, regardless
of form, whether in money, property, or services to obtain favorable treatment
in securing business, to pay for favorable treatment for business secured, to
obtain special concessions or for special concessions already obtained, for or
in respect of any Com-Net, the Shareholders or any Affiliate thereof, or in
violation of any Legal Requirement, or established or maintained any fund or
asset that has not been recorded in the books and records of Com-Net.
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4.23 DISCLOSURE. No representation or warranty of any Shareholder or Com-
Net in this Merger Agreement and no statement in the Disclosure Letter omits to
state a material fact necessary to make the statements herein or therein, in
light of the circumstances in which they were made, not misleading. There is no
fact known to any Shareholder or Com-Net that has specific application to any
Shareholder or Com-Net (other than general economic or industry conditions) and
that materially adversely affects the assets, business, prospects, financial
condition, or results of operations of Com-Net that has not been set forth in
this Merger Agreement or the Disclosure Letter.
4.24 RELATED PARTY TRANSACTIONS. Other than the Headquarters Lease,
neither Com-Net, any Shareholder, nor any Related Person of any Shareholder or
Com-Net has, or has had, any interest in any property (whether real, personal,
or mixed and whether tangible or intangible), used in or pertaining to Com-Net's
business. Except as otherwise set forth in the Disclosure Letter, neither Com-
Net, any Shareholder, nor any Related Person of any Shareholder or Com-Net is,
or has owned (of record or as a beneficial owner) an equity interest or any
other financial or profit interest in, a Person that has had business dealings
or a material financial interest in any transaction with Com-Net, or engaged in
competition with Com-Net with respect to any of the products or services of Com-
Net in any market presently served by Com-Net. Except as set forth in the
Disclosure Letter, neither Com-Net, any Shareholder nor any Related Person of
any Shareholder or Com-Net is a party to any Contract with, or has any claim or
right against, Com-Net.
4.25 INTENTIONALLY DELETED.
4.26 DEFECTS. To best knowledge of Com-Net and the Shareholders, there are
no physical, structural or mechanical defects in the Appurtenant Property,
Improvements, Tangible Personal Property or Towers, and the same are suitable
and adequate for the use for which they were originally designed.
4.27 UTILITIES AND ACCESS. All electric, telephone, drainage facilities
and other utilities required for use and operation of the Offices and the Towers
are installed up to the boundaries of the Real Property on which the Towers are
located within valid, written, recorded easements. Such utilities are in good
working order, meet all current codes and ordinances and are of adequate size
and capacity to service the Offices and the Towers. The Real Property on which
the Towers are located has adequate, direct, indefeasible legal and practical
pedestrian and vehicular access to public roads.
4.28 LIENS. Except as set forth in the Disclosure Letter, no right or
interest in or to property of any kind of Com-Net, whether real, personal, or
mixed and whether tangible or intangible, is subject to any mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), charge or other security interest or any preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement and any
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capital lease having substantially the same economic effect as any of the
foregoing), except Permitted Exceptions.
4.29 REAL PROPERTY TAXES AND ASSESSMENTS. All ad valorem real property
taxes for the Real Property and all personal property taxes for the Tangible
Personal Property have been fully paid for the year 1999, and all prior years.
There are no existing or pending special assessments, fees or similar
obligations affecting the Real Property or the Appurtenant Property, which may
be assessed by any Governmental Authority. Com-Net and each Shareholder will be
liable for any such special assessments, fees or similar obligations affecting
the Real Property or Appurtenant Property that arise between the Effective Date
and the Closing Date.
4.30 CONDEMNATION. To the knowledge of Eldridge and Com-Net, there are no
present or pending legal or administrative proceedings relative to condemnation,
or other taking by any Governmental Authority, of any portion of the Property,
and no such proceeding is contemplated.
4.31 NO FLOOD HAZARD AREA. To the best knowledge of Com-Net and Eldridge,
none of the Real Property on which the Towers are located is located within an
area that has been designated by the Federal Insurance Administration, the Army
Corps of Engineers, the Federal Emergency Management Administration or any other
Governmental Authority as being subject to any special or increased flooding
hazards.
4.32 YEAR 2000 MATTERS. Any reprogramming required to permit the proper
functioning, in and following the year 2000, of (i) Com-Net's computer systems
and (ii) equipment containing embedded microchips (including systems and
equipment supplied by others or with which Com-Net's systems interface) and the
testing of all such systems and equipment, as so reprogrammed, will be completed
by the Closing Date. The cost to Com-Net of such reprogramming and testing and
of the reasonably foreseeable consequences of year 2000 to Com-Net (including,
without limitation, reprogramming errors and the failure of others' systems or
equipment) is reflected on Com-Net's most recent financial statements. Except
for such of the reprogramming referred to in the preceding sentence as may be
necessary, the computer and management information systems, Com-Net is and, with
ordinary course upgrading and maintenance, will continue for the term of this
Merger Agreement to be, sufficient to permit the Surviving Corporation to
conduct its business (including Com-Net's business) after the Effective Date.
4.33 ACCREDITED INVESTOR.
(a) Each of the Shareholders has been furnished any materials relating
to Parent, its business and financial condition, and the Parent Common Stock,
which they have requested and have been afforded the opportunity to ask
questions and receive answers concerning Parent and to obtain any additional
information which Parent possesses or can acquire without unreasonable effort or
expense.
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(b) Parent has answered all inquiries that the Shareholders and their
representative(s), if any, have made of it concerning Parent, its business and
financial condition, or any other matter relating to the operation of Parent and
the Merger.
(c) Each of the Shareholders (i) has adequate means of providing for
his/its current needs and possible personal contingencies, (ii) has no need for
liquidity in this investment, (iii) is able to bear the economic risks of the
investment in the Parent Common Stock, and (iv) at the present time, can afford
a complete loss of such investment.
(d) The Conversion Shares are being acquired solely by the
Shareholders for investment and not as a nominee or agent for the benefit of any
other person, and have no current intention of distributing, reselling or
assigning the Conversion Shares other than in accordance with the provisions of
the Securities Act of 1933, as amended Securities Act, the rules and regulations
promulgated thereunder and any other applicable laws.
(e) The Shareholders understand that (i) there is and may in the
future be no public or other market for the Conversion Shares, (ii) the sale of
the Conversion Shares has not been and will not be registered under the
Securities Act and/or Regulation D promulgated thereunder and the Conversion
Shares must be held indefinitely unless they are subsequently registered under
the Securities Act or an exemption from such registration is available, (iii)
the Parent is under no obligation to register the Conversion Shares on the
Shareholders' behalf or to assist them in complying with any exemption from
registration, (iv) the Conversion Shares may not be sold pursuant to Rule 144
promulgated by the Securities and Exchange Commission pursuant to the Securities
Act unless all of the conditions of that Rule are met, and (v) the transfer or
disposition of the Conversion Shares is further restricted by Section 6.3
herein.
(f) The Shareholders understand that no Federal or State agency has
passed upon the Conversion Shares, or made any finding or determination as to
the fairness of the investment or any recommendation or endorsement of the
Conversion Shares. The Shareholders will not transfer the Conversion Shares
without registering or qualifying the same under applicable state securities
laws unless such transfer is exempt under such laws.
(g) In making their investment decision, the Shareholders have relied
only on the information contained in the information furnished or made available
to the Shareholders by authorized officers of Parent.
(h) Eldridge is a citizen or resident of the United States, is at
least 21 years' of age, and has the legal capacity to execute, deliver, and
perform this Agreement.
4.34 ACCURATE DOCUMENTS. All Contracts, documents, reports, leases, title
insurance policies, title opinions, surveys and other items relating to Com-Net
or the Property and delivered to Parent or Subsidiary pursuant to this Merger
Agreement or in the Disclosure Letter are true, correct and complete copies of
the originals thereof.
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4.35 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All of Com-Net's and each
Shareholder's representations and warranties contained in this Merger Agreement
and Com-Net's and each Shareholder's liability therefor will survive the Closing
for a period of five (5) year thereafter except as to any material breach
thereof by Com-Net or any Shareholder of which Parent or Subsidiary has notified
Com-Net or any Shareholder prior to the expiration of the five (5) year period
in accordance with Section 12 of this Merger Agreement. Neither Parent nor
Subsidiary will have any duty to investigate or inquire about the accuracy or
veracity of any representation or warranty of Com-Net or any Shareholder.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SUBSIDIARY AND PARENT
As a material inducement to Com-Net and the Shareholders to enter into this
Merger Agreement, Subsidiary and Parent represent and warrant to Com-Net and the
Shareholders as follows:
5.1 AUTHORITY. Each of Subsidiary and Parent is a corporation, duly
organized and validly existing under the laws of the State of Florida and their
status is active, and each of Subsidiary and Parent is duly qualified to
transact business under the laws of the states where it conducts business.
Subject to obtaining the approval of the Contemplated Transactions from each of
Parent's and Subsidiary's Board of Directors and from the Lenders, documents,
including this Merger Agreement, executed or to be executed by Subsidiary and
Parent (a) have been or will be duly authorized, executed and delivered by
Subsidiary and Parent, (b) are or will be legal, valid and binding obligations
of Subsidiary and Parent, and (c) do not or will not violate any provisions of
any agreement to which Subsidiary and Parent are a party or to which they are
bound. Subject to obtaining the approval of the Contemplated Transactions from
each of Parent's and Subsidiary's Board of Directors and from the Lenders,
Subsidiary and Parent have the full right, power and authority, without the
necessity of obtaining the consent or approval of any other Person, to enter
into this Merger Agreement and to perform their obligations under this Merger
Agreement.
5.2 CAPITALIZATION. The correct and complete authorized capital stock of
Parent consists of (i) 32,000,000 shares of Class A Common Stock, $.01 par value
per share, of which 880,922 shares are issued and outstanding, (ii) 8,100,000
shares of Class B Common Stock, $.01 par value per share, of which 8,075,000
shares are issued and outstanding, (iii) 8,100,000 shares of 4% Series A
Convertible Preferred Stock, $.01 par value per share, of which 8,050,000 shares
are issued and outstanding, (iv) 8,100,000 shares of 4% Series B Redeemable
Preferred Stock, $.01 par value per share, of which no shares are issued or
outstanding, (v) 4,472,272 shares of 4% Series C Convertible Preferred Stock,
$.01 par value per share, of which none are issued or outstanding and (vi)
4,472,272 shares of 4% Series D Redeemable Preferred Stock, $.01 par value per
share, of which no shares are issued or outstanding.
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5.3 REPORTS AND FINANCIAL STATEMENTS. Parent has filed all Reports on
Form 10-K, Form 10-Q and Form 8-K and registration statements required to be
filed with the SEC since March 7, 1998 (collectively, the "Parent SEC Reports").
Parent has previously furnished or made available to the Shareholders true and
complete copies of all the Parent SEC Reports filed prior to the date hereof.
None of the Parent SEC Reports, as of their respective dates, contained any
untrue statement of material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. Each of the
consolidated balance sheets (including the related notes) included in the Parent
SEC Reports presents fairly, in all material respects, the consolidated
financial position of the Parent and its subsidiaries as of the respective dates
thereof, and the other related statements (including the related notes) included
in the Parent SEC Reports present fairly, in all material respects, the results
of operations and the changes in financial position of the Parent and its
subsidiaries for the respective periods or as of the respective dates set forth
therein, all in conformity with GAAP consistently applied during the periods
involved, except as otherwise noted therein and subject, in the case of the
unaudited interim financial statements, to normal year-end adjustments. All of
the Parent SEC Reports, as of their respective dates, complied as to form in all
material respects with the requirements of the Exchange Act, the Securities Act
and the applicable rules and regulations thereunder.
5.4 MERGER CONSIDERATION. Parent has shares of Parent Common Stock on
hand at the time of execution of this Merger Agreement sufficient to consummate
the Contemplated Transactions on the terms contemplated by this Merger
Agreement, and, at the Effective Time of the Merger, Parent will have available
all of the Parent Common Stock necessary to satisfy its obligations under this
Merger Agreement. In addition to the foregoing:
(a) the Parent Common Stock to be issued pursuant to this Merger
Agreement will, when delivered, be duly and validly issued, fully paid and
nonassessable.
(b) none of the filings made by Parent pursuant to the Exchange Act
contain any untrue statement of a material fact or omit a material fact
necessary in order to make the statements therein not misleading.
5.5 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All of Subsidiary's and
Parent's representations and warranties contained in this Merger Agreement and
Subsidiary's and Parent's liability therefor will survive the Closing for a
period of five (5) year thereafter except as to any material breach thereof by
Subsidiary and Parent of which any Shareholder has notified Subsidiary and
Parent prior to the expiration of the five (5) year period in accordance with
Section 12 of this Merger Agreement. Each Shareholder will have no duty to
investigate or inquire about the accuracy or veracity of any representation or
warranty of Subsidiary and Parent.
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ARTICLE VI
COVENANTS OF THE SHAREHOLDERS AND COM-NET
6.1 AFFIRMATIVE COVENANTS. Between the date of this Merger Agreement and
the Closing Date, the Shareholders will, and will cause Com-Net to:
(a) conduct the business of Com-Net only in the Ordinary Course of
Business and will use best efforts to maintain and preserve the Property,
preserve intact the current business organization of Com-Net, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with Com-Net;
(b) provide Subsidiary and its representatives, agents, contractors,
architects and engineers reasonable access to the Property and the financial
records of Com-Net at any time during normal business hours prior to the Closing
Date, at Subsidiary's sole cost and expense, to perform any tests, borings,
inspections, surveys, studies, environmental site assessments and measurements
which Subsidiary reasonably deems necessary or appropriate;
(c) within ten (10) days after the execution of this Merger Agreement,
furnish to Subsidiary the Disclosure Letter which shall contain true, correct
and complete copies of all records, documentation and other information in its
possession (or in the possession of each Shareholder's or Com-Net's attorneys or
other representatives) as Subsidiary may reasonably request concerning Com-Net,
the Shares, and the ownership, use, operation and condition of the Property,
including without limitation the Office Leases, Construction Contracts, Ground
Leases, the Easements, Tenant Leases and Permits, any title insurance policies,
recorded title documents, title abstracts, title opinions, surveys, plans,
engineering reports, soil tests, service contracts, legal opinions,
environmental site assessments and similar items;
(d) permit Subsidiary to, without any obligation to do so, contact any
Governmental Authority about any Permits or Legal Requirements concerning Com-
Net or the Property and contact any party to any of the Office Leases,
Construction Contracts, Ground Leases, Easements or Tenant Leases or other
Person about Com-Net or the Office Leases, Construction Contracts, Ground
Leases, the Easements, the Tenant Leases or any other aspects of the Property;
(e) cause all Contracts to which Com-Net is a party or by which the
Property is bound to have been performed to the extent required to be performed
as of the Closing Date in full;
(f) cause all Shares being held in escrow pursuant to the Com-Net
Stock Purchase Agreement to be released by the escrow agent;
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(g) cause First Tennessee Bank to release Com-Net as guarantor on a
loan for $2,495,216 to Eldridge and release any Shares held by or pledged to it
as collateral for any reason whatsoever;
(h) pay any and all unpaid amounts, commitments or obligations due,
owing or payable to such employees (whether pursuant to or arising from any
Contract or Legal Requirement or in any other manner), including without
limitation all wages, commissions and other compensation, earned bonuses,
severance pay, accrued and unpaid vacation time, sick leave, accrued and unpaid
benefits and disability payments and shall, effective as of the Closing, cause
all officers and directors of Com-Net to resign from all such positions with
Com-Net and release Com-Net from any claims they may have against Com-Net;
(i) cooperate with Subsidiary and Parent with respect to all filings,
permits or consents that Subsidiary elects to make or obtain or is required by
Legal Requirements or other Persons to make or obtain in connection with the
Contemplated Transactions (including, without limitation, any filing under the
HSR Act, tax clearance filings with the State of California and filings to
enable the Surviving Corporation to be licensed as a general contractor);
(j) promptly notify Subsidiary in writing if any Shareholder or Com-
Net becomes aware of any fact or condition that causes or constitutes a Breach
of any Shareholder's or Com-Net's representations and warranties as of the date
of this Merger Agreement, or if any Shareholder or Com-Net becomes aware of the
occurrence after the date of this Merger Agreement of any fact or condition that
would (except as expressly contemplated by this Merger Agreement) cause or
constitute a Breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition; provided, however, that should any such fact or
-------- -------
condition require any change in the Disclosure Letter if the Disclosure Letter
were dated the date of the occurrence or discovery of any such fact or
condition, each Shareholder and Com-Net will promptly deliver to Subsidiary a
supplement to the Disclosure Letter specifying such change;
(k) promptly notify Subsidiary of the occurrence of any Breach of any
covenant of any Shareholder in this Merger Agreement or of the occurrence of any
event that may make the satisfaction of the conditions in Article VIII
impossible or unlikely;
(l) close all of Com-Net's bank accounts, terminate the authority of
all signatories with respect to all of Com-Net's bank accounts effective as of
the Closing, and transfer the funds contained therein to such bank account as
the Parent may identify;
(m) modify the Headquarters Lease as set forth in the amendment to the
Headquarters Lease attached hereto as Exhibit "6.1(m)";
----------------
(n) promptly take any and all actions required by Parent or its
managing underwriter(s) to facilitate an offering of Parent Common Stock to the
public;
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(o) cause Com-Net to be released from all liabilities and obligations
arising out of or related to the Airplane Lease and any documents or obligations
related to the plane leased pursuant thereto (such as, but not limited to any
agreements for maintenance, hanger space or pilot services).
(p) Assign and transfer the Ground Leases, Tenant Leases, Easements
and Towers (and all Appurtenant Property, Intangible Personal Property, Permits,
Improvements and Real Property related thereto) to the LLC at or prior to the
Closing pursuant to documents and instruments acceptable to Parent and
Subsidiary in their reasonable discretion;
(q) terminate Com-Net's employment of the pilot(s) employed by Com-Net
with respect to the plane leased pursuant to the Airplane Lease at or prior to
the Closing Date; and
(r) deliver to Subsidiary reviewed balance sheets of Com-Net for the
three (3) month period ended March 31, 1999, the related reviewed statements of
income, changes in stockholders' equity, and cash flows for such period prepared
by Blackburn, Childers & Steagall, PLC.
6.2 NEGATIVE COVENANTS.
(a) Except as otherwise expressly permitted by this Merger Agreement,
between the date of this Merger Agreement and the Closing Date, the Shareholders
will not, and will cause Com-Net not to, without the prior consent of
Subsidiary, take any affirmative action, or fail to take any reasonable action
within the Shareholders' or Com-Net's control, as a result of which any of the
changes or events listed in Section 4.16 is likely to occur.
(b) Until such time, if any, as this Merger Agreement is terminated,
each Shareholder will not, and each Shareholder will cause his or its
Representatives, and Com-Net and its Representatives, not to, directly or
indirectly solicit, initiate, or encourage any inquiries or proposals from,
discuss or negotiate with, provide any non-public information to, or consider
the merits of any unsolicited inquiries or proposals from, any Person (other
than Subsidiary) relating to any transaction involving the sale of the business
or assets of Com-Net, or any of the capital stock of Com-Net, or any merger,
consolidation, business combination, or similar transaction involving Com-Net.
(c) Com-Net and the Shareholders will not (i) sublease all or any
portion of the Offices, (ii) except as set forth in the amendment to the
Headquarters Lease attached hereto as Exhibit "6.1(m)", renew, modify or
terminate the Office Leases, (iii) take any action or fail to take any action
that would constitute a default under the Office Leases, or (iv) enter into or
renew any management, maintenance, service or other Contract affecting the
Offices without Subsidiary's prior written approval in each instance, which
approval will not be unreasonably withheld or delayed;
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(d) Com-Net and the Shareholders will not (i) modify or terminate the
Construction Contracts or (ii) take any action or fail to take any action that
would constitute a default under the Construction Contracts; provided, however,
-------- -------
that Com-Net and the Shareholders may take any action specified in clause (i)
above, if (x) Com-Net and/or the Shareholders shall have delivered written
notice to Subsidiary of Com-Net's intent to enter into such modification or
termination at least fifteen (15) Business Days prior to the execution of any
such modification or termination, along with a true and correct copy of the
proposed agreement to be executed, and (y) Subsidiary has delivered to Com-Net
or the Shareholders, within ten (10) Business Days after Subsidiary's receipt of
the notice specified in clause (y), its written approval of the proposed action,
which such approval shall not be unreasonably withheld, except that Subsidiary's
failure to deliver to Com-Net or the Shareholders such written approval on or
prior to the end of such ten (10) Business Day period shall constitute
Subsidiary's approval of the proposed action and shall satisfy the requirements
of this clause (d).
(e) Com-Net and the Shareholders will not (i) except as set forth in
the proviso below, permit any new occupancy of, or enter into any new lease,
-------
license or other occupancy agreement for, space on the Towers or in any of the
Improvements located on the Towers, (ii) renew, modify or terminate the Tenant
Leases, or (iii) take any action or fail to take any action that would
constitute a default under the Tenant Leases; provided, however, that Com-Net
-------- -------
and the Shareholders may take any action specified in clause (i) above, if (x)
the lease, license or other occupancy agreement is on the form of Subsidiary's
standard form for such agreements, (y) Com-Net and/or the Shareholders shall
have delivered written notice to Subsidiary of Com-Net's intent to enter into
such agreement at least fifteen (15) Business Days prior to the execution of any
such agreement, along with a true and correct copy of the proposed agreement to
be executed, and (z) Subsidiary has delivered to Com-Net or the Shareholders,
within ten (10) Business Days after Subsidiary's receipt of the notice specified
in clause (y), its written approval of the proposed action, which such approval
shall not be unreasonably withheld, except that Subsidiary's failure to deliver
to Com-Net or the Shareholders such written approval on or prior to the end of
such ten (10) Business Day period shall constitute Subsidiary's approval of the
proposed action and shall satisfy the requirements of this clause (e).
(f) Com-Net and the Shareholders will not (a) renew, modify or
terminate the Ground Leases, (b) take any action or fail to take any action that
would constitute a default under the Ground Leases, or (c) enter into or renew
any management, maintenance, service or other Contract affecting the Property,
without Subsidiary's prior written approval in each instance, which approval
will not be unreasonably withheld or delayed.
(g) Com-Net and the Shareholders will not (i) modify or terminate the
Easements or (ii) take any action or fail to take any action that would
constitute a default under the Easements.
(h) Com-Net and Eldridge will not encumber, modify or alter the
Property in any material respect.
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(i) Between the date of this Merger Agreement and the Closing Date,
except as otherwise contemplated by this Merger Agreement or as Subsidiary shall
otherwise agree in writing in advance, Eldridge will, and will cause Com-Net to:
(i) maintain insurance coverage at presently existing levels
so long as such insurance is available at commercially reasonable rates;
(ii) not approve any new individual capital expenditure;
(iii) not dispose of or incur, create or assume any encumbrance
other than Permitted Encumbrances on any individual capital asset;
(iv) not incur any Indebtedness in addition to that shown on
the Financial Statements for the twelve (12) month period ended December 31,
1998 other (A) than additional Indebtedness incurred for general working capital
pursuant to Com-Net's current financing arrangements with SunTrust Bank East
Tennessee, N.A. (the outstanding balance of which Indebtedness to SunTrust Bank
East Tennessee, N.A. shall not, at any time, exceed a sum equal to the greater
of 85% of Com-Net's then current accounts receivables or $4,500,000) and (B)
upon prior written notice to Subsidiary and Parent, additional Indebtedness
incurred for working capital in the event Subsidiary and Parent are unable or
unwilling to provide such Indebtedness to Com-Net;
(v) except as required by law or regulation, pursuant to
existing agreements or as may be reasonably necessary to secure or protect
intellectual or industrial property rights of Com-Net's business, not provide
any confidential or proprietary information with respect to Com-Net's business
to any person other than Subsidiary, Parent or their respective Affiliates;
(vi) not take any action which could be reasonably expected to
prevent or materially delay the consummation of the Contemplated Transactions;
(vii) not make any distributions of cash;
(viii) not guarantee any Indebtedness or make any loans of any
nature whatsoever;
(ix) without Parent's and Subsidiary's written consent, not
build any Towers for the account of Com-Net or the LLC other than the four (4)
Towers being built as of the date hereof; and
(ix) not agree to take any of the foregoing actions.
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6.3 LOCK-UP AGREEMENT. Eldridge and the Limited Partnership hereby
acknowledge that Parent may in the future enter into an underwriting agreement
with one or more underwriters providing the issuance of Parent Common Stock to
the public. Eldridge and the Limited Partnership hereby irrevocably agree that,
without the prior written consent of Parent and any such underwriters, he/it
will not sell, offer to sell, solicit an offer to buy, contract to sell, grant
any option to purchase, or otherwise transfer or dispose of, any shares of
Parent Common Stock, or any securities convertible into or exercisable or
exchangeable for Parent Common Stock, for a period of one hundred and eighty
(180) days (or such longer period as may be requested by the underwriters) after
the date of the final prospectus relating to the initial offering of any Parent
Common Stock to the public by such underwriters. In addition, Eldridge and the
Limited Partnership hereby acknowledge and agree that they will not be permitted
to sell all or any portion of their shares of Parent Common Stock in any such
initial public offering of Parent Common Stock and, that subsequent to any such
initial public offering, they will be permitted to sell their shares of Parent
Common Stock solely in accordance with Rule 144 of the Exchange Act. Eldridge
and the Limited Partnership hereby expressly acknowledge and agree that this
Section 6.3 shall be binding upon their successors, assigns, heirs and personal
representatives and that Parent's transfer agent is authorized to decline to
make any transfer of securities if such transfer would constitute a violation or
breach of this Section 6.3. Each of the Shareholders hereby appoints Parent his
or its true and lawful attorney-in-fact to execute all documents on their behalf
required in order to effectuate an initial offering of Parent Common Stock to
the public.
ARTICLE VII
COVENANTS OF SUBSIDIARY AND PARENT
7.1 EMPLOYMENT OF ELDRIDGE. Commencing upon the Closing Date and
continuing until December 31, 2000, Parent agrees to cause the Surviving
Corporation to employ Eldridge, and Eldridge agrees to be employed by the
Surviving Corporation upon the terms set forth below.
(a) TITLE. President of the Surviving Corporation.
(b) BASE SALARY. $150,000 per year ("Base Salary"), prorated for any
partial years.
(c) BONUS. After 2000, Eldridge shall be eligible for a bonus equal
to one hundred percent (100%) of his Base Salary. Such bonus shall be
determined by the Surviving Corporation's Board of Directors in its sole and
absolute discretion based on a bonus plan with objective criteria to be
established by the Surviving Corporation's Board of Directors.
(d) DUTIES. Eldridge Shall report directly to Chief Executive Officer
of Parent and shall perform duties approved by Surviving Corporation's Board of
Directors from time to time.
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(e) NON-COMPETITION.
(i) The agreements and covenants provided by Eldridge in this
Section 7.1 are reasonable and necessary to the Surviving Corporation's and
Parent's protection of their legitimate interests in the transactions
contemplated by this Merger Agreement. Eldridge has certain knowledge of the
business operations that may be required to ensure the effective and successful
conduct of the business of Com-Net. Eldridge has access to trade secrets and
confidential business methods, plans and practices considered confidential by
the Surviving Corporation. This information has commercial value in the business
in which the Surviving Corporation will be engaged after the consummation of the
transaction contemplated by this Merger Agreement. The Surviving Corporation
will be irreparably damaged and their substantial investment in the transaction
contemplated by this Merger Agreement materially impaired if Eldridge were to
enter into an activity competing or interfering with the business of the
Surviving Corporation in violation of the terms of this Section 7.1 or if
Eldridge were to disclose or make unauthorized use of any confidential
information concerning the business of Eldridge or the Surviving Corporation.
The scope and length of the term of this Section 7.1 and the geographical
restrictions contained herein are fair and reasonable and not the result of
overreaching, duress or coercion of any kind, and the full, uninhibited and
faithful observance of each of the agreements and covenants contained in this
Section 7.1 will not cause Eldridge any undue hardship, financial or otherwise,
and enforcement of each of the covenants contained in this Section 7.1 will not
impair his ability, if he so desires, to obtain employment commensurate with his
abilities and on terms fully acceptable to him or otherwise obtain income
required for the comfortable support of him and his family and the satisfaction
of the needs of his creditors.
(ii) Eldridge covenants and agrees that he will not, at any
time during the period of his employment and for a period of one (1) year after
the termination of his employment, compete with the Surviving Corporation or
Parent within the continental United States. As used in this Section 7.1, to
"compete" shall mean to, directly or indirectly, own, manage, operate, join,
control, be employed by, or become a director, officer, employee , agent,
broker, consultant, representative or shareholder of a corporation or an owner
of an interest in or an employee, agent, broker, consultant, representative or
partner of a partnership or in any other capacity whatsoever of any other form
of business association, sole proprietorship or partnership, or otherwise be
connected in any manner with the development, construction ownership,
management, leasing or operation of any tower, tower site telecommunications
facility or telecommunications equipment or any other activities similar to the
activities engaged in by the Surviving Corporation at the date of termination of
Eldridge's employment.
(iii) Eldridge and Subsidiary and Parent acknowledge that the
Surviving Corporation and Parent will be irreparably damaged (and damages at law
would be an inadequate remedy) if this Section 7.1 is not specifically
enforced. Therefore, solely in the event of a breach or threatened breach by
Eldridge of any provision of this Section 7.1, the Surviving Corporation and
Parent shall be entitled, is addition to all other rights or remedies which may
be available at law or in equity, to an injunction restraining such breach,
without being required to
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show any actual damage or to post an injunction bond, and/or to a decree for
specific performance of the provisions of this Section 7.1.
(f) TERMINATION. (i) Eldridge's employment shall terminate on the
first to occur of any of the following events:
(A) December 31, 2000 (unless such date shall be extended
to a date agreeable to each of Eldridge and the Surviving Corporation in their
respective discretion).
(B) Termination by the Surviving Corporation for cause,
upon written notice to Eldridge from the Surviving Corporation, which "cause"
shall be limited to:
(1) the failure of or refusal by Eldridge to comply
with the material orders, advice, directions, policies, standard and regulations
of the Surviving Corporation or its Board of Directors, as promulgated from time
to time.
(2) an act or acts of fraud or dishonesty by Eldridge;
(3) any felony conviction of Eldridge;
(4) the persistent absence by Eldridge from his
employment without cause or explanation; or
(5) any willful malfeasance, gross negligence or other
activity by Eldridge which, in the judgment of the Surviving Corporation, is of
such serious nature that it would make continued employment not in the best
interest of the Surviving Corporation.
(C) The death of Eldridge.
(D) By Eldridge, at his option, after sixty (60) days prior
written notice to the Surviving Corporation.
(E) If Eldridge is disabled. For purposes of this
Agreement, Eldridge shall be deemed "disabled" if it is determined that a
continuing physical or mental impairment has prevented him from fulfilling his
duties for a period of three (3) consecutive months; or
(F) At the option of the Surviving Corporation, upon the
occurrence of a Change in Control.
