<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 15, 1996.
REGISTRATION NO. 333-03338
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMENDMENT NO. 3
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
ADAMS OUTDOOR ADVERTISING
LIMITED PARTNERSHIP
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MINNESOTA 7312 41-1540241
(STATE OR OTHER PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) ----------------
ADAMS OUTDOOR ADVERTISING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MINNESOTA 7312 41-154024
(STATE OR OTHER PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NO.)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) ----------------
1380 W. PACES FERRY ROAD, N.W.
SUITE 170, SOUTH WING
ATLANTA, GA 30327
(404) 233-1366
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANTS' PRINCIPAL EXECUTIVE OFFICES)
----------------
J. KEVIN GLEASON
PRESIDENT AND CHIEF EXECUTIVE OFFICER
ADAMS OUTDOOR ADVERTISING, INC.
1380 W. PACES FERRY ROAD, N.W.
SUITE 170, SOUTH WING
ATLANTA, GA 30327
(404) 233-1366
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE FOR THE REGISTRANTS)
----------------
WITH COPIES TO:
BRUCE J. PARKER
KAPLAN, STRANGIS AND KAPLAN, P.A.
5500 NORWEST CENTER
MINNEAPOLIS, MINNESOTA 55402
(612) 375-1138
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
CROSS REFERENCE SHEET
SHOWING LOCATION IN THE PROSPECTUS OF INFORMATION
REQUIRED BY ITEMS OF FORM S-4
<TABLE>
<CAPTION>
FORM S-4 ITEM NUMBER AND CAPTION
--------------------------------
<C> <S> <C>
1. Forepart of the
Registration Statement and
Outside Front Cover Page Forepart of the Registration Statement and
of Prospectus............. Outside Front Cover Page
2. Inside Front and Outside
Back Cover Pages of Inside Front Cover Page; Available
Prospectus................ Information; Outside Back Cover Page
3. Risk Factors, Ratio of
Earnings to Fixed Charges Prospectus Summary; Risk Factors; The
and Other Information..... Company; Selected Historical and Pro Forma
Financial Data
4. Terms of the Transaction... Prospectus Summary; The Exchange Offer,
Description of the Notes
5. Pro Forma Financial Selected Historical and Pro Forma
Information............... Consolidated Financial Data
6. Material Contracts With the
Company Being Acquired.... N/A
7. Additional Information
Required for Reoferring by
Persons and Parties Deemed
to be Underwriters........ Plan of Distribution
8. Interests of Named Experts
and
Counsel................... Legal Matters; Experts
9. Disclosure of Commission
Position on
Indemnification of
Securities Act
Liabilities............... N/A
10. Information with Respect to
S-3 Registrants........... N/A
11. Incorporation of Certain
Information by Reference.. N/A
12. Information with Respect to
S-2 or S-3 Registrants.... N/A
13. Incorporation of Certain
Information by Reference.. N/A
14. Information with Respect to
Registrants Other than S-3 Outside Front Cover Page; Available
or S-2 Registrants........ Information; Prospectus Summary; Risk
Factors; The Company; Refinancing and Use
of Proceeds; Capitalization; Selected
Historical and Pro Forma Financial Data;
Management's Discussion and Analysis of
Financial Condition and Results of
Operations; Business; Management; Certain
Transactions; Description of New Credit
Facility
15. Information with Respect to
S-3 Companies............. N/A
16. Information with Respect to
S-2 or S-3 Companies...... N/A
17. Information with Respect to
Companies Other than S-2
or S-3 Companies.......... N/A
18. Information if Proxies,
Consents or Authorizations
are to be Solicited....... N/A
19. Information if Proxies,
Consents or Authorizations
are not to be solicited, Prospectus Summary; Management; Certain
or in an Exchange Officer. Transactions
</TABLE>
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION DATED JULY 15, 1996
PROSPECTUS
LOGO
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
ADAMS OUTDOOR ADVERTISING, INC.
OFFER TO EXCHANGE THEIR 10 3/4% SENIOR NOTES DUE 2006,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR ANY AND ALL OF THEIR OUTSTANDING
10 3/4% SENIOR NOTES DUE 2006
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.
NEW YORK CITY TIME, ON , 1996, UNLESS EXTENDED
--------
The 10 3/4% Senior Notes due 2006 are being offered (the "Offering") by and
are the joint and several obligations of Adams Outdoor Advertising Limited
Partnership, a Minnesota limited partnership (the "Company"), and Adams Outdoor
Advertising, Inc., a Minnesota corporation and a general partner of the Company
("AOAI" and collectively with the Company referred to as the "Issuers"), and
the Issuers hereby offer to exchange (the "Exchange Offer") up to $105,000,000
in aggregate principal amount of the Issuers' new 10 3/4% Senior Notes due 2006
(the "New Notes") for $105,000,000 in aggregate principal amount of the
Issuers' outstanding 10 3/4% Senior Notes due 2006 (the "Original Notes"). The
Original Notes and the New Notes are sometimes referred to herein collectively
as the "Notes." Except for its interests and activities as managing general
partner of the Company, AOAI has nominal assets and does not conduct any
operations.
The Terms of the New Notes are substantially identical in all respects
(including principal amount, interest rate and maturity) to the terms of the
Original Notes for which they may be exchanged pursuant to this Exchange Offer,
except that the New Notes will be freely transferable by holders thereof (other
than as provided in the next paragraph) and issued free of any covenant
restricting transfer absent registration. The New Notes will evidence the same
debt as the Original Notes and contain terms which are substantially identical
to the terms of the Original Notes for which they are to be exchanged. For a
complete description of the terms of the Notes, see "Description of the Notes."
There will be no cash proceeds to the Company from the Exchange Offer.
The New Notes will bear interest from the most recent date to which interest
has been paid on the Original Notes, or if no interest has been paid on the
Original Notes, from March 12, 1996. Holders whose Original Notes are accepted
for exchange will not receive any payment in respect of interest on such
Original Notes otherwise payable on any interest payment date the record date
for which occurs on or after consummation of the Exchange Offer. See "The
Exchange Offer--Terms of the Exchange Offer."
The Notes are redeemable at the option of the Issuers, in whole or in part,
on or after March 15, 2001, at the redemption prices set forth herein, plus
accrued and unpaid interest to the date of redemption. Prior to March 15, 1999,
the Issuers may redeem up to 25% of the original principal amount of the Notes
at 110% of the aggregate principal amount so redeemed, plus accrued and unpaid
interest to the redemption date, with the proceeds of one or more Public Equity
Offerings (as defined herein); provided, however, that at least $75.0 million
principal amount of the Notes remain outstanding and that such redemption
occurs within 60 days following the closing of any such Public Equity Offering.
See "Description of the Notes--Optional Redemption."
The Original Notes were sold on March 12, 1996, in a transaction not
registered under the Securities Act of 1933, as amended (the "Securities Act"),
in reliance upon the exemption provided in Section 4(2) of the Securities Act.
Accordingly, the Original Notes may not be offered, resold or otherwise
pledged, hypothecated or transferred in the United States unless registered
under the Securities Act or unless an applicable exemption from the
registration requirements of the Securities Act is available. The New Notes are
being offered to satisfy the obligations of the Company under a Registration
Rights Agreement relating to the Original Notes. See "The Exchange Offer--
Purposes and Effects of the Exchange Offer." New Notes issued pursuant to the
Exchange Offer in exchange for the Original Notes may be offered for resale,
resold or otherwise transferred by the holders thereof (other than any holder
which is an affiliate of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such New Notes are
acquired in the ordinary course of such holders' business and such holders are
not engaged and do not intend to engage, and have no arrangement or
understanding with any person to engage, in the distribution of such New Notes
See "The Exchange Offer--Purpose and Effect of the Exchange Offer."-
The Notes are general unsecured senior obligations of the Issuers and rank
pari passu with all existing and future indebtedness of the Issuers and senior
in right of payment to all existing and future subordinated indebtedness of the
Issuers. The claims of holders of the Notes are effectively subordinated to the
claims of lenders under a credit facility providing for borrowings of up to
$15.0 million (the "New Credit Facility") which was entered into by the Company
concurrently with the sale of the Original Notes. The New Credit Facility is
secured by a substantial portion of the Company's assets. See "Description of
New Credit Facility." The indenture governing the Notes (the "Indenture")
provides that the Company may from time to time incur Indebtedness (as defined
herein) secured by the Company's assets in an aggregate amount, including
amounts outstanding or committed to be advanced under the New Credit Facility
or any replacement thereof, not to exceed $35.0 million. Additionally, the
Company may from time to time incur additional Indebtedness provided that,
among other things, after giving effect to the incurrence of such Indebtedness,
the ratio of the Company's total Indebtedness to the Company's EBITDA (as
determined pursuant to the Indenture) does not exceed certain limits set forth
in the Indenture. See "Description of the Notes--Certain Covenants--Limitation
on Additional Indebtedness." As of May 31, 1996, approximately $109.6 million
of senior indebtedness of the Company (including the Notes) is outstanding.
There is currently no outstanding obligations of the Issuers that are
subordinate to the Notes.
(Continued on next page)
--------
SEE "RISK FACTORS" BEGINNING ON PAGE 13 FOR A DESCRIPTION OF CERTAIN RISKS
RELATING TO THE ISSUERS AND AN INVESTMENT IN ITS SECURITIES.
--------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
--------
The date of this Prospectus is July , 1996.
<PAGE>
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that by so acknowledging and by so delivering a prospectus, a broker-dealer
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Notes received in exchange for Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 165 days after the
date hereof, it will make this Prospectus available to any broker-dealer for
use in connection with any such resale. See "Plan of Distribution."
The Notes constitute securities for which there is no established trading
market. Any Original Notes not tendered and accepted in the Exchange Offer
will remain outstanding. The Company does not currently intend to list the New
Notes on any securities exchange. To the extent that any Original Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered Original Notes could be adversely affected. No assurances can be
given as to the liquidity of the trading market for either the Original Notes
or the New Notes.
The Exchange Offer is not conditioned on any minimum aggregate principal
amount of Original Notes being tendered for exchange. The Exchange Offer will
expire at 5:00 P.M., New York time, on , 1996, unless extended to a
date not later than 60 days from the effective date of the Registration
Statement of which this Prospectus is a part (the "Expiration Date"). The date
of acceptance for exchange of the Original Notes will be the first business
day following the Expiration Date. Original Notes tendered pursuant to the
Exchange Offer may be withdrawn at anytime prior to the Expiration Date,
otherwise, such tenders are irrevocable. The Company will pay all expenses
incident to the Exchange Offer.
FOR PENNSYLVANIA RESIDENTS ONLY:
NEW NOTES OFFERED IN THIS EXCHANGE OFFER TO PENNSYLVANIA RESIDENTS MAY ONLY
BE EXCHANGED FOR ORIGINAL NOTES HELD BY PENNSYLVANIA RESIDENTS WHO ARE: (1)
"QUALIFIED INSTITUTIONAL BUYERS" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") ("QIBS")); (2) INSTITUTIONAL
"ACCREDITED INVESTORS" (AS DEFINED IN RULE 501(A)(1), (2) OR (3) UNDER THE
SECURITIES ACT; AND (3) INSTITUTIONAL INVESTORS AS DEFINED BY (S) 102(K) OF
THE PENNSYLVANIA SECURITIES ACT OF 1972 AND RULE 102.111 OF THE PENNSYLVANIA
CODE, AS AMENDED.
THE DISTRIBUTION OF THIS PROSPECTUS AND THE EXCHANGE OFFER DESCRIBED HEREIN
MAY BE RESTRICTED BY LAW IN CERTAIN JURISDICTIONS. PERSONS INTO WHOSE
POSSESSION THIS PROSPECTUS COMES MUST INFORM THEMSELVES ABOUT, AND OBSERVE,
ANY SUCH RESTRICTIONS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY OF THE SECURITIES TO ANY PERSON IN ANY JURISDICTION WHERE IT
IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. No financial information or other data
with respect to AOAI (including management's discussion and analysis of
financial condition and results of operations) is included herein since such
entity has nominal assets and does not conduct any operations except for its
interest and activities as a general partner of the Company.
THE COMPANY
Adams Outdoor Advertising Limited Partnership (the "Company") is the seventh
largest owner and operator of outdoor advertising structures in the United
States. The Company currently provides outdoor advertising services in eight
markets and surrounding areas in the midwest, southeast and mid-Atlantic
states: Charlotte, NC; Kalamazoo, MI; Lansing/Jackson, MI; Lehigh Valley, PA;
Madison, WI; Minneapolis, MN; Norfolk, VA; and Peoria, IL. As of December 31,
1995, the Company operated, in the aggregate, approximately 7,000 advertising
displays, including approximately 1,900 painted bulletins, 4,500 30-sheet
posters, 150 junior (8-sheet) posters and 450 transit displays.
The Company's strategy is to focus its outdoor advertising operations in
medium-sized markets in which it is or could be the leading provider of such
services. The Company offers its customers comprehensive outdoor advertising
services, including local creative professionals, account executives,
production facilities and business development staffs. These resources allow
the Company to educate current customers and potential customers on the
effectiveness of the outdoor advertising medium and to demonstrate to customers
how to integrate outdoor advertising into their marketing plans. The Company
also develops creative ideas and displays to advertise a customer's products or
services and provides customers with detailed local market research and
information about potential advertising opportunities.
As a result of the acquisition of outdoor advertising businesses from 1983 to
1988, the Company incurred substantial indebtedness. At March 31, 1996, the
Company had outstanding total long-term indebtedness of $112.0 million.
During the five years ended December 31, 1995, net revenues increased from
$31.4 million to $42.9 million. Net income for 1995 increased to $1.6 million
from a net loss of $9.5 million in 1991. The net loss for the three months
ended March 31, 1996 decreased to $262,000 from $1.6 million for the comparable
period in 1995. Cash flow provided by operating activities increased from $1.3
million to $9.1 million and Operating Cash Flow (as defined herein) has grown
from $11.9 million to $20.9 million over the same period. The Company has
improved financial performance primarily through a strategy of increasing
revenues from existing display faces in each market by developing programs that
maximize advertising rates and optimize occupancy levels and through lowering
operating expenses by reducing accounting, administrative and operations staff.
In recent years, this strategy has resulted in high operating leverage which
enabled the Company to increase cash flow provided by operating activities and
Operating Cash Flow at a faster rate than net revenues. Operating Cash Flow is
defined as operating income (loss) before (i) depreciation and amortization
expenses and (ii) deferred compensation expense. Operating Cash Flow is not
intended to represent net cash provided by operating activities as defined by
generally accepted accounting principles and should not be considered as an
alternative to net income or loss as an indicator of the Company's operating
performance or to net cash provided by operating, investing and financing
activities as a measure of liquidity or ability to meet cash needs. Information
is disclosed herein to permit a more complete comparative analysis of the
Company's performance relative to other companies in the media industry that
publicly report Operating Cash Flow or similarly defined measures.
The Company believes that its strong position in its markets, its emphasis on
local and regional advertisers and the geographical diversity of its operations
provide stability to its revenue base, reduce its reliance upon any single
local economy or advertiser, and mitigate the effect of fluctuations in
national advertising expenditures. Net revenues attributable to local and
regional advertising have increased as a percentage of total net revenues from
83.5% in 1991 to 87.4% in 1995.
The Company has been able to maintain its position as a leading provider of
outdoor advertising services in its primary markets due to the barriers to
entry created by the combination of the Company's existing site
3
<PAGE>
locations and government regulations limiting the erection of new displays. The
Company intends to build upon its position as the dominant provider of outdoor
advertising in its markets and the competitive advantage provided by its sales,
creative and business development staffs. The Company plans to accomplish this
by continuing to develop its customer base among local and regional
advertisers, improving the utilization and rate structure of its display faces
and expanding the number of its displays through building in its existing
markets and, when appropriate, through making acquisitions.
The Company's business was founded in 1983 with the acquisition of Central
Outdoor Advertising, which had offices in Lansing, Jackson and Kalamazoo, MI.
Over the next five years, the Company pursued a strategy of geographic
expansion into additional medium-sized markets, primarily through the
acquisition of existing outdoor advertising businesses in selected midwest,
southeast and mid-Atlantic markets. This geographic expansion strategy has
enabled the Company to capitalize on the efficiencies, economies of scale and
marketing opportunities associated with operating outdoor advertising
businesses located in proximate or contiguous geographic markets to its primary
markets. Since 1988, the Company's sales and Operating Cash Flow growth has
resulted from increased display inventory, primarily through new construction
and, to a lesser extent, from acquisitions of displays in existing markets and
the significant upgrading of its existing display inventory. The Company has
also been able to reduce operating expenses while achieving higher rate and
occupancy levels.
The Issuers are privately held. Stephen Adams holds all of the issued and
outstanding stock of AOAI, the managing general partner of the Company. Mr.
Adams is also the individual general partner of the Company and, together with
others, is a limited partner of the Company. See "Principal Security Holders."
<TABLE>
<S> <C>
100% of Adams Outdoor Advertising, Inc.,
Stephen Adams Outstanding a Minnesota corporation, and
Shares managing general partner of the
Company
0.70% General Partnership Interest 0.01% General Partnership Interest
71.30% Limited Partnership Interest 0.99% Limited Partnership Interest
Adams Outdoor Advertising
Limited Partnership, a
Minnesota limited partnership
27% Limited Partnership Interest
Other Limited Partners
(5 Persons)
</TABLE>
REFINANCING TRANSACTION
On March 12, 1996, the Company completed a refinancing (the "Refinancing") to
extend the average life of the Company's debt obligations and to enhance its
financial and operating flexibility. As part of the Refinancing, the Issuers
issued in a private placement (the "Private Offering") $105,000,000 of 10 3/4%
Senior Notes due 2006 which are herein referred to as the Original Notes. In
addition, the Company replaced its existing secured credit facility within a
new secured credit facility (the "New Credit Facility") providing for
borrowings of up to $15.0 million. See "Description of New Credit Facility."
The claim's of holders of the Original Notes and the New Notes will be
effectively subordinated to the lenders of under the New Credit Facility
because the New Credit Facility is secured by a substantial portion of the
Company's assets.
4
<PAGE>
THE EXCHANGE OFFER
Purpose of Exchange Offer..... The Original Notes were sold in the Private
Offering by the Issuers on March 12, 1996 to
certain accredited institutions through CIBC
Wood Gundy Securities Corp., the initial
purchaser (the "Initial Purchaser"). In
connection therewith, the Issuers executed and
delivered, for the benefit of the holders of
the Original Notes, a Registration Rights
Agreement dated March 12, 1996 (the
"Registration Rights Agreement"), which is
filed as an exhibit to the Registration
Statement of which this Prospectus is a part,
providing for, among other things, the Exchange
Offer so that the New Notes will be freely
transferable by the holders thereof without
registration or any prospectus delivery
requirements under the Securities Act, except
that a "dealer" or any of their "affiliates" as
such terms are defined under the Securities
Act, who exchanges Original Notes held for its
own account (a "Restricted Holder") will be
required to deliver copies of this Prospectus
in connection with any resale of the New Notes
issued in exchange for such Original Notes. See
"The Exchange Offer--Purposes and Effects of
the Exchange Offer" and "Plan of Distribution"
and "Risk Factors--Consequences of Failure to
Exchange."
The Exchange Offer............ The Issuers are offering to exchange pursuant
to the Exchange Offer up to $105,000,000
aggregate principal amount of the Issuers' new
10 3/4% Senior Notes due 2006 (the "New Notes")
for $105,000,000 aggregate principal amount of
the Issuers' outstanding 10 3/4% Senior Notes
due 2006 (the "Original Notes"). The Original
Notes and the New Notes are collectively
referred to herein as the "Notes." The terms of
the New Notes, are substantially identical in
all respects (including principal amount,
interest rate and maturity) to the terms of the
Original Notes for which they may be exchanged
pursuant to the Exchange Offer, except that the
New Notes are freely transferable by holders
thereof (other than as provided herein), and
are not subject to any covenant regarding
registration under the Securities Act. See "The
Exchange Offer--Terms of the Exchange Offer"
and "The Exchange Offer--Procedures for
Tendering."
The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Original
Notes being tendered for exchange.
Expiration Date............... The Exchange Offer will expire at 5:00 p.m.,
New York City time on , 1996,
unless extended to a date not later than 60
days from the effective date of the
Registration Statement of which this Prospectus
is a part, (the "Expiration Date").
Conditions of the Exchange The Issuers' obligation to consummate the
Offer........................ Exchange Offer will be subject to certain
conditions. The Issuers will not be required to
accept for exchange any Original Notes for any
New Notes tendered and may terminate or amend
the Exchange Offer as provided herein before
the acceptance of such Original Notes, if,
among other things, certain legal actions or
proceedings are
5
<PAGE>
instituted, there shall have occurred certain
changes or developments in the business or
financial affairs of the Issuers, there shall
have been proposed, adopted or enacted any law,
statutes or regulation materially effecting the
Issuers or the benefits of the Exchange Offer
or there shall have occurred certain economic
or other events. See "The Exchange Offer--
Conditions of the Exchange Offer." The Issuers
reserve the right to terminate or amend the
Exchange Offer at any time prior to the
Expiration Date upon the occurrence of any such
conditions.
Procedures for Tendering Old Each holder of Original Notes wishing to accept
Notes........................ the Exchange Offer must complete, sign and date
the Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal,
or such facsimile, together with the Original
Notes and any other required documentation to
the exchange agent (the "Exchange Agent") at
the address set forth herein. Original Notes
may be physically delivered, but physical
delivery is not required if a confirmation of a
book-entry of such Original Notes to the
Exchange Agent's account at The Depository
Trust Company ("DTC" or the "Depositary") is
delivered in a timely fashion. By executing the
Letter of Transmittal, each holder will
represent to the Issuers that, among other
things, the New Notes acquired pursuant to the
Exchange Offer are being obtained in the
ordinary course of business of the person
receiving such New Notes, whether or not such
person is the holder, that neither the holder
nor any such other person is engaged in, or
intends to engage in, or has an arrangement or
understanding with any person to participate
in, the distribution of such New Notes and that
neither the holder nor any such other person is
an "affiliate," as defined under Rule 405 of
the Securities Act, of the Issuers. Each broker
or dealer that receives New Notes for its own
account in exchange for Original Notes, where
such Original Notes were acquired by such
broker or dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus
in connection with any resale of such New
Notes. See "The Exchange Offer--Procedures for
Tendering" and "Plan of Distribution."
Special Procedures for Any beneficial owner whose Original Notes are
Beneficial Owners............ registered in the name of a broker, dealer,
commercial bank, trust company or other nominee
and who wishes to tender should contact such
registered holder promptly and instruct such
registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes
to tender on such owner's own behalf, such
owner must, prior to completing and executing
the Letter of Transmittal and delivering his
Original Notes, either make appropriate
arrangements to register ownership of the
Original Notes in such owner's name or obtain a
properly completed bond power from the
registered holder. The transfer of registered
ownership may take considerable time. See "The
Exchange Offer--Procedures for Tendering."
6
<PAGE>
Guaranteed Delivery Holders of Original Notes who wish to tender
Procedures................... their Original Notes and whose Original Notes
are not entirely available or who cannot
deliver their Original Notes must complete,
sign and deliver, the Letter of Transmittal or
any other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date and must tender their Original
Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer--
Guaranteed Delivery Procedures."
Withdrawal Rights............. Tenders may be withdrawn at any time prior to
5:00 p.m. New York City time, on the Expiration
Date. See "The Exchange Offer--Withdrawal of
Tenders."
Acceptance of Original Notes
and Delivery of New Notes....
The Issuers will accept for exchange any and
all Original Notes which are properly tendered
in the Exchange Offer prior to 5:00 p.m., New
York City time, on the Expiration Date. The New
Notes issued pursuant to the Exchange Offer
will be delivered promptly following the
Expiration Date. See "The Exchange Offer--Terms
of the Exchange Offer."
Exchange Agent................ United States Trust Company of New York is
serving as Exchange Agent in connection with
the Exchange Offer. See "The Exchange Offer--
Exchange Agent."
Effect on Holders of the As a result of the making of, and upon
Original Notes............... acceptance for exchange of all validly tendered
Original Notes pursuant to the terms of this
Exchange Offer, the Issuers will have fulfilled
one of the covenants contained in the
Registration Rights Agreement and, accordingly,
there will be no increase in the interest rate
on the Original Notes pursuant to the
applicable terms of the Registration Rights
Agreement due to the Exchange Offer. Holders of
the Original Notes who do not tender their
Original Notes will be entitled to all the
rights and limitations applicable thereto under
the Indenture dated as of March 12, 1996, among
the Issuers and United States Trust Company of
New York, as trustee (the "Trustee") relating
to the Original Notes and the New Notes (the
"Indenture"), except for any rights under the
Indenture or the Registration Rights Agreement,
which by their terms, terminate or cease to
have further effectiveness as a result of the
making of, and the acceptance for exchange of
all validly tendered Original Notes pursuant
to, the Exchange Offer. All untendered Original
Notes will continue to be subject to the
restrictions on transfer provided for in the
Original Notes and in the Indenture. To the
extent that Original Notes are tendered and
accepted in the Exchange Offer, the trading
market for untendered Original Notes could be
adversely affected.
Use of Proceeds............... There will be no cash proceeds to the Issuers
from the exchange pursuant to the Exchange
Offer.
7
<PAGE>
TERMS OF NOTES
The Exchange Offer applies to $105,000,000 principal amount of Original
Notes. The terms of the New Notes are identical in all material respects to the
Old Notes, except for certain transfer restrictions and registration and other
rights relating to the exchange of the Original Notes for New Notes. The New
Notes will evidence the same debt as the Original Notes and will be entitled to
the benefits of the Indenture under which both the Original Notes were, and the
New Notes will be, issued. See "Description of the Notes."
Maturity Date................. March 15, 2006.
Interest Payment Date......... Interest accrues from the date of issuance and
is payable in cash semi-annually on each March
15 and September 15, commencing September 15,
1996.
Optional Redemption........... The Notes are redeemable, in whole or in part,
at the option of the Issuers at any time on or
after March 15, 2001, at the redemption prices
set forth herein, plus accrued and unpaid
interest to the redemption date. In addition,
the Issuers, at their option, may redeem in the
aggregate up to 25% of the original principal
amount of the Notes at any time prior to March
15, 1999, at a redemption price equal to 110%
of the principal amount thereof plus accrued
and unpaid interest to the redemption date with
the Net Proceeds (as defined herein) of one or
more Public Equity Offerings (as defined
herein); provided, however, that at least $75.0
million principal amount of the Notes
originally issued remain outstanding and that
such redemption occurs within 60 days following
the closing of any such Public Equity Offering.
See "Description of the Notes--Optional
Redemption."
Ranking....................... The Notes are general unsecured senior
obligations of the Issuers and will rank pari
passu with all existing and future senior
indebtedness of the Issuers and senior in right
of payment to all existing and future
subordinated indebtedness of the Issuers. The
claims of holders of the Notes effectively
subordinated to claims of lenders under the New
Credit Facility providing for borrowings of up
to $15.0 million. The New Credit Facility is
secured by a substantial portion of the
Company's assets. See "Description of New
Credit Facility." The Indenture permits the
Company, subject to certain limitations, to
incur additional Indebtedness secured by the
Company's assets. See "Description of the
Notes--Certain Covenants--Limitation on
Additional Indebtedness." As of March 31, 1996,
$3.1 million was outstanding under the New
Credit Facility.
Change of Control............. In the event of a Change of Control (as defined
herein), each holder of the Notes is entitled
to require the Issuers to purchase such
holder's Notes at a price equal to 101% of the
principal amount thereof plus accrued and
unpaid interest to the date of repurchase.
There can be no assurance that the Issuers will
have sufficient funds, or will be contractually
permitted by the terms of the New Credit
Facility, to repurchase the Notes upon a Change
of Control. The Issuers would not have
sufficient funds to effect a
8
<PAGE>
repurchase of the Notes if a Change of Control
were to occur immediately after the Exchange
Offer. See "Description of the Notes--Change of
Control."
Asset Sale Proceeds........... The Issuers are obligated in certain instances
to make offers to purchase the Notes at a price
equal to 100% of the principal amount thereof
plus accrued and unpaid interest to the date of
repurchase with the net cash proceeds of
certain sales or other dispositions of assets
of the Company. See "Description of the Notes--
Certain Covenants--Limitation on Certain Asset
Sales."
Certain Covenants............. The Indenture contains covenants for the
benefit of the holders of the Notes that, among
other things, restrict the ability of the
Issuers to: (i) incur additional Indebtedness;
(ii) pay dividends and make distributions;
(iii) issue equity interests in subsidiaries;
(iv) make certain investments; (v) repurchase
equity interests; (vi) create liens; (vii)
enter into transactions with affiliates; (viii)
enter into sale and leaseback transactions;
(ix) merge or consolidate the Issuers and (x)
transfer and sell assets. These covenants are
subject to a number of important exceptions.
See "Description of the Notes--Certain
Covenants."
RISK FACTORS
The information set forth under "Risk Factors" should be carefully considered
in evaluating the Notes and the Company.
9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
The following summary historical and pro forma financial data, insofar as it
relates to each of the five years ended December 31, 1995, has been derived
from Company-prepared financial information and should be read in conjunction
with the audited financial statements, including the Company's balance sheets
at December 31, 1994 and 1995 and the related statements of operations for each
of the years in the three-year period ended December 31, 1995 and the notes
thereto appearing elsewhere in this Prospectus. The summary historical and pro
forma financial data as of and for the three months ended March 31, 1995 and
1996 has been derived from unaudited financial statements also appearing herein
which, in the opinion of management, include all adjustments, consisting only
of normal recurring adjustments, necessary for a fair presentation of the
results for the unaudited interim periods. Results for the three months ended
March 31, 1996 are not necessarily indicative of results that may be expected
for the entire year. The summary financial information should be read in
conjunction with the information contained in the Company's financial
statements and the notes thereto, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and "Selected Historical and Pro
Forma Financial Data" included elsewhere herein.
The following unaudited summary pro forma statement of operations data and
other data for the year ended December 31, 1995 and the three months ended
March 31, 1996 give effect to the Refinancing as if it had been completed at
the beginning of the respective periods. Certain management assumptions and
adjustments are described in the accompanying notes hereto. The pro forma
financial data should be read in conjunction with the Company's financial
statements and the notes thereto, as of December 31, 1995 and for the three-
year period then ended, appearing elsewhere in this Prospectus. This pro forma
financial data is not necessarily indicative of the results that would have
occurred had the Refinancing been completed on the dates indicated or the
Company's actual or future operating results or financial position.
10
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED MARCH 31,
------------------------------------------- ----------------------------------
PRO PRO
FORMA FORMA
1991 1992 1993 1994 1995 1995(A) 1995 1996 1996(A)
------- ------- ------- ------- ------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Gross revenues.......... $34,662 $35,811 $36,972 $41,748 $47,589 $47,589 $ 10,531 $11,397 $11,397
Agency commissions...... 3,272 3,487 3,510 4,097 4,698 4,698 1,007 1,017 1,017
------- ------- ------- ------- ------- ------- -------- ------- -------
Net revenues............ 31,390 32,324 33,462 37,651 42,891 42,891 9,524 10,380 10,380
Direct advertising
expenses............... 18,150 18,085 17,539 19,561 20,848 20,848 5,256 5,472 5,472
Corporate general and
administrative
expenses............... 1,341 1,953 998 1,183 1,114 1,114 257 467 467
Depreciation and
amortization........... 7,453 6,380 5,893 5,684 5,568 5,544 1,408 1,447 1,447
Deferred compensation
expense(b)............. 45 433 636 1,530 2,427 2,427 1,152 250 250
------- ------- ------- ------- ------- ------- -------- ------- -------
Operating income........ 4,401 5,473 8,396 9,693 12,934 12,958 1,451 2,744 2,744
Interest expense........ 13,436 11,380 9,111 9,877 11,263 12,465 3,065 3,006 3,116
Other expenses (income),
net.................... 1 (297) (164) 38 16 16 (2) 1 1
(Gain) loss on disposal
of assets, net......... 422 263 388 388 93 93 (9) (1) (1)
------- ------- ------- ------- ------- ------- -------- ------- -------
Net income (loss).... $(9,458) $(5,873) $ (939) $ (610) $ 1,562 $ 384 $(1,603) $ (262) $ (372)
======= ======= ======= ======= ======= ======= ======== ======= =======
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------------------------------- -----------------------------
PRO FORMA(A) PRO FORMA(A)
1991 1992 1993 1994 1995 1995 1995 1996 1996
------- ------- ------- ------- ------- ------------ ------ ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Operating Cash Flow(c).. $11,899 $12,286 $14,923 $16,907 $20,929 $20,929 $4,011 $ 4,441 $4,441
Capital expenditures.... $ 825 $ 1,748 $ 1,661 $ 1,926 $ 2,251 $ 2,251 $ 563 $ 1,004 $1,004
Ratio of earnings to
fixed charges(d)....... -- -- -- -- 1.07x 1.03x -- -- --
Ratio of debt to net
income(e).............. -- -- -- -- 68.79 296.39 -- -- --
Cash flow provided by
(used in):
Operating activities... $ 1,304 $ 6,092 $ 4,984 $ 7,092 $ 9,151 $ 7,949 $ 764 $ 1,194 $ 1,084
Investing activities... $ (738) $(1,864) $(1,654) $(1,791) $(1,979) $(1,979) $ (564) $(1,004) $(1,004)
Financing activities... $ 74 $(4,512) $(2,769) $(5,569) $(6,763) $(6,763) $ (436) $ 355 $ 355
</TABLE>
- --------
(a) The pro forma statement of operations data give effect to the Refinancing
and reflect an increase in interest expense. Pro forma interest expense
from the Refinancing is computed as follows:
<TABLE>
<CAPTION>
THREE
MONTHS
YEAR ENDED ENDED
DECEMBER 31, MARCH 31,
1995 1996
------------ ---------
<S> <C> <C>
$105,000,000 10 3/4% Senior Notes....................... $11,288 $2,822
New Credit Facility:
$8,815,000 at 8.25%.................................... 727 --
$8,981,000 at 8.10%.................................... -- 182
Amortization of deferred financing costs................ 450 112
------- ------
Interest expense........................................ $12,465 $3,116
======= ======
</TABLE>
(b) Deferred compensation expense represents accrued expenses under certain
deferred compensation arrangements, including phantom stock agreements with
certain key management personnel. The phantom stock agreements in effect
provide for the repurchase of the "phantom stock" in three equal annual
payments after a covered executive's termination, death or disability, the
sale of the Company, or the fifth anniversary of the agreement's execution.
See "Management--Agreements with Management--Incentive Compensation."
(Notes continued on following page)
11
<PAGE>
(c) The following table sets forth the calculation of "Operating Cash Flow."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
----------------------------------------------- --------------------
1995 1996
PRO PRO
1991 1992 1993 1994 1995 FORMA 1995 1996 FORMA
------- ------- ------- ------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating income (loss). $ 4,401 $ 5,473 $ 8,396 $ 9,693 $12,934 $12,958 $1,451 $2,744 $2,744
Depreciation and
amortization........... 7,453 6,380 5,893 5,684 5,568 5,544 1,408 1,447 1,447
Deferred compensation
expense................ 45 433 636 1,530 2,427 2,427 1,152 250 250
------- ------- ------- ------- ------- ------- ------ ------ ------
Operating Cash Flow..... $11,899 $12,286 $14,925 $16,907 $20,929 $20,929 $4,011 $4,441 $4,441
</TABLE>
Operating Cash Flow is not intended to represent net cash flow provided by
operating activities as defined by generally accepted accounting principles
and should not be considered as an alternative to net income (loss) as an
indicator of the Company's operating performance or to net cash provided by
operating, investing and financing activities as a measure of liquidity or
ability to meet cash needs. The Company believes Operating Cash Flow is a
measure commonly reported and widely used by analysts, investors and other
interested parties in the media industry. Accordingly, this information has
been disclosed herein to permit a more complete comparative analysis of the
Company's operating performance relative to other companies in the media
industry. However, the definition of Operating Cash Flow or of similarly
defined terms may vary among companies and such differences should be noted
in comparing the Company's operating performance relative to other
companies. See "Management's Discussion and Analysis of Results of Financial
Condition and Results of Operations."
(d) Earnings consist of pre-tax income from continuing operations plus fixed
charges adjusted to exclude capitalized interest. The Company's fixed
charges consist of interest expense plus amortization of deferred financing
costs. Earnings were inadequate to cover fixed charges by approximately
$10.0 million, $6.4 million, $1.6 million and $1.3 million for the years
ended December 31, 1991 through 1994, respectively.
(e) The ratio of total debt to net income for the years ended December 31, 1991
through December 31, 1994 is not meaningful due to the net losses for those
periods.
12
<PAGE>
RISK FACTORS
In addition to the other information set forth in this Prospectus, the
following risk factors should be considered in connection with the Exchange
Offer and an investment in the New Notes. Information contained in this
Prospectus contains "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995, which can be identified by
the use of forward-looking terminology as "may," "will," "would," "expect,"
"anticipate," "estimate" or "continue" or the negative thereof or other
variations thereon or comparable terminology. The following matters,
constitute cautionary statements identifying important factors with respect to
such forward-looking statements, including certain risks and uncertainties,
that could cause actual results to differ materially from those in such
forward-looking statements.
