<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 3, 1997.
REGISTRATION NO. __________
================================================================================
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM SB-2
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
______________________
SPECIALTY TELECONSTRUCTORS, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
NEVADA 1623 85-0421409
(State or jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
12001 HWY 14 NORTH
CEDAR CREST, NEW MEXICO 87008
(505)281-2197
(Address and telephone number of principal executive offices and principal place
of business)
______________________
MICHAEL R. BUDAGHER
CHIEF EXECUTIVE OFFICER
12001 HWY 14 NORTH
CEDAR CREST, NEW MEXICO 87008
(505)281-2197
(Name, address and telephone number of agent for service)
______________________
COPIES TO:
JEFFREY A. HOWARD, ESQ.
JORDAAN, HOWARD & PENNINGTON, PLLC
300 CRESCENT COURT, SUITE 1670
DALLAS, TEXAS 75201
(214) 871-6550
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the date this Registration Statement becomes effective.
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. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please 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 registration statement for the same
offering. [_]
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [_]
______________________
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall become effective on such date as the Commission, acting pursuant
to said Section 8(a), may determine.
================================================================================
<PAGE>
================================================================================
(CONTINUED FROM PREVIOUS PAGE)
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================================
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED OFFERING PRICE PER UNIT AGGREGATE OFFERING REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Units 50,000.00 $12.15 $ 607,500 $184.09
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value (1) 100,000.00 (1) (1) (1)
- ----------------------------------------------------------------------------------------------------------------------------------
Redeemable Common Stock
Purchase Warrants (1) 50,000.00 (1) (1) (1)
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value (2) 50,000.00 $ 6.00 $ 300,000 $ 91.09
- ----------------------------------------------------------------------------------------------------------------------------------
Common Stock, $.01 par value (3) 500,000.00 $ 6.00 $3,000,000 (4)
- ----------------------------------------------------------------------------------------------------------------------------------
Total $3,907,500 $275.18
==================================================================================================================================
</TABLE>
(1) Included in the Units. No additional registration fee is required for these
securities.
(2) Represents shares of Common Stock underlying the Warrants included in the
Units.
(3) Represents shares of Common Stock, underlying 500,000 Redeemable Common
Stock Purchase Warrants that were included in 500,000 Units that were
registered pursuant to the Company's Registration Statement No. 33-79998-D
and sold by the Company in an underwritten initial public offering in
November 1994. Pursuant to Rule 429 under the Securities Act of 1933, as
amended (the "Securities Act of 1933"), the Prospectus included herein also
relates to these shares.
(4) The amount of securities being registered hereby, together with the
securities to be offered pursuant to the Prospectus included herein that
were previously registered under Registration Statement No. 33-79998-D,
represents the maximum amount of securities that are expected to be offered
for sale pursuant to the Prospectus included herein. Filing fees
aggregating $3,370.69 were previously paid in connection with Registration
Statement No. 33-79998-D. These securities were included within the
calculation of such registration fee. Therefore, no additional registration
fee is required with respect to these securities.
Pursuant to Rule 416 under the Securities Act of 1933, there are also being
registered such additional shares of Common Stock as may become issuable
pursuant to the anti-dilution provisions applicable to the Redeemable Common
Stock Purchase Warrants upon exercise thereof.
______________________
EXPLANATORY NOTE
Pursuant to Rule 429 under the Securities Act, the Prospectus included in this
Registration Statement will also be used in connection with the issuance of
500,000 shares Common Stock that were previously registered pursuant to
Registration Statement No. 33-79998-D filed by the Company in connection with
its initial public offering in November, 1994 (the "IPO"). These shares
represent shares issuable upon exercise of 500,000 Redeemable Common Stock
Purchase Warrants ("Warrants") included in the 500,000 Units, each Unit
consisting of two (2) shares of Common Stock and one (1) Warrant, sold to the
public in the IPO. This Registration Statement is a new registration statement,
and also constitutes Post-Effective Amendment No. 1 to Registration Statement
No. 33-7998-D. Such Post-Effective Amendment shall hereafter become effective
concurrently with the effectiveness of this Registration Statement in accordance
with Section 8(c) of the Securities Act of 1933.
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
CROSS REFERENCE SHEET
Showing Location in Prospectus of Information
Required by Items of Form SB-2
<TABLE>
<CAPTION>
FORM SB-2 REGISTRATION STATEMENT AND HEADING HEADING LOCATION IN PROSPECTUS
-------------------------------------------- ------------------------------
<S> <C>
1. Front of Registration Statement and Outside Front
Cover Page of Prospectus......................... Front of Registration Statement and Outside Front
Cover of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus........................................ Inside Front Cover Page of Prospectus; Additional
Information
3. Summary Information and Risk Factors.............. Prospectus Summary; Risk Factors
4. Use of Proceeds................................... Use of Proceeds
5. Determination of Offering Price................... Inapplicable
6. Dilution.......................................... Risk Factors
7. Selling Security Holders.......................... Inapplicable
8. Plan of Distribution.............................. Plan of Distribution
9. Legal Proceedings................................. Business -- Legal proceedings
10. Directors, Executive Officers, Promoters and
Control Persons................................... Management
11. Security Ownership of Certain Beneficial Owners
and Management.................................... Security Ownership of Certain Beneficial Owners and
Management
12. Description of Securities......................... Description of Securities
13. Interest of Named Experts and Counsel............. Legal Counsel
14. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.... Management
15. Organization within Last Five Years............... Inapplicable
16. Description of Business........................... Prospectus Summary; Management's Discussion and
Analysis of Financial Condition and Results of
Operation; Business
17. Management's Discussion and Analysis or Plan of Management's Discussion and Analysis of Financial
Operation......................................... Condition and Results of Operation
18. Description of Property........................... Business - Facilities
19. Certain Relationships and Related
Transactions...................................... Certain Relationships and Related Transactions
20. Market for Common Equity and Related
Stockholder Matters............................... Prospectus Summary; Shares Eligible for Future Sale;
Plan of Distribution
21. Executive Compensation............................ Management -- Executive Compensation
22. Financial Statements.............................. Financial Statements
23. Changes In and Disagreements with Accountants
on Accounting and Financial Disclosure............ Inapplicable
</TABLE>
(i)
<PAGE>
SUBJECT TO COMPLETION OR AMENDMENT-DATED FEBRUARY __, 1997.
SPECIALTY TELECONSTRUCTORS, INC.
50,000 UNITS,
CONSISTING OF 100,000 SHARES OF COMMON STOCK AND
50,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
-----------
550,000 SHARES OF COMMON STOCK
UNDERLYING REDEEMABLE COMMON STOCK PURCHASE WARRANTS
This Prospectus relates to the offering by Specialty Teleconstructors, Inc.
("Specialty" or the "Company") of (i) 50,000 Units, each Unit consisting of two
(2) shares of Common Stock, $.01 par value per share ("Common Stock") and one
(1) Redeemable Common Stock Purchase Warrant ("Warrant"), underlying unit
purchase warrants ("Underwriters' Warrants") issued to certain Underwriters (the
"Representatives") in connection with the Company's November, 1994 initial
public offering (the "IPO"), (ii) 50,000 shares of Common Stock underlying the
50,000 Warrants included in the Units underlying the Underwriters' Warrants and
(iii) 500,000 shares of Common Stock underlying the 500,000 Warrants included in
the 500,000 Units sold to the public in the IPO. Each Underwriters' Warrant
entitles the holder thereof to purchase one (1) Unit at an exercise price of
$12.15 per Unit until November 3, 1999. Each Warrant entitles the holder
thereof to purchase one (1) share of Common Stock at an exercise price of $6.00
per share until November 3, 1999. Prior to November 3, 1999, the Company may, at
its option, redeem all the Warrants then outstanding, at a redemption price of
$.05 per Warrant, if the closing sales price of the Common Stock as reported by
the Pacific Stock Exchange or other national trading market on which the Common
Stock may then be listed has equaled or exceeded $9.00 per share for ten (10)
consecutive trading days (the "Target Price"). The price of the Common Stock has
exceeded the Target Price. Warrants included in the Units underlying the
Underwriters' Warrants are not subject to redemption by the Company prior to
exercise of the Underwriters' Warrants. As of the date of this Prospectus no
Underwriters' Warrants or Warrants had been exercised and 500,000 Warrants (the
"Warrants Called for Redemption") were outstanding.
The Company has caused a notice of redemption to be sent to the holders of the
Warrants Called for Redemption and set the date for redemption thereof on
_________, 1997 (the "Redemption Date"). All holders of Warrants Called for
Redemption have the right to exercise their Warrants Called for Redemption until
5:00 p.m. New York City time on the __________, 1997, the last business day
preceding the Redemption Date. Warrants Called for Redemption may be exercised
by surrendering, at the corporate office of American Stock Transfer & Trust
Company (the "Warrant Agent") at 40 Wall Street, New York, New York 10005, the
Warrant Certificate evidencing such Warrants Called for Redemption together with
a subscription in the form set forth on the reverse side of the Warrant
Certificate, duly executed, and accompanied by the tender, in U.S. dollars, of
either federal funds or a certified check or bank cashier's check, payable to
the order of the Warrant Agent for the applicable exercise price for the
Warrants Called for Redemption. Any Warrants Called for Redemption not so
exercised will be redeemed for $.05 per Warrant Called for Redemption after the
Redemption Date. Upon exercise of the Underwriters' Warrants, the Company
intends to notify the holders of the Warrants included in the Units underlying
the Underwriters' Warrants so exercised of the Company's intention to redeem
such Warrants as soon as practicable.
The Common Stock is traded on the Nasdaq National Market System ("Nasdaq/NMS")
under the symbol "SCTR" and on the Pacific Stock Exchange under the symbol
"SPP." On January 31, 1997, the closing sale price of the Common Stock as
reported by Nasdaq/NMS was $13.00 per share.
-----
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION FROM THE PUBLIC OFFERING PRICE.
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH HEREIN
UNDER "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
================================================================================
PRICE TO UNDERWRITING
PUBLIC DISCOUNTS AND PROCEEDS TO
COMMISSIONS (1) COMPANY (2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Unit ....................... $12.15 $0 $12.15
- --------------------------------------------------------------------------------
Per Share ...................... $ 6.00 $0.42 $ 5.58
- --------------------------------------------------------------------------------
Total(3) ....................... $3,907,500 $210,000 $3,697,500
================================================================================
</TABLE>
(1) The Company has agreed to pay a fee equal to seven percent (7%) of the
exercise price of the Warrants Called for Redemption to H.J. Meyers & Co., Inc.
if certain conditions are met. See "PLAN OF DISTRIBUTION."
(2) Before deducting expenses of this offering payable by the Company, estimated
at $70,000.
(3) Assumes exercise of all (i) the Underwriters' Warrants, (ii) the Warrants
included in the Units underlying the Underwriters' Warrants and (iii) the
Warrants Called for Redemption, although there can be no assurance that all such
securities will be exercised.
It is expected that delivery of the certificates representing the securities
offered hereby will be made against payment therefor on or about the Redemption
Date.
The date of this Prospectus is February __, 1997
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934 (the "Exchange Act") and, in accordance therewith, files
reports and other information with the Securities and Exchange Commission (the
"Commission"). Such reports and other information may be inspected, without
charge, and copies may be obtained, at prescribed rates, at the public reference
facilities of the Commission maintained at Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the Commission's regional offices at 7 World
Trade Center, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such reports and other information may also
be obtained by mail at prescribed rates, from the Public Reference Section of
the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. The Commission
maintains a site on the World Wide Web at http://www.sec.gov that contains
reports, proxy and other information statements regarding registrants that file
electronically with the Commission.
No person has been authorized to give any information or to make any
representations in connection with the offering described herein other than
those contained in this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell, or a
solicitation of an offer to buy, any securities offered hereby by anyone in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to
anyone to whom it is unlawful to make such offer or solicitation. Neither the
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that the information herein contained is
correct as of any time subsequent to the date of this Prospectus.
The Company has filed with the Commission a Registration Statement on Form SB-2
(as amended from time to time and together with all exhibits thereto, the
"Registration Statement") under the Securities Act of 1933 with respect to the
shares of Common Stock offered hereby. This Prospectus constitutes a part of the
Registration Statement and does not contain all the information set forth in the
Registration Statement, certain parts of which have been omitted as permitted by
the rules of the Commission. Statements contained in this Prospectus as to the
contents of any contract or other document referred to herein are not
necessarily complete and, where such contract or other document is an exhibit to
the Registration Statement, each such statement is qualified in all respects by
the provisions of such exhibit, to which reference is hereby made for a full
statement of the provisions thereof. For further information pertaining to the
Company and the securities offered hereby, reference is made to the Registration
Statement.
The Registration Statement may be inspected, without charge, and copies may be
obtained, at prescribed rates, at the public reference facilities of the
Commission maintained at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the Commission's regional offices at 7 World Trade Center, New
York, New York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of the Registration Statement may also be obtained by mail at
prescribed rates, from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed with the Commission by the
Company, are incorporated herein by reference and made a part hereof, (i) Annual
Report on Form 10-KSB for the year ended June 30, 1996, (ii) Notice of Annual
Meeting and Proxy Statement in compliance with Section 14A of the Exchange Act,
October 11, 1996, relating to the Company's Election of Directors, amendment of
its Articles of Incorporation, approval of amendments to its Amended and
Restated 1994 Stock Option Plan and selection of auditors for the fiscal year
ended June 30, 1997.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the offering of the securities to be made hereunder shall be
deemed to be incorporated by reference herein and to be a part hereof from the
date of filing thereof. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified or
superseded for all purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.
The Company will provide, without charge, to each person to whom a copy of this
Prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated herein or in the Registration
Statement by reference (other than exhibits and schedules thereto, unless such
exhibits or schedules are specifically incorporated by reference into the
information that this Prospectus incorporates). Written or telephonic requests
for copies should be directed to the Company's principal office: 12001 Hwy 14
North, Cedar Crest, New Mexico 87008, telephone number (505) 281-2197.
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by the more
detailed information and Consolidated Financial Statements and notes thereto
appearing elsewhere in this Prospectus. Unless the context otherwise requires,
the terms "Specialty" and the "Company" refer to Specialty Teleconstructors,
Inc., a Nevada corporation, and its consolidated subsidiaries, including
Specialty Constructors, Inc., a New Mexico corporation, Specialty Combined
Resources, Inc., a Texas corporation, Specialty Management, Inc., a Nevada
corporation Specialty Fortress, a Nevada corporation, Specialty Acquisitions,
Inc., a Nevada corporation, Specialty Training, Inc., a Nevada corporation and
Specialty Financial, Inc., a Nevada corporation. The securities offered hereby
are highly speculative and involve a high degree of risk and immediate
substantial dilution. Prospective investors should carefully consider the
information set forth herein under "RISK FACTORS."
THE COMPANY
GENERAL
The Company designs, builds, installs, modifies and maintains (collectively,
"wireless infrastructure building and implementation services") wireless
communications transmitting and receiving facilities primarily for providers of
wireless communications services. In addition, the Company (i) provides
electrical design, engineering, and testing services (collectively, "wireless
infrastructure electrical design and engineering services") and site acquisition
and evaluation services ("site acquisition services") in connection with the
installation and location of wireless communications facilities. The Company
also sells unmanned communications shelters designed to be located adjacent to
wireless transmitting and receiving facilities to house electrical equipment
associated with such facilities. The Company's customers include providers of a
broad range of wireless communications services including paging services,
analog and digital cellular telephone services, personal communications services
or "PCS", specialized mobile radio or "SMR" services, enhanced specialized
mobile radio or "ESMR" services and microwave communications services. The
Company's headquarters are located in Cedar Crest, New Mexico, approximately
seven miles from Albuquerque, New Mexico. The Company also maintains regional
offices in Laguna Hills, California, Gilbert, Arizona (located just outside
Phoenix, Arizona), Houston, Texas, Fairview Heights, Illinois (located just
outside St. Louis, Missouri), Crest Hill, Illinois (located just outside
Chicago, Illinois), Birmingham, Alabama, Columbus, Ohio, Raleigh, North Carolina
and Orlando, Florida.
HISTORY
The Company was incorporated in April, 1994 for the purpose of acquiring all of
the issued and outstanding shares of capital stock of Michael R. Budagher
Specialty Constructors, Inc., a New Mexico corporation. In 1995, Michael R.
Budagher Specialty Constructors, Inc. changed its corporate name to Specialty
Constructors, Inc. Originally, the Company's primary business was constructing,
maintaining and modifying microwave transmission and receiving facilities
predominantly for providers of short- and long-distance microwave communications
services. Later, the Company began installing electronic and other related
equipment in connection with these facilities. Following the initiation of the
build out of cellular telephone networks in the United States, which began in
1983, the Company began to build, construct, enhance and maintain cellular
transmitting and receiving facilities as well as microwave transmitting and
receiving facilities. Throughout the late 1980's and continuing until the mid-
1990's, a majority of the Company's growth and revenues were derived from
wireless infrastructure building and implementation services related to the
continuing build out and expansion of cellular telephone and paging networks. In
the early 1990's, the Company began an effort to expand the scope of the
services offered by the Company to include wireless infrastructure electrical
design and engineering services. As a part of this expansion, in July 1995, the
Company acquired ST Combined Resources, Inc., a California-based provider of
electrical design and engineering services to the wireless communications
industry. Following the acquisition, ST Combined Resources, Inc. changed its
corporate name to Specialty Combined Resources, Inc.
RECENT TRENDS
During the fiscal year ended June 30, 1996, the Company continued to derive a
significant portion of its revenues from wireless infrastructure building and
implementation services rendered to providers of microwave, analog and digital
cellular-based wireless communications services. In addition, beginning during
approximately the last half of the fiscal year ended June 30, 1996, the Company
experienced increasing demand for its services from providers of wireless
communications services utilizing new or enhanced wireless communications
technologies such as PCS and ESMR. This trend continued through the first six
months of fiscal 1997. See "MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION."
3
<PAGE>
In January, 1997, the Company determined to cease manufacturing unmanned
communications shelters at its manufacturing facilities located in Albuquerque,
New Mexico. Instead, the Company intends to obtain unmanned communications
shelters from unaffiliated third parties for resale to its customers.
Historically, sales of these shelters have not comprised a significant component
of the Company's revenues or results of operation. The Company does not
anticipate that the cessation of manufacturing operations related to these
shelters will have a material impact on its business, results of operations and
financial condition. See "MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION- Cessation of Shelter Manufacturing
Operations."
BUSINESS STRATEGY
The Company intends to seek to capitalize on the demand for wireless
infrastructure building and implementation services by continuing to expand its
workforce and geographic presence in the marketplace. To accomplish these
objectives, the Company intends to (i) continue its geographic expansion by
opening new regional offices when demand for the Company's services or
acquisition opportunities make such expansion feasible, (ii) continue to enhance
its indigenous new employee hiring, training and retention programs as a method
for attracting, training and retaining new, highly skilled workers and (iii)
continue to seek to acquire other companies engaged in the wireless
infrastructure building and implementation services and wireless infrastructure
electrical design and engineering services businesses that have good reputations
for quality service and highly skilled workers. See "MANAGEMENTS DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION- Business Strategy."
RECENT ACQUISITIONS
On July 1, 1995, the Company acquired all of the issued and outstanding capital
stock of ST Combined Resources, Inc., a provider of wireless infrastructure
electrical design and engineering services located in Laguna Hills, California.
This acquisition was accounted for as a pooling of interests.
On October 23, 1995, the Company acquired substantially all the assets of
Orlando Tower, Inc., an Orlando, Florida-based builder of wireless transmitting
and receiving facilities, for approximately $163,000 in cash. This acquisition
was accounted for as a purchase.
On July 2, 1996, the Company acquired substantially all the assets of East Coast
Tower, Inc., a Greensborough, North Carolina-based builder of wireless
transmitting and receiving facilities, for approximately $90,000 in cash. This
acquisition was accounted for as a purchase.
On October 30, 1996, the Company acquired substantially all the assets of Data
Cell Systems, Inc. ("Data Cell"), a builder of wireless transmitting and
receiving facilities located in Gilbert, Arizona (located just outside Phoenix,
Arizona), in exchange for $160,000 in cash and the issuance of 93,405 shares of
Common Stock. The purchase price of the assets acquired from Data Cell is
subject to increase by an amount not to exceed $200,000 in the aggregate if
certain pre-tax earnings targets are achieved by the Company during the three
fiscal years immediately following the date of the acquisition and if certain
other conditions are met. This acquisition was accounted for as a purchase. See
"MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - Recent Acquisitions."
The Company's principle executive offices are located at 12001 Hwy 14 North,
Cedar Crest, New Mexico 87008 and its telephone number is (505) 281-2197.
4
<PAGE>
THE OFFERING
Securities Offered by the Company: 50,000 Units, each Unit consisting of
100,000 shares of Common Stock and
50,000 Warrants, at a price of $12.15
per Unit (120% of the price at which the
Units were sold to the public in the
Company's November 1994 initial public
offering (the "IPO")) issuable upon
exercise of the Underwriters' Warrants.
The shares of Common Stock and Warrants
included in the Units underlying the
Underwriters' Warrants are immediately
separately transferrable
50,000 shares of Common Stock at a price
of $6.00 per share, issuable upon
exercise of 50,000 Warrants included in
the Units underlying the Underwriters'
Warrants
500,000 shares of Common Stock at a
price of $6.00 per share, issuable upon
exercise of 500,000 Warrants (the
"Warrants Called for Redemption")
included in 500,000 Units (the "Public
Units") sold to the public in the IPO
Common Stock outstanding:
Before the offering 4,195,713 shares (1)
After the offering 4,845,713 shares (1)(2)
Warrants outstanding:
Before the offering 500,000
After the offering 0 (2)
Use of Proceeds The Company intends to use the net
proceeds of this offering for working
capital and for other general corporate
purposes, including possible future
acquisitions. See "USE OF PROCEEDS."
Risk Factors The securities offered hereby are highly
speculative and involve a high degree of
risk and immediate substantial dilution.
Prospective investors should carefully
consider the information set forth
herein under "RISK FACTORS."
Dividend Policy The Company has never paid any cash
dividends on its Common Stock. The
Company expects that it will retain all
available earnings generated by its
operations for the development and
growth of its business and does not
anticipate paying any cash dividends in
the foreseeable future. See "DIVIDEND
POLICY" and "RISK FACTORS."
Nasdaq/NMS Market Symbols "SCTR" and "SCTRW"
Pacific Stock Exchange Symbols "SPP" and "SPPW"
___________
(1) Does not include (i) up to 363,895 shares of Common Stock issuable upon
exercise of outstanding options granted under the Company's Amended and
Restated 1994 Stock Option Plan and Outside Directors' Stock Option Plan at
an average exercise price of $4.62 per share, of which 153,895 are
exercisable as of the date of this Prospectus. See "MANAGEMENT-Amended and
Restated 1994 Stock Option Plan," "MANAGEMENT-Outside Directors' Stock
Option Plan" and "RISK FACTORS-Outstanding Options; Risk of Further
Dilution. "
(2) Assumes exercise of all (i) the Underwriters' Warrants, (ii) the
Warrants included in the Units underlying the Underwriters' Warrants and
(iii) the Warrants Called for Redemption, although there can be no
assurance that all such securities will be exercised. See "RISK FACTORS-
Underwriters' Warrants; Risk of Further Dilution."
5
<PAGE>
SUMMARY FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following summary financial information is derived from the Consolidated
Financial Statements appearing elsewhere herein. This information should be
read in conjunction with the Consolidated Financial Statements and notes
thereto, and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS" appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
EARNINGS STATEMENT DATA:
Fiscal Year Ended June 30, Six Months Ended December 31,
-------------------------- -----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Contract revenues earned............. $ 16,759 $ 8,415 $ 14,592 $ 6,488
Cost of revenues earned.............. 13,987 6,990 11,956 5,128
Gross profit......................... 2,772 1,425 2,636 1,360
Selling, general and administrative
expenses............................ 1,701 1,051 1,381 781
Earnings from operations............. 1,071 374 1,255 579
Net earnings......................... 804 340 758 409
Net earnings per share............... $0.20 $0.09 $0.18 $0.10
Weighted average common and
common equivalent shares outstanding 4,104,336 3,750,806 4,261,264 4,092,308
</TABLE>
BALANCE SHEET DATA(1):
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Working capital.......................................................... $ 5,584
Total assets............................................................. 13,961
Current liabilities...................................................... 5,110
Long-term debt........................................................... 668
Stockholders' equity..................................................... $ 7,951
</TABLE>
______________________
(1) Assumes no exercise of outstanding options to purchase shares of Common
Stock granted pursuant to the Company's Amended and Restated 1994 Stock
Option Plan and Outside Directors' Stock Option Plan. See "RISK FACTORS-
Outstanding Options; Risk of Further Dilution," "MANAGEMENT-Amended and
Restated 1994 Stock Option Plan" and "MANAGEMENT-Outside Directors' Stock
Option Plan."
6
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE HIGHLY SPECULATIVE AND INVOLVE A HIGH DEGREE
OF RISK AND IMMEDIATE SUBSTANTIAL DILUTION FROM THE PUBLIC OFFERING PRICE AND
ARE SUITABLE ONLY FOR PERSONS WHO CAN AFFORD THE LOSS OF THEIR ENTIRE
INVESTMENT. IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING AN
INVESTMENT IN THE SECURITIES OFFERED HEREBY. THIS PROSPECTUS CONTAINS, IN
ADDITION TO HISTORICAL INFORMATION, FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY.
FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH DIFFERENCE INCLUDE, BUT ARE NOT
LIMITED TO, THOSE DISCUSSED BELOW, AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS
PROSPECTUS.
DEPENDENCE ON THE WIRELESS COMMUNICATIONS INDUSTRY
The Company is dependent on the continued growth, viability and financial
stability of its customers, which are in turn substantially dependent on the
continued growth, viability and financial stability of the wireless
communications industry. The wireless communications industry is highly
competitive and has been characterized by rapid technological and regulatory
change. Examples of recent technological changes include the advent or
continued rapid development of new or enhanced wireless communications
technologies such as PCS, ESMR and satellite-based wireless communications
technologies. These technological changes could reduce, delay or make
unnecessary the expansion or construction of new wireless communications
networks, which in turn could render the Company's products and services
obsolete or noncompetitive or otherwise reduce the demand for such products and
services. Examples of regulatory changes affecting the industry include the
enactment of Telecommunications Act of 1996 which is expected to cause
significant changes in existing regulation of the telecommunications industry
that are intended to promote the competitive development of new services, to
expand public availability of telecommunications services and to streamline
regulation of the industry. In addition, many of the Company's customers are
affected by general economic conditions. Any downturn or other disruption of
the wireless communications industry caused by adverse competitive developments,
technological changes, government regulation or other factors would have a
material adverse affect on the Company's business, financial condition and
results of operations. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" and "BUSINESS--The Wireless Communications
Industry" and "BUSINESS--Government Regulation."
DEPENDENCE ON KEY PERSONNEL
The Company relies on the business and technical expertise of its senior
management personnel and certain other key employees and the Company's future
performance depends in substantial part upon the continued contributions of
these individuals. The loss of the services of any one of these individuals
could have a material adverse effect on the Company. In particular, the
Company's future performance is highly dependent on the continued contributions
of Mr. Michael R. Budagher, a founder, director and the Company's Chairman of
the Board, President, Chief Executive Officer and Treasurer. The loss of the
services of Mr. Budagher would have a material adverse effect on the Company's
business, results of operations and financial condition. Mr. Budagher is not
bound by an employment agreement with the Company and no assurances can be given
that his services will be available at acceptable levels of compensation. In
addition, the Company currently maintains key-man life insurance in the amount
of $7,000,000 on Mr. Budagher. However, the Company believes that the proceeds
from such insurance policy or policies would not be sufficient to compensate it
for the loss of Mr. Budagher's services. See "BUSINESS -- Employees" and
"MANAGEMENT."
DEPENDENCE ON LABOR FORCE
The Company's future success is also particularly dependent on its ability to
attract and retain experienced, highly qualified technical employees, project
managers and other key employees who perform and manage the wireless
infrastructure building and implementation of services provided by the Company.
The Company believes there is, and there will continue to be, intense
competition for the services of these individuals from competitors in the
wireless infrastructure development and implementation industry and from
providers of wireless communications services. The loss of significant numbers
of the Company's personnel or the inability to attract and retain sufficient
numbers of additional technical and project management personnel to support the
expansion of the Company's business would have a material adverse effect on the
Company's business, results of operations and financial condition. There can be
no assurance that the Company will be able to retain its key employees or that
it will be able to attract or retain other experienced, highly qualified
technical and project management personnel in the future. See "BUSINESS --
Employees."
7
<PAGE>
ACQUISITIONS
As a key component of its growth strategy, the Company has pursued and intends
to continue to pursue acquisitions of companies that provide wireless
infrastructure building and implementation services and wireless infrastructure
electrical design and engineering services. In furtherance of this component of
its growth strategy, since July, 1995, the Company has substantially all the
assets and employees of three companies that provided wireless infrastructure
building and implementation services similar to those provided by the Company,
and one company that provided wireless infrastructure electrical design and
engineering services. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- Recent Acquisitions." Execution of
component of its growth strategy requires the Company's management to, among
other things: (i) identify geographic markets in which the Company can
successfully compete; (ii) identify acquisition candidates who are willing to be
acquired at prices and on terms acceptable to the Company; and (iii) consummate
identified acquisitions. In addition, it is possible that future acquisitions
will require the Company to obtain additional financing either to consummate the
acquisition or to provide additional working capital to facilitate the increased
level of business activity caused by the acquisition. Certain risks are
inherent in an acquisition strategy, such as dilution of outstanding equity
securities, increased leverage and debt service requirements, the difficulty in
combining different company cultures and facilities and the possibility of
significant turnover among key employees of the acquired company following the
acquisition, any of which could materially adversely affect the Company's
operating results or the market price of the Common Stock prevailing from time
to time. The success of any completed acquisition will depend in part on the
Company's ability to effectively integrate the acquired business, which
integration may involve unforeseen difficulties and may require a
disproportionate amount of management's attention and the Company's financial
and other resources.
The Company is currently considering several acquisitions of companies engaged
in the wireless infrastructure building and implementation services and wireless
infrastructure electrical design and engineering services businesses that the
Company believes can complement or expand the Company's current customer base
and ability to provide wireless infrastructure building and implementation
services and wireless infrastructure electrical design and engineering services
to its customers. No agreement, definitive or otherwise, with respect to any of
these potential acquisitions has been reached. From time to time the Company
has, and in the future may continue to, enter into negotiations with respect to
potential acquisitions for these purposes, some of which have resulted or may
result in preliminary agreements. In the course of these negotiations and/or
due diligence, these negotiations and/or preliminary agreements may be abandoned
modified or terminated. No assurance can be given that the Company will
complete any of the acquisitions currently under consideration, that additional
suitable acquisition candidates will be identified, that such future
acquisitions, if any, will be made on terms acceptable to the Company, or that
future acquisitions, if completed, will be successful.
POSSIBLE NEED FOR ADDITIONAL FINANCING
In addition to the management challenges presented by the continued
implementation of the Company's growth strategy, future growth may require
significant capital. Although the Company currently estimates that the net
proceeds of this Offering, together with cash generated from operations, will be
sufficient to finance its current operations and planned capital expenditure
requirements for at least twelve months following the date of this Prospectus,
there can be no assurance that the Company will not require additional capital
at an earlier date. The Company may, from time to time, seek additional funding
through public or private financing, including debt or equity financing. There
can be no assurance that adequate funding will be available as needed or, if
available, on terms acceptable to the Company. If additional funds are raised
by issuing equity securities, existing stockholders may experience dilution.
Insufficient funds may inhibit future growth or require the Company to scale
back or eliminate some or a significant part of its business. See "USE OF
PROCEEDS" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS -- Liquidity and Capital Resources."
COMPETITION
Historically, the industry for wireless infrastructure building and
implementation services has been highly competitive but also highly fragmented.
As such, most participants in this industry have been relatively small firms of
between three to fifty employees. However, the Company has also faced
competition in the market for wireless infrastructure building and
implementation services from wireless communications equipment manufacturers
which provide such services in conjunction with the sale of wireless
communications equipment. While the industry continues to be comprised
predominately of these smaller firms, over the past two years, the increased
demand for wireless infrastructure building and implementation services has
motivated other competitors to enter the market. These new competitors include,
but are not limited to, traditional,
8
<PAGE>
non-wireless engineering and construction companies and non-wireless
subcontractors who have begun to enter the market either alone or in conjunction
with wireless equipment manufacturers. In addition, the Company faces
competition in the market for wireless infrastructure electrical design and
engineering services from stand-alone electrical engineering and design firms,
other providers of wireless infrastructure building and implementation services
and wireless communications equipment manufacturers. Many of these new
competitors as well as many of the Company's historical competitors have
significantly greater financial and other resources than the Company. As demand
for wireless infrastructure building and implementation services increases, the
Company expects that more non-traditional competitors will enter the market and
provide increased competition to the Company.
GOVERNMENT REGULATION
The wireless communications industry is subject to regulation by state
regulatory agencies, the FCC, Congress, the courts and other governmental
bodies. There can be no assurance that any of these governmental bodies will not
adopt or change regulations or take other actions that would adversely affect
the wireless communications industry and the Company's business, financial
condition and results of operations.
In addition, the Telecommunications Act of 1996 is expected to cause significant
changes in existing regulation of the telecommunications industry that are
intended to promote the competitive development of new services, to expand
public availability of telecommunications services and to streamline regulation
of the industry. These changes include requirements that local exchange carriers
must: (i) permit other competitive carriers, which may include many wireless
communications service providers, to interconnect to their networks; (ii)
establish reciprocal compensation agreements with competitive carriers to
terminate traffic on each other's networks and (iii) offer resale of their local
loop facilities. The implementation of these requirements by the FCC and state
authorities potentially involves numerous changes in established rules and
policies that could adversely affect the wireless communications industry and
the Company's business, financial condition and results of operations.
In addition, the construction and installation of wireless transmitting and
receiving facilities are often the subject to state or local zoning, land use
and other regulation. Such regulation may include zoning, environmental and
building permit approvals or other state or local certification. The
Telecommunications Act of 1996 provides that state and local authority over the
placement, construction and modification of personal wireless services
(including cellular, and other cellular mobile radio services ("CMRS") and
unlicensed wireless services) shall not prohibit or have the effect of
prohibiting personal wireless services or unreasonably discriminate among
providers of functionally equivalent services. Although state and local zoning
authorities retain their rights over land use, their actions cannot have the
effect of banning wireless services or picking and choosing among similar
wireless providers.
ALLEGED HEALTH RISKS RELATED TO RF EMISSIONS
Allegations have been raised that the use of cellular telephones and other
wireless communications devices may pose health risks to humans due to radio
frequency ("RF") emissions from the handsets. Studies performed by wireless
telephone equipment manufacturers dispute these allegations, and a major
industry trade association and certain governmental agencies have stated
publicly that the use of such phones poses no undue health risk. Regardless of
the truth of these allegations, they could have an adverse effect on the
wireless communications industry which in turn could have an adverse effect on
the Company. In addition, digital wireless telephones have been shown to cause
interference to some electronic devices, such as hearing aids and pacemakers.
Concerns over RF emissions also may have the effect of discouraging the use of
wireless communications. The FCC currently is conducting a rulemaking proceeding
to update the guidelines and methods used for evaluating RF emissions from radio
equipment, including wireless telephones. The FCC's proposal, if adopted, would
impose more restrictive standards on RF emissions from devices such as hand-held
cellular and PCS telephones. These concerns could have an adverse effect on the
wireless communications industry which in turn could have an adverse effect on
the Company.
SEASONALITY OF INSTALLATION ACTIVITIES.
Historically, the rate at which contracts for the installation and retrofit of
wireless communications facilities are awarded has been lower during the period
from January 1 to March 31 of each year due to contracting practices of many
providers of wireless communications. In addition, cold weather and the limited
daylight hours in the winter months in certain markets have lowered the revenues
received from wireless infrastructure building and implementation services
during these months. Therefore, the Company may experience lower than average
revenues during the winter season.
9
<PAGE>
TRANSACTIONS WITH AFFILIATES
The Company has several transactions with affiliates. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS." While management of the Company
believes that the transactions with affiliates are at prices believed to be
reasonable and fair, such transactions may be subject to severe abuse. The
Company anticipates that these transactions will continue, but that the
Company's Board of Directors will review all such transactions and
relationships.
CONCENTRATION OF OWNERSHIP
Michael R. Budagher, the Company's Chairman, President, Chief Executive Officer
and Treasurer, will retain beneficial ownership of approximately 48.6% of the
Common Stock outstanding after this offering assuming all the Warrants Called
for Redemption, the Underwriters' Warrants and the Warrants included in the
Units underlying the Underwriters' Warrants are exercised. There can be no
assurance that all such securities will be exercised. As a result, Mr. Budagher
will have the ability to exert significant influence over the business affairs
of the Company, including the ability to influence the election of directors and
the results of voting on all matters requiring stockholder approval. See
"MANAGEMENT" and "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT."
SHARES ELIGIBLE FOR FUTURE SALE; POTENTIAL ADVERSE EFFECT ON MARKET PRICE ON
COMMON STOCK
At the date of this Prospectus, 4,195,713 shares of Common Stock were
outstanding, 2,875,713 of which were "restricted securities" under applicable
securities laws. Upon completion of this offering, assuming all the Warrants
Called for Redemption, the Underwriters' Warrants and the Warrants included in
the Units underlying the Underwriters' Warrants are exercised, the Company will
have 4,845,713 shares of Common Stock outstanding. All of the securities sold
in this offering will be freely transferable without further restriction or
registration under the Securities Act, except for any securities purchased by an
"affiliate" of the Company (as defined under the Securities Act). Additional
shares of Common Stock may become eligible for sale in the public market from
time to time upon exercise of warrants and stock options. See "RISK FACTORS-
Outstanding Options; Risk of Further Dilution" and "RISK FACTORS-Underwriters'
Warrants; Risk of Further Dilution."
Holders of restricted securities must comply with the requirements of Rule 144
in order to sell their shares in the open market. In general, under Rule 144 as
currently in effect, any affiliate of the Company and any person (or persons
whose sales are aggregated) who has beneficially owned his or her restricted
shares for at least two years, would be entitled to sell in the open market
within any three-month period a number of shares that does not exceed the
greater of: (i) 1% of the then outstanding shares of the Company's Common Stock;
or (ii) the average weekly trading volume reported on the Nasdaq System during
the four calendar weeks preceding such sale. Sales under Rule 144 are also
subject to certain limitations on manner of sale, notice requirements, and
availability of current public information about the Company. Nonaffiliates who
have held their restricted shares for three years are entitled to sell their
shares under Rule 144 without regard to any of the above limitations, provided
they have not been affiliates of the Company for the three months preceding such
sale.