(ii) Upon termination, Eldridge shall be entitled to receive his
Base Salary up to and including the effective date of such termination plus any
other benefits required
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by applicable law; provided, however, (A) if Eldridge is terminated pursuant to
-------- -------
clauses (f)(i)(B) or (D) above, neither Eldridge nor the Limited Partnership
shall be entitled to receive any Cash Consideration pursuant to section 3.1(a)
or Share Consideration pursuant to Section 3.1(b) for the calendar year in which
such termination occurs or any year thereafter, (B) if Eldridge is terminated
pursuant to clause (f)(i)(F) above, Eldridge shall be entitled to receive
severance compensation equal to his then current Base Salary upon the occurrence
of the Change in Control, (C) if Eldridge is terminated pursuant to clause
(f)(i)(E) above, Eldridge shall be entitled to receive Cash Consideration
pursuant to Section 3.1(a) or Share Consideration pursuant to Section 3.1(b) for
the calendar year in which such disability occurs if, and only if, such
disability qualifies him to receive long-term disability benefits that the
Surviving Corporation's successor would provide to him as an officer of such
successor entity and (D) if Eldridge is terminated pursuant to clause (f)(i)(C)
above, Eldridge shall be entitled to receive Cash Consideration pursuant to
Section 3.1(a) or Share Consideration pursuant to Section 3.1(b) for the
calendar year in which such death occurs.
(g) GENERAL. Eldridge shall, at all times, conduct his activities in
accordance with the policies, procedures, and programs established by the
Surviving Corporation's Board of Directors and Eldridge's authority shall be
limited to said policies, procedures and programs.
(h) SURVIVAL. The terms of this Article VII shall survive the
Closing.
7.2 COM-NET ACCOUNT RECEIVABLE. At Closing, Subsidiary shall pay, by
cashier's check, attorneys' trust account check or bank wire transfer, the Com-
Net Account Receivable; provided, however, that Subsidiary shall pay the Com-Net
Account Receivable by repaying, on behalf of Eldridge, the outstanding principal
balance of that certain loan in the original principal sum of $2,495,216 by
Eldridge from First Tennessee Bank.
7.3 NOTE PAYABLE. Within thirty (30) days after the end of the fiscal
quarter in which the EBITDA of the Surviving Corporation first exceeds
$1,000,000 in the year 1999, Subsidiary shall pay to Eldridge, by cashier's
check, attorneys' trust account check or bank wire transfer of immediately
available funds, the outstanding principal balance of the Note Payable;
provided, however, (a) that, at Closing, Eldridge shall release, remise, acquit
- -------- -------
and forever discharge the Surviving Corporation and Parent for all interest
accrued up to and including the Closing Date and agree that such interest on the
Note Payable shall not accrue thereafter pursuant to an instrument satisfactory
to the Surviving Corporation and Parent in their reasonable discretion and (b)
in the event the EBITDA of the Surviving Corporation does not exceed $1,000,000
for the twelve (12) month period ended December 31, 1999, Eldridge shall
release, remise, acquit and forever discharge the Surviving Corporation and
Parent from any liability, claims or demands arising out of or related to the
Note Payable pursuant to an instrument satisfactory to the Surviving Corporation
and Parent in their reasonable discretion.
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ARTICLE VIII
CONDITIONS PRECEDENT TO
SUBSIDIARY'S AND PARENT'S PERFORMANCE
Subsidiary's and Parent's obligations hereunder are expressly contingent
upon fulfillment of such of the following terms and conditions (collectively,
the "Subsidiary's and Parent's Conditions Precedent") as have not been waived in
----------------------------------------------
writing by Subsidiary and Parent:
8.1 PERFORMANCE OF COVENANTS AND ACCURACY OF REPRESENTATIONS. All of
Shareholders' and Com-Net's representations and warranties in this Merger
Agreement (considered collectively), and each of these representations and
warranties (considered individually) must have been accurate in all respects as
of the date of this Merger Agreement and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date, without giving
effect to any supplement to the Disclosure Letter, and all of Shareholders' and
Com-Net's covenants, duties and obligations in this Merger Agreement must have
been fully and completely performed as of the Closing Date.
8.2 NO LEGAL ACTION AGAINST CONTEMPLATED TRANSACTIONS. Since the date of
this Merger Agreement, there must not have been commenced or threatened against
Subsidiary, or against any Person affiliated with Subsidiary, any Proceeding (a)
involving any challenge to, or seeking damages or other relief in connection
with, any of the Contemplated Transactions, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with any of the
Contemplated Transactions.
8.3 NO CLAIM REGARDING STOCK OWNERSHIP OR SALE PROCEEDS. There must not
have been made or threatened by any Person any Claim asserting that such Person
(a) is the holder or the beneficial owner of, or has the right to acquire or to
obtain beneficial ownership of, any stock of, or any other voting, equity, or
ownership interest in, Com-Net or the Property, or (b) is entitled to all or any
portion of the Purchase Price payable for the Shares.
8.4 NO PROHIBITIONS. Neither the consummation nor the performance of any
of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Subsidiary or any Person affiliated with
Subsidiary to suffer any material adverse consequence under, (a) any applicable
Legal Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
8.5 ESTOPPELS. Subsidiary shall have obtained on or before the Closing
Date a Ground Lessor Estoppel from each Ground Lessor under each of the Ground
Leases substantially in the form of Exhibit "8.5(a)" attached hereto, a Tenant
----------------
Estoppel from each Tenant under each of the Tenant Leases substantially in the
form of Exhibit "8.5(b)" attached hereto, and a Landlord
----------------
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Estoppel from each Landlord under each of the Office Leases substantially in the
form of Exhibit "8.5(c)" attached hereto.
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8.6 TITLE TO SHARES AND PROPERTY. Each Shareholder shall have good title
to the Shares free and clear of all liens and encumbrances and Com-Net shall
have good, and in the case of the Owned Real Property, marketable fee simple
title, to the Property free and clear of all liens and encumbrances, excepting
only the Permitted Exceptions, and Subsidiary shall have obtained (a) Uniform
Commercial Code, judgment and tax lien searches confirming that no such liens or
encumbrances exist, (b) a commitment issued by First American Title Insurance
Company pursuant to which such company agrees to issue to Subsidiary an owner's
policy of title insurance in such amount as Subsidiary may determine in its
reasonable discretion insuring (i) with respect to the Owned Real Property, the
LLC's fee simple interest in such Owned Real Property, (ii) with respect to
Leased Real Property, the LLC's leasehold interest in such Leased Real Property
under the applicable Ground Lease, and (iii) Com-Net's interest under any
Easements, in each case subject only to such matters as may be acceptable to
Subsidiary, and (c) a current survey of each parcel of Real Property meeting
ALTA requirements and prepared by a surveyor acceptable to Subsidiary which
confirms that all Improvements are located upon the Real Property and do not
encroach upon any easements of record and that no improvements from adjoining
properties encroach upon the Real Property and otherwise does not reveal any
matter which renders the interest of the LLC in the Real Property unmarketable.
8.7 ENVIRONMENTAL ASSETS. Subsidiary shall have obtained environmental
site assessment reports for the Real Property issued by an environmental
engineer confirming that the Real Property has not in the past been used, and is
not presently being used, for the handling, storage, transportation, disposal or
release of hazardous or toxic substances, materials, pollutants or waste (or
similar items under applicable environmental Legal Requirements).
8.8 ZONING AND LAND USE. Subsidiary and Subsidiary's counsel shall be
satisfied that the Property and the operation of the business of leasing space
on the Towers are in compliance with all Legal Requirements and with all
easements, restrictive covenants, reservations and similar matters of record
affecting the Property (as evidenced by such documentation as Subsidiary may
reasonably require, including written confirmation from the applicable
Governmental Authorities that the Property is in compliance with all Legal
Requirements relating to zoning, land use and building matters), or that no
laws, rules, regulations, easements, restrictive covenants, reservations, and
similar matters of record affecting the Property are applicable thereto.
8.9 FAA AND FCC MATTERS. Subsidiary shall have obtained evidence that the
Towers are in full compliance with all applicable FAA and FCC Legal
Requirements.
8.10 NO CHANGE IN THE PROPERTY. No material adverse changes in the
Property have occurred between the date of this Merger Agreement and the Closing
Date.
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8.11 EXECUTION AND DELIVERY OF DOCUMENTS. Each Shareholder and Com-Net
shall have executed and delivered to Subsidiary any and all documents and
instruments contemplated by this Merger Agreement, including without limitation
those set forth on Exhibit "8.11" attached hereto.
--------------
8.12 THIRD PARTY APPROVALS. Subsidiary shall have obtained all third party
approvals and/or non-disturbance agreements from all Governmental Authorities,
landlords, mortgagees, secured parties or other Persons deemed necessary by
Subsidiary in order to consummate the transactions contemplated by this Merger
Agreement and in order for Subsidiary to obtain title insurance for the
Surviving Corporation's contemplated interest in the Real Property.
8.13 OPINIONS OF COUNSEL. Eldridge, the Limited Partnership and Com-Net
shall have delivered to Subsidiary and Parent a written opinion from counsel,
dated as of the Closing Date, to the effect set forth on Exhibit "8.13" attached
--------------
hereto.
8.14 SUBSIDIARY'S SATISFACTION. Subsidiary and its Representatives shall
have conducted their inspection and due diligence of Com-Net and the Property.
If Subsidiary is not satisfied, in its sole and absolute discretion, with the
results of such inspection and due diligence for any reason whatsoever,
including without limitation as a result of Subsidiary's review or inspection of
the Disclosure Letter, the Financial Statements, the Property, the Permits, any
applicable Legal Requirements concerning the Property, the Tenant Leases, the
Easements, the Ground Leases, the Office Leases, all related tests, borings,
inspections, surveys, studies, environmental site assessments and other
inspections or measurements thereof or related thereto, this condition precedent
shall be deemed not to be fulfilled.
8.15 HSR ACT. All required filings under the HSR Act shall have been made
and any required waiting period under the laws applicable to the Contemplated
Transactions shall have expired or been earlier terminated.
8.16 COMPLETION OF AUDIT; REVIEWED FINANCIALS. The audit for the twelve
(12) month period ended December 31, 1998 and the review for the three (3) month
period ended March 31, 1999 being conducted by Blackburn, Childers & Steagall,
PLC, independent certified public accountants, shall have been completed and
copies of such audit and review shall have been delivered to Subsidiary within
five (5) days prior to the Closing Date.
8.17 RELEASE. Christopher Cohan, a former shareholder of Com-Net, shall
have executed a waiver and release agreement releasing Subsidiary and Parent
from any and all claims against Com-Net and its successors arising out of, or
relating to, (i) the Com-Net Stock Purchase Agreement or (ii) the Merger, which
waiver and release agreement shall be substantially in the form attached hereto
as Exhibit "8.17."
8.18 APPROVALS. Each of Subsidiary's and Parent's Board of Directors and
the Lenders shall have approved the Contemplated Transactions.
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8.19 PERMITS, CONSENTS AND LICENSES. Prior to or concurrent with the
closing, Com-Net shall have obtained all permits, consents and licenses
necessary for the Surviving Corporation to continue to conduct Com-Net's
construction business.
8.20 SBA/LLC PURCHASE AGREEMENT. All conditions precedent in Articles VI
and VII of the SBA/LLC Purchase Agreement shall have been satisfied, at or prior
to Closing.
8.21 PERMITTED EXCEPTIONS. Subsidiary and Parent shall have reviewed and
approved, in their sole discretion, the Permitted Exceptions described in the
Disclosure Letter.
In the event that any of the Subsidiary's and Parent's Conditions Precedent
shall not have been fulfilled to the satisfaction of Subsidiary and Parent, in
their sole and absolute discretion or waived in writing by Subsidiary and
Parent, Subsidiary or Parent shall notify the Shareholders in writing as to
which Condition(s) Precedent has not been fulfilled, which notice shall state
with reasonable specificity the reason and basis for such Condition(s) Precedent
not having been fulfilled. The Shareholders shall have a period of three (3)
days following their receipt of such notice within which to notify Subsidiary
and Parent in writing that the Shareholders intend to attempt to cause such
Condition(s) Precedent to be fulfilled. In the event the Shareholders provide
Subsidiary and Parent with such notice, the Shareholders shall have a period of
thirty (30) days within which to attempt to cause such Condition(s) Precedent to
be fulfilled and the Closing shall be extended to accommodate such efforts. In
the event the Shareholders fail to provide Subsidiary and Parent with such
notice within such three (3) day period or provide such notice within such three
(3) day period but fail to cause such Condition(s) Precedent to be fulfilled to
the satisfaction of the Subsidiary and Parent in their sole and absolute
discretion within such thirty (30) day period, Subsidiary and Parent will have
the right, in their sole and absolute discretion, and without any liability or
obligation to any Shareholder or Com-Net whatsoever, to terminate this Merger
Agreement. Subsidiary and Parent will notify each Shareholder in writing of any
Condition(s) Precedent which have not been fulfilled prior to 10:00 a.m. Eastern
Time on the Closing Date. If Subsidiary or Parent fails to so notify each
Shareholder within such time period, then Subsidiary and Parent will be deemed
to have fulfilled or waived all Condition(s) Precedent, and all rights of
Subsidiary and Parent to terminate this Merger Agreement pursuant to this
Article VIII will be null and void and of no further force or effect.
ARTICLE IX
CONDITIONS PRECEDENT TO SHAREHOLDERS' PERFORMANCE
The obligations of each Shareholder hereunder are expressly contingent upon
fulfillment of such of the following terms and conditions (collectively, the
"Shareholders' Conditions Precedent") as have not been waived in writing by each
----------------------------------
Shareholder:
34
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9.1 PERFORMANCE OF COVENANTS AND ACCURACY OF REPRESENTATIONS. All of
Subsidiary's and Parent's representations and warranties in this Merger
Agreement (considered collectively), and each of these representations and
warranties (considered individually), must have been accurate in all respects as
of the date of this Merger Agreement, and must be accurate in all material
respects as of the Closing Date as if made on the Closing Date, and all of
Subsidiary's and Parent's duties, obligations and covenants in this Merger
Agreement must have been fully and completely performed in all material respects
as of the Closing Date.
9.2 EXECUTION AND DELIVERY OF DOCUMENTS. Subsidiary and Parent shall have
executed and delivered to the Shareholders any and all documents and instruments
contemplated by this Merger Agreement, including without limitation those set
forth on Exhibit "9.2" attached hereto.
-------------
In the event that any of the Shareholders' Conditions Precedent shall not
have been fulfilled to the satisfaction of the Shareholders or waived in writing
by the Shareholders, the Shareholders will notify Subsidiary and Parent in
writing as to which Condition(s) Precedent has not been fulfilled, which notice
shall state with reasonable specificity the reason and basis for such
Condition(s) Precedent not having been fulfilled. Subsidiary and Parent shall
have a period of three (3) days following their receipt of such notice within
which to notify the Shareholders in writing that Subsidiary or Parent intend to
attempt to cause such Condition(s) Precedent to be fulfilled. In the event
Subsidiary or Parent provides the Shareholders with such notice, Subsidiary and
Parent shall have a period of thirty (30) days within which to attempt to cause
such Condition(s) Precedent to be fulfilled and the Closing shall be extended to
accommodate such efforts. If Subsidiary or Parent fail to provide the
Shareholders with such notice within such three (3) day period or provide such
notice but fail to cause such Condition(s) Precedent to be fulfilled within such
thirty (30) day period, Shareholders will have the right, in their discretion,
and without any liability or obligation to Subsidiary or Parent whatsoever, to
terminate this Merger Agreement. The Shareholders will notify Subsidiary and
Parent in writing as to which Condition(s) Precedent have not been fulfilled
prior to 10:00 a.m. Eastern Time on the Closing Date. If the Shareholders fail
to so notify Subsidiary and Parent within such time period, then the
Shareholders will be deemed to have fulfilled or waived all Condition(s)
Precedent, and all rights of Com-Net and Shareholders to terminate this Merger
Agreement pursuant to this Article IX will be null and void and of no further
force or effect.
ARTICLE X
EXPENSES
10.1 ATTORNEYS' FEES. The Shareholders and Subsidiary will pay their or
its own attorneys' fees and costs incurred in connection with the negotiation of
this Merger Agreement and consummation of the Closing. The Shareholders shall
pay all attorneys' fees and costs incurred in connection with the assignment and
transfer contemplated by Section 6.1(p) of this Agreement. The Shareholders
agree that they shall pay any attorneys' fees incurred by Com-Net
35
<PAGE>
on or prior to the Closing Date, regardless of whether incurred in connection
with the negotiation of this Merger Agreement and the consummation of the
Closing or otherwise.
10.2 TRANSFER TAXES; RECORDING COSTS. The Shareholders will pay the cost
of all deed or other transfer taxes (including all documentary stamp taxes) with
respect to the Contemplated Transactions and all recording costs of any
documents executed herewith (including recording costs associated with releases
and other documents required to clear title or to comply with the Shareholders'
or Com-Net's obligations hereunder). The Shareholders will pay the cost of all
deed or other transfer taxes (including all documentary stamp taxes) with
respect to the assignment and transfer contemplated by Sections 6.1(p) of this
Merger Agreement and all recording costs of any documents executed in connection
therewith (including any recording costs associated with releases and other
documents required to clear title).
10.3 OTHER EXPENSES. Subsidiary or Parent will pay the cost of any title
insurance obtained by Subsidiary or Parent on behalf of the Surviving
Corporation with respect to the Contemplated Transactions. Any items of cost or
expense not specifically allocated above will be paid by the party to the
transaction that customarily bears such cost or expense within Washington
County, Tennessee.
ARTICLE XI
INDEMNIFICATION
11.1 SURVIVAL. All representations, warranties, covenants, and obligations
in this Merger Agreement, the Disclosure Letter, the supplements to the
Disclosure Letter, and any other certificate or document delivered pursuant to
this Merger Agreement will survive the Closing. Except as set forth below in
this Section 11.1, the right to indemnification, payment of Damages or other
remedy based on such representations, warranties, covenants, and obligations
will not be affected by any investigation conducted with respect to, or any
knowledge acquired (or capable of being acquired) at any time, whether before or
after the execution and delivery of this Merger Agreement or the Closing Date,
with respect to the accuracy or inaccuracy of or compliance with, any such
representation, warranty, covenant, or obligation. Except as set forth below in
this Section 11.1, the waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or obligation, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants,
and obligations. Notwithstanding the foregoing, in the event that, prior to the
Closing Date, Subsidiary or Parent shall have obtained actual knowledge of the
inaccuracy of or noncompliance with any such representation, warranty, covenant,
or obligation, neither Subsidiary nor Parent shall have any right to
indemnification, payment of Damages or other remedy under this Merger Agreement
based such inaccuracy or noncompliance unless Subsidiary or Parent shall have
notified the Shareholders of the failure of the applicable Condition(s)
Precedent to have been fulfilled based upon such inaccuracy or noncompliance and
36
<PAGE>
afforded the Shareholders the opportunity to cause such Condition(s) Precedent
to be fulfilled as provided in the last paragraph of Article VIII of this
Agreement.
11.2 INDEMNIFICATION BY THE SHAREHOLDERS AND COM-NET. Each of Eldridge,
the Limited Partnership, its partners and the directors and officers of Com-Net
(prior to the Closing Date), jointly and severally, will indemnify and hold
harmless Parent Subsidiary and the Surviving Corporation (after the Closing
Date) and their respective Representatives, attorneys, officers, directors,
shareholders, controlling persons, and affiliates (collectively, the "Subsidiary
----------
Indemnified Persons") for, and will pay to the Subsidiary Indemnified Persons
- -------------------
the amount of, any loss, liability, claim, damage (including incidental and
consequential damages), expense (including costs of investigation and defense
and reasonable attorneys' fees) or diminution of value, whether or not involving
a third-party Claim (collectively, "Damages"), arising, directly or indirectly,
-------
from or in connection with (a) any Breach of any representation or warranty made
by Com-Net or any Shareholder in this Merger Agreement (without giving effect to
any supplement to the disclosure letter described therein), the disclosure
letter described therein, the supplements to the disclosure letter described
therein, or any other certificate or document delivered by Com-Net or any
Shareholder pursuant to this Merger Agreement, (b) any Breach of any
representation or warranty made by LLC or any member thereof in the SBA/LLC
Purchase Agreement (without giving effect to any supplement to the Disclosure
Letter), the Disclosure Letter, the supplements to the Disclosure Letter, or any
other certificate or document delivered by LLC or any member thereof pursuant to
the SBA/LLC Purchase Agreement, (c) any Breach by any Shareholder or Com-Net of
any covenant or obligation of such Shareholder or Com-Net in this Merger
Agreement, (d) any Breach by any member of LLC or by LLC of any covenant of any
such member or the LLC in the SBA/LLC Purchase Agreement, (e) any services
provided or Property owned by Com-Net prior to the Closing Date, (f) any claim
by any Person for brokerage or finder's fees or commissions or similar payments
based upon any agreement or understanding alleged to have been made by any such
Person with any Shareholder or Com-Net (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions, (g) the Airplane Lease and
any documents or obligations related to the plane leased pursuant thereto (such
as, but not limited to any agreements for maintenance, hanger space or pilot
services) or (h) the Com-Net Stock Purchase Agreement. The remedies provided
in this Section will not be exclusive of or limit any other remedies that may be
available to any of the Subsidiary Indemnified Persons.
11.3 INDEMNIFICATION BY SUBSIDIARY AND PARENT. Subsidiary and Parent will
indemnify and hold harmless the Shareholders and their respective
Representatives (collectively, the "Shareholder Indemnified Persons") for, and
-------------------------------
will pay to such Shareholder Indemnified Persons the amount of, any Damages
arising, directly or indirectly, from or in connection with (a) any Breach of
any representation or warranty made by Subsidiary or Parent in this Merger
Agreement or in any certificate delivered by Subsidiary or Parent pursuant to
this Merger Agreement, (b) any claim by any Person for brokerage or finder's
fees or commissions or similar payments based upon any agreement or
understanding alleged to have been made by such Person with Subsidiary or Parent
(or any Person acting on their behalf) in connection with any of the
Contemplated Transactions.
37
<PAGE>
11.4 PROCEDURE FOR INDEMNIFICATION.
(a) Promptly after receipt by an indemnified party or of notice of the
commencement of any Proceeding against it, such indemnified party will, if a
Claim is to be made against an indemnifying party under such section, give
notice to the indemnifying party of the commencement of such Claim, but the
failure to notify the indemnifying party will not relieve the indemnifying party
of any liability that it may have to any indemnified party, except to the extent
that the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnifying party's failure to give such notice.
(b) If any such Proceeding is brought against an indemnified party and
it gives notice to the indemnifying party of the commencement of such
Proceeding, the indemnifying party will, unless the Claim involves taxes, be
entitled to participate in such Proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
Proceeding and provide indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel satisfactory to the
indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section for any fees of other counsel
or any other expenses with respect to the defense of such Proceeding, in each
case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If
the indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Merger Agreement that the Claims
made in that Proceeding are within the scope of and subject to indemnification;
(ii) no compromise or settlement of such claims may be effected by the
indemnifying party without the indemnified party's consent unless (A) there is
no finding or admission of any violation of Legal Requirements or any violation
of the rights of any Person and no effect on any other Claims that may be made
against the indemnified party, and (B) the sole relief provided is monetary
damages that are paid in full by the indemnifying party; and (iii) the
indemnified party will have no liability with respect to any compromise or
settlement of such claims effected without its consent. If notice is given to
an indemnifying party of the commencement of any Proceeding and the indemnifying
party does not, within ten days after the indemnified party's notice is given,
give notice to the indemnified party of its election to assume the defense of
such Proceeding, the indemnifying party will be bound by any determination made
in such Proceeding or any compromise or settlement effected by the indemnified
party.
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Merger Agreement,
the indemnified party may, by notice to the indemnifying party, assume the
exclusive right to defend, compromise, or settle such Proceeding,
38
<PAGE>
but the indemnifying party will not be bound by any determination of a
Proceeding so defended or any compromise or settlement effected without its
consent (which may not be unreasonably withheld).
11.5 RIGHT OF OFFSET. Notwithstanding any provision to the contrary
contained in this Merger Agreement, Parent and the Surviving Corporation shall
have the right to, without any further notice to or authorization from the
Shareholders, offset against any sums or other consideration owed by either
Parent or the Surviving Corporation to either of the Shareholders (other than
any sum owed to Eldridge under Section 7.1 of this Agreement), against any
amounts owed by either of the Shareholders to either Parent or the Surviving
Corporation, whether under this Agreement, the SBA/LLC Purchase Agreement or
otherwise. For purposes of this Section 11.5, the fair market value of Parent
Common Stock shall be determined as follows: (a) if Parent is then a publicly
traded company, the fair market value shall be the average closing price per
share of Parent Common Stock quoted on a national market for the five (5)
trading days immediately preceding the date of any claim by the Shareholders
against the Surviving Corporation and/or Parent or (b) if Parent is then a
privately held company, the fair market value of the Parent Common Stock shall
be determined by Parent's independent certified public accountants.
ARTICLE XII
DEFAULT
12.1 SUBSIDIARY'S OR PARENT'S DEFAULT. If either Subsidiary or Parent
fails to perform its obligations under this Merger Agreement, the Shareholders'
and Com-Net's sole and exclusive remedies shall be to bring an action for
specific performance.
12.2 COM-NET OR SHAREHOLDERS' DEFAULT. If Com-Net or any Shareholder fails
to perform any of its or his obligations under this Merger Agreement,
Subsidiary's and Parent's remedies shall be to bring an action for specific
performance or a combination of specific performance and damages. No remedy
conferred upon Subsidiary or Parent is intended to be exclusive of any other
remedy provided for in this Merger Agreement, and each remedy provided for in
this Merger Agreement will be cumulative and in addition to every other remedy
available under this Merger Agreement. No single or partial exercise any remedy
will preclude any other or further exercise thereof. This provision shall be in
addition to Subsidiary's and Parent's remedies under Section 11 hereof.
ARTICLE XIII
MISCELLANEOUS
13.1 BROKERS. Neither Parent, Subsidiary, Com-Net, nor any Shareholder has
entered into an agreement with any agent, broker or finder in connection with
the transaction
39
<PAGE>
contemplated by this Merger Agreement. Each party will indemnify, defend and
hold harmless the other party from any Claims of any agent, broker or finder
claiming to have entered into an agreement with the indemnifying party in
connection with this Merger Agreement. This Section will survive the Closing or
any termination of this Merger Agreement.
13.2 INTERPRETATION. The singular includes the plural and the plural
includes the singular. The word "or" is not exclusive and the word "including"
is not limiting. References to a law include any rule or regulation issued
under the law and any amendment to the law, rule or regulation. Unless
otherwise indicated, references to a Section or Exhibit mean a Section or
Exhibit contained in or attached to this Merger Agreement. The caption headings
in this Merger Agreement are for convenience and reference only and do not
define, modify or describe the scope or intent of any of the terms of this
Merger Agreement. This Merger Agreement will be interpreted and enforced in
accordance with its provisions and without the aid of any custom or rule of law
requiring or suggesting construction against the party drafting or causing the
drafting of the provisions in question.
13.3 NOTICES. All notices, demands or communications required or
permitted under this Merger Agreement will be in writing and delivered by hand
or mailed by certified mail, return receipt requested, postage and registration
or certification charges prepaid, or by nationally recognized overnight courier
service, or by fax, to the party entitled thereto at the address and to the fax
number first set forth in this Agreement, or such other party(ies), address(es)
or fax number(s) as either party specifies by written notice to the other from
time to time. Any legal counsel or any substitute counsel as designated by Com-
Net, any Shareholder, Subsidiary or Parent by written notice to the other
parties is authorized to give notices (but not receive) under this Merger
Agreement on behalf of its respective client.
13.4 ENFORCEMENT COSTS. If any civil action, arbitration or other legal
proceeding is brought for the enforcement of this Merger Agreement, or because
of an alleged dispute, breach, default or misrepresentation in connection with
any provision of this Merger Agreement, the successful or prevailing party or
parties shall be entitled to recover reasonable attorneys' fees, sales and use
taxes, court costs and all expenses even if not taxable as court costs
(including, without limitation, all such fees, taxes, costs and expenses
incident to arbitration, appellate, bankruptcy and post-judgment proceedings),
incurred in that civil action, arbitration or legal proceeding, in addition to
any other relief to which such party or parties may be entitled. Attorneys'
fees shall include, without limitation, paralegal fees, investigative fees,
administrative costs, sales and use taxes and all other charges billed by the
attorney to the prevailing party. The terms of this Section shall survive the
Closing.
13.5 ASSIGNMENT. Subsidiary and Parent will have the right to assign this
Merger Agreement to any Affiliate of Subsidiary or Parent with the consent of
each Shareholder (which consent shall not be unreasonably withheld), after which
(a) Subsidiary or Parent will be relieved of their obligations, as the case may
be, under this Merger Agreement, (b) the assignee will be solely responsible for
such obligations, and (c) the assignee may enforce all rights and remedies
40
<PAGE>
of Subsidiary and Parent under this Merger Agreement. The Shareholders and Com-
Net may not assign his or its rights or obligations with respect to this Merger
Agreement without the prior written consent of Subsidiary.
13.6 GOVERNING LAW. This Merger Agreement will be governed by and
construed and enforced in accordance with the internal laws of the State of
Florida, without regard to Florida's choice or conflict of laws provisions.
13.7 ARBITRATION. Any controversy or claim between Com-Net, the
Shareholders, Parent and Subsidiary with respect to the subject matter of this
Merger Agreement, including any controversy or claim arising out of an alleged
tort, will be determined by binding arbitration in accordance with the Federal
Arbitration Act (or if not applicable, the applicable state law) and the Rules
of Practice and Procedure for Judicial Arbitration and Mediation Services
("JAMS"). Judgment upon any arbitration award may be entered into in any court
having jurisdiction. Any party to this Merger Agreement may bring an action,
including a summary or expedited proceeding, to compel arbitration of any
controversy or claim under this Merger Agreement in any court having
jurisdiction over such action. The arbitration will be conducted in Palm Beach
County, Florida and administered by JAMS, who will appoint the arbitrator. If
JAMS is unable or legally precluded from administering the arbitration, then the
American Arbitration Association will serve. All arbitration hearings will
commence within 90 days of the demand for arbitration. Further, the arbitrator
will only, upon a showing of cause, be permitted to extend the commencement of
such hearing for up to an additional 60 days.
13.8 INTEGRATION. All prior understandings and agreements (including the
Deal Point Summary attached hereto as Exhibit "13.8") among the parties with
-------------
respect to the subject matter of this Merger Agreement are merged in this Merger
Agreement. No party shall rely upon any statement, covenant or representation
made by any other party which is not embodied in this Merger Agreement.
13.9 AMENDMENTS. No purported amendment to or waiver of any term of this
Merger Agreement will be binding upon any party, or have any other force or
effect in any respect, unless the same is in writing and signed by the party to
be charged.
13.10 BINDING EFFECT. This Merger Agreement will be binding upon, and
will inure to the benefit of, each Shareholder, Com-Net and Subsidiary and
Parent, and each of their respective heirs, executors, administrators, legal
representatives, successors and permitted assigns.
13.11 FURTHER ASSURANCES. Each party will, from time to time, execute,
acknowledge and deliver such further instruments, and perform such additional
acts, as the other parties may reasonably request in order to effectuate the
intent of this Merger Agreement. In addition, each Shareholder agrees to keep
and make available for inspection and duplication by Subsidiary and its
representatives, agents, employees, accountants and attorneys, all financial and
other records
41
<PAGE>
and pertinent documents requested by Subsidiary with respect to Com-Net and the
Property, and each Shareholder shall cause the current or former officers,
directors, representatives, agents, independent public accountants of Com-Net to
supply Subsidiary with all information reasonably requested by Subsidiary with
respect to Com-Net. This Section will survive the Closing.