SUBSTANTIAL LEVERAGE
The Company is highly leveraged, primarily as the result of the incurrence
of substantial indebtedness in connection with the acquisition by the Company
of its outdoor advertising operations. At December 31, 1995 the Company's
total long-term debt was $107.4 million (including $2.1 million of current
maturities) as compared to a partners' capital deficit of $66.8 million. After
giving pro forma effect to the completion of the Refinancing and other
transactions contemplated by the Refinancing as at December 31, 1995, total
long-term debt would have been approximately $113.8 million as compared to a
partners' capital deficit of $67.1 million. This substantial leverage has
important consequences to the holders of Notes.
The Company intends to use cash generated from operations for working
capital and to service and reduce its outstanding indebtedness. However, the
Company may, subject to the terms and conditions of its indebtedness, incur
additional indebtedness to finance expansion through capital expenditures or
acquisitions. The ability of the Company to satisfy its debt service
obligations will depend primarily upon its future operating performance, which
is subject to prevailing business, financial and economic conditions, many of
which are beyond its control. Accordingly, future debt repayments by the
Company, including payments on the Notes, may require funds in excess of
internally generated cash flows. There can be no assurance that the Company
will be able to raise additional funds, if necessary, through future
financings. The debt instruments of the Company, including the Notes, impose
restrictions on, among other things, the ability of the Company to incur
additional indebtedness and to pledge assets. Also, the Company may, subject
to restrictions imposed by the terms of its indebtedness, employ cash
generated from operations to make distributions, capital expenditures and
acquisitions. See "Description of New Credit Facility" and "Description of
Notes."
The degree to which the Company is or becomes leveraged could limit the
ability of the Company to obtain additional financing in the future for
working capital, capital expenditures, acquisitions or general corporate
purposes. In addition, because a substantial portion of cash flow from
operations of the Company must be dedicated to the payment of principal and
interest on its indebtedness, the high degree of leverage of the Company may
make it more vulnerable to economic downturns and may limit its ability to
withstand competitive pressures, to consummate acquisitions or to capitalize
on significant business opportunities. Additionally, interest on borrowings
under the New Credit Facility accrues on a floating-rate basis, which causes
the Company to be vulnerable to increases in interest rates. See
"Capitalization," "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Liquidity and Capital Resources" and "Description
of New Credit Facility."
NET LOSSES, DEFICIENCY OF EARNINGS TO FIXED CHARGES
The Company had net losses of $939,000 and $610,000 for the years ended
December 31, 1993 and 1994, respectively, and net income of $1.6 million for
the year ended December 31, 1995. During such years, the Company incurred
interest expense of $9.1 million, $9.9 million and $11.3 million,
respectively, and depreciation and amortization expense of $5.9 million, $5.7
million and $5.6 million, respectively. Although the Refinancing will extend
the average life of the indebtedness of the Company, it will also increase the
Company's total indebtedness and interest expense. See "Refinancing and Use of
Proceeds," "Selected Historical and Pro Forma Financial Data," "Management's
Discussion and Analysis of Results of Operations and Financial Condition" and
the Company's financial statements and the notes thereto.
13
<PAGE>
INDEPENDENT AUDITORS' REPORT
Prior to the Refinancing, approximately $105 million of the Company's long-
term debt had scheduled maturities in 1997. The Company's independent
auditors, in their report on the Company's financial statements for the year
ended December 31, 1995, stated, in Note 12 thereto, that the Company has a
net capital deficiency and its cash flow from operations has not been
sufficient to fund its long-term obligations, which raise substantial doubt
about the Company's ability to continue as a going concern. See Note 12 of
Notes to Financial Statements. As part of the Refinancing, the Company repaid
all of its outstanding long-term indebtedness with net proceeds from the
issuance of the Original Notes together with borrowings under the New Credit
Facility.
INABILITY TO REPURCHASE NOTES UPON A CHANGE OF CONTROL
In the event of a Change of Control (as defined in the Indenture), each
holder of the Notes will be entitled to require the Issuers to purchase such
holder's Notes at a price equal to 101% of the principal amount thereof plus
accrued and unpaid interest to the date of repurchase. There can be no
assurance that the Issuers will have sufficient funds, or will be
contractually permitted under the terms of the New Credit Facility to
repurchase the Notes upon a Change of Control. The Issuers would not have
sufficient funds to effect a repurchase of the Notes if a Change of Control
were to occur immediately after the Exchange Offer. The failure of the Issuers
to comply with their obligations under the Indenture upon a Change of Control
constitutes an Event of Default (as defined in the Indenture) under the
Indenture. See "Description of Notes--Change in Control--Events of Default."
THE NEW CREDIT FACILITY
Substantially all of the assets of the Company are pledged to secure
indebtedness of up to $15.0 million (of which approximately $3.1 million was
outstanding as of March 31, 1996) under the New Credit Facility and,
accordingly, the lenders thereunder will have a prior claim on those assets.
Permitted borrowings under the New Credit Facility will be subject to various
conditions. In addition, the availability of borrowings will be subject to
compliance with certain financial ratios. As of March 31, 1996, the entire
credit facility was available under these ratios. Scheduled reductions in the
banks' commitments under the New Credit Facility will commence in 1997. The
agreement governing the New Credit Facility contains a number of covenants
that are more restrictive than those contained in the Indenture, including
covenants requiring the Company to maintain certain financial ratios that
become more restrictive over time. Adverse operating results could cause
noncompliance with one or more of these covenants, reducing the Company's
borrowing availability and, in certain circumstances, entitling the lenders to
accelerate the maturity of outstanding borrowings. See "Description of New
Credit Facility." The Indenture provides that the Company may from time to
time incur additional Indebtedness of up to $35.0 million secured by the
Company's assets. See "Description of the Notes--Certain Covenants--Limitation
on Additional Indebtedness."
NON-RECOURSE NATURE OF NOTES
The Notes are issued solely by the Issuers, and none of the Issuers'
respective directors, officers, partners, stockholders, employees or
affiliates will be an obligor under the Notes, and the Indenture expressly
provides that, except as to Stephen Adams, such persons shall not have any
liability for any obligations of the Issuers under the Notes or such Indenture
or any claim based on, in respect of or by reason of such obligations, and
that by accepting the Notes, each holder of Notes waives and releases all such
liability, which waiver and release are part of the consideration for the
Notes. Although Stephen Adams, in his capacity as a general partner of the
Company, is personally liable in respect of indebtedness of the Company,
including the Notes, the Indenture specifically limits his recourse liability
and that of any other individual general partner of the Company.
The Indenture provides that the Trustee and holders of the Notes only have
recourse against Stephen Adams, an individual general partner of the Company,
to the extent that the net proceeds of a liquidation of all assets of the
Issuers are less than $40.0 million. The Trustee and the holders of the Notes
have no recourse against any of the Issuers' partners or affiliates except as
indicated in the preceding sentence. See "Description of the Notes--
14
<PAGE>
Release from Liability." The Indenture permits the Issuers to incur additional
Indebtedness in an amount of up to $35.0 million secured by the Company's
assets. See "Description of the Notes--Limitation on Additional Indebtedness."
Accordingly, recourse by the Trustee against Mr. Adams would be limited to
$5.0 million to the extent secured lenders to the Company realize $35.0
million from their collateral. In addition, although Mr. Adams currently has a
net worth significantly in excess of his maximum potential recourse liability
under the Indenture, Mr. Adams' assets consist in large part of illiquid
investments in privately-held companies, including his interest in the Company
which represents one of his significant assets. Accordingly, no assurance can
be given that the Trustee and the holders of the Notes would be able to
realize on any such possible recourse liability of Mr. Adams and holders of
the Notes should not rely on such possible recourse liability of Mr. Adams for
repayment of the Notes.
CONTROL OF ISSUERS
The Issuers are privately held. Stephen Adams holds all of the issued and
outstanding stock of AOAI, the managing general partner of the Company. Mr.
Adams is also the individual general partner of the Company and a 71.3%
limited partner of the Company. As a result of such ownership, Mr. Adams can
effectively control the affairs and policies of the Company. Accordingly, Mr.
Adams can control the payment of distributions by the Company and whether the
Company engages in any transactions with affiliates. However, the Indenture
imposes limitations on the ability of the Company to make distributions and
engage in activities with affiliates. See "Principal Security Holders" and
"Description of the Notes--Certain Covenants."
TOBACCO INDUSTRY ADVERTISING
Historically, manufacturers of tobacco products, principally cigarettes,
have represented a significant portion of the demand for outdoor advertising
displays. Tobacco industry expenditures on outdoor advertising have fluctuated
in response to the declining population of smokers in the United States and
increasing price competition from generic tobacco products. See "Business of
the Company--Sales and Marketing." Although the Company has attempted to
reduce its dependence on revenues derived from this market segment by
increasing its focus on local and regional advertising revenues, reductions
and variations in outdoor advertising expenditures by the tobacco products
industry, which represented 12.6% of the Company's net revenues in 1995, could
adversely affect the financial performance of the Company in the future.
In addition, tobacco advertising is currently subject to regulations and
legislation that has been introduced from time to time in Congress that would
further regulate advertising of tobacco products. In May 1996, Phillip Morris
U.S.A., the domestic tobacco subsidiary of Phillip Morris Companies Inc.,
announced a proposal for comprehensive federal legislation to address concerns
regarding the use of tobacco products by minors which included provisions that
would ban all outdoor tobacco product advertising within 1,000 feet of any
playground or elementary or secondary schools, on small urban billboards or in
or on trains, buses, subways and taxis and stations, stops and shelters used
by such mass-transit vehicles. While such further legislation has not been
enacted by Congress, there can be no assurance that national or local
legislation restricting tobacco advertising will not be enacted in the future.
See "Business--Government Regulation."
REGULATION OF OUTDOOR ADVERTISING
The outdoor advertising business is subject to regulation by federal, state
and local governments. Federal law requires states to restrict billboards on
federally-aided roads to commercial and industrial areas and imposes certain
additional size, spacing and other limitations on billboards. Some states have
adopted standards more restrictive than federal requirements. Local
governments generally control billboards as part of their zoning regulations,
and some local governments prohibit construction of new billboards or allow
new construction only to replace existing structures. In addition, some
jurisdictions, including the city of Charlotte, North Carolina, which is one
of the Company's primary markets, have adopted amortization ordinances under
which owners and operators of outdoor advertising displays are required to
remove existing structures at some future date, often without receipt of
condemnation proceeds. Although the Company has been successful in the past in
negotiating acceptable compensation arrangements in circumstances in which its
displays have been removed, there can be no assurance that the Company will be
successful in the future, and the extent of the possible adverse effect of
15
<PAGE>
the Charlotte, North Carolina ordinance cannot specifically be determined at
this time. In addition, the Company is unable to predict what additional
regulation may be imposed on outdoor advertising in the future. Legislation
regulating the content of billboard advertisements has been introduced in
Congress from time to time in the past, although no laws which, in the opinion
of the management of the Company, would materially adversely affect the
Company's business have been enacted to date. Changes in laws and regulations
affecting outdoor advertising at any level of government may have a material
adverse affect on the Company's results of operations. See "Business--
Government Regulation."
COMPETITION AND GENERAL ECONOMIC CONDITIONS
The Company faces competition from other outdoor advertising companies and
from other media, including radio, cable and network television, newspapers
and direct mail marketing. Some of these competitors are better capitalized
than the Company. Although the Company believes that it has been able to
compete successfully in its markets to date, there can be no assurance that
the Company will be able to continue to do so in the future.
The activities of the Company relate significantly to requirements of
businesses for media advertising. The Company's business may, therefore, be
sensitive to general economic trends affecting the demand for advertisements
on the Company's advertising displays.
BENEFITS OF REFINANCING TO AFFILIATES, EXECUTIVE OFFICERS AND DIRECTORS;
TRANSACTIONS WITH AFFILIATES
A portion of the net proceeds of the Refinancing was used to retire
subordinated indebtedness of the Company, of which approximately $14.7 million
was held by Stephen Adams or entities controlled by Stephen Adams,
approximately $150,000 was held by J. Kevin Gleason, the chief executive
officer of AOAI, approximately $75,000 was held by Abe Levine, the chief
financial officer of AOAI and approximately $380,000 was held by Andris A.
Baltins, who became a director of AOAI upon completion of the Refinancing.
Additionally, a portion of the net proceeds of the Refinancing was used to pay
$2.0 million in deferred compensation payments earned since 1992 by Mr.
Gleason. See "Refinancing and Use of Proceeds" and "Management--Agreements
with Management--Incentive Compensation." Additionally, in the past, the
Company has engaged in certain transactions with the partners, directors,
officers and affiliates of the Issuers. See "Certain Transactions." The
ability of the Issuers to engage in transactions with affiliates is limited by
the terms of the Indenture. See "Description of the Notes--Certain Covenants--
Limitations on Transactions with Affiliates."
FRAUDULENT CONVEYANCE CONSIDERATIONS
The incurrence by the Company of the indebtedness evidenced by the Notes to
retire indebtedness incurred in connection with various of its acquisitions is
subject to review under relevant federal and state fraudulent conveyance
statutes in a bankruptcy or reorganization case or a lawsuit by or on behalf
of creditors of the Company. Under these statutes, if a court were to find
that the obligations were incurred with the intent of hindering, delaying or
defrauding creditors or that the Company received less than a reasonably
equivalent value or fair consideration for those obligations and, at the time
of their incurrence, the Company either (i) was insolvent or rendered
insolvent by reason thereof, (ii) was engaged in a business or transaction for
which its remaining unencumbered assets constituted unreasonably small capital
or (iii) intended to or believed that it would incur debts beyond its ability
to pay as they matured or became due, the court could void those obligations.
If a court were to determine that the indebtedness to be refinanced with the
proceeds of the Offering was incurred in a fraudulent transfer under the
foregoing standards, then a fraudulent conveyance claim also could be asserted
with respect to the Notes. To the extent that the Notes were voided as a
fraudulent conveyance or held to be unenforceable for any other reason,
holders of the Notes would cease to have any claim in respect of the Notes.
The measure of insolvency for purposes of a fraudulent conveyance claim will
vary depending upon the law of the jurisdiction being applied. Generally,
however, a company will be considered insolvent at a particular time if the
sum of its debts at that time is greater than the then fair value of its
assets or if the fair salable value of its assets at that time is less than
the amount that would be required to pay its probable liability on its
existing debts as they become absolute and mature.
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The Company believes that at the time it incurred the indebtedness retired
with the proceeds of the Private Offering it was, and at the time it issued
the Original Notes it was, (i) neither insolvent nor rendered insolvent
thereby, (ii) in possession of sufficient capital to run its business
effectively and (iii) incurring debts within its ability to pay as the same
mature or become due. In reaching these conclusions, the Company has relied
upon various valuations and estimates of future cash flow that necessarily
involve a number of assumptions and choices of methodology. No assurance can
be given, however, that the assumptions and methodologies chosen by the
Company would be adopted by a court or that a court would concur with the
Company's conclusions as to its solvency.
In rendering its opinion on the validity of the Notes, counsel for the
Company will express no opinion as to federal or state laws relating to
fraudulent transfers.
ABSENCE OF PUBLIC MARKET
The New Notes are being offered exclusively to holders of the Original
Notes. The Original Notes were issued to CIBC Wood Gundy Securities Corp. (the
"Initial Purchaser") who resold them to a limited number of institutional
investors on March 12, 1996. There is no existing trading market for the
Notes, and although the Company has been advised that the Initial Purchaser
currently intends to make a market in the Notes, the Initial Purchaser is not
obligated to do so and may discontinue any such market making at any time
without notice. In addition, any market making activities in the Original
Notes may be limited during the pendency of the Exchange Offer. There can be
no assurance that an active trading market for the Notes will develop, or, if
it develops, that it will continue. Future trading prices for the Notes will
depend on many factors, including, among others, the Company's operating
results, the market for similar securities and changes in prevailing interest
rates. See "Description of the Notes--Registration Rights; Liquidated Damages"
and "Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Original Notes who do not exchange their Original Notes for New
Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Original Notes as set forth in the legend
thereon as a consequence of the issuance of the Original Notes pursuant to
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws. In
general, the Original Notes may not be offered or sold, unless registered
under the Securities Act, except pursuant to an exemption from, or in a
transaction not subject to, the Securities Act and applicable state securities
laws. The Issuers do not currently anticipate that they will register the
Original Notes under the Securities Act. New Notes issued pursuant to the
Exchange Offer in exchange for Original Notes may be offered for resale,
resold or otherwise transferred by Holders thereof (other than any such holder
which is an "affiliate" of the Issuers within the meaning of Rule 405 under
the Securities Act) without compliance with the registration and prospectus
delivery provisions of the Securities Act provided that such New Notes are
acquired in the ordinary course of such holders' business and such holders
have no arrangement with any person to participate in the distribution of such
Notes. Each broker-dealer that receives New Notes for its own account pursuant
to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. The Letter of Transmittal states
that, by so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from
time to time, may be used by a broker-dealer in connection with resales of New
Notes received in exchange for Original Notes where such Original Notes were
acquired by such broker-dealer as a result of market-making activities or
other trading activities. The Issuers have agreed that, for a period of 165
days after the effective date of this Prospectus, it will make this Prospectus
available to any broker-dealer for use in connection with any such resale. See
"Plan of Distribution." However, to comply with the securities laws of certain
jurisdictions, if applicable, the New Notes may not be offered or sold unless
they have been registered or qualified for sale in such jurisdictions or an
exemption from registration or qualification is available and is complied
with. To the extent that Original Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Original Notes will be adversely affected.
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THE EXCHANGE OFFER
PURPOSES AND EFFECTS OF THE EXCHANGE OFFER
The Original Notes were sold by the Issuers on March 12, 1996 to the Initial
Purchaser, who resold the Original Notes to "qualified institutional buyers"
(as defined in Rule 144A under the Securities Act) and other institutional
"accredited investors" (as defined in Rule 501(a) under the Securities Act).
In connection with the sale of the Original Notes, the Issuers and the Initial
Purchaser entered into a Registration Rights Agreement dated as of March 12,
1996 (the "Registration Rights Agreement") pursuant to which the Issuers
agreed to file with the Commission a registration statement (the "Exchange
Offer Registration Statement") with respect to an offer to exchange the
Original Notes for New Notes within 30 days following the issuance of the
Original Notes. In addition, the Issuers agreed to use their best efforts to
cause the Exchange Offer Registration Statement to become effective under the
Securities Act and to issue the New Notes pursuant to the Exchange Offer. A
copy of the Registration Rights Agreement has been filed as an exhibit to the
Registration Statement of which this Prospectus is a part.
The Exchange Offer is being made pursuant to the Registration Rights
Agreement to satisfy the Issuer's obligations thereunder. The term "holder,"
with respect to the Exchange Offer, means any person in whose name Original
Notes are registered on the books of the Company or any other person who has
obtained a properly completed bond power from the registered holder, or any
person whose Original Notes are held of record by the Depository. The Issuers
are generally not required to file any registration statement to register any
outstanding Original Notes. Holders of Original Notes who do not tender their
Original Notes or whose Original Notes are tendered but not accepted would
have to rely on exemptions to registration requirements under the securities
laws, including the Securities Act, if they wish to sell their Original Notes.
Based on an interpretation by the staff of the Commission set forth in no-
action letters issued to third parties unrelated to the Issuers, the Issuers
believe that the New Notes issued pursuant to the Exchange Offer in exchange
for Original Notes may be offered for resale, resold and otherwise transferred
by any holder of such New Notes (other than a person that is an "affiliate" of
the Issuers within the meaning of Rule 405 under the Securities Act and except
as set forth in the next paragraph) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
New Notes are acquired in the ordinary course of such holder's business and
such holder is not engaged and does not intend to engage, and has no
arrangement or understanding with any person to engage, in the distribution of
such New Notes.
If any person were to be participating in the Exchange Offer for the purpose
of distributing securities in a manner not permitted by the Commission's
interpretation (i) the position of the staff of the Commission enunciated in
interpretive letters would be inapplicable to such person and (ii) such person
would be required to comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each broker-dealer that receives New Notes for its own account in exchange for
Original Notes, where such Original Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution."
The Exchange Offer is not being made to, nor will the Issuers accept
surrenders for exchange from, holders of Original Notes in any jurisdiction in
which the Exchange Offer or the acceptance thereof would not be in compliance
with the securities or Blue Sky laws of such jurisdiction. Prior to the
Exchange Offer, however, the Issuers will use their best efforts to register
or qualify the New Notes for offer and sale under the securities or Blue Sky
laws of such jurisdictions as is necessary to permit consummation of the
Exchange Offer and do any and all other acts or things necessary or advisable
to enable the offer and sale in such jurisdictions of the New Notes.
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Issuers will accept any and
all Original Notes validly tendered prior to 5:00 p.m., New York
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City time, on the Expiration Date (as defined below). The Issuers will issue
up to $105,000,000 aggregate principal amount of New Notes in exchange for a
like principal amount of outstanding Original Notes which are validly tendered
and accepted in the Exchange Offer. Subject to the conditions of the Exchange
offer described below, the Company will accept any and all Original Notes
which are so tendered. Holders may tender some or all of their Original Notes
pursuant to the Exchange Offer.
The Exchange Offer is not conditioned upon any number of Original Notes
being tendered.
The form and terms of the New Notes will be the same in all material
respects as the form and terms of Original Notes, except that the New Notes
will be registered under the Securities Act and hence will not bear legends
restricting the transfer thereof. The Notes will not represent additional
indebtedness of the Issuers and will be entitled to the benefits of the
Indenture, which is the same Indenture as the one under which the Original
Notes were issued.
Interest on the New Notes will accrue from the most recent date to which
interest has been paid on the Original Notes or, if no interest has been paid,
from March 12, 1996. Accordingly, registered holders of New Notes on the
relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the
most recent date to which interest has been paid or, if no interest has been
paid, from March 12, 1996. Original Notes accepted for exchange will cease to
accrue interest from and after the date of the consummation of the Exchange
Offer. Holders whose Original Notes are accepted for exchange will not receive
any payment in respect of interest on such Original Notes otherwise payable on
any interest payment date the record date for which occurs on or after
consummation of the Exchange Offer.
Holders of Original Notes do not have any appraisal or dissenters' rights
under the Indenture in connection with the Exchange Offer. The Issuers intend
to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement. Original Notes which are not tendered for
exchange or are tendered but not accepted in the Exchange Offer will remain
outstanding and be entitled to the benefits of the Indenture, but will not be
entitled to any registration rights under the Registration Rights Agreement.
The Issuers shall be deemed to have accepted validly tendered Original Notes
when, as and if the Issuers have given oral or written notice thereof to the
Exchange Agent for the Exchange Offer. The Exchange Agent will act as agent
for the tendering holders for the purposes of receiving the New Notes from the
Issuers.
If any tendered Original Notes are not accepted for exchange because of an
invalid tender, the occurrence of certain other events set forth herein or
otherwise, certificates for any such unaccepted Original Notes will be
returned, without expense, to the tendering holder thereof as promptly as
practicable after the Expiration Date.
Holders who tender Original Notes in the Exchange Offer will not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Letters of Transmittal, transfer taxes with respect to the exchange of
Original Notes pursuant to the Exchange Offer. The Company will pay all
charges and expenses, other than certain applicable taxes described below, in
connection with the Exchange Offer. See "--Fees and Expenses."
CONDITIONS OF THE EXCHANGE OFFER
In addition, and notwithstanding any other term of the Exchange Offer, the
Issuers will not be required to accept for exchange any Original Notes for any
New Notes tendered and may terminate or amend the Exchange Offer as provided
herein before the acceptance of such Original Notes, if any of the following
conditions exist:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency or regulatory authority with respect
to the Exchange Offer which, in the judgment of the Issuers, could
reasonably be expected to materially impair the ability of the Issuers to
proceed with the Exchange Offer or have a material adverse effect on the
contemplated benefits of the Exchange Offer to the Issuers; or
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(b) there shall have occurred any change, or any development involving a
prospective change, in the business or financial affairs of the Issuers,
which in the judgment of the Issuers, could reasonably be expected to
materially impair the ability of the Issuers to proceed with the Exchange
Offer or materially impair the contemplated benefits of the Exchange Offer
to the Issuers; or
(c) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation which, in the judgment of the Issuers, could reasonably
be expected to materially impair the ability of the Issuers to proceed with
the Exchange Offer or have a material adverse effect on the contemplated
benefits of the Exchange Offer to the Issuers; or
(d) there shall have occurred (i) any general suspension of, shortening
of hours for, or limitation on prices for, trading in securities on the New
York Stock Exchange (whether or not mandatory), (ii) a declaration of a
banking moratorium or any suspension of payments in respect of banks by
Federal or state authorities in the United States (whether or not
mandatory), (iii) a commencement of a war, armed hostilities or other
international or national crisis directly or indirectly involving the
United States, (iv) any limitation (whether or not mandatory) by any
governmental authority on, or other event having a reasonable likelihood of
affecting, the extension of credit by banks or other lending institutions
in the United States, or (v) in the case of any of the foregoing existing
at the time of the commencement of the Exchange Offer, a material
acceleration or worsening thereof.
The foregoing conditions are for the sole benefit of the Issuers and may be
asserted by the Issuers regardless of the circumstances giving rise to such
conditions or may be waived by the Issuers in whole or in part at any time and
from time to time in its sole discretion. If the Issuers waive or amend the
foregoing conditions, the Issuers will, if required by applicable law, extend
the Exchange Offer for a minimum of five business days from the date that the
Issuers first give notice, by public announcement or otherwise, of such waiver
or amendment, if the Exchange Offer would otherwise expire within such five
business-day period. Any waiver or amendment, if the Exchange Offer would
otherwise expire within such five business-day period. Any determination by
the Issuers concerning the events described above will be final and binding
upon all parties.
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENTS
The Exchange Offer will expire at 5:00 P.M., New York City Time, on
, 1996, subject to extension by the Company by notice to the
Exchange Agent as herein provided. The Issuers reserve the right to so extend
the Exchange Offer at its discretion, in which event the term "Expiration
Date" shall mean the time and date on which the Exchange Offer as so extended
shall expire. The Company will notify the Exchange Agent of any extension by
oral or written notice and will make a public announcement thereof, each prior
to 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date.
The Issuers reserve the right (i) to delay accepting for exchange any
Original Notes for any New Notes or to extend or terminate the Exchange Offer
and not accept for exchange any Original Notes for any New Notes if any of the
events set forth below under the caption "Conditions of the Exchange Offer"
shall have occurred and shall not have been waived by the Issuers by giving
oral or written notice of such delay or termination to the exchange Agent, or
(ii) to amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance for exchange, extension or amendment will be followed as promptly
as practicable by public announcement thereof. If the Exchange Offer is
amended in a manner determined by the Issuers to constitute a material change,
the Issuers will promptly disclose such amendment in a manner reasonably
calculated to inform the holder of New Notes of such amendment and the Company
will extend the Exchange Offer for a period of five to 10 business days,
depending upon the significance of the amendment and the manner of disclosure
to the holders of the New Notes, if the Exchange Offer would otherwise expire
during such five to 10 business-day period. The rights reserved by the Company
in this paragraph are in addition to the Company's rights set forth below
under the caption "Conditions of the Exchange Offer."
PROCEDURES FOR TENDERING
Only a holder of Original Notes may tender such Original Notes in the
Exchange Offer. To tender in the Exchange Offer, a holder must complete, sign
and date the Letter of Transmittal, or a facsimile thereof, have the
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signatures thereon guaranteed if required by the Letter of Transmittal, and
mail or otherwise deliver such Letter of Transmittal or such facsimile,
together with the Original Notes (unless such tender is being effected
pursuant to the procedure for book-entry transfer described below) and any
other required documents, to the Exchange Agent prior to 5:00 P.M., New York
City time, on the Expiration Date.
Any financial institution that is a participant in the Depositary's Book-
Entry Transfer Facility system may make book-entry deliver of the Original
Notes by causing the Depositary to transfer such Original Notes into the
Exchange Agent's account in accordance with the Depositary's procedure for
such transfer. Although delivery of Original Notes may be effected through
book-entry transfer into the Exchange Agent's account at the Depositary, the
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received or confirmed by the Exchange Agent at its addresses set forth
in "Exchange Agent" below prior to 5:00 P.M., New York City time, on the
Expiration Date. DELIVERY OF DOCUMENTS TO THE DEPOSITARY IN ACCORDANCE WITH
ITS PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder of Original Notes will constitute an agreement
between such holder and the Issuers in accordance with the terms and subject
to the conditions set forth herein and in the Letter of Transmittal.
The method of delivery of Original Notes and the Letter of Transmittal and
all other required documents to the Exchange Agent is at the election and risk
of the holders. Instead of delivery by mail, it is recommended that holders
use an overnight or hand delivery service. In all cases, sufficient time
should be allowed to assure delivery to the Exchange Agent before the
Expiration Date. No Letter of Transmittal or Original Notes should be sent to
the Company. Holders may request their respective brokers, dealers, commercial
banks, trust companies or nominees to effect the tenders for such holders.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed by an Eligible Institution (as defined below)
unless the Original Notes tendered pursuant thereto are tendered (i) by a
registered holder who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal,
or (ii) for the account of an Eligible Institution. In the event that
signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, are required to be guaranteed, such guarantee must be by a member of a
signature guarantee program within the meaning of Rule 17Ad-15 under the
Exchange Act (an "Eligible Institution").
If the Letter of Transmittal or any Original Notes or bond powers are signed
by trustees, executors, administrators, guardians, attorneys-in-fact, officers
of corporations or others acting in a fiduciary or representative capacity,
such persons should so indicate when signing, and unless waived by the
Issuers, evidence satisfactory to the Issuers of their authority to so act
must be submitted with the Letter of Transmittal.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance and withdrawal of tendered Original Notes will be
determined by the Issuers in their sole discretion, which determination will
be final and binding. The Issuers reserve the absolute right to reject any and
all Original Notes not properly tendered or any Original Notes the Issuers'
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Issuers also reserve the right to waive any defects,
irregularities or conditions of tender as to particular Original Notes. The
Issuers' interpretation of the terms and conditions of the Exchange Offer
(including the instructions in the Letter of Transmittal) will be final and
binding on all parties. Unless waived, any defects or irregularities in
connection with tenders of Original Notes must be cured within such times as
the Company shall determine. Although the Issuers intend to request the
Exchange Agent to notify holders of defects or irregularities with respect to
tenders of Original Notes, neither the Issuers, the Exchange Agent nor any
other person shall incur any liability for failure to give such notification.
Tenders of Original Notes will not be deemed to have been made until such
defects or irregularities have been cured or waived. Any Original Notes
received by the Exchange Agent that are not properly tendered and as to which
the defects or irregularities have not been cured or waived will be returned
by the Exchange Agent to the tendering holders, unless otherwise provided in
the Letter of Transmittal, as soon as practicable following the Expiration
Date.
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In addition, the Issuers reserve the right in its sole discretion (subject
to limitations contained in the Indenture) (i) to purchase or make offers for
any Original Notes that remain outstanding subsequent to the Expiration Date
and (ii) to the extent permitted by applicable law, purchase Original Notes in
the open market, in privately negotiated transactions or otherwise. The terms
of any such purchases or offers could differ from the terms of the Exchange
Offer.
By tendering, each holder will represent to the Issuers that, among other
things, the New Notes acquired pursuant to the Exchange Offer are being
obtained in the ordinary course of business of the person receiving such New
Notes, whether or not such person is the holder and that neither the holder
nor any such other person has an arrangement or understanding with any person
to participate in the distribution of such New Notes and that neither the
holder nor any such other person is an "affiliate", as defined in Rule 405
under the Securities Act, of the Issuers. If the holder is a broker-dealer
that will receive New Notes for its own account in exchange for Original Notes
that were acquired as a result of market-making activities or other trading
activities, such holder by tendering will acknowledge that it will deliver a
prospectus in connection with any resale of such New Notes.
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (i) whose Original Notes
are not immediately available, or (ii) who cannot deliver their Original Notes
and other required documents to the Exchange Agent, or cannot complete the
procedure for book-entry transfer prior to the Expiration Date, may effect a
tender if:
(a) The tender is made through an Eligible Institution;
(b) Prior to the Expiration Date, the Exchange Agent receives from such
Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery (by facsimile transmission, mail or hand delivery)
setting forth the name and address of the holder, the certificate number(s)
of such Original Notes (if available) and the principal amount of Original
Notes tendered together with a duly executed Letter of Transmittal (or a
facsimile thereof), stating that the tender is being made thereby and
guaranteeing that, within three business days after the Expiration Date,
the certificate(s) representing the Original Notes to be tendered in proper
form for transfer (or a confirmation of a book-entry transfer into the
Exchange Agent's account at the Depositary of Original Notes delivered
electronically) with any other documents required by the Letter of
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent; and
(c) Such certificate(s) representing all tendered Original Notes in
proper form for transfer (or confirmation of a book-entry transfer into the
Exchange Agent's account at the Depositary of Original Notes delivered
electronically) and all other documents required by the Letter of
Transmittal are received by the Exchange Agent within three business days
after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Original Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to 5:00 P.M., New York City time, on the
Expiration Date, unless previously accepted for exchange.
To withdraw a tender of Original Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to 5:00 P.M., New York City time,
on the Expiration Date, and prior to acceptance for exchange thereof by the
Company. Any such notice of withdrawal must (i) specify the name of the person
having deposited the Original Notes to be withdrawn (the "Depositor"), (ii)
identify the Original Notes to be withdrawn (including the certificate number
or numbers and principal amount of such Original Notes), (iii) be signed by
the Depositor in the same manner as the original signature on the Letter of
Transmittal by which such Original Notes were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee with respect to
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the Original Notes register the transfer of such Original Notes into the name
of the person withdrawing the tender, and (iv) specify the name in which any
such Original Notes are to be registered, if different from that of the
Depositor. All questions a to the validity, form and eligibility (including
time of receipt) of such withdrawal notices will be determined by the Issuers,
whose determination shall be final and binding on all parties. Any Original
Notes so withdrawn will be deemed not to have been validly tendered for
purposes of the Exchange Offer and no New Notes will be issued with respect
thereto unless the Original Notes so withdrawn are validly re-tendered. Any
Original Notes which have been tendered but which are not accepted for
exchange or which are withdrawn will be returned to the holder thereof without
cost to such holder as soon as practicable after withdrawal, rejection of
tender or termination of the Exchange Offer. Properly withdrawn Original Notes
may be re-tendered by following one of the procedures described above under
"Procedures for Tendering" at any time prior to the Expiration Date.
FEES AND EXPENSES
The expenses of soliciting tenders pursuant to the Exchange Offer will be
borne by the Issuers. The principal solicitation for tenders pursuant to the
Exchange Offer is being made by mail; however, additional solicitation may be
made by telegraph, telephone or in person by officers and regular employees of
the Issuers and their affiliates.
The Issuers have not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or other
soliciting acceptances of the Exchange Offer. The Issuers, however, will pay
the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection
therewith. The Issuers may also pay brokerage houses and other custodians,
nominees and fiduciaries the reasonable out-of-pocket expenses incurred by
them in forwarding copies of this Prospectus, Letters of Transmittal and
related documents to the beneficial owners of the Original Notes and in
handling or forwarding tenders for exchange. The Issuers will pay the other
expenses to be incurred in connection with the Exchange Offer, including fees
and expenses of the Trustee, accounting and legal fees and printing costs.
The Issuers will pay all transfer taxes, if any, applicable to the exchange
of Original Notes pursuant to the Exchange Offer. If, however, certificates
representing New Notes or Original Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Original Notes
tendered, or if tendered Original Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Original
Notes pursuant to the Exchange Offer, then the amount of any such transfer
taxes (whether imposed on the registered holder or any to her persons) will be
payable by the tendering holder. If satisfactory evidence of payment of such
taxes or exemption therefrom is not submitted with the Letter of Transmittal,
the amount of such transfer taxes will be billed directly to such tendering
holder.
CONSEQUENCES OF FAILURE TO EXCHANGE ORIGINAL NOTES
Generally, holders (other than any holder who is an "affiliate" of the
Issuers within the meaning of Rule 405 under the Securities Act) who exchange
their Original Notes for New Notes pursuant to the Exchange Offer may offer
such New Notes for resale, resell such New Notes, and otherwise transfer such
New Notes without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided such New Notes are acquired in the
ordinary course of the holders' business, and such holders have no arrangement
with any person to participate in a distribution of such New Notes. Each
broker-dealer that receives New Notes for its own account in exchange for
Original Notes, where such Original Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Notes. See "Plan of Distribution." To comply with the securities laws
of certain jurisdictions, it may be necessary to qualify for sale or register
the New Notes prior to offering or selling such New Notes. Upon request by
holders prior to the Exchange Offer, the Issuers will register or qualify the
New Notes in certain jurisdictions subject to the conditions in the
Registration Rights Agreement. If a holder
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does not exchange such Original Notes for New Notes pursuant to the Exchange
Offer, such Original Notes will continue to be subject to the restrictions on
transfer contained in the legend thereon and will not have the benefit of any
covenant regarding registration under the Securities Act. In general, the
Original Notes may not be offered or sold, unless registered under the
Securities Act, except pursuant to the exemption from, or in a transaction not
subject to, the Securities Act and applicable state securities laws. To the
extent that Original Notes are tendered and accepted in the Exchange Offer, a
holder's ability to sell untendered Original Notes could be adversely
affected.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Original
Notes, as reflected in the Issuers' accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Issuers upon the consummation of the Exchange Offer. The
expenses of the Exchange Offer will be amortized by the Issuers over the term
of the New Notes under generally accepted accounting principles.