The Company can make no prediction as to the effect, if any, that sales of
shares of additional shares of Common Stock or the availability of shares for
sale will have on the market price of the Common Stock. Nevertheless, sales of
significant amounts of Common Stock could adversely affect the prevailing market
price of Common Stock, as well as impair the ability of the Company to raise
capital through the issuance of additional equity securities. See "SHARES
ELIGIBLE FOR FUTURE SALE."
DILUTION
The exercise price of each of the Underwriters' Warrants, the Warrants included
in the Units underlying the Underwriters' Warrants and the Warrants Called for
Redemption, when divided by the number of shares of Common Stock receivable upon
such exercise, is substantially higher than the current book value per share of
Common Stock. Consequently, the purchasers of the shares of Common Stock
offered hereby and issuable upon exercise of the Underwriters' Warrants, the
Warrants included in the Units underlying the Underwriters' Warrants and the
Warrants Called for Redemption will experience immediate, substantial dilution.
OUTSTANDING OPTIONS; RISK OF FURTHER DILUTION
As of the date of this Prospectus, the Company has outstanding options to
purchase a total of 363,895 shares of Common
10
<PAGE>
Stock at a weighted average exercise price of $4.62 per share including 343,895
options granted under the Company's Amended and Restated 1994 Stock Option Plan
and 20,000 options granted under the Company's Outside Directors' Stock Option
Plan. Of these options, 153,895 are currently exercisable including 133,895
options granted under the Amended and Restated 1994 Stock Option Plan and all
the options granted to date under the Outside Directors' Stock Option Plan. In
the future, the price which the Company would receive for its Common Stock upon
exercise of such options could be significantly less than the value of, or
market price for, the Common Stock at the time such options are exercised. While
such options are outstanding, the holders thereof are given, at little or no
cost, the opportunity to profit from a rise, if any, in the value of or market
price (if any) for the Common Stock without assuming the risk of ownership. To
the extent that any such options are exercised, the interests of the Company's
stockholders will be diluted proportionately. See "SHARES ELIGIBLE FOR FUTURE
SALE."
UNDERWRITERS' WARRANTS; RISK OF FURTHER DILUTION
In connection with the IPO, in November, 1994, the Company sold the
Underwriter's Warrants to the Representatives for nominal consideration. The
Underwriters' Warrants enable the holders thereof to purchase from the Company
up to 50,000 Units, each Unit consisting of two (2) shares of Common Stock and
one (1) Warrant, at an exercise price of $12.15 per Unit (120% of the price at
which the Units were initially offered to the public in the IPO), until November
3, 1999. The Warrants included in the Units underlying the Underwriters'
Warrants entitle the holders thereof to purchase one (1) share of Common Stock
at an exercise price of $6.00 per share until November 3, 1999 and are identical
to the Warrants Called for Redemption except that the Warrants included in the
Units underlying the Underwriters' Warrants such are not subject to redemption
by the Company prior to exercise of the Underwriters' Warrants. As of the date
of this Prospectus, none of the Underwriters' Warrants have been exercised.
In connection with the issuance of the Underwriters' Warrants, the Company
granted to the Representatives certain demand and incidental registration rights
obligating the Company under certain circumstances to register under the
Securities Act and applicable state securities acts, at the expense of the
Company, the Units underlying the Underwriters' Warrants, the shares of Common
Stock and Warrants included in such Units and the shares of Common Stock
underlying such Warrants. These securities have been included in the
Registration Statement of which this Prospectus is a part in accordance with
these registration rights. There can be no assurance that all the Underwriters'
Warrants or the Warrants included in the Units underlying the Underwriters'
Warrants will be exercised. In the future, the price which the Company would
receive for the shares of Common Stock included in the Units underlying the
Underwriters' Warrants or issuable upon exercise of the Warrants included in
such Units could be significantly less than the value of, or market price for,
the Common Stock at the time such Underwriters' Warrants or such Warrants
included in the Units underlying such Underwriters' Warrants are exercised. For
the life of the Underwriters' Warrants and the Warrants included in the Units
underlying such Underwriters' Warrants, the holders thereof are given, at
nominal cost, the opportunity to profit from the difference, if any, between the
exercise prices thereof and the value, or market price (if any) of, the Common
Stock receivable upon exercise thereof without assuming the risk of ownership.
The terms on which the Company could obtain additional capital during the
exercise period of the Underwriters' Warrants and the Warrants included in the
Units underlying such Underwriters' Warrants may be adversely affected as the
holders of such securities may be expected to exercise them when in all
likelihood, the Company would be able to obtain any needed capital by a new
placement of securities on terms more favorable than those provided for by the
Underwriters' Warrants or the Warrants included in the Units underlying such
Underwriters' Warrants. See"SHARES ELIGIBLE FOR FUTURE SALE."
NO INTENTION TO PAY DIVIDENDS
The Company has never declared or paid any cash dividends on the Common Stock
and does not anticipate paying dividends on the Common Stock at any time in the
near future. The current policy of the Company's Board of Directors is to
retain earnings, if any, to provide funds for operations and expansion of the
Company's business. Any future determination as to the payment of dividends
will be at the discretion of the Board of Directors of the Company and will
depend on the Company's earnings, capital requirements, and financial condition
and such other factors as the Board of Directors may deem relevant. See
"DIVIDEND POLICY."
LIMITATIONS ON DIRECTOR LIABILITY
Section 78.751 of the General Corporation Law of Nevada ("NGCL") empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, except an action by or
in the right of the corporation, by reason of the fact that he or she is or was
a director, officer, employee or agent of the corporation or is or was serving
at the request
11
<PAGE>
of the corporation as a director, officer, employee or agent of another
corporation or enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with such action, suit or proceeding if the person indemnified
acted in good faith and in a manner he or she 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 or her
conduct was unlawful. In the case of any action by or in the right of the
corporation, no indemnification may be made in respect to any claim, issue or
matter as to which such person shall have been adjudged to be liable to the
corporation or for amounts paid in settlement to the corporation unless and only
to the extent that the court in which such action or suit was brought or other
court of competent jurisdiction determines that in view of all the circumstances
of the case such person is fairly and reasonably entitled to indemnity for such
expenses as the court shall deem proper. Section 78.751 further provides that to
the extent a director or officer of a corporation has been successful in the
defense of any action, suit or proceeding referred to above or in the defense of
any claim, issue or matter therein, he or she shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him or
her in connection therewith.
The Articles of Incorporation, as amended (the "Articles"), and By-Laws of the
Company provide, in effect, that to the extent and under the circumstances
permitted by Section 78.751 of the NGCL and subject to certain conditions, the
Company shall indemnify any person who was or is a party or is threatened to be
made a party to or is involved in any action, suit or proceeding of the type
described above by reason of the fact that he or she is or was a director or
officer of the Company or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation. Reference is made
to the Articles and to the Company's By-laws, as amended, both of which have
been filed as Exhibits to the Registration Statement of which this Prospectus is
a part.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain Statements in the Prospectus Summary and under the captions "RISK
FACTORS," "USE OF PROCEEDS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS," "BUSINESS" and elsewhere in this
Prospectus constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or industry results, to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such factors include, among others, the following general
economic and business conditions: industry capacity; other industry trends;
demographic changes; competition; the loss of any significant customers; changes
in business strategy or development plans; availability and successful
integration of acquisition candidates; availability, terms and deployment of
capital; advances in technology; quality of management; business abilities and
judgment of personnel; availability of qualified personnel; changes in, or the
failure to comply with, government regulations; labor costs; and other risk
factors and cautionary statements appearing in this Prospectus. The risks and
other cautionary statements appearing in this Prospectus should not be
construed as exhaustive. See "RISK FACTORS."
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on the Common Stock
and does not anticipate paying dividends on the Common Stock at any time in the
near future. The current policy of the Company's Board of Directors is to
retain earnings, if any, to provide funds for operations and expansion of the
Company's business. Any future determination as to the payment of dividends
will be at the discretion of the Board of Directors of the Company and will
depend on the Company's earnings, capital requirements, and financial condition
and such other factors as the Board of Directors may deem relevant.
12
<PAGE>
USE OF PROCEEDS
Assuming all the Warrants Called for Redemption, the Underwriters' Warrants and
the Warrants included in the Units underlying the Underwriters' Warrants are
exercised, the net proceeds to be received by the Company from the sale of the
securities offered hereby, after deducting the estimated expenses of this
offering, are expected to be approximately $3,627,500. However, there can be no
assurance that all such securities will be exercised. The Company intends to
use the net proceeds from this offering as working capital to support accounts
receivable generated by the Company's wireless infrastructure building and
implementation services business, to effect acquisitions of other companies
engaged in the wireless infrastructure building and implementation services and
wireless infrastructure electrical design and engineering services businesses
and for other general corporate purposes.
The exact allocation of the proceeds for such purposes and timing of such
expenditures has not been finally determined and may vary significantly
depending upon numerous factors, including the continued expansion of the
Company's wireless infrastructure building and implementation services business
and the Company's success in securing acquisition opportunities. Until utilized
for the above purposes, the net proceeds from this offering are intended to be
invested in short-term, investment-grade securities. The Company estimates that
such proceeds will be sufficient to fund such expenditures and other cash
requirements for at least the next 12 months. However, such time periods may
vary significantly depending upon a number of factors, and no assurances can be
given in this regard. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS."
13
<PAGE>
CAPITALIZATION
(IN THOUSANDS)
The following table sets forth the capitalization of the Company as of December
31, 1996. This information should be read in conjunction with the Consolidated
Financial Statements and notes thereto, and "MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" appearing elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
December 31,
1996(1)
-----------------
<S> <C>
Short-term debt:
Current portion of long term debt......................... $ 61
Short term borrowings..................................... 924
------
985
Long-term debt............................................... 668
Stockholders' equity:
Common stock, $.01 par value (10,000,000 shares
authorized, 4,185,713 shares issued and
outstanding).............................................. 42
Additional paid-in capital................................ 4,831
Retained earnings......................................... 3,078
------
Total stockholders' equity................................... 7,951
------
Total capitalization......................................... $9,604
======
</TABLE>
____________
(1) Assumes no exercise of outstanding options to purchase shares of Common
Stock granted pursuant to the Company's Amended and Restated 1994 Stock
Option Plan and Outside Directors' Stock Option Plan. See "RISK FACTORS-
Outstanding Options; Risk of Further Dilution," "MANAGEMENT-Amended and
Restated 1994 Stock Option Plan" and "MANAGEMENT-Outside Directors' Stock
Option Plan."
14
<PAGE>
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is quoted on the Nasdaq National Market under the
symbol "SCTR" and on the Pacific Stock Exchange under the symbol "SPP." On
January 24, 1997, there were approximately 1,701 holders of record of the
Company's common stock. The following table sets forth the quarterly high and
low bid prices for the Company's common stock. These prices reflect inter-dealer
prices and do not include adjustments for retail mark-ups, mark-downs or
commissions and may not represent actual transactions.
<TABLE>
<CAPTION>
Fiscal Year Ended
June 30, 1995: High Low
- -------------- ---- ---
<S> <C> <C>
Fiscal Quarter* $ 5.00 $ 2.75
Fiscal Quarter $ 4.625 $ 2.875
Fiscal Quarter $ 3.625 $ 2.125
* Reflects trading from November 7, 1994 through December 31, 1994.
Fiscal Year Ended
June 30, 1996: High Low
- -------------- ---- ---
Fiscal Quarter $ 3.875 $ 2.50
Fiscal Quarter $ 3.375 $ 2.00
Fiscal Quarter $ 5.75 $ 2.25
Fiscal Quarter $ 6.25 $ 3.625
Fiscal Year Ended
June 30, 1997: High Low
- -------------- ---- ---
Fiscal Quarter $ 9.625 $3.9375
Fiscal Quarter $10.0625 $ 6.75
3/rd/ Fiscal Quarter
(through January 24, 1997) $ 14.00 $ 10.00
</TABLE>
To date, the Company has not declared or paid any cash dividends on its common
stock, and the present policy of the Board of Directors is to retain any
earnings to provide for the Company's growth. Any future determination to pay
dividends will be at the discretion of the Board of Directors, and dependent
upon the Company's financial condition, results of operations, capital
requirements and such other factors as the Board of Directors deems relevant.
See "RISK FACTORS-No Intention to Pay Dividends," and "DIVIDEND POLICY."
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
The following table sets forth selected consolidated earnings statement data for
the fiscal years ended June 30, 1996 and 1995 and the six months ended December
31, 1996 and 1995 and selected balance sheet data as of December 31, 1996. This
information has been derived from the Consolidated Financial Statements
appearing elsewhere herein. This information should be read in conjunction
with, and is qualified by, the Consolidated Financial Statements and notes
thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
INCOME STATEMENT DATA:
Fiscal Year Ended June 30, Six Month Ended December 31,
---------------------------- ----------------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Contract revenues earned......... $ 16,759 $ 8,415 $ 14,592 $ 6,488
Cost of revenues earned.......... 13,987 6,990 11,956 5,128
------ ----- ------ -----
Gross profit..................... 2,772 1,425 2,636 1,360
Selling, general and administrative
expenses......................... 1,701 1,051 1,381 781
----- ----- ----- ----
Earnings from operations......... 1,071 374 1,255 579
Other income (deductions):
Gain (loss) on sale of equipment (5) 13 -- (12)
Interest income................. 219 170 31 117
Interest expense................ (27) (11) (56) (36)
Other, net...................... 18 3 -- 2
----- ----- ----- -----
Earnings before income tax
expense....... 1,277 549 1,230 650
Income tax expense (credit)...... 72 209 472 241
----- ----- ----- -----
Net earnings per common.......... $ 804 $ 340 $ 758 $ 409
Net earnings per common share
and common equivalent share... $ 0.20 $ 0.09 $ 0.18 $ 0.10
Weighted average common shares
and common equivalent shares
outstanding (1)................. 4,104,336 3,750,806 4,261,264 4,092,308
</TABLE>
BALANCE SHEET DATA(1):
<TABLE>
<CAPTION>
December 31, 1996
-----------------
<S> <C>
Working capital......... $5,584
Total assets............ 13,961
Current liabilities..... 5,110
Long-term debt.......... 668
Stockholders' equity.... 7,951
</TABLE>
- -----------------------
(1) Assumes no exercise of outstanding options to purchase shares of Common
Stock granted pursuant to the Company's Amended and Restated 1994 Stock Option
Plan and Outside Directors' Stock Option Plan (See "RISK FACTORS-Underwriters'
Warrants; Risk of Further Dilution," "MANAGEMENT-Amended and Restated 1994
Stock Option Plan" and "MANAGEMENT-Outside Directors' Stock Option Plan."
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
The following discussions contains forward-looking statements within the meaning
of the Reform Act and should be read in conjunction with the Consolidated
Financial Statements of the Company and the notes thereto and the risk factors
and other cautionary statements appearing elsewhere in this Prospectus. Such
forward-looking statements are subject to a number of risks and other factors
that could cause the Company's actual results to differ materially from those
contained in these forward-looking statements, including those set forth under
"RISK FACTORS," "USE OF PROCEEDS," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," "BUSINESS" and elsewhere in this
Prospectus. The risk factors and other cautionary statements appearing in this
Prospectus should not be construed as exhaustive. For a more complete
understanding of the Company's operations, see "RISK FACTORS" and "BUSINESS."
RESULTS OF OPERATIONS
COMPARISON OF THE FISCAL YEARS ENDED JUNE 30, 1996 AND 1995
The following table sets forth certain consolidated financial data expressed as
a percentage of net sales for the fiscal years ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
Percentage of Revenues
------------------------
Fiscal Year Ended June 30,
--------------------------
1996 1995
---- ----
<S> <C> <C>
Contract revenues earned 100.0% 100.0%
Cost of revenues 83.4 83.1
----- -----
Gross profit 16.6 16.9
Selling, general and
administrative expenses 10.1 12.5
----- -----
Earnings from operations 6.5 4.4
Other net - .2
Interest expense ( .2) ( .1)
Interest income 1.3 2.0
----- -----
Earnings before income tax expense 7.6 6.5
Income tax expense 2.8 2.5
----- -----
Net earnings 4.8% 4.0%
===== =====
</TABLE>
Revenues. For the fiscal year ended June 30, 1996, revenues increased to
$16,758,629 from $8,414,590 in the fiscal year ended June 30, 1995, which
represents an increase of $8,344,039 or 99% over fiscal 1995. This increase in
revenues resulted primarily from growth in the Company's wireless infrastructure
building and implementation services business. Beginning during approximately
the last half of the fiscal year ended June 30, 1996 the Company experienced
increasing demand for its services from providers of wireless communications
services utilizing new or enhanced wireless communications technologies such as
PCS and ESMR. During the fiscal year ended June 30, 1996, three customers
represented approximately 44% of the Company's revenues; PCS PrimeCo 18%, Sprint
Cellular Company 16% and Cellular One 10%.
Gross Profit. Gross profit for fiscal year ended June 30, 1996 increased
$1,347,476 or 95% from $1,424,802 in fiscal 1995 to $2,772,278 in fiscal 1996.
Gross profit as a percentage of revenue remained unchanged at 17% for both
fiscal 1995 and fiscal 1996.
Selling, general and administrative ("SG&A") expenses. As a percentage of
revenues, SG&A expenses decreased from 12% of revenues in fiscal 1995 to 10% of
revenues in fiscal 1996. SG&A expenses increased $650,188 or 62% from $1,050,666
in fiscal 1995 to $1,700,854 in fiscal 1996. The decrease in SG&A expenses as a
percentage of revenue was primarily attributable to increased operating and
administrative efficiencies realized as a result of additions to the Company's
administrative staff and facilities during the fiscal year ended 30, 1995 and
the increase in revenues generated during the
17
<PAGE>
fiscal year ended June 30, 1996. The increase in SG&A expenses resulted
primarily from increased marketing and administrative expenses associated with
additional personnel added to accommodate the Company's growth.
Net Earnings. Net earnings increased $464,200 or 136% to $804,355 in the fiscal
year ended June 30, 1996 from $340,155 in the fiscal year ended June 30, 1995.
As a percentage of revenue, net earnings increased to 5% in fiscal 1996 from 4%
in fiscal 1995. This increase in net margin was primarily attributable to
improvements in the Company's operating margin resulting from strong demand for
the Company's wireless infrastructure building and implementation services and a
decrease in SG&A expenses as a percentage of revenue.
COMPARISON OF THE FISCAL YEARS ENDED JUNE 30, 1995 AND 1994
The following table sets forth certain consolidated financial data expressed as
a percentage of net sales for the fiscal years ended June 30, 1996 and 1995.
<TABLE>
<CAPTION>
Percentage of Revenues
----------------------
Fiscal Year Ended June 30,
--------------------------
1995 1994
---- ----
<S> <C> <C>
Contract revenues earned 100.0% 100.0%
Cost of revenues 83.1 72.9
----- -----
Gross profit 16.9 27.1
Selling, general and
administrative expenses 12.5 11.4
----- -----
Earnings from operations 4.4 15.7
Other net .2 .2
Interest expense ( .1) ( .1)
Interest income 2.0 .2
----- -----
Earnings before income tax expense 6.5 16.0
Income tax expense 2.5 6.0
----- -----
Net earnings 4.0% 10.0%
===== =====
</TABLE>
Revenues. The Company's revenues for the fiscal year ended June 30, 1995
increased to $8,414,590 from $6,435,759 for the same time period in the prior
year, an increase of approximately 31%. Four accounts represented 55% of the
Company's revenues for the year ended June 30, 1995; Bell Atlantic Mobile 21%,
Cellular One 10%, Nextel Communications 10% and Sprint Cellular 14%.
Gross Profit. Beginning late in the Company's second quarter of fiscal 1995, the
Company began to increase its project management staff, eventually increasing
the staff by 275% and opening four regional offices. Beginning at the same time
and continuing through the third quarter of the 1995 fiscal year, the Company's
revenue growth paused. The Company believes that this pause may have occurred
because service providers were preoccupied with the auctioning of PCS licenses
by the Federal Government and the consequences of that action on the short and
long-term plans of service providers. The increase in project management staff
significantly increased the Company's cost of revenues. This increase, together
with the lack of revenue growth during the same period, adversely affected the
Company's gross profit. Gross profit, as a percentage of revenues, decreased
from 27% to 16% for the year ended June 30, 1995 compared to the year ended June
30, 1994. There are two significant contributors to this decline, namely, the
275% increase in project management staff and the increased resources needed to
supply its customers' demand for shelters.
In anticipation of growth, the Company expanded its operations and personnel in
various regions throughout the United States. In December of 1994, the Company
opened an office in the Chicago, Illinois area staffed by three project
managers, two of whom were newly hired or promoted. In February of 1995, the
Company opened an office in the Columbus, Ohio area staffed by two project
managers, both of whom were newly promoted. In April of 1995, an office was
opened in Birmingham, Alabama with one newly promoted project manager and one
newly promoted site supervisor. In June 1995, the Company opened an office in
Wycoff, New Jersey with two newly hired project managers. In total, the Company
increased its project management staff by 275% throughout the course of the
fiscal year ended June 30, 1995. The project manager is viewed as the front-
line person responsible for customer satisfaction through quality services and
timely completion of the projects. The Company experienced inefficiencies
associated with the 275% growth in project
18
<PAGE>
management staff. These inefficiencies resulted from project management staff
being in place prior to contracts being entered into that utilized such staff
and the hiring of required field personnel. The Company believes that a strong
project management staff is critical to continued growth of the Company.
During the year ended June 30, 1995, the Company was asked by one of its major
customers to provide portable shelters to house communications equipment used at
cellular transmission facilities. In anticipation of the potential for a
significant market in these shelters to multiple customers, the Company
established a manufacturing facility in Albuquerque, New Mexico and began
producing as demand required.
SG&A Expenses. SG&A expenses for the year ended June 30, 1995 increased to
$1,050,666 from $732,290 for the same time period in the prior year, an increase
of 4% as a percentage of revenues. The Company incurred an increase in SG&A
costs attributable to the opening of four new offices, as discussed above. In
addition, the company incurred costs associated with the acquisition of two
companies, the equipment and personal property of Vidano Corporation in April
1995 and the equity of ST Combined Resources, Inc. in July 1995. A significant
percentage of the increase in SG&A expenses was attributable to fees associated
with being a publicly traded entity, such items as investor relations, legal and
accounting fees for public filing requirements and directors and exchange
listing fees.
Net Earnings. Net earnings decreased to $340,155 for the fiscal year ended June
30, 1995 from $654,044 for the fiscal year ended June 30, 1994, a decrease of
approximately 4% expressed as a percentage of revenues. This decrease was
attributable to increases in costs associated with the 275% increase in project
management staff, the building of communications shelters, the costs associated
with opening new offices and being a publicly traded entity.
COMPARISON OF THE SIX-MONTH PERIODS ENDED DECEMBER 31, 1996 AND 1995
The following table sets forth certain consolidated financial data expressed as
a percentage of contract revenues earned for the six-month periods ended
December 31, 1996 and 1995.
<TABLE>
<CAPTION>
Percentage of Revenues
----------------------
Six Months Ended December 31,
-----------------------------
1996 1995
---- ----
<S> <C> <C>
Contract revenues earned 100.0% 100.0%
Cost of revenues 81.8 79.1
----- -----
Gross profit 18.2 20.9
Selling, general and
administrative expenses 9.5 12.1
----- -----
Earnings from operations 8.7 8.8
Other net - -
Interest expense ( .4) ( .6)
Interest income .2 1.8
----- -----
Earnings before income tax expense 8.5 10.0
Income tax expense 3.3 3.7
----- -----
Net earnings 5.2% 6.3%
===== =====
</TABLE>
Revenues. The Company's revenues for the six-month period ended December 31,
1996, increased approximately 125% to $14,591,735 as compared to $6,487,722 for
the same six-month period in the prior year. The Company believes the increase
is related to growth in the Company's wireless infrastructure building and
implementation services business related primarily to an increase in the
installation of facilities related to new PCS systems.
Gross Profit. Gross profit for the six-month period ended December 31, 1996
increased approximately 94% to $2,635,502 as compared to $1,360,189 for the same
six-month period in the prior year. Gross profit as a percentage of revenue
decreased from 20.9% for the six-month period ended December 31, 1995 to 18.2%
for the six-month period ended December 31, 1996.
SG&A Expenses. SG&A expenses as a percentage of revenues decreased from 12.1%
to 9.5% for the six-month period ended December 31, 1995 and 1996, respectively.
This decrease was a result of operational efficiencies realized with the
19
<PAGE>
increase in revenues.
Net earnings for the six-month period ended December 31, 1996 increased
approximately 85% to $758,037 compared to $409,475 for the same six-month period
in the prior year. As a percentage of revenue, net earnings decreased to 5.2%
from 6.3% in the prior year.
RECENT ACQUISITIONS
On July 1, 1995, the Company acquired all of the issued and outstanding capital
stock of ST Combined Resources, Inc., a provider of wireless infrastructure
electrical design and engineering services located in Laguna Hills, California.
This acquisition was accounted for as a pooling of interests.
On October 23, 1995, the Company acquired substantially all the assets of
Orlando Tower, Inc., an Orlando, Florida-based builder of wireless transmitting
and receiving facilities, for approximately $163,000 in cash. This acquisition
was accounted for as a purchase.
On July 2, 1996, the Company acquired substantially all the assets of East
Coast Tower, Inc., a Greensborough, North Carolina-based builder of wireless
transmitting and receiving facilities, for approximately $90,000 in cash. This
acquisition was accounted for as a purchase.
On October 30, 1996, the Company acquired substantially all the assets of Data
Cell Systems, Inc. ("Data Cell"), a builder of wireless transmitting and
receiving facilities located in Gilbert, Arizona (located just outside Phoenix,
Arizona), in exchange for $160,000 in cash and the issuance of 93,405 shares of
Common Stock. The purchase price of the assets acquired from Data Cell is
subject to increase by an amount not to exceed $200,000 in the aggregate if
certain pre-tax earnings targets are achieved by the Company during the three
fiscal years immediately following the date of the acquisition and if certain
other conditions are met. This acquisition was accounted for as a purchase.
CESSATION OF SHELTER MANUFACTURING OPERATIONS
In January, 1997, the Company determined to cease manufacturing unmanned
communications shelters at its manufacturing facilities located in Albuquerque,
New Mexico. Instead, the Company intends to obtain unmanned communications
shelters from unaffiliated third parties for resale to its customers.
Historically, sales of these shelters have not comprised a significant component
of the Company's revenues or results of operation. The Company does not
anticipate that the cessation of manufacturing operations related to these
shelters will have a material impact on its business, results of operations and
financial condition.
SEASONALITY
Historically, the rate at which contracts for the installation and retrofit of
wireless communications facilities are awarded has been lower during the period
from January 1 to March 31 of each year due to contracting practices of many
providers of wireless communications. In addition, cold weather and the limited
daylight hours in the winter months in certain markets have lowered the revenues
received from wireless infrastructure building and implementation services
during these months. Therefore, the Company may experience lower than average
revenues during the winter season.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had cash and temporary investments totaling
$644,434, a decrease of $2,219,035 from June 30, 1996. During the six-month
period ended December 31, 1996, cash utilized for operating activities was
$730,805. Net cash flow from operating activities was impacted primarily by
increases in accounts receivable associated with increased revenues generated
during the six-month period ended December 31, 1996 as compared to the
comparable period last year. During the six-month period ended December 31,
1996, the Company expended $896,559 on capital expenditures, primarily for
vehicles and equipment used in the Company's wireless infrastructure building
and implementation services business, and $160,000 in connection with the
acquisition of substantially all the assets of Data Cell Systems, Inc. (See
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS-Recent Acquisitions").
In November, 1994, the Company completed an initial public offering (the "IPO")
of 500,000 Units. Each Unit consisted of two (2) shares of the Company's Common
Stock and one (1) Warrant. Each Warrant entitles the holder thereof to purchase
20
<PAGE>
one share of the Company's common stock for a purchase price equal to $6.00 at
any time prior to November 3, 1999. Prior to November 3, 1999, the Company may,
at its option, redeem all the Warrants then outstanding ("Warrants Called for
Redemption"), at a redemption price of $.05 per Warrant Called for Redemption,
if the closing sales price of the Common Stock as reported by the Pacific Stock
Exchange or other national trading market on which the Common Stock may then be
listed has equaled or exceeded $9.00 per share for ten (10) consecutive trading
days (the "Target Price"). The price of the Common Stock has exceeded the
Target Price and the Company has caused a notice of redemption to be sent to the
holders of the Warrants Called for Redemption on the date of this Prospectus and
set the date for redemption thereof on _________, 1997 (the "Redemption Date").
All holders of Warrants Called for Redemption have the right to exercise their
Warrants Called for Redemption until 5:00 p.m. New York City time on the
__________, 1997, the last business day preceding the Redemption Date. Any
Warrants Called for Redemption not so exercised will be redeemed for $.05 per
Warrant Called for Redemption after the Redemption Date. At December 31, 1996,
$868,423 of proceeds from the IPO remained. At present, the Company intends to
utilize the majority of the unexpended proceeds of the IPO together with the net
proceeds, if any, of the securities offered hereby, for working capital to
support accounts receivable generated by the Company's wireless infrastructure
building and implementation services business, to effect acquisitions of other
companies engaged in the wireless infrastructure building and implementation
services and wireless infrastructure electrical design and engineering services
businesses and for other general corporate purposes. See "USE OF PROCEEDS,"
"RISK FACTORS-Acquisitions" and "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS-Cautionary Note Regarding Possible
Future Acquisitions."
At December 31, 1996, the Company had a $2 million line of credit (the "First
State Bank Line of Credit") with First State Bank, Albuquerque, New Mexico, to
be used for working capital. The First State Bank Line of Credit is secured by
the accounts receivable of Specialty Constructors. At December 31, 1996,
outstanding borrowings under the First State Bank Line of Credit totaled
$923,928 and $1,076,072 were available for future borrowing. The final maturity
date of the First State Bank Line of Credit is May 1997. Outstanding borrowings
under the First State Bank Line of Credit accrued interest at the prime rate
which was 8.25% at December 31, 1996. On January 22, 1997, the First State Bank
Line of Credit was replaced with a new line of credit (the "Norwest Line of
Credit") from Norwest Bank New Mexico, N.A. ("Norwest"). On January 29, 1997,
all outstanding borrowings under the First State Bank Line of Credit were repaid
from the proceeds of an advance under the Norwest Line of Credit and the First
State Bank Line of Credit was canceled.
On January 22, 1997, the Company entered into the Norwest Line of Credit. The
Norwest Line of Credit provides up to $6 million in financing for working
capital and is secured by substantially all the Company's accounts receivable.
The Norwest Line of Credit also provides up to $1 million in additional
financing for purchases of vehicles and equipment. As of the date of this
Prospectus, outstanding borrowings under the Norwest Line of Credit totaled
approximately $2 million and approximately $4 million and $1 million was
available for future borrowing for working capital and purchases of vehicles and
equipment, respectively. The final maturity date of the Norwest Line of Credit
is November 30, 1997. Outstanding borrowings under the Norwest Line of Credit
accrue interest at a variable rate equal to the Norwest Bank Minnesota, N.A.
Base Lending Rate plus .5%. As of the date of this Prospectus, the interest
rate on the Norwest Line of Credit was 8.75%.
The Company's future cash requirements for fiscal 1997 and beyond will depend
primarily upon the level of wireless infrastructure building and implementation
business conducted by the Company, the level of working capital needed to
generate the revenues associated with such business and acquisition
opportunities. The Company believes that revenues from operations, amounts
available under the Norwest Line of Credit, net proceeds from the sale of the
securities offered hereby and other capital resources available to the Company
will be adequate to satisfy its working capital requirements for at least twelve
months following the date of this Prospectus. See "RISK FACTORS-Acquisitions,"
and "RISK FACTORS-Possible Need for Additional Financing."
BUSINESS STRATEGY
The Company believes its success is dependent on, among other factors, the
continued expansion and development of the wireless communications industry and
the Company's ability to attract and retain experienced, highly skilled workers.
Historically, the expansion of the wireless communications industry has
necessitated the construction of large numbers of new transmitting and receiving
facilities. Because the construction of wireless transmitting and receiving
facilities is highly specialized, such construction demands highly skilled,
experienced personnel. Over the past several years, the Company has experienced
increasing demand for the Company's wireless infrastructure building and
implementation services. The Company believes this increasing demand is a result
of the continued expansion of the wireless communications industry, the
Company's expertise and experience in the implementation of wireless
transmitting and receiving facilities and the Company's reputation for quality
workmanship. See "RISK FACTORS-Dependence on the Wireless Communications
Industry" and "RISK FACTORS-Dependence on Labor Force."
21
<PAGE>
The Company believes the growth in demand for wireless infrastructure building
and implementation services will continue as the wireless communications
industry continues to expand and develop, fueled in part by the introduction of
new and enhanced wireless communications technologies such as PCS, ESMR and
digital cellular. As an example, the Company anticipates that the completion in
1995 and 1996 of FCC auctions of the A-, B- and C- Block portions of the radio
spectrum allocated by the FCC for PCS licensees will result in the build out of
significant numbers of new PCS systems over the next five to ten years. This is
due in part to the fact that the FCC has mandated that recipients of PCS
licenses adhere to five-year and 10-year build out requirements. Under both
five- and 10-year build out requirements, all 30 MHZ PCS licensees (which
includes holders of all of the approximately 595 A-, B- and C-Block PCS licenses
awarded as of September 1, 1996) must construct facilities necessary to provide
coverage to at least one-third of the population in their service areas within
five years from the date of initial license grants. Service must be provided to
two-thirds of the population within ten (10) years. Violations of these
regulations could result in license revocations, forfeitures or fines.
The Company also anticipates that implementation of new PCS systems may create
significant wireless infrastructure building activity as new PCS licensees pay
to alter or relocate certain existing communications facilities operated by
holders of fixed microwave licenses that currently operate within the same
frequency ranges as the new PCS licensees. This is because, in an effort to
balance the competing interests of existing microwave users and newly authorized
PCS licensees, the FCC has ruled that for a period of up to five years after the
grant of a PCS license, PCS licensees may be required to share their radio
spectrum with existing fixed microwave licensees operating on the same
frequencies as those of the new PCS licensees. In order to initiate service
within the required time frame, many of these new PCS licensees will arrange and
pay for the relocation of certain of these existing users to alternate spectrum
locations or transmission technologies.
The Company intends to seek to capitalize on the demand for wireless
infrastructure building and implementation services by continuing to expand its
workforce and geographic presence in the marketplace. To accomplish these
objectives, the Company intends to (i) continue its geographic expansion by
opening new regional offices when demand for the Company's services or
acquisition opportunities make such expansion feasible, (ii) continue to enhance
its indigenous new employee hiring, training and retention programs as a method
for attracting, training and retaining new, highly skilled workers and (iii)
continue to seek to acquire other companies engaged in the wireless
infrastructure building and implementation services and wireless infrastructure
electrical design and engineering services businesses that have good reputations
for quality service and highly skilled workers.
CAUTIONARY NOTE REGARDING POSSIBLE FUTURE ACQUISITIONS
As a key component of its growth strategy, the Company has pursued and intends
to continue to pursue acquisitions of companies that provide wireless
infrastructure building and implementation services and wireless infrastructure
electrical design and engineering services. In furtherance of this component of
its growth strategy, since July, 1995, the Company has substantially all the
assets and employees of three companies that provided wireless infrastructure
building and implementation services similar to those provided by the Company,
and one company that provided wireless infrastructure electrical design and
engineering services. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- Recent Acquisitions."
The Company is currently considering several acquisitions of companies engaged
in the wireless infrastructure building and implementation services and wireless
infrastructure electrical design and engineering services businesses that the
Company believes can complement or expand the Company's current customer base
and ability to provide wireless infrastructure building and implementation
services and wireless infrastructure electrical design and engineering services
to its customers. No agreement, definitive or otherwise, with respect to any of
these potential acquisitions has been reached. From time to time the Company
has, and in the future may continue to, enter into negotiations with respect to
potential acquisitions for these purposes, some of which have resulted or may
result in preliminary agreements. In the course of these negotiations and/or
due diligence, these negotiations and/or preliminary agreements may be abandoned
modified or terminated. No assurance can be given that the Company will
complete any of the acquisitions currently under consideration, that additional
suitable acquisition candidates will be identified, that such future
acquisitions, if any, will be made on terms acceptable to the Company, or that
future acquisitions, if completed, will be successful. See "RISK FACTORS-
Acquisitions."
In addition, the consummation of one significant acquisition or any number of
smaller acquisitions could require the Company to seek additional financing. As
a consequence, the Company may, from time to time, seek additional funding
through public or private financing, including debt or equity financing. There
can be no assurance that adequate funding will be available as needed or, if
available, on terms acceptable to the Company. See "RISK FACTORS-Possible Need
for Additional Financing."
22
<PAGE>
BUSINESS
GENERAL
Specialty Teleconstructors, Inc., a Nevada corporation, designs, builds,
installs, modifies and maintains (collectively, "wireless infrastructure
building and implementation services") wireless communications transmitting and
receiving facilities primarily for providers of wireless communications
services. In addition, the Company (i) provides electrical design, engineering,
and testing services (collectively, "wireless infrastructure electrical design
and engineering services") and site acquisition and evaluation services ("site
acquisition services") in connection with the installation and location of
wireless communications facilities. The Company also sells unmanned
communications shelters designed to be located adjacent to wireless transmitting
and receiving facilities to house electrical equipment associated with such
facilities. The Company's customers include providers of a broad range of
wireless communications services including paging services, analog and digital
cellular telephone services, personal communications services or "PCS",
specialized mobile radio or "SMR" services, enhanced specialized mobile radio or
"ESMR" services and microwave communications services. The Company conducts
business primarily through its subsidiaries. The Company's principal operating
subsidiaries include Specialty Constructors, Inc., a New Mexico corporation
("Specialty Constructors"), Specialty Combined Resources, Inc., a Texas
corporation ("Specialty Combined Resources"), Specialty Management, Inc., a
Nevada corporation ("Specialty Management") and Specialty Fortress, a Nevada
corporation ("Specialty Fortress"). The Company's headquarters are located in
Cedar Crest, New Mexico, approximately seven miles from Albuquerque, New Mexico.
The Company also maintains regional offices in Laguna Hills, California,
Houston, Texas, Fairview Heights, Illinois (located just outside St. Louis,
Missouri), Crest Hill, Illinois (located just outside Chicago, Illinois),
Birmingham, Alabama, Columbus, Ohio, Raleigh, North Carolina and Orlando,
Florida.