13.12 THIRD PARTIES. Nothing in this Merger Agreement, whether express or
implied, is intended to confer any rights or remedies to any Persons other than
the Shareholders, Com-Net, Subsidiary and Parent and their respective successors
and permitted assigns.
13.13 COUNTERPARTS; FACSIMILE DELIVERY. This Merger Agreement may be
executed in two or more counterparts, each of which will be deemed an original,
but all of which together will constitute one and the same instrument. Delivery
of an executed signature page of this Merger Agreement by facsimile transmission
shall be effective as delivery of a manually executed counterpart hereof.
13.14 SEVERABILITY. If any provision of this Merger Agreement or any
other agreement entered into pursuant hereto is contrary to, prohibited by or
deemed invalid under applicable law or regulation, such provision shall be
inapplicable and deemed omitted to the extent so contrary, prohibited or
invalid, but the remainder hereof shall not be invalidated thereby and shall be
given full force and effect so far as possible. If any provision of this Merger
Agreement may be construed in two or more ways, one of which would render the
provision invalid or otherwise voidable or unenforceable and another of which
would render the provision valid and enforceable, such provision shall have the
meaning which renders it valid and enforceable. The terms of this Section will
survive the Closing.
13.15 COOPERATION. Prior to Closing, upon the request of the
Shareholders, the Shareholders, Com-Net, Parent and Subsidiary shall cooperate
with each other to restructure the Contemplated Transaction to maximize the tax
treatment afforded to the Shareholders provided any such restructuring does not
have or result in a material adverse effect on the business, assets, property,
or condition (financial or otherwise) of Parent or Subsidiary, the economic
benefits of the Contemplated Transaction to the parties or the validity or
enforceability of this Merger Agreement.
[SIGNATURES BEGIN ON NEXT FOLLOWING PAGE]
42
<PAGE>
This Merger Agreement has been executed by each Shareholder, Com-Net,
Parent and Subsidiary on the dates set forth below.
SHAREHOLDERS:
/s/ Daniel J. Eldridge
-------------------------------------
DANIEL J. ELDRIDGE
ELDRIDGE FAMILY LIMITED PARTNERSHIP
By: /s/ Daniel J. Eldridge
----------------------------------
Name: Daniel J. Eldridge
COM-NET CONSTRUCTION SERVICES
INC., a California corporation
By: /s/ Daniel J. Eldridge
----------------------------------
Name: Daniel J. Eldridge
Title:
SUBSIDIARY:
SBA CONSTRUCTION SERVICES,
INC., a Florida corporation
By: /s/ Jeffrey A. Stoops
----------------------------------
Name: Jeffrey A. Stoops
Title: Senior Vice President
PARENT:
SBA COMMUNICATIONS CORPORATION, a Florida
corporation
By: /s/ Jeffrey A. Stoops
----------------------------------
Name: Jeffrey A. Stoops
Title: Senior Vice President
43
<PAGE>
SCHEDULE OF EXHIBITS
--------------------
Exhibit "1" - Defined Terms
Exhibit "4.5" - Certified Copy of Organizational Documents, Certificate
of Limited Partnership and Agreement of Limited
Partnership
Exhibit "6.1(m)" - Amendment to Headquarters Lease
Exhibit "8.5(a)" - Form of Estoppel Certificate from Each Ground Lessors
Exhibit "8.5(b)" - Form of Estoppel Certificate From Tenants
Exhibit "8.5(c)" - Form of Estoppel Certificate from Landlord
Exhibit "8.11" - List of Shareholders' Closing Documents
Exhibit "8.13" - Opinion of Counsel to Eldridge, the Limited Partnership
and Com-Net
Exhibit "8.17" - Form of Release/Waiver
Exhibit "9.2" - List of Subsidiary's and Parent's Closing Documents
Exhibit "13.8" - Copy of Deal Point Summary
<PAGE>
EXHIBIT "1"
-----------
Defined Terms
The following terms will have the following meanings throughout this Merger
Agreement:
"Affiliate" - with respect to a Person, any other Person that, directly or
---------
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with the first Person.
"Airplane Lease" - the Lease Agreement, dated as of May 12, 1998, by and
--------------
between Fleet National Bank and Com-Net (Lease No. 10398-DE).
"Appurtenant Property" - all right, title and interest of Com-Net or the
--------------------
Shareholders, if any, in and to all (a) streets, roads, easements, contract
rights and rights-of-way appurtenant to the Real Property, (b) covenants,
restrictions, agreements, development rights, air rights, density rights,
drainage rights, riparian and/or littoral rights benefitting the Real Property,
(c) utility mains, service laterals, hydrants, valves and appurtenances
servicing the Real Property, (d) utility deposits and reservation fees paid by
or on behalf of a Shareholder or Com-Net with respect to the Real Property, and
(e) oil, gas, minerals, soil, flowers, shrubs, crops, trees, timber, compacted
soil, submerged lands and fill appurtenant to the Real Property.
"Balance Sheets" - collectively, the balance sheets of Com-Net referred to
--------------
in Section 4.9 of this Merger Agreement.
"Breach" - a "Breach" of a representation, warranty, covenant, obligation,
------
or other provision of this Merger Agreement or any instrument delivered pursuant
to this Merger Agreement will be deemed to have occurred if there is or has been
(a) any inaccuracy in or breach of, or any failure to perform or comply with,
such representation, warranty, covenant, obligation, or other provision, or (b)
any claim (by any Person) or other occurrence or circumstance that is or was
inconsistent with such representation, warranty, covenant, obligation, or other
provision, and the term "Breach" means any such inaccuracy, breach, failure,
claim, occurrence, or circumstance.
"Business Day" - any day other than a Saturday, Sunday or a day upon which
------------
banking institutions in the State of Florida are authorized or required by law
to close.
"Change of Control" - the occurrence of one or more of the following
-----------------
events: (i) a person or entity or group (as that term is used in Section
13(d)(3) of the Securities Exchange Act of 1934, as amended) of persons or
entities, other than persons or entities who are the shareholders of Parent as
of the date of this Agreement, shall have become the beneficial owner of
securities of Parent representing a majority of the combined voting power of the
outstanding securities of Parent ordinarily having the right to vote in the
election of directors (excluding an initial public offering of the Parent Common
Stock) or (ii) a person or entity or group (as so defined ) of persons or
entities and its designees, other than persons or entities who are the
shareholders of
<PAGE>
Parent as of the date of this Merger Agreement or their designees, shall
represent a majority of Parent's Board of Directors or (iii) any sale, lease,
exchange or other transfer (in one transaction or a series of related
transactions) of all, or substantially all, the assets of Parent to any person
or entity (as so defined) of persons or entities or (iv) the shareholders of
Parent shall approve any plan or proposal for the liquidation or dissolution of
Parent.
"Claim" - any claim, damage, loss, liability, obligation, demand, defense,
-----
judgment, suit, proceeding, disbursement or expense, including reasonable
attorneys' fees or costs (including those related to appeals).
"Closing" - the date upon which the consummation of the Merger occurs in
-------
accordance with the terms of this Merger Agreement.
"Closing Date" - as defined in Section 1.2.
------------
"Code" - the Internal Revenue Code of 1986 or any successor law, and
----
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"Com-Net Account Receivable" - that certain account receivable due Com-Net
--------------------------
from the LLC in the amount of $2,415,216 which account receivable has been
assigned by Com-Net to Eldridge.
"Construction Contracts" - those contracts by and between Com-Net and
----------------------
Owners for the construction of Towers.
"Com-Net Stock Purchase Agreement" - the Stock Purchase Agreement, dated as
--------------------------------
of January 6, 1998, by and among Eldridge and Christopher Cohan.
"Contemplated Transactions" - all of the transactions contemplated by this
-------------------------
Merger Agreement, including the execution, delivery, and performance of this
Merger Agreement and the documents and instruments referred to herein and the
performance by Parent, Subsidiary, the Shareholders and Com-Net, of their
respective covenants and obligations under this Merger Agreement.
"Contract" - any agreement, contract, obligation, promise, or undertaking
--------
(whether written or oral and whether express or implied) that is legally binding
upon Com-Net, the Shareholders or their respective assets, (including, without
limitation, the Office Leases, Construction Contracts, Ground Leases, Tenant
Leases and Easements).
"Current Funds" - wired funds, cashier's check or certified check.
-------------
"Disclosure Letter" - that certain completed disclosure letter delivered by
-----------------
the Shareholders and Com-Net to Subsidiary within ten (10) days after the
execution of this Merger Agreement containing, among other things, true, correct
and complete copies of certain records,
<PAGE>
documentation and other information concerning the ownership, use, operation and
condition of the Property.
"Easements" - the easements described in the Disclosure Letter through
---------
which access to the Real Property is required or through which utilities to the
Real Property are provided.
"EBITDA" - for any period, net income determined in accordance with GAAP
------
for such period plus, without duplication and to the extent reflected as a
----
charge in the statement of such net income for such period, the sum of (a)
income tax expense, (b) interest expense, amortization or writeoff of debt
discount and debt issuance costs and commissions, discounts and other fees and
charges associated with indebtedness, (c) depreciation and amortization expense,
(d) amortization of intangibles (including, but not limited to, goodwill) and
organization costs, (e) any extraordinary, unusual or non-recurring expenses or
losses (including, whether or not otherwise includeable as a separate item in
the statement of such net income for such period, losses on sales of assets
outside of the ordinary course of business) and (f) any other non-cash charges,
and minus, to the extent included in the statement of such net income for such
-----
period, the sum of (a) interest income (except to the extent deducted in
determining interest expense), (b) any extraordinary, unusual or non-recurring
income or gains (including, whether or not otherwise includeable as a separate
item in the statement of such net income for such period, gains on the sales of
assets outside of the ordinary course of business), and (c) any other non-cash
income; provided, however, that (1) with respect to Sections 3.1 (b)(ii) and
-------- -------
(b)(iii), the EBITDA Calculation for all Towers built directly or indirectly by
the Surviving Corporation for ownership by Parent (including all Towers built in
1999 prior to Closing), if any, shall include a 20% gross profit margin, and (2)
in calculating net income and EBITDA, in no event shall indirect corporate
overhead of Parent be allocated to the Surviving Corporation.
"Effective Date" - the date upon which a counterpart of this Merger
--------------
Agreement, fully executed by the Shareholders, Com-Net, Parent and Subsidiary,
is received by Subsidiary.
"FAA" - Federal Aviation Authority.
---
"FCC" - Federal Communications Commission.
---
"Financial Statements" - collectively, all of the financial information
--------------------
with respect to Com-Net to be delivered to Subsidiary in accordance with Section
4.9 of this Merger Agreement.
"GAAP"- generally accepted United States accounting principles, applied on
----
a basis consistent with the basis on which the Balance Sheets and the other
financial statements referred to in this Merger Agreement were prepared.
"Governmental Authority" - the United States of America, the state, county,
----------------------
town or other municipality in which any of the Property is located and any
entity exercising executive, legislative, judicial, regulatory or administrative
functions over or pertaining to any of the Property (including the FAA, the FCC,
any drainage district, street lighting district or special taxing district).
<PAGE>
"Governmental Authorization" - any approval, consent, license, permit,
--------------------------
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Authority or pursuant to
any Legal Requirement.
"Ground Leases" - the ground leases described in the Disclosure Letter
-------------
pursuant to which Com-Net leases Real Property upon which any of the Towers are
located.
"Ground Lessors" - each of the lessors under the Ground Leases.
--------------
"Headquarters Lease" - the Lease Agreement, dated as of November 1, 1995,
------------------
by and among Daniel J. Eldridge and Tammy Eldridge, as landlord and Com-Net, as
tenant.
"HSR Act" - Hart Scott Rodino Antitrust Improvements Act of 1976, as
-------
amended.
"Improvements" - the Towers, and all poles, buildings, equipment shelters,
------------
storage facilities, cabinets, anchors, guy wires and other improvements which
are located on or appurtenant to the Property.
"Indebtedness" - without duplication, (a) all indebtedness for borrowed
------------
money, (b) all obligations for deferred purchase price of property or services
(other than trade payables incurred in the Ordinary Course of Business), (c) all
obligations evidenced by notes, bonds, debentures or other similar instruments
(other than performance bonds and other obligations of a like nature incurred in
the Ordinary Course of Business), (d) all indebtedness created or arising under
any conditional sale or other title retention agreement with respect to property
acquired (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (e) all capital lease obligations, (f) all obligations, contingent or
otherwise, as an account party under acceptance, letter of credit or similar
facilities, (g) all obligations, contingent or otherwise, to purchase, redeem
retire or otherwise acquire for value any capital stock, (h) all guarantee
obligations in respect of obligations of the kind referred to in clauses (a)
through (g) above, (i) all obligations of the kind referred to in clauses (a)
through (h) above secured by (or for which the holder of such obligation has an
existing right, contingent or otherwise, to be secured by a lien on property
(including, without limitation, accounts and contract rights) owned, whether or
not assumed or liabilities arise for the payment of such obligation, (j) the
$2,495,216 account payable owed by LLC to Com-Net, which account receivable Com-
Net has assigned to Eldridge, (k) an account payable owed by LLC to Com-Net in
the amount of $1,500,000 for or on account of Towers built or being built by
Com-Net for the LLC, which account payable may be increased solely by amounts
expended for or on account of Towers built or being built by Com-Net for the
LLC, and (l) the Note Payable.
"Intangible Personal Property" - any development rights, documents,
----------------------------
technical matter and work product relating to the Property, including any
Permits, environmental studies, construction, engineering, architectural,
landscaping or other plans or drawings related to the Property and any surveys,
maps, site plans, plats and other graphics relating to the Property.
<PAGE>
"IRS"- the United States Internal Revenue Service or any successor agency,
---
and, to the extent relevant, the United States Department of the Treasury.
"Leased Real Property" - the real property described in the Disclosure
--------------------
Letter as being ground leased by any Shareholder or Com-Net.
"Legal Requirements" - any law, ordinance, order, rule or regulation of any
------------------
Governmental Authority which pertains to the Property, a Shareholder or Com-Net,
including without limitation, all building, zoning, land use, subdivision,
setback, platting, health, traffic, environmental, hazardous waste, natural
resources or flood control matters.
"Lenders" - the several lenders from time to time party to the Amended and
-------
Restated Credit Agreement, dated as of February 5, 1999, by and among Parent,
SBA Telecommunications, Inc., the several lenders from time to time party
thereto, Lehman Brothers, Inc., General Electric Capital Corporation, Toronto
Dominion (Texas), Inc., Barclays Bank PLC and Lehman Commercial Paper, Inc.
"LLC" - Com-Net Development Group, LLC, a Tennessee limited liability
---
company and an affiliate of Com-Net, which was formed November 4, 1997 for the
purpose of acquiring, developing and investing in communications towers.
"Merger Agreement" - this instrument, together with all exhibits, schedules
----------------
and addenda attached hereto.
"Note Payable" - that certain Note payable to Daniel J. Eldridge by Com-Net
------------
in an amount equal to $1,144,505.
"Offices" - the premises described in the Office Leases.
-------
"Office Leases" - (a) the Headquarters Lease; and (b) certain development
-------------
office leases between Com-Net and certain landlords in New Jersey, Raleigh,
North Carolina and Cincinnati, Ohio.
"Order"- any award, decision, injunction, judgment, order, ruling,
-----
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Authority or by any arbitrator.
"Ordinary Course of Business"- an action which is taken in the ordinary
---------------------------
course of the normal day-to-day operations of the Person taking such action
consistent with the past practices of such Person, is not required to be
authorized by the board of directors of such Person (or by any Person or group
of Persons exercising similar authority) and is similar in nature and magnitude
to actions customarily taken, without any authorization by the board of
directors (or by any Person or group of Persons exercising similar authority),
in the ordinary course of the normal day-to-day operations of other Persons that
are in the same line of business as such Person.
<PAGE>
"Organizational Documents"- (a) the articles or certificate of
------------------------
incorporation and the bylaws of a corporation; (b) any charter or similar
document adopted or filed in connection with the creation, formation, or
organization of a Person; and (c) any amendment to any of the foregoing.
"Owned Real Property" - the real property described in the Disclosure
-------------------
Letter as being owned by any Shareholder or Com-Net.
"Owner" - those Persons who have contracted with Com-Net to construct
-----
Towers.
"Parent Common Stock" - shares of validly issued, registered, fully paid
-------------------
and non-assessable Class A Common Stock, $.01 par value per share, of the
Parent.
"Permits" - all permits, licenses, authorizations, certificates of
-------
occupancy, certificates of completions, variances and similar approvals of any
Governmental Authority having jurisdiction over Com-Net or the Property.
"Permitted Exceptions" - the exceptions to, or liens or encumbrances upon,
--------------------
title to any portion of the Property set forth in the Disclosure Letter.
"Person" - any individual, corporation (including any non-profit
------
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Authority.
"Proceeding"- any action, arbitration, audit, hearing, investigation,
----------
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Authority or arbitrator.
"Property" - collectively, the Contracts (including, without limitation,
--------
the Office Leases, the Construction Contracts, the Tenant Leases, the Ground
Leases and the Easements), the Real Property, the Appurtenant Property, the
Intangible Personal Property, the Improvements and the Tangible Personal
Property.
"Real Property" - collectively, the Leased Real Property and the Owned Real
-------------
Property.
"Related Person"- with respect to a particular individual, (a) each other
--------------
member of such individual's Family, (b) any Person that is directly or
indirectly controlled by such individual or one or more members of such
individual's Family, (c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and (d) any Person with respect to which such individual or one or more members
of such individual's Family serves as a director, officer, partner, executor, or
trustee (or in a similar capacity). With respect to a specified Person other
than an individual, (a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly
<PAGE>
under common control with such specified Person, (b) any Person that holds a
Material Interest in such specified Person, (c) each Person that serves as a
director, officer, partner, executor, or trustee of such specified Person (or in
a similar capacity), (d) any Person in which such specified Person holds a
Material Interest, (e) any Person with respect to which such specified Person
serves as a general partner or a trustee (or in a similar capacity); and (f) any
Related Person of any individual described in clause (b) or (c). For purposes of
this definition, (a) the "Family" of an individual includes (i) the individual,
(ii) the individual's spouse and former spouses, (iii) any other natural person
who is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual, and
(b) "Material Interest" means the direct or indirect right to vote or dispose of
voting securities or other voting interests representing at least 10% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 10% of the outstanding equity securities or
equity interests in a Person.
"Representative"- with respect to a particular Person, any director,
--------------
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SBA/LLC Purchase Agreement" - the Purchase Agreement, dated as of March
--------------------------
31, 1999, by and among Parent, LLC, SBA Towers Tennessee, Inc., a Florida
corporation, and Eldridge.
"Service Contracts" - all service contracts, maintenance contracts and
-----------------
management contracts, if any, affecting the Property.
"Shares"- all of the issued and outstanding shares of capital stock of Com-
------
Net.
"subsidiary"- with respect to any Person (the "Owner"), any corporation or
----------
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of Com-Net.
"Tangible Personal Property" - all personal property, furniture, fixtures,
--------------------------
equipment, appliances, vehicles, inventory and other items of personal property
owned by Com-Net and used in connection with the Property (including any
unassembled towers).
"Tax Return" - any return (including any information return), report,
----------
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Authority (including, without limitation, the State of California or any agency
thereof) in connection with the determination, assessment, collection, or
payment of any tax or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any tax.
<PAGE>
"Tenant Estoppels" - estoppel letters from each of the Tenants to
----------------
Subsidiary, in form and substance reasonably acceptable to Subsidiary.
"Tenant Leases" - the leases, licenses and other occupancy agreements
-------------
described in the Disclosure Letter pursuant to which any Person is granted the
right to use space or install equipment on the Towers or in any of the
Improvements located on the Real Property on which the Towers are located.
"Tenants" - each of the lessees, licensees or other occupants under the
-------
Tenant Leases.
"Tower" - communication towers or monopoles owned or leased by Com-Net
-----
(whether completed or under construction).
<PAGE>
EXHIBIT "4.5"
-------------
Certified Copy of Organizational Documents, Certificate of Limited Partnership
and the Agreement of Limited Partnership
(See Attached Copies)
<PAGE>
EXHIBIT "6.1(M)"
----------------
Form of First Amendment to Lease
THIS FIRST AMENDMENT TO LEASE (hereinafter referred to as "Amendment") made
and entered into this _________ day of _________, 1999, by and between Daniel J.
Eldridge and wife, Tammy Eldridge, (hereinafter collectively referred to as the
"Landlord") and Com-Net Construction Services, Incorporated, a Tennessee
corporation ("Tenant").
WITNESSETH:
WHEREAS, Landlord and Tenant executed a Lease dated as of November 1, 1995
(hereinafter referred to as "Lease") wherein Tenant leased the land described in
Exhibit "A" attached hereto and made a part hereof in the 11th Civil District of
- -----------
Washington County, Tennessee together with the improvements situated thereon;
and
WHEREAS, Landlord and Tenant desire to otherwise amend the Lease as
provided herein.
NOW THEREFORE, in consideration of One Dollar ($1.00) and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Landlord and Tenant agree as follows:
1. Section 2 of the Lease is hereby amended by adding the following to the end
of such section:
Tenant shall have the right to extend the Term by up to three (3)
additional Terms of five (5) years each (each such extended term shall be
referred to as "Extended Term"). In order to exercise an Extended Term,
-------------
Tenant shall deliver to Landlord notice of its intention to renew not less
than thirty (30) days prior to the expiration of the Term or Extended Term,
as the case may be.
2. Section 3 of the Lease is hereby amended by adding the following to the end
of such section:
Effective November 1, 2000, the annual Base Rent shall be increased to One
Hundred Ten Thousand and No/100 Dollars ($110,000.00), in the event Tenant
elects to exercise an Extended Term. Thereafter, the Base Rent shall
increase each year on November 1 by the percentage increase in the "CPI
Index" (as hereinafter defined). Each such November 1 shall be referred to
as the "Adjustment Date." The CPI Index published for the month preceding
the Adjustment Date shall be compared with the CPI Index published for the
month preceding November 1, 2000 (in the case of the first adjustment) and
with the month preceding the previous Adjustment Date (in the case of each
subsequent adjustment). After the appropriate CPI Index becomes available,
which may be after the Adjustment Date, Landlord shall recalculate the Base
Rent and give Tenant notice of the
<PAGE>
increase. Until Tenant receives such notice from Landlord, Tenant shall
continue to pay the Base Rent due and payable prior to the Adjustment Date;
provided, however, within ten (10) days of receipt of such notice, Tenant
shall remit to Landlord the difference, if any, owed between the Base Rent
actually paid by Tenant from and after the Adjustment Date and the
recalculated Base Rent due and payable as of the Adjustment Date.
The "CPI Index" means the "Consumer Price Index" published by the U.S.
Department of Labor, Bureau of Labor Statistics, U.S. City Average, All
Items for Urban Wage Earners and Clerical Workers (1982-84=100). If the
CPI Index is discontinued or materially revised during the term of this
Lease, Landlord shall adopt a substitute governmental index for computation
which reasonably reflects consumer prices for purposes of computing the
cost of living adjustment provided for herein.
4. Sections 6A.1-3. of the Lease shall be deleted in its entirety and replaced
with the following:
1. Failure by Tenant to pay Rent or other payments owing to Landlord on
the date they are due and such failure continues for a period of ten
(10) days after receipt of written notice from Landlord that the same
are due and owing; or
2. If Tenant shall be in default under any other non-monetary provision
of this Lease and shall remain so for a period of thirty (30) days
after Landlord has provided written notice to Tenant of such default,
provided that if any such default cannot reasonably be remedied by
Tenant within thirty (30) days after written notice of default, then
Tenant shall have such additional time as shall be reasonably
necessary to remedy such default provided that during such time Tenant
is continuously and diligently pursuing the remedy necessary to cure
such default.
5. Section 10 of the Lease shall be deleted in its entirety and replaced with
the following:
10. INDEMNITY. The Tenant does hereby agree to indemnify and hold the
---------
Landlord harmless from any claims or damages resulting from any
accident or misadventure, which may occur upon the Premises during the
period of the Tenant's occupancy and arising solely out of Tenant's
6. The following language shall be added as new sections to the end of the
Lease:
12. ASSIGNMENT AND SUBLEASING. Tenant may sublet the Premises or may
--------------------------
assign or transfer this Lease in whole or in part without Landlord's
consent.
13. LENDER PROVISIONS. Tenant may from time to time grant to its lenders
-----------------
("Lenders") a lien on and security interest in all assets and personal
property of Tenant located on the Premises, including, but not limited
to, all accounts receivable, inventory, goods, machinery and equipment
owned by Tenant (the
<PAGE>
Personal Property") as collateral security for the repayment of any
-----------------
indebtedness to the Lenders, (B) the Lenders may, in connection with
any foreclosure or other similar action relating to the Personal
Property, enter upon the Premises (or permit their representatives to
do so on their behalf) in order to implement a foreclosure or other
action without liability to you; provided, however, that (i) rent is
-------- -------
paid to Landlord during occupancy by or on behalf of the Lenders for
any purpose, (ii) the Lenders pay for any damages caused by the
Lenders or their representatives in removing the Personal Property
from the Premises, and (iii) the Lenders otherwise comply with the
terms of the Lease, (C) Landlord hereby agrees to subordinate any
security interest, lien, claim or other similar right, including,
without limitation, rights of levy or distraint for rent, Landlord may
have in or on the Personal Property, whether arising by agreement or
by law, to the liens and/or security interests in favor of the
Lenders, whether currently existing or arising in the future, (D)
nothing contained herein shall be construed to grant a lien upon or
security interest in any of Landlord's assets, (E) to the extent
required by the terms of the Lease, Landlord consents to any grant by
Tenant to any Lenders of a lien on Tenant's leasehold interest in the
Lease, (F) in the event Landlord gives Tenant any notice of default or
termination of the Lease (or commence any legal process relating
thereto), Landlord will endeavor to simultaneously give a duplicate
copy thereof to the Lenders but shall incur no liability due to your
failure to give such notice and the failure to give such notice shall
not limit your ability to exercise any remedies available to Landlord
under the Lease, (G) Landlord agrees to accept performance on the part
of any of the Lenders or their agents or representatives as though
performed by Tenant to cure any default or condition for termination,
and (H) the terms of this paragraph may not be modified, amended or
terminated except in writing signed by the Lenders.
14. NOTICES. All notices, demands, requests, consents, approvals and other
-------
instruments required or permitted to be given pursuant to this Lease
will be in writing, signed by the notifying party, or officer, agent
or attorney of the notifying party, and will be deemed to have been
effective upon delivery if served personally, including but not
limited to delivery by messenger, overnight courier service or by
overnight express mail, or upon posting if sent by registered or
certified mail, postage prepaid, return receipt requested, and
addressed as follows:
To Landlord:
Daniel J. Eldridge and wife, Tammy Eldridge
____________________
____________________
To Tenant:
BEFORE __________, 1999:
Com-Net Construction Services, Inc.
<PAGE>
____________________
____________________
AFTER ___________, 1999:
SBA Communications Corporation
One Town Center Road, 3rd Floor
Boca Raton, Florida 33486
The address to which any notice, demand, or other writing may be
delivered to any party as above provided may be changed by written
notice given by the party as above provided.
15. CONSENT TO MERGER. Landlord acknowledges that Tenant may be merging
-----------------
into Com-Net Construction Services, Inc., a Florida corporation and an
indirectly owned subsidiary of SBA Communications Corporation ("New
Com-Net"). Landlord hereby consents to the proposed merger of Tenant
into New Com-Net and upon confirmation of such merger, will treat New
Com-Net as the Tenant under this Lease .
7. All terms not otherwise defined in this Amendment shall have the meaning
given to them in the Lease. All of the provisions of the Lease affected by
this Amendment shall be deemed amended, whether or not actually specified
herein, if any such amendment is clearly necessary in order to effectuate
the intent of the parties hereto. To the extent of any conflict between
the provisions of the Lease and the provisions of this Amendment, the
latter shall supersede and control. Except as and to the extent herein
modified, the terms and provisions of the Lease are re-ratified and re-
affirmed by the parties hereto.
IN WITNESS WHEREOF, Landlord and Tenant have placed their hands and seals
below on the date first above cited.
WITNESSES: TENANT:
____________________________ COM-NET CONSTRUCTION SERVICES,
Print Name:_________________ INCORPORATED, a Tennessee
corporation
____________________________
Print Name:_________________ By:____________________________
Print Name:____________________
Title:_________________________
<PAGE>
WITNESSES: LANDLORD:
____________________________
Print Name:_________________ ____________________________
Daniel J. Eldridge
____________________________
Print Name:_________________
____________________________
Print Name:_________________ ____________________________
Tammy Eldridge
____________________________
Print Name:
STATE OF _______________
COUNTY OF ______________
Personally appeared before me, the undersigned, a Notary Public within and for
said State and County, duly commissioned and qualified, ______________, with
whom I am personally acquainted, or proved to me on the basis of satisfactory
evidence, and who, upon oath, acknowledged himself to be the __________ of Com-
Net Construction Services, Inc., a Tennessee corporation, the within named
bargainor, and that he as such _________________, being authorized to do so,
executed the foregoing instrument, for the purposes therein contained by signing
the name of the corporation by himself as such officer.
Witness my hand and seal at office this _____ day of __________, 1999.
My Commission Expires:
[SEAL]
STATE OF _______________
COUNTY OF ______________
Personally appeared before me, the undersigned, a Notary Public in and for said
County and State, duly commissioned and qualified, ____________, the within
named bargainor, with whom I am personally acquainted, or proved to me on the
basis of satisfactory evidence, and who acknowledges that they executed the
foregoing instrument for the purposes therein contained.
Witness my hand and seal at office this _____ day of __________, 1999.
My Commission Expires:
[SEAL]
<PAGE>
STATE OF TENNESSEE
COUNTY OF ______________
Personally appeared before me, the undersigned, a Notary Public in and for said
County and State, duly commissioned and qualified, ____________, the within
named bargainor, with whom I am personally acquainted, or proved to me on the
basis of satisfactory evidence, and who acknowledges that they executed the
foregoing instrument for the purposes therein contained.
Witness my hand and seal at office this _____ day of __________, 1999.
My Commission Expires:
<PAGE>
EXHIBIT "8.5(A)"
----------------
Form of Ground Lease Estoppel Certificate
SBA COMMUNICATIONS CORPORATION
ONE TOWER CENTER ROAD, THIRD FLOOR
BOCA RATON, FLORIDA 33486
____________, 1999
_________________
_________________
_________________
_________________
Re: Lease Agreement ("Ground Lease") dated _________________________ by
------------
and between [INSERT NAME OF LESSOR] herein after referred to as
("Landlord") and COM-NET CONSTRUCTION SERVICES, INC. ("Tenant") with
-------- ------
respect to that certain real property located in ________________,
____________ ("Property")
--------
Dear [NAME OF GROUND LESSOR]:
SBA Communications Corporation, a Florida Corporation ("SBA"), and its
---
indirectly wholly owned subsidiary, SBA Construction Services, Inc., a Florida
corporation ("Subsidiary"), and Tenant have signed an agreement under which
Tenant will merge with and into Subsidiary and Subsidiary will be the surviving
corporation (the "Surviving Corporation"). The Ground Lease and any tenant's
interest in the Property and all rights and proceeds relating thereto are
referred to as the "Leasehold Estate".