EXCHANGE AGENT
United States Trust Company of New York has been appointed as Exchange Agent
for the Exchange Offer. All correspondence in connection with the Exchange
Offer and the Letter of Transmittal should be addressed to the Exchange Agent,
as follows:
By Hand: By Overnight Courier/Mail:
United States Trust Company United States Trust Company
of New York of New York
Receipt and Delivery Window 770 Broadway, 13th Floor
111 Broadway, Lower Level New York, NY 10007
New York, NY 10006 Attention: Corporate Trust Department
Facsimile Transmission:
(212) 420-6152
(For Eligible Institutions Only)
Confirm by Telephone:
(800) 548-6565
Requests for additional copies of this Prospectus or the Letter of
Transmittal should be directed to the Exchange Agent.
24
<PAGE>
THE COMPANY
Adams Outdoor Advertising Limited Partnership is the seventh largest owner
and operator of outdoor advertising structures in the United States. The
Company currently provides outdoor advertising services in eight markets and
surrounding areas in the midwest, southeast and mid-Atlantic states:
Charlotte, NC; Kalamazoo, MI; Lansing/Jackson, MI; Lehigh Valley, PA; Madison,
WI; Minneapolis, MN; Norfolk, VA; and Peoria, IL. As of December 31, 1995, the
Company operated, in the aggregate, approximately 7,000 advertising displays,
including approximately 1,900 painted bulletins, 4,500 30-sheet posters, 150
junior (8-sheet) posters and 450 transit displays.
The Company's strategy is to focus its outdoor advertising operations in
medium-sized markets in which it is or could be the leading provider of such
services. The Company offers its customers comprehensive outdoor advertising
services, including local creative professionals, account executives,
production facilities and business development staffs. These resources allow
the Company to educate current customers and potential customers on the
effectiveness of the outdoor advertising medium and to demonstrate to
customers how to integrate outdoor advertising into their marketing plans. The
Company also develops creative ideas and displays to advertise a customer's
products or services and provides customers with detailed local market
research and information about potential advertising opportunities.
During the five years ended December 31, 1995, net revenues increased from
$31.4 million to $42.9 million. Operating Cash Flow (as defined herein) has
grown from $11.9 million to $20.9 million over the same period. The Company
has increased revenue and Operating Cash Flow primarily through a strategy of
increasing revenues from existing display faces in each market by developing
programs that maximize advertising rates and optimize occupancy levels and
through lowering operating expenses by reducing accounting, administrative and
operations staff. In recent years, this strategy has resulted in high
operating leverage which enabled the Company to increase Operating Cash Flow
at a faster rate than net revenues. Operating Cash Flow is not intended to
represent net cash provided by operating activities as defined by generally
accepted accounting principles and should not be considered as an alternative
to net income or loss as an indicator of the Company's operating performance
or to net cash provided by operating, investing and financing activities as a
measure of liquidity or ability to meet cash needs. Information is disclosed
herein to permit a more complete comparative analysis of the Company's
performance relative to other companies in the media industry that publicly
report Operating Cash Flow or similarly defined measures.
The Company believes that its strong position in its markets, its emphasis
on local and regional advertisers and the geographical diversity of its
operations provide stability to its revenue base, reduce its reliance upon any
single local economy or advertiser, and mitigate the effect of fluctuations in
national advertising expenditures. Net revenues attributable to local and
regional advertising have increased as a percentage of total net revenues from
83.5% in 1991 to 87.4% in 1995.
The Company has been able to maintain its position as a leading provider of
outdoor advertising services in its primary markets due to the barriers to
entry created by the combination of the Company's existing site locations and
government regulations limiting the erection of new displays. The Company
intends to build upon its position as the dominant provider of outdoor
advertising in its markets and the competitive advantage provided by its
sales, creative and business development staffs. The Company plans to
accomplish this by continuing to develop its customer base among local and
regional advertisers, improving the utilization and rate structure of its
display faces and expanding the number of its displays through building in its
existing markets and, when appropriate, through making acquisitions.
The Company's business was founded in 1983 with the acquisition of Central
Outdoor Advertising, which had offices in Lansing, Jackson and Kalamazoo, MI.
Over the next five years, the Company pursued a strategy of geographic
expansion into additional medium-sized markets, primarily through the
acquisition of existing outdoor advertising businesses in selected midwest,
southeast and mid-Atlantic markets. This geographic
25
<PAGE>
expansion strategy has enabled the Company to capitalize on the efficiencies,
economies of scale and marketing opportunities associated with operating
outdoor advertising businesses located in proximate or contiguous geographic
markets to its primary markets. Since 1988, the Company's sales and Operating
Cash Flow growth has resulted from increased display inventory, primarily
through new construction and, to a lesser extent, from acquisitions of
displays in existing markets and the significant upgrading of its existing
display inventory. The Company has also been able to reduce operating expenses
while achieving higher rate and occupancy levels.
The principal executive offices of the Company and Adams Outdoor
Advertising, Inc. are located at 1380 W. Paces Ferry Road, N.W., Suite 170,
South Wing, Atlanta, Georgia 30327. The Company's telephone number is (404)
233-1366.
26
<PAGE>
REFINANCING AND USE OF PROCEEDS
The Private Offering was part of the Refinancing, which extended the average
life of the Company's debt obligations and enhanced its financial and
operating flexibility. As part of the Refinancing, the Company replaced its
existing credit facility with the New Credit Facility, which permits
borrowings, on a revolving basis, in an aggregate amount up to $15.0 million
and to repay certain outstanding indebtedness. See "Description of New Credit
Facility."
Pursuant to the Refinancing, the net proceeds from the issuance of the
Original Notes, after estimated expenses of the Private Offering of $4.5
million, together with borrowings under the New Credit Facility, were used by
the Company to (i) repay its outstanding borrowings under an existing credit
facility ($82.3 million), (ii) retire its 9% Subordinated Notes ($16.3
million), of which, $11.4 million in aggregate principal amount was held by
Stephen Adams or entities controlled by Stephen Adams and $4.9 million in
aggregate principal amount was held by the Initial Purchaser, (iii) retire its
zero coupon 10% Subordinated Notes due January 31, 1996 ($1.9 million), of
which $1.4 in aggregate principal amount was held by Stephen Adams or entities
controlled by Stephen Adams, (iv) retire its zero coupon 10% Subordinated
Notes due January 2, 1997 ($6.8 million outstanding), of which $1.8 million in
aggregate principal amount was held by Stephen Adams or entities controlled by
Stephen Adams, and (v) pay $2.0 million in deferred compensation payments
earned since 1992 by J. Kevin Gleason, the chief executive officer of the
managing general partner of the Company. See "Management--Agreements with
Management--Incentive Compensation."
The following table sets forth the sources and uses of proceeds to effect
the Refinancing:
<TABLE>
<CAPTION>
(DOLLARS
IN
THOUSANDS)
----------
<S> <C>
Sources of proceeds:
Original Notes.................................................... $105,000
New Credit Facility (a)........................................... 8,815
--------
Total sources of proceeds....................................... $113,815
========
Uses of proceeds:
Repayment of existing credit facility............................. $ 82,329
Repayment of 9% Subordinated Notes (b)............................ 16,284
Repayment of zero coupon 10% Subordinated Notes
due January 31, 1996 (c)......................................... 1,915
Repayment of zero coupon 10% Subordinated Notes due January 2,
1997 (d)......................................................... 6,787
Payment of deferred compensation (e).............................. 2,000
Fees and expenses (f)............................................. 4,500
--------
Total uses of proceeds.......................................... $113,815
========
</TABLE>
- --------
(a) The Company entered into the New Credit Facility contemporaneously with
the closing of the sale of the Notes under the Private Offering.
(b) Stephen Adams or entities controlled by Stephen Adams held $11.4 million
and the Initial Purchaser held $4.9 million in principal amount of the 9%
Subordinated Notes.
(c) Stephen Adams or entities controlled by Stephen Adams held $1.4 million of
the principal amount of the zero coupon 10% Subordinated Notes due January
31, 1996.
(d) Stephen Adams or entities controlled by Stephen Adams held $1.8 million of
the principal amount of the zero coupon 10% Subordinated Notes due January
2, 1997. J. Kevin Gleason, the chief executive officer of the managing
general partner of the Company, and Abe Levine, the chief financial
officer of the managing general partner of the Company, held $151,846 and
$76,218, respectively, of the principal amount of the zero coupon 10%
Subordinated Notes due January 2, 1997. Andris A. Baltins, who became a
director of
(Notes continued on following page)
27
<PAGE>
AOAI upon completion of the Refinancing, held $380,547 of the principal
amount of the zero coupon 10% Subordinated Notes due January 2, 1997.
(e) Represents $2.0 million in deferred compensation earned since 1992 due to
J. Kevin Gleason, the chief executive officer of the managing general
partner of the Company, and payable upon completion of the Refinancing.
See "Management--Agreements with Management--Incentive Compensation."
(f) Fees and expenses include a discount to the Initial Purchaser and fees and
expenses related to the New Credit Facility and are estimated.
CAPITALIZATION
The following table sets forth the capitalization of the Company as of March
31, 1996:
<TABLE>
<CAPTION>
AS OF
MARCH 31,
1996
----------
(DOLLARS
IN
THOUSANDS)
<S> <C>
Long-term debt including current maturities:
New Credit Facility............................................. $ 3,099
10 3/4% Senior Notes............................................ 105,000
9% Subordinated Notes........................................... --
10% Subordinated Notes.......................................... 3,882
--------
Total long-term debt.............................................. 111,981
Partners' capital (deficit)....................................... (67,091)
--------
Total capitalization.............................................. $ 44,890
========
</TABLE>
28
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following selected historical and pro forma financial data, insofar as
it relates to each of the five years ended December 31, 1995, has been derived
from Company-prepared financial information and should be read in conjunction
with the audited financial statements, including the Company's balance sheets
at December 31, 1994 and 1995 and the related statements of operations for
each of the years in the three-year period ended December 31, 1995 and the
notes thereto appearing elsewhere in this Prospectus. The selected historical
and pro forma financial data as of and for the three months ended March 31,
1995 and 1996 has been derived from unaudited financial statements as
appearing herein which, in the opinion of management, include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results for the unaudited interim periods. Results for the
three months ended March 31, 1996 are not necessarily indicative of results
that may be expected for the entire year. The selected financial information
should be read in conjunction with the information contained in the Company's
financial statements and the notes thereto, "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Summary
Historical and Pro Forma Financial Data" included elsewhere herein.
The following unaudited selected pro forma statement of operations data and
other data for the year ended December 31, 1995 and the three months ended
March 31, 1996 give effect to the Refinancing as if it had been completed at
the beginning of the respective periods. Certain management assumptions and
adjustments are described in the accompanying notes hereto. The pro forma
financial data should be read in conjunction with the Company's financial
statements and the notes thereto, as of December 31, 1995 and for the three-
year period then ended, appearing elsewhere in this Prospectus. This pro forma
financial data is not necessarily indicative of the results that would have
occurred had the Refinancing been completed on the dates indicated or the
Company's actual or future operating results or financial position.
29
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------------- ---------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995(A) 1995 1996 1996(A)
-------- -------- -------- -------- -------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Gross revenues......... $ 34,662 $ 35,811 $ 36,972 $ 41,748 $ 47,589 $47,589 $10,531 $11,397 $11,397
Agency commissions..... 3,272 3,487 3,510 4,097 4,698 4,698 1,007 1,017 1,017
-------- -------- -------- -------- -------- ------- ------- ------- -------
Net revenues........... 31,390 32,324 33,462 37,651 42,891 42,891 9,524 10,380 10,380
Direct advertising
expenses.............. 18,150 18,085 17,539 19,561 20,848 20,848 5,256 5,472 5,472
Corporate general and
administrative
expense............... 1,341 1,953 998 1,183 1,114 1,114 257 467 467
Depreciation and
amortization.......... 7,453 6,380 5,893 5,684 5,568 5,544 1,408 1,447 1,447
Deferred compensation
expense(b)............ 45 433 636 1,530 2,427 2,427 1,152 250 250
-------- -------- -------- -------- -------- ------- ------- ------- -------
Operating income....... 4,401 5,473 8,396 9,693 12,934 12,958 1,451 2,744 2,744
Interest expense....... 13,436 11,380 9,111 9,877 11,263 12,465 3,065 3,006 3,116
Other expenses
(income), net......... 1 (297) (164) 38 16 16 (2) 1 1
(Gain) loss on
disposal of assets,
net................... 422 263 388 388 93 93 (9) (1) (1)
-------- -------- -------- -------- -------- ------- ------- ------- -------
Net income (loss).... $ (9,458) $ (5,873) $ (939) $ (610) $ 1,562 $ 384 $(1,603) $ (262) $ (372)
======== ======== ======== ======== ======== ======= ======= ======= =======
<CAPTION>
AS OF DECEMBER 31, AS OF MARCH 31,
------------------------------------------------ ----------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents........... 1,713 1,430 1,990 1,722 2,131 1,487 2,675
Working capital........ 1,516 2,909 4,348 4,646 5,944 6,723 9,128
Total assets........... 63,631 56,745 54,637 50,650 48,211 49,769 52,197
Total debt............. 119,992 120,129 118,124 113,261 107,443 115,801 111,981
Total partners'
deficit............... (60,969) (66,842) (67,781) (68,391) (66,829) (69,995) (67,091)
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------------- ---------------------------
PRO FORMA PRO FORMA
1991 1992 1993 1994 1995 1995(A) 1995 1996 1996(A)
-------- -------- -------- -------- -------- --------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
OTHER DATA:
Operating Cash
Flow(c)............... $ 11,899 $ 12,286 $ 14,925 $ 16,907 $ 20,929 $20,929 $ 4,011 $ 4,441 $ 4,441
Capital expenditures... $ 825 $ 1,748 $ 1,661 $ 1,926 $ 2,251 $ 2,251 $ 563 $ 1,194 $ 1,194
Ratio of earnings to
fixed charges(d)...... -- -- -- -- 1.07x 1.03x -- -- --
Ratio of debt to net
income(e)............. -- -- -- -- 68.79 296.39 -- -- --
Cash flow provided by
(used in):
Operating activities. $ 1,304 $ 6,092 $ 4,984 $ 7,092 $ 9,151 $ 7,949 $ 764 $ 1,194 $ 1,084
Investing activities. $ (738) $ (1,864) $ (1,654) $ (1,791) $ (1,979) $(1,979) $ (564) $(1,004) $(1,004)
Financing activities. $ 74 $ (4,512) $ (2,769) $ (5,569) $ (6,763) $(6,763) $ (436) $ 355 $ 355
</TABLE>
- -------
(a) The pro forma statement of operations data give effect to the Refinancing
and reflect an increase in interest expense. Pro forma interest expense
from the Refinancing is computed as follows:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1995 MARCH 31, 1996
----------------- ------------------
<S> <C> <C>
$105,000,000 10 3/4% Senior Notes...... $11,288 $2,822
New Credit Facility:
$8,815,000 at 8.25%................... 727 --
$8,981,000 at 8.10%................... -- 182
Amortization of deferred financing
costs 450 112
------- ------
Interest expense....................... $12,465 $3,116
======= ======
</TABLE>
(b) Deferred compensation expense represents accrued expenses under certain
deferred compensation arrangements, including phantom stock agreements
with certain key management personnel. The phantom stock agreements in
effect provide for the repurchase of the "phantom stock" in three equal
annual payments after each executive's termination, death or disability,
the sale of the Company, or the fifth anniversary of the agreement's
execution. See "Management--Agreements with Management--Incentive
Compensation."
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31 MARCH 31
------------------------------------------------- -----------------------
1995 1996
1991 1992 1993 1994 1995 PRO FORMA 1995 1996 PRO FORMA
------- ------- ------- ------- ------- --------- ------ ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Operating income (loss). $ 4,401 $ 5,473 $ 8,396 $ 9,693 $12,934 $12,958 $1,451 $2,744 $2,744
Depreciation and
amortization........... 7,453 6,380 5,893 5,684 5,568 5,544 1,408 1,447 1,447
Deferred compensation
expense................ 45 433 636 1,530 2,427 2,427 1,152 250 250
------- ------- ------- ------- ------- ------- ------ ------ ------
Operating Cash Flow..... $11,899 $12,286 $14,925 $16,907 $20,929 $20,929 $4,011 $4,441 $4,441
</TABLE>
(c) The following table sets forth the calculation of "Operating Cash Flow."
Operating Cash Flow is not intended to represent net cash flow provided by
operating activities as defined by generally accepted accounting principles
and should not be considered as an alternative to net income (loss) as an
indicator of the Company's operating performance or to net cash provided by
operating, investing and financing activities as a measure of liquidity or
ability to meet cash needs. The Company believes Operating Cash Flow is a
measure commonly reported and widely used by analysts, investors and other
interested parties in the media industry. Accordingly, this information has
been disclosed herein to permit a more complete comparative analysis of the
Company's operating performance relative to other companies in the media
industry. However, the definition of Operating Cash Flow or of similarly
defined terms may vary among companies and such differences should be noted
in comparing the Company's operating performance relative to other
companies. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations."
(d) Earnings consist of pre-tax income from continuing operations plus fixed
charges adjusted to exclude capitalized interest. The Company's fixed
charges consist of interest expense plus amortization of deferred
financing costs. Earnings were inadequate to cover fixed charges by
approximately $10.0 million, $6.4 million, $1.6 million and $1.3 million
for the years ended December 31, 1991 through 1994, respectively.
(e) The ratio of total debt to net income for the years ended December 31,
1991 through December 31, 1994 is not meaningful due to the net losses for
those periods.
30
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is the seventh largest owner and operator of outdoor advertising
structures in the United States. The Company currently provides outdoor
advertising services to eight markets and their surrounding areas in the
midwest, southeast and mid-Atlantic states: Charlotte, NC; Kalamazoo, MI;
Lansing/Jackson, MI; Lehigh Valley, PA; Madison, WI; Minneapolis, MN; Norfolk,
VA; and Peoria, IL. As of December 31, 1995, the Company operated
approximately 7,000 advertising displays, including approximately 1,900
painted bulletins, 4,500 30-sheet posters, 150 junior (8-sheet) posters and
450 transit displays.
The Company's business was founded in 1983 with the acquisition of Central
Outdoor Advertising, which had offices in Lansing, Jackson and Kalamazoo, MI.
Over the next five years, the Company pursued a strategy of geographic
expansion into additional medium-sized markets, primarily through the
acquisition of existing outdoor advertising businesses in selected midwest,
southeast and mid-Atlantic markets. This geographic expansion strategy has
enabled the Company to capitalize on the efficiencies, economies of scale and
marketing opportunities associated with operating outdoor advertising
businesses located in proximate or contiguous geographic markets.
As a result of its acquisition of outdoor advertising businesses from 1983
to 1988, the Company incurred substantial debt. In November 1992, the Company
restructured its debt by extending maturities, reducing interest rates and
modifying financial covenants. However, the interest expense required to
service such debt, together with increased depreciation and amortization, has
contributed to historical net losses for the Company.
Since 1991, the Company has continued to strengthen its market share through
the construction and acquisition of displays in its existing markets, along
with the recent introduction of transit advertising in its Madison, WI market.
This expansion has been financed through internally generated cash flow.
The following table presents certain operating statement items in the
Statements of Operations as a percentage of net revenues for the three years
ended December 31, 1995 and the three months ended March 31, 1995 and 1996.
<TABLE>
<CAPTION>
YEARS ENDED THREE MONTHS
DECEMBER 31, ENDED MARCH 31,
--------------------- --------------
1993 1994 1995 1995 1996
----- ----- ----- ----- ------
<S> <C> <C> <C> <C> <C>
Net revenues........................ 100.0% 100.0% 100.0% 100.0% 100.0%
Direct advertising expenses......... 52.4 52.0 48.6 55.2 52.7
Corporate general and administrative
expenses........................... 3.0 3.1 2.6 2.7 4.5
----- ----- ----- ----- -----
Operating Cash Flow................. 44.6 44.9 48.8 42.1 42.8
Depreciation and amortization....... 17.6 15.1 13.0 14.8 14.0
Deferred compensation expense....... 1.9 4.1 5.6 12.1 2.4
----- ----- ----- ----- -----
Operating income.................... 25.1 25.7 30.2 15.2 26.4
Interest expense.................... 27.2 26.2 26.3 32.1 28.9
Other expenses (income), net........ (0.5) 0.1 0.1 -- --
(Gain) loss on disposals of property
and equipment, net................. 1.2 1.0 0.2 (0.1) --
----- ----- ----- ----- -----
Net income (loss)................... (2.8)% (1.6)% 3.6% (16.8)% (2.5)%
===== ===== ===== ===== =====
</TABLE>
The Company's revenues are a function of both the occupancy rate of the
Company's outdoor advertising display inventory (the percentage of time that
its displays contain paid-for advertisements) and the rates that the Company
charges for use of its displays. The Company's business strategy includes the
optimization of the mix of rate and occupancy of its display inventory in
order to maximize revenues. Advertising rates for the Company's displays are
based upon a variety of factors, including historical base rates, the time of
year and the occupancy rate of a particular market's display inventory.
31
<PAGE>
The following table presents the number of painted bulletins and 30-sheet
poster displays operated by the Company and the average rates and occupancy
levels with respect to such displays for the three years ended December 31,
1995 and the three months ended March 31, 1995 and 1996:
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED DECEMBER ENDED MARCH
31, 31,
---------------------- --------------
1993 1994 1995 1995 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Number of Displays:
Painted Bulletins..................... 1,672 1,713 1,725 1,706 1,744
30-Sheet Posters...................... 4,476 4,464 4,464 4,452 4,457
Average Rates: (1)
Painted Bulletins..................... $1,202 $1,329 $1,495 $1,412 $1,541
30-Sheet Posters...................... $ 410 $ 462 $ 497 $ 499 $ 523
Average Occupancy:
Painted Bulletins..................... 75% 75% 76% 74% 73%
30-Sheet Posters...................... 71% 70% 72% 60% 57%
</TABLE>
- --------
(1) Represents average rate per display per month
The primary operating expenses incurred by the Company are advertising
agency commissions, lease payments to property owners for use of the land on
which the Company's displays are located, operational and administrative costs
and sales expenses (primarily commissions). Of these expenses, advertising
agency commissions, sales expenses and certain operational and administrative
costs are considered direct costs. Commissions are paid to advertising
agencies that contract for the use of the Company's advertising displays on
behalf of advertisers. These agency commissions are deducted from gross
revenues to calculate net revenues.
The Company currently maintains a phantom stock program under which certain
executive management personnel and general managers have the ability to earn
deferred compensation based upon the operating performance of the Company or,
in the case of the general managers, their respective divisions. Annual
accruals under the program are based upon exceeding a base level of operating
profit. See "Management--Agreements with Management--Incentive Compensation."
The Company believes that its phantom stock program provides its senior
employees incentives to continue improving the operating performance of the
Company.
The Company's marketing strategy of servicing local and regional advertisers
and reducing its dependence on national and tobacco advertising resulted in
moderate increases in overall revenues during a time when national advertising
dollars, primarily tobacco, were declining. The Company concentrates its
marketing efforts on generating sales from local and regional advertisers in
each of its markets, including those advertisers within industries and product
categories that have not historically been traditional users of outdoor media.
These potential advertisers include fast food restaurants, retailers, food
stores, casinos, cellular and telecommunications companies, building supply
retailers, radio stations, travel-related industries and medical care
providers. This focus on local and regional advertisers has been critical to
the Company's ability to control revenue fluctuations resulting from the
variability and potential long-term decline of revenues attributable to the
tobacco products industry, the latter of which represented 16.5% of the
Company's net revenues in 1991, 13.4% in 1992, 10.2% in 1993, 10.3% in 1994
and 12.6% in 1995. Sales to local and regional advertisers accounted for 87.4%
of the Company's net revenues in 1995.
The Company's sales and marketing strategy has been successful largely due
to its team of general managers in its markets. These key managers have an
average of 14 years of industry experience. The Company also has integrated a
business development department into each market, making available to each
region's sales force comprehensive information about local market research,
customer needs and advertising opportunities. The business development
departments have given the Company's sales departments significantly improved
information and tools to develop additional local and regional advertising
customers, especially with many customers that have not historically
advertised through the outdoor medium. Sales representatives have been able to
use these additional resources to develop creative ideas for new customers and
educate them about the cost effectiveness of outdoor advertising in attempting
to reach their customers. The Company considers its emphasis
32
<PAGE>
on local and regional sales, the expertise and tenure of its managers and its
marketing and customer service capabilities to be factors which enhance the
productivity of its inventory of advertising displays.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996 Compared With Three Months Ended March 31,
1995
Net revenues (gross revenues net of agency commissions) for the three months
ended March 31, 1996 of $10.4 million increased by 9.0% from $9.5 million for
the comparable period in 1995. This increase resulted entirely from higher
advertising rates.
Direct advertising expenses for the three months ended March 31, 1996 of
$5.5 million increased by 4.1% from $5.3 million for the comparable period in
1995. The increase was attributable to direct costs associated with increased
sales from new displays and an increase in average advertising rates.
Corporate, general and administrative expenses for the three months ended
March 31, 1996 of $467,000 increased by 81.6% from $257,000 for the comparable
period in 1995. This increase was attributable to increased compensation,
directors' fees and travel expenses.
Depreciation and amortization for the three months ended March 31, 1996 of
$1.4 million remained constant with the comparable period in 1995.
Deferred compensation expense for the three months ended March 31, 1996 of
$250,000 decreased significantly from $1.2 million for the comparable period
in 1995 primarily due to the termination in March of 1995 of the deferred
compensation plan made with the Chief Executive Officer of the Company, by the
terms of which the Company agreed to pay a total of $2 million upon
consummation of the Refinancing of the Company's outstanding long-term debt.
Interest expense for the three months ended March 31, 1996 remained
consistent with the comparable period in 1995, although amounts paid to
related parties decreased due to the Refinancing.
Net loss for the three months ended March 31, 1996 decreased to $262,000
from $1.6 million for the comparable period in 1995 primarily as a result of
the items discussed above.
Operating Cash Flow is defined as operating income (loss) before (i)
depreciation and amortization expenses and (ii) deferred compensation expense.
As a partnership the Company is not subject to federal corporate income tax.
Operating Cash Flow is not intended to represent net cash provided by
operating activities as defined by generally accepted accounting principles
and should not be considered as an alternative to net income or loss as an
indicator of the Company's operating performance or to net cash provided by
operating, investing and financing activities as a measure of liquidity or
ability to meet cash needs. The Company believes Operating Cash Flow is a
measure commonly reported and widely used by analysts, investors and other
interested parties in the media industry. Accordingly, this information is
disclosed herein to permit a more complete comparative analysis of the
Company's performance relative to other companies in the media industry.
Operating Cash Flow for the three months ended March 31, 1996 of $4.4 million
increased by 10.7% from $4.0 million for the comparable period in 1995. The
increase was directly attributable to the aforementioned increase in net
revenues coupled with only a modest increase in total operating expenses.
Year Ended December 31, 1995 Compared With Year Ended December 31, 1994
Net revenues for 1995 of $42.9 million increased by 13.9% from $37.7 million
in 1994. This increase resulted primarily from higher advertising rates.
33
<PAGE>
Direct advertising expenses for 1995 of $20.8 million increased by 6.6% from
$19.6 million in 1994. The increase was attributable to direct costs
associated with increased sales as well as increased lease costs, primarily
from the construction of new displays in the Minneapolis, MN market.
Corporate general and administrative expenses for 1995 of $1.1 million
decreased by 5.8% from $1.2 million in 1994. This decrease was attributable to
certain relocation expenses and certain professional fees that were charged in
1994 and were not incurred in 1995.
Depreciation and amortization for 1995 of $5.6 million decreased by 2.1%
from $5.7 million in 1994. This slight decrease resulted from certain assets
being fully depreciated.
Deferred compensation expense for 1995 of $2.4 million increased
significantly from $1.5 million in 1994. This increase was attributable to
higher deferred compensation expense under the Company's phantom stock program
resulting from the relatively larger increase in EBITDA during 1995 as
compared to 1994 and additional accruals relating to the termination of Mr.
Gleason's phantom stock arrangement.
Interest expense for 1995 of $11.3 million increased by 14.1% from $9.9
million in 1994. This increase was attributable to higher interest rates in
1995. The Company's effective interest rate increased to 9.8% in 1995 from
8.1% in 1994, which more than offset the effect of a $5.8 million principal
reduction in the Company's outstanding debt in 1995.
Net income for 1995 increased to $1.6 million from a net loss of $610,000 in
1994 primarily as a result of the items discussed above.
Operating Cash Flow for 1995 of $20.9 million increased by 23.8% from $16.9
million in 1994. This increase was directly attributable to the aforementioned
increase in net revenues coupled with only a modest increase in total
operating expenses.
Year Ended December 31, 1994 Compared With Year Ended December 31, 1993
Net revenues for 1994 of $37.7 million increased by 12.5% from $33.5 million
for 1993. This increase resulted from a $3.7 million increase in local and
regional advertising revenues and a $500,000 increase in national tobacco
advertising revenues. The increase in local and regional advertising reflects
increased marketing efforts directed at these customers, including travel and
entertainment, health care and fast food restaurant companies, among others.
The increase in national tobacco advertising revenues reflects higher rate
charges.
Direct advertising expenses for 1994 of $19.6 million increased by 11.5%
from $17.5 million in 1993. The increase was attributable to direct costs
associated with increased sales.
Corporate general and administrative expenses for 1994 of $1.2 million
increased 18.5% from $1.0 million in 1993. This increase was attributable to
an increase in certain professional fees.
Depreciation and amortization for 1994 of $5.7 million decreased by 3.5%
from $5.9 million for 1993. The slight decrease in depreciation and
amortization resulted from certain assets being fully depreciated.
Deferred compensation expense for 1994 of $1.5 million increased
significantly from $636,000 in 1993. This increase was attributable to
accruing additional deferred compensation expense as part of the Company's
phantom stock program as a result of the increase in Operating Cash Flow in
1994 over 1993.
Interest expense for 1994 of $9.9 million increased 8.4% from $9.1 million
for 1993 due to higher interest rates in 1994, which more than offset the
effect of debt reduction of $4.9 million in 1994. The Company's effective
interest rate increased to 8.1% for 1994 from 7.5% for 1993.
34
<PAGE>
Net loss for 1994 of $610,000 decreased 35.0% from the net loss of $939,000
for 1993. This decrease was attributable to the increase in net revenues and
the improved operating leverage discussed above, which was partially offset by
higher interest expense.
Operating Cash Flow for 1994 of $16.9 million increased by 13.3% from $14.9
million for 1993. This increase was attributable directly to increased sales
and operating leverage.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's cash needs have arisen from operating expenses
(primarily direct advertising expenses and corporate general and
administrative expenses), debt service, capital expenditures and deferred
compensation payments under phantom stock agreements. The Company's interest
expense was $11.3 million in 1995, $9.9 million in 1994 and $9.1 million in
1993. As a result of the Refinancing, the Company's interest expense will
increase due to the higher weighted average interest rate and increased level
of debt.
The Company's primary sources of cash are net cash generated from operating
activities and borrowings under its credit facility. The Company's net cash
provided from operations increased by 29.0% to $9.2 million for 1995 from $7.1
million for 1994 and by 42.3% to $7.1 million for 1994 from $5.0 million for
1993.
As a result of the net cash provided from operating activities, the Company
has been able to repay debt in recent periods. Under the Company's previous
credit agreement which was repaid as part of the Refinancing, excess cash (as
defined) was required to be applied to reduce the Company's indebtedness and
capital expenditures were limited. The Company reduced its debt by $5.8
million in 1995, by $4.9 million in 1994, and by $2.0 million in 1993. The
Company also made capital expenditures, primarily for new billboard
construction in existing markets, of $2.3 million in 1995, $1.9 million in
1994 and $1.7 million in 1993. The Company expects that its capital
expenditures during 1996 will be approximately $3.0 million and will be
primarily for new billboard construction and the upgrading of existing
displays. The Company expects to finance such capital expenditures with cash
flow provided by operating activities or borrowings under the New Credit
Facility. The Company made capital expenditures of $1.0 million during the
three months ended March 31, 1996 compared to $564,000 during the three months
ended March 31, 1995.
At December 31, 1995, the Company's accrued liability for deferred
compensation payable under phantom stock agreements with key employees was
$4.7 million in the aggregate. The New Credit Facility and the Indenture
permit the payment of the deferred compensation which was accrued at December
31, 1995 and such payments are scheduled to be paid during the 1996 through
2002 period, including $2.0 million, from the proceeds of the Private
Offering. See "Management--Agreements with Management--Incentive
Compensation." During the three months ended March 31, 1996, payments of
deferred compensation totalled $159,000.
The Company incurred substantial debt in connection with the acquisition of
its outdoor advertising businesses from 1983 to 1988. The acquisition debt was
restructured in 1992 to reduce interest rates, extend maturities and modify
financial covenants. As part of the Refinancing, substantially all of the
Company's outstanding debt was refinanced. See "Refinancing and Use Of
Proceeds." As a result of the Refinancing, the average maturities of the
Company's debt at December 31, 1995 (without the extension of the existing
debt) were extended from one year to approximately nine years.
Prior to the Refinancing, approximately $105 million of the Company's long-
term debt had scheduled maturities in 1997. The Company's independent
auditors, in their report on the Company's financial statements for the year
ended December 31, 1995, stated, in Note 12 thereto, that the Company has a
net capital deficiency and its cash flow from operations has not been
sufficient to fund its long-term obligations, which raise substantial doubt
about the Company's ability to continue as a going concern. See Note 12 of
Notes to Financial Statements. As part of the Refinancing, the Company repaid
all of its outstanding long-term indebtedness with net proceeds from the
issuance of the Original Notes together with borrowings under the New Credit
Facility. Accordingly, in the opinion of management of the Company, the going
concern consideration expressed by the Company's independent auditors was
resolved by the Refinancing.
35
<PAGE>
In connection with the Refinancing, the Company repaid its previous funded
debt and issued the Notes in the aggregate principal amount of $105 million
and entered into the New Credit Facility which provides a revolving line of
credit of up to $15 million. Proceeds from the Refinancing, together with the
Company's cash reserves were used in March 1996 to repay substantially all of
the Company's funded debt. As a result of the Refinancing, it is expected that
the average outstanding indebtedness and the effective interest rate will be
greater in the current year than in 1995. During 1995 the Company had interest
expense of approximately $11.3 million on average outstanding indebtedness of
approximately $111.8 million, resulting in an effective annual interest rate
of 10.7%. Scheduled interest payments on the Notes aggregate approximately
$11.3 million per year. Additionally, outstanding indebtedness under the New
Credit Facility will accrue interest at a rate equal to, at the option of the
Company, either (i) the Base Rate (which is defined as the prime rate most
recently announced by the agent under the New Credit Facility) or (ii) LIBOR,
in each case plus an applicable margin determined by reference to the ratio of
total debt to cash flow of the Company. Under the terms of the Indenture, the
Company will be permitted to invest in certain Interest Rate Agreements (as
defined herein) which agreements may include transactions involving
derivatives that reduce the effects of the fluctuations in interest rates.
However, as a result of the Refinancing, the Company's interest expense is
expected to increase which will negatively impact net income.
As a result of the Refinancing, substantially all of the Company's existing
funded debt was repaid and the Company entered into the New Credit Facility on
March 12, 1996. The New Credit Facility is a revolving credit facility of up
to $15.0 million. At March 31, 1996, the outstanding borrowings under the New
Credit Facility were $3.1 million. Substantially all of the assets of the
Company are pledged to secure indebtedness under the New Credit Facility.
Permitted borrowings under the New Credit Facility are subject to various
conditions, including the attainment of certain performance measures by the
Company. Scheduled reductions in the lenders' commitments under the New Credit
Facility will commence in 1997. The agreement governing the New Credit
Facility contains a number of covenants that are more restrictive than those
contained in the Indenture, including covenants requiring the Company to
maintain certain financial ratios that become more restrictive over time.
Adverse operating results could cause noncompliance with one or more of these
covenants, reducing the Company's borrowing availability and, in certain
circumstances, entitling the lenders to accelerate the maturity of outstanding
borrowings.
The Company believes that net cash provided from operations and available
credit under the New Credit Facility will be sufficient to meet its cash needs
for its current operations, required debt payments, anticipated capital
expenditures and the deferred compensation payments for the reasonably
foreseeable future.
IMPACT OF INFLATION
Though increases in operating costs could adversely affect the Company's
operations, management does not believe that inflation has had a material
effect on operating profit during the past several years.
SEASONALITY
Although revenues during the first and fourth quarters are slightly lower
than the other quarters, management does not believe that seasonality has a
significant impact on the operations or cash flow of the Company.
Information contained in this Prospectus, including, without limitation in
the foregoing Management's Discussion and Analysis of Financial Condition and
Results of Operations may contain "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995, which can be
identified by the use of forward-looking terminology as "may," "will,"
"would," "expect," "anticipate," "estimate" or "continue" or the negative
thereof or other variations thereon or comparable terminology. Certain
factors, including, those factors described herein under "Risk Factors" could
cause actual results to differ materially from those in such forward-looking
statements.
36
<PAGE>
BUSINESS
GENERAL
The Company is the seventh largest owner and operator of outdoor advertising
structures in the United States. The Company currently provides outdoor
advertising services to eight markets and surrounding areas in the midwest,
southeast and mid-Atlantic states: Charlotte, NC; Kalamazoo, MI;
Lansing/Jackson, MI; Lehigh Valley, PA; Madison, WI; Minneapolis, MN; Norfolk,
VA; and Peoria, IL. As of December 31, 1995, the Company operated, in the
aggregate, approximately 7,000 advertising displays, including approximately
1,900 painted bulletins, 4,500 30-sheet posters, 150 junior (8-sheet) posters
and 450 transit displays.