HISTORY
The Company was incorporated in April, 1994 for the purpose of acquiring all of
the issued and outstanding shares of capital stock of Michael R. Budagher
Specialty Constructors, Inc., a New Mexico corporation. In 1995, Michael R.
Budagher Specialty Constructors, Inc. changed its corporate name to Specialty
Constructors, Inc. Originally, the Company's primary business was constructing,
maintaining and modifying microwave transmission and receiving facilities
predominantly for providers of short- and long-distance microwave communications
services. Later, the Company began installing electronic and other related
equipment in connection with these facilities. Following the initiation of the
build out of cellular telephone networks in the United States, which began in
1983, the Company began to build, construct, enhance and maintain cellular
transmitting and receiving facilities as well as microwave transmitting and
receiving facilities. Throughout the late 1980's and continuing until the mid-
1990's, a majority of the Company's growth and revenues were derived from
wireless infrastructure building and implementation services related to the
continuing build out and expansion of cellular telephone and paging networks. In
the early 1990's, the Company began an effort to expand the scope of the
services offered by the Company to include wireless infrastructure electrical
design and engineering services. As a part of this expansion, in July 1995, the
Company acquired ST Combined Resources, Inc., a California-based provider of
electrical design and engineering services to the wireless communications
industry. Following the acquisition, ST Combined Resources, Inc. changed its
corporate name to Specialty Combined Resources, Inc.
RECENT TRENDS
During the fiscal year ended June 30, 1996, the Company continued to derive a
significant portion of its revenues from wireless infrastructure building and
implementation services rendered to providers of microwave, analog and digital
cellular-based wireless communications services. In addition, beginning during
approximately the last half of the fiscal year ended June 30, 1996 the Company
experienced increasing demand for its services from providers of wireless
communications services utilizing new or enhanced wireless communications
technologies such as PCS and ESMR. This trend has continued into through the
first quarter of fiscal 1997. See "MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION."
In January, 1997, the Company determined to cease manufacturing unmanned
communications shelters at its manufacturing facilities located in Albuquerque,
New Mexico. Instead, the Company intends to obtain unmanned communications
shelters from unaffiliated third parties for resale to its customers.
Historically, sales of these shelters have not comprised a significant component
of the Company's revenues or results of operation. The Company does not
anticipate that the cessation of manufacturing operations related to these
shelters will have a material impact on its business, results of operations and
financial condition. See "MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION-Cessation of Shelter Manufacturing
Operations."
23
<PAGE>
THE WIRELESS COMMUNICATIONS INDUSTRY
Overview. The demand for wireless communications services in the United States
has grown dramatically during the last five years. At present, the rate of
wireless telephony penetration in the United States is estimated to be 13% and,
according to Kagan Associates, is expected to reach 48% by 2006. According to
the Cellular Telecommunications Industry Association ("CTIA"), the compound
annual growth rate of cellular subscribers exceeded 45% from 1990 through 1995.
The wireless communications industry is characterized by networks that use radio
waves to transmit voice and data signals. Typically, different technologies or
applications use different frequencies within the radio spectrum. Examples of
wireless communications technologies include paging services, which involve one-
way or limited two-way data transmission capability, and cellular, PCS services,
SMR and ESMR services, all of which involve two-way voice and data transmission
capabilities.
Cellular. Although SMR and other radio-based communications technologies have
been utilized commercially by taxi cabs, ambulance fleets and other fleet
dispatch services and by government entities such as police and fire departments
for many years, the widespread use of wireless communications technologies for
the general public began with the advent of the cellular telephone industry. The
cellular telephone industry began in 1983 when the FCC began granting licenses
to two licensees in each metropolitan statistical area ("MSA") and many rural
areas ("rural service areas") throughout the United States. Cellular licenses
were eventually awarded in 306 MSAs and 428 rural service areas. In 1986, the
FCC granted additional portions of the radio spectrum to each holder of a
cellular license. Cellular networks operate within a 50 MHZ band located in the
800-900 MHZ frequency range. Paging services also began to expand rapidly in the
1980's. Paging services utilize a different portion of the radio spectrum and,
while not offering two-way voice transmission capability, historically have
offered a lower-cost alternative for mobile communications than cellular
telephony.
PCS. During the late 1980's and early 1990's, advances in technology of
wireless communications gave rise to a new technology known as PCS. PCS is a
digital, wireless communications system supported by high-density call
transmitters. PCS typically involves a network of small, low-powered
transceivers placed throughout a neighborhood, business complex, community or
metropolitan area to provide customers with mobile and portable voice and data
communications. PCS enables subscribers to have dedicated personal telephone
numbers and to communicate using small digital radio handsets that can be
carried in a pocket or purse. In 1993, Congress enacted legislation directing
the FCC to allocate a portion of the radio spectrum for PCS via competitive
bidding. In response, the FCC established PCS service areas in the United States
and began to hold auctions for portions or "Blocks" of the radio spectrum
designated for PCS services. Compared with cellular, PCS will operate at higher
frequencies within a 140 MHZ band in the 1850-1990 MHZ frequency range and in
slightly different geographic coverage areas. The geographic areas for PCS
licenses are divided into 51 major trading areas ("MTAs") for A- and B-Block
licenses, and 493 basic trading areas ("BTAs") for other PCS licenses, including
the C-, D-, E- and F-Block licenses. MTAs and BTAs are different than the
metropolitan statistical areas and rural service areas.
In March 1995, the FCC completed the A- and B-Block PCS auction, resulting in
the award of two 30 MHZ licenses in each MTA. In May 1996, the FCC completed the
C-Block Auction, resulting in the award of one 30 MHZ license in each BTA. After
completion of the C-Block auction, the FCC reauctioned 18 C-Block licenses for
which the high bidders failed to make initial post-auction down payments. On
August 26, 1996, the FCC began the auction for the D-, E- and F-Block licenses,
which will be for one 10 MHZ license in each BTA.
SMR and ESMR Services. As a result of advances in digital technology some
providers of wireless communications services have begun to design and deploy or
modify networks that utilize SMR and ESMR technologies. ESMR technology converts
analog SMR services into an integrated digital transmission system providing for
call hand-off, frequency reuse and wide area call delivery networks. ESMR
technology also increases the capacity of SMR networks enabling more efficient
use of the allocated frequency. This increase coupled with additional advances
in switching technologies are intended to enable ESMR networks to compete
effectively with cellular and PCS networks. While ESMR technology may offer
certain cost advantages over cellular and PCS technologies, at the present time,
it is unclear whether ESMR technologies can compete effectively with cellular
and PCS networks.
Other Wireless Communications Technologies. The FCC has proposed or adopted
final rules authorizing additional wireless communications services. For
example, the FCC has proposed to authorize the use of the 37 and 39 GHz bands
for the provision of fixed and mobile communications services. In May 1996, the
FCC adopted final rules to permit Interactive Video and Data Service licensees
to provide mobile two-way data services. Also in May 1996, the FCC authorized
local multipoint distribution service licensees to provide certain fixed and
mobile communications services. The FCC has proposed to reallocate former
federal government spectrum located at 4 GHz for a broad range of wireless fixed
and mobile services, and is expected to reallocate additional former federal
government spectrum for wireless mobile services in the future.
24
<PAGE>
Several national and global mobile satellite or "MSS" based systems also have
been proposed that are intended to compete directly with land-based wireless
communications networks. In theory, this technology could create an alternative
to land-based wireless networks that might reduce or slow the growth in demand
for new and enhanced land-based wireless communications transmitting and
receiving facilities, which could have a material adverse effect on the
Company's business, financial condition and results of operation. At the present
time, it is not possible to forecast the effect, if any, that MSS or any other
alternative technology will have on the demand for wireless communications
infrastructure development. However, at the present time, the Company does not
believe that MSS technologies will adversely effect demand for the Company's
services in the foreseeable future.
COMPETITION
Historically, the industry for wireless infrastructure building and
implementation services has been highly competitive but also highly fragmented.
As such, most participants in this industry have been relatively small firms of
between three to fifty employees. However, the Company has also faced
competition in the market for wireless infrastructure building and
implementation services from wireless communications equipment manufacturers
which provide such services in conjunction with the sale of wireless
communications equipment. While the industry continues to be comprised
predominately of these smaller firms, over the past two years, the increased
demand for wireless infrastructure building and implementation services has
motivated other competitors to enter the market. These new competitors include,
but are not limited to, traditional, non-wireless engineering and construction
companies and non-wireless subcontractors who have begun to enter the market
either alone or in conjunction with wireless equipment manufacturers. In
addition, the Company faces competition in the market for wireless
infrastructure electrical design and engineering services from stand-alone
electrical engineering and design firms, other providers of wireless
infrastructure building and implementation services and wireless communications
equipment manufacturers. Many of these new competitors as well as many of the
Company's historical competitors have significantly greater financial and other
resources than the Company. As demand for wireless infrastructure building and
implementation services increases, the Company expects that more non-traditional
competitors will enter the market and provide increased competition to the
Company. See "RISK FACTORS-Competition."
EMPLOYEES
As of January 24, 1997, the Company employed 218 full-time employees, 190 in
wireless infrastructure building and implementation services, 16 in wireless
infrastructure electrical design and engineering services and the remainder in
executive and administrative positions. This is an increase of 62 employees from
September 1, 1996. This increase is primarily due to additional installation and
maintenance personnel and administrative personnel required to facilitate the
Company's growth and the acquisition of substantially all the assets and
employees of Data Cell Systems, Inc. in October, 1996. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS- Recent
Acquisitions." None of the Company's employees is represented by a labor union
and the Company considers its employee relations to be good.
FACILITIES
The Company presently leases approximately 5,400 square feet of office space
from Michael R. Budagher, its Chairman of the Board, President, Chief Executive
Officer, Treasurer and a Director, for $16,800 annually. See "CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS."
The office space is located in a 6,400 square foot building in Cedar Crest, New
Mexico. This office serves as the Company's headquarters and as a regional
office for the Company's wireless infrastructure building and implementation and
wireless infrastructure electrical design and engineering operations. The
Company believes the Company's offices in Cedar Crest will be adequate to meet
the Company's needs for at least the next twelve months.
In addition, the Company maintains two regional offices in Illinois and one each
in Ohio, Alabama, North Carolina, Florida, Texas, California and Arizona, from
which the Company conducts primarily wireless infrastructure building and
implementation operations. In addition to the Company's headquarters facility
in Cedar Crest, New Mexico, the Company's electrical design and engineering
operations are conducted primarily from offices located in Laguna Hills,
California and Houston, Texas. Until January, 1997, the Company also maintained
a facility for the construction of shelters in Albuquerque, New Mexico. At the
date of this Prospectus, the Company has ceased manufacturing these shelters and
instead intends to obtain shelters from unaffiliated third parties for resale to
its customers. All of the Company's regional offices and its shelter
construction facility are leased pursuant to operating leases that do not exceed
five years in duration. During fiscal 1996, the Company closed its Wycoff, New
Jersey regional office.
25
<PAGE>
LEGAL PROCEEDINGS
The Company is, and, from time to time may be, a party to routine legal
proceedings incidental to its business. The outcome of these legal proceedings
is not expected to have a material adverse effect on the Company's business,
financial condition or results of operation, based on the Company's current
understanding of the relevant facts and law. The Company maintains general
liability insurance against risks arising out of the normal course of business.
GOVERNMENT REGULATION
The wireless communications industry is subject to regulation by state
regulatory agencies, the FCC, Congress, the courts and other governmental
bodies. There can be no assurance that any of these governmental bodies will not
adopt or change regulations or take other actions that would adversely affect
the wireless communications industry and the Company's business, financial
condition and results of operations.
In addition, the Telecommunications Act of 1996 is expected to cause significant
changes in existing regulation of the telecommunications industry that are
intended to promote the competitive development of new services, to expand
public availability of telecommunications services and to streamline regulation
of the industry. These changes include requirements that local exchange carriers
must: (i) permit other competitive carriers, which may include many wireless
communications service providers, to interconnect to their networks; (ii)
establish reciprocal compensation agreements with competitive carriers to
terminate traffic on each other's networks and (iii) offer resale of their local
loop facilities. The implementation of these requirements by the FCC and state
authorities potentially involves numerous changes in established rules and
policies that could adversely affect the wireless communications industry and
the Company's business, financial condition and results of operations.
In addition, the construction and installation of wireless transmitting and
receiving facilities are often the subject to state or local zoning, land use
and other regulation. Such regulation may include zoning, environmental and
building permit approvals or other state or local certification. The
Telecommunications Act of 1996 provides that state and local authority over the
placement, construction and modification of personal wireless services
(including cellular and other CMRS and unlicensed wireless services) shall not
prohibit or have the effect of prohibiting personal wireless services or
unreasonably discriminate among providers of functionally equivalent services.
Although state and local zoning authorities retain their rights over land use,
their actions cannot have the effect of banning wireless services or picking and
choosing among similar wireless providers.
26
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information as of the date of this
Prospectus with respect to the directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
----- --- --------
<S> <C> <C>
Michael R. Budagher(1) 38 Chairman of the Board, President, Chief
Executive
Officer, Treasurer and Director
Kari A. Young(2) 36 Chief Financial Officer, Treasurer, Secretary
and Director
Dennis K. Hartnett(3) 42 Chief Accounting Officer, Secretary and
Assistant Treasurer
John D. Emery(4)(5) 49 Director
Terry D. Farmer(2)(3)(4)(5) 47 Acting Secretary and Director
Jon D. Word(4)(5) 36 Director
</TABLE>
_______________________
(1) Mr Budagher is a member of the Stock Option Committee of the Board of
Directors and became Treasurer of the Company following the resignation of
Ms. Young on June 14, 1996.
(2) Kari A. Young resigned as Chief Financial Officer, Treasurer, Secretary and
Director of the Company effective June 14, 1996, at which time Terry D.
Farmer became Acting Secretary of the Company. Until her resignation, Ms.
Young was also a member of the Stock Option Committee of the Board of
Directors.
(3) Dennis K. Hartnett, CPA was appointed Secretary and Assistant Treasurer of
the Company effective July 8, 1996, at which time Terry D. Farmer resigned
as Acting Secretary of the Company.
(4) Member of the Compensation Committee of the Board of Directors.
(5) Member of the Audit Committee of the Board of Directors.
Directors hold office until their term expires and until their successors have
been elected and qualified. Officers are appointed annually and serve at the
discretion of the Board of Directors. There are no family relationships among
executive officers or directors of the Company.
Mr. Budagher founded the Company in 1981 and has been Chairman of the Board,
President, Chief Executive Officer and a Director of the Company since its
inception. Mr. Budagher was appointed Treasurer of the Company in June, 1996
following the resignation of Ms. Young as the Company's Chief Financial Officer,
Treasurer, Secretary and a Director, which was effective June 14, 1996. Mr.
Budagher is also a founder, stockholder and President of Specialty Antenna Site
Resources, Inc. ("SASR") and a founder, stockholder and President of Specialty
Constructors Coatings, Inc. ("SCC"). See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS."
Ms. Young resigned as Chief Financial Officer, Treasurer, Secretary and a
Director of the Company effective June 14, 1996. Prior to her resignation, Ms.
Young had been Chief Financial Officer of the Company since 1990 and Secretary,
Treasurer and a Director of the Company since November, 1994. Prior to her
resignation from the Company, Ms. Young was a stockholder in Specialty
Manufacturing, Inc. ("SMI"). See "CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS." Ms. Young received her Bachelor of Business Administration from
the University of New Mexico in 1985 and her Certificate of Public Accountancy
in 1990. Ms. Young is a member of the American Institute of Certified Public
Accountants and the New Mexico Society of Certified Public Accountants.
Mr. Hartnett became employed by the Company as Chief Accounting Officer in June,
1996 and was appointed Secretary and Assistant Treasurer of the Company in July,
1996. From February, 1996 to June, 1996, Mr. Hartnett was Chief Financial
Officer of New Mexico Mortgage Company, Inc. From April, 1995 to February, 1996,
Mr. Hartnett was self-employed as an independent accounting and management
consultant. From March, 1991 to April, 1995, Mr. Hartnett was a Senior Asset
Manager for Northcorp Realty Advisors, Inc.
27
<PAGE>
Mr. Emery has been a Director of the Company since 1994. For more than five
years, Mr. Emery has been president of Corporate Development Center, Inc., a
consulting firm specializing in assisting fast growth companies, arranging
mergers and acquisitions, rendering expert valuations, and providing crisis
management services to businesses. In addition, Mr. Emery has taught
Entrepreneurship, Business Ethics and Organizational Environment, and Business
Policy and Strategy at the University of New Mexico. Mr. Emery holds a Master of
Business Administration from the Harvard Business School.
Mr. Farmer has been a Director of the Company since 1994. Mr. Farmer has been a
stockholder, officer and director of the Albuquerque law firm of Moses, Dunn,
Farmer & Tuthill, P.C. for more than five years. Mr. Farmer is a past
President of the Albuquerque Lawyers Club and the Young Lawyers Division of the
State Bar of New Mexico. In 1994, Mr. Farmer was elected a fellow in the New
Mexico Bar Foundation. See "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
Mr. Word has been a Director of the Company since 1994. Mr. Word has been
President and Chief Executive Officer of Contact New Mexico, L.P., a paging and
messaging service provider in New Mexico and Southern Colorado since August,
1992. Mr. Word also is an owner and director of Rural Telco, Inc., a cellular
telephone provider in North Carolina and is President and Director of Word SMR,
Inc. which holds specialized mobile radio licenses in several locations
throughout the United States. In 1991 and 1992, Mr. Word was a consultant in
the wireless telecommunications industry and from 1988 through 1991 he was Vice
President of Operations for Cellular Information Systems, Inc., a wireless
communications company. Mr. Word received a Bachelor of Science Degree from
Texas A&M University in 1984.
COMPENSATION AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended June 30, 1996, there were four (4) meetings of the
full Board of Directors. All Directors attended at least 75% of the meetings
held during the fiscal year ended June 30, 1996. The Company's Board of
Directors has an Audit Committee, a Compensation Committee and a Stock Option
Committee. Each committee met at least once during the fiscal year ended June
30, 1996. All committee members attended at least 75% of the committee meetings
held during their terms as members of such committees the fiscal year ended June
30, 1996.
Audit Committee. The Audit Committee is currently composed of three (3) non-
employee Directors. The current members of the Audit Committee are Messrs.
Emery, Farmer and Word. This committee meets with the Company's independent
public accountants to review the scope and results of auditing procedures and
the Company's accounting procedures and controls. The Audit Committee also
provides general oversight with respect to the accounting principles employed in
the Company's financial reporting. The Audit Committee met one (1) time during
the fiscal year ended June 30, 1996.
Compensation Committee. The Compensation Committee is composed of three (3) non-
employee Directors. The current members of the Compensation Committee are
Messrs. Emery, Farmer and Word. The Compensation Committee is responsible for
determining and reviewing the compensation of the officers of the Company,
including the Company's Chief Executive Officer. The Compensation Committee
determines and reviews executive bonus plan targets and allocations and
administers the terms and provisions of the Company's Amended and Restated 1994
Stock Option Plan. The Compensation Committee met one (1) time during the fiscal
year ended June 30, 1996.
Stock Option Committee. The Stock Option Committee was formed by the Board of
Directors in 1994 and charged with the responsibility for administering the
Company's Outside Directors' Stock Option Plan (the "Outside Directors' Stock
Option Plan"). Prior to June 14, 1996, the Stock Option Committee administered
the terms and provisions of the Outside Directors' Stock Option Plan and was
comprised of Mr. Budagher and Ms Young. Pursuant to the provisions of the
Outside Directors' Stock Option Plan, so long as the Stock Option Committee is
responsible for administering the Outside Directors' Stock Option Plan, the
Stock Option Committee must be comprised of at least two (2) Directors neither
of whom is eligible to receive stock options under the Outside Directors' Stock
Option Plan. Ms. Young's resignation on June 14, 1996 as the Company's Chief
Financial Officer, Assistant Secretary, Treasurer and a Director, created a
vacancy on the Stock Option Committee that could not be filled in compliance
with the terms of the Outside Directors' Stock Option Plan because Mr. Budagher
is the only remaining member of the Board of Directors who is eligible to serve
on the Stock Option Committee. Consequently, from and after June 14, 1996 to the
present, the Outside Directors' Plan has been administered by the entire Board
of Directors. The Stock Option Committee met one (1) time during the fiscal
year ended June 30, 1996.
Cash Compensation. Directors receive $500 for each Board of Directors meeting
attended and reimbursement for expenses incurred in attending such meetings. In
addition, Directors who serve on committees receive $100 per hour for time spent
attending meetings of such committees.
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<PAGE>
Outside Directors' Stock Option Plan
The Outside Directors' Stock Option Plan (the "Outside Directors Option Plan")
was approved by the Board of Directors and Stockholders of the Company on May
16, 1994. A total of 50,000 shares of Common Stock has been authorized and
reserved for issuance under the Outside Directors Option Plan, subject to
adjustment to reflect changes in the Company's capitalization in the case of a
stock split, stock dividend or similar event. The Outside Directors Option Plan
is currently administered by the entire Board of Directors. Until June 14,
1996, the Outside Directors Option Plan was administered by the Stock Option
Committee of the Board of Directors which consisted of Michael R. Budagher and
Kari A. Young. Following Ms. Young's resignation on June 14, 1996 as Chief
Financial Officer, Treasurer, Secretary and a Director of the Company, in
accordance with the terms of the Outside Directors Option Plan, the Outside
Directors Option Plan began being administered by the entire Board of Directors.
Currently, the Board of Directors has the sole authority to interpret the
Outside Directors Option Plan to determine the persons to whom options will be
granted, to determine the basis upon which the options will be granted and to
determine the exercise price, duration and other terms of options to be granted
under the Outside Directors Option Plan; provided that, (i) the exercise price
of each option granted under the Plan may not be less than the fair market value
of the Common Stock on the day of the grant of the option, (ii) the exercise
price must be paid in cash and or stock upon exercise of the option, (iii) no
option may be exercisable for more than 10 years after the date of grant, and
(iv) no option is transferable other than by will or the laws of descent and
distribution. If an optionee's status as an Outside Director is terminated for
any reason other than death, the optionee may exercise his option at any time
within 90 days after such termination to the extent it was then exercisable. If
an optionee dies while an Outside Director and shall not have fully exercised
options granted under the Outside Directors' Stock Option Plan, such options may
be exercised in whole or in part within six months of the optionee's death by
the executors or administrators of the optionee's estate or by the optionee's
heirs. The vesting period, if any, specified for each option will be
accelerated upon the occurrence of a change of control or threatened change of
control of the Company.
Options under the Outside Directors Option Plan are granted only to Outside
Directors. Under the Outside Directors' Stock Option Plan, the term "Outside
Directors" means only those directors of the Company or a subsidiary of the
Company who are not regular salaried employees of either the Company or a
subsidiary as of the date the option is granted. No stock options were granted
under the Outside Directors Stock Plan during the fiscal year ended June 30,
1996. As of the date of this Prospectus, (i) 30,000 options had been issued
under the Outside Directors' Stock Option Plan, of which 10,000 had been
exercised and 20,000 remained outstanding and currently exercisable, and (ii)
20,000 options remained available for future issuance under the Outside
Directors' Stock Option Plan.
Options are not transferable or assignable by an optionee, voluntarily or by
operation of law, other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order. Each option is exercisable,
during the optionee's lifetime, only by the optionee, his guardian or legal
representative.
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth certain information regarding compensation,
aggregate stock option grants and exercises during the fiscal year ended June
30, 1996 and fiscal year-end stock option values for the Chief Executive Officer
and each executive officer ("Named Executive Officer") of the Company whose
total annual salary and bonus exceeded $100,000 during such fiscal year.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------- ----------------------------
Awards Payouts
--------------- -------
Other Restricted Securities All other
Name and Annual Stock Underlying LTIP Compen-
Principal Salary Bonus Comp. Award(s) Options/ Payouts sation(1)
Position Year ($) ($) ($) ($) SARs(#) ($) ($)
- -------- ---- ------ ----- ------ --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Michael R. 1996 $ 85,000 -- -- -- -- -- --
Budagher 1995 $100,000 -- -- -- -- -- $16,374
(C.E.O.) 1994 $117,645 -- -- -- -- -- --
</TABLE>
_______________________
(1) Reflects employer contributions under the Specialty Constructors, Inc.
Profit Sharing Plan.
29
<PAGE>
Neither the Chief Executive Officer nor any Named Executive Officer received
personal benefits, securities or property in excess of the lesser of $50,000 or
10% of such individual's reported salary and bonus. Neither the Chief Executive
Officer nor any Named Executive Officer has any employment agreement with the
Company or any of its subsidiaries.
Employment Arrangements
The Company has entered into an Employment Agreement with Mr. Hartnett, its
Chief Accounting Officer, Secretary and Assistant Treasurer, the term of which
is terminable at will by either the Company or Mr. Hartnett. The Company has
not entered into any employment agreements or arrangements with any of its other
executive officers, including Mr. Budagher. See "RISK FACTORS-Dependence on Key
Personnel."
Stock Options
No options to purchase Common Stock of the Company were granted to the Chief
Executive Officer or any Named Executive Officer in the fiscal year ended June
30, 1996. At June 30, 1996, neither the Chief Executive Officer nor any Named
Acceptive Officer held any unexercised options to purchase shares of the
Company's common stock and no such options were exercised during the fiscal year
ended June 30, 1996.
Amended and Restated 1994 Option Plan
The Company's 1994 Stock Option Plan was approved by the Board of Directors and
Stockholders of the Company on May 16, 1994 to provide for the grant of
incentive stock options within the meaning of Section 422 of the Internal
Revenue Code of 1986 as amended. A total of 100,000 shares of Common Stock was
originally authorized and reserved for issuance under the 1994 Stock Option Plan
subject to adjustment to reflect changes in the Company's capitalization in the
case of a stock split, stock dividend or similar event. During fiscal 1996, the
Board of Directors approved the amendment and restatement of the 1994 Stock
Option Plan (as amended and restated, the "Amended and Restated 1994 Stock
Option Plan") to increase the number of shares authorized for issuance under the
1994 Stock Option Plan from 100,000 to 400,000. The Amended and Restated 1994
Stock Option Plan and the grant of certain options under the Amended and
Restated 1994 Stock Option Plan to employees and advisors during fiscal 1996
were approved by a vote of the holders of a majority of the Company's
outstanding Common Stock on November 1, 1996. The Amended and Restated 1994
Stock Option Plan is administered by the Compensation Committee, which consists
of the Company's three Outside Directors. Under the Amended and Restated 1994
Stock Option Plan, the term "Outside Directors" means only those directors of
the Company or a subsidiary of the Company who are not regular salaried
employees of either the Company or a subsidiary as of the date the option is
granted. The Compensation Committee has the sole authority to interpret the
Amended and Restated 1994 Stock Option Plan; provided that, (i) the exercise
price of each option granted under the Amended and Restated 1994 Stock Option
Plan may not be less than the fair market value of the Common Stock on the day
of the grant of the option, (ii) the exercise price must be paid in cash and or
stock upon exercise of the option, (iii) no option may be exercisable for more
than ten (10) years after the date of grant, and (iv) no option is transferable
other than by will or the laws of descent and distribution. No option is
exercisable after an optionee who is an employee of the Company ceases to be
employed by the Company or a subsidiary of the Company, subject to the right of
the Compensation Committee to extend the exercise period for not more than 90
days following the date of termination of an optionee's employment. An optionee
who was a director or advisor may exercise his option at any time within 90 days
after such optionee's status as a director or advisor terminates to the extent
he was entitled to exercise such option at the date of termination of his
status. If an optionee's employment is terminated by reason of disability, the
Compensation Committee has the authority to extend the exercise period for not
more than one year following the date of termination of the optionee's
employment or service as an advisor or director. If an optionee dies and shall
hold options not fully exercised, such options may be exercised in whole or in
part within one year of the optionee's death by the executors or administrators
of the optionee's estate or by the optionee's heirs. The vesting period, if
any, specified for each option will be accelerated upon the occurrence of a
change of control or threatened change of control of the Company.
As of the date of this Prospectus, (i) 343,895 options had been issued and
remained outstanding under the Amended and Restated 1994 Stock Option Plan, of
which none had been exercised and 133,895 were currently exercisable, and (ii)
56,105 options remained available for future issuance under the Amended and
Restated 1994 Stock Option Plan.
30
<PAGE>
INDEMNIFICATION AND LIMITATION ON LIABILITY
Section 78.751 of NGCL empowers a corporation to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, except an action by or in the right of the corporation, by reason
of the fact that he or she is or was a director, officer, employee or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with such action,
suit or proceeding if the person indemnified acted in good faith and in a manner
he or she 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 or her conduct was unlawful. In the case of any
action by or in the right of the corporation, no indemnification may be made in
respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation or for amounts paid in settlement to
the corporation unless and only to the extent that the court in which such
action or suit was brought or other court of competent jurisdiction determines
that in view of all the circumstances of the case such person is fairly and
reasonably entitled to indemnity for such expenses as the court shall deem
proper. Section 78.751 further provides that to the extent a director or
officer of a corporation has been successful in the defense of any action, suit
or proceeding referred to above or in the defense of any claim, issue or matter
therein, he or she shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him or her in connection therewith.
The Articles of Incorporation, as amended (the "Articles"), and By-Laws of the
Company provide, in effect, that to the extent and under the circumstances
permitted by Section 78.751 of the NGCL and subject to certain conditions, the
Company shall indemnify any person who was or is a party or is threatened to be
made a party to or is involved in any action, suit or proceeding of the type
described above by reason of the fact that he or she is or was a director or
officer of the Company or is or was serving at the request of the Company as a
director, officer, employee or agent of another corporation. Reference is made
to the Articles and to the Company's By-laws, as amended, both of which have
been filed as Exhibits to the Registration Statement of which this Prospectus is
a part.
The indemnification provisions set forth in the Articles and the Company's By-
laws provide for broad indemnification under Nevada law with no express
exclusion for liabilities arising under or in connection with the Securities Act
of 1933, as amended (the "Securities Act"). 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 Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. At
present, there is no pending litigation or proceeding involving a director or
officer of the Company in which indemnification is required or permitted, and
the Company is not aware of any threatened litigation or proceeding that may
result in a claim for such indemnification.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Set forth below is a description concerning transactions which may not otherwise
be described herein by and between the Company and/or its affiliates and other
persons or entities affiliated with the Company or its affiliates. The Company
is of the view that each of such transactions was on terms no less favorable to
the Company than would otherwise have been available to the Company in
transactions with unaffiliated third parties, if available at all.
Michael R. Budagher owns 52% of SASR. In 1990, SASR acquired approximately 200
microwave towers and related land from Western Union for future sale. SASR has
sold approximately 95% of these towers. The Company did not transact any
business with SASR during fiscal 1996. However, in fiscal 1994 and 1995, the
Company received $13,974 and $1,200, respectively, for services provided to SASR
and, for these respective fiscal years, provided management services to SASR in
exchange for the use of the certain equipment in the amount of $25,700 and none.
The relationship with SASR is expected to be negligible in the future.
As of the date of this Prospectus, Michael R. Budagher owned 50% of SCC. SCC
provides lead abatement services and finishes or refinishes metal structures,
principally elevated water towers. During the years ended June 30, 1994, 1995
and 1996, the Company had paid $17,449, $170,260 and $401,587, respectively, for
services provided by SCC to the Company. SCC operations are primarily involved
in specialized coatings and lead abatement activities. Historically, its
activities required skills that were different from those required by the
Company and included an element of environmental risk that the Company's Board
of Directors did not want the Company to be involved with. In recent years,
providers of wireless communications services have increasingly sought to locate
wireless transmitting and receiving facilities on these elevated
31
<PAGE>
water towers, often necessitating certain lead abatement procedures to be
conducted before these facilities could be installed. As a result, the demand
for services of the type provided by SCC has increased and the skills required
to conduct those activities have become increasingly similar to those needed to
conduct the wireless infrastructure building and implementation services
provided by the Company. The Company believes this trend towards locating
wireless transmitting and receiving facilities on these elevated water towers
and possibly other existing elevated structures, will continue in the future.
Consequently, the Company anticipates that its relationship with SCC will
continue in the indefinite future. In addition, although the Company has no
agreement and has conducted no negotiations with the principles of SCC regarding
a possible acquisition of SCC by the Company, the Company may seek to acquire
SCC in the future.
As of the date of this Prospectus, Bruce P. Budagher, vice president of
Specialty Constructors and the brother of Michael R. Budagher, and Sheril E.
Budagher, the spouse of Michael R. Budagher, owned all of the outstanding stock
of SMI. Prior to August, 1996, Kari A. Young, who resigned on June 14, 1996 as
Chief Financial Officer, Secretary, Assistant Treasurer and a Director of the
Company, owned 1/3 of the outstanding stock of SMI. Ms. Young's SMI stock was
repurchased by SMI as of August, 1996. SMI manufactures devices that ground
electric transmission lines. The Company buys these devices from SMI for use
in connection with certain of the Company's wireless infrastructure building
operations. During the 1994, 1995 and 1996 fiscal years, the Company purchased
$6,403, $12,065 and $13,285, respectively, of SMI products. This relationship is
expected to continue in the indefinite future.
The Company has utilized contract labor from Budagher's Nursery, Inc., a company
wholly owned by William J. Budagher, a brother of Michael R. Budagher and Bruce
P. Budagher. The Company paid $192,493, $126,884 and $92,391 for contract labor
services provided by Budagher's Nursery, Inc. for the years ended June 30, 1994,
1995 and 1996, respectively.
The Company leases its office building from Michael R. Budagher and the spouse
of Michael R. Budagher. The building has 6,400 square feet for which the
Company leases 5,400 square feet and pays $16,800 annually for the space. See
"BUSINESS-Facilities." Management of the Company believes that the rent for the
space is at least as favorable as could have been negotiated in an arms length
transaction. The Company also leases a vehicle from Bruce P. Budagher.
There are numerous conflicts of interest between the Company and its affiliates,
particularly between the Company and entities that are affiliated with
individuals having executive responsibility for the Company. Typically, these
include the possibility of channeling business to entities other than the
Company that is more appropriately business of the Company, the Company paying
excessive prices to affiliated entities, or the Company subsidizing the
affiliated entity by charging less than market rates. The Company has extensive
experience in costing the services it provides, and management of the Company
believes that the Company's costing to affiliated entities is consistent with
its general costing. Similarly, products or services received by the Company
from affiliated entities have been at substantially the same rates charged other
enterprises. The Company has compared these rates prior to engagement with
independent quotes or with rates charged by other entities. None of the
agreements or arrangements with affiliates are subject to adjustment.
While there has been no independent determination as to the fairness of the
Company's transactions with affiliated entities, the Company's Board of
Directors has reviewed these transactions and has found the terms of these
transactions to be fair and reasonable to the Company. Management of the Company
believes that the transactions with affiliated entities that occurred in the
past have been fair and reasonable to the Company and that practical measures
have been taken to assure that any such transactions in the future will be fair
and reasonable to the Company. Nonetheless, almost all transactions between the
Company and affiliated entities have been with entities that are controlled by
Michael R. Budagher. As of the date of this Prospectus, Michael R. Budagher
controls the Company. As a result of this control, Michael R. Budagher has the
legal power to elect directors and thus elect those that set the Company's
policies, including policies involving related party transactions, that is,
should Michael R. Budagher determine to have a different policy regarding
transactions with affiliates, he has the power to elect directors that would
implement that new policy. Michael R. Budagher has no intent to have any
transaction with an affiliated entity that is not fair and reasonable to the
Company, now or in the future. See "RISK FACTORS-Concentration of Ownership."
Each of Michael R. Budagher and Bruce P. Budagher have represented to the
Company that, notwithstanding his equity or other interest in the businesses
other than the Company described herein, he intends to devote substantially all
of his efforts during regular business hours to the business of the Company.
During the fiscal year ended June 30, 1996, the Company engaged in transactions
with the law firm with which Mr. Farmer is associated. During the fiscal year
ended June 30, 1996, the Company paid $32,665 to the law firm of Moses, Dunn,
Farmer and Tuthill, P.C. Mr. Farmer is a stockholder, officer and director of
that firm and a Director of the Company.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information, as of December 31, 1996, with
respect to the beneficial ownership of Common Stock by (i) each director of the
Company, (ii) each executive officer of the Company, (iii) each person known by
the Company to own beneficially 5% or more of the Common Stock, and (iv) all
directors and executive officers of the Company as a group. Unless otherwise
noted, the persons listed below have sole voting and investment power with
respect to such shares.
<TABLE>
<CAPTION>
PERCENTAGE BENEFICIALLY OWNED(2)
--------------------------------
NAME AND ADDRESS OF BENEFICIAL NUMBER OF SHARES
OWNER BENEFICIALLY OWNED(1) BEFORE OFFERING AFTER OFFERING(3)
--------------------- --------------- -----------------
<S> <C> <C> <C>
Michael R. Budagher(4)
12001 Hwy 14 North
Cedar Crest, New Mexico 87008 2,355,000 56.1% 48.6%
Bruce P. Budagher(5)
12001 Hwy 14 North
Cedar Crest, New Mexico 87008 327,750 7.8% 6.7%
John D. Emery(6)
Corporate Development Center, Inc.
1613 University Blvd. 11,500 * *
Albuquerque, New Mexico 87102
Terry D. Farmer
Moses, Dunn, Farmer & Tuthill, P.C.
612 First Street N.W.
Albuquerque, New Mexico 87102 10,000 * *
Jon D. Word(6)
10526 City Lights Drive, N.E.
Albuquerque, New Mexico 87111 10,000 * *
All directors and executive
officers as a group (4 persons)(7) 2,714,250 64.1% 55.6%
</TABLE>
_______________________
*Less than 1%.
(1) Unless otherwise noted and subject to community property laws, where
applicable, the persons named in the table above have sole voting and
investment power with respect to all shares of common stock shown as
beneficially owned by them.
(2) Computations of percent of the outstanding shares of Common Stock treat as
outstanding all shares issuable upon exercise of options exercisable within
60 days held by the particular beneficial owner that are included in the
number of shares beneficially owned by such beneficial owner but otherwise
assume no exercise of outstanding options to purchase shares of Common
Stock granted pursuant to the Company's Amended and Restated 1994 Stock
Option Plan and Outside Directors' Stock Option Plan (See "MANAGEMENT-
Amended and Restated 1994 Stock Option Plan" and "MANAGEMENT-Outside
Directors' Stock Option Plan").
(3) Assumes exercise of all (i) the Underwriters' Warrants, (ii) the Warrants
included in the Units underlying the Underwriters' Warrants and (iii) the
Warrants Called for Redemption, although there can be no assurance that all
such securities will be exercised. See Note (2) under "PROSPECTUS SUMMARY-
The Offering" and "RISK FACTORS-Underwriters' Warrants; Risk of Further
Dilution."