----------------
SBA, certain of its affiliates and certain lenders selected by SBA and its
affiliates ("Lenders") may have entered, and may from time to time in the future
-------
enter into loan or credit agreements, pursuant to which the Lenders may have
extended, or may in the future extend, credit or loan money to SBA or its
affiliates. As a condition to such extensions of credit, such Lenders may
require liens on certain of the Surviving Corporation's or SBA's assets located
on the Property and consent by you to the Surviving Corporation's or SBA's
granting of a leasehold mortgage on the Leasehold Estate.
As part of our due diligence review in determining whether to consummate
such transaction, we would ask that you confirm the following:
1. You consent to the proposed merger to the extent the terms of the
Ground Lease would require your consent to such merger with the
understanding that this consent will be effective only if the proposed
transaction closes.
<PAGE>
2. Attached as Exhibit "A" is a true and complete copy of the Ground
Lease and all amendments or modifications thereto. The Ground Lease
constitutes the entire agreement between you and Tenant with respect
to the subject matter thereof.
3. The expiration date of the initial term of the Ground Lease is
____________ and Tenant has the option to extend the term of the
Ground Lease for _____successive terms of ________ years.
4. Tenant's monthly base rent under the Ground Lease is $___________,
Tenant must pay monthly $______________ as additional rent and all
rent, additional rent and other charges due and payable under the
Ground Lease have been paid through ______________, 19__.
5. Neither you nor Tenant is in default under the Ground Lease and there
is no event which, with the giving of notice and/or the passage of
time, would constitute such a default.
6. You have no claim or defense of any nature whatsoever against Tenant
with respect to the Ground Lease and there is no event which, with the
giving of notice and/or the passage of time, would constitute the
basis of such a claim or defense.
We would appreciate you reviewing and signing this letter at your earliest
possible convenience as we would like to conclude this transaction a quickly as
possible. If you have any questions or comments, please do not hesitate to
contact me at ___-___-____.
Sincerely,
____________________________
[NAME OF SENDER]
[TITLE OF SENDER]
ACKNOWLEDGED AND CONFIRMED:
____________________________
[NAME OF GROUND LESSOR]
<PAGE>
EXHIBIT "8.5(B)"
----------------
Form of Tenant Estoppel Certificate
SBA COMMUNICATIONS CORPORATION
ONE TOWER CENTER ROAD, THIRD FLOOR
BOCA RATON, FLORIDA 33486
[DATE]
[NAME OF TENANT]
[ADDRESS OF TENANT]
Re: Lease, dated __________, 19__ between COM-NET CONSTRUCTION SERVICES,
INC. ("Landlord") and [INSERT NAME OF TENANT] ("Tenant") (the
"Lease"), with respect to [INSERT ADDRESS OR DESCRIPTION OF THE
PROPERTY] (the "Property")
Dear [NAME OF TENANT]:
SBA Communications Corporation, a Florida corporation ("SBA"), its
indirectly wholly owned subsidiary SBA Construction Services, Inc., a Florida
corporation ("Subsidiary"), and Landlord have signed an agreement under which
Landlord will merge with and into Subsidiary. Pursuant to the Merger Agreement,
SBA and Subsidiary would become the owner of the Lease and certain of Landlord's
assets located on the Property, including any antenna tower.
As part of our due diligence review in determining whether to consummate
such transaction, we would ask that you confirm the following:
1. Attached as Exhibit "A" is a true and complete copy of the Lease and
all amendments or modifications thereto. The Lease constitutes the
entire agreement between you and Landlord with respect to the subject
matter thereof. To the extent required by the terms of the Lease, you
consent to the proposed transfer of the Landlord's rights and
interests under the Lease to Subsidiary (by operation of the merger)
with the understanding that this consent will be effective only if the
proposed transaction closes.
2. The term of the Lease commenced on ___________ and you have the option
to extent the term of the Lease for_______ (____) successive terms of
______ (___) years each. The expiration date of the initial term of
the Lese is ___________________.
3. Rent in the amount of $__________ is payable ___________. All rents
and all other charges due and payable under the Lease have been paid
through
<PAGE>
_____________, 19__, and no amounts have been or will be paid
to Landlord for more than one month in advance.
4. You have no right to free rent, rebate of rent or any other type of
rental concession with respect to the Lease except as expressly
provided for in the Lease.
5. The amount of the security deposit paid to and currently being held by
Landlord under the Lease is $__________.
6. Neither you nor landlord is in default under the Lease and there is no
event which, with the giving of notice and/or the passage of time,
would constitute such a default.
7. You have no claim or defense of any nature whatsoever against Landlord
with respect to the Lese and there is no event which, with the giving
of notice and/or the passage of time, would constitute the basis of
such a claim or defense. You have no offsets, claims, counterclaims or
defenses of any nature whatsoever to the performance of your
obligations under the Lease (including, without limitation, the
obligation to pay rent) and, there is no condition which, with the
giving of notice and/or the passage of time, would constitute the
basis of such an offset, claim, counterclaim or defense.
8. You have not assigned, transferred or otherwise encumbered your
interest under the Lease or subleased any part of the Property.
9. You have no outstanding options, right of first refusal or rights of
first negotiation to purchase all or any part of the Property.
10. No petition has been filed by or against you for protection under any
bankruptcy, creditor's rights, insolvency or other similar statutes.
11. You have not in the past used, and are not presently using the
Property for the handling, storage, transportation, or disposal of
hazardous or toxic substances, materials, pollutants or waste (or
similar items under applicable environmental laws or regulations). To
the best of your knowledge, there has been no release of any such
items into the environment from the Property or in, on or under the
Property.
We would appreciate you reviewing and signing this letter at your earliest
possible convenience as we would like to conclude this transaction a quickly as
possible. Once executed,
<PAGE>
please return same to me by facsimile at 561-997-0343 and by regular mail. If
you have any questions or comments, please do not hesitate to contact me at 561-
995-7670.
Sincerely,
____________________________
Neil H. Seidman, Esq.
Acquisitions Manager/Corporate Counsel
ACKNOWLEDGED AND CONFIRMED:
____________________________
By: ________________________
Its: _______________________
<PAGE>
EXHIBIT "8.5(C)"
----------------
Form of Landlord Estoppel Certificate
[Letterhead of Landlord]
[DATE]
SBA Construction Services, Inc.
[ADDRESS]
Re: Lease, dated November 1, 1995, between Daniel J. Eldridge and Tammy
Eldridge ("Landlord") and Com-Net Construction Services, Inc.
("Tenant") (the "Lease") with respect to [INSERT ADDRESS OR
DESCRIPTION OF THE PROPERTY] (the "Property")
Gentlemen:
We understand that the Tenant intends to merge with and into SBA
Construction Services, Inc., a Florida corporation ("Subsidiary") and an
indirectly wholly owned subsidiary of SBA Communications Corporation, a Florida
corporation, and that the surviving corporation of that merger (the "Surviving
Corporation") desires to become the tenant under that Lease.
As the Landlord for the Property described in the Lease and with the
understanding that Subsidiary intends to rely on this letter, the undersigned
hereby confirms as follows:
1. The undersigned consents to the proposed transfer of the Tenant's
rights and interests under the Lease to the Surviving Corporation with
the understanding that this consent will be effective only if the
proposed merger transaction closes.
2. Attached hereto as Exhibit "A" is a true, correct and complete copy of
the Lease and all amendments or modifications thereto. The Lease
constitutes the entire agreement between the Tenant and the
undersigned with respect to the subject matter thereof.
3. The term of the Lease commenced ___________, 19__ and expires
___________, 19__. Tenant has ______ (__), _____ (__) year options to
extend the term of the Lease.
4. The current base rental is $__________, payable in equal monthly
installments of $____________ on the first day of each month. The base
rental is subject to adjustment only in accordance with the terms of
the Lease.
<PAGE>
5. Tenant has paid in full all rent, maintenance and operation charges
and other sums due under the Lease through and including _________,
19__, and has paid a security deposit in the amount of $_________ and
prepaid rent in the amount of $__________, each being held by the
undersigned under the Lease.
6. There are no existing defaults by the undersigned or the Tenant under
the Lease nor have any notices of default been given or received by
the undersigned, and there exists no state of facts which, with the
giving of notice or lapse of time or both, would constitute a default
under the Lease. Neither the Lease nor the validity, obligation or
construction thereof is presently in arbitration or litigation.
7. The undersigned is the sole owner of the property leased pursuant to
the Lease. There are no mortgagees of such premises other than those
who have delivered to the Tenant a valid and enforceable
subordination, non-disturbance and attornment agreement.
8. The Lease is valid and enforceable in accordance with its terms and
has not been amended, terminated or waived in any manner, orally or in
writing, except as indicated in the reference line of this letter and
in the copies attached hereto.
Sincerely,
__________________________________
Daniel J. Eldridge
__________________________________
Tammy Eldridge
<PAGE>
EXHIBIT "8.11"
--------------
List of Shareholders' Closing Documents
1. The Shares.
2. Evidence that all utility charges for the Towers have been paid
through a date not more than thirty (30) days prior to the Closing Date.
3. An affidavit to Subsidiary's title insurer, in form and substance
reasonably acceptable and to Subsidiary, which will be sufficient to have the
standard printed exceptions deleted from the title insurance policy of the
Surviving Corporation.
4. An affidavit certifying that each Shareholder is not a "foreign
person" under Section 1445(f)(3) of the Code.
5. A certificate of the secretary of Com-Net setting forth the
resolutions adopted by the board of directors and shareholders of Com-Net
approving the execution and delivery of each of the Shareholders' Closing
Documents and the consummation of the Contemplated Transactions and authorizing
and directing the president or any vice president of Com-Net to execute and
deliver the documents required to be executed and delivered by Com-Net under the
Merger Agreement, which certificate will show the name, office and signature of
each officer of Com-Net authorized to execute and deliver such documents.
6. A certificate of good standing from the Secretary of State of Com-
Net's state of incorporation and all other jurisdictions in which it does
business verifying that Com-Net (i) is duly organized, validly existing and in
good standing in its state of incorporation, and (ii) is duly qualified as a
foreign corporation to do business in each such other jurisdiction.
7. A certificate from each Shareholder and Com-Net, in form and substance
reasonably acceptable to Subsidiary, certifying that all representations and
warranties of each Shareholder and Com-Net remain true and correct as of the
Closing Date.
8. The legal opinions required to be delivered in Section 8.13.
------------
9. A final determination of "no hazard" from the FAA for each of the
Towers, or evidence satisfactory to Subsidiary that such a determination is not
required.
10. An FCC Form 854R for each of the Towers, or evidence satisfactory to
Subsidiary that such form is not required to be filed for each of the Towers.
11. All original corporate and business documents and instruments related
to Com-Net, including without limitation, all minute books, stock ledgers,
transfer records, checkbooks and checkbook registers, Tax Returns and accounting
records.
<PAGE>
12. A Waiver and Release Agreement regarding the former shareholder of
Com-Net.
13. The Amendment to Headquarters Lease attached hereto as Exhibit
-------
"6.1(m)."
- --------
14. A certificate of the secretary of the general partner of the Limited
Partnership setting forth the resolutions adopted by the board of directors of
the general partner approving the execution and delivery of each of the
Shareholders' Closing Documents and the consummation of the Contemplated
Transactions and authorizing and directing the general partner of the Limited
Partnership to execute and deliver the documents required to be executed and
delivered by the Limited Partnership under the Merger Agreement, which
certificate will show the name, office and signature of the officer of the
general partner of the Limited Partnership authorized to execute and deliver
such documents.
15. A certificate of good standing from the Secretary of State of the
Limited Partnership's state of organization and all other jurisdictions in which
it does business verifying that (i) the Limited Partnership is duly organized,
validly existing and in good standing in its state of organization.
16. Any other documents or instruments required by the Merger Agreement or
reasonably requested by Subsidiary and Parent to consummate the Closing.
<PAGE>
EXHIBIT "8.13"
--------------
Form of Opinion of Counsel to Eldridge, the Limited Partnership and Com-Net
_______________, 1999
SBA Communications Corporation
SBA Construction Services, Inc.
One Town Center Road, 3rd Floor
Boca Raton, Florida 33486
Ladies and Gentlemen:
We have acted as legal counsel to Daniel J. Eldridge ("Eldridge"), Eldridge
Family Limited Partnership (the "Limited Partnership) and Com-Net Construction
Services, Inc., a California corporation ("Com-Net"), in connection with the
merger of Com-Net with and into SBA Construction Services, Inc., a Florida
corporation ("Subsidiary") and an indirectly wholly owned subsidiary of SBA
Communications Corporation, a Florida corporation ("SBA"), pursuant to that
certain Agreement and Plan of Merger, dated as of April __, 1999 (the "Merger
Agreement"), by and among Com-Net, Eldridge, the Limited Partnership, SBA and
Subsidiary. This opinion letter (this "Opinion Letter") is being delivered
pursuant to Section 8.13 of the Merger Agreement. Capitalized terms not
otherwise defined in this Opinion Letter have the definitions set forth in the
Merger Agreement.
In rendering the opinions set forth herein, we have examined and relied on
originals or copies of the following:
(i) the Merger Agreement;
(ii) the Certificate of Incorporation of Com-Net as currently in effect,
the Bylaws of Com-Net and certain resolutions of the Board of Directors and
shareholders of Com-Net, each certified by Com-Net as being true and correct and
in effect on the date hereof;
(iii) such records of Com-Net and such agreements, certificates of public
officials, certificates of officers or other representatives of Com-Net and
others, and such other documents, certificates and records as we have deemed
necessary or appropriate as a basis for the opinions set forth herein;
(iv) a Certificate of Good Standing dated as of ____________, 1999 issued
by the Secretary of State of the State of California with respect to Com-Net
[AND A CERTIFICATE OF GOOD STANDING AS A FOREIGN CORPORATION ISSUED BY THE
SECRETARY OF STATE IN EACH OTHER JURISDICTION IN WHICH COM-NET DOES BUSINESS];
<PAGE>
(v) the Certificate of Limited Partnership of the Limited Partnership as
currently in effect, the Agreement of Limited Partnership of the Limited
Partnership and certain resolutions of the partners of the Limited Partnership,
each certified by the Limited Partnership as being true and correct and in
effect on the date hereof; and
(vi) a Certificate of Good Standing, dated as of _______, 1999, issued by
the Secretary of State of __________ with respect to the Limited Partnership.
Based upon the foregoing, we are of the opinion that:
1. Each of Com-Net and the Limited Partnership is duly organized, validly
existing and in good standing under the laws of the States of California and
_________, respectively, and has the power and lawful authority to own its
properties and to transact the business in which it is currently engaged. Com-
Net is duly qualified to transact business in all other jurisdictions in which
it is required to be so qualified.
2. Com-Net, Eldridge and the Limited Partnership have full power to enter
into the Merger Agreement and to carry out their obligations thereunder. The
execution and delivery of the Merger Agreement and the consummation of the
transactions contemplated thereby have been duly and validly authorized by Com-
Net's Board of Directors and shareholders and by the Limited Partnership's
partners. No other acts or proceedings on the part of Com-Net, Eldridge or the
Limited Partnership will be necessary to authorize execution and delivery of the
Merger Agreement or the consummation of the transactions contemplated thereby.
3. The execution and delivery of the Merger Agreement, the consummation
of the transactions contemplated thereby, the performance by Com-Net, Eldridge
and the Limited Partnership of each of their obligations under the Merger
Agreement, and the exercise of SBA's and Subsidiary's of the rights created by
each of the Shareholders' Closing Documents do not and will not (i) violate the
Articles of Incorporation or bylaws of Com-Net; (ii) constitute a breach of or a
default under any Contract, agreement or instrument to which Com-Net is a party
or by which its assets are bound, or result in the creation of a mortgage, lien,
security interest or other encumbrance upon the assets of Com-Net; or (iii)
violate a judgment, decree or order of any Governmental Authority or court or
administrative tribunal, which judgment, decree or order is binding on Com-Net,
Eldridge or the Limited Partnership.
4. No permits, approvals, consents, satisfaction of waiting periods, or
waivers thereof of any Governmental Authority, or of any other Person
whatsoever, are necessary to allow Com-Net, Eldridge and the Limited
Partnership to consummate the transactions contemplated in the Merger Agreement
in compliance with, and not in breach of, (i) all applicable Legal Requirements,
and (ii) the provisions of any Contract binding upon Com-Net, Eldridge or the
Limited Partnership.
5. No actions, suits or proceedings are pending or overtly threatened in
writing against Com-Net, Eldridge or the Limited Partnership that challenge the
validity of the Shareholders' Closing Documents or any action to be taken by
Com-Net, Eldridge or the Limited Partnership pursuant to the Shareholders'
Closing Documents.
<PAGE>
6. The Merger Agreement has been executed and delivered by Com-Net,
Eldridge and the Limited Partnership, and is a valid and binding obligation of
Com-Net, Eldridge and the Limited Partnership, enforceable against each of them
under the law of Florida and the federal law of the United States.
7. The Shares have been duly and validly issued, fully paid and are non-
assessable.
8. Com-Net does not, either directly or indirectly, beneficially or of
record, own any securities or other interests in any other Person, which, by
nature of such ownership, would give Com-Net the power to elect a majority of
that Person's board of directors or other similar governing body or otherwise
give Com-Net the power to direct the business and policies of that Person.
9. Com-Net's authorized capitalization consists of (i) ______ shares of
common stock, $____ par value per share, of which _____ shares are outstanding
and ______ shares of preferred stock, $____ par value per share, of which _____
shares our outstanding.
10. There are no contracts or other agreements or documents, pursuant to
which Com-Net may be required to authorize or issue additional securities.
11. There are no pre-emptive rights or other similar rights, whether under
any of the Organizational Documents, any Legal Requirement, or pursuant to any
Contract, and no Person has any pre-emptive rights or similar rights to purchase
or receive any equity securities or other securities of Com-Net.
Our opinions are limited to the specific issues addressed and are limited
in all respects to laws and facts existing on the date hereof. By rendering
this Opinion Letter, we do not undertake to advise you of any changes in such
laws or facts which may occur or come to our attention after the date hereof.
Subject to the foregoing, this Opinion Letter may be relied upon by you
only in connection with the Shareholder's Closing Documents and the transactions
contemplated therein, and may not be used or relied upon by you or any other
person for any purpose whatsoever, without the prior written consent of this
Firm.
Very truly yours,
________________________________
<PAGE>
EXHIBIT "8.17"
--------------
Form of Release Agreement
This AGREEMENT (this "Agreement") is made and entered into on this __ day
of _____, 1999, by Christopher Cohan ("Cohan") for the benefit of SBA
Communications Corporation, a Florida corporation ("Parent"), and Com-Net
Construction Services, Inc., a Florida corporation and an indirectly wholly
owned subsidiary of Parent ("Subsidiary") and Com-Net Construction Services,
Inc., a California corporation ("Com-Net").
WHEREAS, Cohan and Daniel J. Eldridge ("Eldridge") entered into that
certain Stock Purchase Agreement, dated as of January 6, 1998 pursuant to which
Cohan sold 33.333 shares (the "Stock") of common stock in Com-Net Construction
Services, Inc., a California corporation ("Com-Net"), to the Eldridge Family
Limited Partnership, a Tennessee limited partnership (the "Limited Partnership")
(the "Com-Net Stock Purchase Agreement");
WHEREAS, upon consummation of the transactions contemplated in the Com-Net
Stock Purchase Agreement, Eldridge and the Limited Partnership became the
beneficial owner of all of the issued and outstanding capital stock of Com-Net;
WHEREAS, pursuant to the terms and conditions of the Com-Net Stock Purchase
Agreement, upon a Sale (as defined in the Com-Net Stock Purchase Agreement) of
the Stock within twenty-four months after the closing of the transactions
contemplated in the Com-Net Stock Purchase Agreement, the Limited Partnership
was required to pay Cohan additional amounts of money as a premium contingent on
the price received in connection with such Sale;
WHEREAS, Eldridge, the Limited Partnership, Parent and Subsidiary entered
into that certain Agreement and Plan of Merger, dated as of March __, 1999,
pursuant to which Com-Net will be merged with and into Subsidiary (the "Merger
Agreement");
NOW, THEREFORE, in consideration of $100.00 and other good and valuable
consideration and with the understanding and expectation that Parent, Subsidiary
and Com-Net intend to and shall rely on this Agreement in consummating
transactions contemplated by the Merger Agreement, Cohan agrees as follows:
1. Release. Cohan knowingly and voluntarily waives, releases and
-------
discharges Parent, Subsidiary and Com-Net, their successors and assigns from any
and all actions, causes of action, suits, debts, dues, sums of money, accounts,
bonds, bills, covenants, contracts, agreements, promises, damages, demands
whatsoever, in law or equity, that Cohan may now have or hereinafter can, shall
or may have (including, but not limited to, any matter arising under or in any
way associated with or relating to the Com-Net Stock Purchase Agreement or the
Merger Agreement).
2. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original.
<PAGE>
3. Governing Law. This Agreement and all transactions contemplated
-------------
by this Agreement shall be governed by, and construed and enforced in accordance
with, the laws of the State of Florida.
IN WITNESS WHEREOF, the parties hereto have duly executed and caused this
Agreement to be executed the day and year first written above.
COHAN:
________________________
Christopher Cohan
<PAGE>
EXHIBIT "9.2"
-------------
List of Subsidiary's and Parent's Closing Documents
1. A certificate of the secretary of each of Subsidiary and Parent
setting forth the resolutions adopted by the board of directors of Subsidiary
authorizing and directing the president or any vice president of Subsidiary to
execute and deliver the documents required to be executed and delivered by
Subsidiary and Parent under this Merger Agreement, which certificate will show
the name, office and signature of each officer of Subsidiary and Parent
authorized to execute and deliver such documents.
2. A certificate of good standing from the Secretary of State of
Subsidiary's and Parent's states of incorporation verifying that each of
Subsidiary and Parent is duly organized, validly existing and in good standing.
3. A certificate from Subsidiary and Parent, in form and substance
reasonably acceptable to the Shareholders, certifying that all representations
and warranties of Subsidiary and Parent remain true and correct as of the
Closing Date.
4. Any other documents or instruments required by this Merger Agreement
or reasonably requested by the Shareholders to consummate the Closing.
<PAGE>
EXHIBIT "13.8"
--------------
Copy of Deal Point Summary
(See Attached Copy)
<PAGE>
EXHIBIT 10.9
PURCHASE AGREEMENT
BY AND AMONG
SBA COMMUNICATIONS CORPORATION,
A FLORIDA CORPORATION ("PARENT")
AND
SBA TOWERS TENNESSEE, INC.,
A FLORIDA CORPORATION ("SUBSIDIARY")
AND
COM-NET DEVELOPMENT GROUP, LLC
A TENNESSEE LIMITED LIABILITY COMPANY ("COM-NET")
AND
DANIEL J. ELDRIDGE, A RESIDENT OF
THE STATE OF TENNESSEE ("DAN ELDRIDGE")
AND
TAMMY W. ELDRIDGE, A RESIDENT OF
THE STATE OF TENNESSEE ("TAMMY W. ELDRIDGE")
DATED AS OF MARCH 31, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I
SALE AND PURCHASE.................................................. 1
ARTICLE II
PURCHASE PRICE AND METHOD OF PAYMENT............................... 2
2.1 Purchase Price............................................... 2
2.2 Payment of Purchase Price.................................... 2
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COM-NET AND MEMBER............... 2
3.1 Organization and Good Standing............................... 2
3.2 Duly Authorized.............................................. 2
3.3 No Subsidiaries.............................................. 3
3.4 Enforceability............................................... 3
3.5 No Conflicts................................................. 3
3.6 No Consents.................................................. 3
3.7 Capitalization............................................... 3
3.8 Title to Membership Interests................................ 3
3.9 Financial Statements......................................... 3
3.10 Books and Records............................................ 4
3.11 No Undisclosed Liabilities................................... 4
3.12 Taxes........................................................ 4
3.13 Employee Benefit Plans and Compliance with ERISA............. 4
3.14 Compliance with Legal Requirements and Governmental
Authorizations............................................... 5
3.15 Legal Proceedings and Orders................................. 6
3.16 Absence of Certain Changes Since Date of Balance
Sheets....................................................... 6
3.17 Property..................................................... 7
3.18 Contracts.................................................... 7
3.19 Hazardous Materials.......................................... 9
3.20 Employees.................................................... 9
3.21 Labor Relations; Compliance.................................. 9
3.22 Certain Payments............................................. 10
3.23 Disclosure................................................... 10
3.24 Related Party Transactions................................... 10
3.25 Intentionally Deleted........................................ 10
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
3.26 Defects...................................................... 10
3.27 Utilities and Access......................................... 10
3.28 Liens........................................................ 11
3.29 Real Property Taxes and Assessments.......................... 11
3.30 Condemnation................................................. 11
3.31 No Flood Hazard Area......................................... 11
3.32 Year 2000 Matters............................................ 11
3.33 Accurate Documents........................................... 12
3.34 Accuracy of Representations and Warranties................... 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SUBSIDIARY AND PARENT............ 12
4.1 Authority.................................................... 12
4.2 Accuracy of Representations and Warranties................... 12
ARTICLE V
COVENANTS OF COM-NET............................................... 13
5.1 Affirmative Covenants........................................ 13
5.2 Negative Covenants........................................... 15
ARTICLE VI
CONDITIONS PRECEDENT TO SUBSIDIARY'S AND PARENT'S PERFORMANCE..... 17
6.1 Performance of Covenants and Accuracy of
Representations.............................................. 17
6.2 No Legal Action Against Contemplated Transactions............ 17
6.3 No Claim Regarding Membership Interests or Sale
Proceeds..................................................... 17
6.4 No Prohibitions.............................................. 17
6.5 Estoppels.................................................... 17
6.6 Title to Membership Interest and Property.................... 18
6.7 Environmental Assets......................................... 18
6.8 Zoning and Land Use.......................................... 18
6.9 FAA and FCC Matters.......................................... 18
6.10 No Change in the Property.................................... 18
6.11 Execution and Delivery of Documents.......................... 19
6.12 Third Party Approvals........................................ 19
6.13 Opinions of Counsel.......................................... 19
6.14 Subsidiary's Satisfaction.................................... 19
6.15 HSR Act...................................................... 19
6.16 Releases..................................................... 19
6.17 Approvals.................................................... 19
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C>
6.18 Permits, Consents and Licenses............................... 19
6.19 Merger Agreement............................................. 20
ARTICLE VII
CONDITIONS PRECEDENT TO MEMBERS' PERFORMANCE....................... 20
7.1 Performance of Covenants and Accuracy of
Representations.............................................. 20
7.2 Execution and Delivery of Documents.......................... 21
ARTICLE VIII
CLOSING............................................................ 21
8.1 The Closing.................................................. 21
ARTICLE IX
EXPENSES........................................................... 21
9.1 Attorneys' Fees.............................................. 21
9.2 Transfer Taxes; Recording Costs.............................. 22
9.3 Other Expenses............................................... 22
ARTICLE X
INDEMNIFICATION.................................................... 22
10.1 Survival; Right to Indemnity Not Affected by
Knowledge.................................................... 22
10.2 Indemnification by the Members and Com-Net................... 22
10.3 Indemnification by Subsidiary and Parent..................... 23
10.4 Procedure for Indemnification................................ 23
10.5 Right of Offset.............................................. 24
ARTICLE XI
DEFAULT............................................................ 25
11.1 Subsidiary's or Parent's Default............................. 25
11.2 Com-Net or Member's Default.................................. 25
ARTICLE XII
MISCELLANEOUS...................................................... 25
12.1 Brokers...................................................... 25
12.2 Interpretation............................................... 25
12.3 Notices...................................................... 25
12.4 Enforcement Costs............................................ 26
</TABLE>
iii
<PAGE>
<TABLE>
<S> <C>
12.5 Assignment................................................... 26
12.6 Governing Law................................................ 26
12.7 Arbitration.................................................. 26
12.8 Integration.................................................. 27
12.9 Amendments................................................... 27
12.10 Binding Effect............................................... 27
12.11 Further Assurances........................................... 27
12.12 Third Parties................................................ 27
12.13 Counterparts; Facsimile Delivery............................. 27
12.14 Severability................................................. 27
</TABLE>
iv
<PAGE>
PURCHASE AGREEMENT
------------------
THIS PURCHASE AGREEMENT (this "Agreement"), dated as of March 31, 1999,
among SBA COMMUNICATIONS CORPORATION, a Florida corporation, with its principal
place of business located at One Town Center Road, 3rd Floor, Boca Raton,
Florida 33486, Attention: Jeffrey A. Stoops, Senior Vice President, Fax Number
(561) 997-0343 ("Parent"), SBA TOWERS TENNESSEE, INC., a Florida corporation and
an indirectly wholly owned subsidiary of Parent, with its principal place of
business located at One Town Center Road, 3rd Floor, Boca Raton, Florida 33486,
Attention: Jeffrey A. Stoops, Senior Vice President, Fax Number (561) 997-0343
("Subsidiary"), COM-NET DEVELOPMENT GROUP, LLC, a Tennessee limited liability
company, with its principal place of business located at 121 Boone Ridge Drive,
Johnson City, Tennessee, 37615, Attn: Daniel J. Eldridge, Fax Number (423) 952-
0863 ("Com-Net"), DANIEL J. ELDRIDGE, an individual domiciled in the State of
Tennessee, whose address is 121 Boone Ridge Drive, Johnson City, Tennessee,
37615, Fax Number (423) 952-0863 ("Daniel Eldridge") and TAMMY W. ELDRIDGE, an
individual domiciled in the State of Tennessee, whose address is 121 Boone Ridge
Drive, Johnson City, Tennessee 37615, Fax Number (423) 952-0863 ("Tammy
Eldridge") (Dan Eldridge and Tammy Eldridge are sometimes hereinafter
collectively referred to as the "Members"). Capitalized terms used but not
otherwise defined in this Agreement will have the meanings set forth in Exhibit
-------
"1".
- ---
WITNESSETH:
----------
WHEREAS, Subsidiary desires to purchase from Members, and Members desire to
sell to Subsidiary, all of Members' Membership Interests in Com-Net upon the
terms and subject to the conditions set forth herein;
WHEREAS, each of the parties to this Agreement desire to make certain
representations, warranties and agreements in connection with the Contemplated
Transaction and also to prescribe various conditions thereto.
In consideration of the foregoing premises and the representations,
warranties and agreements contained herein, the parties to this Agreement agree
as follows:
ARTICLE I
SALE AND PURCHASE
Subject to the terms, conditions and covenants of this Agreement, the
Members will sell and transfer all of their Membership Interests in Com-Net to
Subsidiary and Subsidiary will purchase all of the Members' Membership Interests
from the Members.
<PAGE>
ARTICLE II
PURCHASE PRICE AND METHOD OF PAYMENT
2.1 PURCHASE PRICE. The aggregate purchase price for the Members'
Membership Interests is One Million and No/100 Dollars ($1,000,000.00).