HISTORY
The Company's business was founded in 1983 with the acquisition of Central
Outdoor Advertising, which had offices in Lansing, Jackson and Kalamazoo, MI.
Over the next five years, the Company pursued a strategy of geographic
expansion into additional medium-sized markets, primarily through the
acquisition of existing outdoor advertising businesses in selected midwest,
southeast and mid-Atlantic markets. This geographic expansion strategy has
enabled the Company to capitalize on the efficiencies, economies of scale and
marketing opportunities associated with operating outdoor advertising
businesses located in proximate or contiguous geographic markets to its
primary markets. Since 1988, the Company's sales and Operating Cash Flow
growth has resulted from increased display inventory primarily through new
construction and, to a lesser degree, from acquisitions of displays in
existing markets and the significant upgrading of its existing display
inventory. The Company has also been able to reduce operating expenses while
achieving higher rate and occupancy levels.
INDUSTRY OVERVIEW
Outdoor advertising is one of several major advertising media that include
television, radio, newspapers and magazines, among others. According to the
Outdoor Advertising Association of America, Inc. ("OAAA"), an industry trade
association, outdoor advertising in the United States generated total revenues
of approximately $1.9 billion in 1995, a record for the industry and a 9.4%
increase over 1994. Because of its repetitive impact and relatively low cost-
per-thousand impressions (a commonly used media standard), outdoor advertising
is attractive to both large national advertisers and smaller local and
regional businesses.
The principal outdoor advertising display is the billboard, of which there
are three standardized formats:
. PAINTED BULLETINS are generally 14 feet high and 48 feet wide (672 square
feet) and consist of panels or a single sheet of vinyl that are hand
painted at the facilities of the outdoor advertising company or computer
painted in accordance with design specifications supplied by the
advertiser. The panels or vinyl are then transported to the billboard
site and mounted to the face of the display. On occasion, to attract more
attention, some of the displays are designed to extend beyond the linear
edges of the display face and may include three-dimensional
embellishments for which the outdoor advertising company often receives
additional revenue. Because of painted bulletins' greater impact and
higher cost relative to other types of billboards, they are usually
located near major highways, and space is usually sold to advertisers for
periods of four to twelve months.
. 30-SHEET POSTERS are generally 12 feet high by 25 feet wide (300 square
feet) and are the most common type of billboard. Lithographed or silk-
screened paper sheets that are supplied by the advertiser are prepasted
and packaged in airtight bags by the outdoor advertising company and
applied, like wallpaper, to the face of the display. The 30-sheet posters
are concentrated on major traffic arteries and space is usually sold to
advertisers for periods of one to twelve months.
. JUNIOR (8-SHEET) POSTERS are usually 6 feet high by 12 feet wide (72
square feet). The displays are prepared and mounted in the same manner as
30-sheet posters. Most junior posters, because of their smaller size, are
generally concentrated on city streets and are targeted at pedestrian
traffic. Space on junior posters is usually sold to advertisers for
periods of one to twelve months.
37
<PAGE>
Typically, billboards are mounted on structures that are owned by the
outdoor advertising company and located on sites that are owned or leased by
it or on which it has a permanent easement. Leases of structure sites usually
provide for a term of three to ten years depending on locale. A structure may
contain one or more displays (generally two), each of which is referred to as
a "face."
A more recent addition to the various types of outdoor advertising displays
are bus shelter displays and transit ads, which are located on the sides of
buses. Bus shelter displays are usually enclosed within glassed, backlighted
cases on two or more sides of a pedestrian shelter located at an urban bus
stop. Transit displays are inserted into panels on the sides and back
exteriors of buses. The advertisements appear on lithographed or silk screened
posters supplied in a single sheet by the advertiser. Transit displays and bus
shelter displays generally are sold to advertisers for periods of one to
twelve months.
Advertisers usually contract for outdoor displays (and other media exposure)
through advertising agencies, which are responsible for the artistic design
and written content of the advertising as well as the choice of media and the
planning and implementation of the overall campaign. Outdoor advertising
companies pay commissions to the agencies for advertising contracts secured
through such agencies. Advertising contracts are negotiated on the basis of
the monthly rates that are published in the outdoor advertising company's
"rate card." These rates, which are typically set annually during the first
quarter of each year, are based on a particular display's exposure (or number
of "impressions" delivered) in relation to the demographics of the particular
market and its location within that market. The number of "impressions"
delivered by a display (measured by the number of vehicles passing the site
during a defined period and weighted to give effect to such factors as its
proximity to other displays and the speed and viewing angle of approaching
traffic) are determined by surveys that are verified by the Traffic Audit
Bureau, an independent agency which is the outdoor advertising industry's
equivalent of television's Arbitron ratings and which audits approximately
175,000 outdoor advertising sites annually.
Advertisers purchase outdoor advertising for a variety of reasons. In the
case of restaurants, motels, service stations and similar roadside businesses,
the message reaches potential customers close to the point of sale and
provides ready directional information. For advertisers seeking to build
product brand name awareness, outdoor advertising is attractive because of its
constant repetition and comparatively low cost per thousand impressions.
According to the OAAA, the top ten categories of businesses ranked by
outdoor advertising expenditures for 1994 were tobacco products, retail
establishments, business and consumer services, entertainment, automotive,
hotel/motel, publishing and media, and alcoholic beverages.
BUSINESS STRATEGY
The Company's strategy is to focus its operations on providing value-added
outdoor advertising services to advertisers in medium-sized markets in which
it is or could be the leading provider of such services. The Company believes
that its focus on medium-sized markets allows it to achieve a dominant share
of outdoor advertising revenues and display faces within those markets. The
Company also believes that by educating current and potential customers on the
effectiveness of the outdoor medium, it has a significant opportunity to gain
a larger share of overall advertising expenditures. The Company's business
strategy comprises the following elements:
. Focus marketing efforts on local and regional advertisers in order to
develop and maintain a diverse client base and to limit reliance on
national advertising accounts. The Company believes that focusing on
local and regional advertisers helps generate stable revenue growth and
reduce its reliance on any single local economy or industry segment. As a
result of this focus, the Company has been able to increase net revenues
attributable to local and regional advertising as a percentage of total
net revenues from 83.5% in 1991 to 87.4% in 1995.
. Take advantage of recent technological advances in computer and printing
technology, which allow the Company to provide higher quality
reproduction to its customers, thereby attracting new advertisers such as
Calvin Klein, ReMax Realty, Prudential Health Care and Blue Cross-Blue
Shield to the outdoor medium.
38
<PAGE>
. Raise potential customers' awareness of the reach, impact and value of
outdoor advertising and convince customers to use outdoor advertising as
an integral part of their advertising plan.
. Continue to enhance sales, marketing and customer service capabilities.
In each market area, the Company has recruited and trained a skilled
sales force, placing an emphasis on market research and artistic
creativity. Each salesperson is paid pursuant to a performance-based
compensation system and supervised by a local sales manager executing a
coordinated marketing plan.
. Increase revenues from existing display faces by developing programs that
maximize advertising rates and optimize occupancy levels in each market.
In addition, the Company also plans to pursue new advertising categories,
such as transit buses and passenger shelters, to further diversify the
Company's revenue base.
. Expand operations within the Company's markets through construction of
new display faces and the upgrading of existing displays, placing an
emphasis on painted bulletins, which generally command higher rates and
longer contracts from advertisers.
. Pursue strategic acquisitions of outdoor displays in existing and
contiguous markets and capitalize on the efficiencies, economies of scale
and significant opportunities for inter-market cross-selling that are
associated with operating in proximate or contiguous geographic markets.
The Company recognizes, and closely monitors, the needs of its customers and
seeks to provide them with a quality advertising product at a lower cost than
competitive media. The Company believes it has a reputation of providing
excellent customer service and quality outdoor advertising space. As such, the
Company has been nationally recognized as a five star member (the highest
ranking) of the OAAA, a distinction currently held by only 25 of the
approximately 800 members of the OAAA.
MARKETS
The Company operates in eight geographically-diverse medium-sized markets
which offer to local, regional and national advertisers significant areas of
population to whom advertising may be targeted. In addition, the Company
offers comprehensive outdoor advertising services, including local production
facilities and local representation, in all of its markets except in the
Minneapolis market.
The following table sets forth information as of December 31, 1995 with
respect to each of the Company's markets, including the ADI (as defined
herein) rank of that market and the number of each display type operated by
the Company in that market:
<TABLE>
<CAPTION>
ADI PAINTED 30-SHEET 8-SHEET TRANSIT
MARKET RANKING(A) BULLETINS POSTERS POSTERS DISPLAYS TOTAL
- ------ ---------- --------- -------- ------- -------- -----
<S> <C> <C> <C> <C> <C> <C>
Charlotte, NC............. 28 602 870 66 -- 1,538
Lansing/Jackson, MI....... 106 459 906 -- -- 1,365
Kalamazoo, MI............. 38 317 738 -- -- 1,055
Lehigh Valley, PA (b)..... -- 180 736 -- -- 916
Norfolk, VA............... 40 150 619 28 -- 797
Madison, WI............... 85 61 270 -- 450 781
Peoria, IL................ 114 57 337 61 -- 455
Minneapolis, MN........... 14 95 -- -- -- 95
----- ----- --- --- -----
Total................. 1,921 4,476 155 450 7,002
===== ===== === === =====
</TABLE>
- --------
(a) Indicates the market rank of the area of dominant influence ("ADI"), as
determined by The Arbitron Company, within which the office is located.
ADIs are ranked based on population, with the market having the largest
population ranked first. ADI rank is the standard measure of market size
used by the media industry.
(b) The Lehigh Valley market is included in the Philadelphia ADI ranking.
According to the U.S. Census Bureau, the Lehigh Valley market was the 86th
largest metropolitan statistical area in the United States at December 31,
1990, the latest date for which such information is available.
39
<PAGE>
The following tables set forth information with respect to the net revenues,
operating income and operating margins for the Company's displays in each of
its markets for each of the past five years:
NET REVENUES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
MARKET 1991 1992 1993 1994 1995
- ------ ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Charlotte, NC........................... $ 7,285 $ 7,201 $ 7,518 $ 8,646 $ 9,680
Lansing/Jackson, MI..................... 6,475 6,353 6,873 7,541 8,227
Kalamazoo, MI........................... 4,391 4,642 4,640 4,976 5,535
Lehigh Valley, PA....................... 4,107 4,468 4,532 5,045 5,909
Norfolk, VA............................. 4,153 4,300 4,309 4,827 5,672
Madison, WI............................. 1,842 1,869 2,039 2,545 3,070
Peoria, IL.............................. 1,982 2,212 2,028 2,397 2,562
Minneapolis, MN......................... 1,155 1,279 1,523 1,674 2,236
------- ------- ------- ------- -------
Total............................... $31,390 $32,324 $33,462 $37,651 $42,891
======= ======= ======= ======= =======
</TABLE>
OPERATING INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
MARKET 1991 1992 1993 1994 1995
- ------ ------ ------ ------ ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Charlotte, NC.......................... $ 939 $1,346 $1,904 $2,701 $ 3,602
Lansing/Jackson, MI.................... 2,224 2,118 2,603 3,044 3,570
Kalamazoo, MI.......................... 1,535 1,719 1,852 1,967 2,440
Lehigh Valley, PA...................... 524 815 1,155 1,466 2,161
Madison, WI............................ 140 351 791 915 1,232
Norfolk, VA............................ 642 899 955 1,387 2,279
Peoria, IL............................. 633 751 582 851 863
Minneapolis, MN........................ 126 159 401 233 631
Corporate.............................. (2,362) (2,685) (1,847) (2,871) (3,844)
------ ------ ------ ------ -------
Total.............................. $4,401 $5,473 $8,396 $9,693 $12,934
====== ====== ====== ====== =======
</TABLE>
OPERATING MARGIN
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
MARKET 1991 1992 1993 1994 1995
- ------ ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Charlotte, NC..................................... 12.9% 18.7% 25.3% 31.2% 37.2%
Lansing/Jackson, MI............................... 34.3 33.3 37.9 40.4 43.4
Kalamazoo, MI..................................... 36.0 37.0 39.9 39.5 44.1
Lehigh Valley, PA................................. 12.8 18.3 25.5 29.1 36.6
Madison, WI....................................... 7.6 18.8 38.8 36.0 40.1
Norfolk, VA....................................... 15.5 20.9 22.2 28.7 40.2
Peoria, IL........................................ 31.9 33.9 28.7 35.3 33.7
Minneapolis, MN................................... 10.9 12.4 26.3 13.9 28.2
---- ---- ---- ---- ----
Total......................................... 14.0 16.9 25.1 25.7 30.2
==== ==== ==== ==== ====
</TABLE>
SALES AND MARKETING
The growth in the Company's revenues and Operating Cash Flow is primarily a
result of its focus on the use of sales and marketing staff to increase the
productivity of its inventory of displays while maintaining strict controls on
its expenses.
40
<PAGE>
Historically, outdoor advertising companies have derived a significant
portion of their revenues from large national advertisers, such as tobacco
companies, auto manufacturers and distributors of alcoholic beverages. As
tobacco industry advertising purchases have declined in recent years, some
outdoor advertising companies have recently shifted their marketing focus to
local and regional advertisers to replace these lost revenues. Nonetheless,
large national advertisers continue to account for a significant percentage of
outdoor advertising industry revenues. Despite this fact, the Company believes
that sales to local and regional advertisers lend stability to its revenue
stream by diversifying its customer base. Accordingly, over the past several
years, the Company has shifted its marketing focus to emphasize sales to such
customers. As a result, in 1995, the Company generated approximately 87.4% of
its net revenues from local and regional sales, up from 83.5% in 1991. These
efforts have been critical to the Company's ability to control revenue
fluctuations resulting from the variability and potential long-term decline of
revenues attributable to the tobacco products industry, which represented
16.5% of the Company's net revenues in 1991, 13.4% in 1992, 10.2% in 1993,
10.3% in 1994 and 12.6% in 1995. In addition, the Company's local and regional
focus enables it to capitalize on the growing use of outdoor media by
advertisers that historically have relied on other media in marketing their
products and services, such as consumer product companies, professional
service firms, health care providers and financial institutions.
The Company's sales and marketing strategy has been successful largely due
to the efforts of its team of general managers in its markets. These general
managers have an average of over 14 years of experience in the outdoor
advertising industry and are responsible for implementing the Company's sales
and marketing strategy. Each of the Company's markets has a team of account
executives that is supported locally by a creative department, which provides
innovative marketing ideas, generates art work and designs billboard
advertising for potential customers' advertising campaigns. In addition, each
market has a business development staff, which makes available comprehensive
information about local market research, customer needs and advertising
opportunities. This allows the Company to assess the impact and potential
reach for a potential target customer's display in a given market. The sales
and marketing departments focus on increasing revenues through developing new
marketing programs for customers, educating both current and potential
customers on the effectiveness of the outdoor advertising product relative to
other advertising media and integrating this medium into a customer's
marketing plan. The Company's sales personnel are compensated primarily on a
commission basis which maximizes their incentive to perform.
The following table illustrates the diversity of the Company's markets and
customers by setting forth the percentage of the Company's gross revenues for
1995 attributable to each of the top ten advertising categories:
1995 REVENUES BY CATEGORY
(PERCENT OF GROSS REVENUES)
<TABLE>
<CAPTION>
LANSING/ LEHIGH
CHARLOTTE, KALAMAZOO, JACKSON, VALLEY, MADISON, NORFOLK, PEORIA, MINNEAPOLIS,
NC MI MI PA WI VA IL MN TOTAL
---------- ---------- -------- ------- -------- -------- ------- ------------ -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Tobacco................. 14.1% 10.0% 8.3% 9.3% 7.0% 32.0% 13.2% 14.5% 13.5%
Restaurants............. 14.1 18.7 15.0 8.1 8.5 10.0 7.6 11.2 12.6
Automotive.............. 5.3 9.6 19.2 11.9 10.7 5.2 9.3 1.6 9.9
Amusement............... 4.5 7.5 5.6 3.5 3.6 6.4 11.1 2.6 5.7
Hotel/Motel............. 6.2 5.7 6.6 2.8 3.1 3.0 1.8 2.4 4.7
Beverage-Alcoholic...... 4.0 3.0 3.3 5.8 9.9 0.0 10.0 4.7 4.2
Radio/Television........ 5.3 8.1 2.5 0.0 6.9 4.3 6.3 1.7 4.2
Banking................. 3.1 1.3 2.1 1.9 2.4 3.0 3.5 0.0 2.3
Real Estate............. 8.2 0.0 0.0 0.0 3.2 0.0 2.5 0.0 2.2
Health Care............. 0.0 2.9 1.6 4.5 6.2 1.5 2.8 0.0 2.1
All Others.............. 35.2 33.2 35.8 52.2 38.5 34.6 31.9 61.3 38.6
----- ----- ----- ----- ----- ----- ----- ----- -----
Total................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
41
<PAGE>
LOCAL MARKET OPERATIONS
In each of its primary markets, the Company maintains a complete outdoor
advertising operation including a sales office, a construction and maintenance
facility, an art department equipped with state-of-the-art computer
technology, a real estate unit and support staff. The Company conducts its
outdoor advertising operations through these local offices, which is
consistent with senior management's belief that an organization with
decentralized sales and operations is more responsive to local market demand
and provides greater incentives to employees. At the same time, the Company
maintains consolidated accounting and financial controls, which allow it to
monitor closely the operating and financial performance of each market. The
general managers, who report directly to the Company's chief executive
officer, are responsible for the day-to-day operations of their offices and
are compensated based on the financial performance of their respective
markets. In general, these local managers oversee market development,
production and local sales.
Each local office is responsible for locating and ultimately obtaining sites
for the displays in its market. Each office has a leasing department, which
maintains an extensive data base containing information on local property
ownership, lease contract terms, zoning ordinances and permit requirements.
The Company owns certain of the sites on which its displays are located and
leases others. Site lease contracts vary in term but typically range from
three to ten years with various termination and renewal provisions. As of and
for the twelve months ended December 31, 1995, the Company had approximately
3,200 active site leases accounting for a total land lease expense of
approximately $4.8 million, representing approximately 11.3% of net revenues.
In each of its primary markets, the Company has construction and maintenance
facilities, which facilitate the expeditious and economical construction and
maintenance of displays and the painting and mounting of customers'
advertisements. Typically, the Company uses vinyl skins for bulletins. The
vinyl skins are reusable, thereby reducing the Company's production costs, and
are easily transportable. Due to the geographic proximity of the Company's
markets and the transportability of vinyl skins, the Company can shift
production among markets to use its available capacity more effectively. The
local offices also maintain fully-equipped art departments to assist local
customers in the development and production of creative, effective
advertisements.
COMPETITION
The Company competes in each of its markets with other outdoor advertisers
as well as other media, including broadcast and cable television, radio,
newspaper and direct mail marketers. In competing with other media, outdoor
advertising relies on its low cost-per-thousand impressions and its ability to
repetitively reach a broad segment of the population in a specific market or
geographic area within that market. In most of its markets, the Company
encounters direct competition from other major outdoor media companies,
including 3M National Advertising Co. (a division of Minnesota Mining and
Manufacturing Company) and Whiteco, among others, each of which has a large
national network and resources significantly greater than the Company's. The
Company believes that its focus on local and regional advertisers and its
position as the leading provider of full service outdoor advertising in each
of its primary markets enable it to compete effectively with other outdoor
media operators, as well as other media, both within those markets and in each
respective region. The Company also competes with other outdoor advertising
companies for sites on which to build new structures.
GOVERNMENT REGULATION
The outdoor advertising industry is subject to governmental regulation at
the federal, state and local level. Federal law, principally the Highway
Beautification Act of 1965, encourages states, by the threat of withholding
federal appropriations for the construction and improvement of highways within
such states, to implement legislation to control outdoor advertising
structures located within 660 feet of or visible from interstates and primary
highways, except in commercial or industrial areas, and to force the removal
at the owner's expense and without any compensation of any nonconforming
structures on such highways. The Highway Beautification Act and the various
state statutes implementing it require the payment of just compensation
whenever governmental authorities require legally erected and maintained
structures to be removed from federally-aided highways.
42
<PAGE>
States and local jurisdictions have, in some cases, passed additional
regulation on the construction, repair, upgrading, height, size and location
of outdoor advertising structures adjacent to federally-aided highways and
other thoroughfares. Such regulations, often in the form of municipal
building, sign or zoning ordinances, specify standards for the height, size
and location of outdoor advertising structures. In the event non-conforming
advertising structures are damaged, including damage caused by natural events,
such as windstorms and hurricanes, the Company may not be able to repair the
structures. In some cases, the construction of new or relocation of existing
structures is prohibited. Some jurisdictions also have restricted the ability
to enlarge or upgrade existing structures, such as converting from wood to
steel or from non-illuminated to illuminated structures. From time to time,
governmental authorities order the removal of structures by the exercise of
eminent domain or through various regulatory actions or other litigation. In
such cases, the Company seeks compensation under appropriate procedures and
thus far, the Company has been able to obtain satisfactory compensation for
any of its structures removed at the direction of governmental authorities.
However, compensation may not always be available in such circumstances. Some
municipalities have attempted to regulate outdoor advertising by taxing
revenues attributable to advertising structures, or by requiring the payment
of annual permit fees based on factors such as the square footage of an
outdoor advertising company's display faces, located in those municipalities.
Other municipalities take into account lease payments received by lessors of
property on which advertising structures are located in making property tax
assessments. These taxes and fees can increase an outdoor advertising
company's direct operating costs.
Amortization legislation has also been adopted in some areas across the
country, including Charlotte, NC, one of the Company's markets. Amortization
only permits the owner of an outdoor advertising structure to operate its
structure as a non-conforming use for a specified period of time, after which
it must remove or otherwise conform its structure to the applicable
regulations at its own cost without any compensation. Some jurisdictions
require the removal of certain structures without any compensation if there is
a change in use of the premises (e.g., construction on previously unimproved
land). Amortization and such other regulations requiring the removal of
structures without compensation currently are subject to vigorous litigation
in the state and federal courts, which have reached differing conclusions as
to their constitutionality.
On February 1, 1988, the city of Charlotte, NC, adopted a comprehensive sign
ordinance prohibiting the construction of all new off-premises outdoor
advertising signs except those built adjacent to interstate highways. The
ordinance also mandated that all nonconforming signs either be brought into
compliance or be removed by February 1, 1996 at the owner's expense without
compensation. The sign owner is allowed the opportunity to seek an extension
allowing a nonconforming sign to remain in place for an additional two years.
Grant or denial of the extension is in the city's discretion based upon mostly
subjective criteria, which management of the Company believes it can satisfy.
Exempted from the uncompensated removal requirement of the ordinance are off-
premises outdoor advertising signs maintained adjacent to a street or highway
which is part of the former North Carolina Primary Highway System or the
current National Highway System and with respect to which a North Carolina or
federal statute requires payment of compensation as a condition to removal of
signs. Assuming failure by the city to grant any variances, the Company could
be forced to remove approximately 135 structures at its expense without
payment of compensation, with an attendant material adverse impact on the
gross revenues and Operating Cash Flow attributable to the Charlotte, NC
market, but, in the opinion of management, not on the financial condition of
the Company as a whole. In 1988, the Company filed a lawsuit in the Superior
Court of Mecklenburg County, NC, challenging the constitutionality of the
Charlotte sign ordinance. The litigation was stayed by mutual agreement of the
parties until November, 1995. Since the stay expired, neither party has
advanced the litigation. However, the Company intends to actively pursue such
litigation if it is unsuccessful in convincing the city of Charlotte to either
grandfather existing non-conforming signs or to otherwise provide extension
variances satisfactory to the Company. A majority of the City Council recently
voted in favor of a grandfather amendment to the sign ordinance for off-
premises outdoor advertising signs which was then vetoed by the Mayor of
Charlotte. The City Council failed to override the Mayor's veto. Although the
Company has been advised that it is unlikely to prevail in the litigation, it
is likely that all non-conforming signs will be allowed to remain in place
until initial legal procedures have been exhausted, expected to take a minimum
of two years. Thus, it is unlikely that the Company will have to remove non-
conforming signs until 1998 or later.
43
<PAGE>
In recent years, there have been movements to restrict billboard advertising
of certain products, including tobacco and alcohol. No bills have become law
at the federal level except those requiring health hazard warnings similar to
those on cigarette packages and print advertisements. It is uncertain whether
legislation of this type will be enacted in the future. Most recently, in May
1996, Phillip Morris U.S.A., the domestic tobacco subsidiary of Phillip Morris
Companies Inc., announced a proposal for comprehensive federal legislation to
address concerns regarding the use of tobacco products by minors which
included provisions that would ban all outdoor tobacco product advertising
within 1,000 feet of any playground or elementary or secondary school, on 8-
sheet-posters in urban neighborhoods and on transit displays. In the opinion
of management, such legislation would not have a material adverse impact on
the gross revenues or Operating Cash Flow of the Company.
To date, regulations applicable in the Company's markets, have not
materially affected its operations, and compliance with those regulations has
not had a material impact on its costs. No assurance can be given, however, as
to the effect of changes in those regulations or of new regulations that may
be adopted in the future.
FACILITIES
The Company's corporate office is located in Atlanta, GA. In addition, the
Company has an office and complete production and maintenance facilities in
each of Charlotte, NC; Kalamazoo, MI; Lansing/Jackson, MI; Lehigh Valley, PA;
Madison, WI; Norfolk, VA; and Peoria, IL. The Peoria and Minneapolis
facilities are leased, and all other facilities are owned. The Company
considers its facilities to be well-maintained and adequate for its current
and reasonably anticipated future needs.
The Company owns approximately 145 parcels of real property that serve as
the sites for its outdoor displays. The Company also has perpetual easements
on approximately 25 parcels of real property on which it has outdoor displays.
Additionally, the Company's displays are located on sites leased or licensed
by the Company, typically for three to ten years with renewal options.
EMPLOYEES
As of December 31, 1995, the Company employed 213 persons, of whom
approximately 60 were primarily engaged in sales and marketing, 76 were
engaged in painting, posting, construction and maintenance of displays, and
the balance were employed in financial, administrative and similar capacities.
No employees are covered by a collective bargaining agreement except for five
production shop workers in Peoria, IL covered by a collective bargaining
agreement with the Brotherhood and Painters and Allied Trades that expires on
December 31, 1996. Management considers its employee relations to be good.
LEGAL PROCEEDINGS
In 1989, the Company initiated litigation challenging certain city sign
ordinances affecting the existing outdoor advertising structures in the city
of Madison, WI. The litigation was resolved pursuant to a judicially-approved
settlement agreement that permitted the Company to erect 16 new painted
bulletin display faces along the city's major arterial system. The Company
from time to time is involved in litigation in the ordinary course of
business, including disputes involving advertising contracts, site leases,
employment claims, construction matters, condemnation and amortization. The
Company is also involved in routine administrative and judicial proceedings
regarding permits and fees relating to outdoor advertising structures and
compensation for condemnations. The Company is not a party to any lawsuit or
proceeding which, in the opinion of management, is likely to have a material
adverse effect on the Company. See "Business--Government Regulation."
Information contained in this Prospectus, including, without limitation
information in this Business section may contain "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995,
which can be identified by the use of forward-looking terminology as "may,"
"will," "would," "expect," "anticipate," "estimate" or "continue" or the
negative thereof or other variations thereon or comparable terminology.
Certain factors, including, those factors described herein under "Risk
Factors" could cause actual results to differ materially from those in such
forward-looking statements.
44
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of Adams Outdoor Advertising, Inc., the
managing general partner of the Company, are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Stephen Adams............... 58 Chairman of the Board
J. Kevin Gleason............ 44 Chief Executive Officer, President and
Director
Abe Levine.................. 42 Chief Financial Officer, Vice President,
Secretary and Treasurer
George Pransky.............. 55 Director
David Frith-Smith........... 50 Director
Andris A. Baltins........... 51 Director
</TABLE>
Stephen Adams has been Chairman of Adams Outdoor Advertising, Inc. since its
founding in 1983. Since the 1970's, Mr. Adams has served as chairman of
privately-owned banking, bottling, publishing, outdoor advertising, television
and radio companies in which he held a controlling ownership interest. Mr.
Adams is Chairman of the Board of Directors of Affinity Group, Inc., a
membership-based marketing company.
J. Kevin Gleason has served as the Chief Executive Officer of the Company
and President of Adams Outdoor Advertising, Inc. since 1991. Mr. Gleason has
seventeen years of experience in advertising, eleven of which have been
dedicated to the outdoor advertising industry. Mr. Gleason has been with Adams
Outdoor Advertising, Inc. since 1987, serving as General Manager of various
local markets and then as Executive Vice President at the corporate level.
Prior to joining Adams Outdoor Advertising, Inc., Mr. Gleason served as
General Manager of Naegele Outdoor Advertising ("Naegele") of Southern
California from 1985 to 1987. Mr. Gleason also currently serves as a Vice
Chairman of the Outdoor Advertising Association of America.
Abe Levine has served as Chief Financial Officer of the Company and as Vice
President of Adams Outdoor Advertising, Inc. since 1991. From 1988 to 1991,
Mr. Levine worked as Controller of Adams Outdoor Advertising of Atlanta, Inc.
Mr. Levine was employed by Gulf + Western Industries, Inc. from 1979 through
1987 in various senior accounting and financial positions, and by KPMG Peat
Marwick from 1975 through 1979 in various auditing positions.
George Pransky, Ph.D. has been in private practice as co-director of Pransky
and Associates in La Conner, Washington since 1988. He is a frequent
consultant for government and private agencies and has been a contract faculty
member for a number of educational institutions, including the University of
Washington, the University of Oregon and Antioch College. Dr. Pransky has
trained management groups in team building, stress elimination and management
development for fifteen years.
David Frith-Smith has served as managing partner of Biller, Frith-Smith &
Archibald, Certified Public Accountants, since 1988. Mr. Frith-Smith was a
principal in Maidy and Lederman, Certified Public Accountants, from 1980 to
1984, and with Maidy Biller Frith-Smith & Brenner, Certified Public
Accountants, from 1984 to 1988. Mr. Frith-Smith is a director of various
private and non-profit corporations.
Andris A. Baltins has been a member of the law firm of Kaplan, Strangis and
Kaplan, P.A. since 1979. He is a director of Affinity Group, Inc., a
membership-based marketing company, and Polaris Industries Inc., a
manufacturer of snowmobiles, all-terrain vehicles, personal watercraft and
related products. Mr. Baltins is also a director of various private and non-
profit corporations.
45
<PAGE>
OTHER SIGNIFICANT MANAGEMENT PERSONNEL
The following table sets forth certain information with respect to other
significant management personnel:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David A. Burge.................. 45 General Manager--Lansing/Jackson and
Kalamazoo, MI
John Hayes...................... 43 General Manager--Lehigh Valley, PA
John Kane....................... 30 General Manager--Madison, WI
Gardner King.................... 44 General Manager--Norfolk, VA
Barry M. Asmann................. 38 General Manager--Charlotte, NC
Robert J. Lord.................. 37 General Manager--Peoria, IL
Robert A. Graiziger............. 42 General Manager--Minneapolis, MN
</TABLE>
David Burge has been general manager for the Lansing/Jackson and Kalamazoo,
MI divisions since June 1994. Mr. Burge joined the Company in May 1990 as
sales manager for the Norfolk division and was, from November 1992 until his
recent promotion, general manager of that division. He began his career in
outdoor advertising as an account executive with Naegele in Asheville, NC in
1984.
John Hayes has served as general manager of the Lehigh Valley, PA division
from 1985 to 1991 and from 1994 to the present. He began his career in outdoor
advertising in 1976 as an account executive with Creative Displays in the
Lehigh Valley market, later becoming sales manager in 1979 and assistant
manager in 1981. From 1991 to 1994 Mr. Hayes managed a paging business in the
Lehigh Valley area.
John Kane has been general manager of the Madison, WI division since
November 1995. He joined the Company in 1989 as an account executive in its
Lehigh Valley, PA division. He also served as regional sales manager and
poster sales manager for Lehigh until his recent promotion to general manager
of Madison.
Gardner King has served as general manager of the Norfolk, VA division since
January 1988. From 1980 through 1985, Mr. King was the founder and sole
proprietor of an outdoor advertising company in Norfolk, VA, which he sold to
Whiteco. After the expiration of his non-compete agreement with Whiteco, Mr.
King joined the Company in 1988. Mr. King has 15 years of experience in the
outdoor advertising industry.
Barry Asmann has served as general manager of the Charlotte, NC division
since January 1993 and prior thereto was sales manager in both the Charlotte,
NC and Lehigh Valley, PA divisions. Mr. Asmann has 12 years of experience in
the outdoor advertising industry, working in various markets throughout the
country with the Company and Naegele.
Robert Lord has served as general manager of the Peoria, IL division since
December 1993. From February 1993 to December 1993, he served as the sales
manager of the Company's Charlotte division and from 1989 to January 1993, he
served as the sales manager of the Company's Peoria, IL division. Mr. Lord
served as an account executive in the Peoria division from 1986 to 1989.
Robert Graiziger has served as general manager of the Minneapolis, MN
division since 1988, when he sold an outdoor advertising company that he
founded and operated in Minneapolis to the Company. Mr. Graiziger has been
involved in the outdoor advertising business in various capacities since 1978.
EXECUTIVE COMPENSATION
The following table provides certain summary information concerning the
compensation paid by the Company to its Chief Executive Officer and each of
the two other executive officers for the years ended December 31, 1993, 1994
and 1995. The following table does not include deferred phantom stock
compensation,
46
<PAGE>
the amount of which is determined upon the earlier of five years from grant,
the sale of the Company or termination of employment. See "Agreements with
Management--Incentive Compensation" below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-----------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------- --------------------- -------
OTHER
NAME AND ANNUAL RESTRICTED SECURITIES ALL OTHER
PRINCIPAL COMPEN- STOCK UNDERLYING LTIP COMPEN-
POSITION YEAR SALARY BONUS(A) SATION(B) AWARD(S) OPTIONS PAYOUTS SATION(C)
--------- ---- ------ -------- --------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen
Adams 1995 0
Chairman(d) 1994 0
1993 0
J. Kevin
Gleason 1995 $321,709 $787,550 $34,620
Chief
Executive
Officer 1994 280,900 805,787 4,620
1993 250,825 406,663 4,497
Abe Levine 1995 $150,000 $993,775 $17,805
Chief
Financial
Officer 1994 125,000 402,894 3,029
1993 125,000 203,321 4,134
</TABLE>
- --------
(a) All amounts represent accruals under deferred phantom stock agreements.
See "Management--Agreements with Management--Incentive Compensation."
(b) Less than the lesser of (i) 10% of total annual salary and bonus and (ii)
$50,000.
(c) Amounts for 1995 include contributions in 1996 to the accounts of Messrs.
Gleason and Levine under the Company's nonqualified retirement plan of
$30,000 and $15,000, respectively. All other amounts represent Company
contributions to the Company's 401(k) plan.
(d) Upon consummation of the Refinancing, the Company entered into an
employment agreement with Mr. Adams providing for a salary of $200,000 per
year and the reimbursement of business expenses. See "Management--
Employment Agreement."
EMPLOYMENT AGREEMENT
Upon completion of the Refinancing, AOAI and Stephen Adams entered into an
employment agreement which was effective January 1, 1996. Under the employment
agreement, Mr. Adams is employed as Chairman of AOAI until December 31, 2001
at a base salary of $200,000 plus an annual cost of living increase.
AGREEMENTS WITH MANAGEMENT--INCENTIVE COMPENSATION
The Company has deferred phantom stock agreements with certain managers,
including each general manager with respect to the performance of his
respective market and with Mr. Levine with respect to the overall performance
of the Company. The compensation is calculated using a multiple of the
operating profit of the general manager's respective division for the fiscal
year ending immediately prior to the determination date over the value of the
division at the time of agreement. The agreements provide for three equal
annual payments to the participants upon the determination date, which is
defined as termination of employment, death, disability, sale of the Company
or the fifth anniversary of the execution of the agreement. In Mr. Levine's
case, the value of his compensation has been determined to be $2.0 million in
the aggregate. The Company incurred deferred compensation expense related to
the phantom stock agreements of $1.5 million and $1.6 million for the years
ended December 31, 1994 and 1995, respectively. Through December 31, 1995, the
Company has accrued the following amounts of deferred compensation expense:
<TABLE>
<CAPTION>
NAME AMOUNT
---- ----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
J. Kevin Gleason.................................. $2,000
Abe Levine........................................ 1,600
Others............................................ 1,130
------
Total......................................... $4,730
======
</TABLE>
47
<PAGE>
If amounts accrued through December 31, 1995 as deferred compensation
expense are paid as currently scheduled (assuming no executive terminations,
deaths or disabilities), such payments would occur as follows:
<TABLE>
<CAPTION>
NAME 1996 1997 1998 1999 2000 2001 2002
---- ------ ---- ---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
J. Kevin Gleason.......................... $2,000 -- -- -- -- -- --
Abe Levine................................ -- $533 $533 $534 -- -- --
Others.................................... 185 47 303 278 $288 $18 $11
------ ---- ---- ---- ---- --- ---
Total................................. $2,185 $580 $836 $812 $288 $18 $11
====== ==== ==== ==== ==== === ===
</TABLE>
Mr. Gleason and the Company were parties to a phantom stock agreement dated
January 1, 1992. Subsequently, Mr. Gleason and the Company mutually agreed to
terminate such phantom stock agreement and in lieu thereof, the Company agreed
to pay to Mr. Gleason $2.0 million upon completion of the Refinancing.