(4) Consists entirely of shares owned by the Budagher Family Limited
Partnership #1 (the "Budagher Family Partnership") of which Michael R.
Budagher is the sole general partner. As the sole general partner of the
Budagher Family Partnership, Michael R. Budagher has sole voting and
investment power with respect to these shares.
(5) Includes 27,500 shares subject to options exercisable within 60 days.
(6) Includes 10,000 shares subject to options exercisable within 60 days.
(7) Includes 20,000 shares subject to options exercisable within 60 days.
33
<PAGE>
DESCRIPTION OF SECURITIES
Upon consummation of this offering, the Company's authorized capital stock will
consist of 10,000,000 shares of Common Stock, par value $.01 per share, of which
4,845,713 shares will be outstanding, assuming (i) no exercise of outstanding
options to purchase shares of Common Stock granted pursuant to the Company's
Amended and Restated 1994 Stock Option Plan and Outside Directors' Stock Option
Plan (See "RISK FACTORS-Outstanding Options; Risk of Further Dilution,"
"MANAGEMENT-Amended and Restated 1994 Stock Option Plan" and "MANAGEMENT-Outside
Directors' Stock Option Plan."), and (ii) exercise of all (a) the Underwriters'
Warrants, (b) the Warrants included in the Units underlying the Underwriters'
Warrants and (c) the Warrants Called for Redemption although there can be no
assurance that all such securities will be exercised. See Note (2) under
"PROSPECTUS SUMMARY-The Offering" and "RISK FACTORS-Underwriters' Warrants; Risk
of Further Dilution."
COMMON STOCK
Holders of Common Stock are entitled to one vote for each share held in the
election of directors and on all other matters submitted to a vote of
stockholders. Cumulative voting of shares of Common Stock is prohibited.
Accordingly, holders of a majority of the shares of Common Stock entitled to
vote in any election of directors may elect all of the directors standing for
election.
Holders of Common Stock are entitled to receive ratably such dividends, if any,
as may be declared by the Board of Directors out of funds legally available
therefor. See "Dividend Policy." Upon the liquidation, dissolution or winding
up of the Company, the holders of Common Stock are entitled to receive ratably
the net assets of the Company available after payment of all debts and other
liabilities. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights. The outstanding shares of Common Stock are,
and the shares offered by the Company in this offering will be, when issued and
paid for, fully paid and nonassessable.
WARRANTS
The Warrants have been issued in registered form under, governed by, and subject
to the terms of a warrant agreement (as amended, the "Warrant Agreement")
between the Company, American Stock Transfer & Trust Company as warrant agent
(the "Warrant Agent") and H.J. Meyers & Co., Inc., successor to Thomas James &
Associates, Inc. The following statements are brief summaries of certain
provisions of the Warrant Agreement. Copies of the Warrant Agreement may be
obtained from the Company or the Warrant Agent and have been filed with the
Commission as an exhibit to the Registration Statement of which this Prospectus
is a part.
REDEMPTION OF WARRANTS
The Warrant Agreement provides that upon thirty (30) days' written notice the
Company may, at its option, redeem the Warrants then outstanding at $.05 per
Warrant if the closing sales price of the Common Stock on the Pacific Stock
Exchange or such other national trading market on which the Common Stock is then
listed is at least $9.00 per share for ten (10) consecutive trading days (the
"Target Price"). The price of the Common Stock has exceeded the Target Price.
Warrants included in the Units underlying the Underwriters' Warrants are not
subject to redemption by the Company prior to exercise of the Underwriters'
Warrants. As of the date of this Prospectus no Underwriters' Warrants or
Warrants had been exercised and 500,000 Warrants (the "Warrants Called for
Redemption") were outstanding.
The Company has caused a notice of redemption to be sent to the holders of the
Warrants Called for Redemption and set the date for redemption thereof on
_________, 1997 (the "Redemption Date"). All holders of Warrants Called for
Redemption have the right to exercise their Warrants Called for Redemption until
5:00 p.m. New York City time on the __________, 1997, the last business day
preceding the Redemption Date. Warrants Called for Redemption may be exercised
by surrendering, at the corporate office of American Stock Transfer & Trust
Company (the "Warrant Agent") at 40 Wall Street, New York, New York 10005, the
Warrant Certificate evidencing such Warrants Called for Redemption together with
a subscription in the form set forth on the reverse side of the Warrant
Certificate, duly executed, and accompanied by the tender, in U.S. dollars, of
either federal funds or a certified check or bank cashier's check, payable to
the order of the Warrant Agent for the applicable exercise price for the
Warrants Called for Redemption. Any Warrants Called for Redemption not so
exercised will be redeemed for $.05 per Warrant Called for Redemption after the
Redemption Date. Upon exercise of the Underwriters' Warrants, the Company
intends to notify the holders of the Warrants included in the Units underlying
the Underwriters' Warrants so exercised of the Company's intention to redeem
such Warrants as soon as practicable.
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<PAGE>
Any redemption of Warrants, including redemption of the Warrants Called for
Redemption, shall also be subject to the following conditions: (i) the Company
must give, or cause to be given, within fifteen (15) days after the end of the
particular ten (10) consecutive trading days upon which the Redemption Date is
based, a notice to each registered holder of Warrants stating the Company's
intention to redeem the Warrants; (ii) the Company must permit each registered
holder of any Warrant to exercise his Warrant for a period, which may be
extended by the Company in its discretion, of not less than thirty (30) days
following the date of such notice; (iii) within three business days after the
Redemption Date, the Company must deposit with the Warrant Agent sufficient
immediately available funds for the purpose of redeeming the outstanding,
unexercised Warrants being redeemed; and (iv) following the Redemption Date,
holders of unexercised Warrants may surrender their Warrant at the corporate
office of such Warrant Agent at 40 Wall Street, New York, New York 10005, with
the Form of Assignment of the Warrant on the reverse side duly completed and
signed with the signature guaranteed. As soon as practicable after surrender of
the Warrants by the holder, the Warrant Agent shall forward payment of the
redemption price for such Warrants to each said holder by first class or
certified mail, postage pre-paid. The Warrant Agreement provides that after
expiration of the 30-day period following the notice date, each Warrant then
noticed for redemption shall automatically be converted into a right to receive
the redemption price and the Warrant Agent will no longer honor any purported
exercise of such Warrant.
UNDERWRITERS' WARRANTS
In connection with the IPO, in November, 1994, the Company sold the
Underwriter's Warrants to the Representatives for nominal consideration. The
Underwriters' Warrants enable the holders thereof to purchase from the Company
up to 50,000 Units, each Unit consisting of two (2) shares of Common Stock and
one (1) Warrant, at an exercise price of $12.15 per Unit (120% of the price at
which the Units were initially offered to the public in the IPO), until November
3, 1999. The Warrants included in the Units underlying the Underwriters'
Warrants entitle the holders thereof to purchase one (1) share of Common Stock
at an exercise price of $6.00 per share until November 3, 1999 and are identical
to the Warrants Called for Redemption except that the Warrants included in the
Units underlying the Underwriters' Warrants such are not subject to redemption
by the Company prior to exercise of the Underwriters' Warrants. As of the date
of this Prospectus, none of the Underwriters' Warrants have been exercised.
In connection with the issuance of the Underwriters' Warrants, the Company
granted to the Representatives certain demand and incidental registration rights
obligating the Company under certain circumstances to register under the
Securities Act and applicable state securities acts, at the expense of the
Company, the Units underlying the Underwriters' Warrants, the shares of Common
Stock and Warrants included in such Units and the shares of Common Stock
underlying such Warrants. These securities have been included in the
Registration Statement of which this Prospectus is a part in accordance with
these registration rights. There can be no assurance that all the Underwriters'
Warrants or the Warrants included in the Units underlying the Underwriters'
Warrants will be exercised. See "RISK FACTORS-Underwriters' Warrants-Risk of
Further Dilution."
STOCKHOLDER ACTION
Pursuant to the Company's Articles of Incorporation, as amended, with respect to
any action required of or by the holders of the Company's Common Stock, the
affirmative vote of the holders of a majority of the issued and outstanding
shares of Common Stock entitled to vote thereon is sufficient to authorize,
affirm, ratify or consent to such act or action, except as otherwise provided by
law.
Under the NGCL, stockholders may take certain actions without the holding of a
meeting by a written consent or consents signed by the holders of a majority of
the outstanding shares of the capital stock of the Company entitled to vote
thereon. Prompt notice of the taking of any action without a meeting by less
than unanimous consent of the stockholders is required to be given to those
stockholders who do not consent in writing to the action. The purposes of this
provision are to facilitate action by stockholders and to reduce the corporate
expense associated with annual and special meetings of stockholders. Pursuant to
the rules and regulations of the Commission, if stockholder action is taken by
written consent, the Company will be required to send each stockholder entitled
to vote on the applicable matter, but whose consent was not solicited, an
information statement containing information substantially similar to that which
would have been contained in a proxy statement.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock and Warrants is American
Stock Transfer & Trust Company, 40 Wall Street, New York, New York 10005.
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<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, assuming all the Warrants Called for
Redemption, the Underwriters' Warrants and the Warrants included in the Units
underlying the Underwriters' Warrants are exercised, the Company will have
4,845,713 shares of Common Stock outstanding. All of the securities sold in
this offering will be freely transferable without further restriction or
registration under the Securities Act, except for any securities purchased by an
"affiliate" of the Company (as defined under the Securities Act). Additional
shares of Common Stock may become eligible for sale in the public market from
time to time upon exercise of warrants and stock options. See "RISK FACTORS-
Outstanding Options; Risk of Further Dilution" and "RISK FACTORS-Underwriters'
Warrants; Risk of Further Dilution.". At the date of this Prospectus, there
were outstanding 4,195,713 shares of Common Stock, 2,875,713 of which shares are
"restricted securities" under applicable securities laws. Additional shares of
Common Stock may become eligible for sale in the public market from time to time
upon exercise of warrants and stock options.
Holders of restricted securities must comply with the requirements of Rule 144
in order to sell their shares in the open market. In general, under Rule 144 as
currently in effect, any affiliate of the Company and any person (or persons
whose sales are aggregated) who has beneficially owned his or her restricted
shares for at least two years, would be entitled to sell in the open market
within any three-month period a number of shares that does not exceed the
greater of: (i) 1% of the then outstanding shares of the Company's Common Stock
(approximately 46,957 shares immediately after this offering); or (ii) the
average weekly trading volume reported on the Nasdaq System during the four
calendar weeks preceding such sale. Sales under Rule 144 are also subject to
certain limitations on manner of sale, notice requirements, and availability of
current public information about the Company. Nonaffiliates who have held their
restricted shares for three years are entitled to sell their shares under Rule
144 without regard to any of the above limitations, provided they have not been
affiliates of the Company for the three months preceding such sale.
As of the date of this Prospectus, (i) an aggregate of 400,000 shares of Common
Stock had been reserved for issuance to employees of the Company pursuant to the
Amended and Restated 1994 Stock Option Plan, (ii) 343,895 options had been
issued and remained outstanding under the Amended and Restated 1994 Stock Option
Plan, of which none had been exercised and 133,895 were currently exercisable,
and (iii) 56,105 options remained available for future issuance under the
Amended and Restated 1994 Stock Option Plan. In addition, at the date of this
Prospectus, (i) an aggregate of 40,000 shares of Common Stock has been reserved
for issuance to Directors of the Company pursuant to the Outside Directors'
Stock Option Plan, (ii) 30,000 options had been issued under the Outside
Directors' Stock Option Plan, of which 10,000 had been exercised and 20,000
remained outstanding and currently exercisable, and (iii) 20,000 options
remained available for future issuance under the Outside Directors' Stock Option
Plan. See "RISK FACTORS-Outstanding Options; Risk of Further Dilution"
In addition, at the date of this Prospectus, an aggregate of 150,000 shares of
Common Stock has been reserved for issuance in connection with the issuance of
Units issuable upon exercise of the Underwriter's Warrants and the exercise of
the Redeemable Warrants included therein. See "DESCRIPTION OF SECURITIES-
Underwriters' Warrants," "RISK FACTORS-Underwriters' Warrants; Risk of Further
Dilution" and UNDERWRITERS' WARRANT SECURITIES OFFERING."
The Company can make no prediction as to the effect, if any, that sales of
shares of Common Stock or the availability of shares for sale will have on the
market price of Common Stock. Nevertheless, sales of significant amounts of
Common Stock could adversely affect the prevailing market price of Common Stock,
as well as impair the ability of the Company to raise capital through the
issuance of additional equity securities.
PLAN OF DISTRIBUTION
No underwriters are employed with respect to the exercise of the Warrants Called
for Redemption, the Underwriters' Warrants or the Warrants included in the Units
underlying the Underwriters' Warrants, however, pursuant to the terms of the
Warrant Agreement, the Company is required to pay a fee equal to 7% of the
Exercise Price of the Warrants Called for Redemption to H.J. Meyers & Co., Inc.
if the following conditions are met: (i) the market price of the Company's
Common Stock is greater than the then Exercise Price of the Warrants Called for
Redemption, (ii) the exercise of the Warrant Called for Redemption was solicited
by a member of the National Association of Securities Dealers, Inc. ("NASD") as
designated in writing on the Warrant Certificate Subscription Form, (iii) the
Warrant Called for Redemption was not held in a discretionary account, (iv)
disclosure of compensation arrangements was made both at the time of the
original offering and at the time of exercise; and (v) the solicitation of the
exercise of the Warrant Called for Redemption was not in violation of Rule 10b-6
(as such rule or any successor rule may be in effect as of such time of
exercise) promulgated under the Securities
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<PAGE>
Exchange Act of 1934. The Company anticipates that the shares of Common Stock
described in this Prospectus and issuable upon exercise of the Warrants Called
for Redemption, the Underwriters' Warrants and the Warrants included in the
Units underlying the Underwriters' Warrants, will be offered for sale by such
holders from time to time in the open market. None of these securities are being
offered through underwriters and no such arrangements have been made with any
outside broker, dealer, or underwriter for the resale of such securities. The
Company will not receive any proceeds from the sale of the shares of Common
Stock received by the holders of the Warrants Called for Redemption, the
Underwriters' Warrants or the Warrants included in the Units underlying the
Underwriters' Warrants upon exercise thereof; however, it will receive proceeds
from the exercise thereof, estimated at $3,627,500. There can be no assurance
that all the Warrants Called for Redemption, the Underwriters' Warrants or the
Warrants included in the Units underlying the Underwriters' Warrants will be
exercised.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed upon
for the Company by Jordaan, Howard & Pennington, PLLC, Dallas, Texas. Jeffrey A.
Howard, a member of Jordaan, Howard & Pennington, PLLC, owns options to purchase
60,000 shares of Common Stock under the Plan, 20,000 of which are exercisable as
of the date of this Prospectus.
EXPERTS
The consolidated financial statements of Specialty Teleconstructors, Inc. as of
June 30, 1996 and 1995 and for the fiscal years ended June 30, 1996 and 1995,
have been included herein and in the Registration Statement in reliance upon the
report of KPMG Peat Marwick LLP, independent certified public accountants,
appearing elsewhere herein, and upon the authority of said firm as experts in
accounting and auditing.
37
<PAGE>
INDEX TO FINANCIAL STATEMENTS
SPECIALTY TELECONSTRUCTORS, INC.
<TABLE>
<CAPTION>
UNAUDITED INTERIM FINANCIAL STATEMENTS Page
----
<S> <C>
Consolidated Balance Sheets at December 31, 1996 and 1995 (Unaudited) F-2
Consolidated Statements of Earnings for the six months ended December 31, 1996 and 1995 (Unaudited) F-3
Consolidated statements of Cash Flows for the six months ended December 31, 1996 and 1995 (Unaudited) F-4
Consolidated Statements of Stockholders' Equity for the six-month periods ended December 31, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-7
AUDITED ANNUAL FINANCIAL STATEMENTS
Report of Independent Auditors F-9
Consolidated Balance Sheets at June 30, 1996 and 1995 F-10
Consolidated Statements of Earnings for the fiscal years ended June 30, 1996 and 1995 F-11
Consolidated Statements of Stockholders' Equity for the fiscal years ended June 30, 1996 and 1995 F-12
Consolidated Statements of Cash Flows for the fiscal years ended June 30, 1996 and 1995 F-13
Notes to Consolidated Financial Statements F-15
</TABLE>
F-1
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
Consolidated Balance Sheets
December 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
Assets
------
1996 1995
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 644,434 $ 4,045,309
Contracts receivable 8,101,699 3,068,837
Costs and estimated earnings in
excess of billings on
uncompleted contracts 1,651,804 456,650
Other 331,820 18,000
----------- -----------
Total current assets 10,693,757 7,588,796
Property and equipment, net 2,884,360 1,295,139
Other assets 383,375 237,593
----------- -----------
$13,961,492 $ 9,121,528
=========== ===========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Short-term notes payable $ 923,928 $ 600,000
Current installments of notes
payable to banks 60,792 74,384
Trade accounts payable 3,179,979 574,957
Billings in excess of costs and
estimated earnings on
uncompleted contracts 295,675 241,193
Accrued expenses 462,766 517,066
Current income taxes - 119,089
Deferred income taxes 186,611 -
----------- -----------
Total current liabilities 5,109,751 2,126,689
Deferred income taxes 232,537 684,747
Notes payable to banks, excluding
current installments 667,886 177,201
----------- -----------
Total liabilities 6,010,174 2,988,637
----------- -----------
Stockholders' equity:
Common Stock, $0.01 par value,
authorized 10,000,000 shares;
issued, 4,185,713 in 1996 and
4,092,308 in 1995 41,857 40,923
Additional paid-in-capital 4,830,935 4,166,359
Retained earnings 3,078,526 1,925,609
----------- -----------
Total stockholders' equity 7,951,318 6,132,891
----------- -----------
$13,961,492 $ 9,121,528
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
Consolidated Statements of Earnings
For the six months ended December 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Contract revenues
earned $14,591,735 $ 6,487,722
Cost of revenues
earned 11,956,233 5,127,533
----------- -----------
Gross profit 2,635,502 1,360,189
Selling, general
and administrative
expenses 1,380,270 781,396
----------- -----------
Earnings from
operations 1,255,232 578,793
----------- -----------
Other income (deductions):
Interest income 30,490 116,790
Interest expense (55,743) (36,012)
Other, net 58 (9,614)
----------- -----------
(25,195) 71,164
Earnings before
income taxes 1,230,037 649,957
Income taxes 472,000 240,482
----------- -----------
Net earnings $ 758,037 $ 409,475
=========== ===========
Earnings per common share and common equivalent shares:
Net earnings $ .18 $ .10
=========== ===========
Weighted average common shares
outstanding 4,261,264 4,092,308
=========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
Consolidated Statements of Cash Flows
For the six months ended December 31, 1996 and 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings 758,037 409,475
Adjustments to reconcile net earnings
to net cash provided (used)by operating
activities:
Depreciation of property 436,698 124,934
and equipment
Amortization of goodwill 63,729 23,442
Gain(loss)on sale of equipment - 12,000
Changes in certain assets
and liabilities:
Contracts receivable (1,458,645) (609,397)
Costs and estimated earnings in
excess of billings on uncompleted contracts (552,365) (278,050)
Other assets (152,915) 124,252
Trade accounts payable 1,025,406 371,952
Billings in excess of costs and
estimated earnings on uncompleted contracts 59,211 (7,807)
Accrued expenses (293,359) 241,993
Current income taxes (467,725) 119,089
Deferred income taxes (148,877) (101,108)
----------- -----------
Net cash provided (used)by
operating activities (730,805) 430,755
----------- -----------
Cash flows from investing activities:
Purchases of property
and equipment (896,559) (427,392)
Cash expended in acquisition
of Data Cell Systems, Inc. (160,000) -
Other, net - 1,500
----------- -----------
Net cash used in
investing activities (1,056,559) (425,892)
----------- -----------
Cash flows from financing activities:
Line of credit with bank, net (976,072) -
Borrowings on notes payable to banks 586,466 -
Principal payments on
notes payable to banks (42,065) (46,791)
----------- -----------
Net cash used in financing
activities (431,671) (46,791)
----------- -----------
Net decrease in cash and cash
equivalents (2,219,035) (41,908)
Cash and cash equivalents at beginning of period 2,863,469 4,087,217
----------- -----------
Cash and cash equivalents at end of period $ 644,434 $ 4,045,309
=========== ===========
</TABLE>
F-4
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
Consolidated Statements of Cash Flows
For the six months ended December 31, 1996 and 1995
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Supplemental disclosure of cash flow information:
Interest paid $ 55,743 $ 36,012
========== ==========
Taxes paid $1,088,602 $ 9,060
========== ==========
Noncash transactions -
acquisition of vehicles in exchange for debt $ - $ 241,455
========== ==========
Data Cell Systems, Inc. Acquisition:
Consisting of:
Accounts receivable 200,000 -
Property and equipment 267,000 -
Other current assets 100,000 -
Goodwill 258,510 -
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
SPECIALTY TELECONSTRUCTORS,INC.
Consolidated Statements of Changes in Stockholders' Equity
For the six months ended December 31, 1996 and 1995
(unaudited)
<TABLE>
<CAPTION>
Common Stock
------------
Additional Retained
Shares Amount Paid-in-capital earnings Total
--------- ------- --------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Balances as of
June 30, 1995 4,092,308 $40,923 $4,166,359 $1,516,134 $5,723,416
Net earnings - - - 409,475 409,475
--------- ------- ---------- ---------- ----------
Balances as of
December 31, 1995 4,092,308 $40,923 $4,166,359 $1,925,609 $6,132,891
========= ======= ========== ========== ==========
Balances as of
June 30, 1996 4,092,308 $40,923 $4,166,359 $2,320,489 $6,527,771
Issuance of Common Shares
to acquire Data Cell Systems,
Inc. 93,405 934 664,576 - 665,510
Net earnings - - - 758,037 758,037
--------- ------- ---------- ---------- ----------
Balances as of
December 31, 1996 4,185,713 $41,857 $4,830,935 $3,078,526 $7,951,318
========= ======= ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
Notes to Consolidated Financial Statements
December 31, 1996 and 1995
(Unaudited)
Note 1: Basis of Presentation
The notes to the consolidated financial statements do not present all
disclosures required under generally accepted accounting principles but instead,
as permitted by Securities and Exchange Commission regulations, presume that
users of the interim financial statements have read or have access to the June
30, 1996 audited consolidated financial statements and that the adequacy of
additional disclosure needed for a fair presentation may be determined in that
context.
The financial information included herein reflects all adjustments (consisting
of normal recurring adjustments) which are, in the opinion of management,
necessary to a fair presentation of the results for interim periods. The
results of operations for the six-month periods ended December 31, 1996 and 1995
respectively, are not necessarily indicative of the results to be expected for
the full year.
Note 2: Acquisition
As of October 30, 1996, a wholly-owned subsidiary of Specialty Teleconstructors,
Inc., purchased substantially all the assets of Data Cell Systems, Inc., an
Arizona corporation, in exchange for $160,000 in cash and the delivery of 93,405
shares of common stock of the Company. The purchase price of the assets
acquired may be increased by an amount not to exceed $200,000 in the aggregate
if certain pre-tax earnings targets are achieved by the Company during the three
fiscal years immediately following the date of the acquisition and if certain
other conditions are met. The transaction was accounted for by the Company as a
purchase.
F-7
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Consolidated Financial Statements
June 30, 1996 and 1995
(With Independent Auditors' Report Thereon)
F-8
<PAGE>
KPMG Peat Marwick LLP
6565 Americas Parkway NE, #700
Albuquerque, New Mexico 87190
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Specialty Teleconstructors, Inc.:
We have audited the accompanying consolidated balance sheets of Specialty
Teleconstructors, Inc. and subsidiaries as of June 30, 1996 and 1995, and the
related consolidated statements of earnings, stockholders' equity, and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Specialty
Teleconstructors, Inc. and subsidiaries as of June 30, 1996 and 1995, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Albuquerque, New Mexico
August 23, 1996
F-9
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, 1996 and 1995
<TABLE>
<CAPTION>
Assets 1996 1995
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,863,469 4,086,506
Contracts receivable, net 6,443,054 2,550,910
Income tax receivable - 208,121
Costs and estimated earnings in excess of billings on
uncompleted contracts (note 2) 1,063,439 178,600
Other 113,781 -
----------- ---------
Total current assets 10,483,743 7,024,137
Property and equipment, net (notes 3 and 5) 2,157,499 800,465
Other assets, net 153,718 180,783
----------- ---------
$12,794,960 8,005,385
=========== =========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Trade accounts payable $ 2,154,573 236,238
Short-term notes payable (note 5) 1,900,000 600,000
Billings in excess of costs and estimated earnings on
uncompleted contracts (note 2) 236,464 249,000
Accrued expenses 756,125 223,956
Current installments of notes payable to banks (note 5) 60,792 61,674
Current income taxes (note 7) 467,725 -
Deferred income taxes (note 7) 186,611 217,830
----------- ---------
Total current liabilities 5,762,290 1,588,698
Deferred income taxes (note 7) 381,414 568,024
Notes payable to banks, excluding current installments (note 5) 123,485 125,247
----------- ---------
Total liabilities 6,267,189 2,281,969
----------- ---------
Stockholders' equity:
Common stock, $.01 par value. Authorized 7,500,000 shares;
issued 4,092,308 shares in 1996 and 1995 (notes 6 and 11) 40,923 40,923
Additional paid-in capital 4,166,359 4,166,359
Retained earnings 2,320,489 1,516,134
----------- ---------
Total stockholders' equity 6,527,771 5,723,416
Commitments and contingency (note 4)
----------- ---------
$12,794,960 8,005,385
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-10
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Contract revenues earned (note 8) $16,758,629 8,414,590
Cost of revenues earned (notes 2 and 10) 13,986,351 6,989,788
----------- ---------
Gross profit 2,772,278 1,424,802
Selling, general and administrative expenses 1,700,854 1,050,666
----------- ---------
Earnings from operations 1,071,424 374,136
----------- ---------
Other income (deductions):
Gain (loss) on sale of equipment (5,112) 13,392
Interest income 219,126 169,530
Interest expense (26,618) (11,384)
Other, net 17,933 2,963
----------- ---------
205,329 174,501
----------- ---------
Earnings before income taxes 1,276,753 548,637
Income taxes (note 7) 472,398 208,482
----------- ---------
Net earnings $ 804,355 340,155
=========== =========
Earnings per common and common equivalent share $ .20 .09
=========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-11
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
Common stock Additional
------------ paid-in Retained
Shares Amount capital earnings Total
------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1994 3,000,000 $30,000 - 1,187,052 1,217,052
Issuance of common stock and
warrants to acquire common
stock 1,000,000 10,000 4,091,472 - 4,101,472
Adjustment for Specialty
Combined Resources, Inc.
pooling of interests (note 11) 92,308 923 24,000 (11,073) 13,850
Noncash compensation - - 50,887 - 50,887
Net earnings - - - 340,155 340,155
--------- ------ --------- --------- ---------
Balance at June 30, 1995 4,092,308 40,923 4,166,359 1,516,134 5,723,416
Net earnings - - - 804,355 804,355
--------- ------ --------- --------- ---------
Balance at June 30, 1996 4,092,308 $40,923 4,166,359 2,320,489 6,527,771
========= ======= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-12
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended June 30, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 804,355 340,155
Adjustments to reconcile net earnings to net cash
used in operating activities:
Depreciation of property and equipment 325,190 142,883
Amortization of goodwill 94,418 15,112
Loss (gain) on sale of equipment 5,112 (13,392)
Changes in certain assets and liabilities:
Contracts receivable (3,892,144) (1,204,185)
Income tax receivable 208,121 (178,136)
Costs and estimated earnings in excess of billings on
uncompleted contracts (884,839) 17,000
Other assets (181,134) (195,895)
Trade accounts payable 1,918,335 189,331
Billings in excess of costs and estimated earnings on
uncompleted contracts (12,536) 232,200
Accrued expenses 532,169 61,177
Current income taxes 467,725 (9,800)
Deferred income taxes (217,829) 238,818
----------- ----------
Net cash used in operating activities (833,057) (364,732)
----------- ----------
Cash flows from investing activities:
Proceeds from sales of property and equipment - 16,951
Purchases of property and equipment (1,687,336) (354,943)
----------- ----------
Net cash used in investing activities (1,687,336) (337,992)
----------- ----------
Cash flows from financing activities:
Line of credit with bank, net 1,300,000 600,000
Borrowings from notes payable to bank 88,979 -
Principal payments on notes payable to banks (91,623) (50,080)
Proceeds from sale of common stock and warrants to acquire
common stock - 5,062,500
Payment of registration costs associated with initial public
offering of common stock - (844,166)
----------- ----------
Net cash provided by financing activities 1,297,356 4,768,254
----------- ----------
Net increase (decrease) in cash and
cash equivalents (1,223,037) 4,065,530
Cash and cash equivalents at beginning of year 4,086,506 20,976
----------- ----------
Cash and cash equivalents at end of year $ 2,863,469 4,086,506
=========== ==========
</TABLE>
(Continued)
F-13
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Supplemental disclosure of cash flow information:
Interest paid $ 26,618 11,384
========= ========
Taxes paid $ - 188,815
========= ========
Noncash transactions - acquisition of vehicles in $ - 117,000
exchange for debt ========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-14
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) Description of Business
-----------------------
Specialty Teleconstructors, Inc. and its wholly owned subsidiaries
(the Company) are located in Cedar Crest, New Mexico. The Company
designs, builds, installs, modifies and maintains (collectively,
"wireless infrastructure building and implementation services")
wireless communications transmitting and receiving facilities
primarily for providers of wireless communications services. In
addition, the Company (i) provides electrical design, engineering, and
testing services (collectively, "wireless infrastructure design and
engineering services") and site acquisition and evaluation services
("site acquisition services") in connection with the installation and
relocation of wireless communications facilities. The Company also
manufactures and sells unmanned communications shelters designed to be
located adjacent to wireless transmitting and receiving facilities to
house electrical equipment associated with such facilities. The
Company's customers are located throughout the country.
(b) Principles of Consolidation
---------------------------
The consolidated financial statements include the financial statements
of Specialty Teleconstructors, Inc. and its wholly owned subsidiaries,
Specialty Constructors, Inc., Specialty Acquisitions, Inc., Specialty
Management, Inc., Specialty Combined Resources, Inc. and Specialty
Fortress, Inc. The Company operates under the name of Specialty
Constructors. All significant intercompany balances and transactions
have been eliminated in consolidation.
(c) Contract Revenue and Cost Recognition
-------------------------------------
Revenues from fixed-price construction contracts are recognized on the
percentage-of-completion method. Contract costs include all direct
material and labor costs and those indirect costs related to contract
performance. Selling, general and administrative costs are charged to
expense as incurred. Provisions for estimated losses on uncompleted
contracts are made in the period in which such losses are determined.
"Costs and estimated earnings in excess of billings on uncompleted
contracts" represents revenues recognized in excess of amounts billed.
"Billings in excess of costs and estimated earnings on uncompleted
contracts" represents billings in excess of revenues recognized.
(d) Statements of Cash Flows
------------------------
For purposes of statements of cash flows, the Company considers all
highly liquid debt instruments with original maturities of three
months or less to be cash equivalents.
F-15
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(e) Property and Equipment
----------------------
Property and equipment are stated at cost. Depreciation on property
and equipment is provided on a straight-line basis over the estimated
useful lives of the assets ranging from 3 to 10 years.
(f) Uses 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 those estimates.
(g) Goodwill
--------
The excess of purchase price over the value of net assets acquired is
included in other assets and is amortized on a straight-line basis
over the estimated benefit period from 2 to 5 years.
The Company periodically evaluates potential impairment of goodwill,
based on the intangible asset which gave rise to the goodwill and the
recoverability period involved. Any impairments would be recognized in
operating results in the period in which a permanent impairment
occurs.
(h) Income Taxes
------------
The Company uses the asset and liability method to account for income
taxes. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and tax
credit carryforwards. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(i) Earnings Per Common Share
-------------------------
Earnings per common and common equivalent share are computed by
dividing net income applicable to common stock by the total of the
weighted average number of common shares outstanding and the
additional dilutive effect of stock options during the period. The
dilutive effect of outstanding stock options is computed using the
greater of the closing price or the average market price of the
Company's common stock for the period.
(Continued)
F-16
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The number of shares used in the earnings per share computation at
June 30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Weighted average common shares
outstanding $4,092,308 3,747,103
Weighted average common share
equivalents 12,028 3,703
---------- ---------
$4,104,336 3,750,806
========== =========
</TABLE>
(j) Financial Instruments
---------------------
Statement of Financial Accounting Standards No. 107, Disclosures about
----------------------------------------------------------------------
Fair Values of Financial Instruments, requires the fair value of
financial instruments be disclosed. The Company's financial
instruments are accounts receivable, accounts payable, and long-term
variable rate debt. The carrying amounts of accounts receivable,
accounts payable, and long-term variable rate debt, because of their
nature, approximate fair value.
(2) Costs and Estimated Earnings on Uncompleted Contracts
-----------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Costs incurred on uncompleted contracts $ 3,837,204 2,334,759
Estimated earnings 2,090,890 1,032,736
Less billings to date (5,101,119) (3,437,895)
$ 826,975 (70,400)
----------- ----------
Included in the accompanying balance sheet:
Costs and estimated earnings in excess
of billings on uncompleted contracts $ 1,063,439 178,600
Billings in excess of costs and estimated
earnings on uncompleted contracts (236,464) (249,000
------------ ----------
$ 826,975 (70,400)
=========== ==========
</TABLE>
(Continued)
F-17
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Property and Equipment
----------------------
Property and equipment consists of the following at June 30:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Vehicles $1,737,789 774,787
Furniture and fixtures 613,383 302,969
Equipment 579,540 207,446
Leasehold improvements 36,347 17,863
---------- ---------
2,967,059 1,303,065
Less accumulated depreciation (809,560) (502,600)
---------- ---------
$2,157,499 800,465
========== =========
</TABLE>
Depreciation expense on property, plant and equipment in 1996 and 1995 was
$325,190 and $142,883, respectively.
(4) Lease Obligations
-----------------
The Company leases its main office building from a shareholder and a
vehicle from an employee of the Company, who is also the shareholder's
brother (see note 10). The Company also leases office space for
regional offices located in Illinois, California, Ohio and Florida
from unrelated parties. These leases are operating leases that expire
over the next four years. The main office building lease contains a
renewal option for five years and requires the Company to pay all
executor costs such as maintenance and insurance. Rental expense for
operating leases was $116,343 and $30,492 for the years ending June
30, 1996 and 1995, respectively.
Future minimum lease payments under noncancelable operating
leases (see note 10) at June 30, 1996 are:
Year ending June 30
-------------------
1997 $63,592
1998 25,954
-------
Total minimum lease payments $89,546
=======
(Continued)
F-18
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Notes Payable to Banks
----------------------
Notes payable to banks consist of the following at June 30:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Short-term notes payable - $2,000,000 line of credit
with bank, interest due monthly at prime rate (8.25% at
June 30, 1996), balance due May 1997; secured by
accounts receivable of a subsidiary $1,900,000 600,000
========== =======
Long-term notes payable:
9.0% note payable in monthly installments of $292,
including interest, with the balance due May
1997; secured by a vehicle $ 5,904 8,720
8.0% note payable in monthly installments of $367,
including interest, with the balance due September
1998; secured by a vehicle 8,618 12,437
8.0% note payable in monthly installments of $773,
including interest, with the balance due January
1999; secured by a vehicle 20,707 28,543
8.2% note payable in monthly installments of $409,
including interest, with the balance due September
1999; secured by a vehicle 13,224 16,803
8.0% note payable in monthly installments of $773,
including interest, with the balance due June
1999; secured by a vehicle 12,153 15,610
8.5% note payable in monthly installments of $1,600,
including interest, with the balance due June 2000;
secured by vehicles 51,277 76,942
8.5% note payable in monthly installments of $1,309,
including interest, with the balance due August 2000;
secured by vehicles 54,163 -
8.0% note payable in monthly installments of $2,790,
including interest, with the balance due June 1996;
secured by vehicles - 27,866
Other 18,231 -
-------- -------
Total long-term notes payable 184,277 186,921
Less current installments 60,792 61,674
-------- -------
Notes payable to banks, excluding
current installments $123,485 125,247
======== =======
</TABLE>
(Continued)
F-19
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Subsequent to year end, the Company entered into a new note agreement
with a bank for $586,466 to finance vehicles purchased for cash in
fiscal 1996. The new note requires monthly payments of $12,068 with
the balance due July 1999, has a stated interest rate of 8.5 percent
and is secured by vehicles.
The aggregate maturities of notes payable to banks for each of the next
five years, including the July 1996 note payable to bank, are as follows:
<TABLE>
<CAPTION>
Year ending June 30
-------------------
<S> <C>
1997 $150,998
1998 166,687
1999 162,152
2000 289,266
2001 1,640
--------
Total $770,743
========
</TABLE>
The Company's borrowings available under the $2,000,000 secured line
of credit with bank are limited to seventy-five (75) percent of the
accounts receivable balances of one of their wholly owned
subsidiaries, which are less than ninety (90) days delinquent
(approximately $5,265,000 at June 30, 1996).
(6) Stockholders' Equity
--------------------
In November 1994, the Company completed an initial public offering of
1,000,000 shares of common stock and warrants to acquire 500,000
shares of common stock. Proceeds from the offering, net of commissions
and other related expenses, totaled approximately $4.1 million. The
Company intends to utilize substantially all of the net proceeds of
the initial public offering for the purpose of acquisitions, joint
ventures, and other similar business opportunities. The Company is
restricted from using the proceeds for payment to, or acquisition of,
any affiliated entity.
Warrants issued in connection with the public offering are exercisable
for $6.00 per share and expire November 1999. As of June 30, 1996,
none of the warrants outstanding have been exercised.
In connection with the public offering, the Company issued warrants to
the underwriters to purchase 50,000 units, each unit consisting of two
shares of common stock and one warrant to acquire a share of common
stock. The exercise price is 120 percent of the initial public
offering price of $10.125 per unit, or $12.15 per unit. The
underwriters' warrants are exercisable through November 1999. As of
June 30, 1996, none of the warrants have been exercised.
(Continued)
F-20
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
The Company's Board of Directors resolved and the shareholders
approved an Incentive Stock Option Plan. The plan authorized 400,000
shares to be awarded to officers and key employees of the Company. The
plan may be terminated at any time by the Board of Directors, subject
to approval by the shareholders of the Company. The Company has
granted 310,145 options to acquire shares of common stock under the
terms of the plan. The exercise price of the options range from
$3.0625 to $4.5625 per share, market value at date of grant. The
options expire ten years from the date of grant or upon termination of
employment. As of June 30, 1996, 13,365 options granted have expired
under the terms of the plan, 40,145 options are exercisable under the
plan, and none of the options granted have been exercised.