2.2 PAYMENT OF PURCHASE PRICE.
(a) On the Closing Date, Subsidiary will deliver to the Members the
aggregate sum of One Million and No/100 Dollars ($1,000,000.00) by cashier's
check, attorneys, trust account check or bank wire transfer of immediately
available funds to an account designated by the Members.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF
COM-NET AND MEMBER
As a material inducement to Subsidiary and Parent to enter into this
Agreement, Com-Net and the Members represent and warrant to Subsidiary and
Parent as follows:
3.1 ORGANIZATION AND GOOD STANDING. Com-Net is a limited liability
company duly organized, validly existing, and in good standing under the laws of
the state of its organization, with full power and authority to conduct its
business as it is now being conducted, to own or use the properties and assets
that it purports to own or use, and, following the assignment and transfer
referred to in Section 5.1(k) below, to perform all its obligations under the
Ground Leases, Easements, Tenant Leases and all other Contracts to which it is a
party. Com-Net is duly qualified to do business as a foreign limited liability
company and is in good standing under the laws of each state or other
jurisdiction in which either the ownership or use of the properties owned or
used by it, or the nature of the activities conducted by it, requires such
qualification.
3.2 DULY AUTHORIZED. Com-Net and the Members have the absolute and
unrestricted right, power, authority, and capacity to execute and deliver this
Agreement and to perform their obligations under this Agreement and the Members'
Closing Documents to which each of them is a party and to perform their
obligations under this Agreement and the Members' Closing Documents to which
each of them is a party. The execution and delivery of this Agreement and the
Members' Closing Documents, as well as the consummation of the Contemplated
Transactions, have been approved by the Members, and no other proceedings on the
part of Com-Net shall be necessary or required to authorize this Agreement, the
Members' Closing Documents or the Contemplated Transactions.
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3.3 NO SUBSIDIARIES. Com-Net does not own any Subsidiaries.
3.4 ENFORCEABILITY. This Agreement constitutes the legal, valid, and
binding obligation of each Member and Com-Net, enforceable against each Member
and Com-Net in accordance with its terms. Upon the execution and delivery by
each Member and Com-Net of the Members' Closing Documents to which they are a
party, the Members' Closing Documents will constitute the legal, valid, and
binding obligations of each Member and Com-Net, enforceable against them in
accordance with their respective terms.
3.5 NO CONFLICTS. Neither the execution and delivery of this Agreement
nor the consummation or performance of any of the transactions contemplated by
this Agreement, the Members' Closing Documents, or any agreement, instrument or
document contemplated thereby, will, directly or indirectly (with or without
notice or lapse of time or both) (a) contravene, conflict with, or result in a
violation of any provision of the Organizational Documents of Com-Net, true,
correct and complete copies of which are attached hereto as Exhibit "3.5," or
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any resolution adopted by Com-Net, (b) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right to declare
a default or exercise any remedy under, any Legal Requirement or any Contract to
which Com-Net or either Member is a party or any of the assets owned or used by
Com-Net may be subject, or (d) result in the imposition or creation of any
encumbrance upon or with respect to any of the assets owned or used by Com-Net.
3.6 NO CONSENTS. Except as otherwise provided in this Agreement, neither
Com-Net nor either Member shall be required to give any notice to or obtain any
consent or approval from any Person in connection with the execution and
delivery of this Agreement or the consummation or performance of any of the
Contemplated Transactions (including without limitation, any Person who is a
party to the Ground Leases, Easements, Tenant Leases or any other Contract).
3.7 CAPITALIZATION. The Members are the sole members of Com-Net and
collectively own one hundred percent (100%) of the Membership Interests of Com-
Net. There are no contracts relating to the issuance, delivery, sale, or
transfer of any Membership Interests in Com-Net (including, without limitation,
Membership Interests held by the Members).
3.8 TITLE TO MEMBERSHIP INTERESTS. The Members are and will be on the
Closing Date the sole beneficial owners and holders of all Membership Interests
in Com-Net, free and clear of all encumbrances. No Person has any pre-emptive
rights or similar rights to purchase or receive any Membership Interests of Com-
Net.
3.9 FINANCIAL STATEMENTS. Com-Net has delivered to Subsidiary audited
balance sheets of Com-Net at and as of December 31, 1997 and December 31, 1998,
the related audited statements of income, changes in members' equity, and cash
flows for the fiscal year then ended, including the notes thereto, together with
the report thereon of Blackburn, Childers & Steagall, PLC, independent certified
public accountants. The Financial Statements fairly present the financial
condition and the results of operations, changes in members' equity, and cash
flows of
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Com-Net at the respective dates of and for the periods referred to in such
Financial Statements, all in accordance with GAAP. The Financial Statements
referred to in this Section 3.9 reflect the consistent application of such
accounting principles throughout the periods involved. No financial statements
of any Person other than Com-Net are required by GAAP to be included in the
Financial Statements.
3.10 BOOKS AND RECORDS. The books of account, minute books, Membership
Interest record books and all other records of Com-Net, all of which have been
made available to Subsidiary, are true, complete and correct and have been
maintained in accordance with sound business practices. At the Closing, all
such books and records will be delivered to Subsidiary.
3.11 NO UNDISCLOSED LIABILITIES. Com-Net has no liabilities or obligations
of any nature (whether known or unknown and whether absolute, accrued,
contingent, or otherwise), except for liabilities or obligations reflected or
reserved against in the Balance Sheets and current liabilities incurred in the
Ordinary Course of Business since the respective dates thereof.
3.12 TAXES. Com-Net has filed or caused to be filed (on a timely basis
since January 1, 1992) all Tax Returns that are or were required to be filed by
or with respect to it, either separately or as a member of a group of
corporations, pursuant to applicable Legal Requirements. The Members have
delivered or made available to Subsidiary copies of all such Tax Returns
relating to income or franchise taxes filed since January 1, 1992. Com-Net has
paid, or made provision for the payment of, all taxes that have or may have
become due pursuant to those Tax Returns or otherwise, or pursuant to any
assessment received by the Members or Com-Net. None of the federal and state
income Tax Returns of Com-Net has been audited by the IRS or relevant state tax
authorities. The charges, accruals, and reserves with respect to taxes on the
respective books of Com-Net are adequate (determined in accordance with GAAP)
and are at least equal to Com-Net's liability for taxes. There exists no
proposed tax assessment against Com-Net except as disclosed in the Balance
Sheets or in the Disclosure Letter. No consent to the application of Section
341(f)(2) of the Code has been filed with respect to any property or assets
held, acquired, or to be acquired by Com-Net. All taxes that Com-Net is or was
required by Legal Requirements to withhold or collect have been duly withheld or
collected and, to the extent required, have been paid to the proper Governmental
Authority or other Person. All Tax Returns filed by Com-Net are true, correct,
and complete. There is no tax sharing agreement that will require any payment
by Com-Net after the date of this Agreement.
3.13 EMPLOYEE BENEFIT PLANS AND COMPLIANCE WITH ERISA. Except as set forth
in the Disclosure Letter, neither Com-Net nor any of its Affiliates has ever
established, sponsored, maintained, contributed to or otherwise participated in,
or had any obligation to establish, sponsor, maintain, contribute to or
otherwise participate in, any compensation, profit sharing, bonus, deferred
compensation, savings, insurance, pension, retirement, or other employee benefit
plan or arrangement which is or was governed by or subject to the Employee
Retirement Income Security Act of 1974, or any successor law, or any regulations
or rules issued pursuant to that Act or any successor law. Neither Com-Net nor
any of its Affiliates provide health or welfare
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benefits for any retired or former employee or are obligated to provide health
or welfare benefits to any active employee following such employee's retirement
or other termination of service. The consummation of the Contemplated
Transactions will not result in the payment, vesting, or acceleration of any
benefit.
3.14 COMPLIANCE WITH LEGAL REQUIREMENTS AND GOVERNMENTAL AUTHORIZATIONS.
Com-Net is, and at all times has been, in full compliance with each Legal
Requirement that is or was applicable to it or to the conduct or operation of
its business or the ownership or use of any of its assets. No event has
occurred or circumstance exists that (with or without notice or lapse of time or
both) may constitute or result in a violation by Com-Net of, or a failure on the
part of Com-Net to comply with, any Legal Requirement, or may give rise to any
obligation on the part of Com-Net to undertake, or to bear all or any portion of
the cost of, any remedial action of any nature. Com-Net has not received any
notice or other communication (whether oral or written) from any Governmental
Authority or any other Person regarding any actual, alleged, possible, or
potential violation of, or failure to comply with, any Legal Requirement, or any
actual, alleged, possible, or potential obligation on the part of Com-Net to
undertake, or to bear all or any portion of the cost of, any remedial action of
any nature. The use, maintenance and operation of the Property by Com-Net, the
Members, the Tenants and, to the best knowledge of the Members and Com-Net, all
other Persons, is in full compliance with all Legal Requirements, Easements,
restrictive covenants, reservations and similar matters of record. There are no
outstanding notices of violation currently in effect for Com-Net or the
Property. The Disclosure Letter contains a complete and accurate list of each
Governmental Authorization that is held by Com-Net or that otherwise relates to
the business of, or to any of the assets owned or used by, Com-Net. Each
Governmental Authorization listed or required to be listed in the Disclosure
Letter is valid and in full force and effect. Com-Net is and has been in full
compliance with all of the terms and requirements of each Governmental
Authorization identified or required to be identified in the Disclosure Letter.
No event has occurred or circumstance exists that may (with or without notice or
lapse of time or both) constitute or result directly or indirectly in a
violation of or a failure to comply with any term or requirement of any
Governmental Authorization listed or required to be listed in the Disclosure
Letter, or result directly or indirectly in the revocation, withdrawal,
suspension, cancellation, or termination of, or any modification to, any
Governmental Authorization listed or required to be listed in the Disclosure
Letter. Com-Net has not received any notice or other communication (whether
oral or written) from any Governmental Authority or any other Person regarding
any actual, alleged, possible, or potential violation of or failure to comply
with any term or requirement of any Governmental Authorization, or any actual,
proposed, possible, or potential revocation, withdrawal, suspension,
cancellation, termination of, or modification to any Governmental Authorization.
All applications required to have been filed for the renewal of the Governmental
Authorizations listed or required to be listed in the Disclosure Letter have
been duly filed on a timely basis with the appropriate Governmental Authorities,
and all other filings required to have been made with respect to such
Governmental Authorizations have been duly made on a timely basis with the
appropriate Governmental Authorities. The Governmental Authorizations listed in
Disclosure Letter collectively constitute all of the Governmental Authorizations
necessary to permit Com-Net to lawfully conduct and
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operate its businesses in the manner it currently conducts and operates such
businesses and to permit Com-Net to own and use its assets in the manner in
which it currently owns and uses such assets.
3.15 LEGAL PROCEEDINGS AND ORDERS. There is no pending Proceeding that has
been commenced by or against Com-Net or that otherwise relates to or may affect
the business of, or any of the assets owned or used by, Com-Net, or that
challenges, or that may have the effect of preventing, delaying, making illegal,
or otherwise interfering with, any of the Contemplated Transactions. To the
best knowledge of the Members and Com-Net, no such Proceeding has been
threatened, and no event has occurred or circumstance exists that may give rise
to or serve as a basis for the commencement of any such Proceeding. Neither
Com-Net nor the Members are subject to any Order that relates to the business
of, or any of the assets owned or used by, Com-Net. No member, officer,
director, agent, or employee of Com-Net is subject to any Order that prohibits
such member, officer, director, agent, or employee from engaging in or
continuing any conduct, activity, or practice relating to the business of Com-
Net.
3.16 ABSENCE OF CERTAIN CHANGES SINCE DATE OF BALANCE SHEETS. Except as
set forth in the Disclosure Letter, since the date of the Balance Sheets, Com-
Net has conducted its business only in the Ordinary Course of Business and there
has not been any (a) change in Com-Net's Membership Interests; grant of any
option or right to purchase Membership Interests of Com-Net; issuance of any
interest convertible into such Membership Interests; grant of any registration
rights, purchase, redemption, retirement, or other acquisition by Com-Net of any
interest of any such Membership Interests; or declaration or payment of any
dividend or other distribution or payment in respect of any Membership
Interests, (b) amendment to the Organizational Documents of Com-Net, (c) payment
or increase by Com-Net of any bonuses, salaries, or other compensation to any
member, director, officer, or (except in the Ordinary Course of Business)
employee or entry into any employment, severance, or similar Contract with any
director, officer, or employee, (d) adoption of, or increase in the payments to
or benefits under, any profit sharing, bonus, deferred compensation, savings,
insurance, pension, retirement, or other employee benefit plan for or with any
employees of Com-Net, (e) damage to or destruction or loss of any asset or
property of Com-Net, whether or not covered by insurance, materially and
adversely affecting the properties, assets, business, financial condition, or
prospects of Com-Net, taken as a whole, (f) entry into, termination of, or
receipt of notice of termination of any Contract or transaction involving a
total remaining commitment by or to Com-Net of at least $20,000, (g) sale,
lease, or other disposition of any asset or property of Com-Net or mortgage,
pledge, or imposition of any lien or other encumbrance on any material asset or
property of Com-Net, (h) cancellation or waiver of any claims or rights, (i)
material change in the accounting methods used by Com-Net, (j) material adverse
change in the business, operations, properties, prospects, assets, or condition
of Com-Net, or event that may result in such a material adverse change, (k)
Indebtedness other than in the Ordinary Course of Business, (l) guarantee or
other endorsement of obligations of any Person by Com-Net or (m) Contract by
Com-Net to do any of the foregoing.
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3.17 PROPERTY. Following the assignment and transfer referred to in
Section 5.1(k) below, Com-Net will have good title to the Appurtenant Property,
the Intangible Personal Property and the Tangible Personal Property (including
without limitation, Towers, Improvements, equipment, vehicles and inventory),
free and clear of all liens and encumbrances, excepting only the Permitted
Exceptions. Following the assignment and transfer referred to in Section 5.1(k)
below, Com-Net will have good and marketable fee simple title to the Owned Real
Property and the Improvements on the Owned Real Property, free and clear of all
liens and encumbrances, excepting only the Permitted Exceptions. The Disclosure
Letter lists all vehicles owned or leased by Com-Net.
3.18 CONTRACTS. Upon delivery to Subsidiary, the Disclosure Letter shall
contain a complete and accurate list, and the Members and Com-Net shall have
delivered to Subsidiary true and complete copies, of:
(a) the Ground Leases. Following the assignment and transfer
referred to in Section 5.1(k) below, Com-Net will have validly succeeded to the
rights of the original lessee under each of the Ground Leases with respect to
the Leased Real Property, hold the leasehold interest created under each of the
Ground Leases, and be the sole owner of the Improvements located on the Leased
Real Property being leased thereunder. The Ground Leases and the Improvements
in connection therewith are, and at Closing, shall be, free and clear of all
liens and encumbrances, excepting only the Permitted Exceptions. Furthermore,
Com-Net and the Members, jointly and severally, represent and warrant that (i)
each Ground Lease is in full force and effect and has not been materially
modified or amended, (ii) Com-Net Construction currently is and, following the
assignment and transfer referred to in Section 5.1(k) below, Com-Net will be in
actual possession of the leased premises under each of the Ground Leases, (iii)
Com-Net Construction currently has paid the rent set forth in each of the Ground
Leases on a current basis and there are no past due amounts, (iv) except as
expressly set forth in the Ground Leases, neither Com-Net Construction nor Com-
Net are obligated to pay any additional rent or charges to any of the Ground
Lessors for any period subsequent to the Closing Date, and (v) none of Com-Net
Construction, Com-Net or the Members has received notice from or given notice to
any Ground Lessor claiming that such Ground Lessor or Com-Net Construction or
Com-Net is in default under any of the Ground Leases, and, to the best knowledge
of Com-Net and the Members, there is no event which, with the giving of notice
or the passage of time or both, would constitute such a default;
(c) the Tenant Leases. Following the assignment and transfer referred
to in Section 5.1(k) below, Com-Net will have validly succeeded to the rights of
the original lessor under each of the Tenant Leases. The Tenant Leases are, and
at the Closing will be, free and clear of all liens and encumbrances, excepting
only the Permitted Exceptions. Except for the rights of the Tenants, as tenants
only, pursuant to the Tenant Leases, and except for the rights of the other
parties to each of the Ground Leases, no Person other than Subsidiary will on
the Closing Date be in, or have any right or claim to, possession of any of the
Property. Other than as may be provided by the Ground Leases and the Tenant
Leases, there are no leases, subleases,
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licenses or other occupancy agreements (written or oral) which grant any
possessory interest in or to the Property or the Improvements thereon, or which
grant other rights with respect to the use of any of the Property. Furthermore,
Com-Net and the Members, jointly and severally, represent and warrant that (i)
each Tenant Lease is in full force and effect and has not been materially
modified or amended, (ii) each Tenant has accepted possession of its premises
under its Tenant Lease, (iii) Com-Net Construction currently is and, following
the assignment and transfer referred to in Section 5.1(k) below, Com-Net will be
collecting the rent set forth in each Tenant Lease on a current basis and there
are no past due amounts thereunder in excess of one month, (iv) except as
expressly set forth in the Tenant Leases, no Tenant is entitled to any rental
concessions or abatements in rent for any period subsequent to the Closing Date,
(v) Com-Net Construction has not given notice to any Tenant claiming that the
Tenant is in default under its Tenant Lease, and, to the best knowledge of Com-
Net and the Members, there is no event which, with the giving of notice or the
passage of time or both, would constitute such a default, (vi) None of Com-Net
Construction, Com-Net or Members have received notice from any Tenant claiming
that Com-Net is in default under the Lease, or claiming that there are defects
in the Improvements, which default or defect remains in any manner uncured,
(vii) None of Com-Net Construction, Com-Net or Members have received notice from
any Tenant asserting any Claims, offsets or defenses of any nature whatsoever to
the performance of its obligations under its Tenant Lease and, to the best
knowledge of the Members and Com-Net, there is no event which, with the giving
of notice or the passage of time or both, would constitute the basis of such
Claim, offset or defense, and (viii) except as expressly set forth in the Tenant
Leases, there are no security deposits or prepaid rentals under any of the
Tenant Leases;
(d) the Easements. Following the assignment and transfer referred to
in Section 5.1(k) below, Com-Net will have validly succeeded to the rights of
the original grantee) under each of the Easements, has good title to the
Easements, and is the sole owner of the Improvements located on the easement
areas thereunder. At Closing, the Easements and the Improvements in connection
therewith shall be free and clear of all liens and encumbrances, excepting only
the Permitted Exceptions. Furthermore, Com-Net and the Members, jointly and
severally, represent and warrant that (i) each Easement is in full force and
effect and has not been materially modified or amended, (ii) Com-Net
Construction currently is and, following the assignment and transfer referred to
in Section 5.1(k) below, Com-Net will be in actual possession of the easement
area under each of the Easements, (iii) except as set forth in the Ground
Leases, Neither Com-Net Construction nor Com-Net is obligated to pay any rent or
charges under any of the Easements for any period subsequent to the Closing
Date, and (iv) None of Com-Net Construction, Com-Net or Members have given
notice to or received notice from any Person claiming that the Person or Com-Net
is in default under any Easement, and, to the best knowledge of Com-Net and the
Members, there is no event which, with the giving of notice or the passage of
time or both, would constitute such a default;
(e) any other Contract to which Com-Net is a party or by which any of
the Property is bound. Com-Net and the Members, jointly and severally, represent
and warrant that (i) each such Contract is in full force and effect and has not
been modified or amended, (ii) Com-
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Net has paid all sums due thereunder on a current basis and there are no past
due amounts, and (iii) none of Com-Net or the Members have received notice from
or given notice to any Person claiming that such Person, Com-Net or the Members
are in default under any such Contract, and, to the best knowledge of Com-Net
and the Members, there is no event which, with the giving of notice or the
passage of time or both, would constitute such a default under any such
Contract.
3.19 HAZARDOUS MATERIALS. The Property has not in the past been used, and
is not presently being used, for the handling, storage, transportation, or
disposal of hazardous or toxic substances, materials, pollutants or waste (or
similar items under applicable environmental Legal Requirements). To the best
knowledge of the Members and Com-Net, there has been no release of any such
items into the environment from the Real Property or in, on or under the Real
Property.
3.20 EMPLOYEES. The Disclosure Letter contains a complete and accurate
list of the following information for each employee or director of Com-Net,
including each employee on leave of absence or layoff status: employer; name;
job title; current compensation paid or payable and any change in compensation
since January 1, 1995; vacation accrued; and service credited for purposes of
vesting and eligibility to participate under Com-Net's pension, retirement,
profit- sharing, thrift-savings, deferred compensation, stock bonus, stock
option, cash bonus, employee stock ownership (including investment credit or
payroll stock ownership), severance pay, insurance, medical, welfare, or
vacation plan, or any other benefit plan. The Disclosure Letter also contains a
complete and accurate list of the following information for each retired
employee or director of Com-Net, or their dependents, receiving benefits or
scheduled to receive benefits in the future: name, pension benefit, pension
option election, retiree medical insurance coverage, retiree life insurance
coverage, and other benefits.
3.21 LABOR RELATIONS; COMPLIANCE. Since January 1, 1996, there has not
been, there is not presently pending or existing, and there is not threatened,
any Proceeding against or affecting Com-Net relating to the alleged violation of
any Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Authority, organizational activity, or other labor
or employment dispute against or affecting Com-Net or its premises. No event
has occurred or circumstance exists that could provide the basis for any work
stoppage or other labor dispute. Com-Net has complied in all respects with all
Legal Requirements relating to employment, equal employment opportunity,
nondiscrimination, immigration, wages, hours, benefits, collective bargaining,
the payment of social security and similar taxes, occupational safety and
health, and plant closing. Com-Net is not liable for the payment of any
compensation, damages, taxes, fines, penalties, or other amounts, however
designated, for failure to comply with any of the foregoing Legal Requirements.
3.22 CERTAIN PAYMENTS. Neither Com-Net nor any director, officer, agent,
or employee of Com-Net, the Members or other Person associated with or acting
for or on behalf of
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Com-Net or the Members, has directly or indirectly made any contribution, gift,
bribe, rebate, payoff, influence payment, kickback, or other payment to any
Person, private or public, regardless of form, whether in money, property, or
services to obtain favorable treatment in securing business, to pay for
favorable treatment for business secured, to obtain special concessions or for
special concessions already obtained, for or in respect of any Com-Net, the
Members or any Affiliate thereof, or in violation of any Legal Requirement, or
established or maintained any fund or asset that has not been recorded in the
books and records of Com-Net.
3.23 DISCLOSURE. No representation or warranty of the Members or Com-Net
in this Agreement and no statement in the Disclosure Letter omits to state a
material fact necessary to make the statements herein or therein, in light of
the circumstances in which they were made, not misleading. There is no fact
known to the Members or Com-Net that has specific application to the Members or
Com-Net (other than general economic or industry conditions) and that materially
adversely affects the assets, business, prospects, financial condition, or
results of operations of Com-Net that has not been set forth in this Agreement
or the Disclosure Letter.
3.24 RELATED PARTY TRANSACTIONS. Except as otherwise set forth in the
Disclosure Letter, none of Com-Net, either Member, or any Related Person of
either Member or Com-Net has, or has had, any interest in any property (whether
real, personal, or mixed and whether tangible or intangible), used in or
pertaining to Com-Net's business. Except as otherwise set forth in the
Disclosure Letter, none of Com-Net, either Member, or any Related Person of
either Member or Com-Net is, or has owned (of record or as a beneficial owner)
an equity interest or any other financial or profit interest in, a Person that
has had business dealings or a material financial interest in any transaction
with Com-Net, or engaged in competition with Com-Net with respect to any of the
products or services of Com-Net in any market presently served by Com-Net.
Except as set forth in the Disclosure Letter, none of Com-Net, either Member or
any Related Person of either Member or Com-Net is a party to any Contract with,
or has any claim or right against, Com-Net.
3.25 INTENTIONALLY DELETED.
3.26 DEFECTS. To the best knowledge of Com-Net and the Members, there are
no physical, structural or mechanical defects in the Appurtenant Property,
Improvements, Tangible Personal Property or Towers, equipment, vehicles or
inventory, and the same are suitable and adequate for the use for which they
were originally designed.
3.27 UTILITIES AND ACCESS. All electric, telephone, drainage facilities
and other utilities required for use and operation of the Towers are installed
up to the boundaries of the Real Property on which the Towers are located within
valid, written, recorded easements. Such utilities are in good working order,
meet all current codes and ordinances and are of adequate size and capacity to
service the Towers. The Real Property on which the Towers are located has
adequate, direct, indefeasible legal and practical pedestrian and vehicular
access to public roads.
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3.28 LIENS. Except as set forth in the Disclosure Letter, no right or
interest in or to property of any kind of Com-Net, whether real, personal, or
mixed and whether tangible or intangible, is subject to any mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), charge or other security interest or any preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement and any capital lease having substantially the same economic effect as
any of the foregoing), except Permitted Exceptions.
3.29 REAL PROPERTY TAXES AND ASSESSMENTS. All ad valorem real property
taxes for the Real Property and all personal property taxes for the Tangible
Personal Property have been fully paid for the year 1999, and all prior years.
There are no existing or pending special assessments, fees or similar
obligations affecting the Real Property or the Appurtenant Property, which may
be assessed by any Governmental Authority. Com-Net and the Members will be
liable for any such special assessments, fees or similar obligations affecting
the Real Property or Appurtenant Property that arise between the Effective Date
and the Closing Date.
3.30 CONDEMNATION. To the best knowledge of the Members and Com-Net, there
are no present or pending legal or administrative proceedings relative to
condemnation, or other taking by any Governmental Authority, of any portion of
the Property, and no such proceeding is contemplated.
3.31 NO FLOOD HAZARD AREA. To the best knowledge of Com-Net and the
Members, none of the Real Property on which the Towers are located is located
within an area that has been designated by the Federal Insurance Administration,
the Army Corps of Engineers, the Federal Emergency Management Administration or
any other Governmental Authority as being subject to any special or increased
flooding hazards.
3.32 YEAR 2000 MATTERS. Any reprogramming required to permit the proper
functioning, in and following the year 2000, of (i) Com-Net's computer systems
and (ii) equipment containing embedded microchips (including systems and
equipment supplied by others or with which Com-Net's systems interface) and the
testing of all such systems and equipment, as so reprogrammed, will be completed
by the Closing Date. The cost to Com-Net of such reprogramming and testing and
of the reasonably foreseeable consequences of year 2000 to Com-Net (including,
without limitation, reprogramming errors and the failure of others' systems or
equipment) is reflected on Com-Net's most recent financial statements. Except
for such of the reprogramming referred to in the preceding sentence as may be
necessary, the computer and management information systems, Com-Net is and, with
ordinary course upgrading and maintenance, will continue for the term of this
Agreement to be, sufficient to permit the Subsidiary to conduct its business
(including Com-Net's business) after the Closing Date.
3.33 ACCURATE DOCUMENTS. All Contracts, documents, reports, leases, title
insurance policies, title opinions, surveys and other items relating to Com-Net
or the Property and delivered
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to Parent or Subsidiary pursuant to this Agreement are true, correct and
complete copies of the originals thereof.
3.34 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All of Com-Net's and the
Members' representations and warranties contained in this Agreement and Com-
Net's and the Members' liability therefor will survive the Closing for a period
of five (5) years thereafter except as to any material breach thereof by Com-Net
or the Members of which Subsidiary or Parent has notified Com-Net or either
Member prior to the expiration of the five (5) year period in accordance with
Section 10 of this Agreement. Neither Subsidiary nor Parent will have any duty
to investigate or inquire about the accuracy or veracity of any representation
or warranty of Com-Net or the Members.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SUBSIDIARY AND PARENT
As a material inducement to Com-Net and the Members to enter into this
Agreement, Subsidiary and Parent represent and warrant to Com-Net and the
Members as follows:
4.1 AUTHORITY. Each of Subsidiary and Parent is a corporation, duly
organized and validly existing under the laws of the State of Florida and their
status is active, and each of Subsidiary and Parent is duly qualified to
transact business under the laws of the states where it conducts business.
Subject to obtaining the approval of the Contemplated Transactions from each of
Parent's and Subsidiary's Board of Directors and from the Lenders, all
documents, including this Agreement, executed or to be executed by Subsidiary
and Parent (a) have been or will be duly authorized, executed and delivered by
Subsidiary and Parent, (b) are or will be legal, valid and binding obligations
of Subsidiary and Parent, and (c) do not or will not violate any provisions of
any agreement to which Subsidiary and Parent are a party or to which they are
bound. Subject to obtaining the approval of the Contemplated Transactions from
each of Parent's and Subsidiary's Board of Directors and from the Lenders,
Subsidiary and Parent have the full right, power and authority, without the
necessity of obtaining the consent or approval of any other Person, to enter
into this Agreement and to perform their obligations under this Agreement.
4.2 ACCURACY OF REPRESENTATIONS AND WARRANTIES. All of Subsidiary's and
Parent's representations and warranties contained in this Agreement and
Subsidiary's and Parent's liability therefor will survive the Closing for a
period of five (5) years thereafter except as to any material breach thereof by
Subsidiary and Parent of which either Member has notified Subsidiary and Parent
prior to the expiration of the five (5) year period in accordance with Section
10 of this Agreement. The Members will have no duty to investigate or inquire
about the accuracy or veracity of any representation or warranty of Subsidiary
and Parent.