Contemporaneously with the termination of his phantom stock agreement, Mr.
Gleason purchased a 3% limited partnership interest in the Company from an
affiliate of Mr. Adams.
401(K) SAVINGS PLAN
Company employees also participate in a deferred savings and profit sharing
plan (the "401(k) Plan") qualified under Section 401(a) and 401(k) of the
Internal Revenue Code (the "Code"). All employees over age 21 who have
completed one year of service are eligible to participate in the 401(k) Plan.
Eligible employees may contribute to the 401(k) Plan up to 10% of their salary
subject to an annual maximum established under the Code, and the Company
matches these employee contributions at a rate of 50% up to the first 6% of
the employee's salary. Employees may make additional voluntary contributions.
NONQUALIFIED RETIREMENT PLAN
The Company also maintains a retirement plan for each of Messrs. Gleason,
Levine and each of the area general managers. Under such plan, the Company
contributes $30,000 per year to the retirement account of Mr. Gleason and
$15,000 per year to the account of each of the other participants.
DIRECTOR COMPENSATION
Following the Refinancing, AOAI pays directors who are not also employees
(Messrs. Pransky, Frith-Smith and Baltins) director fees of $4,500 per
quarter.
CERTAIN TRANSACTIONS
MANAGEMENT SERVICES ARRANGEMENT
Under a management services arrangement with the Company, affiliates of Mr.
Adams provided management services, including in the areas of financial and
strategic planning, acquisition approval, executive compensation, budget
review and approval and financial performance review, to the Company prior to
1996. Such agreement included the services of Mr. Adams, who did not receive
compensation for his services directly from the Company prior to 1996. In 1992
and 1993, the Company paid management services fees of $66,666 and $50,000,
respectively. No amounts were paid in 1994 and 1995. Effective January 1,
1996, the management services arrangement was terminated.
OTHER CERTAIN TRANSACTIONS
In 1992, Radio Group Corporation and Adams Radio of Charlotte, Inc.,
entities in which Stephen Adams was the Chairman and controlling shareholder,
consented to the appointment of receivers to effect a transfer of control of
the radio operations of such entities as part of a consensual restructuring of
the debt of such entities. In 1993, Adams Outdoor of Atlanta, Inc. ("Adams
Atlanta"), a corporation controlled by Stephen Adams and managed by the same
executive management as the Company entered into a consensual foreclosure
agreement with its lenders. Adams Atlanta was acquired in 1988 in a leveraged
transaction, and ownership was transferred to its secured lender in July 1993.
In addition, in July 1993, a party whose claim was being disputed filed an
involuntary bankruptcy petition against Adams Atlanta. The petition was
withdrawn and dismissed three days after the filing.
48
<PAGE>
In 1989, the Company made a loan of $934,000 to Frank White, who was then
President and Chief Executive Officer of Adams Outdoor Advertising, Inc., the
managing general partner of the Company. Mr. White retired in 1991, and the
loan was repaid in November 1992.
Stephen Adams, J. Kevin Gleason and Abe Levine own 40%, 10% and 10%,
respectively, of HSP Graphics ("HSP"), a printing company headquartered in
Canada. The Company pays the salary and expenses of the HSP salesmen who
operate in the Atlanta, GA area and HSP reimburses the Company for those
expenses in cash and services. At December 31, 1993, 1994 and 1995, the
Company had accounts receivable of $64,215, $109,329 and $171,828,
respectively, outstanding from HSP. The Company paid HSP $112,104, $38,226 and
$42,000 for printing services provided during 1993, 1994 and 1995,
respectively.
Andris A. Baltins is a member of the law firm of Kaplan, Strangis and
Kaplan, P.A. which provides legal services to the Company. Mr. Baltins, who is
a director of AOAI and held $380,547 in principal amount of the zero coupon
10% Subordinated Notes of the Company due January 2, 1997 which the Company
retired with a portion of the proceeds of the Private Offering. Messrs. Adams,
Gleason and Levine also held interests in such notes. See "Refinancing and
Uses of Proceeds."
PRINCIPAL SECURITY HOLDERS
The table below sets forth, the beneficial ownership interests in the
Company as of March 31, 1996.
<TABLE>
<CAPTION>
GENERAL LIMITED AGGREGATE
PARTNERSHIP PARTNERSHIP PARTNERSHIP
NAME INTEREST INTEREST INTERESTS
- ---- ----------- ----------- -----------
<S> <C> <C> <C>
Adams Outdoor Advertising, Inc.(a)......... 0.01% 0.99% 1.00%
1380 W. Paces Ferry Road, N.W.
Suite 170, South Wing
Atlanta, GA 30327
Stephen Adams.............................. 0.70 71.30 72.00
3601 Calle Tecate
Camarillo, CA 93102
Stephen M. Adams(b)........................ -- 6.00 6.00
26529 Oliver Road
Carmel, CA 93923
Mark C. Adams(b)........................... -- 6.00 6.00
c/o Adams Publishing Corp.
68860 Perez Road, Suite J
Cathedral City, CA 92234
Scott L. Adams(b).......................... -- 6.00 6.00
236 Mullen Avenue
San Francisco, CA 94110
Kent R. Adams(b)........................... -- 6.00 6.00
5017 Vincent Avenue So.
Minneapolis, MN 55410
J. Kevin Gleason(c)........................ -- 3.00 3.00
732 Ashley Street, N.W.
Atlanta, GA 30318
---- ----- ------
0.71% 99.29% 100.00%
</TABLE>
- --------
(a) Stephen Adams holds 100% of the issued and outstanding shares of AOAI, the
managing general partner of the Company, and, accordingly, may control the
affairs of the Issuers.
(b) Stephen M. Adams, Mark C. Adams, Scott L. Adams and Kent R. Adams are sons
of Stephen Adams.
(c) Mr. Gleason purchased his limited partnership interest in the Company from
an affiliate of Mr. Adams contemporaneously with the termination of his
phantom stock agreement.
49
<PAGE>
DESCRIPTION OF THE COMPANY'S PARTNERSHIP AGREEMENT
The Company was organized on December 12, 1985 as a limited partnership
under the Minnesota Uniform Limited Partnership Act, as it may be amended from
time to time (the "Act"). The following is a summary of certain provisions of
the Limited Partnership Agreement of the Company, as amended (the "Partnership
Agreement"). The rights and obligations of Adams Outdoor Advertising, Inc. and
of Stephen Adams, as the Company's general partners, are as set forth in the
Partnership Agreement. The summary does not constitute a complete discussion
of the Partnership Agreement and is qualified in its entirety by reference to
the Partnership Agreement, a copy of which is available upon written request
to the Company.
Management. Adams Outdoor Advertising, Inc. has exclusive and complete
discretion to manage the Company's business and operations except as otherwise
specified in the Partnership Agreement. No person dealing with the Company or
the managing general partner is required to determine the authority of the
managing general partner to make any undertaking on behalf of the Company.
Liability of General Partners. The Partnership Agreement provides that the
general partners will not be liable, responsible or accountable in damages or
otherwise to the Company or to the limited partners for acts and omissions
which the general partners believed to be in the best interests of the
Company, so long as such acts and omissions did not result from a general
partner's gross negligence or willful misconduct. The Company will indemnify
the general partners against any loss or damage incurred by a general partner
by reason of any act or omission performed or omitted by it in a manner
believed by it to be in the best interests of the Company and not incurred by
reasons of gross negligence or willful misconduct.
Additional Partnership Contributions. The Partnership Agreement provides
that in the event that the aggregate proceeds available for payment to
creditors of the Company (including holders of the notes issued under the New
Credit Facility and the amount paid to the holders of the Notes) from a
liquidation of all assets of the Company is less than $40.0 million, Stephen
Adams will contribute up to $40.0 million to satisfy the shortfall in such
amount. Such contributions, if made, reduce Mr. Adams' limited recourse
liability as a general partner. See "Description of the Notes--Release From
Liability."
Amendment of Partnership Agreement. The Partnership Agreement may be amended
only by an instrument in writing and signed by the general partners and the
limited partners or on behalf of the limited partners pursuant to the power of
attorney described herein.
Power of Attorney. AOAI, as managing general partner, is appointed the
lawful attorney-in-fact for the limited partners to, among other things,
execute, deliver, swear to, file and record in the appropriate public offices
such documents as are deemed necessary or appropriate.
Termination, Dissolution and Liquidation. The Partnership Agreement provides
that the term of the Company will continue until December 31, 2025, or until
earlier dissolved upon the sale of all or substantially all of the Company's
assets or by the election of all the partners of the Company. A general
partner may not voluntarily leave the Company without the prior consent of a
majority in interest of the limited partners. The limited partners have no
stated authority to remove a general partner, but upon the withdrawal,
bankruptcy, death, dissolution or adjudication of incompetence of a general
partner who is not at the time the sole general partner, the interest of that
general partner will without further action be converted to a limited
partnership interest. The withdrawal, bankruptcy, death, dissolution, or
adjudication of incompetence of a partner shall not terminate or dissolve the
Company unless such partner is at the time the sole general partner of the
Company.
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DESCRIPTION OF NEW CREDIT FACILITY
The Canadian Imperial Bank of Commerce, an affiliate of the Initial
Purchaser, has provided the New Credit Facility. The New Credit Facility is a
senior line of credit in an aggregate principal amount of $15.0 million.
The aggregate available commitment under the New Credit Facility will be
reduced incrementally on a quarterly basis, beginning March 31, 1997. The New
Credit Facility matures on March 31, 2001 unless previously terminated. Prior
to making any advance under the New Credit Facility, the Company will be
required to be in compliance with all financial and operating covenants. The
lenders under the New Credit Facility are paid a commitment fee at the rate of
0.5% per annum on unused commitments, payable quarterly. In addition, the
agent thereunder receives other customary fees.
Borrowings under the New Credit Facility bear interest at a rate equal to,
at the option of the Company, either (i) the Base Rate (which is defined as
the prime rate most recently announced by the agent under the New Credit
Facility), or (ii) LIBOR, in each case plus an applicable margin determined by
reference to the ratio of total debt to cash flow of the Company.
The obligations of the Company under the New Credit Facility are secured
primarily by a first priority pledge of the stock of AOAI, a first priority
pledge of the partnership interests in the Company and a first priority lien
on all the assets of the Company, with the exception of certain real estate
assets, which will be subject to a negative pledge.
The New Credit Facility contains, among other things, covenants restricting
the ability of the Company to dispose of assets, make distributions to its
partners, create liens, make capital expenditures, make certain investments or
acquisitions, enter into transactions with affiliates and otherwise restrict
certain activities. The New Credit Facility also contains the following
financial covenants: maximum ratio of total debt to operating cash flow;
minimum permitted interest coverage and a minimum permitted fixed charge
coverage ratio.
Events of default under the New Credit Facility include those usual and
customary for facilities of this type, including, among other things, default
in the payment of principal or interest in respect of material amounts of
indebtedness of the Company or its subsidiaries, any non-payment on such
indebtedness, a Change of Control (as defined in the New Credit Facility), any
material breach of the covenants or representations and warranties included in
the New Credit Facility and related documents, the institution of any
bankruptcy proceedings, the failure of any security agreement related to the
New Credit Facility or lien granted thereunder to be valid and enforceable and
the loss, without replacement using insurance proceeds, of a material number
of outdoor advertising displays during any twelve month period. Upon the
occurrence and continuance of an event of default under the New Credit
Facility, the lenders may terminate their commitments to lend and declare the
then outstanding loans due and payable.
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DESCRIPTION OF THE NOTES
The Original Notes were, and the New Notes will be, issued under an
Indenture, dated as of March 12, 1996 (the "Indenture") among the Issuers and
the United States Trust Company of New York, as trustee (the "Trustee"). The
terms of the Notes include those stated in the Indenture and those made part
of the Indenture by reference to the Trust Indenture Act of 1939, as amended
(the "Trust Indenture Act"), as in effect from time to time. The Notes are
subject to all such terms, and holders of the Notes are referred to the
Indenture and the Trust Indenture Act for a statement of them.
The following is a summary of the material terms and provisions of the
Notes. This summary does not purport to be a complete description of the Notes
and is subject to the detailed provisions of, and qualified in its entirety by
reference to, the Notes and the Indenture (including the definitions contained
therein). Definitions relating to certain capitalized terms are set forth
under "--Certain Definitions" and throughout this description. Capitalized
terms that are used but not otherwise defined herein have the meanings
assigned to them in the Indenture and such definitions are incorporated herein
by reference. The Indenture has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The form of the New Notes and
the Original Notes are identical in all material respects except that the New
Notes will have been registered under the Securities Act and, therefore, will
not bear legends restricting their transfer. The New Notes will not represent
new indebtedness of the Company, will be entitled to the benefits of the same
Indenture which governs the Original Notes and will rank pari passu with the
Original Notes. Any provisions of the Indenture which require actions by or
approval of a specified percentage of Original Notes shall require the
approval of the holders of such percentage of principal amount of Original
Notes and New Notes, in the aggregate.
GENERAL
The Notes are limited in aggregate principal amount to $105.0 million. The
Notes are senior unsecured obligations of the Issuers ranking pari passu in
right of payment with all existing and future senior indebtedness of the
Issuers and senior in right of payment to all existing and future subordinated
indebtedness of the Issuers that by its terms is subordinated in right of
payment to the Notes. The Notes are effectively subordinated to all secured
Indebtedness of the Issuers to the extent of the value of the assets securing
such Indebtedness.
MATURITY, INTEREST AND PRINCIPAL
The Notes mature on March 15, 2006. The Notes bear interest at a rate of 10
3/4% per annum from the date of original issuance until maturity. Interest is
payable semi-annually in arrears on March 15 and September 15, commencing
September 15, 1996, to holders of record of the Notes at the close of business
on the immediately preceding March 1 and September 1, respectively (whether or
not a business day). The interest rate on the Notes is subject to increase,
and such Additional Interest (as defined herein) will be payable on the
payment dates set forth above, in certain circumstances, if the Notes (or
other securities substantially similar to the Notes) are not registered with
the Commission and declared effective within certain prescribed time periods.
See "Exchange Offer; Registration Rights."
OPTIONAL REDEMPTION
The Notes are redeemable at the option of the Issuers, in whole or in part,
at any time on or after March 15, 2001 at the following redemption prices
(expressed as a percentage of principal amount), together, in each case, with
accrued and unpaid interest to the redemption date, if redeemed during the
twelve-month period beginning on March 15 of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
---- ----------
<S> <C>
2001........................................................... 105.375%
2002........................................................... 103.583%
2003........................................................... 101.792%
2004 and thereafter............................................ 100.000%
</TABLE>
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Notwithstanding the foregoing, the Issuers may redeem in the aggregate up to
25% of the original principal amount of Notes at any time and from time to
time prior to March 15, 1999 at a redemption price equal to 110% of the
aggregate principal amount so redeemed, plus accrued and unpaid interest to
the redemption date, out of the Net Proceeds of one or more Public Equity
Offerings, provided, however, that at least $75 million of the principal
amount of Notes originally issued remains outstanding immediately after the
occurrence of any such redemption and that any such redemption occurs within
60 days following the closing of any such Public Equity Offering.
In the event of redemption of fewer than all of the Notes, the Trustee shall
select pro rata, by lot or in such other manner as it shall deem fair and
equitable, the Notes to be redeemed. The Notes will be redeemable in whole or
in part upon not less than 30 nor more than 60 days' prior written notice,
mailed by first class mail to a holder's last address as it shall appear on
the register maintained by the Registrar of the Notes. If any Note is to be
redeemed in part only, the notice of redemption that relates to such Note
shall state the portion of the principal amount thereof to be redeemed. A new
Note, in a principal amount equal to the unredeemed portion thereof will be
issued in the name of the holder thereof upon cancellation of the original
Note. After any redemption date, unless the Issuers shall default in the
payment of the redemption price, interest will cease to accrue on the Notes or
portions thereof called for redemption.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants. Except as
otherwise specified, all of the covenants described below will appear in the
Indenture.
Limitation on Additional Indebtedness
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, incur (as defined) any Indebtedness (including
Acquired Indebtedness) other than Permitted Indebtedness, provided, however,
that the Company may incur Indebtedness (including Acquired Indebtedness) if
(a) after giving effect to the incurrence of such Indebtedness and the receipt
and application of the proceeds thereof, the ratio of the Company's total
Indebtedness to the Company's EBITDA (determined on a pro forma basis for the
most recently ended four full fiscal quarters of the Company for which
financial statements are available at the date of determination) is less than
5.5 to 1 if the Indebtedness is to be incurred on or before March 15, 1999,
5.25 to 1 if the Indebtedness is to be incurred between March 15, 1999 and
March 15, 2001 and 5.0 to 1 if the Indebtedness is to be incurred on and after
March 15, 2001, provided, however, that if the Indebtedness which is the
subject of a determination under this provision is Acquired Indebtedness, or
Indebtedness incurred in connection with the simultaneous acquisition of any
Person, business, property or assets, then such ratio shall be determined by
giving effect to (on a pro forma basis, as if the transaction had occurred at
the beginning of the four-quarter period) both the incurrence or assumption of
such Acquired Indebtedness or such other Indebtedness by the Company and the
inclusion in the Company's EBITDA of the EBITDA of the acquired Person,
business, property or assets and (b) no Default or Event of Default shall have
occurred and be continuing at the time or as a consequence of the incurrence
of such Indebtedness.
The Indenture provides that the Company will not, directly or indirectly,
incur any Indebtedness that is subordinated to any other Indebtedness of the
Company unless such Indebtedness is also expressly subordinated to the Notes,
provided, however, that no Indebtedness of the Company shall be deemed to be
subordinated to any other Indebtedness of the Company solely because such
other Indebtedness is secured.
Limitation on Indebtedness of Subsidiaries
The Company will not permit any of its Subsidiaries to incur any
Indebtedness except (i) Indebtedness to and held by the Company or a Wholly-
Owned Subsidiary of the Company, provided, however, that any subsequent
issuance or transfer of any Equity Interest that results in such Subsidiary
ceasing to be a Wholly-Owned Subsidiary of the Company or any transfer of such
Indebtedness to any Person other than the Company
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<PAGE>
or a Wholly-Owned Subsidiary of the Company shall be deemed to be the
incurrence of such Indebtedness by the Company, (ii) Permitted Secured
Indebtedness and (iii) Acquired Indebtedness, provided, however, that such
Acquired Indebtedness was not incurred in connection with, or in anticipation
of, such Person becoming a Subsidiary.
Limitation on Restricted Payments
The Company will not make, and will not permit any of its Subsidiaries to,
directly or indirectly, make, any Restricted Payment unless:
(a) no Default or Event of Default shall have occurred and be continuing
at the time of or immediately after giving effect to such Restricted
Payment;
(b) immediately after giving pro forma effect to such Restricted Payment,
the Company could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the covenant set forth under "Limitation on
Additional Indebtedness"; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
through and including the date of such Restricted Payment (the "Base
Period") does not exceed the sum of (1) 50% of the Company's Consolidated
Net Income (or in the event such Consolidated Net Income shall be a
deficit, minus 100% of such deficit) during the Base Period and (2) 100% of
the aggregate Net Proceeds, including the fair market value of securities
or other property received by the Company from the issue or sale, during
the Base Period, of Equity Interests (other than Disqualified Equity
Interests or Equity Interests of the Company issued to any Subsidiary of
the Company) of the Company or any Indebtedness or other securities of the
Company convertible into or exercisable or exchangeable for Equity
Interests (other than Disqualified Equity Interests) of the Company which
have been so converted or exercised or exchanged, as the case may be. For
purposes of determining under this clause (c) the amount expended for
Restricted Payments, cash distributed shall be valued at the face amount
thereof and property other than cash shall be valued at its fair market
value.
The provisions of this covenant shall not prohibit (i) the agreement or
commitment to make any payment or distribution permitted under the Indenture
or the payment or distribution so agreed or committed to be made as long as
such payment or distribution is made on the date of such agreement or
commitment or within 60 days thereof, provided, however, that on the date of
such agreement or commitment such payment would comply with the foregoing
provisions, it being understood that the agreement or commitment to make such
payment or distribution shall constitute Permitted Indebtedness, (ii) the
retirement of any Equity Interests of the Company or subordinated Indebtedness
of the Company by conversion into, or by or in exchange for, Equity Interests
(other than Disqualified Equity Interests), or out of, the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other shares of Equity Interests of the Company (other than Disqualified
Equity Interests), (iii) the redemption or retirement of Indebtedness of the
Company subordinated to the Notes in exchange for, by conversion into, or out
of the Net Proceeds of, a substantially concurrent sale or incurrence of
Indebtedness (other than any Indebtedness owed to a Subsidiary) of the Company
that is contractually subordinated in right of payment to the Notes to at
least the same extent as the subordinated Indebtedness being redeemed or
retired, (iv) the retirement of any shares of Disqualified Equity Interests by
conversion into, or by exchange for, shares of Disqualified Equity Interests,
or out of the Net Proceeds of the substantially concurrent sale (other than to
a Subsidiary of the Company) of other shares of Disqualified Equity Interests
and (v) Prior Accrued Bonus Payments, provided, however, that the aggregate
amount of all such payments made after the Issue Date does not exceed $2.7
million, provided, however, that in the case of the immediately preceding
clauses (ii), (iii) and (v), no Default or Event of Default shall have
occurred and be continuing at the time of such Restricted Payment or would
occur as a result thereof.
The Indenture provides that in determining the aggregate amount of
Restricted Payments made subsequent to the Issue Date for purposes of
subparagraph (c) above, amounts expended pursuant to clauses (i) and (ii) of
the immediately preceding paragraph shall be included, but without
duplication, in such calculation.
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<PAGE>
The Indenture provides that for purposes of calculating the net proceeds
received by the Company from the issuance or sale of its Equity Interests
either upon the conversion of, or exchange for, Indebtedness of the Company or
any Subsidiary, such amount will be deemed to be an amount equal to the
difference of (a) the sum of (i) the principal amount or accreted value
(whichever is less) of such Indebtedness on the date of such conversion or
exchange and (ii) the additional cash consideration, if any, received by the
Company upon such conversion or exchange, less any payment on account of
fractional shares, minus (b) all expenses incurred in connection with such
issuance or sale. In addition, for purposes of calculating the net proceeds
received by the Company from the issuance or sale of its Equity Interests upon
the exercise of any options or warrants of the Company, such amount will be
deemed to be an amount equal to the difference of (a) the additional cash
consideration, if any, received by the Company upon such exercise, minus (b)
all expenses incurred in connection with such issuance or sale.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by this covenant were computed, which calculations may be based upon
the Company's latest available financial statements, and that no Default or
Event of Default exists and is continuing and no Default or Event of Default
will occur immediately after giving effect to such Restricted Payment.
Limitation on Subsidiaries and Unrestricted Subsidiaries
The Indenture provides that the Company may designate any Subsidiary
(including a newly acquired or a newly formed Subsidiary) to be an
Unrestricted Subsidiary and that for purposes of the covenant described under
"Limitation on Restricted Payments" above, (i) an "Investment" shall be deemed
to have been made at the time any Subsidiary is designated as an Unrestricted
Subsidiary in an amount (proportionate to the Company's percentage Equity
Interest in such Subsidiary) equal to the net worth of such Subsidiary at the
time that such Subsidiary is designated as an Unrestricted Subsidiary; (ii) at
any date the aggregate of all Restricted Payments made as Investments since
the Issue Date shall exclude and be reduced by an amount (proportionate to the
Company's percentage Equity Interest in such Subsidiary) equal to the net
worth of any Unrestricted Subsidiary at the time that such Unrestricted
Subsidiary is designated a Subsidiary, not to exceed, in the case of any such
redesignation of an Unrestricted Subsidiary as a Subsidiary, the amount of
Investments previously made by the Company and its Subsidiaries in such
Unrestricted Subsidiary (in each case (i) and (ii) "net worth" to be
calculated based upon the fair market value of the assets of such Subsidiary
as of any such date of designation); and (iii) any property transferred to or
from an Unrestricted Subsidiary shall be valued at its fair market value at
the time of such transfer.
The Indenture provides that notwithstanding the foregoing, the Board of
Directors of the Company may not designate any Subsidiary of the Company to be
an Unrestricted Subsidiary if, after such designation, (a) the Company or any
Subsidiary of the Company (i) provides credit support for, or a guarantee of,
any Indebtedness of such Subsidiary (including any undertaking, agreement or
instrument evidencing such Indebtedness) or (ii) is directly or indirectly
liable for any Indebtedness of such Subsidiary, (b) a default with respect to
any Indebtedness of such Subsidiary (including any right which the holders
thereof may have to take enforcement action against such Subsidiary) would
permit (upon notice, lapse of time or both) any holder of any other
Indebtedness of the Company or any Subsidiary of the Company to declare a
default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its final scheduled maturity or (c) such
Subsidiary owns any Equity Interests in, or owns or holds any Lien on any
property of, any Subsidiary which is not a Subsidiary of the Subsidiary to be
so designated.
Limitations on Investments
The Company will not, and will not permit any of its Subsidiaries to, make
any Investment except (i) a Permitted Investment or (ii) an Investment that is
made in compliance with the covenant described under "Limitation on Restricted
Payments."
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Limitations on Liens
The Company will not, and will not permit any of its Subsidiaries to,
create, incur or otherwise cause or suffer to exist or become effective any
Liens of any kind (other than Permitted Liens) upon any property or asset of
the Company or any Subsidiary whether owned on the Issue Date or acquired
after the Issue Date or on any shares of stock or debt of any Subsidiary which
owns property or assets, now owned or hereafter acquired or on any income or
profits therefrom, or assign or otherwise convey any right to receive income
or profits thereon.
Limitation on Transactions with Affiliates
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, enter into or suffer to exist any transaction or
series of related transactions (including, without limitation, the sale,
purchase, exchange or lease of assets, property or services) with any
Affiliate of the Company (including entities in which the Company or any
Subsidiary thereof owns a minority interest) or holder of 10% or more of an
Issuer's Equity Interests (each such transaction, an "Affiliate Transaction")
or extend, renew, waive or otherwise modify the terms of any Affiliate
Transaction entered into prior to the Issue Date unless (i) such Affiliate
Transaction is solely between or among the Company and its Wholly-Owned
Subsidiaries; (ii) such Affiliate Transaction is solely between or among
Wholly-Owned Subsidiaries of the Company; (iii) such Affiliate Transaction is
for reasonable fees and compensation paid to, and indemnity provided on behalf
of, officers, directors, employees or consultants of the Company or any
Subsidiary thereof as determined in good faith by the Board of Directors or
senior management of the Company or of such Subsidiary, as the case may be; or
(iv) the terms of such Affiliate Transaction are fair and reasonable to the
Company or such Subsidiary, as the case may be, and the terms of such
Affiliate Transaction are at least as favorable as the terms which could be
obtained by the Company or such Subsidiary, as the case may be, in a
comparable transaction made on an arm's-length basis between unaffiliated
parties. In any Affiliate Transaction involving an amount or having a value in
excess of $250,000 in any one year which is not permitted under clause (i) or
(ii) above, the Company or such Subsidiary, as the case may be, must obtain a
resolution of its Board of Directors certifying that such Affiliate
Transaction complies with clause (iv) above. In transactions with a value in
excess of $2.5 million which are not permitted under clause (i) or (ii) above,
the Company or such Subsidiary, as the case may be, must obtain a written
opinion as to the fairness of such a transaction, from a financial point of
view, from an Independent Financial Advisor.
The foregoing provisions will not apply to (i) the payment of reasonable
annual compensation to directors or executive officers of the Issuers, (ii)
payments to Stephen Adams pursuant to the employment agreement by and between
the Company and Stephen Adams as in effect on the Issue Date and (iii)
Restricted Payments made in compliance with the covenant described under
"Limitation on Restricted Payments."
Limitation on Certain Asset Sales
The Company will not, and will not permit any of its Subsidiaries to,
consummate an Asset Sale unless (i) the Company or such Subsidiary, as the
case may be, receives consideration at the time of such sale or other
disposition at least equal to the fair market value thereof (as determined for
Asset Sales other than eminent domain, condemnation or similar governmental
proceedings in good faith by its Board of Directors); and (ii) either (A) not
less than 85% of the consideration received by the Company or the Subsidiary,
as the case may be, from such Asset Sale is in the form of cash or cash
equivalents (those equivalents allowed under "Temporary Cash Investments") or
(B) after giving effect to such Asset Sale, the Company and its Subsidiaries
hold in the aggregate no more than $2.5 million of Asset Sale Proceeds that
are in a form other than cash or cash equivalents; and (iii) the Asset Sale
Proceeds received by the Company or such Subsidiary are applied, to the extent
the Company elects, (A) to repay and permanently reduce outstanding Permitted
Secured Indebtedness and to permanently reduce the commitments in respect
thereof, provided, however, that such repayment and commitment reduction
occurs within 270 days following the receipt of such Asset Sale Proceeds or
(B) to an investment in assets (including Equity Interests or other securities
purchased in connection with the acquisition of Equity Interests or property
of another person) used or useful in businesses similar or ancillary to the
business of the Company or such Subsidiary as conducted at the time of such
Asset Sale, provided, however, that such
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<PAGE>
investment occurs or the Company or such Subsidiary enters into contractual
commitments to make such investment, subject only to customary conditions
(other than the obtaining of financing), on or prior to the 180th day
following receipt of such Asset Sale Proceeds (the "Reinvestment Date") and
Asset Sale Proceeds contractually committed are so applied within 270 days
following the receipt of such Asset Sale Proceeds. Any Asset Sale Proceeds
that are not applied as permitted by clause (iii) of the preceding sentence
shall constitute "Excess Proceeds." If at any time the aggregate amount of
Excess Proceeds exceeds $3 million, the Issuers shall offer (an "Excess
Proceeds Offer") to purchase from all holders of Notes, pursuant to procedures
set forth in the Indenture, the maximum principal amount of Notes that may be
purchased with such Excess Proceeds at a purchase price in cash equal to 100%
of the principal amount thereof plus accrued interest, if any, to the date of
the purchase. To the extent that the aggregate amount of Notes tendered
pursuant to such Excess Proceeds Offer is less than the amount of Excess
Proceeds, the Company may use such portion of the Excess Proceeds that is not
used to purchase Notes so tendered for general partnership purposes. If the
aggregate principal amount of Notes tendered pursuant to such Excess Proceeds
Offer is more than the amount of the Excess Proceeds, the Notes tendered will
be repurchased on a pro rata basis or by such other method as the Trustee
shall deem fair and appropriate. Upon the closing of any repurchase of Notes
tendered pursuant to such Excess Proceeds Offer, the amount of Excess Proceeds
shall be deemed to be zero.
If the Issuers are required to make an Excess Proceeds Offer, the Issuers
shall mail, within 30 days following the Reinvestment Date, a notice to the
holders of the Notes stating, among other things: (1) that such holders have
the right to require the Issuers to apply the Excess Proceeds to repurchase
such Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase; (2)
the purchase date, which shall be no earlier than 30 days and not later than
60 days from the date such notice is mailed; (3) the instructions, determined
by the Issuers, that each holder of Notes must follow in order to have such
Notes repurchased; and (4) the calculations used in determining the amount of
Excess Proceeds to be applied to the repurchase of such Notes.
In the event of the transfer of substantially all (but not all) of the
assets of the Company or any Subsidiary of the Company or substantially all
(but not all) of the assets of any division or line of business of the Company
or any Subsidiary of the Company as an entirety to a Person in a transaction
permitted under "--Mergers, Consolidations and Sales of Assets," the successor
corporation shall be deemed to have sold the assets of the Company, the
Subsidiary or the division or line of business, as the case may be, not so
transferred for purposes of this covenant, and shall comply with the
provisions of this covenant with respect to such deemed sale as if it were an
Asset Sale. In addition, the fair market value of such assets of the Company,
the Subsidiary or the division or line of business, as the case may be, deemed
to be sold shall be deemed to be Asset Sale Proceeds for purposes of this
covenant.
Any Excess Proceeds Offer will be made in substantially the same manner as a
Change of Control Offer. The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations to
the extent such laws and regulations are applicable to an Excess Proceeds
Offer.
Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any of its Subsidiaries to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any consensual encumbrance or restriction of any kind on the ability
of any of its Subsidiaries to (a) pay dividends or make any other
distributions to the Company or any Subsidiary on its Equity Interests, (b)
pay any Indebtedness owed to the Company or any Subsidiary, (c) make loans or
advances to the Company or any Subsidiary thereof or (d) transfer any of its
properties or assets to the Company or any Subsidiary thereof, except, in each
case, for such encumbrances or restrictions existing under or contemplated by
or by reason of (i) the Notes or the Indenture, (ii) any restrictions existing
under or contemplated by agreements in effect on the Issue Date, including,
without limitation, restrictions under the New Credit Facility as in effect on
the Issue Date and comparable provisions in the agreements evidencing any
other Permitted Secured Indebtedness, (iii) any restrictions, with respect to
a Subsidiary of the Company that is not a Subsidiary of the Company on the
Issue Date, in existence at the time such Person becomes a Subsidiary of the
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Company (but not created in contemplation of such Person becoming a Subsidiary
of the Company and which encumbrance or restriction is not applicable to any
Person or the property or assets of any Person other than such Person or the
property or assets of such Person so acquired) and (iv) any restrictions
existing under any agreement that refinances or replaces an agreement
containing a restriction permitted by clause (i), (ii) or (iii) above,
provided, however, that the terms and conditions of any such restrictions are
not materially less favorable in the aggregate to the holders of the Notes
than those under or pursuant to the agreement being replaced or the agreement
evidencing the Indebtedness refinanced or replaced.
Limitation on Equity Interests of Subsidiaries
The Company will at all times own 100% of the Equity Interests of its
Subsidiaries. The Company will not (i) sell, pledge, hypothecate or otherwise
convey or dispose of any Equity Interests of a Subsidiary (other than pursuant
to an agreement evidencing Permitted Secured Indebtedness or a successor
facility or to the Company or a Wholly-Owned Subsidiary of the Company) or
(ii) permit any of its Subsidiaries to issue any Equity Interests, other than
to the Company or a Subsidiary of the Company. The foregoing restrictions
shall not apply to an Asset Sale made in compliance with the covenant
described under "Limitation on Certain Asset Sales" or the issuance of
Preferred Equity Interests in compliance with the covenant described under
"Limitation on Additional Indebtedness."
Limitation on Creation of Subsidiaries
The Company will not create or acquire, nor permit any of its Subsidiaries
to create or acquire, any Subsidiary other than (i) a Wholly-Owned Subsidiary
existing as of the Issue Date, (ii) a Wholly-Owned Subsidiary that is acquired
or created after the date hereof or (iii) an Unrestricted Subsidiary.
Limitation on Sale and Lease-Back Transactions
The Company will not, and will not permit any of its Subsidiaries to, enter
into any Sale and Lease-Back Transaction unless (i) the consideration received
in such Sale and Lease-Back Transaction is at least equal to the fair market
value of the property sold and (ii) immediately prior to and after giving
effect to the Attributable Indebtedness in respect of such Sale and Lease-Back
Transaction, the Company could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) in compliance with the covenant described
under "Limitation on Additional Indebtedness."
Payments for Consent
None of the Issuers or any of their Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or
agreed to be paid to all holders of the Notes which so consent, waive or agree
to amend in the time frame set forth in the solicitation documents relating to
such consent, waiver or agreement.
Line of Business
The Company will not, and will not permit any of its Subsidiaries to, engage
in any business other than the owning, operating or managing of outdoor
advertising businesses or out-of-home media businesses and related or
ancillary activities.
CHANGE OF CONTROL OFFER
Within 30 days of the occurrence of a Change of Control, the Issuers shall
notify the Trustee in writing of such occurrence and shall make an offer to
purchase (the "Change of Control Offer") the outstanding Notes at a
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purchase price equal to 101% of the principal amount thereof plus any accrued
and unpaid interest thereon to the Change of Control Payment Date (as
hereinafter defined) (such applicable purchase price being hereinafter
referred to as the "Change of Control Purchase Price") in accordance with the
procedures set forth in this covenant.
Within 30 days of the occurrence of a Change of Control, the Issuers also
shall (i) cause a notice of the Change of Control Offer to be sent at least
once to the Dow Jones News Service or similar business news service in the
United States and (ii) send by first-class mail, postage prepaid, to the
Trustee and to each holder of the Notes, at the address appearing in the
register maintained by the Registrar of the Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment, and
otherwise subject to the terms and conditions set forth herein;
(2) the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 20 business days from the date such
notice is mailed (the "Change of Control Payment Date"));
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Issuers default in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date;
(6) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Notes delivered for purchase, and a
statement that such holder is withdrawing his election to have such Notes
purchased;
(7) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, provided that each Note purchased and each such new
Note issued shall be in an original principal amount in denominations of
$1,000 and integral multiples thereof;
(8) any other procedures that a holder must follow to accept a Change of
Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Issuers shall, to the extent
lawful, (i) accept for payment all Notes or portions thereof or beneficial
interests under a Global Note tendered pursuant to the Change of Control
Offer, (ii) deposit with the Paying Agent money sufficient to pay the purchase
price of all Notes or portions thereof or beneficial interests, so tendered
and (iii) deliver or cause to be delivered to the Trustee Notes so accepted
together with an Officers' Certificate stating the Notes or portions thereof
tendered to the Issuers. The Paying Agent shall promptly (1) mail to each
holder of Notes so accepted and (2) cause to be credited to the respective
accounts of the Holders under a Global Note of beneficial interests so
accepted payment in an amount equal to the Change of Control Purchase Price
for such Notes, and the Issuers shall execute and issue, and the Trustee shall
promptly authenticate and mail to such holder, a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered and shall issue a
new Global Note equal in principal amount to any unpurchased portion of
beneficial interest so surrendered; provided, however, that each such new Note
shall be issued in an original principal amount in denominations of $1,000 and
integral multiples thereof.