The Company's Board of Directors resolved and the shareholders
approved an Outside Directors' Stock Option Plan. The plan authorized
50,000 shares to be awarded to nonemployee directors of the Company.
The plan will terminate in May 2004. The Company has granted 30,000
options to acquire shares of common stock under the terms of the plan.
The exercise price for the options is $3.0625 per share, market value
at date of grant. The directors are limited in the amount of options
they can exercise at any given time to no more than one-third each
year over the next three years. The options expire in May 2004. As of
June 30, 1996, none of the options granted have been exercised.
The Company has reserved 150,000 shares of common stock for issuance
pursuant to the Company's stock option plans.
(7) Income Taxes
------------
Income tax expense consists of:
<TABLE>
<CAPTION>
Current Deferred Total
------- -------- -----
<S> <C> <C> <C>
Year ended June 30, 1996:
U.S. federal $634,264 (200,168) 434,096
State and local 55,963 (17,661) 38,302
-------- -------- -------
Total $690,227 (217,829) 472,398
======== ======== =======
Year ended June 30, 1995:
U.S. federal $(24,317) 206,978 182,661
State and local (6,019) 31,840 25,821
-------- -------- -------
Total $(30,336) 238,818 208,482
======== ======== =======
</TABLE>
(Continued)
F-21
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Income tax expense differed from the amounts computed by applying the
U.S. federal income tax rate of 34 percent to pretax income from continuing
operations as a result of the following factors:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Computed "expected" tax $434,096 186,537
State income taxes, net of federal tax benefit 28,159 17,371
Other 10,143 4,574
-------- -------
Total $472,398 208,482
======== =======
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June 30,
1996 and 1995 are primarily a result of the Company being a cash basis taxpayer
and are presented below.
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Adjustment for conversion from cash basis to
accrual basis tax reporting $(583,634) (808,882)
Tax credit carryforward - 18,182
Amortization of goodwill for financial reporting
purposes in excess of tax amounts 15,609 4,846
--------- --------
Total deferred income tax liability $(568,025) (785,854)
========= ========
Current deferred income tax liability $(186,611) (217,830)
========= ========
Long-term deferred income tax
liability
$(381,414) (568,024)
========= ========
</TABLE>
(8) Major Customers
-----------------
Customers comprising 10 percent or greater of the Company's contract
revenues earned are summarized as follows:
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Bell Atlantic Mobile - 22%
Cellular One 10% 10%
Nextel Communications, Inc./Motorola, Inc. - 11%
PCS Prime Co. 18% -
Sprint Cellular Company 16% 15%
All others 56% 42%
---- ----
100% 100%
==== ====
</TABLE>
The Company generally does not require collateral from its customers.
(Continued)
F-22
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Profit-sharing Plan
-------------------
The Company has a defined contribution plan covering substantially all
of its employees. Contributions are discretionary based on the
operating results of the Company. Contributions to the plan were none
and $74,900 for the years ended June 30, 1996 and 1995, respectively.
(10) Related Party Transactions
--------------------------
(a) Leases
------
The Company leases its main office building from Michael R. Budagher
(a shareholder) and a vehicle from an employee of the Company (a
shareholder), who is also Michael R. Budagher's brother (see note 4).
(b) Budagher's Nursery, Inc.
------------------------
The Company uses contract labor provided by Budagher's Nursery, Inc.,
a corporation which is wholly owned by Michael R. Budagher's brother.
The Company incurred $92,391 and $126,884 for contract labor services
provided by Budagher's Nursery, Inc. during the years ended June
30,1996 and 1995, respectively.
(c) Specialty Constructors Coatings, Inc.
------------------------------------
The Company uses contract labor services provided by Specialty
Constructors Coatings, Inc. (SCC). SCC is a corporation which is 50
percent owned by Michael R. Budagher. The Company incurred $401,587
and $170,260 for contract labor services provided by SCC during the
years ended June 30, 1996 and 1995, respectively.
(d) Specialty Manufacturing, Inc.
-----------------------------
The Company purchases equipment from Specialty Manufacturing, Inc.
(SM) which is used in certain construction projects. SM is owned 34
percent by Michael R. Budagher's spouse, 33 percent by Michael R.
Budagher's brother and 33 percent by an employee of the Company. The
Company purchases from SM totaled $13,285 and $12,065 during the years
ended June 30, 1996 and 1995, respectively.
(Continued)
F-23
<PAGE>
SPECIALTY TELECONSTRUCTORS, INC.
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(11) Acquisitions
------------
On April 7, 1995, a wholly owned subsidiary of Specialty
Teleconstructors, Inc. purchased the equipment, inventory, furniture,
fixtures, customer lists and personal property of Vidano Corporation
(Vidano) for periodic cash payments estimated to total $315,660.
Vidano, located in Joliet, Illinois, builds and maintains wireless
communication transmitting and receiving facilities. The future
periodic payments are subject to reduction if employees of Vidano
leave employment of the company during the eighteen-month period
following the acquisition. The transaction was accounted for as a
purchase. Goodwill recorded from the purchase was approximately
$121,000 which will be amortized on a straight-line basis over the
estimated benefit period which management believes to be two years.
The Company's consolidated results of operations include the
operations of Vidano since the acquisition date.
On July 1, 1995, Specialty Teleconstructors, Inc. issued 92,308 shares
of restricted common stock of Specialty Teleconstructors, Inc. at a
price of $2.75 per share, determined by the closing price on or about
July 1, 1995, in exchange for all of the outstanding shares of
Specialty Combined Resources, Inc. (Specialty Combined). The source of
the shares for the transaction are unissued shares of the Company.
Specialty Combined, located in Laguna Hills, California, provides
engineering, design and coordination services of power, lighting and
control systems for communications, health care, petrochem,
institutional and commercial customers. The Company also entered into
a consulting and noncompete agreement with the former principal of
Specialty Combined for a period of thirty-six (36) months from the
date of the acquisition for $75,000. Additionally, the Company entered
into an employment agreement with the former principal of Specialty
Combined to provide services to the Company for a period of thirty-six
(36) months from the date of the acquisition. The transaction was
accounted for as a pooling of interests. Accordingly, the Company's
consolidated financial statements have been restated to include the
operations of Specialty Combined for all periods presented.
F-24
<PAGE>
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO PURCHASE, ANY SECURITIES OTHER THAN THE SECURITIES
TO WHICH IT RELATES OR AN OFFER TO OR A SOLICITATION OF ANY PERSON IN ANY
JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER THE
DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
___________________________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Dividend Policy........................................................... 12
Use of Proceeds........................................................... 13
Capitalization............................................................ 14
Market for Common Equity and Related
Stockholder Matters.................................................... 15
Selected Consolidated Financial
Information............................................................ 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................................................. 17
Business.................................................................. 23
Management................................................................ 27
Certain Transactions...................................................... 31
Security Ownership of Certain Beneficial
Owners and Management.................................................. 33
Description of Securities................................................. 34
Shares Eligible for Future Sale........................................... 36
Plan of Distribution...................................................... 36
Legal Matters............................................................. 37
Experts................................................................... 37
Index to Financial Statements............................................. F-1
</TABLE>
================================================================================
================================================================================
50,000 UNITS,
CONSISTING OF 100,000 SHARES OF COMMON STOCK AND 50,000 REDEEMABLE WARRANTS,
UNDERLYING UNDERWRITERS' WARRANTS
------------
550,000 SHARES
OF COMMON STOCK,
UNDERLYING REDEEMABLE COMMON STOCK PURCHASE WARRANTS
SPECIALTY
TELECONSTRUCTORS, INC.
_________________
PROSPECTUS
_________________
FEBRUARY __, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 78.751 of the Nevada General Corporation Law (the "NGCL") provides, in
effect, that any person made a party to any action by reason of the fact that
such person is or was a director, officer, employee or agent of the Company may
and, in certain cases, must be indemnified by the Company against, in the case
of a non-derivative action, judgments, fines, amounts paid in settlement and
reasonable expenses (including attorney's fees) incurred by such person as a
result of such action, and in the case of a derivative action, against expenses
(including attorney's fees), if in either type of action such person acted in
good faith and in a manner such person reasonably believed to be in or not
opposed to the best interests of the Company. This indemnification does not
apply, in a derivative action, to matters as to which it is adjudged that the
director, officer, employee or agent is liable to the Company, unless upon court
order it is determined that, despite such adjudication of liability, but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for expenses, and, in a on-derivative action, to any
criminal proceeding in which such person had reasonable cause to believe such
person's conduct was unlawful.
Article VII, Section 1 of the By-Laws of the Company, as amended (the "By-Laws")
provides that the Company shall indemnify each person who was or is a party or
is threatened to be made a party to or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigation, by reason
of the fact that he or a person of whom he is the legal representative is or was
a director or officer of the Company or is or was serving at the request of the
Company or for its benefit as a director or officer of another corporation, or
as its representative in a partnership, joint venture, trust or other
enterprise, to the fullest extent legally permissible under the NGCL against all
expenses, liability and loss (including attorneys, fees, judgments, fines and
amounts paid or to be paid in settlement) reasonably incurred or suffered by him
in connection therewith. The expenses of officers and directors incurred in
defending a civil or criminal action, suit or proceeding must be paid by the
Company as they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or on behalf of the
director or officer to repay the amount if it's ultimately determined by a court
of competent jurisdiction that he is not entitled to be indemnified by the
corporation. This right of indemnification is a contract right which may be
enforced in any manner desired by such person. This right of indemnification is
not exclusive of any other right which such directors, officers or
representatives may have or hereafter acquire and, without limiting the
generality of such statement, they shall be entitled to their respective rights
of indemnification under any bylaw, agreement, vote of stockholders, provision
of law or otherwise, as well as their rights under the By-Laws.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses, other than underwriting discounts
and commissions, paid or payable in connection with the issuance and
distribution of the Common Stock being registered hereby (as such expenses are
estimated except as noted):
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee...... $ 275.18
Nasdaq National Market Listing Fee....................... 13,000.00
Printing and Engraving Expenses.......................... 7,500.00*
Legal Fees and Expenses.................................. 30,000.00*
Accounting Fees and Expenses............................. 4,000.00*
Blue Sky Fees and Expenses............................... 5,000.00*
Transfer Agent and Registrar Fees........................ 3,000.00*
Miscellaneous Fees and Expenses.......................... 7,224.82*
-----------
Total............................................... $70,000.00*
===========
</TABLE>
_____________________
* Estimated
II-1
<PAGE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In July 1995, in connection with the Company's acquisition of all of the
outstanding equity of ST Combined Resources, Inc. ("ST Combined Resources"), the
Company issued 92,308 shares of its Common Stock, $.01 par value ("Common
Stock") to the former sole shareholder of ST Combined Resources. No fees,
commissions or discounts were paid to any person in connection with this
issuance. These securities were issued without registration under the
Securities Act of 1933, as amended (the "Securities Act") pursuant to the
exemption afforded by Section 4(2) of the Securities Act. In connection with
the transaction, the recipient of these securities gave representations,
warranties and covenants to the Company customary for a transaction of this
type, including certain representations, warranties and covenants designed to
ensure the availability of the exemption afforded by Section 4(2) of the
Securities Act.
In October 1996, in connection with the Company's acquisition of substantially
all the assets of Data Cell Systems, Inc. ("Data Cell"), the Company issued
93,405 shares of its Common Stock to Data Cell. No fees, commissions or
discounts were paid to any person in connection with this issuance. These
securities were issued without registration under the Securities Act of 1933, as
amended (the "Securities Act of 1933") pursuant to the exemption afforded by
Section 4(2) of the Securities Act of 1933. In connection with the transaction,
Data Cell and its sole shareholder each gave representations, warranties and
covenants to the Company customary for a transaction of this type, including
certain representations, warranties and covenants designed to ensure the
availability of the exemption afforded by Section 4(2) of the Securities Act of
1933.
ITEM 27. INDEX TO EXHIBITS.
The following is a list of all exhibits filed as a part of this Registration
Statement on Form SB-2, including those incorporated herein by reference.
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
3.1 Articles of Incorporation of the Registrant, as amended.(2)
3.2 Amendment to the Articles of Incorporation of the Registrant.(2)
3.3 By-laws of the Registrant.(3)
4.1 Specimen Common Stock Certificate, par value $.01, of the
Registrant.(3)
4.2 Specimen Redeemable Common Stock Purchase Warrant Certificate of
the Registrant.(1)
4.3 Warrant Agreement, dated November 4, 1994, by and among the
Registrant, American Stock Transfer & Trust Company and Thomas
James & Associates, Inc.(1)
4.4 Underwriters' Warrant dated as of November 4, 1994 issued to
Thomas James & Associates, Inc.(1)
4.5 Underwriters' Warrant dated as of November 4, 1994 issued to
Dillon-Gage Securities, Inc.(1)
5.1 Opinion of Jordaan, Howard & Pennington, PLLC as to the validity
of the issuance of the securities registered hereby.(1)
10.1 Lease Agreement by and among the Registrant and Michael R.
Budagher and Sheril E. Budagher(3)
10.2 Amended and Restated 1994 Stock Option Plan of Specialty
Teleconstructors, Inc.(4)
10.3 Outside Directors Stock Option Plan of Specialty
Teleconstructors, Inc.(3)
10.4 Revolving Line of Credit Agreement, dated April 12, 1994 between
the Registrant and First State Bank of Albuquerque, New
Mexico.(3)
10.5 Letter Agreement and Promissory Note, dated January 22, 1997,
between the Registrant and Norwest Bank New Mexico, N.A.(1)
21 Subsidiaries of the Registrant.(1)
23.1 Consent of KPMG Peat Marwick LLP, independent certified public
accountants(1)
23.2 Consent of Jordaan, Howard & Pennington, PLLC, (included in the
Opinion filed as Exhibit 5.1 to the Registration Statement).(1)
25 Power of Attorney (Included on page II-4 of the Registration
Statement).(1)
27.1 Financial Data Schedule.(1)
- ----------------
(1) Filed herewith.
(2) Incorporated by reference from the Registrant's Registration Statement on
Form S-8, SEC File No. 333-18899.
(3) Incorporated herein by reference from the Registrant's Registration
Statement on Form SB-2, SEC file No. 33-79998-D
II-2
<PAGE>
(4) Incorporated herein by reference from the Registrant's Definitive Proxy
Materials filed in connection with the Registrant's 1996 Annual Meeting.
ITEM 28. UNDERTAKINGS.
The Registrant hereby undertakes to:
1. File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to:
(i) Include any prospectus required by section 10(a)(3) of the
Securities Act;
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information in the registration statement;
(iii) Include any additional or changed material information on the
plan of distribution.
2. For determining liability under the Securities Act, treat each post-
effective amendment as a new registration statement of the securities
offered, and the offering of the securities at that time to be the
initial bona fide offering.
3. File a post-effective amendment to remove from registration any of the
securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
small business issuer pursuant to the foregoing provisions, or otherwise, the
small business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer 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 small business issuer 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 issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Cedar Crest, State of New Mexico, on the 3rd day of
February, 1997.
SPECIALTY TELECONSTRUCTORS, INC.
By: /s/ Michael R. Budagher
----------------------------------
Michael R. Budagher Chairman of the Board,
President, Chief Executive Officer, and
Treasurer
POWER OF ATTORNEY AND SIGNATURES
EACH PERSON WHOSE SIGNATURE appears below this Registration Statement hereby
constitutes and appoints Michael R. Budagher and Dennis K. Hartnett and each of
them, with full power to act without the other, his true and lawful attorney-in-
fact and agent, with full power of substitution and resubstitution, for him or
her and in his or her name, place and stead in any and all capacities (until
revoked in writing) to sign all amendments (including post-effective amendments)
to this Registration Statement on Form SB-2 of Specialty Teleconstructors, Inc.
and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary fully to all
intents and purposes as he might or could do in person thereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his or her substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities and
on the dates indicated.
SIGNATURE TITLE(S) DATE
--------- -------- ----
/s/ Michael R. Budagher President, Chief Executive February 3, 1997
- -------------------------
Michael R. Budagher Officer, Treasurer and Chairman
of the Board
/s/ Dennis K. Hartnett Chief Accounting Officer February 3, 1997
- -------------------------
Dennis K. Hartnett
/s/ John D. Emery Director February 3, 1997
- -------------------------
John D. Emery
/s/ Terry D. Farmer Director February 3, 1997
- -------------------------
Terry D. Farmer
/s/ Jon D. Word Director February 3, 1997
- -------------------------
Jon D. Word
II-4
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------ ----------------------
3.1 Articles of Incorporation of the Registrant, as amended.(2)
3.2 Amendment to the Articles of Incorporation of the Registrant.(2)
3.3 By-laws of the Registrant.(3)
4.1 Specimen Common Stock Certificate, par value $.01, of the
Registrant.(3)
4.2 Specimen Redeemable Common Stock Purchase Warrant Certificate of
the Registrant.(1)
4.3 Warrant Agreement, dated November 4, 1994, by and among the
Registrant, American Stock Transfer & Trust Company and Thomas
James & Associates, Inc.(1)
4.4 Underwriters' Warrant dated as of November 4, 1994 issued to
Thomas James & Associates, Inc.(1)
4.5 Underwriters' Warrant dated as of November 4, 1994 issued to
Dillon-Gage Securities, Inc.(1)
5.1 Opinion of Jordaan, Howard & Pennington, PLLC as to the validity
of the issuance of the securities registered hereby.(1)
10.1 Lease Agreement by and among the Registrant and Michael R.
Budagher and Sheril E. Budagher(3)
10.2 Amended and Restated 1994 Stock Option Plan of Specialty
Teleconstructors, Inc.(4)
10.3 Outside Directors Stock Option Plan of Specialty
Teleconstructors, Inc.(3)
10.4 Revolving Line of Credit Agreement, dated April 12, 1994 between
the Registrant and First State Bank of Albuquerque, New
Mexico.(3)
10.5 Letter Agreement and Promissory Note, dated January 22, 1997,
between the Registrant and Norwest Bank New Mexico, N.A.(1)
21 Subsidiaries of the Registrant.(1)
23.1 Consent of KPMG Peat Marwick LLP, independent certified public
accountants(1)
23.2 Consent of Jordaan, Howard & Pennington, PLLC, (included in the
Opinion filed as Exhibit 5.1 to the Registration Statement).(1)
25 Power of Attorney (Included on page II-4 of the Registration
Statement).(1)
27.1 Financial Data Schedule.(1)
________________
(1) Filed herewith.
(2) Incorporated by reference from the Registrant's Registration Statement on
Form S-8, SEC File No. 333-18899.
(3) Incorporated herein by reference from the Registrant's Registration
Statement on Form SB-2, SEC file No. 33-79998-D
(4) Incorporated herein by reference from the Registrant's Definitive Proxy
Materials filed in connection with the Registrant's 1996 Annual Meeting.
II-5
<PAGE>
EXHIBIT 4.2
VOID AFTER NOVEMBER 4, 1999
REDEEMABLE COMMON STOCK WARRANT CERTIFICATE
NO. STW FOR PURCHASE OF COMMON STOCK OF WARRANTS
THIS CERTIFICATE IS SPECIALITY TELECONSTRUCTORS, INC.
TRANSFERABLE IN
NEW YORK, NEW YORK
CUSIP 847517 11 7
This certifies that FOR VALUE RECEIVED
or registered assigns (the "Registered Holder") is the owner of the number
of Redeemable Common Stock Purchase Warrants (the "Warrants") specified above.
Each Warrant initially entitles the Registered Holder to purchase, subject to
the terms and conditions set forth in this Certificate and the Warrant Agreement
(as hereinafter defined), one fully paid and nonassessable share of Common
Stock, $0.01 par value, of Specialty Teleconstructors, Inc., a Nevada
corporation (the "Company") at any time between November 4, 1994 and the
Expiration Date (as hereinafter defined), upon the presentation and surrender of
this Warrant Certificate with the Subscription Form on the reverse hereof duly
executed, at the corporate office of American Stock Transfer & Trust Company as
Warrant Agent, or its successor (the "Warrant Agent"), accompanied by payment of
$6.00 (the "Purchase Price") in lawful money of the United States of America in
cash or by official bank or certified check made payable to the Warrant Agent.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subjects in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated as of November
4, 1994, by and among the Company, the Warrant Agent and Thomas James
Associates, Inc.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but no fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
The term "Expiration Date" shall mean 5:00 p.m. (New York City time) on
November 4, 1999, or such earlier date as the Warrants shall be redeemed. If
such date shall in the State of New York be a holiday or a day on which the
banks are authorized to close, then the Expiration Date shall be 5:00 p.m. (New
York City time) the next day which in the State of New York is not a holiday or
a day in which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended, with respect to such securities is
effective. The Company has covenanted and agreed that it will file a
registration statement and will use its best efforts to cause the same to become
effective and to keep such registration statement current while any of the
Warrants are outstanding. This Warrant shall not be exercisable by a Registered
Holder in any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificates of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment together with any tax or other
governmental charge imposed in connection therewith, for registration of
transfer of this Warrant Certificate at such office, a new Warrant Certificate
or Warrant Certificates representing an equal aggregate number of Warrants will
be issued to the transferee in exchange therefor, subject to the limitations
provided in the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote or to receive dividends or
other distributions, and shall not be entitled to receive any notice or any
proceedings of The Company, except as provided in the Warrant Agreement.
Commencing February 2, 1995, this Warrant may be redeemed at the option of
the Company, at redemption price of $0.05 per Warrant, provided the closing
price of the Company's Common Stock as reported by the Pacific Stock Exchange or
other national trading market which the Common Stock may then be listed is at
least $9.00, for at least 10 consecutive trading days ending within 15 days of
the date of the notice of redemption. Notice of redemption shall be given not
later than the thirtieth (30th) day before the date fixed for redemption, all as
provided in the Warrant Agreement. On and after the date fixed for redemption,
the Registered Holder shall have no rights with respect to this Warrant except
to receive the $0.05 per Warrant upon surrender of this Certificate.
Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
The Company has agreed to pay a fee of seven (7%) percent of the Purchase
Price upon certain conditions as specified in the Warrant Agreement upon the
exercise of the Warrant.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of Nevada.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two (2) of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated
Countersigned:
AMERICAN STOCK TRANSFER & TRUST COMPANY
as Warrant Agent
By:
Authorized Officer
(Corporate Seal appears here)
SPECIALITY TELECONSTUCTORS, INC.
By: /s/ Sheril E. Budagher By: /s/ Michael R. Budagher
Secretary President
<PAGE>
SUBSCRIPTION FORM
To Be Executed by the Registered Holder in Order to Exercise Warrants
The undersigned Registered Holder here by irrevocably elects to exercise
_________ (________) Warrants represented by this Warrant Certificate, and to
purchase the securities upon the exercise of such Warrants, and requests that
certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
(please print or type name and address)
and be delivered to
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
(please print or type name and address)
and if such number of Warrants shall be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the Registered Holder
at the address stated below.
This undersigned represents that the exercise of the within Warrant was
solicited by a member of the National Association of Securities Dealers, Inc.
("NASD"). If not solicited by an NASD member, please write "unsolicited" in the
space below. Unless otherwise indicated by listing the name of another NASD
member firm, it will be assumed that the exercise was solicited by Thomas James
Associates, Inc.
________________________________________
Name of NASD member if other than
Thomas James Associates, Inc.
Dated:________________________________ ________________________________________
Signature
Note:The above signature must correspond
with the name as written upon the face
of this Warrant Certificate in every
particular, without alteration or
enlargement or any change whatever.
________________________________________
Street Address
________________________________________
City, State and Zip Code
________________________________________
Taxpayer ID Number
Signature Guaranteed:
ASSIGNMENT
To Be Executed by the Registered Holder in Order to Assign Warrants
FOR VALUE RECEIVED, THE undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
(please print or type name and address)
__________ (__________) of the Warrants represented by this Warrant Certificate,
and hereby irrevocably constitutes and appoints
_______________________________________________________________________ Attorney
to transfer this Warrant Certificate on the books of the Company, with full
power of substitution in the premises.
Dated:________________________________ ________________________________________
Signature Guaranteed:
________________________________________
THE SIGNATURE MUST BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION PURSUANT
TO S.E.C. RULE 17 Ad-15.
<PAGE>
EXHIBIT 4.3
WARRANT AGREEMENT
-----------------
AGREEMENT, dated as of November 4, 1994, by and among SPECIALTY
TELECONSTRUCTORS, INC., a Nevada corporation (the "Company"), AMERICAN STOCK
TRANSFER & TRUST COMPANY, a New York corporation, as Warrant Agent (the "Warrant
Agent"), and THOMAS JAMES ASSOCIATES, INC., a New York corporation, as
representative ("Thomas James" or "Representative") of the underwriters (the
"Underwriters").
W I T N E S S E T H
WHEREAS, in connection with a public offering pursuant to a registration
statement (the "Registration Statement") on Form SB-2 declared effective by the
Securities and Exchange Commission on November 4, 1994, of up to 500,000 units
("Units") (and up to 75,000 additional Units covered by an over-allotment option
granted by the Company and the Budagher Family Limited Partnership #1 (the
"Selling Stockholder") to the Underwriters) each Unit consisting of one (1)
share of the Company's Common Stock, par value $0.01 per share ("Common Stock")
and one (1) Redeemable Common Stock Purchase Warrant (the "Warrants") pursuant
to an underwriting agreement (the "Underwriting Agreement") dated November 4,
1994 between the Company and Thomas James as Representative of the Underwriters
set forth in Schedule I thereto and the issuance to the Underwriters or their
designees of Underwriters' Warrants to purchase up to an aggregate of 50,000
additional Units, dated as of November 4, 1994 (the "Underwriters' Warrants"),
the Company will issue up to an aggregate of 625,000 Warrants; and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange and redemption of the Warrants, the
issuance of certificates representing the Warrants, the exercise of the
Warrants, the exercise of the Warrants, and the rights of the holders thereof.
NOW THEREFORE, in consideration of the premises and the mutual agreements
hereinafter set forth and for the purpose of defining the terms and provisions
of the Warrants and the certificated representing the Warrants and the
certificates respective rights and obligations thereunder of the Company, the
holders of certificates representing the Warrants and the Warrant Agent, the
parties hereto agree as follows:
SECTION 1. Definitions. As used herein, the following terms shall have the
-----------
following meanings, unless the context shall otherwise require:
(a) "Common Stock" shall mean the authorized stock of the Company of
any class, whether now or hereafter authorized, which has the right to
participate in the distribution of earnings and assets of the Company without
limit as to amount or percentage, which at the date hereof consists of 7,500,000
shares of Common Stock, $0.01 par value per share.
<PAGE>
(b) "Corporate Office" shall mean the office of the Warrant Agent (or
its successor) at which at any particular time its principal business shall be
administered, which office is located on the date hereof at 40 Wall Street, New
York, New York.
(c) "Exercise Date" shall mean, as to any Warrant, the date on which
the Warrant Agent shall received both (a) the Warrant Certificate representing
such Warrant, with the exercise form thereon duly executed by the Registered
Holder thereof or his attorney duly authorized in writing, and (b) payment in
cash, or by official bank or certified check made payable to the Warrant Agent,
of an amount in lawful money of the United Stated of America equal to the
applicable Purchase Price.
(d) "Initial Warrant Exercise Date" and shall mean, as to each
Warrant, November 4, 1994.
(e) "Purchase Price" shall mean the price to be paid upon exercise of
each Warrant in accordance with the terms hereof, which price shall be $6.00,
subject to adjustment from time to time pursuant to the provisions of Section 9,
and subject to the Company's right to reduce the Purchase Price upon notice to
all Warrant Holders.
(f) "Redemption Price" shall mean the Price at which the Company may,
at its option, redeem the Warrants, in accordance with the terms hereof, which
price shall be $0.05 per Warrant, subject to adjustment from time to time
pursuant to the provisions of Section 9.
(g) "Registered Holder" shall mean the person in whose name any
certificate representing Warrants shall be registered on the books maintained by
the Warrant Agent pursuant to Section 6.
(h) "Transfer Agent" shall mean American Stock Transfer & Trust
Company, as the Company's transfer agent, or its authorized successor, as such.
(i) "Warrant Expiration Date" shall mean, with respect to each
Warrant, 5:00 p.m. (New City time) on November 3, 1999, or the Redemption Date
as defined in Section 8, whichever is earlier; provided that if such date shall
in the State of New York be a holiday or a day on which banks are authorized to
close, then 5:00 pm. (New York City time) on the next following day which in the
State of New York is not a holiday or a day on which banks are authorized to
close. Upon notice to all Warrant Holders, the Company shall have the right to
extend the Warrant Expiration Date.
SECTION 2. Warrants and Issuance of Warrant Certificates.
---------------------------------------------
(a) Each Warrant shall initially entitle the Registered Holder of the
Warrant Certificate representing such Warrant to purchase one (1) share of
Common Stock upon the exercise thereof, in accordance with' the terms hereof,
subject to modification and adjustment as provided in Section 9.
2
<PAGE>
(b) Upon execution of this Agreement, Warrant Certificates representing the
number of Warrants sold pursuant to the Underwriting Agreement shall be executed
by the Company and delivered to the Warrant Agent. Upon written order of the
Company signed by its President or Chairman or a Vice President and by its
Secretary or an Assistant Secretary, the Warrant Certificates shall be
countersigned, issued and delivered by the Warrant Agent as part of the Units.
(c) From time to time, up to the Warrant Expiration Date, the Transfer
Agent shall countersign and deliver stock certificates in required whole number
denominations representing up to an aggregate of 625,000 shares of Common Stock,
subject to adjustment as described herein, upon the exercise of Warrants in
accordance with this Agreement.
(d) From time to time, up to the Warrant Expiration Date, the Warrant Agent
shall countersign and deliver Warrant Certificates in required whole number
denominations to the persons entitled thereto in connection with any transfer or
exchange permitted under this Agreement; provided that no Warrant Certificates
shall be issued except (i) those initially issued hereunder, (ii) those issued
on or after the Initial Warrant Exercise Date, upon the exercise of fewer than
all Warrants represented by any Warrant Certificate, to evidence any unexercised
Warrants held by the exercising Registered Holder, (iii) those issued upon any
transfer or exchange pursuant to Section 6; (iv) those issued in replacement of
lost, stolen, destroyed or mutilated Warrant Certificates pursuant to Section 7;
(v) those issued pursuant to the Representative's Warrant; and (vi) at the
option of the Company, in such form as may be approved by its Board of
Directors, to reflect any adjustment or change in the Purchase Price, the number
of shares of Common Stock purchasable upon exercise of the Warrants or the
Redemption Price therefor made pursuant to Section 9.
(e) Pursuant to the terms of the Underwriters' Warrant, the Underwriters'
may purchase up to an aggregate of 50,000 Units, which include up to 50,000
Warrants.
SECTION 3. Form and Execution of Warrant Certificates.
-------------------------------------------
(a) The Warrant Certificates shall be substantially in the form annexed
hereto as Exhibit A and may have such letters, numbers or other marks of
identification or designation and such legends, summaries or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Agreement or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the
Warrants may be listed, or to conform to usage. The Warrant Certificates shall
be dated the date of issuance thereof (whether upon initial issuance, transfer,
exchange or in lieu of mutilated, lost, stolen, or destroyed Warrant
Certificates) and issued in registered form. Warrants shall be numbered
serially with the letters W on the Warrants.
(b) Warrant Certificates shall be executed on behalf of the Company by its
Chairman of the Board, President or any Vice President and by its Secretary or
an Assistant Secretary, by manual signatures or by facsimile signatures printed
thereon, and shall have imprinted thereon a facsimile of the Company's seal.
Warrant Certificates shall be manually countersigned by the
3
<PAGE>
Warrant Agent and shall be valid for any purpose unless so countersigned. In
case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer of the Company before the date of
issuance of the Warrant Certificates or before countersignature by the Warrant
Agent and issue and delivery thereof, such Warrant Certificates may nevertheless
be countersigned by the Warrant Agent, issued and delivered with the same force
and effect as though the person who signed such Warrant Certificates had not
ceased to be such officer of the Company. After countersignature by the Warrant
Agent, Warrant Certificates shall be delivered by the Warrant Agent to the
Registered Holder without further action by the Company, except as otherwise
provided by Section 4(a).
SECTION 4. Exercise.
---------
(a) Each Warrant may be exercised by the Registered Holder thereof at any
time on or after the Initial Warrant Exercise Date, but not after the Warrant
Expiration Date, upon the terms and subject to the conditions set forth herein
and in the applicable Warrant Certificate. A Warrant shall be deemed to have
been exercised immediately prior to the close of business on the Exercise Date
and the person entitled to receive the securities deliverable upon such
exercisable shall be treated for all purposes as the holder upon exercise
thereof as of the close of business on the Exercise Date. As soon as practicable
on or after the Exercise Date the Warrant Agent shall deposit the proceeds
received from the exercise of a Warrant and shall notify the Company in writing
of the exercise of the Warrants. Promptly following, and in any event within (5)
days after the date of such notice from the Warrant Agent, the Warrant Agent, on
behalf of the Company, shall cause to be issued and delivered by the Transfer
Agent, to the person or persons entitled to receive the same, as certificate or
certificates for the securities deliverable upon such exercise, (plus a Warrant
Certificate for any remaining unexercised Warrants of the Registered Holder)
unless prior to the date of issuance of such certificated the Company shall
instruct the Warrant Agent to refrain from causing such issuance of certificates
pending clearance of checks received in payment of the Purchase Price pursuant
to such Warrants. Notwithstanding the foregoing, in the case of payment made in
the form of a check drawn on an account of Thomas James or such other investment
banks and brokerage houses as the Company shall approve in writing to the
Warrant Agent, certificates shall immediately be issued without prior notice to
the Company or nay delay. Upon the exercise of any Warrant and clearance of the
funds received, the Warrant Agent shall promptly remit the payment received for
the Warrant to the Company or as the Company may direct in writing.
(b) If, at the Exercise Date in respect of the exercise of any Warrant at
any time on or after the first anniversary of the date hereof (i) the market
price of the Company's Common Stock id greater than the then Purchase Price of
the Warrant, (ii) the exercise of the Warrant was solicited by a member of the
National Association of Securities Dealers, Inc. ("NASD"), (iii) the Warrant was
not held in a discretionary account, (iv) disclosure of compensation
arrangements was made both at the time of the original offering and at the time
of exercise; and (v) the solicitation of the exercise of the Warrant was not in
violation of Rule 10b-6 (as such rule or any successor rule may be in effect as
of such time of exercise) promulgated under the Securities Exchange Act of 1934,
then the Warrant Agent, simultaneously with the distribution of proceeds to the
Company, received upon exercise of the Warrant(s) so exercised shall, on behalf
of the Company, pay from the proceeds received upon exercise of the Warrant(s),
a fee
4
<PAGE>
of seven (7%) percent of the Purchase Price to Thomas James (of which a
percentage may be reallowed to the dealer who solicited the exercise, which
dealer may also be Thomas James). Within five days after exercise the Warrant
Agent shall send Thomas James a copy of the reverse side of each Warrant
exercised. Thomas James shall reimburse the Warrant Agent, upon request, for
its reasonable expenses relating to compliance with this Section 4(b). In
addition, Thomas James and the Company may at any time during business hours,
examine the records of the Warrant Agent, including its ledger of original
Warrant Certificates returned to the Warrant Agent upon exercised of Warrants.
The provisions of this paragraph may not be modified, amended or deleted without
the prior written consent of Thomas James and the Company.
SECTION 5. Reservation of Shares; Listing; Payment of Taxes; etc.
------------------------------------------------------
(a) The Company covenants that it will at all times reserve and keep
available out of its authorized Common Stock, solely for the purpose of issue
upon exercise of Warrants, such number of shares of Common Stock as shall then
be issuable upon the exercise of all outstanding Warrants. The Company
covenants that all shares of Common Stock which shall be issuable upon exercise
of the Warrants shall, at the time of delivery, be duly and validly issued,
fully paid, nonassessable and free from all taxes, liens and charges with
respect to the issue thereof (other than those which the Company shall promptly
pay or discharge) and that upon issuance such shares shall be listed on each
national securities exchange, if any, on which the other shares of outstanding
Common Stock of the Company are then listed.
(b) The Company covenants that if any securities to be reserved for the
purpose of exercise of Warrants hereunder require registration with, or approval
of, any governmental authority under any federal securities law before such
securities may be validly issued or delivered upon such exercise, then the
Company will in good faith and as expeditiously as reasonably possible, endeavor
to secure such registration or approval. The Company will use reasonable efforts
to obtain appropriate approvals or registrations under state "blue sky"
securities laws with respect to any such securities. However, Warrants may not
be exercised by, or shares of Common Stock issued to, any Registered holder in
any state in which such exercise would be unlawful.
(c) The Company shall pay all documentary, stamp or similar taxes and other
governmental charges that may be imposed with respect to the issuance of
Warrants, or the issuance or delivery of any shares upon exercise of the
Warrants; provided, however, that if the shares of Common Stock are to be
delivered in a name other that the name of the Registered Holder of the Warrant
Certificate representing any Warrant being exercised, then no such delivery
shall be made unless the person requesting the same has paid to the Warrant
agent the amount of transfer taxes or charges incident thereto, if any.
(d) The Warrant Agent is hereby irrevocably authorized to requisition the
Company's Transfer Agent from time to time for certificates representing shares
of Common Stock required upon exercise of the Warrants, and the Company will
authorize the Transfer Agent to comply with all such proper requitsitions. The
Company will file with the Warrant Agent a statement setting forth the name and
address of the Transfer Agent of the Company for shares of Common
5
<PAGE>
Stock issuable upon exercise of the Warrants, unless the Warrant Agent and the
Transfer Agent are the same entity.
SECTION 6. Exchange and Registration of Transfer.
--------------------------------------
(a) Warrant Certificates may be exchanged for other Warrant Certificates
representing an equal aggregate number of Warrants of the same class or may be
transferred in whole or in part. Warrant Certificates to be exchanged shall be
surrendered to the Warrant Agent at its Corporate Office, and upon satisfaction
of the terms and provisions hereof, the Company shall execute and the Warrant
Agent shall countersign, issue and deliver in exchange therefor the Warrant
Certificate or Certificates which the Registered Holder making the exchange
shall be entitled to receive.
(b) The Warrant Agent shall keep at its office books in which, subject to
such reasonable regulations as it may prescribe, it shall register Warrant
Certificates and the transfer thereof in accordance with its regular practice.
Upon due presentment for registration of transfer of any Warrant Certificate at
such office, the Company shall execute and the Warrant Agent shall issue and
deliver to the transferee or transferees a new Warrant Certificate or
Certificates representing an equal aggregate number of Warrants of the same
class.