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ARTICLE V
COVENANTS OF COM-NET AND THE MEMBERS
5.1 AFFIRMATIVE COVENANTS. Between the date of this Agreement and the
Closing Date, the Members will, and will cause Com-Net to:
(a) conduct the business of Com-Net only in the Ordinary Course of
Business and will use best efforts to maintain and preserve the Property,
preserve intact the current business organization of Com-Net, and maintain the
relations and good will with suppliers, customers, landlords, creditors,
employees, agents, and others having business relationships with Com-Net;
(b) provide Subsidiary and its representatives, agents, contractors,
architects and engineers reasonable access to the Property and the financial
records of the Property at any time during normal business hours prior to the
Closing Date, at Subsidiary's sole cost and expense, to perform any tests,
borings, inspections, surveys, studies, environmental site assessments and
measurements which Subsidiary reasonably deems necessary or appropriate;
(c) within ten (10) days after the execution of this Agreement,
furnish to Subsidiary the Disclosure Letter which shall contain true, correct
and complete copies of all records, documentation and other information in its
possession (or in the possession of the Members' or Com-Net's attorneys or other
representatives) as Subsidiary may reasonably request concerning Com-Net, the
Members' Membership Interests, and the ownership, use, operation and condition
of the Property, including without limitation the Ground Leases, Easements,
Tenant Leases and Permits, any title insurance policies, recorded title
documents, title abstracts, title opinions, surveys, plans, engineering reports,
soil tests, service contracts, legal opinions, environmental site assessments
and similar items;
(d) permit Subsidiary to, without any obligation to do so, contact
any Governmental Authority about any Permits or Legal Requirements concerning
Com-Net or the Property and contact any party to any of the Ground Leases,
Easements or Tenant Leases or other Person about Com-Net or the Ground Leases,
the Easements, the Tenant Leases or any other aspects of the Property;
(e) cause all Contracts to which Com-Net is a party or by which the
Property is bound to have been performed to the extent required to be performed
as of the Closing Date in full;
(f) cause all employees of Com-Net to be terminated effective as of
the Closing Date and pay any and all unpaid amounts, commitments or obligations
due, owing or payable to such employees (whether pursuant to or arising from any
Contract or Legal Requirement or in any other manner), including without
limitation all wages, commissions and
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other compensation, earned bonuses, severance pay, accrued and unpaid vacation
time, sick leave, accrued and unpaid benefits and disability payments and shall,
effective as of the Closing, cause all officers and directors of Com-Net to
resign from all such positions with Com-Net;
(g) cooperate with Subsidiary and Parent with respect to all filings,
permits or consents that Subsidiary elects to make or obtain or is required by
Legal Requirements or other Persons to make or obtain in connection with the
Contemplated Transactions (including without limitation, any filing under the
HSR Act);
(h) promptly notify Subsidiary in writing if either Member or Com-Net
becomes aware of any fact or condition that causes or constitutes a Breach of
the Members' or Com-Net's representations and warranties as of the date of this
Agreement, or if either Member or Com-Net becomes aware of the occurrence after
the date of this Agreement of any fact or condition that would (except as
expressly contemplated by this Agreement) cause or constitute a Breach of any
such representation or warranty had such representation or warranty been made as
of the time of occurrence or discovery of such fact or condition; provided,
--------
however, that should any such fact or condition require any change in the
- -------
Disclosure Letter if the Disclosure Letter were dated the date of the occurrence
or discovery of any such fact or condition, the Members and Com-Net will
promptly deliver to Subsidiary a supplement to the Disclosure Letter specifying
such change;
(i) promptly notify Subsidiary of the occurrence of any Breach of any
covenant of either Member in this Agreement or of the occurrence of any event
that may make the satisfaction of the conditions in Article VII impossible or
unlikely;
(j) close all of Com-Net's bank accounts, terminate the authority of
all signatories with respect to all of Com-Net's bank accounts, effective as of
the Closing Date, and transfer the funds contained therein to such bank account
as Parent may identify;
(k) accept an assignment and transfer of the Ground Leases, Tenant
Leases, Easements and Towers (and all Appurtenant Property, Intangible Personal
Property, Permits, Improvements and Real Property related thereto) from Com-Net
Construction; and
(l) deliver to Subsidiary reviewed balance sheets of Com-Net for the
three (3) month period ended March 31, 1999, the related reviewed statements of
income, changes in stockholders' equity, and cash flows for such period prepared
by Blackburn, Childers & Steagall, PLC.
5.2 NEGATIVE COVENANTS.
(a) Except as otherwise expressly permitted by this Agreement,
between the date of this Agreement and the Closing Date, the Members will not,
and will cause Com-Net not to, without the prior written consent of Subsidiary,
take any affirmative action, or fail to take any
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reasonable action within the Members' or Com-Net's control, as a result of which
any of the changes or events listed in Section 3.16 is likely to occur.
(b) Until such time, if any, as this Agreement is terminated, each
Member will, and each Member will cause his or her Representatives, and Com-Net
and its Representatives, not to, directly or indirectly solicit, initiate, or
encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals from, any Person (other than Subsidiary) relating to any
transaction involving the sale of the business or assets of Com-Net, or any
Membership Interest of Com-Net, or any merger, consolidation, business
combination, or similar transaction involving Com-Net.
(c) Com-Net and the Members will not (i) except as set forth in the
proviso below, permit any new occupancy of, or enter into any new lease, license
- -------
or other occupancy agreement for, space on the Towers or in any of the
Improvements located on the Towers, (ii) renew, modify or terminate the Tenant
Leases, or (iii) take any action or fail to take any action that would
constitute a default under the Tenant Leases; provided, however, that Com-Net
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and the Members may take any action specified in clause (i) above, if (x) the
lease, license or other occupancy agreement is on the form of Subsidiary's
standard form for such agreements, (y) Com-Net and/or the Members shall have
delivered written notice to Subsidiary of Com-Net's intent to enter into such
agreement at least fifteen (15) Business Days prior to the execution of any such
agreement, along with a true and correct copy of the proposed agreement to be
executed, and (z) Subsidiary has delivered to Com-Net or the Members, within ten
(10) Business Days after Subsidiary's receipt of the notice specified in clause
(y), its written approval of the proposed action, which such approval shall not
be unreasonably withheld, except that Subsidiary's failure to deliver to Com-Net
or the Members such written approval on or prior to the end of such ten (10)
Business Day period shall constitute Subsidiary's approval of the proposed
action and shall satisfy the requirements of this clause (c).
(d) Com-Net and the Members will not (a) renew, modify or terminate
the Ground Leases, (b) take any action or fail to take any action that would
constitute a default under the Ground Leases, or (c) enter into or renew any
management, maintenance, service or other Contract affecting the Property,
without Subsidiary's prior written approval in each instance, which approval
will not be unreasonably withheld or delayed.
(e) Com-Net and the Members will not (i) modify or terminate the
Easements or (ii) take any action or fail to take any action that would
constitute a default under the Easements.
(f) Com-Net and the Members will not encumber, modify or alter the
Property in any material respect.
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(g) Between the date of this Agreement and the Closing Date, except
as otherwise contemplated by this Agreement or as Subsidiary shall otherwise
agree in writing in advance, the Members will, and will cause Com-Net to:
(i) maintain insurance coverage at presently existing levels
so long as such insurance is available at commercially reasonable rates;
(ii) not approve any new individual capital expenditure;
(iii) not dispose of or incur, create or assume any encumbrance
other than Permitted Encumbrances on any individual capital asset;
(iv) not incur any Indebtedness, except Indebtedness to Com-Net
Construction on account of Towers constructed or to be constructed by Com-Net
Construction for Com-Net;
(v) except as required by law or regulation, pursuant to
existing agreements or as may be reasonably necessary to secure or protect
intellectual or industrial property rights of Com-Net's business, not provide
any confidential or proprietary information with respect to Com-Net's business
to any person other than Subsidiary, Parent or their respective Affiliates;
(vi) not take any action which could be reasonably expected to
prevent or materially delay the consummation of the Contemplated Transactions;
(vii) not make any distributions of cash;
(viii) not guarantee any Indebtedness or make any loans of any
nature whatsoever;
(ix) without Parent's and Subsidiary's written consent, not
request or allow Com-Net Construction to build any Towers for the account of
Com-Net other than the four (4) Towers being built as of the date hereof; and
(x) not agree to take any of the foregoing actions.
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ARTICLE VI
CONDITIONS PRECEDENT TO
SUBSIDIARY'S AND PARENT'S PERFORMANCE
Subsidiary's and Parent's obligations hereunder are expressly contingent
upon fulfillment of such of the following terms and conditions (collectively,
the "Subsidiary's and Parent's Conditions Precedent") as have not been waived in
----------------------------------------------
writing by Subsidiary and Parent:
6.1 PERFORMANCE OF COVENANTS AND ACCURACY OF REPRESENTATIONS. All of the
Members' and Com-Net's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually) must have been accurate in all respects as of the date
of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date, without giving effect to any
supplement to the Disclosure Letter, and all of Members' and Com-Net's
covenants, duties and obligations in this Agreement must have been fully and
completely performed as of the Closing Date.
6.2 NO LEGAL ACTION AGAINST CONTEMPLATED TRANSACTIONS. Since the date of
this Agreement, there must not have been commenced or threatened against
Subsidiary, or against any Person affiliated with Subsidiary, any Proceeding (a)
involving any challenge to, or seeking damages or other relief in connection
with, any of the Contemplated Transactions, or (b) that may have the effect of
preventing, delaying, making illegal, or otherwise interfering with any of the
Contemplated Transactions.
6.3 NO CLAIM REGARDING MEMBERSHIP INTERESTS OR SALE PROCEEDS. There must
not have been made or threatened by any Person any Claim asserting that such
Person (a) is the holder or the beneficial owner of, or has the right to acquire
or to obtain beneficial ownership of, any Membership Interests of, or any other
voting or ownership interest in, Com-Net or the Property, or (b) is entitled to
all or any portion of the Purchase Price payable for the Members' Membership
Interests.
6.4 NO PROHIBITIONS. Neither the consummation nor the performance of any
of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time), materially contravene, or conflict with, or result in
a material violation of, or cause Subsidiary or any Person affiliated with
Subsidiary to suffer any material adverse consequence under, (a) any applicable
Legal Requirement or Order, or (b) any Legal Requirement or Order that has been
published, introduced, or otherwise proposed by or before any Governmental Body.
6.5 ESTOPPELS. Subsidiary shall have obtained on or before the Closing
Date a Ground Lessor Estoppel from each Ground Lessor to each of the Ground
Leases, substantially in
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the form of Exhibit "6.5(a)" attached hereto, and a Estoppel from each Tenant
---------------
under each of the Tenant Leases, substantially in the form of Exhibit "6.5(b)"
---------------
attached hereto.
6.6 TITLE TO MEMBERSHIP INTEREST AND PROPERTY. The Members shall have
good title to the Membership Interests free and clear of all liens and
encumbrances and Com-Net shall have good, and in the case of the Owned Real
Property, marketable fee simple title, to the Property free and clear of all
liens and encumbrances, excepting only the Permitted Exceptions, and Subsidiary
shall have obtained (a) Uniform Commercial Code, judgment and tax lien searches
confirming that no such liens or encumbrances exist, (b) a commitment issued by
First American Title Insurance Company pursuant to which such company agrees to
issue to Subsidiary an owner's policy of title insurance in such amount as
Subsidiary may determine in its reasonable discretion insuring (i) with respect
to the Owned Real Property, Com-Net's fee simple interest in such Owned Real
Property, (ii) with respect to Leased Real Property, Com-Net's leasehold
interest in such Leased Real Property under the applicable Ground Lease, and
(iii) Com-Net's interest under any Easements, in each case subject only to such
matters as may be acceptable to Subsidiary, and (c) a current survey of each
parcel of Real Property meeting ALTA requirements and prepared by a surveyor
acceptable to Subsidiary which confirms that all Improvements are located upon
the Real Property and do not encroach upon any easements of record and that no
improvements from adjoining properties encroach upon the Real Property and
otherwise does not reveal any matter which renders the fee simple interest in
the Real Property unmarketable.
6.7 ENVIRONMENTAL ASSETS. Subsidiary shall have obtained environmental
site assessment reports for the Real Property issued by an environmental
engineer confirming that the Real Property has not in the past been used, and is
not presently being used, for the handling, storage, transportation, disposal or
release of hazardous or toxic substances, materials, pollutants or waste (or
similar items under applicable environmental Legal Requirements).
6.8 ZONING AND LAND USE. Subsidiary and Subsidiary's counsel shall be
satisfied that the Property and the operation of the business of leasing space
on the Towers are in compliance with all Legal Requirements and with all
easements, restrictive covenants, reservations and similar matters of record
affecting the Property (as evidenced by such documentation as Subsidiary may
reasonably require, including written confirmation from the applicable
Governmental Authorities that the Property is in compliance with all Legal
Requirements relating to zoning, land use and building matters), or that no
laws, rules, regulations, easements, restrictive covenants, reservations, and
similar matters of record affecting the Property are applicable thereto.
6.9 FAA AND FCC MATTERS. Subsidiary shall have obtained evidence that the
Towers are in full compliance with all applicable FAA and FCC Legal
Requirements.
6.10 NO CHANGE IN THE PROPERTY. No material adverse changes in the
Property have occurred between the date of this Agreement and the Closing Date.
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6.11 EXECUTION AND DELIVERY OF DOCUMENTS. The Members and Com-Net shall
have executed and delivered to Subsidiary any and all documents and instruments
contemplated by this Agreement, including without limitation those set forth on
Exhibit "6.11" attached hereto.
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6.12 THIRD PARTY APPROVALS. Subsidiary shall have obtained all third party
approvals and/or non-disturbance agreements from all Governmental Authorities,
landlords, mortgagees, secured parties or other Persons deemed necessary by
Subsidiary in order to consummate the transactions contemplated by this
Agreement and in order for Subsidiary to obtain title insurance for Com-Net's
interest in the Real Property.
6.13 OPINIONS OF COUNSEL. The Members and Com-Net shall have delivered to
Subsidiary and Parent a written opinion from counsel, dated as of the Closing
Date, to the effect set forth on Exhibit "6.13" attached hereto.
--------------
6.14 SUBSIDIARY'S SATISFACTION. Subsidiary and its Representatives shall
have conducted their inspection and due diligence of Com-Net and the Property.
If Subsidiary is not satisfied, in its sole and absolute discretion, with the
results of such inspection and due diligence for any reason whatsoever,
including without limitation as a result of Subsidiary' review or inspection of
the Disclosure Letter, the Financial Statements, the Property, the Permits, any
applicable Legal Requirements concerning the Property, the Tenant Leases, the
Easements, the Ground Leases, all related tests, borings, inspections, surveys,
studies, environmental site assessments and other inspections or measurements
thereof or related thereto, this condition precedent shall be deemed not to be
fulfilled.
6.15 HSR ACT. All required filings under the HSR shall have been made and
any required waiting period under the laws applicable to the Contemplated
Transactions shall have expired or been earlier terminated.
6.16 RELEASES. The Anderson Group, a former member of Com-Net, shall have
executed a waiver and release agreement releasing Subsidiary and Parent from any
and all claims against Com-Net and its successors arising out of, or relating to
(i) that certain Separation Agreement dated as of December 31, 1998 by and
between the Members and The Anderson Group or (ii) the Contemplated
Transactions, which waiver and release agreement shall be substantially in the
form of Exhibit "6.16" attached hereto.
-------------
6.17 APPROVALS. Each of Subsidiary's and Parent's Board of Directors and
the Lenders shall have approved the Contemplated Transactions.
6.18 PERMITS, CONSENTS AND LICENSES. Prior to or concurrent with the
closing, Com-Net shall have obtained all permits, consents and licenses
necessary for Subsidiary to continue to conduct Com-Net's business.
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6.19 MERGER AGREEMENT. All conditions precedent in Article VII of the
Merger Agreement shall have been satisfied, at or prior to Closing.
6.20 PERMITTED EXCEPTIONS. Subsidiary and Parent shall have reviewed and
approved, in their sole discretion, the Permitted Exceptions discussed in the
Disclosure Letter.
In the event that any of the Subsidiary's and Parent's Conditions Precedent
shall not have been fulfilled to the satisfaction of Subsidiary and Parent, in
their sole and absolute discretion or waived in writing by Subsidiary and
Parent, Subsidiary or Parent shall notify the Members in writing as to which
Condition(s) Precedent has not been fulfilled, which notice shall state with
reasonable specificity the reason and basis for such Condition(s) Precedent not
having been fulfilled. The Members shall have a period of three (3) days
following their receipt of such notice within which to notify Subsidiary and
Parent in writing that the Members intend to attempt to cause such Condition(s)
Precedent to be fulfilled. In the event the Members provide Subsidiary and
Parent with such notice, the Member shall have a period of thirty (30) days
within which to attempt to cause the such Condition(s) Precedent to be fulfilled
and the Closing shall be extended to accommodate such efforts. In the event the
Members fail to provide Subsidiary and Parent with such notice within such three
(3) day period or provide such notice with such three (3) day period but fail to
cause such Condition(s) Precedent to be fulfilled to the satisfaction of the
Subsidiary and Parent in their sole and absolute discretion within such thirty
(30) day period, Subsidiary and Parent will have the right, in their sole and
absolute discretion, and without any liability or obligation to the Members or
Com-Net whatsoever, to terminate this Agreement. Subsidiary and Parent will
notify the Members in writing of any Condition(s) Precedent which have not been
fulfilled prior to 10:00 a.m. Eastern Time on the Closing Date. If Subsidiary
fails to so notify the Members and Com-Net within such time period, then
Subsidiary will be deemed to have fulfilled or waived all Condition(s)
Precedent, and all rights of Subsidiary and Parent to terminate this Agreement
pursuant to this Article VI will be null and void and of no further force or
effect.
ARTICLE VII
CONDITIONS PRECEDENT TO MEMBERS' PERFORMANCE
The obligations of the Members hereunder are expressly contingent upon
fulfillment of such of the following terms and conditions (collectively, the
"Members' Conditions Precedent") as have not been waived in writing by the
-----------------------------
Members:
7.1 PERFORMANCE OF COVENANTS AND ACCURACY OF REPRESENTATIONS. All of
Subsidiary's and Parent's representations and warranties in this Agreement
(considered collectively), and each of these representations and warranties
(considered individually), must have been accurate in all respects as of the
date of this Agreement, and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date, and all of Subsidiary's
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and Parent's duties, obligations and covenants in this Agreement must have been
fully and completely performed in all material respects as of the Closing Date.
7.2 EXECUTION AND DELIVERY OF DOCUMENTS. Subsidiary and Parent shall have
executed and delivered to the Members any and all documents and instruments
contemplated by this Agreement, including without limitation those set forth on
Exhibit "7.2" attached hereto.
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In the event that any of the Members' Conditions Precedent shall not have
been fulfilled to the satisfaction of the Members or waived in writing by the
Members, the Members shall notify Subsidiary and Parent in writing as to which
Condition(s) Precedent has not been fulfilled, which notice shall state with
reasonable specificity the reason and basis for such Condition(s) Precedent not
having been fulfilled. Subsidiary and Parent shall have a period of three (3)
days following their receipt of such notice within which to notify the Members
in writing that Subsidiary or Parent intends to attempt to cause such
Condition(s) Precedent to be fulfilled. In the event Subsidiary or Parent
provides the Members with such notice, Subsidiary and Parent shall have a period
of thirty (30) days within which to attempt to cause such Condition(s) Precedent
to be fulfilled and the Closing shall be extended to accommodate such efforts.
If Subsidiary or Parent fails to provide the Members with such notice within
such three (3) day period or provides such notice but fails to cause such
Condition(s) Precedent to be fulfilled within such thirty (30) day period, the
Members will have the right, in their discretion, and without any liability or
obligation to Subsidiary or Parent whatsoever, to terminate this Agreement. The
Members will notify Subsidiary and Parent in writing as to which Condition(s)
Precedent have not been fulfilled prior to 10:00 a.m. Eastern Time on the
Closing Date. If the Members fail to so notify Subsidiary and Parent within
such time period, then the Members will be deemed to have fulfilled or waived
all Condition(s) Precedent, and all rights of the Members to terminate this
Agreement pursuant to this Article VII will be null and void and of no further
force or effect.
ARTICLE VIII
CLOSING
8.1 THE CLOSING. The closing of the Contemplated Transactions (the
AClosing@) will take place at the offices of Com-Net, located at 121 Boone Ridge
Drive, Johnson City, Tennessee, on the later of (a) April 30, 1999, or (b) the
Business Day immediately following the date as of which each of the conditions
set forth in Articles VI and VII have been fulfilled or waived or on such other
date as the parties hereto may mutually agree (the "Closing Date"); provided,
--------
however, that in any event the Closing Date shall not be later than September
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30, 1999.
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ARTICLE IX
EXPENSES
9.1 ATTORNEYS' FEES. The Members and Subsidiary will each pay his, her or
its own attorneys' fees and costs incurred in connection with the negotiation of
this Agreement and consummation of the Closing. The Members shall pay all
attorneys' fees and costs incurred in connection with the assignment and
transfer contemplated by Section 5.1(k) of this Agreement. The Members agree
that they shall pay any attorneys' fees incurred by Com-Net on or prior to the
Closing Date, regardless of whether incurred in connection with the negotiation
of this Agreement and the consummation of the Closing or otherwise.
9.2 TRANSFER TAXES; RECORDING COSTS. The Members will pay the cost of all
deed or other transfer taxes (including all documentary stamp taxes), with
respect to the Contemplated Transactions and all recording costs of any
documents executed herewith (including recording costs associated with releases
and other documents required to clear title or to comply with the Members' or
Com-Net's obligations hereunder). The Members will pay the costs of all deed or
other transfer taxes (including all documentary stamp taxes) with respect to the
assignment and transfer contemplated by Section 5.1(k) of this Agreement and all
recording costs of any documents executed in connection therewith (including any
recording costs associated with releases or other documents required to clear
title).
9.3 OTHER EXPENSES. Subsidiary or Parent will pay the cost of any title
insurance obtained by Subsidiary or Parent on behalf of Com-Net with respect to
the Contemplated Transactions. Any items of cost or expense not specifically
allocated above will be paid by the party to the transaction that customarily
bears such cost or expense within Washington County, Tennessee.
ARTICLE X
INDEMNIFICATION
10.1 SURVIVAL. All representations, warranties, covenants, and obligations
in this Agreement, the Disclosure Letter, the supplements to the Disclosure
Letter, and any other certificate or document delivered pursuant to this
Agreement will survive the Closing. Except as set forth below in this Section
10.1, the right to indemnification, payment of Damages or other remedy based on
such representations, warranties, covenants, and obligations will not be
affected by any investigation conducted with respect to, or any knowledge
acquired (or capable of being acquired) at any time, whether before or after the
execution and delivery of this Agreement or the Closing Date, with respect to
the accuracy or inaccuracy of or compliance with, any such representation,
warranty, covenant, or obligation. Except as set forth below in this Section
10.1, the waiver of any condition based on the accuracy of any representation or
warranty, or on the performance of or compliance with any covenant or
obligation, will not affect the right to
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indemnification, payment of Damages, or other remedy based on such
representations, warranties, covenants, and obligations. Notwithstanding the
foregoing, in the event that, prior to the Closing Date, Subsidiary or Parent
shall have obtained actual knowledge of the inaccuracy of or noncompliance with
any such representation, warranty, covenant, or obligation, neither Subsidiary
nor Parent shall have any right to indemnification, payment of Damages or other
remedy under this Agreement based such inaccuracy or noncompliance unless
Subsidiary or Parent shall have notified the Shareholders of the failure of the
applicable Condition(s) Precedent to have been fulfilled based upon such
inaccuracy or noncompliance and afforded the Shareholders the opportunity to
cause such Condition(s) Precedent to be fulfilled as provided in the last
paragraph of Article VIII of this Agreement.
10.2 INDEMNIFICATION BY THE MEMBERS AND COM-NET. The Members and the
directors and officers of Com-Net (prior to the Closing Date), jointly and
severally, will indemnify and hold harmless Subsidiary, Parent and Com-Net
(after the Closing Date) and their respective Representatives, attorneys,
officers, directors, controlling persons, and affiliates (collectively, the
"Subsidiary Indemnified Persons") for, and will pay to the Subsidiary
------------------------------
Indemnified Persons the amount of, any loss, liability, claim, damage (including
incidental and consequential damages), expense (including costs of investigation
and defense and reasonable attorneys' fees) or diminution of value, whether or
not involving a third-party Claim (collectively, the "Damages"), arising,
-------
directly or indirectly, from or in connection with (a) any Breach of any
representation or warranty made by Com-Net or the Members in this Agreement
(without giving effect to any supplement to the Disclosure Letter), the
Disclosure Letter, the supplements to the Disclosure Letter, or any other
certificate or document delivered by Com-Net or the Members pursuant to this
Agreement, (b) any Breach of any representation or warranty made by Com-Net
Construction or a Shareholder in the Merger Agreement (without giving effect to
any supplement to the disclosure letter described therein), the disclosure
letter described therein, the supplements to the disclosure letter described
therein, or any other certificate or document delivered by Com-Net or a
shareholder pursuant to the Merger Agreement; (c) any Breach by the Members or
Com-Net of any covenant or obligation of the Members in this Agreement, (d) any
Breach by a Shareholder or Com-Net Construction of any covenant or obligation of
the Shareholders or Com-Net Construction in the Merger Agreement; (e) any
services provided or Property owned by Com-Net prior to the Closing Date, (f)
any claim by any Person for brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding alleged to have been made by
any such Person with the Members or Com-Net (or any Person acting on their
behalf) in connection with any of the Contemplated Transactions, or (g) the
Merger Agreement. The remedies provided in this Section will not be exclusive
of or limit any other remedies that may be available to any of the Subsidiary
Indemnified Persons.
10.3 INDEMNIFICATION BY SUBSIDIARY AND PARENT. Subsidiary and Parent will
indemnify and hold harmless the Members and their respective Representatives
(collectively, the "Member Indemnified Persons") for, and will pay to the Member
--------------------------
Indemnified Persons the amount of, any Damages arising, directly or indirectly,
from or in connection with (a) any Breach of any representation or warranty made
by Subsidiary or Parent in this Agreement or in any
23
<PAGE>
certificate delivered by Subsidiary or Parent pursuant to this Agreement, (b)
any claim by any Person for brokerage or finder's fees or commissions or similar
payments based upon any agreement or understanding alleged to have been made by
such Person with Subsidiary or Parent (or any Person acting on their behalf) in
connection with any of the Contemplated Transactions.
10.4 PROCEDURE FOR INDEMNIFICATION.
(a) Promptly after receipt by an indemnified party or of notice of
the commencement of any Proceeding against it, such indemnified party will, if a
Claim is to be made against an indemnifying party under such section, give
notice to the indemnifying party of the commencement of such Claim, but the
failure to notify the indemnifying party will not relieve the indemnifying party
of any liability that it may have to any indemnified party, except to the extent
that the indemnifying party demonstrates that the defense of such action is
prejudiced by the indemnifying party's failure to give such notice.
(b) If any such Proceeding is brought against an indemnified party
and it gives notice to the indemnifying party of the commencement of such
Proceeding, the indemnifying party will, unless the Claim involves taxes, be
entitled to participate in such Proceeding and, to the extent that it wishes
(unless (i) the indemnifying party is also a party to such Proceeding and the
indemnified party determines in good faith that joint representation would be
inappropriate, or (ii) the indemnifying party fails to provide reasonable
assurance to the indemnified party of its financial capacity to defend such
Proceeding and provide indemnification with respect to such Proceeding), to
assume the defense of such Proceeding with counsel satisfactory to the
indemnified party and, after notice from the indemnifying party to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will not, as long as it diligently conducts such defense, be
liable to the indemnified party under this Section for any fees of other counsel
or any other expenses with respect to the defense of such Proceeding, in each
case subsequently incurred by the indemnified party in connection with the
defense of such Proceeding, other than reasonable costs of investigation. If the
indemnifying party assumes the defense of a Proceeding, (i) it will be
conclusively established for purposes of this Agreement that the Claims made in
that Proceeding are within the scope of and subject to indemnification; (ii) no
compromise or settlement of such claims may be effected by the indemnifying
party without the indemnified party's consent unless (A) there is no finding or
admission of any violation of Legal Requirements or any violation of the rights
of any Person and no effect on any other Claims that may be made against the
indemnified party, and (B) the sole relief provided is monetary damages that are
paid in full by the indemnifying party; and (iii) the indemnified party will
have no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an indemnifying party of
the commencement of any Proceeding and the indemnifying party does not, within
ten days after the indemnified party's notice is given, give notice to the
indemnified party of its election to assume the defense of such Proceeding, the
indemnifying party will be bound by any determination made in such Proceeding or
any compromise or settlement effected by the indemnified party.
24
<PAGE>
(c) Notwithstanding the foregoing, if an indemnified party determines
in good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
indemnified party may, by notice to the indemnifying party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the indemnifying
party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
10.5 RIGHT OF OFFSET. Notwithstanding any provision to the contrary
contained in this Agreement, Parent and Subsidiary shall have the right to,
without any further notice to or authorization from either Member, offset
against any sums or other consideration owed by either Parent or Subsidiary to
either Member (other than any sum owed to Dan Eldridge under Section 7.1 of the
Merger Agreement) against any amounts owed by either Member to either Parent or
Subsidiary, whether under this Agreement, the Merger Agreement or otherwise.
ARTICLE XI
DEFAULT
11.1 SUBSIDIARY'S OR PARENT'S DEFAULT. If either Subsidiary or Parent
fails to perform its obligations under this Agreement, the Members' and Com-
Net's sole and exclusive remedies shall be to bring an action for specific
performance.
11.2 COM-NET OR MEMBER'S DEFAULT. If Com-Net or either Member fails to
perform any of its, his or her obligations under this Agreement, Subsidiary's
and Parent's remedies shall be to bring an action for specific performance or a
combination of specific performance and damages. No remedy conferred upon
Subsidiary or Parent is intended to be exclusive of any other remedy provided
for in this Agreement, and each remedy provided for in this Agreement will be
cumulative and in addition to every other remedy available under this Agreement.
No single or partial exercise any remedy will preclude any other or further
exercise thereof. This provision shall be in addition to Subsidiary's and
Parent's remedies under Section 10 hereof.
ARTICLE XII
MISCELLANEOUS
12.1 BROKERS. Neither Parent, Subsidiary, Com-Net, nor the Members have
entered into an agreement with any agent, broker or finder in connection with
the transaction contemplated by this Agreement. Each party will indemnify,
defend and hold harmless the other party from any Claims of any agent, broker or
finder claiming to have entered into an agreement with the indemnifying party in
connection with this Agreement. This Section will survive the Closing or any
termination of this Agreement.
25
<PAGE>
12.2 INTERPRETATION. The singular includes the plural and the plural
includes the singular. The word "or" is not exclusive and the word "including"
is not limiting. References to a law include any rule or regulation issued
under the law and any amendment to the law, rule or regulation. Unless
otherwise indicated, references to a Section or Exhibit mean a Section or
Exhibit contained in or attached to this Agreement. The caption headings in
this Agreement are for convenience and reference only and do not define, modify
or describe the scope or intent of any of the terms of this Agreement. This
Agreement will be interpreted and enforced in accordance with its provisions and
without the aid of any custom or rule of law requiring or suggesting
construction against the party drafting or causing the drafting of the
provisions in question.
12.3 NOTICES. All notices, demands or communications required or
permitted under this Agreement will be in writing and delivered by hand or
mailed by certified mail, return receipt requested, postage and registration or
certification charges prepaid, or by nationally recognized overnight courier
service, or by fax, to the party entitled thereto at the address and to the fax
number first set forth above, or such other party(ies), address(es) or fax
number(s) as either party specifies by written notice to the other from time to
time. Any legal counsel designated above or any substitute counsel as
designated by Com-Net, the Members, Subsidiary or Parent by written notice to
the other parties is authorized to give notices (but not receive notices) under
this Agreement on behalf of its respective client.
12.4 ENFORCEMENT COSTS. If any civil action, arbitration or other legal
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any
provision of this Agreement, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees, sales and use taxes, court
costs and all expenses even if not taxable as court costs (including, without
limitation, all such fees, taxes, costs and expenses incident to arbitration,
appellate, bankruptcy and post-judgment proceedings), incurred in that civil
action, arbitration or legal proceeding, in addition to any other relief to
which such party or parties may be entitled. Attorneys' fees shall include,
without limitation, paralegal fees, investigative fees, administrative costs,
sales and use taxes and all other charges billed by the attorney to the
prevailing party. The terms of this Section shall survive the Closing.
12.5 ASSIGNMENT. Subsidiary and Parent will have the right to assign this
Agreement to any Affiliate of Subsidiary or Parent with the consent of the
Members (which consent shall not be unreasonably withheld), after which (a)
Subsidiary or Parent will be relieved of their obligations, as the case may be,
under this Agreement, (b) the assignee will be solely responsible for such
obligations, and (c) the assignee may enforce all rights and remedies of
Subsidiary and Parent under this Agreement. The Members and Com-Net may not
assign his, her or its rights or obligations with respect to this Agreement
without the prior written consent of Subsidiary.