The Indenture requires that if the New Credit Facility is in effect, or any
other Permitted Secured Indebtedness is outstanding, at the time of the
occurrence of a Change of Control, prior to the mailing of the notice to
holders described in the preceding paragraphs, but in any event within 30 days
following any Change
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of Control, the Company covenants to (i) repay in full all obligations and
terminate all commitments under such Permitted Secured Indebtedness or offer
to repay in full all obligations and terminate all commitments under such
Permitted Secured Indebtedness of each lender who has accepted such offer or
(ii) obtain the requisite consent under such Permitted Secured Indebtedness to
permit the repurchase of the Notes as described above. The Company must first
comply with the covenant described in the preceding sentence before it shall
be required to purchase Notes in the event of a Change of Control, provided,
however, that the Company's failure to comply with the covenant described in
the preceding sentence constitutes an Event of Default described in clause
(iii) under "Events of Default" below. As a result of the foregoing a holder
of the Notes may not be able to compel the Issuers to purchase the Notes
unless the Company is able at the time to refinance all of the New Credit
Facility or obtain requisite consents under the New Credit Facility. Failure
by the Issuers to make a Change of Control Offer when required by the
Indenture constitutes an Event of Default under the Indenture.
The Indenture provides that, (A) if the Company or any Subsidiary thereof
has issued any outstanding (i) Indebtedness that is subordinated in right of
payment to the Notes or (ii) Preferred Equity Interests, and the Company or
such Subsidiary is required to make a Change of Control Offer or to make a
distribution with respect to such subordinated Indebtedness or Preferred
Equity Interests in the event of a change of control, the Company and such
Subsidiary shall not consummate any such offer or distribution with respect to
such subordinated Indebtedness or Preferred Equity Interests until such time
as the Issuers shall have paid the Change of Control Purchase Price in full to
the holders of Notes that have accepted the Issuers' Change of Control Offer
and shall otherwise have consummated the Change of Control Offer made to
holders of the Notes and (B) the Company will not issue Indebtedness that is
subordinated in right of payment to the Notes or Preferred Equity Interests
with change of control provisions requiring the payment of such Indebtedness
or Preferred Equity Interests prior to the payment of the Notes in the event
of a Change in Control under the Indenture.
In the event that a Change of Control occurs and the holders of Notes
exercise their right to require the Issuers to purchase Notes, if such
purchase constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act at that time, the Issuers will comply with the requirements of
Rule 14e-1 as then in effect with respect to such repurchase.
The Issuers' ability to purchase the Notes will be limited by the Company's
then available financial resources and, if such financial resources are
insufficient, their ability to arrange financing to effect such purchases.
There can be no assurance that the Issuers will have sufficient funds to
repurchase the Notes upon a Change of Control or that the Issuers will be able
to arrange financing for such purpose.
RELEASE FROM LIABILITY
The Indenture provides that the Notes are being issued solely by the
Issuers, and none of the Issuers' respective directors, officers, partners,
stockholders, employees or affiliates will be an obligor under the Notes, and
that, except as to Stephen Adams, such persons shall not have any liability
for any obligations of the Issuers under the Notes or the Indenture or any
claim based on, in respect of or by reason of such obligations, and that by
accepting the Notes, each holder of Notes waives and releases all such
liability, which waiver and release are part of the consideration for the
Notes. Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a waiver is
against public policy. Although Stephen Adams, in his capacity as a general
partner of the Company, is personally liable in respect of indebtedness of the
Company, including the Notes, the Indenture specifically limits his recourse
liability and that of any other individual general partner of the Company. In
addition, although Mr. Adams currently has a net worth significantly in excess
of his maximum potential recourse liability under the Indenture, Mr. Adams'
assets consist in large part of illiquid investments in privately-held
companies, including his interest in the Company which represents one of his
significant assets. Accordingly, no assurance can be given that the Trustee
and the holders of the Notes would be able to realize on any such possible
recourse liability of Mr. Adams and holders of the Notes should not rely on
such possible recourse liability of Mr. Adams for repayment of the Notes.
The terms of the Indenture will provide that the Trustee and holders of the
Notes will only have recourse against Stephen Adams, an individual general
partner of the Company, to the extent that the aggregate proceeds
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available for payment to creditors of the Company from a liquidation of all
assets of the Issuers are less than the lesser of (i) $40.0 million and (ii)
the aggregate amount owed by the Company to such creditors at the time of such
liquidation. The Trustee and the holders of the Notes will have no recourse
against any of the Issuers' partners or affiliates with respect to the Notes or
the Indenture except as indicated in the preceding sentence.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company will not and will not permit any of its Subsidiaries to
consolidate with, merge with or into, or transfer all or substantially all of
its assets (as an entirety or substantially as an entirety in one transaction
or a series of related transactions), to any Person unless: (i) the Company or
such Subsidiary, as the case may be, shall be the continuing Person, or the
Person (if other than the Company or such Subsidiary) formed by such
consolidation or into which the Company or such Subsidiary, as the case may be,
is merged or to which the properties and assets of the Company or such
Subsidiary, as the case may be, are transferred shall be a corporation
organized and existing under the laws of the United States or any State thereof
or the District of Columbia and shall expressly assume, by a supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all of the obligations of the Company or such Subsidiary, as the case
may be, under the Notes and the Indenture, and the obligations under the
Indenture shall remain in full force and effect; (ii) immediately before and
immediately after giving effect to such transaction, no Default or Event of
Default shall have occurred and be continuing; (iii) immediately after giving
effect to such transaction on a pro forma basis the Company or such Person
could incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) under the covenant set forth under "Limitation on Additional
Indebtedness"; and (iv) immediately thereafter, the Company, such Subsidiary or
the other surviving entity, as the case may be, shall have a Consolidated Net
Worth equal to or greater than the Consolidated Net Worth of the Company or
such Subsidiary, as the case may be, immediately prior to such transaction.
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in
respect thereto comply with this provision and that all conditions precedent
herein provided for relating to such transaction or transactions have been
complied with.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) default in payment of any principal of, or premium, if any, on the
Notes when such principal becomes due and payable;
(ii) default for 30 days in the payment of any interest on the Notes
after such interest becomes due and payable;
(iii) the failure of the Issuers to comply with any of the terms or
provisions of "--Change of Control Offer" or "--Limitation on Certain Asset
Sales";
(iv) default by the Issuers in the observance or performance of any other
provision in the Notes or the Indenture for 30 days after written notice
from the Trustee or the holders of not less than 25% in aggregate principal
amount of the Notes then outstanding;
(v) failure to pay when due principal, interest or premium in an
aggregate amount of $3 million or more with respect to any Indebtedness of
the Company or any Subsidiary thereof, or the acceleration prior to its
express maturity of any such Indebtedness aggregating $3 million or more;
(vi) any final judgment or judgments which can no longer be appealed for
the payment of money in excess of $3 million (which are not paid or covered
by third party insurance by financially sound insurers that have not
disclaimed coverage) shall be rendered against the Company or any
Subsidiary thereof, and shall not be discharged for any period of 60
consecutive days during which a stay of enforcement shall not be in effect;
(vii) certain events involving bankruptcy, insolvency or reorganization
of either of the Issuers or any Subsidiary of the Company.
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The Indenture provides that the Trustee may withhold notice to the holders
of the Notes of any default (except in payment of principal or premium, if
any, or interest on the Notes or that resulted from the failure of the Issuers
to comply with the provisions of "--Change of Control Offer" or "--Limitation
on Certain Asset Sales") if the Trustee considers it to be in the best
interest of the holders of the Notes to do so.
The Indenture provides that if an Event of Default (other than an Event of
Default resulting from certain events of bankruptcy, insolvency or
reorganization) shall have occurred and be continuing, then the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding may declare to be immediately due and payable the entire principal
amount of all the Notes then outstanding plus accrued interest to the date of
acceleration, provided, however, that after such acceleration but before a
judgment or decree based on acceleration is obtained by the Trustee, the
holders of a majority in aggregate principal amount of outstanding Notes may,
under certain circumstances, rescind and annul such acceleration if all Events
of Default, other than nonpayment of accelerated principal, premium or
interest, have been cured or waived as provided in the Indenture. In case an
Event of Default resulting from certain events of bankruptcy, insolvency or
reorganization shall occur, the principal, premium and interest amount with
respect to all of the Notes shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or the
holders of the Notes.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to waive any existing default or compliance with any
provision of the Indenture or the Notes and to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee,
subject to certain limitations specified in the Indenture.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder
shall have previously given to the Trustee written notice of a continuing
Event of Default and unless also the holders of at least 25% in aggregate
principal amount of the outstanding Notes shall have made written request and
offered reasonable indemnity to the Trustee to institute such proceeding as a
trustee, and unless the Trustee shall not have received from the holders of a
majority in aggregate principal amount of the outstanding Notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted on such Note on or after the respective due dates expressed in such
Note.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides that the Issuers may elect either (a) to defease and
be discharged from any and all obligations with respect to the Notes (except
for the obligations to register the transfer or exchange of such Notes, to
replace temporary or mutilated, destroyed, lost or stolen Notes, to maintain
an office or agency in respect of the Notes and to hold monies for payment in
trust) ("defeasance") or (b) to be released from their obligations with
respect to the Notes under certain covenants contained in the Indenture and
described above under "Covenants" ("covenant defeasance"), upon the deposit
with the Trustee (or other qualifying trustee), in trust for such purpose, of
money and/or U.S. Government Obligations which through the payment of
principal and interest in accordance with their terms will provide money, in
an amount sufficient to pay the principal of, premium, if any, and interest on
the Notes, on the scheduled due dates therefor or on a selected date of
redemption in accordance with the terms of the Indenture. Such a trust may
only be established if, among other things, the Issuers have delivered to the
Trustee an Opinion of Counsel (as specified in the Indenture) (i) to the
effect that neither the trust nor the Trustee will be required to register as
an investment company under the Investment Company Act of 1940, as amended,
and (ii) describing either a private ruling concerning the Notes or a
published ruling of the Internal Revenue Service, to the effect that holders
of the Notes or persons in their positions will not recognize income, gain or
loss for federal income tax purposes as a result of such deposit, defeasance
and discharge and will be subject to federal income tax on the same amount and
in the same manner and at the same times, as would have been the case if such
deposit, defeasance and discharge had not occurred.
MODIFICATION OF INDENTURE
From time to time, the Issuers and the Trustee may, without the consent of
holders of the Notes, modify, amend, waive or supplement the provisions of the
Indenture or the Notes for certain specified purposes, including
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providing for uncertificated Notes in addition to certificated Notes, and
curing any ambiguity, defect or inconsistency, or making any other change that
does not materially and adversely affect the rights of any holder. The
Indenture contains provisions permitting the Issuers and the Trustee, with the
consent of holders of at least a majority in principal amount of the
outstanding Notes, to modify, amend, waive or supplement the Indenture or the
Notes, except that no such modification shall, without the consent of each
holder affected thereby, (i) reduce the amount of Notes whose holders must
consent to an amendment, supplement, or waiver to the Indenture or the Notes,
(ii) reduce the rate of or change the time for payment of interest on any
Note, (iii) reduce the principal of or premium on or change the stated
maturity of any Note, (iv) make any Note payable in money other than that
stated in the Note or change the place of payment from New York, New York, (v)
change the amount or time of any payment required by the Notes or reduce the
premium payable upon any redemption of Notes, or change the time before which
no such redemption may be made, (vi) waive a default on the payment of the
principal of, interest on, or redemption payment with respect to any Note,
(vii) subordinate in right of payment, or otherwise subordinate, the Notes to
any other Indebtedness or obligation of the Issuers, (viii) amend, alter,
change or modify the obligation of the Issuers to make and consummate a Change
of Control Offer in the event of a Change of Control or make and consummate an
Excess Proceeds Offer or waive any Default in the performance of any such
offers or modify any of the provisions or definitions with respect to any such
offers or (ix) take any other action otherwise prohibited by the Indenture to
be taken without the consent of each holder affected thereby.
REPORTS TO HOLDERS
So long as any of the Notes are outstanding, whether or not the Issuers are
required to be subject to Section 13(a) or 15(d) of the Exchange Act, the
Issuers will furnish the information required thereby to the Commission, the
holders of the Notes and to the Trustee. The Indenture provides that even if
the Issuers are entitled under the Exchange Act not to furnish such
information to the Commission or to the holders of the Notes, they will
nonetheless continue to furnish such information to the Commission, the
holders of the Notes and the Trustee.
COMPLIANCE CERTIFICATE
The Issuers will deliver to the Trustee on or before 120 days after the end
of the Issuers' fiscal year and on or before 50 days after the end of each of
the first, second and third fiscal quarters in each year an Officers'
Certificate stating whether or not the signers know of any Default or Event of
Default that has occurred. If they do, the certificate will describe the
Default or Event of Default and its status.
THE TRUSTEE
The Trustee under the Indenture will be the Registrar and Paying Agent with
regard to the Notes. The Indenture provides that, except during the
continuance of an Event of Default, the Trustee will perform only such duties
as are specifically set forth in the Indenture. During the existence of an
Event of Default, the Trustee will exercise such rights and powers vested in
it under the Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange Notes in accordance with the
Indenture. The Registrar under such Indenture may require a holder, among
other things, to furnish appropriate endorsements and transfer documents, and
to pay any taxes and fees required by law or permitted by the Indentures. The
Registrar is not required to transfer or exchange any Note selected for
redemption. Also, the Registrar is not required to transfer or exchange any
Note for a period of 15 days before selection of the Notes to be redeemed.
The registered holder of a Note may be treated as the owner of it for all
purposes.
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CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Indenture. Reference is made to the Indenture for
the full definition of all such terms as well as any other capitalized terms
used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (including a
Subsidiary) existing at the time such Person becomes a Subsidiary or assumed
in connection with the acquisition of assets from such Person.
"Affiliate" of any specified Person means any other Person which directly or
indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such specified Person. For the purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise.
"Asset Sale" means the direct or indirect sale, transfer, issuance,
conveyance, lease (other than operating leases entered into in the ordinary
course of business pursuant to ordinary business terms), assignment or other
disposition for value (including, without limitation, by eminent domain,
condemnation or similar governmental proceeding) or any merger or
consolidation of any Subsidiary of the Company with or into another Person
(other than the Company or any Wholly-Owned Subsidiary of the Company) whereby
such Subsidiary shall cease to be a Wholly-Owned Subsidiary in any single
transaction or series of related transactions (separate eminent domain,
condemnation or similar governmental proceedings to each be considered a
single transaction but not to be considered together as a series of related
transactions) involving property or assets with a fair market value in excess
of $250,000 of (a) any Equity Interest in any Subsidiary, (b) real property
owned by the Company or any Subsidiary thereof, or a division, line of
business or comparable business segment of the Company or any Subsidiary
thereof or (c) other property, assets or rights of the Company, any Subsidiary
thereof or any division or line of business of the Company or any Subsidiary
thereof, provided, however, that Asset Sales shall not include (i) sales,
leases, conveyances, transfers or other dispositions to the Company or to a
Subsidiary thereof or to any other Person if after giving effect to such sale,
lease, conveyance, transfer or other disposition such other Person becomes a
Wholly-Owned Subsidiary of the Company, (ii) transactions complying with "--
Merger, Consolidation or Sale of Assets" above (except as otherwise provided
in the penultimate paragraph set forth under "--Limitation on Certain Asset
Sales" above), (iii) sales, transfers, issuances, conveyances, leases,
assignments or other dispositions for value to the Company or any Wholly-Owned
Subsidiary of the Company, (iv) transfers or other distributions of assets
which constitute (1) Permitted Investments or (2) Restricted Payments made in
compliance with the covenant described under "Limitation on Restricted
Payments" and (v) the exchange of property or assets of the Company or a
Subsidiary of the Company for similar assets constituting one or more outdoor
advertising properties owned by another Person.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Company or any Subsidiary thereof from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such
Asset Sale (calculated as provided in "Permitted Tax Distributions"), (b)
payment of all brokerage commissions, underwriting and other fees and expenses
related to such Asset Sale, (c) provision for minority interest holders in any
Subsidiary as a result of such Asset Sale, (d) payments made to retire
Indebtedness secured by the assets subject to such Asset Sale and (e)
deduction of appropriate amounts to be provided by the Company or a Subsidiary
thereof as a reserve, in accordance with GAAP, against any liabilities
associated with the assets sold or disposed of in such Asset Sale and retained
by the Company or a Subsidiary thereof after such Asset Sale, including,
without limitation, pension and other post employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the assets sold or disposed of in such Asset Sale,
and (ii) promissory notes and other noncash consideration received by the
Company or any Subsidiary thereof from such Asset Sale or other disposition
upon the liquidation or conversion of such notes or noncash consideration into
cash.
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"Attributable Indebtedness" under the Indenture in respect of a Sale and
Lease-Back Transaction means, as at the time of determination, the greater of
(i) the fair value of the property subject to such arrangement (as determined
in good faith by the Board of Directors) and (ii) the present value of the
notes (discounted at the rate of interest implicit in such transaction) of the
total obligations of the lessee for rental payments during the remaining term
of the lease included in such Sale and Lease-Back Transaction (including any
period for which such lease has been extended).
"Board of Directors" means, as to any Person, the board of directors or any
duly authorized committee thereof of such Person or, if such Person is a
partnership, of the managing general partner of such Person.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such
Indebtedness shall be the capitalized amount of such obligations determined in
accordance with GAAP.
A "Change of Control" will be deemed to have occurred at such time as (i)
the Permitted Holders, individually or in the aggregate, shall cease to
beneficially own (as defined under Rule 13d-3 or any successor rule or
regulation promulgated under the Exchange Act), directly or indirectly, 50.1%
or more of the Common Equity Interests of the Company or of the Managing
General Partner and any Person (including a Person's Affiliates and
associates), other than a Permitted Holder, beneficially owns (as defined
under Rule 13d-3 or any successor rule or regulation promulgated under the
Exchange Act), directly or indirectly, 35% or more of the Common Equity
Interests of the Company or of the Managing General Partner, (ii) there shall
be consummated any consolidation or merger of the Company or the Managing
General Partner in which the Company or the Managing General Partner, as the
case may be, is not the continuing or surviving corporation or pursuant to
which the Common Equity Interests of the Company or the Managing General
Partner, as the case may be, would be converted into cash, securities or other
property, other than a merger or consolidation of the Company or the Managing
General Partner in which the holders of the Common Equity Interests of the
Company or the Managing General Partner, as the case may be, outstanding
immediately prior to the consolidation or merger hold, directly or indirectly,
at least a majority of the Common Equity Interests of the surviving
corporation immediately after such consolidation or merger, (iii) there is a
sale, lease or transfer of all or substantially all of the assets of the
Company or the Managing General Partner to any Person or group (as such term
is defined in Section 13(d)(3) of the Exchange Act), other than a Permitted
Holder, (iv) the shareholders of the Managing General Partner or the partners
of the Company shall approve any plan or proposal for the liquidation or
dissolution of the Managing General Partner or the Company, as the case may
be, (v) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Managing
General Partner (together with any new directors whose election by such Board
of Directors has been approved by 66 2/3% of the directors then still in
office who either were directors at the beginning of such period or whose
election or recommendation for election was previously so approved) cease to
constitute a majority of the Board of Directors of the Managing General
Partner or (vi) any Person is admitted as a general partner of the Company
after which the Managing General Partner does not have the responsibility to
take all of the actions to the same extent it is entitled or required to take
under the Partnership Agreement of the Company as in effect on the Issue Date.
"Common Equity Interests" of any Person means all Equity Interests of such
Person that are generally entitled to (i) vote in the election of directors of
such Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or
others that will control the management and policies of such Person.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on an
income statement for such Person and its Subsidiaries on a consolidated basis,
imputed interest included in Capitalized Lease Obligations, all commissions,
discounts and other fees and charges owed with respect to letters of credit
and bankers' acceptance financing, the net costs associated with hedging
obligations, amortization of other financing fees and expenses, the interest
portion of any deferred payment obligation,
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amortization of discount or premium, if any, and all other non-cash interest
expense (other than interest amortized to cost of sales)) plus, without
duplication, all net capitalized interest for such period and all interest
incurred or paid under any guarantee of Indebtedness (including a guarantee of
principal, interest or any combination thereof) of any Person, plus the amount
of all dividends or distributions paid on Disqualified Equity Interests (other
than dividends paid or payable in Equity Interests).
"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP, plus the
amount of any dividends or distributions received by such Person from
Unrestricted Subsidiaries, provided, however, that (a) the Net Income of any
Person (the "other Person") in which the Person in question or any of its
Subsidiaries has less than a 100% interest (which interest does not cause the
net income of such other Person to be consolidated into the net income of the
Person in question in accordance with GAAP) shall be included only to the
extent of the amount of dividends or distributions paid to the Person in
question or the Subsidiary, (b) the Net Income of any Subsidiary of the Person
in question that is subject to any restriction or limitation on the payment of
dividends or the making of other distributions (other than pursuant to the
Notes or the Indenture) shall be excluded to the extent such restriction or
limitation would prevent such Subsidiary from being able to pay dividends or
make other distributions out of its Net Income, (c)(i) the Net Income of any
Person acquired in a pooling of interests transaction for any period prior to
the date of such acquisition and (ii) any net gain (but not loss) resulting
from an Asset Sale by the Person in question or any of its Subsidiaries other
than in the ordinary course of business shall be excluded, (d) extraordinary
gains and losses (including any related tax effects on the Company) shall be
excluded, (e) the net income of any Subsidiary to the extent of any
restrictions or encumbrances on its ability to distribute such net income to
such Person shall be excluded and (f) the amount of any Permitted Tax
Distributions shall be excluded. Consolidated Net Income shall be calculated
without deducting therefrom any accruals made for Phantom Compensation.
"Consolidated Net Worth" with respect to any Person means the equity of the
holders of Equity Interests of such Person and its Subsidiaries (excluding any
Disqualified Equity Interests), as reflected in a balance sheet of such Person
determined on a consolidated basis and in accordance with GAAP.
"Consolidated Total Assets" means, with respect to any Person at any date of
determination, the aggregate amount of assets of such Person and its
Subsidiaries at such date (less applicable depreciation, amortization and
other valuation reserves) as determined on a consolidated basis in accordance
with GAAP and as set forth or reflected in the Person's most recent
consolidated balance sheet.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disqualified Equity Interests" means any Equity Interest which, by its
terms (or by the terms of any security into which it is convertible or for
which it is exchangeable at the option of the holder), or upon the happening
of any event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or is redeemable at the option of the holder thereof,
in whole or in part, on or prior to the maturity date of the Notes, for cash
or securities constituting Indebtedness. Without limitation of the foregoing,
Disqualified Equity Interests shall be deemed to include (i) any Preferred
Equity Interests of a Subsidiary of the Company and (ii) any Preferred Equity
Interests of the Company, with respect to either of which, under the terms of
such Preferred Equity Interests, by agreement or otherwise, such Subsidiary or
the Company is obligated to pay current dividends or distributions in cash
during the period prior to the maturity date of the Notes, provided, however,
that Preferred Equity Interests of the Company or any Subsidiary thereof that
is issued with the benefit of provisions requiring a change of control offer
to be made for such Preferred Equity Interests in the event of a change of
control of the Company or such Subsidiary, which provisions have substantially
the same effect as the provisions of the Indenture described under "Change of
Control," shall not be deemed to be Disqualified Equity Interests solely by
virtue of such provisions.
"EBITDA" means, with respect to any Person for any period, the sum, without
duplication, of (i) Consolidated Net Income, (ii) Consolidated Interest
Expense, (iii) provision for taxes based on income or profits
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of such Person for such period, (iv) depreciation, (v) amortization, (vi)
Phantom Compensation, (vii) the amount of any Permitted Tax Distributions and
(viii) any other non-cash charges to the extent deducted from Consolidated Net
Income (including non-cash expenses recognized in accordance with Financial
Accounting Standards Bulletin Number 106 but excluding any non-cash charge to
the extent that it requires an accrual of or a reserve for cash disbursements
for any future period), in each case to the extent deducted from Consolidated
Net Income for the period as to which the computation of EBITDA is made, all
as determined in accordance with GAAP.
"Equity Interests" means, with respect to any Person, any and all shares or
other equivalents (however designated) of capital stock, partnership interests
or any other participation, right or other interest in the nature of an equity
interest in such Person or any option, warrant or other security convertible
into or exchangeable for any of the foregoing.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"fair market value" or "fair value" means, with respect to any assets or
property, the price which could be negotiated in an arm's-length free market
transaction, for cash, between a willing seller and a fully informed, willing
and able buyer, neither of whom is under undue pressure or compulsion to
complete the transaction, all as determined by a majority of the Board of
Directors acting in good faith, such determination to be evidenced by a board
resolution delivered to the Trustee. No such determination need be supported
by an appraisal or expert opinion.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become, directly or indirectly, liable in
respect of such Indebtedness or other obligation or the recording, as required
pursuant to GAAP or otherwise, of any such Indebtedness or other obligation on
the balance sheet of such person (and "incurrence," "incurred," "incurable,"
and "incurring" shall have meanings correlative to the foregoing), provided,
however, that a change in GAAP that results in an obligation of such Person
that exists at such time becoming Indebtedness shall not be deemed an
incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other liabilities arising in the ordinary
course of business) if and to the extent any of the foregoing indebtedness
would appear as a liability upon a balance sheet of such Person prepared in
accordance with GAAP, and shall also include, to the extent not otherwise
included (i) any Capitalized Lease Obligations, (ii) obligations secured by a
lien to which the property or assets owned or held by such Person is subject,
whether or not the obligation or obligations secured thereby shall have been
assumed, (iii) all Indebtedness of others of the type described in the other
clauses of this definition (including all dividends of other Persons) the
payment of which is guaranteed, directly or indirectly, by such Person or that
is otherwise its legal liability or which such Person has agreed to purchase
or repurchase or in respect of which such Person has agreed contingently to
supply or advance funds (whether or not such items would appear upon the
balance sheet of the guarantor), (iv) all obligations for the reimbursement of
any obligor on any letter of credit, banker's acceptance or similar credit
transaction, (v) in the case of the Company, Disqualified Equity Interests of
the Company or any Subsidiary thereof, and (vi) obligations of any such Person
under any Interest Rate Agreement applicable to any of the foregoing (if and
to the extent such Interest Rate Agreement obligations would appear as a
liability upon a balance sheet of such Person prepared in accordance with
GAAP). The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and,
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with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, provided,
however, that (i) the amount outstanding at any time of any Indebtedness
issued with original issue discount, including the Notes, is the principal
amount of such Indebtedness less the remaining unamortized portion of the
original issue discount of such Indebtedness at such time as determined in
conformity with GAAP, (ii) Indebtedness shall not include any liability for
federal, state, local or other taxes, and (iii) Indebtedness shall not include
obligations for Phantom Compensation or Prior Accrued Bonus Payments.
Notwithstanding any other provision of the foregoing definition, any trade
payable arising from the purchase of goods or materials or for services
obtained in the ordinary course of business shall not be deemed to be
"Indebtedness" of the Issuers or any Subsidiaries for purposes of this
definition. Furthermore, guarantees of (or obligations with respect to letters
of credit supporting) Indebtedness otherwise included in the determination of
such amount shall not also be included.
"Independent Financial Advisor" means an accounting, appraisal, investment
banking or consulting firm of nationally recognized standing that is, in the
reasonable and good faith judgment of the Board of Directors of the Company,
qualified to perform the task for which such firm has been engaged and
disinterested and independent with respect to the Company and its Affiliates.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance, account receivable
(other than an account receivable arising in the ordinary course of business,
including accounts receivable arising in the ordinary course of business and
acquired as a part of the assets acquired by the Company in connection with an
acquisition of assets which is otherwise permitted by the terms of the
Indenture), loan or capital contribution to (by means of transfers of property
to others, payments for property or services for the account or use of others
or otherwise), the purchase of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities of, the
acquisition, by purchase or otherwise, of all or substantially all of the
business or stock or other evidence of beneficial ownership of, any Person,
the guarantee or assumption of the Indebtedness of any other Person (except
for an assumption of Indebtedness for which the assuming Person receives
consideration with a fair market value at least equal to the principal amount
of the Indebtedness assumed), the designation of a Subsidiary as an
Unrestricted Subsidiary or the making of any investment in any Person and all
other items that would be classified as investments on a balance sheet of such
Person prepared in accordance with GAAP. Investments shall exclude extensions
of trade credit on commercially reasonable terms in accordance with normal
trade practices.
"Issue Date" means March 12, 1996.
"Lien" means with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority, or other security agreement or preferential arrangement
of any kind or nature whatsoever on or with respect to such property or assets
(including without limitation, any Capitalized Lease Obligation, conditional
sales, or other title retention agreement having substantially the same
economic effect as any of the foregoing).
"Managing General Partner" means Adams Outdoor Advertising, Inc., a
Minnesota corporation.
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Net Investments" means the excess of (i) the aggregate of all Investments
made by the Company or a Subsidiary thereof on or after the Issue Date (in the
case of an Investment made other than in cash, the amount shall be the fair
market value of such Investment as determined in good faith by the Board of
Directors of the Company) over (ii) the sum of (A) the aggregate amount
returned in cash on such Investments whether through
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interest payments, principal payments, dividends or other distributions and
(B) the net cash proceeds received by the Company or such Subsidiary from the
disposition of all or any portion of such Investments (other than to a
Subsidiary of the Company), provided, however, that with respect to all
Investments made in Unrestricted Subsidiaries the sum of clauses (A) and (B)
above with respect to such Investments shall not exceed the aggregate amount
of all Investments made in all Unrestricted Subsidiaries.
"Net Proceeds" means (a) in the case of any sale of Equity Interests by the
Issuers, the aggregate net proceeds received by the Company, after payment of
expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the Board of Directors of the Company,
at the time of receipt) and (b) in the case of any exchange, exercise,
conversion or surrender of outstanding securities of any kind for or into
Equity Interests of the Company which are not Disqualified Equity Interests,
the net book value of such outstanding securities on the date of such
exchange, exercise, conversion or surrender (plus any additional amount
required to be paid by the holder to the Company upon such exchange, exercise,
conversion or surrender, less any and all payments made to the holders, e.g.,
on account of fractional shares and less all expenses incurred by the Company
in connection therewith).
"New Credit Facility" means the credit facility by and among the Company,
the Managing General Partner, as guarantor, Canadian Imperial Bank of Commerce
as administrative agent and collateral agent and the lenders listed therein,
as the same may be amended, modified, replaced, renewed, refunded or
refinanced from time to time.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer, the President or any Vice President and
the Chief Financial Officer or any Treasurer of such Person (or, in the case
of a Person that is a partnership, of a general partner of such Person in such
capacity) that shall comply with applicable provisions of the Indenture.
"Permitted Holders" means Stephen Adams, his spouse and lineal descendants
and trusts for the exclusive benefit of any of the foregoing persons.
"Permitted Indebtedness" means:
(i) Indebtedness (plus interest, premium, fees and other obligations
associated therewith) of the Company or any Subsidiary thereof arising
under or in connection with Permitted Secured Indebtedness;
(ii) Indebtedness under the Notes;
(iii) Indebtedness not covered by any other clause of this definition
which is outstanding on the date of the Indenture;
(iv) Interest Rate Agreements;
(v) Additional Indebtedness of the Company, including Indebtedness
incurred in connection with or arising out of Capitalized Lease
Obligations, in an aggregate principal amount outstanding at any time not
to exceed $1 million;
(vii) Indebtedness of a Subsidiary issued to and held by the Company or a
Wholly-Owned Subsidiary or Indebtedness of the Company to a Wholly-Owned
Subsidiary in respect of intercompany advances or transactions; and
(vi) Refinancing Indebtedness.
"Permitted Investments" means, for any Person, Investments made on or after
the date of the Indenture consisting of:
(i) Temporary Cash Investments;
(ii) (A) Investments in the Company or a Wholly-Owned Subsidiary of the
Company, (B) Investments in any Person, if (1) as a result of such
Investment (y) such Person becomes a Wholly-Owned Subsidiary of
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the Company or (z) such Person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or a Wholly-Owned Subsidiary thereof and (2)
after giving effect to such Investment the Company is in compliance with
the covenant described under "Line of Business" above and (C) Net
Investments in any Person, provided, however, that the aggregate amount of
all such Net Investments made pursuant to this clause (C) shall not exceed
$3 million at any one time outstanding;
(iii) Investments represented by accounts receivable created or acquired
in the ordinary course of business;
(iv) Advances to employees in the ordinary course of business not to
exceed an aggregate of $100,000 outstanding at any one time;
(v) Investments under or pursuant to Interest Rate Agreements;
(vi) Investments in the Notes; and
(vii) Investments existing on the Issue Date.
"Permitted Liens" means, without duplication, (i) Liens existing on the date
of the Indenture, (ii) Liens in favor of the Company or any Subsidiary
thereof, (iii) Liens on property of a Person existing at the time such Person
is acquired by, merged into or consolidated with the Company or any Subsidiary
thereof, provided, however, that such Liens (a) were not created in
anticipation of such acquisition, merger or consolidation and (b) are not
applicable to any other property of the Company or any of the other
Subsidiaries of the Company, (iv) Liens for taxes, assessments or governmental
charges or claims that are not yet delinquent or that are being contested in
good faith by appropriate proceedings promptly instituted and diligently
conducted, provided, however, that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor,
(v) landlords', carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business and
with respect to amounts which are not yet delinquent or are being contested in
good faith by appropriate proceedings, (vi) pledges or deposits made in the
ordinary course of business in connection with (a) leases, performance bonds
and similar obligations, (b) workers' compensation, unemployment insurance and
other social security legislation, or (c) securing the performance of surety
bonds and appeal bonds required (1) in the ordinary course of business or in
connection with the enforcement of rights or claims of the Company or a
Subsidiary thereof or (2) in connection with judgments that do not give rise
to an Event of Default and which do not exceed $3 million in the aggregate,
(vii) easements, rights-of-way, restrictions, minor defects or irregularities
in title and other similar encumbrances which, in the aggregate, do not
materially detract from the value of the property subject thereto or
materially interfere with the ordinary conduct of the business of the Company
or any Subsidiary thereof, (viii) Liens on property or assets of, or any
Equity Interests of or secured debt of, any Person existing at the time such
Person becomes a Subsidiary of the Company or at the time such Person is
merged into the Company or any Subsidiary thereof, provided, however, that
such Liens are not incurred in connection with, or in contemplation of, such
Person becoming a Subsidiary of the Company or merging into the Company or any
of its Subsidiaries, (ix) Liens in favor of the Company or any of its
Subsidiaries, (x) Liens to secure Purchase Money Indebtedness that is
otherwise permitted under the Indenture, provided, however, that (a) any such
Lien is created solely for the purpose of securing Indebtedness representing,
or incurred to finance, refinance or refund, the cost (including sales and
excise taxes, installation and delivery charges and other direct costs of, and
other direct expenses paid or charged in connection with, such purchase or
construction) of such Property, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such costs, and (c) such Lien
does not extend to or cover any Property other than such item of Property and
any improvements on such item, (xi) Liens securing Permitted Secured
Indebtedness, (xii) Liens securing Capitalized Lease Obligations permitted to
be incurred under clause (v) of the definition of "Permitted Indebtedness,"
provided, however, that such Lien does not extend to any property other than
that subject to the underlying lease, (xiii) Liens pursuant to leases and
subleases of real property which do not interfere with the ordinary conduct of
the business of the Company or any of its Subsidiaries and which are made on
customary and usual terms applicable to similar properties, (xiv) Liens
securing reimbursement obligations under letters of credit, but only in or
upon the goods the purchase of which
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were financed by such letters of credit and (xv) Liens securing Refinancing
Indebtedness, provided, however, that such Liens extend only to the assets
securing the Indebtedness being extended, refinancing, renewed or replaced,
and such Indebtedness was previously secured by such assets and provided,
further, the terms of such Liens are no less favorable to the holders of the
Notes than the Liens being extended, refinanced, renewed or replaced.
"Permitted Secured Indebtedness" means any Indebtedness (plus interest,
premium, fees and other obligations associated therewith), and any
refinancing, refunding, replacement, renewal or extension thereof, under (a)
the New Credit Facility, and (b) agreements evidencing any other Indebtedness
which is secured by assets of the Company, whether involving the same or any
other lender or creditor or group of lenders or creditors as has provided the
New Credit Facility, provided, however, that the aggregate amount of all such
Indebtedness outstanding (or committed to be advanced under the agreements to
which such Indebtedness relates) at any time shall not exceed $35 million.
"Permitted Tax Distributions" means, for so long as the Company is a
partnership or substantially similar pass-through entity for federal income
tax purposes, distributions to the partners of the Company based on estimates
of the amount of federal, state and local income taxes that the Company would
be required to pay with respect to a fiscal year calculated as if, for the
applicable fiscal year, the Company were treated as a "C corporation"
incorporated under the laws of the State of Minnesota rather than as a
partnership.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Phantom Compensation" means the compensation accrued after the Issue Date
pursuant to Article II of the "phantom stock" agreements entered into, in
writing, between the Company and certain of its employees or substitutions to
or replacements of such article of such agreements, and any comparable
subordinated incentive compensation agreement with its employees on the basis
of the increase in value of the Company or a division or Subsidiary thereof.