(c) With respect to all Warrant Certificates presented for registration or
transfer, or for exchange or exercise, the subscription form on the reverse
thereof shall be duly endorsed, or be accompanied by a written instrument or
instruments of transfer and subscription, in form satisfactory to the Company
and the Warrant Agent, duly executed by the Registered Holder or his
attorney-in-fact duly authorized in writing.
(d) A service charge may be imposed by the Warrant Agent for any exchange
or registration of transfer of Warrant Certificates. In addition, the Company
may require payment by such holder of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.
(e) All Warrant Certificates surrendered for exercise or for exchange in
case of mutilated Warrant Certificates shall be promptly cancelled by the
Warrant Agent and thereafter retained by the Warrant Agent until termination of
this Agreement or resignation as Warrant Agent, or, with the prior written
consent of Thomas James, disposed of or destroyed, at the direction of the
Company.
(f) Prior to due presentment for registration of transfer thereof, the
Company and the Warrant Agent may deem and treat the Registered Holder of any
Warrant Certificate as the absolute owner thereof and of each Warrant
represented thereby (notwithstanding any notations of ownership or writing
thereon made by anyone other than a duly authorized officer of the Company or
the Warrant Agent) for all purposes and shall not be affected by any notice to
the contrary. The Warrants, which are being publicly offered in Units with
shares of Common Stock pursuant to the Underwriting Agreement, will be
immediately detachable and transferable separately from the Common Stock.
6
<PAGE>
SECTION 7. Loss or Mutilation. Upon receipt by the Company and the Warrant
-------------------
Agent of evidence satisfactory to them of the ownership of and loss, theft,
destruction or mutilation of any Warrant Certificate and (in case of loss, theft
or destruction) of indemnity satisfactory to execute and the Warrant Agent
shall (in the absence of notice to the Company and/or Warrant Agent that the
Warrant Certificate has been acquired by a bona fide purchaser) countersign and
deliver to the Registered Holder in lieu thereof a new Warrant Certificate of
like tenor representing an equal aggregate number of Warrants. Applicants for a
substitute Warrant Certificate shall comply with such other reasonable
regulations and pay such other reasonable charges as the Warrant Agent may
prescribe.
SECTION 8. Redemption.
-----------
(a) Commencing 90 days from the effective date of the Registration
Statement, on not less than thirty (30) days prior written notice, the Warrants
may be redeemed, at the option of the Company, at a redemption price of $0.05
per Warrant, provided the closing price of the Company's Common Stock as
reported by the Pacific Stock Exchange is at least $9.00 for at least 10
consecutive trading days ending within 15 days of the date of the notice of
redemption. All Warrants must be redeemed if any of the Warrants are redeemed.
(b) In case the Company shall desire to exercise its right to so redeem the
Warrants, it shall request the Warrant Agent, or Thomas James if the date fixed
for redemption is on or after the first anniversary of the date hereof to mail a
notice of redemption to each of the Registered Holders of the Warrant's to be
redeemed, first class, postage prepaid, not later than the thirtieth (30th) day
before the date fixed for redemption, at their last address as shall appear on
the records of the Warrant Agent. Any notice mailed in the manner provided
herein shall be conclusively presumed to have been duly given whether or not
the Registered Holder receives such notice.
(c) The notice of redemption shall specify (i) the redemption price, (ii)
the date fixed for redemption, (iii) the place where the Warrant Certificates
shall be delivered and the redemption price paid, (iv) that Thomas James will
assist each Registered Holder of a Warrant in connection with the exercise
thereof (if Thomas James has conducted, or caused to be conducted, the mailing)
and (v) that the right to exercise the Warrant shall terminate at 5:00 p.m.
(New York City time) on the business day immediately preceding the date fixed
for redemption. The date fixed for the redemption of the Warrants that have
been called for redemption shall be the Redemption Date. No failure to mail
such notice not any defect therein or in the mailing thereof shall affect the
validity of the proceedings for such redemption except as to a holder (a) to
whom notice was not mailed or (b) whose notice was defective. An affidavit of
the Warrant Agent or of the Secretary or an Assistant Secretary of Thomas James
or the Company that notice of redemption has been mailed shall, in the absence
of fraud, be prima facie evidence of the facts stated therein.
(d) Any right to exercise a Warrant that has been called for redemption
shall terminate at 5:00 p.pm. (New York City time) on the business day
immediately preceding the Redemption
7
<PAGE>
Date. On and after the Redemption Date, Holders of the redeemed Warrants shall
have no further rights except to receive, upon surrender of the redeemed
Warrant, the Redemption Price.
(e) From and after the date specified for redemption, the Company shall, at
the place specified in the notice of redemption, upon presentation and surrender
to the Company by or on behalf of the Registered Holder thereof of one or more
Warrants to be redeemed, deliver or cause to be delivered to or upon the written
order of such Holder a sum in cash equal to the redemption price of each such
Warrant. From and after the date fixed for redemption and upon the deposit or
setting aside by the Company of a sum sufficient to redeem all the Warrants
called for redemption, such Warrants shall expire and become void and all rights
hereunder and under the Warrant Certificates, except the right to receive
payment of the redemption price, shall cease.
SECTION 9. Adjustment of Exercise Price and Number of
Shares of Common Stock or Warrants
------------------------------------------
(a) Subject to the exceptions referred to in Section 9(g), in the event
the Company shall, at any time or from time to time after the date hereof, sell
any shares of Common Stock for a consideration per share less than the then
current Purchase Price or issue any shares of Common Stock as a stock dividend
to the holders of Common Stock, or subdivide or combine the outstanding shares
of Common Stock into a greater or lesser number of shares (any such sale,
issuance, subdivision or combination being herein called a "Change of Shares"),
then, and thereafter upon each further Change of Shares, the applicable Purchase
Price in effect immediately prior to such Change of Shares shall be changed to a
price (including any applicable fraction of a cent) determined by multiplying
the Purchase Price in effect immediately prior thereto by a fraction, the
numerator of which shall be the sum of (a) the total number of shares of Common
Stock outstanding immediately prior to such Change of Shares and (b) the number
of shares of Common Stock which the aggregate consideration received by the
Company upon such sale, issuance, subdivision or combination (determined in
accordance with subsection f(vi) below) could have purchased at the then current
Purchase Price, and the denominator of which shall be the total number of shares
of Common Stock outstanding immediately after such Change of Shares.
Upon each adjustment of the applicable Purchase Price to this Section 9,
the total number of shares of Common Stock purchasable upon the exercise of each
Warrant shall (subject to the provisions contained in Section 9(b)) be such
number of shares (calculated to the nearest tenth) purchasable at the applicable
Purchase Price immediately prior to such adjustment multiplied by a fraction,
the numerator of which shall be the applicable Purchase Price in effect
immediately prior to such adjustment and the denominator of which shall be the
applicable Purchase Price in effect immediately after such adjustment.
(b) The Company may elect, upon any adjustment of the applicable Purchase
Price hereunder, to adjust the number of Warrants outstanding, in lieu of
adjusting the number of shares of Common Stock purchasable upon the exercise of
each Warrant as hereinabove provided, so that each Warrant outstanding after
such adjustment shall represent the right to purchase one share of Common Stock.
Each Warrant held of record prior to such adjustment
8
<PAGE>
of the number of Warrants shall become that number of Warrants (calculated to
the nearest tenth) determined by multiplying the number one by a fraction, the
numerator or which shall be the applicable Purchase in Price in effect
immediately prior to such adjustment and the denominator of which shall be the
applicable Purchase Price in effect immediately after such adjustment. Upon each
such adjustment of the number of Warrants, the Redemption Price in effect
immediately prior to such adjustment also shall be adjusted by multiplying such
Redemption Price by a fraction, the numerator of which shall be the Purchase
Price in effect immediately after such adjustment and the denominator of which
shall be the Purchase Price in effect immediately prior to such adjustment. Upon
each adjustment of the number of Warrants pursuant to this Section 9, the
Company shall, as promptly as practicable, cause to be distributed to each
Registered Holder of Warrant Certificates on the date of such adjustment Warrant
Certificates evidencing, subject to Section 10, the number of additional
Warrants, if any, to which such Holder shall be entitled as a result of such
adjustment or, at the option of the Company, cause to be distributed to such
Holder in substitution and replacement for the Warrant Certificates held by him
prior to the date of adjustment (and upon surrender thereof, if required by the
Company) new Warrant Certificates evidencing the number of Warrants to which
such Holder shall be entitled after such adjustment.
(c) In case of any reclassification, capital reorganization or other change
of outstanding shares of Common Stock, or in case of any consolidation or merger
of the Company with or into another corporation (other than a consolidation or
merger in which the Company is the continuing corporation and which does not
result in any reclassification, capital, reorganization or other change of
outstanding shares of Common Stock), or in case of any sale or conveyance to
another corporation of the property of the Company as, or substantially as, an
entirety (other than a sale/leaseback, mortgage or other financing transaction),
the Company shall cause effective provision to be made so that each holder of a
Warrant then outstanding shall have the right thereafter, be exercising such
Warrant, to purchase the kind and number of shares of stock or other securities
of property (including cash) receivable upon such reclassification, capital
reorganization or other change, consolidation, merger, sale or conveyance by a
holder of the number of shares of Common Stock that might have been purchased
upon exercise of such Warrant, immediately prior to such reclassification,
capital reorganization or other change, consolidation, merger, sale or
conveyance. Any such provision shall include provision for adjustments that
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Section 9. The foregoing provisions shall similarly apply to
successive reclassifications, capital reorganizations and other changes of
outstanding shares of Common Stock and to successive consolidations, mergers,
sales or conveyances.
(d) Irrespective of any adjustments or changes in the Purchase Price or the
number of shares of Common Stock purchasable upon exercise of the Warrants, the
Warrant Certificates theretofore and thereafter issued shall, unless the Company
shall exercise its option to issue new Warrant Certificates pursuant to Section
2(f), continue to express the applicable Purchase Price per share, the number of
shares purchasable thereunder and the Redemption Price therefor as the Purchase
Price per share, and the number of shares purchasable thereunder and the
Redemption Price therefor were expressed in the Warrant Certificates when the
same were originally issued.
9
<PAGE>
(e) After each adjustment of the Purchase Price pursuant to this Section
9, the Company will promptly prepare a certificate signed by the Chairman or
President, and by the Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary, of the Company setting forth: (i)the applicable Purchase
Price as so adjusted, (ii) the number of shares of Common Stock purchasable upon
exercise of each Warrant after such adjustment, and, if the Company shall
have elected to adjust the number of Warrants, the number of Warrants to which
the registered holder of each Warrant shall then be entitled, and the
adjustment in Redemption Price resulting therefrom, and (iii) a brief statement
of the facts accounting for such adjustment. The Company will promptly file such
certificate with the Warrant Agent and cause a brief summary thereof to be sent
by ordinary first class mail to Thomas James and to each registered holder of
Warrants at his last address as it shall appear on the registry books of the
Warrant Agent. No failure to mail such notice nor any defect therein or in the
mailing thereof shall affect the validity thereof except as to the holder to
whom the Company failed to mail such notice, or except as to the holder whose
notice was defective. The affidavit of and officer of the Warrant Agent or the
Secretary or an Assistant Secretary of the Company that such notice has been
mailed shall, in the absence of fraud, be prima facie evidence of the facts
stated therein.
(f) For purposes of Section 9(a) and 9(b) hereof, the following provisions
(i) to (vi) shall also be applicable;
(i) The number of shares of Common Stock outstanding at any given
time shall include shares of Common Stock owned or held by or for the account of
the Company and the sale or issuance of such treasury shares of the distribution
of any such treasury shares shall not be considered a Change of Shares for
purposes of said sections.
(ii) No adjustment of the Purchase Price shall be made unless
adjustment would require an increase or decrease of at least $0.05 in such
price; provided that any adjustments which by reason of this clause (ii) are not
required to be made shall be carried forward and shall be made at the time of
and together with the next subsequent adjustment which, together with any
adjustment(s) so carried forward, shall require an increase or decrease of at
least $0.05 in the Purchase Price then in effect hereunder.
(iii) In case of (1) the sale by the Company solely for cash of any
rights or warrants to subscribe for or purchase, or any options for the purchase
of, Common Stock or any securities convertible into to exchangeable for Common
Stock without the payment of any further consideration other than cash, if any
(such convertible for exchangeable securities being herein called "Convertible
Securities"), or (2) the issuance by the Company, without the receipt by the
Company of any consideration therefor, of any rights or warrants to subscribe
for or purchase, or any option for the purchase of, Common Stock or Convertible
Securities, in each case, if (and only if) the consideration payable to the
Company upon the exercise of such rights, warrants or options shall consist
solely of cash, whether or not such rights, warrants or options, or the right to
convert or exchange such Convertible Securities, are immediately exercisable,
and the price per share for which Common Stock is issuable upon the exercise of
such rights, warrants of options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (x) the minimum aggregate
consideration payable to the Company upon the exercise of such rights, warrants
or options, plus the consideration received by the Company
10
<PAGE>
for the issuance of sale of such rights, warrants or options, plus, in the case
of such Convertible Securities, the minimum aggregate amount of additional
consideration, if any other than such Convertible Securities, payable upon the
conversion or exchange thereof, by (y) the total maximum number of shares of
Common Stock issuable upon the exercise of such rights, warrants or options or
upon the conversion or exchange of such Convertible Securities issuable upon the
exercise of such rights, warrants or options) is less than the then Purchase
Price immediately prior to the date of the issuance or sale of such rights,
warrants or options, then the total maximum number of shares of Common Stock
issuable upon the exercise of such rights, warrants or options or upon the
conversion or exchange of such Convertible Securities (as of the date of the
issuance of sale of such rights, warrants or options) shall be deemed to be
outstanding shares of Common Stock for purposes of Sections 9(a) and 9(b) hereof
and shall be deemed to have been sold for cash in an amount equal to such price
per share.
(iv) In case of the sale by the Company solely for cash of any
Convertible Securities, whether or not the right of conversion or exchange
thereunder is immediately exercisable, and the price per share for which Common
Stock is issuable upon the conversion or exchange of such Convertible Securities
(determined by dividing (x) the total amount of consideration received by the
Company for the sale of such Convertible Securities, plus the minimum aggregate
amount of additional consideration, if any, other than such Convertible
Securities, payable upon the conversion or exchange thereof, by (y) the total
maximum number of shares Common Stock issuable the conversion or exchange of
such Convertible upon Securities) is less than the then Purchase Price
immediately prior to the date of the sale of such Convertible Securities, then
the total maximum number of shares of Common Stock issuable upon the conversion
or exchange of such Convertible Securities (as of the date of the sale of such
Convertible Securities) shall be deemed to be outstanding shares of Common Stock
for purposes of Sections 9(a) and 9(b) hereof and shall be deemed to have been
sold for cash in an amount equal to such price per share.
(v) If the exercise or purchase price provided for in any right,
warrant or option referred to in clause (iii) above, or the rate at which any
Convertible Securities referred to in clauses (iii) or (iv) above are
convertible into or exchangeable for Common Stock, shall change at any time
(other than under or by reason of provisions designed to protect against
dilution),the Purchase Price then in effect hereunder shall forthwith be
readjusted to such Purchase Price as would have obtained (1) had the adjustments
made upon the issuance of sale of such rights, warrants options or Convertible
Securities been made upon the basis of the issuance of only the number of shares
of Common Stock theretofore actually delivered (and the total consideration
received therefor) upon the exercise of such rights, warrants or options or upon
the conversion or exchange of such Convertible Securities, (2) had adjustments
been made on the basis of the Purchase Price as adjusted under clause (1) for al
transactions (which would have affected such adjusted Purchase Price) made after
the issuance or sale of such rights, warrants, options or Convertible
Securities, and (3) had any such rights, warrants options or Convertible
Securities then still outstanding been originally issued or sold at the time, of
such change. On the expiration of any such right, warrant or option or the
termination of any such right to convert or exchange any such Convertible
Securities, the Purchase Price then in effect hereunder shall forthwith be
readjusted to such Purchase Price as would have obtained (a) had the adjustments
made upon the issuance of sale of such rights, warrants, options or Convertible
Securities been
11
<PAGE>
made upon the basis of the issuance of only the number of shares of Common Stock
theretofore actually delivered (and the total consideration received therefor)
upon the exercise of such rights, warrants or options or upon the conversion or
exchange of such Convertible Securities and (b) had adjustments been made on the
basis of the Purchase Price as adjusted under clause (a) for all transactions
(which would have affected such adjusted Purchase Price) made after the issuance
of sale of such rights, warrants, options or Convertible Securities.
(vi) In case of the sale for cash of any shares of Common Stock, any
Convertible Securities, any rights or warrants to subscribe for or purchase, or
any options for the purchase of, Common Stock or Convertible Securities, the
consideration received by the Company therefore shall be deemed to be the gross
sales price therefor without deducting therefrom any expense paid or incurred by
the Company or any underwriting discounts or commissions or concessions paid or
allowed by the Company in connection therewith.
(g) No adjustment to the Purchase price of the Warrants or to the number of
shares of Common Stock purchasable upon the exercise of each Warrant will be
made, however:
(i) upon the grant or exercise of any other options which may
hereafter be granted or exercised under any employee benefit plan of the Company
as described in the Registration Statement; or
(ii) upon the sale or exercise of the Warrants, including without
limitation the sale or exercise of any of the Warrants underlying the
Underwriters' Warrant; or
(iii) upon the sale of any shares of Common Stock in the public
offering pursuant to the Registration Statement, including, without limitation,
shares sold upon the exercise of any over-allotment option granted to the
Underwriters in connection with such offering; or
(iv) upon the issuance or sale of Common Stock or Convertible
Securities upon the exercise of any rights or warrants to subscribe for or
purchase, or any options for the purchase of, Common Stock or Convertible
Securities, whether or not such rights, warrants or options were outstanding on
the date of the original sale of the Warrants or were thereafter issued or sold;
or
(v) upon the issuance or sale of Common Stock upon conversion or
exchange of any Convertible Securities, whether or not any adjustment in the
Purchase Price was made or required to be made upon the issuance or sale of such
Convertible Securities and whether or not such Convertible Securities were
outstanding on the date of the original sale of the Warrants of were thereafter
issued or sold; or
(vi) upon any amendment to or change in the terms of any rights or
warrants to subscribe for or purchase, or options for the purchase of, Common
Stock or Convertible Securities or in the terms of any Convertible Securities,
including, but not limited to, any extension of any expiration date of any such
right, warrant or option, any change in any exercise or purchase price provided
for in any such right, warrant or option, any extension of any date through
which any Convertible Securities are convertible into or exchangeable for Common
12
<PAGE>
Stock or any change in the rate at which any Convertible Securities are
convertible into or exchangeable for Common Stock (other than rights, warrants,
options or Convertible Securities issued or sold after the close of business on
the date of the original issuance of the Units (i) for which an adjustment in
the Purchase Price then in effect was theretofore made or required to be made,
upon the issuance or sale thereof, or (ii) for which such an adjustment would
have been required had the exercise or purchase price of such rights, warrants
or options at the time of the issuance or sale thereof or the rate of conversion
or exchange of such Convertible Securities, at the time of the sale of such
Convertible Securities, or the issuance or sale of rights or warrants to
subscribe for or purchase, or options for the purchase of, such Convertible
Securities, been the price or rate as changed, in which case the provisions of
Section 9(f)(v) hereof shall be applicable if, but only if, the exercise or
purchase price thereof, as changed, or the rate of conversion or exchange
thereof, as changed, consists solely of cash or requires the payment of
additional consideration, if any, consisting solely of cash and the Company did
not receive any consideration other than cash, if any, in connection with such
change).
(h) As used in this Section 9, the term "Common Stock" shall mean and
include the Company's Stock authorized on the date of the original issue of the
Units and shall also include any capital stock of any class of the Company
thereafter authorized which shall not be limited to a fixed sum or percentage in
respect of the rights of the holders thereof to participate in dividends and in
the distribution of assets upon the voluntary liquidation, dissolution or
winding up of the Company; provided, however, that the shares issuable upon
exercise of the Warrants shall include only shares of such class designated in
the Company's Certificate of Incorporation as Common Stock on the date of the
original issue of the Units or (i), in the case of any reclassification, change,
consolidation, merger, sale or conveyance of the character referred to in
Section 9(c) hereof, the stock, securities or property provided for in such
section or (ii), in the case of any reclassification or change in the
outstanding shares of Common Stock issuable upon exercise of the Warrants as a
result of a subdivision or combination or consisting of a change in par value,
or from par value to no par value, or from no par value to par value, such
shares of Common Stock as so reclassified or changed.
(i) Any determination as to whether an adjustment in the Purchase Price in
effect hereunder is required pursuant to Section 9, or as to the amount of any
such adjustment, if required, shall be binding upon the holders of the Warrants
and the Company if made in good faith by the Board of Directors of the Company.
(j) If and whenever the Company shall grant to the holders of Common Stock,
as such, rights or warrants to subscribe for or to purchase, or any options for
the purchase of, Common Stock or securities convertible into or exchangeable for
or carrying a right, warrant or option to purchase Common Stock, the Company
shall concurrently therewith grant to each of the then Registered Holders of the
Warrants all of such rights, warrants or options to which each such holder would
have been entitled if, on the date of determination of stockholders entitled to
the rights, warrants or options being granted by the Company, such holder were
the holder of record of the number of whole shares of Common Stock then issuable
upon exercise (assuming, for purposes of this Section 9(j), that exercise of
Warrants is permissible during periods prior to the Initial Warrant Exercise
Date) of his Warrants. Such grant by the Company to the holders of
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<PAGE>
the Warrants shall be in lieu of any adjustment which otherwise might be called
for pursuant to this Section 9.
SECTION 10. Fractional Warrants and Fractional Shares.
-----------------------------------------
(a) If the number of shares of Common Stock purchasable upon the exercise
of each Warrant is adjusted pursuant to Section 9 hereof, the Company shall
nevertheless not be required to issue fractions of shares, upon exercise of the
Warrants or otherwise, or to distribute certificates that evidence fractional
shares. With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in cash equal to such
fraction multiplied by the current market value of such fractional share,
determined as follows:
(i) If the Common Stock is listed on a National Securities Exchange
or admitted to unlisted trading privileges on such exchange or listed for
trading on the NASDAQ Quotation System, the current value shall be the last
reported sale price of the Common Stock on such exchange on the last
business day prior to the date of exercise of the Warrant or if no such
sale is made on such day, the average of the closing bid and asked prices
for such day on such exchange; or
(ii) If the Common Stock is not listed or admitted to unlisted
trading privileges, the current value shall be the mean of the last
reported bid and asked prices prices reported by the National Quotation
Bureau, Inc. on the last business day prior to the date of the exercise of
the Warrant; or
(iii) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the
current value shall be an amount determined in such reasonable manner as
may be prescribed by the Board of Directors of the Company.
SECTION 11. Warrant Holders Not Deemed Stockholders. No holder of Warrants
----------------------------------------
shall, as such, be entitled to vote or to receive dividends or be deemed the
holder of Common Stock that may at any time be issuable upon exercise of such
Warrants for any purpose whatsoever, nor shall anything contained herein be
construed to confer upon the holder of Warrants, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issue or reclassification of stock, change of par value or change of stock to no
par value, consolidation, merger or conveyance or otherwise), or to receive
notice of meetings, or to receive dividends or subscription rights, until such
Holder shall have exercised such Warrants and been issued shares of Common Stock
in accordance with the provisions hereof.
SECTION 12. Rights of Action. All rights of action with respect to this
-----------------
Agreement are vested in the respective Registered Holders of the Warrants, and
any Registered Holder of a Warrant, without consent of the Warrant Agent or of
the holder of any other Warrant, may, in his own behalf and for his own benefit,
enforce against the Company his right to exercise his
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<PAGE>
Warrants for the purchase of shares of Common Stock in the manner provided in
the Warrant Certificates and this Agreement.
SECTION 13. Agreement of Warrant Holders. Every holder of a Warrant, by his
----------------------------
acceptance thereof, consents and agrees with the Company, the Warrant Agent and
every other holder of a Warrant that:
(a) The Warrants are transferable only on the registry books of the Warrant
Agent by the Registered Holder thereof in person or by his attorney duly
authorized in writing and only if the Warrant Certificates representing such
Warrants are surrendered at the office of the Warrant Agent, duly endorsed or
accompanied by a proper instrument of transfer satisfactory to the Warrant Agent
and the Company in their sole discretion, together with payment of any
applicable transfer taxes; and
(b) The Company and the Warrant Agent may deem and treat the person in
whose name the Warrant Certificate is registered as the holder and as the
absolute, true and lawful owner of the Warrants represented thereby for all
purposes, and neither the Company nor the Warrant Agent shall be affected by any
notice or knowledge to the contrary, except as otherwise expressly provided in
Section 7 hereof.
SECTION 14. Cancellation of Warrant Certificates. If the Company shall
------------------------------------
purchase or acquire any Warrant or Warrants, the Warrant Certificate or Warrant
Certificates evidencing the same thereupon be delivered to the Warrant Agent and
cancelled by it and retired. The Warrant Agent shall also cancel Common Stock
following exercise of any or all of the Warrants represented thereby or
delivered to it for transfer, split-up, combination or exchange.
SECTION 15. Concerning the Warrant Agent. The Warrant Agent acts hereunder
----------------------------
as agent and in a ministerial capacity for the Company, and its duties shall be
determined solely by the provisions hereof. The Warrant Agent shall not, by
issuing and delivering Warrant Certificates or by any other act hereunder be
deemed to make many representations as to the validity, value or authorization
of the Warrant Certificates or the Warrants represented thereby or of any
securities or other property delivered upon exercise of any Warrant or whether
any stock issued upon exercise of any Warrant is fully paid and nonassessable.
The Warrant Agent shall not at any time be under any duty or responsibility
to any holder of Warrant Certificates to make or cause to be made any adjustment
of the Purchase Price or the Redemption Price provided in this Agreement, or to
determine whether any fact exists which may require any such adjustments, or
with respect to the nature or extent of any such adjustment, when made, or with
respect to the method employed in making the same. It shall not (i) be liable
for any recital or statement of facts contained herein or for any action taken,
suffered or omitted by it in reliance on any Warrant Certificate or other
document of instrument believed by it in good faith to be genuine and to have
been signed or presented by the proper party or parties, (ii) be responsible for
any failure on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in any Warrant Certificate, or (iii)
be liable for any act or omission in connection with this Agreement except for
its own negligence or willful misconduct.
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<PAGE>
The Warrant Agent may at any time consult with counsel satisfactory to it
(who may be counsel for the Company or for Thomas James) and shall incur no
liability or responsibility for any action taken, suffered or omitted by it in
good faith in accordance with the opinion or advice of such counsel.
Any notice, statement, instruction, request, direction, order or demand of
the Company shall be sufficiently evidenced by an instrument signed by the
Chairman of the Board, President, any Vice President, its Secretary, or
Assistant Secretary, (unless other evidence in respect thereof is herein
specifically prescribed). The Warrant Agent shall not be liable for any action
taken, suffered or omitted by it in accordance with such notice, statement,
instruction, request, direction, order or demand believed by it to be genuine.
The Company agrees to pay the Warrant Agent reasonable compensation for its
services hereunder and to reimburse it for its reasonable expenses hereunder; it
further agrees to indemnify the Warrant Agent and save it harmless against any
and all losses, expenses and liabilities, including judgments, costs and counsel
fees, for anything done or omitted by the Warrant Agent in the execution of its
duties and powers hereunder except losses, expenses and liabilities arising as a
result of the Warrant Agent's negligence or willful misconduct.
In the event of a dispute under this Agreement between the Company and
Thomas James regarding proceeds received by the Warrant Agent from the exercise
of the Warrants, the Warrant Agent shall have the right, but not the obligation,
to bring an interpleader action to resolve such dispute.
The Warrant Agent may resign its duties and be discharged from all further
duties and liabilities hereunder (except liabilities arising as a result of the
Warrant Agent's own negligence or willful misconduct), after giving 30 days'
prior written notice to the Company. At least 15 days prior to the date such
resignation is to become effective, the Warrant Agent shall cause a copy of such
notice of resignation to be mailed to the Registered Holder of each Warrant
Certificate at the Company's expense. Upon such resignation, or any inability of
the Warrant Agent to act as such hereunder, the Company shall appoint a new
warrant agent in writing. If the Company shall fail to make such appointment
within a period 15 days after it has been notified in writing of such
resignation by the resigning Warrant Agent, then the Registered Holder of any
Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether appointed by
the Company or by such a court shall be a bank or trust company having a capital
and surplus as shown by its last published report to its stockholders, of not
less than Ten Million ($10,000,000.00) Dollars, or a stock transfer company.
After acceptance in writing of such appointment by the new warrant agent is
received by the Company, such new warrant agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance, act or
deed; but if for any reason it shall be necessary or expedient to execute and
deliver any further assurance, conveyance, act or deed, the same shall be done
at the expense of the Company and shall be legally and validly executed and
delivered by the resigning Warrant Agent. Not later than the effective date of
any such appointment the Company shall file notice thereof with the resigning
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<PAGE>
Warrant Agent and shall forthwith cause a copy of such notice to be mailed to
the Registered Holder of each Warrant Certificate.
Any corporation into which the Warrant Agent or any new warrant agent may
be converted or merged or any corporation resulting from any consolidation to
which the Warrant Agent or any new warrant agent shall be a party or any
corporation succeeding to the trust business of the Warrant Agent shall be a
successor warrant agent under this Agreement without any further act, provided
that such corporation is eligible for appointment as successor to the Warrant
Agent under the provisions of the preceding paragraph. Any such successor
warrant agent shall promptly cause notice of its succession as warrant agent to
be mailed to the Company and to the Registered Holder of each Warrant
Certificate.
The Warrant Agent, its subsidiaries and affiliates, and any of its or their
officers or directors, may buy and hold or sell Warrants or other securities of
the Company and otherwise deal with the Company in the same manner and to the
same extent and with like effects as though it were not Warrant Agent. Nothing
herein shall preclude the Warrant Agent from acting in any other capacity for
the Company or for any other legal entity.
SECTION 16. Modification of Agreement. Subject to the provisions of
-------------------------
Section 4(b), the Warrant Agent and the Company may by supplemental agreement
make any changes or corrections in this Agreement (i) that they shall deem
appropriate to cure any ambiguity or to correct any defective or inconsistent
provision or manifest mistake or error herein contained; or (ii) that they may
deem necessary or desirable and which shall not adversely affect the interests
of the holders of Warrant Certificates provided, however, that this Agreement
--------
shall not otherwise be modified, supplemented or altered in any respect except
with the consent in writing of the Registered Holders of Warrant Certificates
representing not less than 50% of the Warrants then outstanding; and provided,
--------
further, that no change in the number or nature of the securities purchasable
- -------
upon the exercise of any Warrant, or the Purchase Price therefor, or the
acceleration of the Warrant Expiration Date, shall be made without the consent
in writing of the Registered Holder of the Warrant Certificate representing such
Warrant, other than such changes as are specifically prescribed by this
Agreement as originally executed.
SECTION 17. Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be deemed to have been
made when delivered or mailed first class registered or certified mail, postage
prepaid as follows: if to the Registered Holder of a Warrant Certificate, at the
address of such holder as shown on the registry books maintained by the Warrant
Agent; if to the Company, at 12001 State Highway 14 North, Cedar Crest, New
Mexico 87008 Attention: President, or at such other address as may have been
furnished to the Warrant Agent in writing by the Company; if to the Warrant
Agent, at 40 Wall Street, New York, New York 10005; if to Thomas James, at
Thomas James Associates, Inc., 1895 Mt. Hope Avenue, Rochester, New York 14620,
Attention: Michael Smith, Esq.
SECTION 18. Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Nevada, without reference
to principles of conflict of laws.
17
<PAGE>
SECTION 19. Binding Effect. This Agreement shall be binding upon and
--------------
inure to the benefit of the Company and, the Warrant Agent and their respective
successors and assigns, and the holders from time to time of the Warrant
Certificate. Nothing in this Agreement is intended or shall be construed to
confer upon other person any right, remedy or claim, in equity or at law, or to
impose upon any other person any duty, liability or obligation.
SECTION 20. Termination. This Agreement shall terminate at the close of
-----------
business on the Expiration Date of all Warrants of such earlier date upon which
all Warrants have been exercised, except that Warrant Agent shall account to the
Company for cash held by it and the provisions of Section 15 hereof shall
survive such termination.
SECTION 21. Counterparts. This Agreement may be executed in several
------------
counterparts, which together shall constitute a single document.
IN WITNESS WHEREOF, the parties hereto have caused this Warrant Agreement
to be duly executed as of the date first above written.
SPECIALTY TELECONSTRUCTORS, INC.
By /s/ Michael R. Budagher
----------------------------
Authorized Officer
AMERICAN STOCK TRANSFER & TRUST COMPANY
By /s/ Carolyn Schwartz
----------------------------
Authorized Officer
THOMAS JAMES ASSOCIATES, INC.
By /s/ John D. Harbaugh
----------------------------
Authorized Officer
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<PAGE>
EXHIBIT A
[FROM OF FACE OF WARRANT CERTIFICATE]
No. W ____ (__) Warrants
VOID AFTER _________, 1999
REDEEMABLE COMMON STOCK WARRANT CERTIFICATE
FOR PURCHASE OF COMMON STOCK OF
SPECIALTY TELECONSTRUCTORS, INC.
This certifies that FOR VALUE RECEIVED __________________ or registered
assigns (the "Registered Holder") is the owner of the number of Redeemable
Common Stock Purchase Warrants (the "Warrants") specified above. Each Warrant
initially entitles the Registered Holder to purchase, subject to the terms and
conditions set forth in this Certificate and the Warrant Agreement (as
hereinafter defined), one fully paid and nonassessable share of Common Stock,
$0.01 par value, of Specialty Teleconstructors, Inc., a Nevada corporation (the
"Company") at any time between November 4, 1994 and the Expiration Date (as
hereinafter defined), upon the presentation and surrender of this Warrant
Certificate with the Subscription Form on the reverse hereof duly executed, at
the corporate office of American Stock Transfer & Trust Company as Warrant
Agent, or its successor (the " Warrant Agent"), accompanied by payment of $6.00
(the "Purchase Price") in lawful money of the United States of America in cash
or by official bank or certified check made payable to the Warrant Agent.
This Warrant Certificate and each Warrant represented hereby are issued
pursuant to and are subject in all respects to the terms and conditions set
forth in the Warrant Agreement (the "Warrant Agreement"), dated as of November
4, 1994, by and among the Company, the Warrant Agent and Thomas James
Associates, Inc.
In the event of certain contingencies provided for in the Warrant
Agreement, the Purchase Price or the number of shares of Common Stock subject to
purchase upon the exercise of each Warrant represented hereby are subject to
modification or adjustment.
Each Warrant represented hereby is exercisable at the option of the
Registered Holder, but not fractional shares of Common Stock will be issued. In
the case of the exercise of less than all the Warrants represented hereby, the
Company shall cancel this Warrant Certificate upon the surrender hereof and
shall execute and deliver a new Warrant Certificate or Warrant Certificates of
like tenor, which the Warrant Agent shall countersign, for the balance of such
Warrants.
<PAGE>
The term "Expiration Date" shall mean 5:00 p.m. (New York City time) on
November 3, 1999, or such earlier date as the Warrants shall be redeemed. If
such date shall in the State of New York be a holiday or a day on which the
banks are authorized to close, then the Expiration Date shall be 5:00 pm. (New
York City time) the next day which in the State of New York is not a holiday or
a day in which banks are authorized to close.
The Company shall not be obligated to deliver any securities pursuant to
the exercise of this Warrant unless a registration statement under the
Securities Act of 1933, as amended, with respect to such securities is
effective. The Company has covenanted and agreed that it will file a
registration statement and will use its best efforts to cause the same to become
effective and to keep such registration statement current while any of the
Warrants are outstanding. This Warrant shall not be exercisable by a Registered
Holder in any state where such exercise would be unlawful.
This Warrant Certificate is exchangeable, upon the surrender hereof by the
Registered Holder at the corporate office of the Warrant Agent, for a new
Warrant Certificate or Warrant Certificate of like tenor representing an equal
aggregate number of Warrants, each of such new Warrant Certificates to represent
such number of Warrants as shall be designated by such Registered Holder at the
time of such surrender. Upon due presentment together with any tax or other
governmental charge imposed in connection therein, for registration of transfer
of this Warrant Certificate at such office, a new Warrant Certificate or Warrant
Certificates representing an equal aggregate number of Warrants will be issued
to the transferee in exchange therefor, Subject to the limitations provided in
the Warrant Agreement.
Prior to the exercise of any Warrant represented hereby, the Registered
Holder shall not be entitled to any rights of a stockholder of the Company,
including, without limitation, the right to vote to receive dividends or other
distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided in the Warrant Agreement.
Commencing February 2, 1995, this Warrant may be redeemed at the option of
the Company, at redemption price of $0.05 per Warrant, provided the closing
price of the Company's Common Stock as reported by the Pacific Stock Exchange is
at least $9.00, for at least 10 consecutive trading days ending within 15 days
of the date of the notice of redemption. Notice of redemption shall be given not
later than the thirtieth (30th) day before the date fixed for redemption, all as
provided in the Warrant Agreement. On and after the date fixed for redemption,
the Registered Holder shall have no rights with respect with respect to this
Warrant except to receive the $0.05 per Warrant upon surrender of this
Certificate.
2
<PAGE>
Prior to due presentment for registration of transfer hereof, the Company
and the Warrant Agent may deem and treat the Registered Holder as the absolute
owner hereof and of each Warrant represented hereby (notwithstanding any
notations of ownership or writing hereon made by anyone other than a duly
authorized officer of the Company or the Warrant Agent) for all purposes and
shall not be affected by any notice to the contrary.
The Company has agreed to pay a fee of seven (7%) percent of the Purchase
Price upon certain conditions as specified in the Warrant Agreement upon the
exercise of this Warrant.
This Warrant Certificate shall be governed by and construed in accordance
with the laws of the State of Nevada.
This Warrant Certificate is not valid unless countersigned by the Warrant
Agent.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to be
duly executed, manually or in facsimile by two (2) of its officers thereunto
duly authorized and a facsimile of its corporate seal to be imprinted hereon.
Dated: _____________
SPECIALTY TELECONSTRUCTORS, INC.