26
<PAGE>
12.6 GOVERNING LAW. This Agreement will be governed by and construed and
enforced in accordance with the internal laws of the State of Florida, without
regard to Florida's choice or conflict of laws provisions.
12.7 ARBITRATION. Any controversy or claim between Com-Net, the Members,
Parent and Subsidiary with respect to the subject matter of this Agreement,
including any controversy or claim arising out of an alleged tort, will be
determined by binding arbitration in accordance with the Federal Arbitration Act
(or if not applicable, the applicable state law) and the Rules of Practice and
Procedure for Judicial Arbitration and Mediation Services ("JAMS"). Judgment
upon any arbitration award may be entered into in any court having jurisdiction.
Any party to this Agreement may bring an action, including a summary or
expedited proceeding, to compel arbitration of any controversy or claim under
this Agreement in any court having jurisdiction over such action. The
arbitration will be conducted in Palm Beach County, Florida and administered by
JAMS, who will appoint the arbitrator. If JAMS is unable or legally precluded
from administering the arbitration, then the American Arbitration Association
will serve. All arbitration hearings will commence within 90 days of the demand
for arbitration. Further, the arbitrator will only, upon a showing of cause, be
permitted to extend the commencement of such hearing for up to an additional 60
days.
12.8 INTEGRATION. All prior understandings and agreements (including the
Deal Point Summary attached hereto as Exhibit "12.8") among the parties with
--------------
respect to the subject matter of this Agreement are merged in this Agreement.
No party shall rely upon any statement, covenant or representation made by any
other party which is not embodied in this Agreement.
12.9 AMENDMENTS. No purported amendment to or waiver of any term of this
Agreement will be binding upon any party, or have any other force or effect in
any respect, unless the same is in writing and signed by the party to be
charged.
12.10 BINDING EFFECT. This Agreement will be binding upon, and will inure
to the benefit of, the Members, Com-Net and Subsidiary and Parent, and each of
their respective heirs, executors, administrators, legal representatives,
successors and permitted assigns.
12.11 FURTHER ASSURANCES. Each party will, from time to time, execute,
acknowledge and deliver such further instruments, and perform such additional
acts, as the other parties may reasonably request in order to effectuate the
intent of this Agreement. In addition, the Members agree to keep and make
available for inspection and duplication by Subsidiary and its representatives,
agents, employees, accountants and attorneys, all financial and other records
and pertinent documents requested by Subsidiary with respect to Com-Net and the
Property, and the Members shall cause the current or former officers, directors,
representatives, agents, independent public accountants of Com-Net to supply
Subsidiary with all information reasonably requested by Subsidiary with respect
to Com-Net. This Section will survive the Closing.
27
<PAGE>
12.12 THIRD PARTIES. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies to any Persons other than
the Members, Com-Net, Subsidiary and Parent and their respective successors and
permitted assigns.
12.13 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. Delivery of an executed
signature page of this Agreement by facsimile transmission shall be effective as
delivery of a manually executed counterpart hereof.
12.14 SEVERABILITY. If any provision of this Agreement or any other
agreement entered into pursuant hereto is contrary to, prohibited by or deemed
invalid under applicable law or regulation, such provision shall be inapplicable
and deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible. If any provision of this Agreement may be
construed in two or more ways, one of which would render the provision invalid
or otherwise voidable or unenforceable and another of which would render the
provision valid and enforceable, such provision shall have the meaning which
renders it valid and enforceable. The terms of this Section will survive the
Closing.
This Agreement has been executed by the Members, Com-Net, Parent and
Subsidiary on the dates set forth below.
MEMBERS:
/s/ Daniel J. Eldridge
--------------------------------
DANIEL J. ELDRIDGE
/s/ Tammy W. Eldridge
--------------------------------
TAMMY W. ELDRIDGE
--------------------------------
COM-NET:
COM-NET DEVELOPMENT GROUP,
LLC, a limited liability company
By: /s/ Daniel J. Eldridge
-----------------------------
Name: Daniel J. Eldridge
Title: Operating Manager
28
<PAGE>
SUBSIDIARY:
SBA TOWERS TENNESSEE, INC., a
Florida corporation
By: /s/ Jeffrey A. Stoops
-----------------------------
Name: Jeffrey A. Stoops
Title: Senior Vice President
PARENT:
SBA COMMUNICATIONS CORPORATION, a Florida
corporation
By: /s/ Jeffrey A. Stoops
-----------------------------
Name: Jeffrey A. Stoops
Title: Senior Vice President
29
<PAGE>
SCHEDULE OF EXHIBITS
Exhibit "1" Defined Terms
Exhibit "3.5" Certified Copies of Organizational Documents
Exhibit "6.5(a)" Form of Estoppel Certificate from Each Ground Lessor
Exhibit "6.5(b)" Form of Estoppel Certificate from Tenants
Exhibit "6.5(c)" Form of Estoppel Certificate from Landlord
Exhibit "6.11" List of Member's Closing Documents
Exhibit "6.13" Opinion of Counsel to the Members and Com-Net
Exhibit "6.16" Form of Release/Waiver
Exhibit "7.2" List of Subsidiary's and Parent's Closing Documents
Exhibit "12.8" Deal Point Summary
<PAGE>
EXHIBIT "1"
-----------
DEFINED TERMS
The following terms will have the following meanings throughout this Agreement:
"Affiliate" - with respect to a Person, any other Person that, directly or
---------
indirectly through one or more intermediaries, controls, is controlled by or is
under common control with the first Person.
"Agreement" - this instrument, together with all exhibits, schedules and
---------
addenda attached hereto.
"Appurtenant Property" - all right, title and interest of Com-Net or the
--------------------
Members, if any, in and to all (a) streets, roads, easements, contract rights
and rights-of-way appurtenant to the Property, (b) covenants, restrictions,
agreements, development rights, air rights, density rights, drainage rights,
riparian and/or littoral rights benefitting the Property, (c) utility mains,
service laterals, hydrants, valves and appurtenances servicing the Property, (d)
utility deposits and reservation fees paid by or on behalf of the Members or
Com-Net with respect to the Property, and (e) oil, gas, minerals, soil, flowers,
shrubs, crops, trees, timber, compacted soil, submerged lands and fill
appurtenant to the Property.
"Balance Sheets" - collectively, the balance sheets of Com-Net referred to
--------------
in Section 3.9 of this Agreement.
"Breach" - a "Breach" of a representation, warranty, covenant, obligation,
------
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement or referred to in this Agreement or the Merger Agreement will be
deemed to have occurred if there is or has been (a) any inaccuracy in or breach
of, or any failure to perform or comply with, such representation, warranty,
covenant, obligation, or other provision, or (b) any claim (by any Person) or
other occurrence or circumstance that is or was inconsistent with such
representation, warranty, covenant, obligation, or other provision, and the term
"Breach" means any such inaccuracy, breach, failure, claim, occurrence, or
circumstance.
"Business Day" - any day other than a Saturday, Sunday or a day upon which
------------
banking institutions in the State of Florida are authorized or required by law
to close.
"Claim" - any claim, damage, loss, liability, obligation, demand, defense,
-----
judgment, suit, proceeding, disbursement or expense, including reasonable
attorneys' fees or costs (including those related to appeals).
"Closing" - the date upon which the consummation of the Contemplated
-------
Transactions occurs in accordance with the terms of this Agreement.
"Closing Date" - has the meaning set forth in Section 8.1.
------------
<PAGE>
"Code" - the Internal Revenue Code of 1986 or any successor law, and
----
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"Com-Net Account Receivable" - that certain account receivable due Com-Net
--------------------------
from the LLC in the amount of $2,415,216 which account receivable has been
assigned by Com-Net to Eldridge.
"Com-Net Construction" - Com-Net Construction Services, Inc., a California
--------------------
corporation.
"Contemplated Transactions" - all of the transactions contemplated by this
-------------------------
Agreement, including the execution, delivery, and performance of this Agreement
and the documents and instruments referred to herein and the performance by
Parent, Subsidiary, the Members and Com-Net, of their respective covenants and
obligations under this Agreement.
"Contract" - any agreement, contract, obligation, promise, or undertaking
--------
(whether written or oral and whether express or implied) that is legally binding
upon Com-Net, the Members or their respective assets (including without
limitation, the Ground Leases, Tenant Leases and Easements).
"Disclosure Letter" - that certain completed disclosure letter delivered by
-----------------
the Members and Com-Net to Subsidiary within ten (10) days after the execution
of this Agreement containing, among other things, true, correct and complete
copies of certain records, documentation and other information concerning the
ownership, use, operation and condition of the Property.
"Easements" - the easements described in the Disclosure Letter through
---------
which access to the Subsidiary is required or through which utilities to the
Real Property are provided.
"Effective Date" - the date upon which a counterpart of this Agreement,
--------------
fully executed by the Members, Com-Net, Parent and Subsidiary, is received by
Subsidiary.
"Exchange Act" - Exchange Act of 1934, as amended.
------------
"FAA" - Federal Aviation Authority.
---
"FCC" - Federal Communications Commission.
---
"Financial Statements" - collectively, all of the financial information
--------------------
with respect to Com-Net to be delivered to Subsidiary in accordance with Section
3.9 of this Agreement.
"GAAP"- generally accepted United States accounting principles, applied on
----
a basis consistent with the basis on which the Balance Sheets and the other
financial statements referred to in this Agreement were prepared.
<PAGE>
"Governmental Authority" - the United States of America, the state, county,
----------------------
town or other municipality in which any of the Property is located and any
entity exercising executive, legislative, judicial, regulatory or administrative
functions over or pertaining to any of the Property (including the FAA, the FCC,
any drainage district, street lighting district or special taxing district).
"Governmental Authorization" - any approval, consent, license, permit,
--------------------------
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Authority or pursuant to
any Legal Requirement.
"Ground Leases" - the ground leases described in the Disclosure Letter
-------------
pursuant to which Com-Net Construction leases Real Property upon which any of
the towers are located.
"Ground Lessors" - each of the lessors under the Ground Leases.
--------------
"Improvements" - the towers, and all poles, buildings, equipment shelters,
------------
storage facilities, cabinets, anchors, guy wires and other improvements which
are located on or appurtenant to the Property.
"Indebtedness" - without duplication, (a) all indebtedness for borrowed
------------
money, (b) all obligations for deferred purchase price of property or services
(other than trade payables incurred in the Ordinary Course of Business), (c) all
obligations evidenced by notes, bonds, debentures or other similar instruments
(other than performance bonds and other obligations of a like nature incurred in
the Ordinary Course of Business), (d) all indebtedness created or arising under
any conditional sale or other title retention agreement with respect to property
acquired (even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), (e) all capital lease obligations, (f) all obligations, contingent or
otherwise, as an account party under acceptance, letter of credit or similar
facilities, (g) all obligations, contingent or otherwise, to purchase, redeem
retire or otherwise acquire for value any capital stock, (h) all guarantee
obligations in respect of obligations of the kind referred to in clauses (a)
through (g) above, (i) all obligations of the kind referred to in clauses (a)
through (h) above secured by (or for which the holder of such obligation has an
existing right, contingent or otherwise, to be secured by a lien on property
(including, without limitation, accounts and contract rights) owned, whether or
not assumed or liabilities arise for the payment of such obligation, (j) the
$2,495,216 account payable owed by Com-Net to Com-Net Construction, which
account receivable Com-Net Construction has assigned to Eldridge; an account
payable by Com-Net to Com-Net Construction in the amount of $1,500,000 for or on
account of Towers built or being built by Com-Net Construction for Com-Net which
account payable may be increased by amounts expended for or on account of Towers
built or being built by Com-Net Construction for Com-Net; and (l) the Note
Payable.
"Intangible Personal Property" - any development rights, documents,
----------------------------
technical matter and work product relating to the Property, including any
Permits, environmental studies, construction, engineering, architectural,
landscaping or other plans or drawings related to the Property and any surveys,
maps, site plans, plats and other graphics relating to the Property.
<PAGE>
"IRS"- the United States Internal Revenue Service or any successor agency,
---
and, to the extent relevant, the United States Department of the Treasury.
"Leased Real Property" - the real property described in the Disclosure
--------------------
Letter as being ground leased by Com-Net Construction.
"Legal Requirements" - any law, ordinance, order, rule or regulation of any
------------------
Governmental Authority which pertains to the Property, the Members or Com-Net,
including without limitation, all building, zoning, land use, subdivision,
setback, platting, health, traffic, environmental, hazardous waste, natural
resources or flood control matters.
"Lenders" - the several lenders from time to time party to the Amended and
-------
Restated Credit Agreement, dated as of February 5, 1999, by and among Parent,
SBA Telecommunications, Inc., the several lenders from time to time party
thereto, Lehman Brothers, Inc., General Electric Capital Corporation, Toronto
Dominion (Texas), Inc., Barclays Bank PLC and Lehman Commercial Paper, Inc.
"Membership Interest" - with respect to a member, the member's entire
-------------------
ownership interest in a limited liability company, including the member's (i)
rights to receive allocations of profits and losses, distributions, and a return
of capital and (ii) rights, if any, of a member to participate in the management
of Com-Net, including the rights to receive information, to inspect and audit
the books and records, and to vote on, consent to, or approve actions of Com-
Net.
"Merger Agreement" - that certain Agreement and Plan of Merger, dated of
----------------
even date herewith, among Parent, SBA Construction Services, Inc., Daniel J.
Eldridge, an individual, and Com-Net Construction.
"Note Payable" - that certain Note payable to Daniel J. Eldridge by Com-Net
------------
in an amount equal to $1,144,505.
"Order"- any award, decision, injunction, judgment, order, ruling,
-----
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Authority or by any arbitrator.
"Ordinary Course of Business"- an action which is taken in the ordinary
---------------------------
course of the normal day-to-day operations of the Person taking such action
consistent with the past practices of such Person, is not required to be
authorized by the board of directors of such Person (or by any Person or group
of Persons exercising similar authority) and is similar in nature and magnitude
to actions customarily taken, without any authorization by the board of
directors (or by any Person or group of Persons exercising similar authority),
in the ordinary course of the normal day-to-day operations of other Persons that
are in the same line of business as such Person.
<PAGE>
"Organizational Documents"- (a) the articles or organization and the
------------------------
limited liability company agreement; (b) any charter or similar document adopted
or filed in connection with the creation, formation, or organization of a
Person; and (c) any amendment to any of the foregoing.
"Owned Real Property" - the real property described in the Disclosure
-------------------
Letter as being owned by Com-Net Construction.
"Parent Common Stock" - shares of validly issued, registered, fully paid
-------------------
and non- assessable Class A Common Stock, $.01 par value per share, of the
Parent.
"Permits" - all permits, licenses, authorizations, certificates of
-------
occupancy, certificates of completions, variances and similar approvals of any
Governmental Authority having jurisdiction over Com-Net or the Property.
"Permitted Exceptions" - the exceptions to, or liens or encumbrances upon,
--------------------
title to any portion of the Property set forth in the Disclosure Letter.
"Person" - any individual, corporation (including any non-profit
------
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Authority.
"Proceeding"- any action, arbitration, audit, hearing, investigation,
----------
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Authority or arbitrator.
"Property" - collectively, the Contracts (including, without limitation,
--------
the Tenant Leases, the Ground Leases and the Easements), the Real Property, the
Appurtenant Property, the Intangible Personal Property, the Improvements and the
Tangible Personal Property.
"Purchase Price" - the sum referred to in Section 2.1 of this Agreement.
--------------
"Real Property" - collectively, the Leased Real Property and the Owned Real
-------------
Property.
"Related Person"- with respect to a particular individual, (a) each other
--------------
member of such individual's Family, (b) any Person that is directly or
indirectly controlled by such individual or one or more members of such
individual's Family, (c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a Material Interest;
and (d) any Person with respect to which such individual or one or more members
of such individual's Family serves as a director, officer, partner, executor, or
trustee (or in a similar capacity). With respect to a specified Person other
than an individual, (a) any Person that directly or indirectly controls, is
directly or indirectly controlled by, or is directly or indirectly under common
control with such specified Person, (b) any Person that holds a Material
Interest in such specified Person, (c) each Person that serves as a director,
officer, partner, executor, or trustee of such specified Person (or in a similar
capacity), (d) any Person in which such specified
<PAGE>
Person holds a Material Interest, (e) any Person with respect to which such
specified Person serves as a general partner or a trustee (or in a similar
capacity); and (f) any Related Person of any individual described in clause (b)
or (c). For purposes of this definition, (a) the "Family" of an individual
includes (i) the individual, (ii) the individual's spouse and former spouses,
(iii) any other natural person who is related to the individual or the
individual's spouse within the second degree, and (iv) any other natural person
who resides with such individual, and (b) "Material Interest" means the direct
or indirect right to vote or dispose of voting securities or other voting
interests representing at least 10% of the outstanding voting power of a Person
or equity securities or other equity interests representing at least 10% of the
outstanding equity securities or equity interests in a Person.
"Representative"- with respect to a particular Person, any director,
--------------
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"Service Contracts" - all service contracts, maintenance contracts and
-----------------
management contracts, if any, affecting the Property.
"Share Consideration" - has the meaning set forth in Section 2.2.
-------------------
"subsidiary"- with respect to any Person (the "Owner"), any corporation or
----------
other Person of which securities or other interests having the power to elect a
majority of that corporation's or other Person's board of directors or similar
governing body, or otherwise having the power to direct the business and
policies of that corporation or other Person (other than securities or other
interests having such power only upon the happening of a contingency that has
not occurred) are held by the Owner or one or more of its Subsidiaries; when
used without reference to a particular Person, "Subsidiary" means a Subsidiary
of Com-Net.
"Tangible Personal Property" - all personal property, furniture, fixtures,
--------------------------
equipment, appliances, vehicles, inventory, and other items of personal
property owned by Com-Net and used in connection with the Property.
"Tax Return" - any return (including any information return), report,
----------
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Authority in connection with the determination, assessment, collection, or
payment of any tax or in connection with the administration, implementation, or
enforcement of or compliance with any Legal Requirement relating to any tax.
"Tenant Estoppels" - estoppel letters from each of the Tenants to
----------------
Subsidiary, in form and substance reasonably acceptable to Subsidiary.
"Tenant Leases" - the leases, licenses and other occupancy agreements
-------------
described in the Disclosure Letter pursuant to which any Person is granted the
right to use space or install
<PAGE>
equipment on the Towers or in any of the Improvements located on the Real
Property on which the Towers are located.
"Tenants" - each of the lessees, licensees or other occupants under the
-------
Tenant Leases.
"Tower" - communication towers or monopoles owned or leased by Com-Net
-----
(whether completed or under construction).
<PAGE>
EXHIBIT "3.5"
-------------
CERTIFIED COPIES OF ORGANIZATIONAL DOCUMENTS
(See Attached Copies)
<PAGE>
EXHIBIT "6.5(A)"
----------------
FORM OF GROUND LEASE ESTOPPEL CERTIFICATE
SBA COMMUNICATIONS CORPORATION
ONE TOWER CENTER ROAD, THIRD FLOOR
BOCA RATON, FLORIDA 33486
____________, 1999
_________________
_________________
_________________
_________________
Re: Lease Agreement ("Ground Lease") dated _________________________ by
------------
and between [INSERT NAME OF LESSOR] herein after referred to as
("Landlord") and COM-NET DEVELOPMENT GROUP, LLC ("Tenant") with
-------- ------
respect to that certain real property located in ________________,
____________ ("Property")
--------
Dear [NAME OF GROUND LESSOR]:
SBA Communications Corporation, a Florida Corporation ("SBA"), and its
---
indirectly wholly owned subsidiary, SBA Towers Tennessee, Inc., a Florida
corporation ("Subsidiary"), and Tenant have signed an agreement under which
Subsidiary is purchasing all of the issued and outstanding Membership Interests
in Tenant. The Ground Lease and any tenant's interest in the Property and all
rights and proceeds relating thereto are referred to as the "Leasehold Estate."
-----------------
SBA, certain of its affiliates and certain lenders selected by SBA and its
affiliates ("Lenders") may have entered, and may from time to time in the future
-------
enter into loan or credit agreements, pursuant to which the Lenders may have
extended, or may in the future extend, credit or loan money to SBA or its
affiliates. As a condition to such extensions of credit, such Lenders may
require liens on certain of the Tenant's or SBA's assets located on the Property
and consent by you to the Tenant's or SBA's granting of a leasehold mortgage on
the Leasehold Estate.
As part of our due diligence review in determining whether to consummate
such transaction, we would ask that you confirm the following:
1. You consent to the proposed transaction to the extent the terms of the
Ground Lease would require your consent to such transaction with the
understanding that this consent will be effective only if the proposed
transaction closes.
<PAGE>
2. Attached as Exhibit "A" is a true and complete copy of the Ground
Lease and all amendments or modifications thereto. The Ground Lease
constitutes the entire agreement between you and Tenant with respect
to the subject matter thereof.
3. The expiration date of the initial term of the Ground Lease is
____________ and Tenant has the option to extend the term of the
Ground Lease for _____ successive terms of ________ years.
4. Tenant's monthly base rent under the Ground Lease is $___________,
Tenant must pay monthly $______________ as additional rent and all
rent, additional rent and other charges due and payable under the
Ground Lease have been paid through ______________, 19__.
5. Neither you nor Tenant is in default under the Ground Lease and there
is no event which, with the giving of notice and/or the passage of
time, would constitute such a default.
6. You have no claim or defense of any nature whatsoever against Tenant
with respect to the Ground Lease and there is no event which, with the
giving of notice and/or the passage of time, would constitute the
basis of such a claim or defense.
We would appreciate you reviewing and signing this letter at your earliest
possible convenience as we would like to conclude this transaction a quickly as
possible. If you have any questions or comments, please do not hesitate to
contact me at ___-___-____.
Sincerely,
________________________________
[NAME OF SENDER]
[TITLE OF SENDER]
ACKNOWLEDGED AND CONFIRMED:
________________________________
[NAME OF GROUND LESSOR]
<PAGE>
EXHIBIT "6.5(B)"
----------------
FORM OF TENANT ESTOPPEL CERTIFICATE
SBA COMMUNICATIONS CORPORATION
ONE TOWER CENTER ROAD, THIRD FLOOR
BOCA RATON, FLORIDA 33486
[DATE]
[NAME OF TENANT]
[ADDRESS OF TENANT]
Re: Lease, dated __________, 19__ between COM-NET DEVELOPMENT GROUP, LLC
("Landlord") and [INSERT NAME OF TENANT] ("Tenant") (the "Lease"),
with respect to [INSERT ADDRESS OR DESCRIPTION OF THE PROPERTY] (the
"Property")
Dear [NAME OF TENANT]:
SBA Communications Corporation, a Florida corporation ("SBA"), its
indirectly wholly owned subsidiary SBA Towers Tennessee, Inc., a Florida
corporation ("Subsidiary"), and Landlord have signed an agreement under which
Subsidiary is purchasing all of the issued and outstanding Membership Interests
of Landlord.
As part of our due diligence review in determining whether to consummate
such transaction, we would ask that you confirm the following:
1. Attached as Exhibit "A" is a true and complete copy of the Lease and
all amendments or modifications thereto. The Lease constitutes the
entire agreement between you and Landlord with respect to the subject
matter thereof. To the extent required by the terms of the Lease, you
consent to Subsidiary purchasing all of the membership interests in
the Landlord with the understanding that this consent will be
effective only if the proposed transaction closes.
2. The term of the Lease commenced on ___________ and you have the option
to extent the term of the Lease for_______ (____) successive terms of
______ (___) years each. The expiration date of the initial term of
the Lese is ___________________.
3. Rent in the amount of $__________ is payable ___________. All rents
and all other charges due and payable under the Lease have been paid
through _____________, 19__, and no amounts have been or will be paid
to Landlord for more than one month in advance.
<PAGE>
4. You have no right to free rent, rebate of rent or any other type of
rental concession with respect to the Lease except as expressly
provided for in the Lease.
5. The amount of the security deposit paid to and currently being held by
Landlord under the Lease is $__________.
6. Neither you nor landlord is in default under the Lease and there is no
event which, with the giving of notice and/or the passage of time,
would constitute such a default.
7. You have no claim or defense of any nature whatsoever against Landlord
with respect to the Lese and there is no event which, with the giving
of notice and/or the passage of time, would constitute the basis of
such a claim or defense. You have no offsets, claims, counterclaims or
defenses of any nature whatsoever to the performance of your
obligations under the Lease (including, without limitation, the
obligation to pay rent) and, there is no condition which, with the
giving of notice and/or the passage of time, would constitute the
basis of such an offset, claim, counterclaim or defense.
8. You have not assigned, transferred or otherwise encumbered your
interest under the Lease or subleased any part of the Property.
9. You have no outstanding options, right of first refusal or rights of
first negotiation to purchase all or any part of the Property.
10. No petition has been filed by or against you for protection under any
bankruptcy, creditor's rights, insolvency or other similar statutes.
11. You have not in the past used, and are not presently using the
Property for the handling, storage, transportation, or disposal of
hazardous or toxic substances, materials, pollutants or waste (or
similar items under applicable environmental laws or regulations). To
the best of your knowledge, there has been no release of any such
items into the environment from the Property or in, on or under the
Property.
We would appreciate you reviewing and signing this letter at your earliest
possible convenience as we would like to conclude this transaction a quickly as
possible. Once executed,
<PAGE>
please return same to me by facsimile at ____________ and by regular mail. If
you have any questions or comments, please do not hesitate to contact me at
____________.
Sincerely,
____________________________
[NAME]______________________
[TITLE]_____________________
ACKNOWLEDGED AND CONFIRMED:
_______________________________
By: ___________________________
Its: __________________________
<PAGE>
EXHIBIT "6.5(C)"
----------------
FORM OF LANDLORD ESTOPPEL CERTIFICATE
[Letterhead of Landlord]
[DATE]
SBA Towers Tennessee, Inc.
One Tower Center Road, Third Floor
Boca Raton, FL 33486
[ADDRESS]
Re: Lease, dated ________________, between [LANDLORD] ("Landlord") and
Com-Net Development Group, LLC ("Tenant") (the "Lease") with respect
to [INSERT ADDRESS OR DESCRIPTION OF THE PROPERTY] (the "Property")
Gentlemen:
We understand that all of the membership interests in the Tenant are being
purchased by SBA Towers Tennessee, Inc., a Florida corporation ("Subsidiary")
and an indirectly wholly owned subsidiary of SBA Communications Corporation, a
Florida corporation.
As the Landlord for the Property described in the Lease and with the
understanding that Subsidiary intends to rely on this letter, the undersigned
hereby confirms as follows:
1. The undersigned consents to the proposed purchase of all of the
membership interests in the Landlord by the Subsidiary with the
understanding that this consent will be effective only if the proposed
transaction closes.
2. Attached hereto as Exhibit "A" is a true, correct and complete copy of
the Lease and all amendments or modifications thereto. The Lease
constitutes the entire agreement between the Tenant and the
undersigned with respect to the subject matter thereof.
3. The term of the Lease commenced ___________, 19__ and expires
___________, 19__. Tenant has ______ (__), _____ (__) year options to
extend the term of the Lease.
4. The current base rental is $__________, payable in equal monthly
installments of $____________ on the first day of each month. The base
rental is subject to adjustment only in accordance with the terms of
the Lease.
<PAGE>
5. Tenant has paid in full all rent, maintenance and operation charges
and other sums due under the Lease through and including _________,
19__, and has paid a security deposit in the amount of $_________ and
prepaid rent in the amount of $__________, each being held by the
undersigned under the Lease.
6. There are no existing defaults by the undersigned or the Tenant under
the Lease nor have any notices of default been given or received by
the undersigned, and there exists no state of facts which, with the
giving of notice or lapse of time or both, would constitute a default
under the Lease. Neither the Lease nor the validity, obligation or
construction thereof is presently in arbitration or litigation.
7. The undersigned is the sole owner of the property leased pursuant to
the Lease. There are no mortgagees of such premises other than those
who have delivered to the Tenant a valid and enforceable
subordination, non-disturbance and attornment agreement.
8. The Lease is valid and enforceable in accordance with its terms and
has not been amended, terminated or waived in any manner, orally or in
writing, except as indicated in the reference line of this letter and
in the copies attached hereto.
Sincerely,
__________________________________
__________________________________
[LANDLORD]
<PAGE>
EXHIBIT "6.11"
--------------
LIST OF MEMBERS' CLOSING DOCUMENTS
1. The Members' Membership Interests and such documents and instruments as
may be necessary to transfer the Membership Interests to Subsidiary.
2. Originals of all Ground Leases, Tenant Leases, Easements and Permits.
3. Evidence that all utility charges for the Towers have been paid through
a date not more than thirty (30) days prior to the Closing Date.
4. An affidavit to Subsidiary' title insurer, in form and substance
reasonably acceptable and to Subsidiary, which will be sufficient to have the
standard printed exceptions deleted from the title insurance policy of Com-Net.
5. An affidavit certifying that the Members are not "foreign persons"
under Section 1445(f)(3) of the Code.
6. A certificate of the Members approving the execution and delivery of
the Members' Closing Documents and the consummation of the Contemplated
Transactions and authorizing and directing the Members to execute and deliver
the documents required to be executed and delivered by Com-Net under the
Agreement.
7. A certificate of good standing from the Secretary of State of Com-Net's
state of formation and all other jurisdictions in which it does business
verifying that Com-Net (i) is duly organized, validly existing and in good
standing in its state of formation, and (ii) is duly qualified as a foreign
limited liability company to do business in each such other jurisdiction.
8. A certificate from the Members and Com-Net, in form and substance
reasonably acceptable to Subsidiary, certifying that all representations and
warranties of the Members and Com-Net remain true and correct as of the Closing
Date.
9. All keys and other security access devices to the Improvements, as well
as any mailbox and safety deposit box keys.
10. The legal opinions required to be delivered in Section 6.13.
------------
11. A final determination of "no hazard" from the FAA for each of the
Towers, or evidence satisfactory to Subsidiary that such a determination is not
required.
12. An FCC Form 854R for each of the Towers, or evidence satisfactory to
Subsidiary that such form is not required to be filed for each of the Towers.
<PAGE>
13. All original records and business documents and instruments related to
Com-Net, including without limitation, all minute books, Membership Interest
ledgers, transfer records, checkbooks and checkbook registers, Tax Returns and
accounting records.
14. The Waiver and Release Agreement executed by The Anderson Group.
15. Any other documents or instruments required by the Agreement or
reasonably requested by Subsidiary and Parent to consummate the Closing.
<PAGE>
EXHIBIT "6.13"
--------------
FORM OF OPINION OF COUNSEL TO THE MEMBERS AND COM-NET
_______________, 1999
SBA Communications Corporation
SBA Towers Tennessee, Inc.
One Town Center Road, 3rd Floor
Boca Raton, Florida 33486
Ladies and Gentlemen:
We have acted as legal counsel to Daniel J. Eldridge and Tammy W. Eldridge
(the "Members"), and Com-Net Development Group, LLC, a Tennessee limited
liability company ("Com-Net"), in connection with the purchase of all of the
Members' Membership Interests in Com-Net by SBA Towers Tennessee, Inc., a
Florida corporation ("Subsidiary") and an indirectly wholly owned subsidiary of
SBA Communications Corporation, a Florida corporation ("SBA"), pursuant to that
certain Purchase Agreement, dated as of April __, 1999 (the "Agreement"), by and
among Com-Net, the Members, SBA and Subsidiary. This opinion letter (this
"Opinion Letter") is being delivered pursuant to Section 6.13 of the Agreement.