"Preferred Equity Interest" means any Equity Interest of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the
holders of other Equity Interests issued by such Person.
"Prior Accrued Bonus Payments" means payments in respect of Phantom
Compensation accrued prior to the Issue Date.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in
the most recent consolidated balance sheet of such Person and its Subsidiaries
under GAAP.
"Public Equity Offering" means, with respect to any Person, a public
offering by such Person of some or all of its Common Equity Interests other
than Disqualified Equity Interests (however designated and whether voting or
non-voting) and any and all rights, warrants or options to acquire such Equity
Interests.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the
cost of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances,
renews, replaces or extends any Indebtedness of the Company outstanding on the
Issue Date or other Indebtedness permitted to be incurred by the Issuers or
the Subsidiaries pursuant to the terms of the Indenture, whether involving the
same or any other lender or creditor or group of lenders or creditors, but
only to the extent that (i) the Refinancing Indebtedness is subordinated to
the Notes to at least the same extent as the Indebtedness being refunded,
refinanced or extended,
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if at all, (ii) the Refinancing Indebtedness is scheduled to mature either (a)
no earlier than the Indebtedness being refunded, refinanced or extended, or
(b) after the maturity date of the Notes, (iii) has a weighted average life to
maturity at the time such Refinancing Indebtedness is incurred that is equal
to or greater than the weighted average life to maturity of the Indebtedness
being refunded, refinanced or extended, (iv) such Refinancing Indebtedness is
in an aggregate principal amount that is less than or equal to the aggregate
principal or accreted amount (in the case of any Indebtedness issued with
original issue discount, as such) then outstanding under the Indebtedness
being refunded, refinanced or extended and (v) such Refinancing Indebtedness
is incurred by the same Person that initially incurred the Indebtedness being
refunded, refinanced or extended, except that the Company may incur
Refinancing Indebtedness to refund, refinance or extend Indebtedness of any
Wholly-Owned Subsidiary of the Company.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Equity
Interests of the Company or any Subsidiary thereof or any payment made to the
direct or indirect holders (in their capacities as such) of Equity Interests
of the Company or any Subsidiary thereof (other than (a) dividends or
distributions payable solely in Equity Interests (other than Disqualified
Equity Interests) or in options, warrants or other rights to purchase Equity
Interests (other than Disqualified Equity Interests), (b) in the case of
Subsidiaries of the Company, dividends or distributions payable to the Company
or to a Wholly-Owned Subsidiary of the Company and (c) Permitted Tax
Distributions), (ii) the purchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any Subsidiary
thereof (other than Equity Interests owned by the Company or a Wholly-Owned
Subsidiary, excluding Disqualified Equity Interests), (iii) the making of any
principal payment on, or the purchase, defeasance, repurchase, redemption or
other acquisition or retirement for value, prior to any scheduled maturity,
scheduled repayment or scheduled sinking fund payment, of any Indebtedness
which is subordinated in right of payment to the Notes, (iv) the making of any
Investment or guarantee of any Investment in any Person other than a Permitted
Investment, (v) forgiveness of any Indebtedness of an Affiliate of the Company
to the Company or a Subsidiary thereof, (vi) cash payments in respect of
Phantom Compensation and (vii) the payment of amounts to Stephen Adams (other
than dividends or distributions otherwise permitted by the terms of the
Indenture) to the extent the aggregate amount of such payments made in any one
year exceeds the sum of (i) $200,000 and (ii) the cumulative effect of
reasonable annual cost-of-living adjustments made from the Issue Date to the
date of such payment. For purposes of determining the amount expended for
Restricted Payments, cash distributed or invested shall be valued at the face
amount thereof and property other than cash shall be valued at its fair market
value.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Subsidiary of the Company of
any real or tangible personal property, which property (i) has been or is to
be sold or transferred by the Company or such Subsidiary to such Person in
contemplation of such leasing and (ii) would constitute an Asset Sale if such
property had been sold in an outright sale thereof.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which
more than 50% of the total voting power of the Equity Interests entitled
(without regard to the occurrence of any contingency) to vote in the election
of directors, officers or trustees thereof is held by such first-named Person
or any of its Subsidiaries; or (ii) in the case of a partnership, joint
venture, association or other business entity, with respect to which such
first-named Person or any of its Subsidiaries has the power to direct or cause
the direction of the management and policies of such entity by contract or
otherwise or if in accordance with generally accepted accounting principles
such entity is consolidated with the first-named Person for financial
statement purposes. Notwithstanding the foregoing, an Unrestricted Subsidiary
shall not be deemed a Subsidiary of the Company other than for purposes of the
definition of Unrestricted Subsidiary, unless the Company shall have
designated such Unrestricted Subsidiary as a "Subsidiary" by written notice to
the Trustee. An Unrestricted Subsidiary may be designated as a Subsidiary at
any time by the Company by written notice to the Trustee, provided, however,
that (i) no Default or Event of Default shall have occurred and be continuing
or would arise therefrom and (ii) if such Unrestricted Subsidiary is an
obligor of any Indebtedness, any such designation shall be deemed to be an
incurrence as of the date of such designation by the Company of such
Indebtedness and
72
<PAGE>
immediately after giving effect to such designation, the Company could incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant
to the covenant described under "Limitation on Additional Indebtedness."
"Temporary Cash Investments" means (i) Investments in marketable, direct
obligations issued or guaranteed by the United States of America, or of any
governmental agency or political subdivision thereof, maturing within 365 days
of the date of purchase; (ii) Investments in certificates of deposit issued by
a bank organized under the laws of the United States of America or any state
thereof or the District of Columbia, in each case having capital, surplus and
undivided profits totaling more than $500 million and rated at least A by
Standard & Poor's Corporation and A-2 by Moody's Investors Service, Inc.,
maturing within 365 days of purchase; or (iii) Investments not exceeding 365
days in duration in money market funds that invest substantially all of such
funds' assets in the Investments described in the preceding clauses (i) and
(ii).
"Unrestricted Subsidiary" means, any Subsidiary of the Company which shall
have been designated as an Unrestricted Subsidiary by the Company by written
notice to the Trustee and any Subsidiary of an Unrestricted Subsidiary. A
Subsidiary may be designated as an Unrestricted Subsidiary at any time by the
Company by written notice to the Trustee, provided, however, that (i) no
Default or Event of Default shall have occurred and be continuing or would
arise therefrom, (ii) such designation is at that time permitted under the
covenant described under "Limitation on Restricted Payments" and (iii)
immediately after giving effect to such designation, the Company could incur
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant
to the covenant described under "Limitation on Additional Indebtedness." An
Unrestricted Subsidiary may be designated as a Subsidiary at a later date in
the manner provided in the definition of "Subsidiary" above.
"Wholly-Owned Subsidiary" means any Subsidiary, all of the outstanding
voting securities (other than directors' qualifying shares) of which are
owned, directly or indirectly, by the Company.
BOOK-ENTRY; DELIVERY AND FORM
The Old Notes were initially issued in the form of a Global Note (the
"Original Global Note"). Except for New Notes issued to Non-Global Purchasers
(as defined below), the New Notes will initially be issued in the form of one
or more Global Notes (collectively, the "New Global Notes"). The Original
Global Note was deposited on the date of closing of the sale of the Original
Notes, and the New Global Notes will be deposited on the date of closing of
the Exchange offer, with or on behalf of the Depositary and registered in the
name of CEDE & Co., as nominee of the Depositary (such nominee being referred
to herein as the "DTC Nominee").
Notes that are (i) originally issued to or transferred to "institutional
accredited investors" that are not "qualified institutional buyers," as
defined in Rule 144A under the Securities Act (the "Non-Global Purchasers") or
(ii) issued as described below under "--Certificated Securities" will be
issued in registered form, without interest coupons (the "Certificated
Securities"). Upon the transfer to a qualified institutional buyer of
Certificated Securities initially issued to a Non-Global Purchaser, such
Certificated Securities will, unless the Global Notes have previously been
exchanged for Certificated Securities, be exchanged for an interest in the
Global Notes representing the principal amount of Notes being transferred.
"Global Notes" means the Original Global Notes or the New Global Notes as the
case may be.
DTC is (i) a limited purpose trust company organized under the banking laws
of the State of New York (and is a "banking organization" within the meaning
of such laws), (ii) a member of the Federal Reserve System, (iii) a "clearing
corporation" within the meaning of the New York Uniform Commercial Code, as
amended, and (iv) a "Clearing Agency" registered pursuant to Section 17A of
the Exchange Act. DTC was created to hold securities for its participating
organizations (the "participants") and to facilitate the clearance and
settlement of securities transactions between participants through electronic
book-entry changes to the accounts of its participants. DTC's participants
include securities brokers and dealers, commercial banks, trust companies,
clearing corporations and certain other organizations. DTC is owned by a
number of its direct participants and by each of the New York Stock Exchange,
Inc., the American Stock Exchange, Inc. and the
73
<PAGE>
National Association of Securities Dealers, Inc. Access to DTC's systems is
also available to other entities such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. Persons who are not participants
may beneficially own securities held by or on behalf of the DTC only thorough
the DTC's direct or indirect participants.
Pursuant to procedures established by the Depositary (i) upon deposit of the
Global Notes, the Depositary will credit the accounts of participants in
connection with the Notes with portions of the principal amount of the Global
Notes and (ii) ownership of the Notes will be shown on, and the transfer of
ownership thereof will be effected only through, records maintained by the
Depositary (with respect to the interests of the Depositary's participants),
the Depositary's participants and the Depository's indirect participants.
So long as DTC's Nominee is the registered owner of the Global Notes, DTC or
DTC's Nominee, as the case may be, is considered the sole owner and holder
under the Indenture of the underlying Notes. Unless DTC notifies the Issuers
that it is unwilling or unable to continue serving as depositary for such
Notes, DTC ceases to be a clearing agency registered under the Exchange Act,
the Issuers determine to permit the Global Notes to be exchanged for
certificated Notes or an Event of Default has occurred and is continuing with
respect to the Notes, owners of beneficial interests in the Global Notes will
not be entitled to have the Notes evidenced by the Global Note registered in
their names, will not receive or be entitled to receive physical delivery of
certificated Notes in definitive and fully registered form, and will not be
considered to be the owners or holders of any Notes under the Indenture or
such Notes for any purposes. Neither the Issuers nor the Trustee have any
responsibility or liability for any aspect of the records of DTC or for
maintaining, supervising or reviewing any records of DTC relating to the
Notes.
Payments in respect of the principal of, premium, if any, and interest on
the Global Notes are payable by the Trustee to DTC or DTC's nominee, as the
case may be, as the registered holder under the Indenture. Under the terms of
the Indenture, the Issuers and the Trustee may treat the Persons in whose
names Notes are registered as the owners thereof for the purpose of receiving
such payments. Consequently, neither the Issuers nor the Trustee has any
responsibility or liability of the payment of such amounts to beneficial
owners of Notes (including principal, premium, if any, Liquidated Damages, if
any, and interest). The Issuers believe, however, that it is currently the
policy of DTC to immediately credit the accounts of the relevant participants
with such payments, in amounts proportionate to their respective holdings of
beneficial interests in the relevant security as shown on the records of DTC.
Payments by DTC's direct and indirect participants to the beneficial owners of
Notes are governed by standing instructions and customary practice and are the
responsibility of DTC's direct and indirect participants.
CERTIFICATED SECURITIES
Subject to certain conditions, any Person having a beneficial interest in
the Global Notes may, upon request to the Trustee, exchange such beneficial
interest for Notes in the form of Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of, and cause the same to be delivered to, such Person or Persons (or
the nominee of any thereof). All such certificated Original Notes would be
subject to the legend requirements described herein under "Notice to
Investors." In addition, if (i) the Issuers notify the Trustee in writing that
DTC is no longer willing or able to act as a depositary and the Issuer is
unable to locate a qualified successor with 90 days or (ii) the Issuers, at
their option, notify the Trustee in writing that they elect to cause the
issuance of Notes in the form of Certificated Securities under the Indenture,
then, upon surrender by DTC's Nominee of its Global Notes, Notes in such form
will be issued to each Person that DTC's Nominee and DTC identify as being the
beneficial owner of the related Notes.
Neither the Issuers nor the Trustee are liable for any delay by DTC or DTC's
Nominee, as the case may be, in identifying the beneficial owners of Notes and
the Issuers and the Trustee may conclusively rely on, and will be protected in
relying on, instructions from DTC or DTC's Nominee for all purposes.
Neither DTC nor DTC's Nominee will consent or vote in any manner with
respect to the Notes. Pursuant to its customary procedures, in the case of any
matter as to which the consent or vote of holders of the Notes is
74
<PAGE>
sought, DTC will mail an Omnibus Proxy to the Issuers as soon as practicable
after the record date for the determination of holders eligible to consent or
vote on the matter to be acted upon. The Omnibus Proxy serves to assign DTC's
Nominee's right to consent or vote to the direct participants whose accounts
it maintains as of the record date.
Notices of redemption and repurchase with respect to Notes held by direct
participants in the DTC system will be forwarded to DTC's Nominee. In the case
of a partial redemption, DTC's practice is to determine, by lot, the amount of
the beneficial interest in the Notes to be redeemed of each of its direct
participants.
Beneficial owners who elect to participate in a tender offer or purchase of
their securities, must provide notice of such election, through its direct or
indirect participant in DTC's system, to the appropriate depositary, tender or
purchase agent, and effect delivery of their Notes by causing the direct
participant in DTC's system to transfer the indirect participants interest in
the Notes, as reflected in DTC's records, to such depositary, tender or
purchase agent. The requirement for physical delivery of certificates
evidencing the Notes in connection with aforementioned transactions will be
deemed satisfied when the beneficial ownership rights in the Global Notes are
transferred by direct participants on DTC's records.
The conveyance of all notices and other communications by DTC to its direct
participants, among DTC's direct and indirect participants and by DTC's direct
and indirect participants to owners of beneficial interests in the Notes is
governed by customary arrangements among them, subject to statutory or
regulatory requirements in effect with respect thereto from time to time.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interest in the Global Notes among participants of DTC, it is under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Issuers nor the
Trustee have any responsibility for the performance by DTC or its participants
of their respective obligations under the rules and procedures governing their
operations.
PLAN OF DISTRIBUTION
Each broker-dealer that receives New Notes for its own account pursuant to
the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such New Notes. This Prospectus, as it may be
amended or supplemented from time to time, may be used by a broker-dealer in
connection with resales of New Notes received in exchange for Original Notes
where such Original Notes were acquired as a result of market-making
activities or other trading activities. The Issuers have agreed that, for a
period of 165 days after the effective date of this Prospectus, it will make
this Prospectus, as amended or supplemented, available to any broker-dealer
for use in connection with any such resale.
The Issuers will not receive any proceeds from any sale of New Notes by
broker-dealers. New Notes received by broker-dealers for their own accounts
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the New Notes or a combination of such
methods of resale, at market prices at the time of resale, at prices related
to such prevailing market prices or negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New Notes that were received by it for its own account pursuant
to the Exchange Offer and any broker or dealer that participates in a
distribution of such New Notes may be deemed to be an "underwriter" within the
meaning of the Securities Act and any profit on any such resale of New Notes
and any commissions or concessions received by any such persons may be deemed
to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the Securities Act.
75
<PAGE>
For a period of 165 days after the effective date of this Prospectus, the
Issuers will promptly send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that request
such documents in the Letter of Transmittal. The Issuers have agreed, in
connection with the Exchange Offer, to indemnify the Initial Purchaser against
certain liabilities, including liabilities under the Securities Act.
By acceptance of the Exchange Offer, each broker-dealer that receives New
Notes pursuant to the Exchange Offer hereby agrees to notify the Issuers prior
to using the Prospectus in connection with the sale or transfer of New Notes,
and acknowledges and agrees that, upon receipt of notice from the Issuers of
the happening of any event which makes any statement in the Prospectus untrue
in any material respect or which requires the making of any changes in the
Prospectus in order to make the statements therein not misleading (which notice
the Issuers agree to deliver promptly to such broker-dealer), such broker-
dealer will suspend use of the Prospectus until the Issuers have amended or
supplemented the Prospectus to correct such misstatement or omission and has
furnished copies of the amended or supplemented prospectus to such broker-
dealer.
LEGAL MATTERS
The validity of the New Notes will be passed upon for the Issuers by Kaplan,
Strangis and Kaplan, P.A., Minneapolis, Minnesota. Andris A. Baltins, a member
of the law firm of Kaplan, Strangis and Kaplan, P.A., is a director of AOAI,
the managing general partner of the Company.
EXPERTS
The financial statements of Adams Outdoor Advertising Limited Partnership as
of December 31, 1994 and 1995, and for each of the years in the three-year
period ended December 31, 1995, and the balance sheets of Adams Outdoor
Advertising, Inc. as of December 31, 1994 and 1995, have been included herein
and in the Registration Statement in reliance upon the reports of KPMG Peat
Marwick LLP, independent certified public accountants, appearing elsewhere
herein and upon authority of said firm as experts in accounting and auditing.
The report of KPMG Peat Marwick LLP covering the December 31, 1993, 1994 and
1995 financial statements of Adams Outdoor Advertising Limited Partnership
contains an explanatory paragraph that states that the Company has a net
capital deficiency and its cash flow from operations has not been sufficient to
fund its long-term debt obligations, which raise substantial doubt about the
entity's ability to continue as a going concern. The financial statements do
not include any adjustments that might result from the outcome of that
uncertainty.
AVAILABLE INFORMATION
The Issuers have filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 under the Securities Act
with respect to the New Notes offered hereby (the "Registration Statement").
This Prospectus, which constitutes a part of the Registration Statement, does
not contain all the information set forth in the Registration Statement,
certain portions of which are omitted from the Prospectus as permitted by the
rules and regulations of the Commission. For further information with respect
to the Issuers and the New Notes offered hereby, reference is made to the
Registration Statement, including the exhibits thereto, and financial
statements and notes filed as a part thereof. Statements made in the Prospectus
concerning the contents of any document referred to herein are not necessarily
complete. With respect to each such document filed with the Commission as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference.
The Registration Statement, including the exhibits and schedules thereto, may
be inspected and copied at the Public Reference Section of the Commission at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549 and at
the regional offices of the commission located at Seven World Trade Center, New
York, NY 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, IL 60661. Copies of such materials may be obtained from the
Public Reference Section of the Commission, Room 1024,
76
<PAGE>
Judiciary Plaza, 450 Fifth Street, N.W., Washington, DC 20549, and from its
public reference facilities in New York, NY and Chicago, IL, at the prescribed
rates.
As a result of the Exchange Offer, the Issuers will be subject to the
periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Also, under the
Indenture dated as of March 12, 1996 (the "Indenture"), between the Issuers
and United States Trust Company of New York, as Trustee (the "Trustee"), under
which the Old Notes were issued and the New Notes will be issued, the Issuers
are required to file with the Commission the periodic reports which would be
required if it were subject to such requirements. In addition, the Indenture
requires the Issuers to file copies of such reports with the Trustee and to
mail copies of such reports to the registered holders of the Old Notes and New
Notes.
77
<PAGE>
INDEX TO FINANCIAL STATEMENTS
AUDITED FINANCIAL STATEMENTS:
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
<TABLE>
<S> <C>
Independent Auditors' Report.............................................. F-2
Balance Sheets as of December 31, 1994 and 1995........................... F-3
Statements of Operations for the years ended December 31, 1993, 1994, and
1995..................................................................... F-4
Statements of Changes in Partners' Equity (Deficit) for the years ended
December 31, 1993, 1994, and 1995........................................ F-5
Statements of Cash Flows for the years ended December 31, 1993, 1994, and
1995..................................................................... F-6
Notes to Financial Statements............................................. F-7
ADAMS OUTDOOR ADVERTISING, INC.
Independent Auditors' Report.............................................. F-15
Balance Sheets as of December 31, 1994 and 1995........................... F-16
Statements of Operations for the years ended December 31, 1993, 1994, and
1995..................................................................... F-17
Statements of Stockholder's Equity for the years ended December 31, 1993,
1994, and 1995........................................................... F-18
Statements of Cash Flows for the years ended December 31, 1993, 1994, and
1995..................................................................... F-19
Notes to Financial Statements............................................. F-20
UNAUDITED INTERIM FINANCIAL STATEMENTS:
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
Balance Sheet as of March 31, 1996 (unaudited)............................ F-22
Statements of Operations for the quarters ended March 31, 1995 and 1996
(unaudited).............................................................. F-23
Statements of Cash Flows for the quarters ended March 31, 1995 and 1996
(unaudited).............................................................. F-24
Notes to Interim Financial Statements (unaudited)......................... F-25
ADAMS OUTDOOR ADVERTISING, INC.
Balance Sheet as of March 31, 1996 (unaudited)............................ F-26
Statements of Operations for the quarters ended March 31, 1995 and 1996
(unaudited).............................................................. F-27
Statements of Cash Flows for the quarters ended March 31, 1995 and 1996
(unaudited).............................................................. F-28
Notes to Interim Financial Statements (unaudited)......................... F-29
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Partners
Adams Outdoor Advertising
Limited Partnership:
We have audited the accompanying balance sheets of Adams Outdoor Advertising
Limited Partnership (the Partnership) as of December 31, 1994 and 1995, and
the related statements of operations, changes in partners' equity (deficit),
and cash flows for each of the years in the three-year period ended December
31, 1995. These financial statements are the responsibility of the management
of the Partnership. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Partnership as of
December 31, 1994 and 1995, and the results of its operations and its cash
flows for each of the years in the three-year period ended December 31, 1995
in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Partnership will continue as a going concern. As discussed in note 12 to the
financial statements, the Partnership has a net capital deficiency and its
cash flow from its operations has not been sufficient to fund its long-term
debt obligations, which raise substantial doubt about the ability of the
Partnership to continue as a going concern. Management's plans concerning
these matters are also described in note 12. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
KPMG Peat Marwick LLP
Atlanta, Georgia
February 23, 1996, except for the
last paragraph of note 7 and note 12
which are as of February 28, 1996
F-2
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
ASSETS (NOTE 7) 1994 1995
--------------- ------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................... $ 1,722,167 2,130,911
Accounts receivable, less allowance for doubtful
accounts of $436,497 and $546,123, respectively... 4,715,807 5,324,495
Accounts receivable from related parties (note 2).. 109,329 171,828
Receivables from employees......................... 91,538 160,100
Inventories........................................ 155,246 207,799
Prepaid rent....................................... 1,392,092 1,534,665
Other prepaid expenses (note 3).................... 1,245,091 1,284,298
------------ -----------
Total current assets............................. 9,431,270 10,814,096
Property, plant, and equipment, net (note 4)......... 34,707,433 31,371,378
Intangible assets, net (note 5)...................... 6,452,673 5,950,055
Other assets......................................... 58,750 75,750
------------ -----------
$ 50,650,126 48,211,279
============ ===========
<CAPTION>
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
------------------------------------------
<S> <C> <C>
Current liabilities:
Accounts payable................................... $ 291,588 225,791
Interest payable................................... 1,067,954 680,034
Interest payable to related parties................ -- 340,653
Accrued expenses and other (note 6)................ 1,613,163 1,498,990
Current installments of long-term debt (note 7).... 1,812,500 2,125,000
------------ -----------
Total current liabilities........................ 4,785,205 4,870,468
Long-term debt, less current installments (notes 2
and 7)............................................ 108,550,847 90,598,167
Long-term debt to related parties.................. 2,897,921 14,719,405
Other liabilities (note 10)........................ 2,807,505 4,852,605
------------ -----------
Total liabilities................................ 119,041,478 115,040,645
------------ -----------
Partners' equity (deficit)--(note 1):
General partners' deficit.......................... (69,391,352) (67,829,366)
Limited partners' equity........................... 1,000,000 1,000,000
------------ -----------
Total partners' deficit.......................... (68,391,352) (66,829,366)
Commitments and contingencies (notes 8, 10 and 11)
------------ -----------
$ 50,650,126 48,211,279
============ ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
----------- ---------- ----------
<S> <C> <C> <C>
Gross revenues............................ $36,972,114 41,747,602 47,588,790
Less agency commissions................. (3,510,411) (4,096,908) (4,698,330)
----------- ---------- ----------
Net outdoor advertising revenue....... 33,461,703 37,650,694 42,890,460
----------- ---------- ----------
Operating expenses:
Direct advertising expenses............. 17,539,222 19,560,429 20,848,384
Corporate general and administrative.... 998,286 1,183,291 1,113,593
Depreciation and amortization........... 5,892,133 5,684,400 5,567,736
Deferred compensation (note 10)......... 636,134 1,530,000 2,427,160
----------- ---------- ----------
Total operating expenses.............. 25,065,775 27,958,120 29,956,873
----------- ---------- ----------
Operating income...................... 8,395,928 9,692,574 12,933,587
----------- ---------- ----------
Other expenses (income):
Interest expense........................ 8,867,027 9,607,755 9,865,283
Interest expense to related parties..... 243,811 268,643 1,397,612
Other expenses (income), net............ (164,158) 38,279 16,095
(Gain) loss on disposals of property and
equipment, net......................... 388,525 387,795 92,611
----------- ---------- ----------
Total other expenses.................. 9,335,205 10,302,472 11,371,601
----------- ---------- ----------
Net (loss) income..................... $ (939,277) (609,898) 1,561,986
=========== ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995
<TABLE>
<CAPTION>
GENERAL LIMITED
PARTNERS PARTNERS TOTAL
------------ --------- -----------
<S> <C> <C> <C>
Balances at December 31, 1992.............. $(67,842,177) 1,000,000 (66,842,177)
Net loss................................... (939,277) -- (939,277)
------------ --------- -----------
Balances at December 31, 1993.............. (68,781,454) 1,000,000 (67,781,454)
Net loss................................... (609,898) -- (609,898)
------------ --------- -----------
Balances at December 31, 1994.............. (69,391,352) 1,000,000 (68,391,352)
Net income................................. 1,561,986 -- 1,561,986
------------ --------- -----------
Balances at December 31, 1995.............. $(67,829,366) 1,000,000 (66,829,366)
============ ========= ===========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)...................... $ (939,277) (609,898) 1,561,986
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Depreciation.......................... 5,499,837 5,555,607 5,333,841
Amortization of intangible assets..... 572,607 619,931 701,256
Deferred compensation................. 636,134 1,530,000 2,427,160
Payments for deferred compensation..... (250,000) (267,065) (250,000)
Loss on disposals of property and
equipment, net....................... 388,525 387,795 92,611
Write-off of note payable............. (200,000) -- --
Barter (income) loss.................. (9,959) (214,797) 114,154
Changes in assets and liabilities:
Increase in account receivable, net.. (1,311,431) (493,358) (964,952)
Decrease (increase) in inventories... 4,094 33,570 (52,553)
Increase in prepaid rent and other
prepaid expenses.................... (766,957) (312,161) (181,780)
(Increase) decrease in other assets.. (783) 12,905 (17,000)
Increase (decrease) in accounts
payable and accrued expenses........ 572,983 (49,644) (179,970)
Increase in interest payable......... 787,895 824,081 698,090
Increase (decrease) in other
liabilities--long-term.............. 35 74,961 (132,060)
----------- ----------- -----------
Net cash provided by operating
activities......................... 4,983,703 7,091,927 9,150,783
----------- ----------- -----------
Cash flows from investing activities:
Additions to property, plant, and
equipment............................. (1,656,792) (1,895,268) (2,042,132)
Proceeds from sales of property, plant,
and equipment......................... 2,760 104,694 62,784
----------- ----------- -----------
Net cash used in investing
activities......................... (1,654,032) (1,790,574) (1,979,348)
----------- ----------- -----------
Cash flows from financing activities:
Debt financing costs................... (103,784) (29,609) (198,638)
Advances from long-term debt........... 6,889,766 6,887,630 8,150,394
Payments on long-term debt............. (9,555,479) (12,427,288) (14,714,447)
----------- ----------- -----------
Net cash used in financing
activities......................... (2,769,497) (5,569,267) (6,762,691)
----------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents................... 560,174 (267,914) 408,744
Cash and cash equivalents at beginning
of year................................ 1,429,907 1,990,081 1,722,167
----------- ----------- -----------
Cash and cash equivalents at end of
year................................... $ 1,990,081 1,722,167 2,130,911
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) The Partnership
The Partnership was organized under the Minnesota Uniform Limited
Partnership Act on December 12, 1985 and will terminate on December 31, 2025
unless terminated sooner under the provisions of the Partnership Agreement.
The Partnership was organized for the purpose of acquiring and operating
businesses engaged in the outdoor advertising industry. The managing general
partner is Adams Outdoor Advertising, Inc.
The Partnership Agreement was amended on December 31, 1991 and November 23,
1992 in connection with the agreements entered into between the Partnership
and certain of its lenders (note 7). Under the terms of the amendments, at
December 31, 1993 and 1994, the general partners interests were 71%, the
Class A limited partners interests were 7% and the Class B limited partners
interests were 22%.
The Class B limited partners interests were created in connection with the
original lending agreements and amendments through November 23, 1992. The
Class B limited partners had provided loans totaling $17,381,619 at December
31, 1994. In April 1995, the Class A limited partners interests and the Class
B limited partners interests were purchased by an affiliate of the General
Partner. The purchase consideration of $17,452,677 represented the aggregate
outstanding principal balance on the 9% subordinated notes and convertible
notes payable to the Class B Limited Partners and all accrued interest
thereon, plus a $500,000 payment for the Class A and Class B limited partners
interests. The affiliate of the General Partner currently holds the notes and
Partnership interests. The Partnership continues to make payments on these
notes with the same terms as were made to the previous noteholders.
The Partnership Agreement was amended on March 31, 1995 to convert and
transfer 99% of the general partners interest to Class A limited partners
interests. At December 31, 1995 the general partners interests were 0.71%, the
Class A limited partners interests were 77.29% and the Class B limited
partners interests were 22%. The Partnership Agreement was amended and
restated on January 1, 1996 to among other matters, eliminate classes of
limited partner interests resulting in general partners interests of 0.71% and
limited partners interests of 99.29%.
The Partnership Agreement provides that losses will be allocated 100% to the
general partners. Profits will be allocated to the general and limited
partners in the same proportion, based on their aggregate interest in the
Partnership, as they have received distributions of distributable cash
(defined as annual cash gross receipts, less cash expenses and any amount set
aside for reserves) for such fiscal year. In the event there are profits in a
fiscal year in which no distribution of distributable cash has been made,
profits will be allocated 100% to the general partners.
In the event of a sale, refinancing, or dissolution of the Partnership, the
proceeds available for distribution, after payment of all expenses and
previously outstanding debt of the Partnership, will be distributed to the
partners, up to an amount equal to the respective partners' adjusted aggregate
interest in the Partnership.
(b) Cash Equivalents
The Partnership considers all short-term, highly liquid investments
purchased with an original maturity of three months or less to be cash
equivalents.
F-7
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(c) Inventories
Inventories are valued at the lower of cost or market. Cost is determined by
the first-in, first-out method. Market is defined principally as net
realizable value.
(d) Property, Plant, and Equipment
Property, plant, and equipment are stated at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the assets
which are as follows:
<TABLE>
<S> <C>
Buildings and equipment.................................... 5 to 32 years
Outdoor advertising structures............................. 12 to 15 years
Vehicles, office equipment, machinery and equipment........ 3 to 5 years
</TABLE>
Maintenance and repairs are charged to expense as incurred and major
renewals and betterments are capitalized. The cost and accumulated
depreciation or amortization of property retired or otherwise disposed of are
removed from the accounts, and any resulting gain or loss is included in
income.
(e) Intangible Assets
Intangible assets include organizational costs, financing costs, noncompete
agreements, and goodwill. Goodwill is being amortized using the straight-line
method over periods of between 12 and 40 years. The remaining intangible
assets are recorded at cost and are amortized using the straight-line method
over the assets' estimated useful lives of five years for organizational costs
and noncompete agreements and the terms of the related debt for financing
costs. The Partnership evaluates the carrying value of intangible assets based
upon expected future cash flows.
(f) Income Taxes
The financial statements include only those assets, liabilities, revenues,
and expenses which relate to the Partnership. The financial statements do not
include any assets, liabilities, income, or expenses attributable to the
partners' individual activities. The Partnership is not considered a taxable
entity for Federal and state income tax purposes. Any taxable income or loss,
tax credits, and certain other items are reported by the partners on their own
tax returns in accordance with the Partnership Agreement.
(g) Revenue Recognition
Revenues represent outdoor advertising services provided by the Partnership.
The Partnership recognizes revenue from advertising contracts when billed,
usually on a monthly basis in accordance with contract terms, as advertising
services are provided.
(h) Barter Transactions
Barter transactions, which represent the exchange of advertising for goods
or services, are recorded at the estimated fair value of the advertising
provided and the products or services received. Barter revenue is recognized
when advertising services are rendered, and barter expense is recognized when
the related products or services are received.
(i) Reclassifications
Reclassifications were made to certain 1993 and 1994 amounts to conform to
classifications adopted in 1995.
(j) Recent Accounting Pronouncements
In March 1995, the Financial Accounting Standards Board issued Statement
Number 121, "Impairment of Long-Lived Assets." The Partnership evaluates
whether an impairment exists by assessing whether events have occurred which
could affect the fair value of assets, such as changes in market conditions,
legal restrictions or reduced utilization. When the Partnership determines an
event has occurred, it compares the carrying amount of the asset to its fair
value or the expected future cash flows from its utilization. If the carrying
amount exceeds these valuations an impairment is recognized and recorded. The
Partnership has evaluated its long-lived assets and based on projected
results, an impairment of long-lived assets does not exist at this time. The
Company will re-evaluate potential impairment of long-lived assets
periodically.
On October 23, 1995, the Financial Accounting Standards Board issued
Statement Number 123, "Accounting for Stock-Based Compensation." Currently the
Partnership is structured as a limited partnership, therefore this accounting
principle does not apply at this time.
F-8
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(2) RELATED PARTY TRANSACTIONS
At December 31, 1994 and 1995, the Partnership had notes payable of
$4,244,000 plus accrued interest to Central Advertising Company, the former
owner of Central Advertising Company Limited Partnership. At December 31, 1994
and 1995, the Partnership had notes payable of $1,000,000 plus accrued
interest to Illinois Outdoor Advertising Company Limited Partnership. Both
entities are related to the Partnership through common ownership.
In April 1995, an affiliate of the General Partner purchased the aggregate
outstanding principal balance on the 9% subordinated notes and convertible
notes payable and all accrued interest thereon. At December 31, 1995, the
aggregate balance on the notes held by the affiliate is $11,540,146.
A related party to the Partnership purchased HSP Graphics ("HSP")
headquartered in Canada. The Partnership pays the salary and expenses of the
HSP salesman, who operates in the Atlanta area and HSP has agreed to reimburse
the Partnership for these expenses in cash or services. At December 31, 1994
and 1995, the Partnership had accounts receivable of $109,329 and $171,828,
respectively, outstanding related to this arrangement with HSP. The
Partnership paid HSP $112,104, $38,226, and $42,000 for printing services
provided during 1993, 1994, and 1995, respectively.
Additionally, the Partnership paid $50,000 in 1993 to an affiliate for
management service fees.
(3) OTHER PREPAID EXPENSES
Other prepaid expenses consist of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
---------- ---------
<S> <C> <C>
Prepaid insurance.................................... $ 642,195 494,626
Other prepaid........................................ 602,896 789,672
---------- ---------
$1,245,091 1,284,298
========== =========
</TABLE>
(4) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consists of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
----------- ----------
<S> <C> <C>
Land............................................... $ 1,577,038 1,631,734
Outdoor advertising structures..................... 67,465,371 68,786,649
Buildings and improvements......................... 2,602,813 2,627,851
Automobiles and trucks............................. 2,278,298 2,391,284
Machinery and equipment............................ 606,804 660,742
Office equipment................................... 2,029,173 2,147,457
Construction in progress........................... 138,696 166,379
----------- ----------
76,698,193 78,412,096
Less accumulated depreciation...................... 41,990,760 47,040,717
----------- ----------
$34,707,433 31,371,379
=========== ==========
</TABLE>
F-9
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(5) INTANGIBLE ASSETS
Intangible assets consist of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
---------- ----------
<S> <C> <C>
Goodwill............................................ $7,532,597 7,532,597
Noncompete agreements............................... 625,000 665,000
Financing and organization costs.................... 4,860,798 5,019,445
Other............................................... 50,000 50,000
---------- ----------
13,068,395 13,267,042
Less accumulated amortization....................... 6,615,722 7,316,987
---------- ----------
$6,452,673 5,950,055
========== ==========
</TABLE>
(6) ACCRUED EXPENSES AND OTHER
Accrued expenses and other consist of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
---------- ---------
<S> <C> <C>
Accrued insurance.................................... $ 483,456 470,503
Accrued payroll...................................... 393,415 469,877
Accrued expenses and other........................... 736,292 558,610
---------- ---------
$1,613,163 1,498,990
========== =========
</TABLE>
(7) LONG-TERM DEBT
Long-term debt at December 31, 1994 and 1995 consists of the following:
<TABLE>
<CAPTION>
1994 1995
------------ -----------
<S> <C> <C>
Senior term loan payable in unequal quarterly
principal installments maturing December 31, 1996;
interest payable monthly at LIBOR plus 3 1/4% or
prime plus 1 5/8% (9.09% at December 31, 1995)...... $ 87,994,277 81,583,636
Revolving note payable due December 31, 1996;
interest payable monthly at prime plus 1 5/8%
(10.25% at December 31, 1995)....................... -- 688,062
9% subordinated notes payable partially due to an
affiliate of the General Partner (note 2) December
31, 1996; interest payable quarterly................ 17,230,639 16,389,165
Subordinated note payable to Central Advertising
Company Limited Partnership including amounts due to
related parties of $1,641,173 and $1,792,045 at
December 31, 1994 and 1995, respectively (note 2),
due January 2, 1997; interest at 10% compounded
annually (including capitalized accrued interest of
$1,919,800 and $2,486,436 at December 31, 1994 and
1995, respectively)................................. 6,163,800 6,730,436
Subordinated note payable to Illinois Outdoor
Advertising Ltd. Partnership including amounts due
to related parties of $1,256,748 and $1,387,214 at
December 31, 1994 and 1995, respectively (note 2),
due January 31, 1996; interest at 10% compounded
quarterly (including capitalized accrued interest of
$721,572 and $900,293 at December 31, 1994 and 1995,
respectively)....................................... 1,721,572 1,900,293
9% convertible subordinated notes payable due to an
affiliate of the General Partner (note 2), due
December 31, 1996; interest payable quarterly....... 150,980 150,980
------------ -----------
113,261,268 107,442,572
Less current installments of long-term debt.......... 1,812,500 2,125,000
------------ -----------
Long-term debt, less current installments........ $111,448,768 105,317,572
============ ===========
</TABLE>
F-10
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
All of the assets of the Partnership are pledged as collateral for the long-
term debt.