____________________________________ By____________________________________
President
____________________________________ By____________________________________
Secretary
[seal]
Countersigned:
AMERICAN STOCK TRANSFER & TRUST
COMPANY
By__________________________________
Authorized Officer
3
<PAGE>
[FORM OF REVERSE OF CLASS A WARRANT CERTIFICATE]
SUBSCRIPTION FORM
-----------------
To be Executed by the registered Holder
in Order to Exercise Warrants
The undersigned Registered Holder hereby irrevocably elects to exercise
__________ (______) Warrants represented by this Warrant Certificate, and to
purchase the Securities issuable upon the exercise of such Warrants, and
requests that certificates for such securities shall be issued in the name of
PLEASE INSERT SOCIAL SECURITY OR OTHER INDENTIFYING NUMBER
_____________________________
_____________________________
_____________________________
_____________________________
[Please print or type name and address]
and be delivered to
______________________________
______________________________
______________________________
______________________________
[Please print or type name and address]
and if such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, that a new Warrant Certificate for the balance of such
Warrants be registered in the name of, and delivered to, the registered Holder
at the address stated below.
The undersigned represents that the exercise of the within Warrant was
solicited by a member of the National Association of Securities Dealers, Inc.
("NASD"). If not solicited by an NASD member, please write "unsolicited" in the
space below. Unless otherwise indicated by listing the name of another NASD
member
<PAGE>
firm, it will be assumed that the exercise was solicited by Thomas James
Associates, Inc.
______________________________
Name of NASD Member if other
than Thomas James Associates,
Inc.
Dated:________________________ ______________________________
Signature
______________________________
Street Address
______________________________
City, State and Zip Code
______________________________
Taxpayer ID Number
Signature Guaranteed:
______________________________
2
<PAGE>
ASSIGNMENT
----------
To be Executed by the Registered Holder
in Order to Assign Warrants
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfer
unto
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
______________________________
______________________________
______________________________
______________________________
[please print or type name and address]
___________________ (______) of the Warrants represented by this Warrant
Certificate, and hereby irrevocably constitutes and appoints ___________________
Attorney to transfer this Warrant Certificate on the books of the Company, with
full power of substitution in the premises.
Dated: _____________________ ______________________________
Signature Guaranteed:
______________________________
THE SIGNATURE MUST BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION PURSUANT
TO S.E.C. RULE 17 AND 15.
<PAGE>
EXHIBIT 4.4
Warrant to Purchase 37,500 Units
consisting of 75,000 Shares of Common
Stock and 37,500 Redeemable Common
Stock Purchase Warrants
UNDERWRITER'S WARRANT
---------------------
Dated: as of November 4, 1994
THIS CERTIFIES THAT Thomas James Associates, Inc (herein sometimes called
the "Holder" and the "Underwriter") is entitled to purchase from SPECIALTY
TELECONSTRUCTORS, INC., a Nevada corporation (the "Company"), at the price and
during the period as herein specified, up to Thirty-Seven Thousand Five Hundred
(37,500) Units (the Units), each Units consisting of two (2) shares of Common
Stock, par value $.01 per share (the "Shares"), and one (1) Redeemable Common
Stock Purchase Warrant ("Warrants"), each exercisable to purchase one (1) share
of Common Stock at a purchase price of $6.00 per share, in each case subject to
adjustment as described below, at any time commencing on the effective date of
the Registration Statement ("Effective Date") and ending on the fifth (5th)
anniversary of the Effective Date.
This Underwriter's Warrant (the "Underwriter's Warrant") is issued pursuant
to an Underwriting Agreement between the Company and Thomas James Associates,
Inc, as Representative of the Underwriters set forth in Schedule I thereto, in
connection with a public offering through the Underwriters, of 500,000 Units as
therein described, (and up to 75,000 additional Units covered by an
over-allotment option granted by the Company and the Selling Stockholder to the
Underwriters) and in consideration of $3.75 received by the Company for the
Underwriter's Warrant. Except as specifically otherwise provided herein, the
Shares and the Warrants issued pursuant to the Underwriter's Warrant shall bear
the same terms and conditions as described under the caption "Description of
Securities" in the Registration Statement on Form SB-2, File No. 33-79998-D (the
"Registration Statement") except that the Holder shall have registration rights
under the Securities Act of 1933, as amended (the "Act"), for the Underwriter's
Warrant, the Shares, the Warrants and the Common Stock issuable upon exercise of
the Warrants as more fully described in Section 6 herein.
1. The rights represented by the Underwriter's Warrant shall be exercised
at the price, subject to adjustment in accordance with Section 8 hereof (the
"Exercise Price"), and during the periods as follows:
(a) Between the date hereof and November 3, 1999, (five (5) years
from the Effective Date, i.e. the "Expiration Date") inclusive,
the Holder shall have
<PAGE>
the option to purchase Units hereunder at a price of $12.15 per
Unit (120% of initial public offering price of Unit).
(b) After the Expiration Date, the Holder shall have no right to
purchase any Units hereunder.
2. (a) The rights represented by the Underwriter's Warrant may be
exercised at any time within the periods above specified, in whole or in part,
by (i) the surrender of this Underwriter's Warrant (with the purchase form at
the end hereof properly executed) at the principal executive office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the Holder at the address of the Holder appearing on the
books of the Company); (ii) payment to the Company of the exercise price then in
effect for the number of Units specified in the above-mentioned purchase form
together with applicable stock transfer taxes, if any; and (iii) delivery to the
Company of a duly executed agreement signed by the person(s) designated in the
purchase form to the effect that such person(s) agree(s) to be bound by the
provisions of Section 6 and Subsections (b), (c) and (d) of Section 7 hereof.
The Underwriter's Warrant shall be deemed to have been exercised, in whole or
in part to the extent specified, immediately prior to the close of business on
the date the Underwriter's Warrant is surrendered and payment is made in
accordance with the foregoing provisions of this Section 2, and the person or
persons in whose name or names the certificates for shares of Common Stock and
Warrants shall be issuable upon such exercise shall become the holder or holders
of record of such Common stock and Warrants at that time and date. The Common
Stock and Warrants and the certificates for the Common Stock and Warrants so
purchased shall be delivered to the Holder within a reasonable time, not
exceeding ten (10) days, after the rights represented by this Underwriter's
Warrant shall have been so exercised.
(b) Notwithstanding anything to the contrary contained in Section
2(a), the Holder may elect, with the consent of the Company, to exercise this
Underwriter's Warrant in whole or in part by receiving shares of Common Stock
equal to the value (as determined below) of this Underwriter's Warrant, or any
part hereof, upon surrender of the Underwriter's Warrant at the principal office
of the Company together with notice of such election in which event the Company
shall issue to the Holder a number of shares Common Stock computed using the
following formula:
X = Y(A-B) + Z(A-C)
-------------------
A A
Where: X = the number of Shares to be issued to the Holder;
Y = the number of Shares underlying the Units to be
exercised under this Underwriter's Warrant;
A = the current fair market value of one share of Common
Stock calculated as of the last trading day immediately
preceding the exercise of this Underwriter's Warrant;
2
<PAGE>
B = the Exercise Price of the Underwriter's Warrant;
Z = the number of shares of Common Stock issuable upon exercise
of Warrants included in the Units underlying this
Underwriter's Warrant; and
C = the exercise price of the Warrants included in the Units
underlying this Underwriter's Warrant;
As used herein, current fair market value of Common Stock as of a
specified date shall mean with respect to each share of Common Stock the average
of the closing prices of the Company's Common Stock sold on all securities
exchanges on which the Common Stock may at the time be listed, or, if there have
been no sales of any such exchange on such day, the average of the highest bid
and lowest ask price on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which the current fair market value of Common Stock
is being determined and the 20 consecutive Business Days prior to such day. If
on the date for which current fair market value is to be determined the Common
Stock is not listed on any securities exchange or quoted in the NASDAQ System or
the over-the-counter market, the current fair market value of Common Stock shall
be the highest price per share which the Company could then obtain from a
willing buyer (not a current employee or director) for shares of Common Stock
sold by the Company, from authorized but unissued shares, as determined in good
faith by the Board of Directors of the Company, unless prior to such date the
Company has become subject to a merger, acquisition or other consolidation
pursuant to which the Company is not the surviving party, in which case the
current fair market value of the Common Stock shall be deemed to be the value
received by the holders of the Company's Common Stock for each share thereof
pursuant to the Company's acquisition.
3. The Underwriter's Warrant and the securities issuable upon exercise
thereof shall not be transferred, sold, assigned, or hypothecated for a period
of one year commencing on the Effective Date except that it may be transferred
to successors of the Holder, and may be assigned in whole or in part to any
person who is an officer of the Holder or to any of the several Underwriters or
members of the selling group and/or the officers or partners thereof during such
period. Any such assignment shall be effected by the Holder by (i) executing
the form of assignment at the end hereof and (ii) surrendering in the
Underwriter's Warrant for cancellation at the office or agency of the Company
referred to in Section 2 hereof, accompanied by a certificate (signed by an
officer of the Holder if the Holder is a corporation), stating that each
transferee is a permitted transferee under this Section 3; whereupon the Company
shall issue, in the name or names specified by the Holder (including the Holder)
a new Underwriter's Warrant or Warrants of like tenor and representing in the
aggregate rights to purchase the same number of Units as are purchasable
hereunder.
3
<PAGE>
4. The Company covenants and agrees that all shares of Common Stock which
may be issued as part of the Units purchased hereunder will, upon issuance, be
duly and validly issued, fully paid and nonassessable, and no personal liability
will attach to the holder thereof. The Company further covenants and agrees
that, during the periods within which the Underwriter's Warrant may be
exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the exercise of
the Underwriter's Warrant and that it will have authorized and reserved a
sufficient number of shares of Common Stock for issuance upon exercise of the
Warrants included in the Units.
5. The Underwriter's Warrant shall not entitle the Holder to any voting
rights or other rights as a shareholder of the Company.
6. (a) (i) The Company shall advise the Holder or its transferee,
whether the Holder holds the Underwriter's Warrant or has exercised the
Underwriter's Warrant and holds Units or any of the securities underlying the
Units, by written notice at least four weeks prior to the filing of any post-
effective amendment to the Registration Statement or of any new registration
statement or post-effective amendment thereto under the Act covering any
securities of the Company, for its own account or for the account of others,
except for any registration statement filed on Form S-4 or S-8, and will, for a
period of seven years from the Effective Date, upon the request of the Holder,
and subject to Section 6(a)(ii) below, include in any such post-effective
amendment or new registration statement such information as may be required to
permit a public offering of the Underwriter's Warrant, all or any of the Units
underlying the Underwriter's Warrant, the Common Stock or Warrants included in
the Units or the Common Stock issuable upon the exercise of the Warrants (the
"Registrable Securities"). The Company shall supply prospectuses and such other
documents as the Holder may reasonably request in order to facilitate the public
sale or other disposition of the Registrable Securities, use its best efforts to
register and qualify any of the Registrable Securities for sale in such states
as such Holder designates and do any and all other acts and things which may be
necessary or desirable to enable such Holder to consummate the public sale or
other disposition of the Registrable Securities, all at no expense to the Holder
or the Underwriter, and furnish indemnification in the manner provided in
Section 7 hereof. The Holder shall furnish information and indemnification as
set forth in Section 7.
(ii) If the registration of which the Company gives notice is for
a registered public offering involving an underwriting, the Company shall so
advise the Holder as a part of the written notice given pursuant to Section
6(a)(i). If the managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the underwriter may
exclude none, some or all Registrable Securities from such registration and
underwriting; provided, however, that no other securityholder may include any
securities in such Registration Statement if any of the Registrable Securities
have been excluded from such registration.
(b) If any 50% Holder (as defined below) shall give notice to the
Company at any time to the effect that such Holder desires to register under the
Act any or all of the Registrable Securities under such circumstances that a
public distribution (within the meaning of the Act) of any such securities will
be involved, then the Company will promptly, but no later
4
<PAGE>
than four weeks after receipt of such notice, file a post-effective amendment
to the current Registration Statement or a new registration statement pursuant
to the Act, so that such designated Registrable Securities may be publicly sold
under the Act as promptly as practicable thereafter and the Company will use its
best efforts to cause such registration to become and remain effective
(including the taking of such steps as are necessary to obtain the removal of
any stop order) within 90 days after the receipt of such notice, provided, that
such Holder shall furnish the Company with appropriate information in connection
therewith as the Company may reasonably request in writing. The 50% Holder may,
at its option, request the filing of a post-effective amendment to the current
Registration Statement or a new registration statement under the Act on two (2)
occasions during the four-year period beginning one (1) year from the Effective
Date. The 50% Holder may, at its option, request the registration of the Under
writer's Warrant and/or any of the securities underlying the Underwriter's
Warrant in a registration statement made by the Company as contemplated by
SEction 6(a) or in connection with a request made pursuant to this Section 6(b)
prior to acquisition of the Units issuable upon exercise of the Underwriter's
Warrant. The 50% Holder may, at its option, request such post-effective
amendment or new registration statement during the described period with respect
to the Underwriter's Warrants, the Units as units, or separately as to the
Common Stock and/or Warrants included in the Units and/or the Common Stock
issuable upon the exercise of the Warrants, and such registration rights may be
exercised by the 50% Holder prior to or subsequent to the exercise of the
Warrant. Within ten days after receiving any such notice pursuant to this
Section 6(b), the Company shall give notice to any other Holders of the
Underwriter's Warrant, advising that the Company is proceeding with such
post-effective amendment or registration statement and offering to include
therin the securities underlying that part of the Warrant held by the other
Holders, provided that they shall furnish the Company with such appropriate
information (relating to the intentions of such Holders) in connection therewith
as the Company shall reasonably request in writing. All costs and expenses of
the first post-effective amendment or new registration statement shall be borne
by the Company, except that the Holder(s) shall bear the fees of their own
counsel and any underwriting discounts or commissions applicable to any of the
securities sold by them. All costs and expenses of the second such
post-effective amendment or new registration statement shall be borne by the
Holder(s). The Company will maintain such registration statement or
post-effective amendment current under the Act for a period of at least six
months (and for up to an additional three (3) months if requested by the
Holder(s) from the effective date thereof. The Company shall supply
prospectuses, and such other documents as the Holder(s) may request in order to
facilitate the public sale or other disposition of the Registrable Securities,
use its bestefforts to register and qualify any of the Registrable Securities
for sale in such states as such Holder(s) designate and furnish indemnification
in the manner provided in Section 7 hereof. In no event shall any other
securityholder of the Company be permitted to include any of the Company's
securities in any registration statement filed pursuant to this Section 6(b)
without the prior written consent(s) of the Holder(s) of the Registrable
Securities.
(c) The term "50% Holder" as used in this Section 6 shall mean the
Holder(s) of at least 50% of this Underwriter's Warrant and an Underwriter's
Warrant of same date for the purchase of 12,500 Units initially issued to
Dillon-Gage Securities, Inc. or its designees, and/or the Common Stock and the
Warrants underlying such Underwriter's Warrants (considered in the aggregate)
and shall include any owner or combination of owners of such securities, which
5
<PAGE>
ownership shall be calculated by determining the number of shares of Common
Stock held by such owners as well as the number of shares then issuable upon
exercise of the Warrants.
7. (a) Whenever pursuant to Section 6 a registration statement relating
to the Underwriter's Warrant or any Common Stock or Warrants issued or issuable
upon the exercise of any Warrant is filed under the Act, amended or
supplemented, the Company will indemnify and hold harmless each Holder of the
securities covered by such registration statement, amendment or supplement (such
Holder being hereinafter called the "Distributing Holder"), and each person, if
any, who controls (within the meaning of the Act) the Distributing Holder, and
each underwriter (within the meaning of the Act) of such securities and each
person, if any, who controls (within the meaning of the Act) any such
underwriter, against any losses, claims, damages or liabilities, joint or
several, to which the Distributing Holder, any such controlling person or any
such underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities, or actions in respect thereof, arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any such registration statement or any preliminary
prospectus or final prospectus constituting a part thereof or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading and will reimburse
the Distributing Holder or such controlling person or underwriter in connection
with investigating or defending any such loss, claim, damage, liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, said preliminary
prospectus, said final prospectus or said amendment or supplement in reliance
upon and in conformity with written information furnished by such Distributing
Holder or any other Distributing Holder for use in the preparation thereof.
(b) The Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, and each
person, if any, who controls the Company (within the meaning of the Act) against
any losses, claims, damages or liabilities, joint or several, to which the
Company or any such director, officer or controlling person may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities, or actions in respect thereof, arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in said
registration statement, said preliminary prospectus, said final prospectus, or
said amendment or supplement, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged made in said registration statement, said
preliminary prospectus, said final prospectus or said amendment or supplement in
reliance upon and in conformity with written information furnished by such
Distributing Holder for use in the preparation thereof; and will reimburse the
Company or any such director, officer or controlling person for any legal or
other expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, damage, liability or action.
6
<PAGE>
(c) Promptly after receipt by an indemnified party under this Section
7 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof, but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section 7.
(d) In case any such action is brought against any indemnified party,
and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in and, to the extent that it
may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
8 The Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of the Warrant shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, or (iv) the Warrants or
outstanding shares of Common Stock of the Company are at any time changed into
or exchanged for a different number or kind of shares or other security of the
Company or of another corporation through reorganization, merger, consolidation,
liquidation or recapitalization, then appropriate adjustments in the number and
kind of such securities subject to this Warrant shall be made and the Exercise
Price in effect at the time of the record date for such dividend or distribution
or of the effective date of such subdivision, combination, reclassification,
reorganization, merger, consolidation, liquidation or recapitalization shall be
proportionately adjusted so that the Holder of this Underwriter's Warrant
exercised after such date shall be entitled to receive the aggregate number and
kind of Shares which, if this Underwriter's Warrant had been exercised by such
Holder immediately prior to such date, he would have owned upon such exercise
and been entitled to receive upon such dividend, distribution, subdivision,
combination, reclassification, reorganization, merger, consolidation,
liquidation or recapitalization. For example, if the Company declares a 2 for 1
stock distribution and the Exercise Price immediately prior to such event was
$12.15 per Unit and the number of Units purchasable upon exercise of this
Underwriter's Warrant was 37,500, the adjusted Exercise Price immediately after
such event would be $6.075 per Unit and the adjusted number of Units purchasable
upon exercise of this Underwriter's Warrant would be 75,000. Such adjustment
shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall hereafter distribute without
consideration to all holders of its Common Stock evidences of its indebtedness
or assets (excluding cash dividends
7
<PAGE>
or distributions and dividends or distributions referred to in Subsection (a)
above) or subscription rights or warrants, then in each such case the Exercise
Price in effect thereafter shall be determined by multiplying the number of
shares then comprising a Unit by the Per Share Exercise Price in effect
immediately prior thereto, multiplied by a fraction, the numerator of which
shall be the total number of shares of Common Stock then outstanding multiplied
by the current market price per share of Common Stock (as defined in Subsection
(d) below), less the fair market value (as determined by the Company's Board of
Directors) of said assets, or evidences of indebtedness so distributed or of
such rights or warrants, and the denominator of which shall be the total number
of shares of Common Stock outstanding multiplied by such current market price
per share of, Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholder entitled to receive such distribution.
(c) Whenever the Exercise Price payable upon exercise of the
Underwriter's Warrant is adjusted pursuant to Subsections (a) or (b) above, the
number of Units purchasable upon exercise of this Underwriter's Warrant shall
simultaneously be adjusted by multiplying the number of Units issuable upon
exercise of this Underwriter's Warrant by the Exercise Price in effect on the
date hereof and dividing the product so obtained by the Exercise Price, as
adjusted.
(d) For the purpose of any computation under Subsection (b) above,
the current market price per share of Common Stock at any date shall be deemed
to be the average of the daily closing prices of the Common Stock for 30
consecutive business days before such date. The closing price for each day shall
be the last sale price regular way or, in case no such reported sale takes place
on such day, the average of the last reported bid and asked prices regular way,
in either case on the principal national securities exchange on which the Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on such exchange, the average of the highest reported bid and lowest reported
asked prices as reported by NASDAQ, or other similar organization if NASDAQ is
no longer reporting such information, or if not so available, the fair market
price as determined by the Board of Directors.
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least $0.05 in such
price; provided, however, that any adjustments which by reason of this
Subsection (e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment required to be made hereunder. All
calculations under this Section 8 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in this Section 8
to the contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the Exercise Price, in addition to those
required by this Section 8, as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in shares of Common Stock,
or any subdivision, reclassification or combination of Common Stock, hereafter
made by the Company shall not result in any Federal income tax liability to the
holders of Common Stock or securities convertible into Common Stock (including
Warrants issuable upon exercise of this Underwriter's Warrant).
(f) Whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly cause a notice setting forth the adjusted Exercise Price
and adjusted number of
8
<PAGE>
Units issuable exercise of this Underwriter's Warrant to be mailed to the
Holder, at its address set forth herein, and shall cause a certified copy
thereof to be mailed to the Company's transfer agent if any. The Company may
retain a firm of independent certified public accountants selected by the Board
of Directors (who may be the regular accountants employed by the Company) to
make any computation required by this Section 8, and a certificate signed by
such firm shall be conclusive evidence of the correctness of such adjustment.
(g) In the event that at any time, as a result of an adjustment made
pursuant to the provisions of this Section 8, the Holder of this Underwriter's
Warrant thereafter shall become entitled to receive any shares of the Company,
other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of this Underwriter's Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
Subsections (a) to (e). inclusive, above.
9. This Agreement shall be governed by and in accordance with the
laws of the State of Nevada.
IN WITNESS WHEREOF, SPECIALTY TELECONSTRUCTORS, INC. has caused this
Underwriter's Warrant to be signed by its duly authorized officers under its
corporate seal, and this Underwriter's Warrant to be dated as of November 4,
1994.
SPECIALTY TELECONSTRUCTORS, INC.
BY: /s/ Michael Budagher
----------------------------------
Michael Budagher, President
(Corporate Seal)
Attest:
/s/ Kari A. Young
- ---------------------------
Kari A. Young
<PAGE>
PURCHASE FORM
-------------
(To be signed only upon exercise of Warrant)
The undersigned, the holder of the foregoing Underwriter's Warrant, hereby
irrevocably elects to exercise the purchase rights represented by such Warrant
for, and to purchase thereunder, ________ Units of SPECIALTY TELECONSTRUCTORS,
INC., each Unit consisting of two (2) shares of $.01 par value Common Stock, and
one (1) Redeemable Common Stock Purchase Warrant to purchase one (1) share of
Common Stock, and herewith makes payment of $___________ therefor, and requests
that the Warrants and certificates for shares of Common Stock be issued in the
name(s) of, and delivered to __________________, whose address(es) is (are):
Dated:______________________, 19____
_____________________________________________
_____________________________________________
Address
<PAGE>
TRANSFER FORM
-------------
(To be signed only upon transfer of warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto _________________________ the right to purchase Units represented by the
foregoing Underwriter's Warrant to the extent of _______________________ Units,
and appoints _________________________ attorney to transfer such rights on the
books of _____________________________ , with full power of substitution in the
premises.
Dated:___________________________, 19
By:__________________________________
_____________________________________
_____________________________________
Address
In the presence of :
<PAGE>
EXHIBIT 4.5
Warrant to Purchase 12,500 units,
consisting of 25,000 Shares of
Common Stock and 12,500
Redeemable Common Stock Purchase
Warrants
UNDERWRITER'S WARRANT
---------------------
Dated: as of November 4, 1994
THIS CERTIFIES THAT Dillon-Gage Securities, Inc. (herein sometimes called
the "Holder" and the "Underwriter") is entitled to purchase from SPECIALTY
TELECONSTRUCTORS, INC., a Nevada corporation (the "Company"), at the price and
during the period as hereinafter specified, up to Twelve Thousand Five Hundred
(12,500) Units (the "Units"), each Unit consisting of two (2) shares of Common
Stock, par value $.01 per share (the "Shares"), and one (1) Redeemable Common
Stock Purchase Warrant ("Warrants"), each exercisable to purchase one (1) share
of Common Stock at a purchase price of $6.00 per share, in each case subject to
adjustment as described below, at any time commencing on the effective date of
the Registration Statement ("Effective Date") and ending on the fifth (5th)
anniversary of the Effective Date.
This Underwriter's Warrant (the "Underwriter's Warrant") is issued
pursuant to an Underwriting Agreement between the Company and Thomas James
Associates, Inc, as Representative of the Underwriters set forth in Schedule I
thereto, in connection with a public offering, through the Underwriters, of
500,000 Units as therein described, (and up to 75,000 additional Units covered
by an over-allotment option granted by the Company and the Selling Stockholder
to the Underwriters) and in consideration of $1.25 received by the Company for
the Underwriter's Warrant. Except as specifically otherwise provided herein, the
Shares and the Warrants issued pursuant to the Underwriter's Warrant shall bear
the same terms and conditions as described under the caption "Description of
Securities" in the Registration Statement on Form SB-2, File No. 33-79998-D (the
"Registration Statement") except that the Holder shall have registration rights
under the Securities Act of 1933, as amended (the "Act"), for the Underwriter's
Warrant, the Shares, the Warrants and the Common Stock issuable upon exercise of
the Warrants as more fully described in Section 6 herein.
1. The rights represented by the Underwriter's Warrant shall be exercised
at the price, subject to adjustment in accordance with Section 8 hereof (the
"Exercise Price"), and during the periods as follows:
(a) Between the date hereof and November 3, 1999, (five (5) years
from the Effective Date, i.e. the "Expiration Date") inclusive,
the Holder shall have
<PAGE>
the option to purchase Units hereunder at a price of $12.15 per
Unit (120% of initial public offering price of Unit).
(b) After the Expiration Date, the Holder shall have no right to
purchase any Units hereunder.
2. (a) The rights represented by the Underwriter's Warrant may be
exercised at any time within the periods above specified, in whole or in part,
(i) the surrender of this Underwriter's Warrant (with the purchase form at the
end hereof properly executed) at the principal executive office of the Company
(or such other office or agency of the Company as it may designate by notice in
writing to the Holder at the address of the Holder appearing on the books of the
Company); (ii) payment to the Company of the exercise price then in effect for
the number of Units specified in the above-mentioned purchase form together
with applicable stock transfer taxes, if any; and (iii) delivery to the Company
of a duly executed agreement signed by the person(s) designated in the purchase
form to the effect that such person(s) agree(s) to be bound by the provisions of
Section 6 and Subsections (b), (c) and (d) of Section 7 hereof. The
Underwriter's Warrant shall be deemed to have been exercised, in whole or in
part to the extent specified, immediately prior to the close of business on the
date the Underwriter's Warrant is surrendered and payment is made in accordance
with the foregoing provisions of this Section 2, and the person or persons in
whose name or names the certificates for shares of Common Stock and Warrants
shall be issuable upon such exercise shall become the holder or holders of
record of such Common Stock and Warrants at that time and date. The Common Stock
and Warrants and the certificates for the Common Stock and Warrants so purchased
shall be delivered to the Holder within a reasonable time, not exceeding ten
(10) days, after the rights represented by this Underwriter's Warrant shall have
been so exercised.
(b) Notwithstanding anything to the contrary contained in Section
2(a), the Holder may elect, with the consent of the Company, to exercise this
Underwriter's Warrant in whole or in part by receiving shares of Common Stock
equal to the value (as determined below) of this Underwriter's Warrant, or any
part hereof, upon surrender of the Underwriter's Warrant at the principal
office of the Company together with notice of such election in which event the
Company shall issue to the Holder a number of shares of Common Stock computed
using the following formula:
X = Y(A-B) + Z(A-C)
-------------------
A A
Where: X = the number of Shares to be issued to the Holder;
Y = the number of Shares underlying the Units to be exercised
under this Underwriter's Warrant;
A = the current fair market value of one share of Common Stock
calculated as of the last trading day immediately preceding
the exercise of this Underwriter's Warrant;
2
<PAGE>
B = the Exercise Price of the Underwriter's Warrant;
Z = the number of shares of Common Stock issuable upon exercise
of the Warrants included in the Units underlying this
Underwriter's Warrant; and
C = the exercise price of the Warrants included in the Units
underlying this Underwriter's Warrant;
As used herein, current fair market value of Common Stock as of a
specified date shall mean with respect to each share of Common Stock the average
of the closing prices of the Company's Common Stock sold on all securities
exchanges on which the Common Stock may at the time be listed, or, if there have
been no sales of any such exchange on such day, the average of the highest bid
and lowest ask price on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 21 days
consisting of the day as of which the current fair market value of Common Stock
is being determined and the 20 consecutive Business Days prior to such day. If
on the date for which current fair market value is to be determined the Common
Stock is not listed on any securities exchange or quoted in the NASDAQ System or
the over-the-counter market, the current fair market value of Common Stock shall
be the highest price per share which the Company could then obtain from a
willing buyer (not a current employee or director) for shares of Common Stock
sold by the Company, from authorized but unissued shares, as determined in good
faith by the Board of Directors of the Company, unless prior to such date the
Company has become subject to a merger, acquisition or other consolidation
pursuant to which the Company is not the surviving party, in which case the
current fair market value of the Common Stock shall be deemed to be the value
received by the holders of the Company's Common Stock for each share thereof
pursuant to the Company's acquisition.
3. The Underwriter's Warrant and the securities issuable upon exercise
thereof shall not be transferred, sold, assigned, or hypothecated for a period
of one year commencing on the Effective Date except that it may be transferred
to successors of the Holder, and may be assigned in whole or in part to any
person who is an officer of the Holder or to any of the several Underwriters or
members of the selling group and/or the officers or partners thereof during such
period. Any such assignment shall be effected by the Holder by (i) executing the
form of assignment at the end hereof and (ii) surrendering the Underwriter's
Warrant for cancellation at the office or agency of the Company referred to in
Section 2 hereof, accompanied by a certificate (signed by an officer of the
Holder if the Holder is a corporation), stating that each transferee is a
permitted transferee under this Section 3; whereupon the Company shall issue, in
the name or names specified by the Holder (including the Holder) a new
Underwriter's Warrant or Warrants of like tenor and representing in the
aggregate rights to purchase the same number of Units as are purchasable
hereunder.
3
<PAGE>
4. The Company covenants and agrees that all shares of Common Stock which
may be issued as part of the Units purchased hereunder will, upon issuance, be
duly and validly issued, fully paid and nonassessable, and no personal liability
will attach to the holder thereof. The Company further covenants and agrees
that, during the periods within which the Underwriter's Warrant may be
exercised, the Company will at all times have authorized and reserved a
sufficient number of shares of its Common Stock to provide for the exercise of
the Underwriter's Warrant and that it will have authorized and reserved a
sufficient number of shares of Common Stock for issuance upon exercise of the
Warrants included in the Units.
5. The Underwriter's Warrant shall not entitle the Holder to any voting
rights or other rights as a shareholder of the Company.
6. (a) (i) The Company shall advise the Holder or its transferee,
whether the Holder holds the Underwriter's Warrant or has exercised the
Underwriter's Warrant and holds Units or any of the securities underlying the
Units, by written notice at least four weeks prior to the filing of any post-
effective amendment to the Registration Statement or of any new registration
statement or post-effective amendment thereto under the Act covering any
securities of the Company, for its own account or for the account of others,
except for any registration statement filed on Form S-4 or S-8, and will, for a
period of seven years from the Effective Date, upon the request of the Holder,
and subject to Section 6(a)(ii) below, include in any such post-effective
amendment or new registration statement such information as may be required to
permit a public offering of the Underwriter's Warrant, all or any of the Units
underlying the Underwriting's Warrant, the Common Stock or Warrants included in
the Units or the Common Stock issuable upon the exercise of the Warrants (the
"Registrable Securities"). The Company shall supply prospectuses and such other
documents as the Holder may reasonably request in order to facilitate the public
sale or other disposition of the Registrable Securities, use its best efforts to
register and qualify any of the Registrable Securities for sale in such states
as such Holder designates and do any and all other acts and things which may be
necessary or desirable to enable such Holder to consummate the public sale or
other disposition of the Registrable Securities, all at no expense to the Holder
or the Underwriter, and furnish indemnification in the manner provided in
Section in 7 hereof. The Holder shall furnish information and indemnification as
set forth in Section 7.
(ii) If the registration of which the Company gives notice is
for a registered public offering involving an underwriting, the Company shall so
advise the Holder as a part of the written notice given pursuant to Section
6(a)(i). If the managing underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the underwriter may
exclude none, some or all Registrable Securities from such registration and
underwriting; provided, however, that no other securityholder may include any
securities in such Registration Statement if any of the Registrable Securities
have been excluded from such registration.
(b) If any 50% Holder (as defined below) shall give notice to the
Company at any time to the effect that such Holder desires to register under the
Act any or all of the Registrable Securities under such circumstances that a
public distribution (within the meaning of the Act) of any such securities will
be involved, then the Company will promptly, but no later
4
<PAGE>
than four weeks after receipt of such notice, file a post-effective amendment to
the current Registration Statement or a new registration statement pursuant to
the Act, so that such designated Registrable Securities may be publicly sold
under the Act as promptly as practicable thereafter and the Company will use its
best efforts to cause such registration to become and remain effective
(including the taking of such steps as are necessary to obtain the removal of
any stop order) within 90 days after the receipt of such notice, provided, that
such Holder shall furnish the Company with appropriate information in connection
therewith as the Company may reasonable request in writing. The 50% Holder may,
at its option, request the filing of a post-effective amendment to the current
Registration Statement or a new registration statement under the Act on two
(2) occasions during the four-year period beginning one (1) year from the
Effective Date. The 50% Holder may, at its option, request the registration of
the Underwriter's Warrant and/or any of the securities underlying the
Underwriter's Warrant in a registration statement made by the Company as
contemplated by Section 6(a) or in connection with a request made pursuant to
this Section 6(b) prior to acquisition of the Units issuable upon exercise of
the Underwiter's Warrant. The 50% Holder may, at its option, request such post-
effective amendment or new registration statement during the described period
with respect to the Underwiter's Warrant, the Units as units, or separately as
to the Common Stock and/or Warrants included in the Units and/or the Common
Stock issuable upon the exercise of the Warrants, and such registration rights
may be exercised by the 50% Holder prior to or subsequent to the exercise of the
Warrant. Within ten days after receiving any such notice pursuant to this
Section 6(b), the Company shall give notice to any other Holders of the
Underwriter's Warrant, advising that the Company is proceeding with such post-
effective amendment or registration statement and offering to including therein
the securities underlying that part of the Warrant held by the other Holders,
provided that they shall furnish the Company with such appropriate information
(relating to the intentions of such Holders) in connection therewith as the
Company shall reasonably request in writing. All costs and expenses of the first
post-effective amendment or new registration statement shall be borne by the
Company, except that the Holder(s) shall bear the fees of their own counsel and
any underwriting discounts or commissions applicable to any of the securities
sold by them. All costs and expenses of the second such post-effective amendment
or new registration statement shall be borne by the Holder(s). The Company will
maintain such registration statement or post-effective amendment current under
the Act for a period of at six months (and for up to an additional three (3)
months if requested by the Holder(s)) from the effective date thereof. The
Company shall supply prospectuses, and such other documents as the Holder(s) may
request in order to facilitate the public sale or other disposition of the
Registrable Securities, use its best efforts to register and quality any of the
Registrable Securities for sale in such states as such Holder(s) designate and
furnish indemnification in the manner provide in Section 7 hereof. In no event
shall any other securityholder of the Company be permitted to include any of the
Company's securities in any registration statement filed pursuant to this
Section 6(b) without the prior written consent(s) of the Holder(s) of the
registrable Securities.
(c) The term "50% Holder" as used in this Section 6 shall mean the
Holder(s) of at least 50% of this Underwriter's Warrant and an Underwriter's
Warrant of same date for the purchase of 37,500 Units initially issued to Thomas
James Associates, Inc. or its designees, and/or the Common Stock and the
warrants underlying such Underwriter's Warrants (considered in the aggregate)
and shall include any owner or combination of owners of such securities, which
5
<PAGE>
ownership shall be calculated by determining the number of shares of Common
Stock held by such owner or owners as well as the number of shares then issuable
upon exercise of the Warrants.
7. (a) Whenever pursuant to Section 6 a registration statement relating
to the Underwriter's Warrant or any Common Stock or Warrants issued or issuable
upon the exercise of any Warrant is filed under the Act, amended or
supplemented, the Company will indemnify and hold harmless each Holder of the
securities covered by such registration statement, amendment or supplement (such
Holder being hereinafter called the "Distributing Holder"), and each person, if
any, who controls (within the meaning of the Act) the Distributing Holder, and
each underwriter (within the meaning of the Act) of such securities and each
person, if any, who controls (within the meaning of the Act) any such
underwriter, against any losses, claims, damages or liabilities, joint or
several, to which the Distributing Holder, any such controlling person or any
such underwriter may become subject, under the Act or otherwise, insofar as such
losses, claims, damages or liabilities, or actions in respect thereof, arise out
of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any such registration statement or any preliminary
prospectus or final prospectus constituting a part thereof or any amendment or
supplement thereto, or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading and will reimburse
the Distributing Holder or such controlling person or underwriter in connection
with investigating or defending any such loss, claims, damages, liability or
action; provided, however, that the Company will not be liable in any such case
to the extent that any such loss, claim, damage or liability arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in said registration statement, said preliminary
prospectus, said final prospectus or said amendment or supplement in reliance
upon and in conformity with written information furnished by such Distributing
Holder or any other Distributing Holder for use in the preparation thereof.
(b) The Distributing Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed said
registration statement and such amendments and supplements thereto, and each
person, if any, who controls the Company (within the meaning of the Act) against
any losses, claims, damages or liabilities, joint or several, to which the
Company or any such director, officer or controlling person may become subject,
under the Act or otherwise, insofar as such losses, claims, damages or
liabilities, or actions in respect thereof, arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in said
registration statement, said preliminary prospectus, said final prospectus, or
said amendment or supplement, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each case
to the extent, but only to the extent, that such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in said registration statement,
said preliminary prospectus, said final prospectus or said amendment or
supplement in reliance upon and in conformity with written information furnished
by such Distributing Holder for use in the preparation thereof; and will
reimburse the Company or any such director, officer or controlling person for
any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action.
6
<PAGE>
(c) Promptly after receipt by an indemnified party under this Section
7 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party, give the
indemnifying party notice of the commencement thereof, but the omission so to
notify the indemnifying party will not relieve it from any liability which it
may have to any indemnified party otherwise than under this Section 7.
(d) In case any such action is brought against any indemnified
party, and it notifies an indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate in and, to the extent that it
may wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party under this
Section 7 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation.