Capitalized terms not otherwise defined in this Opinion Letter have the
definitions set forth in the Purchase Agreement.
In rendering the opinions set forth herein, we have examined and relied on
originals or copies of the following:
(i) the Purchase Agreement;
(ii) the Articles of Organization of Com-Net as currently in effect, the
Limited Liability Company Agreement of Com-Net, each certified by Com-Net as
being true and correct and in effect on the date hereof;
(iii) such records of Com-Net and such agreements, certificates of public
officials, certificates of officers or other representatives of Com-Net and
others, and such other documents, certificates and records as we have deemed
necessary or appropriate as a basis for the opinions set forth herein; and
(iv) a Certificate of Good Standing dated as of ____________, 1999 issued
by the Secretary of State of the State of Tennessee with respect to Com-Net [AND
A CERTIFICATE OF GOOD STANDING AS A FOREIGN LIMITED LIABILITY COMPANY ISSUED BY
THE SECRETARY OF STATE IN EACH OTHER JURISDICTION IN WHICH COM-NET DOES
BUSINESS].
<PAGE>
Based upon the foregoing, we are of the opinion that:
1. Com-Net is duly organized, validly existing and in good standing under
the laws of the State of Tennessee, and has the power and lawful authority to
own its properties and to transact the business in which it is currently
engaged. Com-Net is duly qualified to transact business in all other
jurisdictions in which it is required to be so qualified.
2. Com-Net, and the Members have full power to enter into the Agreement
and to carry out their obligations thereunder. The execution and delivery of
the Agreement and the consummation of the transactions contemplated thereby have
been duly and validly authorized by the Members. No other acts or proceedings
on the part of Com-Net, or the Members will be necessary to authorize execution
and delivery of the Agreement or the consummation of the transactions
contemplated thereby.
3. The execution and delivery of the Agreement, the consummation of the
transactions contemplated thereby, the performance by Com-Net and the Members of
each of their obligations under the Agreement, and the exercise of SBA's and
Subsidiary's of the rights created by the Members' Closing Documents do not and
will not (i) violate the Articles of Organization or the Limited Liability
Company Agreement of Com-Net; (ii) constitute a breach of or a default under any
Contract, agreement or instrument to which Com-Net is a party or by which its
assets are bound, or result in the creation of a mortgage, lien, security
interest or other encumbrance upon the assets of Com-Net; or (iii) violate a
judgment, decree or order of any Governmental Authority or court or
administrative tribunal, which judgment, decree or order is binding on Com-Net
or the Members.
4. No permits, approvals, consents, satisfaction of waiting periods, or
waivers thereof of any Governmental Authority, or of any other Person
whatsoever, are necessary to allow Com-Net and the Members to consummate the
transactions contemplated in the Agreement in compliance with, and not in breach
of, (i) all applicable Legal Requirements, and (ii) the provisions of any
Contract binding upon Com-Net or the Members.
5. No actions, suits or proceedings are pending or overtly threatened in
writing against Com-Net or the Members that challenge the validity of the
Members' Closing Documents or any action to be taken by Com-Net or the Members
pursuant to the Members' Closing Documents.
6. The Agreement has been executed and delivered by Com-Net and the
Members, and is a valid and binding obligation of Com-Net and the Members,
enforceable against each of them under the law of Florida and the federal law of
the United States.
7. The Membership Interests have been duly and validly issued, fully paid
and are non-assessable.
8. Com-Net does not, either directly or indirectly, beneficially or of
record, own any securities or other interests in any other Person, which, by
nature of such ownership, would give Com-Net the power to elect a majority of
that Person's board of directors or other similar governing body or otherwise
give Com-Net the power to direct the business and policies of that Person.
<PAGE>
9. The Member are the members of Com-Net and own one hundred percent
(100%) of Com-Net's Membership Interests.
10. There are no contracts or other agreements or documents, pursuant to
which Com-Net may be required to authorize or issue additional Membership
Interests.
11. There are no pre-emptive rights or other similar rights, whether under
any of the Organizational Documents, any Legal Requirement, or pursuant to any
Contract, and no Person has any pre-emptive rights or similar rights to purchase
or receive any equity ownership interest or other ownership interest of Com-Net.
Our opinions are limited to the specific issues addressed and are limited
in all respects to laws and facts existing on the date hereof. By rendering
this Opinion Letter, we do not undertake to advise you of any changes in such
laws or facts which may occur or come to our attention after the date hereof.
Subject to the foregoing, this Opinion Letter may be relied upon by you
only in connection with the Members' Closing Documents and the transactions
contemplated therein, and may not be used or relied upon by you or any other
person for any purpose whatsoever, without the prior written consent of this
Firm.
Very truly yours,
________________________________
<PAGE>
Exhibit "6.16"
--------------
FORM OF RELEASE AGREEMENT
This AGREEMENT (this "Agreement") is made and entered into on this __ day
of _____, 1999, by The Anderson Group ("Anderson") for the benefit of SBA
Communications Corporation, a Florida corporation ("Parent"), SBA Towers
Tennessee, Inc., a Florida corporation ("Subsidiary"), and Com-Net Development
Group, LLC, a Tennessee limited liability company ("Com-Net").
WHEREAS, Anderson and Daniel J. Eldridge ("Eldridge") entered into that
certain Separation Agreement, dated as of December 31, 1998 pursuant to which
Anderson released all of its membership interests in Com-Net to Eldridge or his
assignee (the "Anderson Purchase Agreement");
WHEREAS, upon consummation of the transactions contemplated in the Anderson
Purchase Agreement, Eldridge and Tammy W. Eldridge became the beneficial owners
of all of the membership interests of Com-Net;
WHEREAS, Eldridge and Tammy W. Eldridge have entered into that certain
Purchase Agreement, dated March 31, 1999 with Parent and Subsidiary to sell all
of their membership interests in Com-Net to Subsidiary (the "SBA Purchase
Agreement");
NOW, THEREFORE, in consideration of $100.00 and other good and valuable
consideration and with the understanding and expectation that Parent, Subsidiary
and Com-Net intend to and shall rely on this Agreement in consummating the
transactions contemplated by the SBA Purchase Agreement, Anderson agrees as
follows:
1. Release. Anderson knowingly and voluntarily waives, releases and
-------
discharges Eldridge, Tammy W. Eldridge, Parent, Subsidiary and Com-Net, their
successors and assigns from any and all actions, causes of action, suits, debts,
dues, sums of money, accounts, bonds, bills, covenants, contracts, agreements,
promises, damages, demands whatsoever, in law or equity, that Anderson may now
have or hereinafter can, shall or may have (including, but not limited to, any
matter arising under or in any way associated with or relating to the Anderson
Purchase Agreement or the SBA Purchase Agreement), except that Eldridge shall
continue to be bound by the terms of the Anderson Purchase Agreement.
2. Counterparts. This Agreement may be executed in counterparts, each of
------------
which shall be deemed an original.
3. Governing Law. This Agreement and all transactions contemplated
-------------
by this Agreement shall be governed by, and construed and enforced in accordance
with, the laws of the State of Florida.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed and caused this
Agreement to be executed the day and year first written above.
ANDERSON:
THE ANDERSON GROUP
By:________________________________
Name:
Title:
<PAGE>
EXHIBIT "7.2"
-------------
LIST OF SUBSIDIARY'S AND PARENT'S CLOSING DOCUMENTS
3. The Purchase Price (subject to all adjustments and credits provided
for in this Agreement).
4. A certificate of the secretary of each of Subsidiary and Parent
setting forth the resolutions adopted by the board of directors of Subsidiary
authorizing and directing the president or any vice president of Subsidiary to
execute and deliver the documents required to be executed and delivered by
Subsidiary and Parent under this Agreement, which certificate will show the
name, office and signature of each officer of Subsidiary and Parent authorized
to execute and deliver such documents.
5. A certificate of good standing from the Secretary of State of
Subsidiary's and Parent's states of incorporation verifying that each of
Subsidiary and Parent is duly organized, validly existing and in good standing.
6. A certificate from Subsidiary and Parent, in form and substance
reasonably acceptable to the Members, certifying that all representations and
warranties of Subsidiary and Parent remain true and correct as of the Closing
Date.
7. Any other documents or instruments required by this Agreement or
reasonably requested by the Members to consummate the Closing.
<PAGE>
EXHIBIT "12.8"
--------------
DEAL POINT SUMMARY
(See Attached Copy)
<PAGE>
STOCK OPTION AGREEMENT-REVISED
THIS STOCK OPTION AGREEMENT (this "Agreement"), is made and entered into as
of the 14th day of March, 1997 by and between STEVEN E. BERNSTEIN ("SEB") and
JEFFREY A. STOOPS (the "Optionee");
WITNESSETH
WHEREAS, SEB is desirous of having Optionee enter into an employment
agreement as of the date hereof (the "Employment Agreement") with SBA
Communications Corporation, a Florida corporation (the "Company"); and
WHEREAS, to induce Optionee, SEB desires to grant to the Optionee options
to purchase 1,369,863 shares of the Company's Class B Common Stock, $.01 par
value per share (the "Class B Common Stock") currently owned by SEB, all as more
particularly set forth herein;
NOW, THEREFORE, in consideration of the mutual premises and covenants, and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, it is hereby agreed as follows:
1. Grant of Option. Subject to and upon the terms and conditions set
---------------
forth in this Agreement, SEB hereby grants to the Optionee options (the
"Options") to purchase up to one million, three hundred sixty three thousand,
eight hundred sixty three (1,369,863) shares of Class B Common Stock (the
"Shares") at an exercise price of two dollars nineteen cents ($2.19) per share
(the "Exercise Price"). This revised Agreement supercedes and replaces in its
entirety an agreement of similar date which set forth a grant of options to
purchase 600,000 Shares at an exercise price of $5.00 per Share.
2. Vesting. Subject to the terms, provisions and limitations contained in
-------
the Plan, the option granted under this Agreement shall vest and become
exercisable in three equal installments of 456,621 shares each, with the first
installment to vest on December 31, 1997, the second installment to vest on
December 31, 1998 and the third installment to vest on December 31, 1999. Once
vested, the Options may be exercised up to and including the date which is ten
(10) years from the date the Options are granted.
3. Loss of Vesting; Accelerated Vesting. In order for the Options to
------------------------------------
vest in accordance with Section 3 above, Optionee must be an employee of the
Company or its subsidiaries as of the date of vesting; provided, however, that
all options granted under this Agreement shall vest and become immediately
exercisable in the event (i) Optionee's employment with the Company is
terminated "Without Cause," or (ii) a "Change in Control" occurs, as such terms
are defined in that certain Employment Agreement between Optionee and the
Company of even date herewith.
4. Payment of Price. The Exercise Price is payable in cash and/or shares
----------------
of Stock (as such term is defined in the Company's 1996 Stock Option Plan (the
"Plan")), or by
<PAGE>
surrendering some of the Options, valued at their Fair Market Value (as such
term is defined in the Plan, which, in the case of a surrender of Options shall
be an amount equal to the Fair Market Value per share of the Company's Class A
Common Stock less the Exercise Price per share) at the time the Options are
exercised, or by delivering to SEB a copy of irrevocable instructions to a
stockbroker to deliver promptly to SEB an amount of sale or loan proceeds
sufficient to pay the Exercise Price.
5. Method of Exercising Option. Subject to the terms and conditions of
---------------------------
this Agreement, the Options may be exercised by written notice to SEB at the
address set forth below. Such notice shall state the election to exercise an
Option(s) and the number of shares in respect of which it is being exercised and
shall be signed by the person or persons so exercising the Options. Such notice
shall be accompanied by payment of the full Exercise Price of such shares, and
SEB shall deliver a certificate or certificates representing such shares as soon
as practicable after such payment shall be received. The certificate or
certificates for the shares as to which the Options shall have been so exercised
shall be registered in the name of the person or persons so exercising the
Options (or, if the Options shall be exercised by the Optionee and if the
Optionee shall so request in the notice exercising the Options, shall be
registered in the name of the Optionee and another person jointly, with right of
survivorship) and shall be delivered as provided above to or upon the written
order of the person or persons exercising the Options. In the event the Options
shall be exercised by any person or persons other than the Optionee, such notice
shall be accompanied by appropriate proof of the right of such person or persons
to exercise the Options. All shares that shall be purchased upon the exercise of
the Options as provided herein shall be fully paid and non-assessable.
6. No Shareholder Rights or Obligation. This Agreement will not entitle
-----------------------------------
the Optionee (or subsequent assignee of any or all of the Options) hereof to any
voting rights or other rights as a shareholder of the Company. No provision of
this Agreement will give rise to any obligation of the Optionee for the Exercise
Price of Common Stock acquirable by exercise hereof or as a shareholder of the
Company.
7. Tax Withholding. The Holder or other person receiving Common Stock
---------------
upon an exercise of the Options may be required to pay to the Company or a
Subsidiary, as appropriate prior to delivery of such Common Stock, the amount of
any federal, state or local taxes which the Company or subsidiary is required to
withhold, if any, with respect to such Common Stock. The Company shall accept
shares of Common Stock of equivalent Fair Market Value in payment of such
withholding tax obligations if the Holder elects to make payment in such manner
at least six months prior to the date such tax obligation is determined.
8. Changes in Capital Structure. The Options shall be subject to
----------------------------
adjustment or substitution as to the number of shares and Exercise Price of
Common Stock so as to be equitable in the event of changes in the outstanding
Common Stock or in the capital structure of the Company, by reason of stock
dividends, stock splits, recapitalizations, reorganizations, mergers,
consolidations, combinations, exchanges or other relevant changes in
capitalization occurring
2
<PAGE>
after the date of this Agreement, or which otherwise warrants equitable
adjustment because it interferes with the intended operation of this Agreement.
In the event of any such adjustments or substitution, the aggregate number of
shares of Common Stock issuable upon exercise of the Options and Exercise Price
shall be appropriately adjusted, taking into account whatever adjustments or
substitutions are made by the Company with respect to options granted under the
Plan. Upon each adjustment in the Exercise Price, the number of shares of Common
Stock purchasable hereunder shall be adjusted, to the nearest whole share, to
the product obtained by multiplying the number of shares purchasable immediately
prior to such adjustment in the Exercise Price by a fraction, the numerator of
which shall be the Exercise Price immediately prior to such adjustment and the
denominator of which shall be the Exercise Price immediately thereafter.
9. No Transferability. The options may not be sold, conveyed, pledged,
------------------
hypothecated or otherwise transferred in any manner by the Optionee without the
prior written consent of SEB; provided, however, that the options may be
transferred pursuant to will or the laws of intestacy following Optionee's life
or, during Optionee's life, to a person or entity who would be deemed an
Eligible Class B Stockholder as such term is defined in the Company's Articles
of Incorporation ("Eligible Class B Stockholder") and substituting in such
definition as appropriate Optionee for Steven M. Bernstein. No such sale,
transfer or hypothecation may occur in any event except in compliance with
federal and state securities laws, as determined to the satisfaction of the
Company and its counsel in their sole discretion.
10. Partial Exercise. Exercise of the options up to the extent stated may
----------------
be made in part at any time and from time to time within the limits of Section 2
hereof, except that the options may not be exercised for a fraction of a share.
Any fractional share with respect to which an installment of the options cannot
be exercised because of the limitation contained in the preceding sentence shall
remain subject to the options and shall be available for later purchase by the
Optionee in accordance with the terms hereof.
11. Restricted Shares; Purchase for Investment. The Optionee agrees that
------------------------------------------
(i) his purchase of the Shares upon an exercise of the Options hereunder will
not be made with a view toward the "distribution" of such Shares, as defined in
the Securities Act of 1933, as amended (the "1933 Act"), (ii) such Shares may
not be transferred or hypothecated unless, in the opinion of counsel to the
Company, such transfer or hypothecation would be in compliance with the
registration provisions of the 1933 Act or pursuant to an exemption therefrom;
and (iii) that the certificate for the Shares so purchased may be inscribed with
a legend to ensure compliance with the 1933 Act. Optionee understands that the
Shares will not be registered under the 1933 Act, or under the laws of any
jurisdiction. Optionee hereby represents and warrants that Optionee, or through
his advisers, is sophisticated and experienced in financial business and
investment matters and, as a result, Optionee is in a position to evaluate the
merits and risks of an investment in the Company.
12. Assignment of Registration Rights Agreement. SEB hereby assigns and
-------------------------------------------
transfers
3
<PAGE>
to Optionee all of his rights and obligations applicable to the Options and the
Shares under that certain Registration Rights Agreement by and among SEB, Ronald
G. Bizick, II and Robert M. Grobstein and the Company dated March 6, 1997 (the
"Registration Rights Agreement"). Optionee hereby agrees to become a party to
the Registration Rights Agreement and hereby assumes all of SEB's obligations
thereunder as they relate to the Options and the Shares.
13. Stock Pledge. To secure his obligations to deliver the Shares upon
------------
exercise of the Options, SEB has delivered to Optionee a stock pledge of even
date herewith, stock certificates evidencing the Shares and a stock power, duly
endorsed and executed.
14. No Obligation to Exercise Option. The grant and acceptance of the
--------------------------------
options hereunder imposes no obligation on the Optionee to exercise the options.
15. Amendments. The provisions of this Agreement may not be amended,
----------
supplemented, waived or changed orally, but only by a written signed by the
party as to whom enforcement of any such amendment, supplement, waiver or
modification is sought and making specific reference to this Agreement.
16. Assignments. Except as otherwise provided herein, no party shall
-----------
assign his or its rights and/or obligations hereunder without the prior written
consent of each other party to this Agreement; provided, however, that SEB may
transfer any or all of the Shares to an Eligible Class B Stockholder provider
such Eligible Class B Stockholder executes an instrument in favor of Optionee
assuming SEB's obligations hereunder with respect to the Shares transferred.
17. Further Assurances. The parties hereby agree from time to time to
------------------
execute and deliver such further and other transfers, assignments and documents
and do all matters and things which may be convenient or necessary to more
effectively and completely carry out the intentions of this Agreement.
18. Binding Effect. All of the terms and provisions of this Agreement,
--------------
whether so expressed or not, shall be binding upon, inure to the benefit of, and
be enforceable by the parties and their respective legal representatives,
successors and permitted assigns.
19. Notices. All notices, requests, consents and other communications
-------
required or permitted under this Agreement shall be in writing (including telex
and telegraphic communication) and shall be (as elected by the person giving
such notice) hand delivered by messenger or courier service, telecommunicated,
or mailed (airmail if international) by registered or certified mail (postage
prepaid), return receipt requested, addressed to:
If to Optionee:
Jeffrey A. Stoops
15575 Woodmar Court
4
<PAGE>
Wellington, FL 33414
Telephone: (561) 791-8316
If to SEB:
Steven E. Bernstein
SBA Communications Corporation
6001 Broken Sound Parkway, Suite 400
Boca Raton, Florida 33487
Telephone: (561) 995-7670
Telefax: (561) 995-7626
or to such other address as any party may designate by notice complying with the
terms of this Section. Each such notice shall be deemed delivered (a) on the
date delivered if by personal delivery; (b) on the date of transmission with
confirmed answer back if by electronic transmission; and (c) on the date upon
which the return receipt is signed or delivery is refused or the notice is
designated by the postal authorities as not deliverable, as the case may be, if
mailed.
20. Headings. The headings contained in this Agreement are for
--------
convenience of reference only, and shall not limit or otherwise affect in any
way the meaning or interpretation of this Agreement.
21. Severability. If any part of this Agreement or any other Agreement
------------
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given full force
and effect so far as possible. If any provision of this Agreement may be
construed in two or more ways, one of which would render the provision invalid
or otherwise voidable or unenforceable and another of which would render the
provision valid and enforceable, such provision shall have the meaning which
renders it valid and enforceable.
22. Survival. All covenants, agreements, representations and warranties
--------
made herein or otherwise made in writing by any party pursuant hereto shall
survive the execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby.
23. Waivers. The failure or delay of any part at any time to require
performance by another party of any provision of this Agreement, even if known,
shall not affect the right of such party to require performance of that
provision or to exercise any right, power or remedy hereunder, and any waiver by
any party of any breach of any provision of this Agreement should not be
construed as a waiver of any continuing or succeeding breach of such provision,
a waiver of the provision itself, or a waiver of any right, power or remedy
under this Agreement. No notice to or demand on any party in any case shall, of
itself, entitle such party to any other or further notice or demand in similar
or other circumstances.
5
<PAGE>
24. Jurisdiction and Venue. The parties acknowledge that a substantial
-----------------------
portion of negotiations, anticipated performance and execution of this Agreement
occurred or shall occur in Palm Beach County, Florida, and that, therefore,
without limiting the jurisdiction or venue of any other federal or state courts,
each of the parties irrevocably and unconditionally (i) agrees that any suit,
action or legal proceeding arising out of or relating to this Agreement may be
brought in the courts of record of the State of Florida in Palm Beach County or
the court of the United States, Southern District of Florida; (ii) consents to
the jurisdiction of each such court in any suit, action or proceeding; (iii)
waives any objection which it may have to the laying of venue of any such suit,
action or proceeding in any of such courts; and (iv) agrees that service of any
court paper may be effected on such party by mail, as provided in this
Agreement, or in such other manner as may be provided under applicable laws or
court rules in said state.
25. Enforcement Costs. If any civil action, arbitration or other legal
-----------------
proceeding is brought for the enforcement of this Agreement, or because of an
alleged dispute, breach, default or misrepresentation in connection with any
provision of this Agreement, the successful or prevailing party or parties shall
be entitled to recover reasonable attorneys' fees, sales and use taxes, court
costs and all expenses even if not taxable as court costs (including, without
limitation, all such fees, taxes, costs and expenses incident to arbitration,
appellate, bankruptcy and post-judgment proceedings), incurred in that civil
action, arbitration or legal proceeding, in addition to any other relief to
which such party or parties may be entitled. Attorneys' fees shall include,
without limitation, paralegal fees, investigative fees, administrative costs,
sales and use taxes and all other charges billed by the attorney to the
prevailing party.
26. Remedies Cumulative. No remedy herein conferred upon any party is
-------------------
intended to be exclusive of any other remedy, and each and every such remedy
shall be cumulative and shall be in addition to every other remedy given
hereunder or now or hereafter existing at law or in equity or by statute or
otherwise. No single or partial exercise by any party of any right, power or
remedy hereunder shall preclude any other or further exercise thereof.
27. Governing Law. This Agreement and all transactions contemplated by
-------------
this Agreement shall be governed by, and construed and enforced in accordance
with, the laws of the State of Florida.
28. Entire Agreement. This Agreement represents the entire understanding
----------------
and agreement between the parties with respect to the subject matter hereof, and
supersedes all other negotiations, understandings and representations (if any)
made by and between such parties.
6
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
/s/ Steven E. Bernstein
--------------------------------------
Steven E. Bernstein
/s/ Jeffrey A. Stoops
--------------------------------------
Jeffrey A. Stoops
7
<PAGE>
PLEDGE AND SECURITY AGREEMENT-REVISED
-------------------------------------
THIS PLEDGE AND SECURITY AGREEMENT (this "Agreement") is entered into as of
March 14, 1997, between STEVEN E. BERNSTEIN, an individual ("Pledgor") and
JEFFREY A. STOOPS, an individual ("Pledgee").
PRELIMINARY STATEMENT
A. Pledgee and Pledgor have executed that certain Option Agreement, of
even date herewith (the "Option Agreement"), evidencing the right of Pledgee to
purchase form Pledgor up to one million, three hundred sixty nine thousand,
eight hundred sixty three (1,369,863) shares of Class B Common Stock, $.01 par
value per share (the "Shares"), of SBA Communications Corporation, a Florida
corporation (the "Company") currently owned by Pledgor.
B. To secure Pledgor's obligations to deliver the Shares, Pledgor has
granted to Pledgee a security interest in the Collateral (as defined below),
subject to the terms and conditions of this Agreement.
C. In consideration of Ten Dollars ($10.00), and other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties hereby agree as follows.
1. Pledge of Collateral. Pledgor hereby grants Pledgee a security
--------------------
interest in the Shares, which Pledgor has delivered to Pledgee in the form of
stock certificate Nos. B002, B004 to and including B008, and B014 (the
"Collateral"). Pledgee shall hold the Collateral under the terms and conditions
of this Agreement. This revised Agreement supercedes and replaces in its
entirety an agreement of similar date describing a pledge by Pledgor to Pledgee
of 600,000 shares of Class B Common Stock.
2. Obligations Secured. The security interest in the Collateral
-------------------
granted hereby secures performance of all obligations of Pledgor or Pledgee
under the Option Agreement (all of Pledgor's obligations under the Option
Agreement being hereinafter referred to as the "Obligations").
3. Rights of Pledgee with Respect to the Collateral. Pledgee shall
------------------------------------------------
have the right but not the obligation to (a) protect, preserve or assert any
other rights of Pledgor or take any other action with respect to the Collateral,
and (b) pay any taxes, liens, assessments, insurance premiums or other charges
pertaining to the Collateral. Any expenses incurred by Pledgee under the
preceding sentence shall be paid by Pledgor upon demand and become part of the
Obligations secured by the Collateral. Pledgee shall use reasonable care in the
custody and preservation of the Collateral, but Pledgee shall be relieved of all
responsibility for the Collateral upon surrendering it to Pledgor.
4. Pledgor's Representations and Warranties. Pledgor represents and
----------------------------------------
warrants that (a) Pledgor is and will be the lawful owner of the Collateral, (b)
the Collateral is and will be fully paid and non-assessable, (c) the Collateral
is and will remain free and clear of
<PAGE>
all liens, encumbrances and security interests other than the security interest
granted by Pledgor hereunder, and (d) Pledgor has the sole right and lawful
authority to pledge the Collateral and otherwise to comply with the provisions
hereof.
5. Voting of Collateral. Prior to Pledgee's exercise of his rights
--------------------
under the Option Agreement, Pledgor may vote the Shares herein pledged as the
Collateral.
6. Dividends and other Distributions. Pledgor shall retain rights to
---------------------------------
(a) all dividends and other cash distributions payable to Pledgor as a result of
Pledgor's record ownership of any of the Shares, and (b) any stock dividends,
stock splits or other distributions of securities in respect of the Collateral.
Any such dividends, splits or distributions under clause (b) above shall become
part of the Collateral.
7. Pledgor's Default. Pledgor shall be in default hereunder upon the
-----------------
occurrence of any of the following events:
(a) If any lien, encumbrance or adverse claim of any nature
whatsoever (other than those created by Pledgee) is asserted with respect to any
Collateral and is not dismissed, released or discharged within ninety (90) days;
or
(b) If Pledgor fails to pay or perform any of the Obligations by
the date when such payment or performance is due.
8. Pledgee's Rights upon Default. Upon the occurrence of any default
-----------------------------
as defined in the preceding section, Pledgee may, if Pledgee so elects in its
sole discretion, exercise all rights available to a secured party under the
Uniform Commercial Code as then in effect in the State of Florida and under any
other applicable law.
9. Miscellaneous.
-------------
(a) This Agreement shall be governed by and construed in
accordance with the internal laws of the State of Florida, without regard to the
principles of conflicts of laws.
(b) All of the terms and provisions of this Agreement shall be
binding upon, inure to the benefit of, and be enforceable by the parties and
their respective administrators, executors, other legal representatives, heirs
and permitted assigns, whether so expressed or not. Any rights given or duties
imposed upon the estate of a deceased shareholder shall inure to the benefit of
and be binding upon the fiduciary of such decedent's estate in his fiduciary
capacity.
(c) This Agreement may not be changed or terminated orally, but
only by a writing signed by the party against whom enforcement of such change or
termination is sought.
(d) If any provision of this Agreement or any other agreement
entered into pursuant hereto is contrary to, prohibited by or deemed invalid
under applicable law or regulation, such provision shall be inapplicable and
deemed omitted to the extent so contrary, prohibited or invalid, but the
remainder hereof shall not be invalidated thereby and shall be given
<PAGE>
full force and effect so far as possible. If any provision of this Agreement
may be construed in two or more ways, one of which would render the provision
invalid or otherwise voidable or unenforceable and another of which would render
the provision valid and enforceable, such provision shall have the meaning which
renders it valid and enforceable.
(e) THIS AGREEMENT IS WITHOUT ANY RECOURSE WHATSOEVER AGAINST
PLEDGOR. IN ANY ACTION BROUGHT TO ENFORCE THE OBLIGATIONS OF PLEDGOR UNDER THIS
AGREEMENT OR UNDER THE NOTE, THE JUDGMENT OR DECREE SHALL BE ENFORCEABLE AGAINST
PLEDGOR ONLY TO THE EXTENT OF PLEDGOR'S INTEREST IN THE COLLATERAL, AND ANY SUCH
JUDGMENT OR DECREE SHALL NOT BE SUBJECT TO EXECUTION ON, OR BE A LIEN ON ASSETS
OF, PLEDGOR (OTHER THAN PLEDGOR'S INTERESTS IN THE COLLATERAL). IN NO EVENT
SHALL PLEDGEE SEEK OR OBTAIN A DEFICIENCY OR OTHER MONEY JUDGMENT AGAINST
PLEDGOR
This Agreement has been executed by Pledgor and Pledgee as of the date
first set forth above.
PLEDGOR:
/s/ Steven E. Bernstein
----------------------------------
STEVEN E. BERNSTEIN
PLEDGEE:
/s/ Jeffrey A. Stoops
----------------------------------
Jeffrey A. Stoops
3
<PAGE>
Exhibit 11
<TABLE>
<CAPTION>
Year Ended
December 31, 1998
-----------------
<S> <C>
Net loss available to common stockholders...... $(22,476,095)
Basic and diluted weighted average number
of shares of common stock..................... 8,526,052
Basic and diluted loss per ordinary shares..... $ (2.64)
</TABLE>
1
<PAGE>
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,
April 19, 1999.
<PAGE>
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
April 19, 1999
<PAGE>
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
April 19, 1999
<PAGE>
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
April 19, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 12-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997
<PERIOD-START> JAN-01-1998 JAN-01-1997
<PERIOD-END> DEC-31-1998 DEC-31-1997
<CASH> 26,743,270 6,109,418
<SECURITIES> 0 0
<RECEIVABLES> 12,949,245 11,439,306
<ALLOWANCES> 436,671 508,268
<INVENTORY> 0 0
<CURRENT-ASSETS> 45,835,949 18,141,413
<PP&E> 157,456,629 18,546,686
<DEPRECIATION> 6,510,149 717,624
<TOTAL-ASSETS> 214,573,326 44,797,404
<CURRENT-LIABILITIES> 37,752,642 18,124,703
<BONDS> 165,572,133 0
0 0
33,558,333 30,983,333
<COMMON> 89,559 80,750
<OTHER-SE> 716,131 0
<TOTAL-LIABILITY-AND-EQUITY> 214,573,326 44,797,404
<SALES> 59,100,909 54,999,805
<TOTAL-REVENUES> 59,100,909 54,999,805
<CGS> 43,780,766 36,826,363
<TOTAL-COSTS> 43,780,766 36,826,363
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 16,906,914 406,934
<INCOME-PRETAX> (21,425,401) 5,863,495
<INCOME-TAX> (1,524,306) 5,595,998
<INCOME-CONTINUING> (19,901,095) 267,497
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (19,901,095) 267,497
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