The revolving note provides up to $3,000,000 to the Partnership. The balance
outstanding under the amended revolving note is $688,062 at December 31, 1995.
The credit agreement underlying the 9% subordinated notes and the 9%
convertible subordinated notes provides for an extension of the maturity date
if the senior term loan's maturity date is extended beyond December 31, 1996,
however, it may not be extended beyond December 31, 1997.
The subordinated notes payable to Central Advertising Company Limited
Partnership and Illinois Outdoor Advertising Ltd. Partnership provide that any
accrued interest which is unpaid at the end of the calendar year should be
capitalized and added to the principal amount outstanding on the notes. These
notes payable can be extended if the senior term loan's maturity date is
extended.
The senior term loan and revolving note payable can be extended for one year
(December 31, 1997) at the option of the Partnership, if certain conditions
are met as set forth in the senior debt agreement at December 31, 1996.
Management of the Partnership believes it will meet the conditions necessary
to extend the term of the senior term loan and revolving note payable to
December 31, 1997.
As a condition of the original senior debt agreement and, as renegotiated in
1992, the senior lender required the Partnership to enter into an Appreciation
Rights Agreement. The appreciation rights consist of "A" and "B" rights, which
are subject to redemption at a defined purchase price using fair market value
of the Partnership, less its indebtedness and certain other liabilities (the
"appraisal amount"). When the appreciation rights were granted, the
Partnership assigned no value to these rights. The senior lender has the right
to require that the Partnership redeem and cancel the appreciation rights (the
"put" option) at any time on or after the 9% subordinated and 9% convertible
notes are paid in cash at the defined purchase price; however, the put option
may not be exercised at any time before October 1, 1995 if, as a result of
such redemption, an event of default would occur. The Partnership has the
right to redeem and cancel the appreciation rights, referred to as the "call
option," at any time on or after August 1, 1994 at an amount equal to 3% of
the appraisal amount for "A" appreciation rights plus 1% of the appraisal
amount less $250,000 for "B" appreciation rights. If the appreciation rights
have not been redeemed by July 1, 1999, the Partnership must redeem and cancel
them at that time. Based upon an independent appraisal as of July 31, 1994,
the appreciation rights were redeemed on February 27, 1995 for cash
consideration of $334,041 for the "A" appreciation rights and no consideration
for "B" appreciation rights and the amount paid was charged to interest
expense.
The senior debt agreement related to the senior term loan and revolving
notes includes, among other things, provisions for the maintenance of a
specified level of operating cash flow, specified ratios of operating profit
to interest expense and to principal outstanding, restrictions on the amount
and character of future debt that may be incurred by the Partnership, and
restrictions on certain payments, including capital expenditures, deferred
compensation, interest in other notes payable, and corporate expenses.
During 1994, management of the Partnership requested a waiver of the capital
expenditures and corporate expense limitations as set forth in its senior debt
agreement, which was granted by the senior lender on December 22, 1994 by
increasing the amounts allowed for capital expenditures and corporate expenses
for the year ended December 31, 1994. In return for the waiver, the senior
lender received a one-time, lump-sum payment on the senior debt equal to the
amount by which the Partnership exceeded these limitations.
F-11
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Additionally, the senior lender to the Partnership asserted that the
Partnership had, in 1994, made deferred compensation payments and salary
payments to management in excess of the limitations in the senior debt
agreement. While disputing such assertions, management acted to obtain
repayment of the compensation that was asserted by the senior lender to be in
excess of the applicable limitations. Management believes that its actions
have satisfied the requirements of the covenants of its senior debt agreement.
Although the senior lender has not conceded that the Partnership is in
compliance with such covenants, on May 9, 1995 the senior lender agreed to
forbear through December 30, 1996 from exercising its rights and remedies
under the senior debt agreement, which could include acceleration of the
outstanding indebtedness prior to its due date of December 31, 1996. On
February 2, 1996, the senior lender agreed to extend the previous forbearance
through February 28, 1997.
Management of the Partnership believes it was in compliance with the
provisions of the senior debt agreement at December 31, 1995.
On February 28, 1996, the senior lender agreed to extend the maturity date
of the senior term loan and revolving note payable to March 3, 1997. As a
result of the senior lender's extension and since the credit agreements
pertaining to the subordinated notes provide for an extension of the maturity
date if the senior debt is extended, all indebtedness has been classified as
long-term at December 31, 1995, except for those installments of the senior
term loan contractually due in the year ending December 31, 1996.
Annual minimum maturities of long-term debt are as follows:
<TABLE>
<S> <C>
1996......................................................... $ 2,125,000
1997......................................................... 105,317,572
------------
$107,442,572
============
</TABLE>
(8) LEASE COMMITMENTS
The Partnership leases real estate to erect signs in commercial and
industrial zoned areas along traffic routes in cities or close to populated
urban areas. The Partnership also leases certain vehicles used in its
operations. These leases have terms ranging from one to 10 years.
Approximate future minimum lease payments under these noncancelable
operating leases, having terms greater than one year, as of December 31, 1995
are as follows:
<TABLE>
<S> <C>
Years ending December 31:
1996....................................................... $ 3,076,631
1997....................................................... 2,597,840
1998....................................................... 2,092,489
1999....................................................... 1,494,518
2000....................................................... 1,070,438
Thereafter................................................. 3,204,183
-----------
$13,536,099
===========
</TABLE>
Rent expense incurred under operating leases aggregated approximately
$4,033,000, $4,823,000, and $5,406,000 for the years ended December 31, 1993,
1994, and 1995, respectively.
(9) EMPLOYEE BENEFIT PLANS
401(k) Plan
The Partnership has a 401(k) deferred savings and profit sharing plan.
Employees must be at least age 21 and have completed one year of service to
participate in the plan. Employees may contribute up to 10% of their salaries,
and the Partnership matches employee contributions at the rate of 50% up to 6%
of the employee's
F-12
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
salary. The Partnership's contributions to the plan were $167,679, $152,675,
and $158,195 in the years ended December 31, 1993, 1994, and 1995,
respectively.
Nonqualified Retirement Plan
The Partnership also maintains a nonqualified retirement plan for corporate
management. Under such plan, the Partnership made no contribution to the Plan
in 1993, 1994 or 1995.
(10) DEFERRED COMPENSATION BENEFITS
The Partnership has deferred compensation benefits referred to as phantom
stock agreements with certain management personnel. The compensation is
calculated using a multiple of the operating profit of a division or the
Partnership for the fiscal year ending immediately prior to the determination
date over the base cost, which is the assigned value of the division or the
Partnership, at the date of the agreement's execution. The agreements provide
for three equal annual payments to the participants upon the determination
date, which is defined as termination, death, disability, the sale of the
Partnership, or the fifth anniversary of the agreement's execution. The
Partnership incurred deferred compensation expense related to these agreements
of $636,134, $1,530,000, and $2,427,160 for the years ended December 31, 1993,
1994, and 1995, respectively. Deferred compensation is included in other
liabilities since the senior debt agreement limits annual cash payments to no
more than $250,000, and only if certain cash flow levels are achieved.
In 1995, the Chief Executive Officer and the Partnership mutually terminated
his participation in deferred compensation benefits under his phantom stock
agreement, with the Partnership agreeing to pay him $2,000,000 upon the
refinancing (see note 14) of all of the Partnership's outstanding debt
obligations. As a result, $787,550 was expensed on March 31, 1995 such that
total deferred compensation benefits include $2,000,000 related to this
arrangement.
(11) COMMITMENTS AND CONTINGENCIES
Zoning Regulations
In some of the localities in which the Partnership operates, outdoor
advertising is subject to restrictive and, in some cases, prohibitive, zoning
regulations. Management expects Federal, state, and local regulations to
continue to be a significant factor in the operation of the Partnership's
business. While it is not possible to predict the extent to which such
regulations could affect future operations, management believes there is no
material adverse impact on the financial condition of the Partnership from
these regulations.
Litigation
The Partnership is a party to a number of lawsuits and claims which it is
vigorously defending. Such matters arise out of the normal course of business
and relate to government regulations and other issues. Certain of these
actions seek damages. While the results of litigation cannot be predicted with
certainty, management believes, based on advice of Partnership counsel, the
final outcome of such litigation will not have a material adverse effect on
the financial statements of the Partnership.
(12) GOING CONCERN
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. As shown in the financial
statements, during the years ended December 31, 1993, 1994, and 1995, the
Partnership reported net (losses) income of ($939,277), ($609,898), and
$1,561,986, respectively, and as of those dates, the Partnership's
F-13
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
total liabilities exceeded its total assets by $68,391,352 and $66,829,366 at
December 31, 1994 and 1995, respectively. Additionally, approximately $105
million of the Partnership's long-term debt has scheduled maturities in 1997
(see note 7) and the Partnership has been unable to fund its long-term debt
from cash flow from operations, which raise substantial doubt about the
Partnership's ability to continue as a going concern. The Company is pursuing
several alternatives to provide the necessary financing for its operations.
Its first option is to refinance its existing indebtedness with a combination
of privately placed bonds and a revolving line of credit. Secondly, there have
been discussions regarding the refinancing of existing indebtedness with a new
bank group. Thirdly, the Company has discussed the possibility of extending
its existing senior debt for a period of one year until these other
alternatives can be finalized. The Company believes it can refinance its
existing debt obligations based upon its discussions with other potential
lenders.
The financial statements do not include any adjustments relating to the
recoverability and classification of liabilities that might be necessary
should the Partnership be unable to continue as a going concern. The
Partnership's continuation as a going concern is dependent upon its ability to
generate sufficient cash flow to meet its obligations on a timely basis, to
comply with terms and covenants of its financing agreements, to obtain
additional financing or refinancing as may be required, and ultimately to
attain successful operations. Management believes that the Partnership will
generate sufficient funds to meet its obligations from forecasted cash flows
and the refinancing of a portion of its debt obligations through the bond
offering referenced in note 14 or, if such bond offering should not be
consummated, from a refinancing of the remaining balance of such 1997
maturities (see note 7).
(13) SUPPLEMENTAL CASH FLOW INFORMATION
The following summarizes supplemental cash paid and noncash activities for
the years ended December 31, 1993, 1994, and 1995:
<TABLE>
<CAPTION>
1993 1994 1995
---------- --------- ---------
<S> <C> <C> <C>
Supplemental disclosure of cash paid during the
year for interest.............................. $8,146,627 9,238,046 9,668,563
========== ========= =========
Supplemental disclosure of noncash activities:
Accrued interest payable capitalized to long-
term debt (note 7)........................... $ 660,209 676,949 745,357
========== ========= =========
Property, plant, and equipment acquired for
accounts receivable.......................... $ 380,130 260,299 111,049
========== ========= =========
</TABLE>
(14) SUBSEQUENT EVENT--BOND OFFERING
The Partnership is currently pursuing a bond offering which is expected to
be effective during the first quarter of 1996. The proceeds of the offering
will be used to retire all outstanding debt obligations of the Partnership.
F-14
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Adams Outdoor Advertising, Inc.:
We have audited the accompanying balance sheets of Adams Outdoor
Advertising, Inc. (the "Company") as of December 31, 1994 and 1995 and the
related statements of operations, stockholder's equity and cash flows for the
three-year period ended December 31, 1995. These financial statements are the
responsibility of the management of the Company. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1994 and 1995, and the results of its operations and its cash flows for
each of the years in the three-year period ended December 31, 1995 in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Atlanta, Georgia
February 23, 1996
F-15
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
BALANCE SHEETS
DECEMBER 31, 1994 AND 1995
<TABLE>
<CAPTION>
ASSETS 1994 1995
------ ----- ----
<S> <C> <C>
Investment (note 2)................................................. $ 40 40
===== ====
<CAPTION>
STOCKHOLDER'S EQUITY
--------------------
<S> <C> <C>
Preferred stock, $0.001 par value
Authorized 800,000 shares; no shares issued or outstanding $ -- --
Common stock, $0.001 par value
Authorized 200,000 shares; 10,000 shares issued and outstanding.... 100 100
Additional paid-in capital.......................................... 900 900
Common stock subscribed............................................. (960) (960)
----- ----
Commitment (note 3) $ 40 40
===== ====
</TABLE>
See accompanying notes to financial statements.
F-16
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Revenues......................................................... $-- -- --
Expenses......................................................... -- -- --
---- ---- ----
Net income (loss)................................................ $-- -- --
==== ==== ====
</TABLE>
See accompanying notes to financial statements.
F-17
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
<TABLE>
<CAPTION>
ADDITIONAL COMMON TOTAL
PREFERRED COMMON PAID-IN STOCK STOCKHOLDER'S
STOCK STOCK CAPITAL SUBSCRIBED EQUITY
--------- ------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1992..................... $-- 100 900 (960) 40
Net income (loss)......... -- -- -- -- --
---- --- --- ---- ---
BALANCE DECEMBER 31, 1993. -- 100 900 (960) 40
Net income (loss)......... -- -- -- -- --
---- --- --- ---- ---
BALANCE DECEMBER 31, 1994. -- 100 900 (960) 40
Net income (loss)......... -- -- -- -- --
---- --- --- ---- ---
DECEMBER 31, 1995......... $-- 100 900 (960) 40
==== === === ==== ===
</TABLE>
See accompanying notes to financial statements.
F-18
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1994, AND 1995
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities............................. $-- -- --
Cash flows from investing activities............................. -- -- --
Cash flows from financing activities............................. -- -- --
---- --- ---
Net change in cash............................................. -- -- --
Cash at beginning of year........................................ -- -- --
---- --- ---
Cash at end of year.............................................. $-- -- --
==== === ===
</TABLE>
See accompanying notes to financial statements.
F-19
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) The Company
The Company was organized as a corporation under the Minnesota Statutes on
December 12, 1985. The Company is the managing general partner of Adams
Outdoor Advertising Limited Partnership (the "Partnership"). The Company is
wholly-owned by the individual general partner of the Partnership, who is also
a limited partner in the Partnership. The Company has nominal assets and does
not conduct any operations, except for its activities as managing general
partner of the Partnership.
The Company and its sole stockholder have agreed that all profits or losses
allocable to the general partners will be allocated to the individual general
partner, and none will be allocated to the Company.
(b) Investment
Investment consists of a general and limited partnership interest which are
carried at cost, since the partnership interest is not readily marketable.
(c) Income Taxes
Income taxes are accounted for under the asset and liability method.
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. 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.
(d) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
F-20
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(2) INVESTMENT IN AFFILIATED PARTNERSHIP
The Company has a 1.00% aggregate partnership interest in the Partnership
which consists of 0.01% general partnership interest and 0.99% limited
partnership interest. Summary audited financial information for the investee
Partnership as of and for the years ended December 31, 1994 and 1995 follows
(in thousands of dollars):
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Balance Sheet Information:
Current assets................................... $ 9,431 $ 10,814
Current liabilities.............................. (4,785) (4,870)
--------- ---------
Working capital.................................. 4,646 5,944
--------- ---------
Property, plant and equipment.................... 34,707 31,371
Intangible assets, net........................... 6,453 5,950
Other assets..................................... 59 76
Long-term debt................................... (111,449) (105,318)
Other liabilities................................ (2,807) (4,852)
--------- ---------
Partners' deficit................................ $ (68,391) $ (66,829)
========= =========
Income Statement Information:
Net outdoor advertising revenues................. $ 37,651 $ 42,890
========= =========
Operating income................................. $ 9,693 $ 12,933
========= =========
Net (loss) income................................ $ (610) $ 1,562
========= =========
</TABLE>
(3) EMPLOYMENT AGREEMENT WITH SOLE STOCKHOLDER
Effective January 1, 1996, the Company entered into an employment agreement
with the sole stockholder as an executive, which provides a base salary and
benefits, subject to increases based on the Consumer Price Index annually,
plus reimbursement of business expenses. The agreement expires December 31,
2001 unless terminated by the Company or the sole stockholder and provides one
year of severance pay, if terminated by the Company under certain
circumstances.
F-21
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
ASSETS 1996
------ ------------
<S> <C>
Current assets:
Cash and cash equivalents....................................... $ 2,675,110
Accounts receivable, less allowance for doubtful accounts of
$633,015....................................................... 5,506,560
Accounts receivable from related parties........................ 178,009
Accounts receivable from employees.............................. 105,599
Inventories..................................................... 207,262
Prepaid rent.................................................... 1,661,317
Other prepaid expenses.......................................... 1,168,826
------------
Total current assets.......................................... 11,502,683
Property, plant and equipment, net................................ 31,013,850
Intangible assets, net............................................ 9,608,474
Other assets...................................................... 71,916
------------
$ 52,196,923
============
<CAPTION>
LIABILITIES AND PARTNERS' EQUITY (DEFICIT)
------------------------------------------
<S> <C>
Current liabilities:
Accounts payable................................................ 413,195
Interest payable................................................ 580,860
Interest payable to related parties............................. --
Accrued expenses and other...................................... 1,380,917
Current installments of long term debt.......................... --
Deferred compensation........................................... 2,715,586
------------
Total current liabilities..................................... 5,090,558
Long term debt, less current installments......................... 111,980,528
Long term debt--related parties................................... --
Other liabilities................................................. 112,117
Deferred compensation............................................. 2,105,035
------------
Total liabilities............................................. 119,288,238
Partners' equity (deficit):
General partners' deficit....................................... (68,091,315)
Limited partners' equity........................................ 1,000,000
------------
Total partners' deficit....................................... (67,091,315)
Commitments and contingencies.....................................
------------
$ 52,196,923
============
</TABLE>
See accompanying notes to unaudited interim financial statements.
F-22
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
------------------------
1995 1996
----------- -----------
<S> <C> <C>
Gross Revenues....................................... $10,531,264 $11,396,555
Less agency commissions............................ 1,006,837 1,016,766
----------- -----------
Net outdoor advertising revenue.................. 9,524,427 10,379,789
Operating expenses:
Direct advertising expenses........................ 5,256,201 5,471,954
Corporate general and administrative............... 257,245 467,169
Depreciation and amortization...................... 1,407,777 1,447,102
Deferred compensation.............................. 1,152,000 250,000
----------- -----------
Total operating expenses......................... 8,073,223 7,636,225
----------- -----------
Operating income................................. 1,451,204 2,743,564
----------- -----------
Other expenses (income):
Interest expense................................... 2,608,324 2,730,976
Interest expense--related parties.................. 456,911 275,175
Other expenses (income), net....................... (2,384) 945
(Gain) loss on disposals of property, plant and
equipment, net.................................... (8,340) (1,579)
----------- -----------
Total other expenses............................. 3,054,511 3,005,517
----------- -----------
Net loss......................................... $(1,603,307) $ (261,953)
=========== ===========
</TABLE>
See accompanying notes to unaudited interim financial statements.
F-23
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED MARCH 31,
--------------------------
1996 1995
------------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss...................................... $ (261,953) $(1,603,307)
Adjustments to reconcile net loss to cash
provided by (used in) operating activities:
Depreciation................................. 1,387,125 1,328,802
Amortization of intangible assets............ 524,844 154,446
Deferred compensation expense................ 250,000 1,152,000
Payments of deferred compensation............ (159,255) (14,091)
Barter (income) expense...................... 36,229 90,150
Gain (loss) on disposals of property, plant
and equipment, net.......................... 1,579 8,340
Changes in assets and liabilities:
Increase in accounts receivable, net........ (196,968) (153,038)
Decrease (increase) in inventories.......... 537 (24,789)
Increase in prepaid rent and other prepaid
expenses................................... (11,180) (118,567)
Decrease in other assets.................... 3,834 2,326
Increase in accounts payable and accrued
expenses................................... 69,329 54,630
Decrease in interest payable................ (439,827) (150,907)
Increase (decrease) in other liabilities.... (10,610) 38,111
------------- -----------
Net cash provided by operating activities.. 1,193,684 764,106
Cash flows from investing activities:
Additions to property, plant and equipment.... (1,004,178) (563,550)
Cash flows from financing activities:
Debt financing costs.......................... (4,183,263) (78,397)
Proceeds from Senior Notes.................... 105,000,000 2,991,478
Payments on long-term debt.................... (103,560,515) (3,348,674)
Advances on revolving line of credit.......... 3,098,471 0
------------- -----------
Net cash provided by (used in) financing
activities................................ 354,693 (435,593)
------------- -----------
Net increase (decrease) in cash and cash
equivalents............................... 544,199 (235,037)
Cash and cash equivalents at beginning of
period........................................ 2,130,911 1,722,167
------------- -----------
Cash and cash equivalents at end of period..... $ 2,675,110 $ 1,487,130
============= ===========
</TABLE>
See accompanying notes to unaudited interim financial statements.
F-24
<PAGE>
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
NOTES TO INTERIM FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements included herein have been
prepared by Adams Outdoor Advertising Limited Partnership (the "Company") in
accordance with the instructions for Form 10-Q and therefore, do not include
all information and footnotes necessary for a fair presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. All adjustments consist of normal recurring
accruals, which are necessary for a fair presentation of the information for
the periods described. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been considered or omitted pursuant to
such rules and regulations. Although the Company believes that the disclosures
are adequate to make the information presented not misleading, it is suggested
that these financial statements be read in conjunction with the Company's 1995
audited financial statements and notes thereto.
(2) DEFERRED COMPENSATION
On March 31, 1995, the Chief Executive Officer and the Partnership mutually
terminated his participation in deferred compensation benefits under his
phantom stock agreement by agreeing to pay him $2,000,000 upon the refinancing
of all of the Partnership's outstanding debt obligations. The Partnership
expensed $787,550 as deferred compensation expense related to this transaction
for the three months ended March 31, 1995. As a result, deferred compensation
payable at March 31, 1996 and December 31, 1995 includes $2,000,000 related to
this arrangement.
(3) REFINANCING
On March 12, 1996, the Company arranged a new $120 million credit facility
consisting of $105 million at 10 3/4%, Senior Notes due 2006 under an
Indenture (the "Indenture"), and a new $15 million revolving line of credit
(the "New Credit Facility"). Substantially all of the assets of the Company
are pledged to secure indebtedness of up to $15.0 million (of which
approximately $3.1 million was outstanding as of March 31, 1996) under the New
Credit Facility and, accordingly, the lenders thereunder will have a prior
claim on those assets. Permitted borrowings under the New Credit Facility are
subject to various conditions. In addition, the availability of borrowings are
subject to compliance with certain financial covenants. Scheduled reductions
in the banks' commitments under the New Credit Facility will commence in 1997.
The agreement governing the New Credit Facility contains a number of covenants
that are more restrictive than those contained in the Indenture, including
covenants requiring the Company to maintain certain financial ratios that
become more restrictive over time. Adverse operating results could cause
noncompliance with one or more of these covenants, reducing the Company's
borrowing availability, and, in certain circumstances, entitling the lenders
to accelerate the maturity of outstanding borrowings.
As a result of the Refinancing, the Company's previously existing debt was
paid as follows:
<TABLE>
<S> <C>
Long-term debt outstanding at December 31, 1995............ $107,442,572
Accrued interest at December 31, 1995...................... 1,020,687
Interest expensed subsequent to December 31, 1995 and prior
to the Refinancing........................................ 1,965,243
Payments subsequent to December 31, 1995 for principal and
interest prior to the Refinancing......................... (2,308,090)
Proceeds from the Refinancing:
Senior Notes............................................. 105,000,000
Revolving line of credit................................. 3,098,471
Payments of long-term debt, including interest............. (104,238,355)
------------
Long-term debt outstanding at March 31, 1996............... $111,980,528
============
</TABLE>
F-25
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31,
ASSETS 1996
------ ---------
<S> <C>
Investment............................................................. $ 40
=====
<CAPTION>
STOCKHOLDER'S EQUITY
--------------------
<S> <C>
Preferred stock, $0.001 par value
Authorized 800,000 shares; no shares issued or outstanding............ $ --
Common stock, $0.001 par value
Authorized 200,000 shares; 10,000 shares issued and outstanding....... 100
Additional paid-in capital............................................. 900
Common stock subscribed................................................ (960)
-----
$ 40
=====
</TABLE>
See accompanying notes to unaudited interim financial statements.
F-26
<PAGE>
ADAMS OUTDOOR ADVERTISING INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER ENDED
MARCH 31,
--------------
1995 1996
------- ------
<S> <C> <C>
Revenues........................................................ $ -- --
Expenses........................................................ -- --
------- ------
Net income (loss)............................................... $ -- --
======= ======
</TABLE>
See accompanying notes to unaudited interim financial statements.
F-27
<PAGE>
ADAMS OUTDOOR ADVERTISING, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
ENDED
MARCH 31,
---------
1995 1996
---- ----
<S> <C> <C>
Cash flows from operating activities.................................. $-- --
Cash flows from investing activities.................................. -- --
Cash flows from financing activities.................................. -- --
---- ---
Net change in cash.................................................. -- --
Cash at beginning of period........................................... -- --
---- ---
Cash at end of period................................................. $-- --
==== ===
</TABLE>
See accompanying notes to unaudited interim financial statements.
F-28
<PAGE>
ADAMS OUTDOOR ADVERTISING INC.
NOTES TO INTERIM FINANCIAL STATEMENTS
MARCH 31, 1996
(UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited financial statements included herein have been
prepared by Adams Outdoor Advertising Inc. (the "Company") in accordance with
the instructions for Form 10-Q and therefore, do not include all information
and footnotes necessary for a fair presentation of financial position, results
of operations, and cash flows in conformity with generally accepted accounting
principles. All adjustments consist of normal recurring accruals, which are
necessary for a fair presentation of the information for the periods
described. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been considered or omitted pursuant to such rules and
regulations. Although the Company believes that the disclosures are adequate
to make the information presented not misleading, it is suggested that these
financial statements be read in conjunction with the Company's 1995 audited
financial statements and notes thereto.
F-29
<PAGE>
================================================================================
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE ISSUERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR THE SOLICITATION OF AN OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON
MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES
CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
ISSUERS 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.............................................................. 13
The Exchange Offer........................................................ 18
The Company............................................................... 25
Refinancing and Use of Proceeds........................................... 27
Capitalization............................................................ 28
Selected Historical and Pro Forma Financial Data.......................... 29
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 31
Business.................................................................. 37
Management................................................................ 45
Certain Transactions...................................................... 48
Principal Security Holders................................................ 49
Description of the Company's Partnership Agreement........................ 50
Description of New Credit Facility........................................ 51
Description of the Notes.................................................. 52
Plan of Distribution...................................................... 75
Legal Matters............................................................. 76
Experts................................................................... 76
Available Information..................................................... 76
Index to Financial Statements............................................. F-1
</TABLE>
-----------
UNTIL , 1996 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL
DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN SELLING NEW
NOTES RECEIVED IN EXCHANGE FOR ORIGINAL NOTES HELD FOR THEIR OWN ACCOUNT. SEE
"PLAN OF DISTRIBUTION."
===============================================================================
===============================================================================
[LOGO OF ADAMS APPEARS HERE]
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
ADAMS OUTDOOR ADVERTISING, INC.
OFFER TO EXCHANGE ITS
10 3/4% SENIOR NOTES DUE 2006
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT
FOR ANY AND ALL OF ITS OUTSTANDING
10 3/4% SENIOR NOTES DUE 2006
----------
PROSPECTUS
----------
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Adams Outdoor Advertising, Inc. ("AOAI"), one of the registrants is a
Delaware corporation. AOAI's Certificate of Incorporation or By-laws contains
provisions limiting the personal liability of its directors for monetary
damages resulting from breaches of their duty of care to the extent permitted
by Section 102(b)(7) of the Delaware General Corporation Law. AOAI's
Certificate of Incorporation or By-laws also contains provisions making
indemnification of such company's directors and officers mandatory to the
fullest extent permitted by the Delaware General Corporation Law.
The Delaware General Corporation Law permits the indemnification by a
Delaware corporation of its directors, officers, employees and other agents
against expenses (including attorneys' fees), judgments, fines and amounts
paid in settlement in connection with specified actions, suits or proceedings,
whether civil, criminal, administrative or investigative (other than
derivative actions which are by or in the right of the corporation) if they
acted in good faith and in a manner they 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 their
conduct was illegal. A similar standard of care is applicable in the case of
derivative actions, except that indemnification only extends to expenses
(including attorneys' fees) incurred in connection with defense or settlement
of such an action and court approval is required before there can be any
indemnification where the person seeking indemnification has been found liable
to the corporation.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER
-------
<C> <S>
3.1* Articles of Incorporation of Adams Outdoor Advertising, Inc.
("AOAI")
3.2* By-laws of AOAI
3.3* Limited Partnership Agreement of Adams Outdoor Advertising
Limited Partnership (the "Company")
4.1* Indenture dated as of March 12, 1996 among the Company, AOAI and
United States Trust Company, as Trustee (the "Indenture")
4.2* Form of Original Note
4.3* Form of New Note
4.4* Registration Rights Agreement dated as of March 12, 1996 among
the Company, AOAI and the Initial Purchaser referred to therein
5.1* Legal Opinion of Kaplan, Strangis and Kaplan, P.A.
10.1* Securities Purchase Agreement dated as of March 5, 1996 by and
among the Company, AOAI and the Initial Purchaser referred to
therein
10.2* Employment Agreement between AOAI and Stephen Adams
10.3* Agreement between Kevin Gleason and the Company
10.4* Phantom Stock Agreement between the Company and Abe Levine
10.5* Nonqualified Retirement Plan for Key Employees
12.1* Statement re: Computation of Ratios
23.1(1) Consent of Kaplan, Strangis and Kaplan, P.A.
23.2** Consent of KPMG Peat Marwick LLP, independent auditors addressed
to the Company.
23.3** Consent of KPMG Peat Marwick LLP, independent auditors addressed
to AOAI.
24.1* Powers of Attorney
25.1* Statement of Eligibility of Trustee, United States Trust Company,
on Form T-1
99.1* Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
</TABLE>
- --------
(1) Filed as part of the opinion of Kaplan, Strangis and Kaplan, P.A. (see
Exhibit 5.1).
* Previously filed.
** Filed herewith.
II-1
<PAGE>
(b) FINANCIAL STATEMENT SCHEDULES
Schedule II Adams Outdoor Advertising Limited Partnership Valuation and
Qualifying Accounts
(c) NOT APPLICABLE.
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended, may be permitted to directors, officers and
controlling persons of the Registrants pursuant to the foregoing provisions,
or otherwise, the Registrants have been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act of 1933, as amended, and is
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrants of
expenses incurred or paid by a director, officer or controlling person of the
Registrants 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 Registrants 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 Act and will be governed by
the final adjudication of such issue.
(b) (1) The undersigned Registrants hereby undertake as follows: that prior
to any public reoffering of the securities registered hereunder through use of
a prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuers undertake that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(2) The Registrants undertake that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Act and is used in connection with
an offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(c) The undersigned Registrants hereby undertake:
(1) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the Registration Statement through the date of responding
to the request.
(2) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not subject of and included in the Registration Statement when it
became effective.
(d) The undersigned Registrants hereby undertake that:
(1) For the purposes of determining liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
the registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrants pursuant to Rule 424(b) (1) or
(4) or 487(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it is declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED ADAMS
OUTDOOR ADVERTISING, INC., A DELAWARE CORPORATION, HAS DULY CAUSED THIS
AMENDMENT TO THE REGISTRATION STATEMENT TO BE SIGNED ON BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED IN THE CITY OF ATLANTA, GEORGIA ON JULY
15, 1996;
Adams Outdoor Advertising, Inc.
/s/ J. Kevin Gleason
By __________________________________
J. Kevin Gleason
President and Chief Executive
Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
AMENDMENT TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. Kevin Gleason President, Chief Executive July 15, 1996
____________________________________ Officer and Director
J. Kevin Gleason (Principal Executive
Officer)
/s/ Abe Levine Chief Financial Officer July 15, 1996
____________________________________ (Principal Financial and
Abe Levine Accounting Officer)
* Chairman of the Board July 15, 1996
____________________________________ (Director)
Stephen Adams
* Director July 15, 1996
____________________________________
Andris A. Baltins
* Director July 15, 1996
____________________________________
David Frith-Smith
* Director July 15, 1996
____________________________________
George Pransky
</TABLE>
/s/ J. Kevin Gleason
*By: __________________________
J. Kevin Gleason
(as attorney-in-fact)
II-3
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Adams Outdoor Advertising Limited Partnership:
Under date of February 23, 1996, we reported on the balance sheets of Adams
Outdoor Advertising Limited Partnership as of December 31, 1994 and 1995, and
the related statements of operations, partners' equity (deficit) and cash
flows for each of the years in the three-year period ended December 31, 1995,
which are included in the registration statement. In connection with our
audits of the aforementioned financial statements, we also audited the related
financial statement schedule in the registration statement. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly,
in all material respects, the information set forth therein.
The audit report on the financial statements of Adams Outdoor Advertising
Limited Partnership referred to above contains an explanatory paragraph that
states that the Partnership has a net capital deficiency and its cash flow
from operations has not been sufficient to fund its long-term debt
obligations, which raise substantial doubt about the entity's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of that uncertainty.
KPMG Peat Marwick LLP
Atlanta, Georgia
February 23, 1996
<PAGE>
SCHEDULE II
ADAMS OUTDOOR ADVERTISING LIMITED PARTNERSHIP
VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED BALANCE AT
BEGINNING OF TO DEDUCTIONS-- END OF
PERIOD COSTS DESCRIBE PERIOD
------------ ------- ------------ ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1993--
allowance for doubtful accounts.. $462,885 108,769 244,211(1) 327,443
Year ended December 31, 1994--
allowance for doubtful accounts.. $327,443 271,393 162,339(1) 436,497
Year ended December 31, 1995--
allowance for doubtful accounts.. $436,497 237,114 127,488(1) 546,123
</TABLE>
- --------
(1) Accounts deemed to be uncollectible and written off, net of any recoveries
during the period.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NO.
----------- ----------- --------
<C> <S> <C>
3.1* Articles of Incorporation of Adams Outdoor Advertising,
Inc. ("AOAI")
3.2* By-laws of AOAI
3.3* Limited Partnership Agreement of Adams Outdoor
Advertising Limited Partnership (the "Company")
4.1* Indenture dated as of March 12, 1996 among the Company,
AOAI and United States Trust Company, as Trustee (the
"Indenture")
4.2* Form of Original Note
4.3* Form of New Note
4.4* Registration Rights Agreement dated as of March 12,
1996 among the Company, AOAI and the Initial Purchaser
referred to therein
5.1* Legal Opinion of Kaplan, Strangis and Kaplan, P.A.
10.1* Securities Purchase Agreement dated as of March 5, 1996
by and among the Company, AOAI and the Initial
Purchaser referred to therein
10.2* Employment Agreement between AOAI and Stephen Adams
10.3* Agreement between Kevin Gleason and the Company
10.4* Phantom Stock Agreement between the Company and Abe
Levine
10.5* Nonqualified Retirement Plan for Key Employees
12.1* Statement re: Computation of Ratios
23.1(1) Consent of Kaplan, Strangis and Kaplan, P.A.
23.2** Consent of KPMG Peat Marwick LLP, independent auditors
addressed to the Company.
23.3** Consent of KPMG Peat Marwick LLP, independent auditors
addressed to AOAI.
24.1* Powers of Attorney
25.1* Statement of Eligibility of Trustee, United States
Trust Company, on Form T-1
99.1* Form of Letter of Transmittal
99.2* Form of Notice of Guaranteed Delivery
</TABLE>
- --------
(1) Filed as part of the opinion of Kaplan, Strangis and Kaplan, P.A. (see
Exhibit 5.1 hereto).
* Previously filed.
** Filed herewith.
<PAGE>
The Board of Directors
Adams Outdoor Limited Partnership:
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the registration statement.
Our report dated February 23, 1996, except for the last paragraph of note 7
and note 12 which are as of February 28, 1996, contains an explanatory
paragraph that states that the Partnership has a net capital deficiency and
its cash flow from operations has not been sufficient to fund its long-term
debt obligations, which raise substantial doubt about the entity's ability to
continue as a going concern. The financial statements do not include any
adjustments that might result from the outcome of that uncertainty.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Atlanta, Georgia
July 15, 1996
<PAGE>
The Board of Directors
Adams Outdoor Advertising, Inc.:
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the registration statement.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Atlanta, Georgia
July 15, 1996