8. The Exercise Price in effect at any time and the number and kind of
securities purchasable upon the exercise of the Warrant shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding shares of Common Stock in shares of Common
Stock, (ii) subdivide or reclassify its outstanding shares of Common Stock into
a greater number of shares, or (iii) combine or reclassify its outstanding
shares of Common Stock into a smaller number of shares, or (iv) the Warrants or
outstanding shares of Common Stock of the Company are at any time changed into
or exchanged for a different number or kind of shares or other security of the
Company or of another corporation through reorganization, merger, consolidation,
liquidation or recapitalization, then appropriate adjustments in the number and
kind of such securities subject to this Warrant shall be made and the Exercise
Price in effect at the time of the record date for such dividend or distribution
or of the effective date of such subdivision, combination, reclassification,
reorganization, merger, consolidation, liquidation or recapitalization shall be
proportionately adjusted so that the Holder of this Underwriter's Warrant
exercised after such date shall be entitled to receive the aggregate number and
kind of Shares which, if this Underwriter's Warrant had been exercised by such
Holder immediately prior to such date, he would have owned upon such exercise
and been entitled to receive upon such dividend, distribution, subdivision,
combination, reclassification, reorganization, merger, consolidation,
liquidation or recapitalization. For example, if the Company declares a 2 for 1
stock distribution and the Exercise Price immediately prior to such event was
$12.15 per Unit and the number of Units purchasable upon exercise of this
Underwriter's Warrant was 12,500, the adjusted Exercise Price immediately after
such event would be $6.075 per Unit and the adjusted number of Units purchasable
upon exercise of this Underwriter's Warrant would be 25,000. Such adjustment
shall be made successively whenever any event listed above shall occur.
(b) In case the Company shall hereafter distribute without
consideration to all holders of its Common Stock evidences of its indebtedness
or assets (excluding cash dividends
7
<PAGE>
or distributions and dividends or distributions referred to in Subsection (a)
above) or subscription rights or warrants, then in each such case the Exercise
Price in effect thereafter shall be determined by multiplying the number of
shares then comprising a Unit by the Per Share Exercise Price in effect
immediately prior thereto, multiplied by a fraction, the numerator of which
shall be the total number of shares of Common Stock then outstanding multiplied
by the current market price per share of Common Stock (as defined in Subsection
(d) below), less the fair market value (as determined by the Company's Board of
Directors) of said assets, or evidences of indebtedness so distribution or of
such rights or warrants, and the denominator of which shall be the total number
of shares of Common Stock outstanding multiplied by such current market price
per share of, Common Stock. Such adjustment shall be made whenever any such
distribution is made and shall become effective immediately after the record
date for the determination of shareholders entitled to receive such
distribution.
(c) Whenever the Exercise Price payable upon exercise of the
Underwriter's Warrant is adjusted pursuant to Subsections (a) or (b) above, the
number of Units purchasable upon exercise of this Underwriter's Warrant shall
simultaneously be adjusted by multiplying the number of Units issuable upon
exercise of this Underwriter's Warrant by the Exercise Price in effect on the
date hereof and dividing the product so obtained by the Exercise Price, as
adjusted.
(d) For the purpose of any computation under Subsection (b) above,
the current market price per share of Common Stock at any date shall be deemed
to be the average of the daily closing prices of the Common Stock for 30
consecutive business days before such date. The closing price for each day shall
by the last sale price regular way or, in case no such reported sale takes place
on such day, the average of the last reported bid and asked prices regular way,
in either case on the principal national securities exchange on which Common
Stock is admitted to trading or listed, or if not listed or admitted to trading
on such exchange, the average of the highest reported bid and lowest reported
asked prices as reported by NASDAQ, or other similar organization if NASDAQ is
no longer reporting such information, or if not so available, the fair market
price as determined by the Board of Directors.
(e) No adjustment in the Exercise Price shall be required unless such
adjustment would require an increase or decrease of at least $0.05 in such
price; provided, however, that any adjustments which by reason of this
Subsection (e) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment required to be made hereunder. All
calculations under this Section 8 shall be made to the nearest cent or to the
nearest one-hundredth of a share, as the case may be. Anything in this Section 8
to the contrary notwithstanding, the Company shall be entitled, but shall not be
required, to make such changes in the Exercise Price, in addition to those
required by this Section 8, as it shall determine, in its sole discretion, to be
advisable in order that any dividend or distribution in shares of Common Stock,
hereafter made by the Company shall not result in any Federal income tax
liability to the holders of Common Stock or securities convertible into Common
Stock (including Warrants issuable upon exercise of this Underwriter's Warrant).
(f) whenever the Exercise Price is adjusted, as herein provided, the
Company shall promptly cause a notice setting forth the adjusted Exercise Price
and adjusted number of
8
<PAGE>
Units issuable exercise of this Underwriter's Warrant to be mailed to the
Holder, at its address set forth herein, and shall cause a certified copy
thereof to be mailed to the Company's transfer agent, if any. The Company may
retain a firm of independent certified public accountants selected by the Board
of Directors (who may be the regular accountants employed by the Company) to
make any compuration required by this Section 8, and a certificate signed by
such firm shall be conclusive evidence of the correctness of such adjustment.
(g) In the event that at any time, as a result of an adjustment made
pursuant to the provisions of this Section 8, the Holder of this Underwriter's
Warrant thereafter shall become entitled to receive any shares of the Company,
other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of this Underwriter's Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
Subsections (a) to (e), inclusive, above.
9. This Agreement shall be governed by and in accordance with the laws of
the State of Nevada.
IN WITNESS WHEREOF, SPECIALTY TELECONSTRUCTORS, INC. has caused this
Underwriter's Warrant to be signed by its duly authorized officers under its
corporate seal, and this Underwriter's Warrant to be dated as of November 4,
1994.
SPECIALTY TELECONSTRUCTORS, INC.
BY: /s/ Michael Budagher
-----------------------------
Michael Budagher, President
(Corporate Seal)
Attest:
/s/ Kari A. Young
- ---------------------------
Kari A. Young
<PAGE>
PURCHASE FORM
-------------
(To be signed only upon exercise of Warrant)
The undersigned, the holder of the foregoing Underwriter's Warrant, hereby
irrevocably elects to exercise the purchase rights represented by such Warrant
for, and to purchase thereunder, ___________ Units of SPECIALTY
TELECONSTRUCTORS, INC., each Unit consisting of two (2) shares of $.01 par value
Common Stock, and one (1) Redeemable Common Stock Purchase Warrant to purchase
one (1) share of Common Stock, and herewith makes payment of $_____________
therefor, and requests that the Warrants and certificates for shares of Common
Stock be issued in the name(s) of, and delivered to ______________________,
whose address(es) is (are):
Dated:__________________________________, 19________
____________________________________
____________________________________
Address
<PAGE>
TRANSFER FORM
-------------
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers
unto ________________ the right to purchase Units represented by the foregoing
Underwriter's Warrant to the extent of ______________ Units, and appoints
__________________________ attorney to transfer such rights on the books of
______________________, with full power of substitution in the premises.
Dated:________________________, 19
BY:_______________________________
__________________________________
__________________________________
Address
In the presence of:
<PAGE>
EXHIBIT 5.1
JORDAAN, HOWARD & PENNINGTON, PLLC
ATTORNEYS AND COUNSELORS AT LAW
300 Crescent Court, Suite 1670
Dallas, Texas 75201
Jeffrey A. Howard (214) 871-6551
February 3, 1997
Specialty Teleconstructors, Inc.
12001 Hwy 14 North
Cedar Crest, New Mexico 87008
RE: Registration Statement on Form SB-2
SEC File No. ___________
Gentlemen:
We have acted as counsel to Specialty Teleconstructors, Inc., a Nevada
corporation (the "Company"), in connection with the registration under the
Securities Act of 1933, as amended (the "Securities Act of 1933"), of (i) 50,000
units (the "Underwriters' Warrant Units"), each Underwriters' Warrant Unit
consisting of two (2) shares of common stock, $.01 par value per share ("Common
Stock"), and one (1) Redeemable Common Stock Purchase Warrants ("Warrants"),
issuable upon exercise of 50,000 Underwriters' Warrants (the "Underwriters'
Warrants") issued to the representatives of the Underwriters in connection with
the Company's underwritten initial public offering (the "IPO") of 500,000 Units
(the "Public Units"), each Public Unit consisting of two (2) shares of Common
Stock and one (1) Warrant, in November, 1994, (ii) 50,000 shares of Common Stock
issuable upon exercise of 50,000 Warrants included in the Underwriters' Warrant
Units, and (iii) 500,000 shares of Common Stock issuable upon exercise of
500,000 Warrants (the "Warrants Called for Redemption") that were included in
Public Units. The Public Units, including the shares of Common Stock and the
Warrants Called for Redemption included therein, were registered under the
Securities Act of 1933 pursuant to the Company's Registration Statement on Form
SB-2, SEC File No. 33-79998-D (as amended, the "Prior Registration Statement"),
which was declared effective by the Securities and Exchange Commission (the
"Commission") on November 4, 1994. The Warrants included in the Underwriters'
Warrant Units and the Warrants Called for Redemption Warrant are substantially
identical and entitle the holder thereof to purchase one (1) share of Common
Stock of the Company at a purchase price of $6.00 per share, subject to certain
conditions set forth in that certain Warrant Agreement, dated as of November 4,
1994, by and among the Company, American Stock Transfer & Trust Company
("American Stock Transfer & Trust Company") and Thomas James & Associates, Inc.
<PAGE>
Specialty Teleconstructors, Inc.
12001 Hwy 14 North
Cedar Crest, New Mexico 87008
January 31, 1997
Page 2
A registration statement on Form SB-2, SEC File No. __________ (the
"Registration Statement") was filed with the Commission on February 3, 1997. In
connection with rendering this opinion we have examined executed copies of the
Registration Statement (as amended, the "Registration Statement") and all
exhibits thereto. We have also examined and relied upon the original, or copies
certified to our satisfaction, of (i) the Prior Registration Statement and all
exhibits thereto, (iii) the Articles of Incorporation, as amended, and the
Bylaws of the Company, (iii) minutes and records of the corporate proceedings of
the Company with respect to the issuance of the Underwriters' Warrant Units, the
Warrants included in the Underwriters' Warrant Units and the Warrants Called for
Redemption and related matters, and (iv) such other agreements and instruments
relating to the Company as we deemed necessary or appropriate for the purposes
of the opinion expressed herein. In rendering such opinion, we have made such
further investigation and inquiries relevant to the transactions contemplated by
the Registration Statement as we have deemed necessary to the opinion expressed
herein, and have relied, to the extent we deemed reasonable, on certificates and
certain other information provided to us by officers of the Company and public
officials as to matters of fact of which the maker of such certificate or the
person providing such other information had knowledge. Furthermore, in
rendering our opinion, we have assumed the authenticity of all documents
submitted to us as originals, the genuineness of all signatures, the legal
capacity of natural persons and the conformity to originals of all copies of all
documents and corporate records submitted to us.
We understand that American Stock Transfer & Trust Company was engaged as
of November 4, 1994 to be the transfer agent for the Common Stock and the
Warrants. We assume the records of American Stock Transfer & Trust Company are
true, accurate and complete, and contain all transactions with respect to the
Common Stock and the Warrants since November 4, 1994.
We are members only of the Bar of the State of Texas and are not experts
in, and express no opinion regarding, the laws of any jurisdiction other than
the State of Texas, the United States of America, and the General Corporation
Law of the State of Nevada.
Based upon the foregoing we are of the opinion that (i) the Underwriters'
Warrant Units, including the shares of Common Stock and the Warrants included
therein, to be issued by the Company upon exercise of the Underwriters' Warrants
as described in the Registration Statement, (ii) the shares of Common Stock to
be issued by the Company upon exercise of the Warrants included in the
Underwriters' Warrant Units as described in the Registration Statement and
(iii) the shares of Common Stock to be issued by the Company upon exercise of
the Warrants Called for Redemption as described in the Registration Statement,
have been duly and validly authorized for issuance and sale and when issued by
the Company and paid for as described in the Registration Statement, will be
validly issued, fully paid and nonassessable.
<PAGE>
Specialty Teleconstructors, Inc.
12001 Hwy 14 North
Cedar Crest, New Mexico 87008
January 31, 1997
Page 3
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Sincerely,
JORDAAN, HOWARD & PENNINGTON, PLLC
By: /s/ Jeffrey A. Howard
__________________________
Jeffrey A. Howard, Manager
JAH/ja
<PAGE>
EXHIBIT 10.4
CHARLES B. EWING
Senior Vice President
Norwest Bank New Mexico, N.A.
Lomas Office
NORWEST BANKS 200 Lomas Boulevard Northwest
Post Office Box 1081, M.S. 9307
Albuquerque, New Mexico 87103-1081
January 22, 1997 Bus. 505/765-5056
Fax: 505/247-4639
Michael R. Budagher, Chairman of the Board & CEO
Specialty Teleconstructors, Inc.
12001 State Highway 14 North
Cedar Crest, New Mexico 87008
Dear: Mr. Budagher:
Norwest Bank New Mexico, National Association (the "Bank") is pleased to extend
to Specialty Teleconstructors, Inc. (the "Borrower") a Conditional Revolving
Credit Line (the "Line"), subject to the following terms and conditions:
THE LINE
- --------
1. Amount of the Line. The Bank may make no advances under the line from
------------------
time to time until termination of the Line as provided in Section 9
below in amounts not to exceed the lesser of: (i) the Borrowing Base
as described in Section 8 below, or (ii) an aggregate amount of
$6,000,000.00 outstanding at any time.
2. Conditional Line. Any advance will be at the bank's sole discretion
----------------
and nothing contained in this letter agreement should be interpreted
as being a promise to make any advance.
3. Loan Requests. Each request for an advance under the Line will be made
-------------
in writing, in person, or by telephone by any person designated in
writing by Borrower. The Borrower may prepay and reborrow under the
Line (but always at the discretion of the Bank's officers and subject
to the dollar limitations described in Section 1 above).
4. The Note. The Borrower's obligations to repay all advances made by the
--------
Bank under the Line will be evidenced by a note, signed by the
Borrower, in form satisfactory to the Bank, together with any
extensions, modifications or renewals of such note (the "Note"). The
principal outstanding under the Note will be payable (check applicable
box):
[X] on demand, but in any event on___________if demand has not been
made prior to such date.
[_] on November 30, 1997.
<PAGE>
The Note also will specify some of the rights and remedies of the Bank
upon an event of default, including (among other things) the right to
accelerate the outstanding principal and unpaid interest. Such rights
and remedies will be available to the Bank upon the occurrence of an
event of default set forth in Section 17 below.
5. Interest. The Note will bear interest (computed on the basis of actual
--------
days elapsed in a 360 day year) on the principal balance outstanding
from time to time, from the date of the initial advance until the Note
is paid in full at an annual rate equal to (check applicable box):
[X] .50% in excess of the "Base Rate" of the Bank in effect from time
to time, and shall change as and when the Base Rate changes.
[_] ____% (fixed).
[_] ____________________________________________________________
____________________________________________________________
The amount of interest that accrues each month will be payable on or
before the 1st day of the next month and, if the Note is payable on
demand, on demand.
6. Facility Fee. None.
------------
7. Security. The Note will be secured by the Borrower's and its
--------
subsidiary companies accounts, contracts and other receivables, which
will be more fully described in the security agreement(s) that grants
the security interest in favor of the Bank. The security agreement(s),
in form and content acceptable to the Bank, is or will be signed by
the Borrower or the appropriate subsidiary; it extends to property of
the type described, whether now owned or hereafter acquired, including
products and proceeds thereof. The Borrower or the appropriate
subsidiary will sign any financing statements or other documents
necessary or desirable for the Bank to perfect its security interest.
Any of the Borrower's (or subsidiaries) other property in which the
Bank has a security interest to secure payment of any other debt or
liabilities owed to the Bank, whether actual, contingent, direct or
indirect (collectively, the "Other Debt"), also will secure payment of
the Note. Borrower agrees that all of its or its subsidiary property
in which the Bank has a security interest and all of its other
property of any kind held by the Bank shall stand as one general,
continuing collateral security to secure payment of the Note and all
Other Debt.
8. Borrowing Base. The Borrowing Base shall consist of 75% of Acceptable
--------------
Accounts Receivable (as defined in the Addendum to this letter
agreement). To enable the Bank to determine the Borrowing Base, the
Borrower will provide to the Bank a Borrowing Base Certificate, in
form satisfactory to the Bank, in accordance with Section 14(D) of
this letter agreement.
-2-
<PAGE>
9. Termination. The Line shall terminate as follows:
-----------
[_] at the time that the Bank demands repayment of the Note, but in
any event on __________________________ it demand has not been
made prior to such date.
[X] on November 30, 1997.
The Line also shall terminate upon any event of default under Section
17.
10. Required Paydown
----------------
In the event any advances are made to the Borrower by the Bank between
November 1, 1996 and November 30, 1997, the Line shall be repaid in
full and have a zero (0) outstanding principal for not less than sixty
(60) total days during such period. Such days need not be consecutive
and each calendar day on which the Line has a zero balance shall be
included in the sixty-day total. For example, if all advances on the
Line are paid by the Bank's close of business on Friday and a new
advance is made Monday, the Line will be considered paid three (3)
days (Friday, Saturday, and Sunday). All payments to rest the Line
must be in currently available, collected funds in accordance with the
Bank's funds availability policy in effect at that time.
GENERAL PROVISIONS
- ------------------
11. Guaranties. Specialty Management, Inc., Specialty Constructors, Inc.,
----------
Specialty Acquisitions, Inc., Specialty Combined Resources, Inc.,
Specialty Fortress, Inc., Specialty Training Centers, Inc. and
Specialty Constructors East, Inc. each will guaranty all indebtedness
of the Borrower owned to the Bank, in form and consent satisfactory to
the Bank. Each guaranty is or will be duly signed by such
guarantor(s).
12. Deposits. All depository accounts of the Borrower and subsidiary
--------
companies shall be domiciled at Norwest Bank Mexico, N.A. In the case
of the Borrower or subsidiaries maintaining accounts outside of New
Mexico, accounts will maintained at Norwest Bank(s) in those states
whenever possible.
13. Subordination. N/A
-------------
14. Reports. In order to monitor the financial condition of the Borrower,
-------
the Borrower agrees to provide the Bank with the following:
A. Within 120 days after the Borrower's fiscal year end, the annual
consolidated financial statement of the Borrower in the form of
an audit, including the balance sheet of the Borrower as of the
end of such year and the income statement of the Borrower for
such fiscal year then ended, prepared and audited by a certified
public accountant satisfactory to the Bank; and within 30 days of
filing, a true and correct copy of its federal income tax return
for such fiscal year, including all supporting schedules.
-3-
<PAGE>
B. Within 60 days after the end of each calendar quarter,
quarterly interim consolidated financial statements of the
Borrower, including the balance sheet of the Borrower as of
the end of such quarter and the income statement of the
Borrower from the beginning of the fiscal year through such
quarter then ended, in form satisfactory to the Bank and
certified as correct by an officer of the Borrower.
C. Within 30 days after the end of each month, the following:
(i) a Borrowing Base Certificate, in form satisfactory to
the Bank; and (ii) a Loan Covenant Compliance Certificate;
both in form satisfactory to the Bank. Borrowing Base
Certificate shall be accompanied by a current listing and
aging of all accounts owed to Borrower and subsidiary
companies.
D. Within 120 days after the Borrower's fiscal year end, a
Compliance Certificate prepared by the Borrower's certified
public accountants, stating whether, in preparing their
audit, they have become aware of any event of Default or
non-compliance with the covenants of Section 15 below and,
if any such event has occurred, specifying the nature and
period of such default or non-compliance.
E. Annually, a copy of general liability insurance policies
insuring the Borrower and subsidiaries.
F. Concurrently with the submission of financial and other
information required by or furnished to the Securities
Exchange Commission, Borrower shall submit a copy of such
information to Bank.
G. Copies of all press releases as they are released to the
media.
H. Other information as may be reasonably requested by the Bank
from time to time.
The financial statement described in Sections 14(A) and (C) shall
be prepared in accordance with generally accepted accounting
principles consistently applied.
15. Financial and Affirmative Covenants. For purposes of determining
-----------------------------------
the financial covenants contained in this Section 15, the
definitions set forth in the attached Addendum shall apply to
the capitalized financial terms. So long as any amounts are
outstanding under the Line, the Borrower agrees that it will:
A. Maintain a Net Worth (plus Subordinated Debt) of $6,000,000
or more at all times.
B. Maintain a ratio of Debt (minus Subordinated Debt) to
Tangible Net Worth (plus Subordinated Debt) of not greater
than 1.75 to 1.0 at all times.
-4-
<PAGE>
C. Maintain insurance with financially sound and reputable
insurers covering its tangible properties and business
against those losses, casualties and contingencies and in
the types and amounts as are customarily insured by persons
operating similar businesses with similar properties
similarly situated, with the Bank named as loss payee.
D. Permit any representative of the Bank reasonable access
during normal business hours to inspect and copy all of
Borrowers and subsidiaries books and records and to conduct
a full or partial inspection of all property in which it has
granted to the Bank a security interest.
16. Negative Covenants. So long as any amounts are outstanding under
------------------
the Line, neither the Borrower or any subsidiary shall without
the Bank's prior written consent:
A. Purchase or acquire any securities of, or make any
investments in any person, firm or corporation, except for
firms or corporations which are in related business lines of
Borrower and except for obligations of the United States
Government, open market commercial paper rated prime, or
certificates of deposit in commercial banks.
17. Default. The Line shall terminate and the Bank shall be under no
-------
further obligation to advance funds upon the occurrence of any
Default under any promissory note or any commercial security
agreement and the expiration of any applicable notice and cure
period.
18. Supplementary Agreement. The provisions in this letter agreement
-----------------------
are in additional to and supplement those provisions in the Note,
the security agreements, and any other evidence of liability held
by the Bank, all of which shall be construed as complementary to
one another. Nothing contained in this letter agreement shall
prevent the Bank from enforcing any or all other agreements with
the Borrower in accordance with their respective terms; however,
the provisions contained in this letter agreement shall supersede
any inconsistent provisions contained in any previous or other
agreement between the Borrower and the Bank.
19. General Provisions. The following provisions also will apply with
------------------
respect to this letter agreement:
A. Before any advance will be made under the Line, the Borrower
must execute and deliver to the Bank all necessary documents
described in this letter agreement.
-5-
<PAGE>
B. This letter agreement and the documents executed and
delivered pursuant to this letter agreement contain the
entire agreement between the parties with respect to the
Line, and may be amended only by a written agreement signed
on behalf of each party. If any provision of this letter
agreement shall be held invalid under any applicable laws,
such invalidity shall not affect any other provision that
can be given effect without the invalid provision, and, to
this end, the provisions of this letter agreement are
severable.
C. None of the provisions of this letter agreement shall
diminish or abrogate the Bank's right to demand, at any
time, immediate repayment of any note that is due on demand.
D. The Bank shall have the right at all times to enforce the
provisions of this letter agreement, the Note, the security
agreements, and the guaranties in strict accordance with the
terms thereof, notwithstanding any conduct or custom on the
part of the Bank in refraining from so doing at any time or
times. The failure of the Bank at any time or times to
enforce its rights under such provisions shall not be
construed as having created a custom in any manner contrary
to specific provisions of this letter agreement or as having
in any way or manner modified or waived the same. All rights
and remedies of the Bank are cumulative and concurrent.
This letter agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but which taken together shall constitute one
and the same instrument. The parties hereto have duly executed this letter
agreement to be effective as of the day and year first above written.
Sincerely,
/s/ Charles B. Ewing
Charles B. Ewing
Senior Vice President
NORWEST BANK NEW MEXICO, N.A.
Accepted and agreed to this 22 day of January, 1997.
/s/ Michael R. Budagher
-------------------------------
Specialty Teleconstructors, Inc.
By: Michael R. Budagher
----------------------------
Its: President
---------------------------
-6-
<PAGE>
ADDENDUM TO LETTER AGREEMENT
----------------------------
"Acceptable Accounts Receivable" shall mean the Borrower's & subsidiaries
accounts receivable, contracts and other receivables determined in accordance
with generally accepted accounting principles consistently applied, that are:
(i) 90 days or less in age; (ii) not due from any account debtor, 10% or more of
whose accounts are more than 90 days in age; (iii) not subject to offset,
dispute or retainage; (iv) not due from the U.S. Government, foreign entities,
of affiliates or subsidiaries of the Borrower; (v) not representing bonded
orders; and (vi) not representing booked but unfilled orders.
"Base Rate" shall mean the "base" or "prime" rate of interest as announced by
Norwest Bank Minnesota, N.A., at its principal office located in Minneapolis, as
in effect from time to time, which rate may not necessarily be the best rate
that it offers to any of its customers.
"Cash Flow" shall mean, for the fiscal year of the Borrower, the aggregate
amount of the following items properly shown on its year-end income statement,
determined in accordance with generally accepted accounting principles
consistently applied: (i) net income after taxes; (ii) amortization expense;
(iii) depreciation and depletion expense; (iv) deferred tax expense; and (v)
similar types of noncash charges against income which the Bank determines, in
its sole discretion, to be appropriate "add-backs."
"Current Assets" shall mean the aggregate amount of the Borrower's assets
properly shown as current assets on its balance sheet, determined in accordance
with generally accepted accounting principles consistently applied, minus the
following: receivables, loans and other amounts due from any shareholder,
direct, officer, or employee of the Borrower, and receivables, loans and other
amounts due from any other related or affiliated person, corporation,
partnership, trust, or other entity of the Borrower.
"Current Liabilities" shall mean the aggregate amount of the Borrower's
liabilities properly shown as current liabilities on its balance sheet,
determined in accordance with generally accepted accounting principles
consistently applied, minus any portion of such current liabilities which the
Bank determines, in its sole discretion, to be subordinated in writing in a
satisfactory manner to the Borrower's indebtedness to the Bank.
"Current Maturities of Long-Term Debt" shall mean, that portion of the
Borrower's "Long-Term Debt" that matures or that is scheduled to be paid during
the fiscal year of the Borrower. For the purposes of this definition,
"Long-Term Debt" shall mean the following: (i) the aggregate amount of the
Borrower's liabilities properly shown as non-current liabilities on its balance
sheet, determined in accordance with generally accepted accounting principles
consistently applied, as of the last day of its preceding fiscal year; and (ii)
any new liabilities of the Borrower incurred during its fiscal year that, in
accordance with generally accepted accounting principles consistently applied,
should be shown as non-current liabilities on its balance sheet at fiscal
year-end.
<PAGE>
"Debt" shall mean the aggregate amount of the Borrower's items properly shown as
liabilities on its balance sheet, determined in accordance with generally
accepted accounting principles consistently applied.
"Eligible Inventory" shall mean the Borrower's inventory, determined in
accordance with generally accepted accounting principles consistently applied,
that consists of raw materials, work-in-process, or finished goods intended for
sale.
"Net Worth" shall mean the aggregate amount of the Borrower's items properly
shown as assets on its balance sheet minus the aggregate amount of the
Borrower's items properly shown as liabilities on its balance sheet, determined
in accordance with generally accepted accounting principles consistently
applied.
"Tangible Net Worth" shall mean Net Worth (defined above) minus the aggregate
amount of the Borrower's items properly shown as the following types of assets
on its balance sheet, determined in accordance with generally accepted
accounting principles consistently applied; (i) goodwill, patents, copyrights,
mailing lists, trade names, trademarks, servicing rights, organizational and
franchise costs, bond underwriting costs, and other like assets properly
classified as intangible; (ii) leasehold improvements; (iii) receivables, loans
and other amounts due from any shareholder, director, officer, or employee of
the Borrower, and receivables, loans and other amounts due from any other
related or affiliated person, corporation, partnership, trust, or other entity
of the Borrower; and (iv) investments or interests in non-public companies,
cooperatives, or partnerships.
"Subordinated Debt" shall mean the amount of the Borrower's liabilities and debt
that has been subordinated to the Borrower's indebtedness to the Bank, in a form
and manner satisfactory to the Bank.
"Work Capital" shall mean Current Assets (defined above) minus Current
Liabilities (defined above).
-2-
<PAGE>
PROMISSORY NOTE
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------
PRINCIPAL LOAN DATE MATURITY LOAN NO CALL COLLATERAL ACCOUNT OFFICER INITIALS
<S> <C> <C> <C> <C> <C> <C> <C> <C>
$6,000,000.00 01-22-1997 01-30-1997 50030361 030 201 95834 07CBE
- -----------------------------------------------------------------------------------------------------------------------
References in the shaded area are for Lender's use only and do no limit the applicability of this document to any
particular loan or item.
- -----------------------------------------------------------------------------------------------------------------------
BORROWER: SPECIALTY TELECONSTRUCTORS, INC. LENDER: Norwest Bank New Mexico, National Association
12001 STATE HIGHWAY 14 NORTH Lomas Business Banking
CEDAR CREST,NM 87008 P.O Box 1081
200 Lomas NW
Albuquerque, NM 87103-1081
=======================================================================================================================
Principal Amount: $6,000,000.00 Initial Rate: 8.750% Date of Note:January 22, 1997
</TABLE>
PROMISE TO PAY. SPECIALTY TELECONSTRUCTORS, INC. ("Borrower") promises to pay to
Norwest Bank New Mexico, National Association ("Lender"), or order, in lawful
money of the United Stated of America, the principal amount of Six Million &
00/100 Dollars ($6,000,000.00) or so much as may be outstanding, together with
interest on the unpaid outstanding principal balance of each advance. Interest
shall be calculated from the date of each advance until repayment of each
advance.
PAYMENT. Borrower will pay this loan in one payment of all outstanding
principal plus all accrued unpaid interest on November 30, 1997. In addition,
Borrower will pay regular monthly payments of accrued unpaid interest beginning
February 28, 1997, and all subsequent interest payments are due on the same day
on the same of each month after that. Interest on this Note is computed on a
365/360 simple interest basis; that is, by applying the ration of the annual
interest rate over a year of 360 days, multiplied by the outstanding principal
balance, multiplied by the actual number of days the principal balance is
outstanding. Borrower will pay Lender at Lender's address shown above or at such
other place as Lender may designate in writing. Unless otherwise agreed or
required by applicable law, payments will be applied first to accrued unpaid
interest, then to principal, and any remaining amount to any unpaid collection
cost and late charges.
VARIABLE INTEREST RATE. The interest rate on this Note is Subject to changes in
an independent index which is the NORWEST BANK MINNESOTA N.A. BASE LENDING
RATE (the "Index"). The Index is not necessarily the lowest rate charged by
Lender on its loans. If the Index becomes unavailable during the term of this
loan, Lender may designate a substitute index after notice to Borrower. Lender
will tell Borrower the current Index rate upon Borrower's request. Borrower
understands that Lender may Lender may make loans based on other rates as well.
The interest rate change will not occur more often than each DAY. The Index
currently is 8.250% per annum. The interest rate to be applied to the unpaid
principal balance of this Note will be at a rate of 0.500 percentage points over
the Index, resulting in an initial rate of 8.750% per annum. NOTICE: Under no
circumstances will the interest rate on this Note be more than the maximum rate
allowed by applicable law.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan an will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not unless agreed to by the Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments of accrued unpaid interest.
Rather, they will reduce the principal balance due.
LATE PAYMENTS. If any payment is not received by Lender within five calendar
days after the payment is due as provided in this Note (the "Due Date"), then
additional interest will accrue beginning on the sixth calendar day on the
entire unpaid principal balance at the rate of three percent (3%) per year (the
"Additional Interest") until all past-due payments and any Additional interest
are paid in full. All payments received more than 5 calendar days after the Due
Date will be applied first to past due interest and principal then to current
interest and current principal, and then to cost of collection.
APPLICATION OF REGULAR PAYMENTS. Notwithstanding any provision of this Note to
the contrary, any regularly scheduled installment payment of principal and
interest which is received before the due date of such payment or which is
received within 5 calendar days after the due date, will be applied to interest
and to principal as if such payment were received on the due date.
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in this Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Any representation or statement made or furnished to
Lender by Borrower or on Borrower's behalf is false or misleading in any
material respect either now or at the time made or furnished. (e) Any creditor
tries to take any of Borrower's property on or in which Lender has a lien or
security interest. This includes a garnishment of any of Borrower's accounts
with Lender. (f) Any of the other events described in this default section
occurs with respect to any guarantor of this Note. (g) A material adverse
change occurs in Borrower's financial condition, or Lender believes the prospect
of payment or performance of the Indebtedness is impaired. (h) Lender in good
faith deems itself insecure. See DEFAULT - Continued below.
LENDER'S RIGHTS. Upon default, and expiration of any applicable cure period,
Lender may declare the entire unpaid principal balance on this Note and all
accrued unpaid interest immediately due, without notice, and then Borrower will
pay that amount. Upon default, including failure to pay upon final maturity,
Lender, at its option, may also, if permitted under applicable law, increase the
variable rate on this Note to 5,500 percentage points over the Index. The
interest rate will not exceed the maximum rate permitted by applicable law.
Lender may hire or pay someone else to help collect this Note if Borrower does
not pay. Borrower also will pay lender that amount. This includes, subject to
any limits under applicable law, Lender's attorneys' fees and Lender's legal
expenses whether or not there is a lawsuit, including attorneys' fees and legal
expenses for bankruptcy proceedings (including efforts to modify or vacate any
automatic stay or injunction), appeals, and any anticipated post-judgment
collection services. If not prohibited by applicable law, Borrower also will
pay any court costs, in addition to all other sums provided by law. This Note
has been delivered to Lender and accepted by Lender in the State of New Mexico.
If there is a lawsuit, Borrower agrees upon Lender's request to submit to the
jurisdiction of the courts of Bernalillo County, the State of New Mexico This
Note shall be governed by and construed in accordance with the laws of the State
of New Mexico.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA and Keogh accounts,
and all trust accounts for which the grant of a security interest would be
prohibited by law. Borrower authorizes Lender, to the extent permitted by
applicable law, to charge or setoff all sums owing on this Note against any and
all such accounts.
LINE OF CREDIT. This Note evidences a revolving line of credit. Advances under
this Note, as well as directors for payment from Borrower's accounts, may be
requested orally or in writing by Borrower or by an authorized person. Lender
may, but need not, require that all oral requests be confirmed in writing.
Borrower agrees to be liable for all sums either: (a) advanced in accordance
with the instructions of an authorized person or (b) credited to any of
Borrower's accounts with Lender. The unpaid principal balance owing on this
Note at any time may be evidenced by endorsements on this Note or by Lender's
Internal records, including daily computer print-outs. Lender will have no
obligation to advance funds under this Note it: (a) Borrower or any guarantor is
in default under the terms of this Note or any agreement that Borrower or any
guarantor has with Lender, including any agreement made in connection with the
signing of this Note; (b) Borrower or any guarantor ceases doing business
without Lender's prior written consent or is insolvent; (c) any guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such guarantor's
guarantee of this Note or any other loan with Lender; or (e) Lender in good
faith deems itself insecure under this Note or any other agreement between
Lender and Borrower.
FINANCIAL STATEMENTS. I agree to provide to you, upon request, any financial
statements or information you may deem necessary, I warrant that all financial
statements and information I provide to you are or will be accurate, correct and
complete.
DEFAULT - CONTINUED. (d) Borrower becomes insolvent, a receiver is appointed
for any part of Borrower's property, Borrower makes an assignment for the
benefit of creditors, any proceedings is commenced by Borrower under any
bankruptcy or insolvency laws, or any proceeding is commenced against Borrower
under any bankruptcy or insolvency laws and such proceeding is not dismissed
within 60 days of filing.
NOTICE - RIGHT TO CURE DEFAULT. Upon the occurrance of any DEFAULT, Lender will
give Borrower written notice of such Default. Borrower shall have 5 (five) days
from actual receipt of notice to cure any Default for failure to make any
payment when due. Borrower shall have 30 days from actual receipt of notice to
cure any Default, other than failure to make any payment when due, provided such
other Default is succeptible to cure (a false or misleading representation or
statement made or furnished to the Lender would not, as an example, be
succeptible to cure). Notice by the Lender will be made by any one or more of
the following methods to Borrower's principal place of business or such other
address or facsimile telephone number as Borrower designates to the Lender in
writing: 1. hand delivery, 2. delivery by courier service or overnight delivery
service, or 3. telephone facsimile transmission.
<PAGE>
01-22-1997 PROMISSORY NOTE Page 2
Loan No 50030361 (Continued)
================================================================================
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, walve
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
SPECIALTY TELECONSTRUCTORS, INC.
By: /s/ Michael R. Budagher
-----------------------------------
MICHAEL R. BUDAGHER, PRESIDENT
================================================================================
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
Percentage
of Voting
Securities
Name Address Incorporation Owned
---- ------- ------------- -----
<S> <C> <C> <C>
Specialty Constructors, Inc. Cedar Crest, NM NM 100%
Specialty Management, Inc. Cedar Crest, NM NV 100%
Specialty Acquisitions, Inc. Cedar Crest, NM NV 100%
Specialty Combined Resources, Inc. Laguna Hills, CA TX 100%
Specialty Fortress, Inc. Cedar Crest, NM NV 100%
Specialty Training, Inc. Cedar Crest, NM NV 100%
Specialty Financial, Inc. Cedar Crest, NM NV 100%
</TABLE>
<PAGE>
EXHIBIT 23.1
KPMG Peat Marwick LLP
6565 Americas Parkway NE, Suite 700
Albuquerque, NM 87190
The Board of Directors
Specialty Teleconstructors, Inc.
We consent to the use of our reports included herein and incorporated
herein by reference and to the reference to our firm under the heading "Experts"
in the prospectus.
KPMG PEAT MARWICK LLP
Albuquerque, New Mexico
January 27,1997
End of Document
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SPECIALTY TELECONSTRUCTORS, INC.
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C> <C>
<PERIOD-TYPE> 6-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1997
<PERIOD-END> DEC-31-1996 DEC-31-1996
<CASH> 644,434 644,434
<SECURITIES> 0 0
<RECEIVABLES> 8,101,699 8,101,699
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 10,693,757 10,693,757
<PP&E> 4,127,701 4,127,701
<DEPRECIATION> 1,243,341 1,243,341
<TOTAL-ASSETS> 13,961,492 13,961,492
<CURRENT-LIABILITIES> 5,109,751 5,109,751
<BONDS> 0 0
0 0
0 0
<COMMON> 41,857 41,857
<OTHER-SE> 7,909,461<F1> 7,909,461<F1>
<TOTAL-LIABILITY-AND-EQUITY> 13,961,492 13,961,492
<SALES> 14,591,735 9,130,957
<TOTAL-REVENUES> 14,622,283 9,138,857
<CGS> 11,956,233 7,550,888
<TOTAL-COSTS> 13,336,503 8,351,466
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 55,743 22,168
<INCOME-PRETAX> 1,230,037 765,223
<INCOME-TAX> 472,000 292,400
<INCOME-CONTINUING> 758,037 472,823
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 758,037 472,823
<EPS-PRIMARY> .18 .11
<EPS-DILUTED> .18 .11
<FN>
<F1>Other Equity of $7,909,461 is comprised of Additional paid-in Capital of
$4,830,935 and Retained Earnings of $3,078,526.
</FN>
</TABLE>
