As filed with the Securities and Exchange Commission on September 27, 1996.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
Registration Statement Under The Securities Act of 1933
BOWLIN OUTDOOR ADVERTISING
& TRAVEL CENTERS INCORPORATED
(Name of small business issuer in its charter)
Nevada 5399 85-0113644
- ------------------------ ---------------------------- ----------------
(State of Incorporation) (Primary Standard Industrial (I.R.S. Employer
Classification Code Number) Identification No.)
150 Louisiana N.E., Albuquerque, New Mexico
87108, (505) 266-5985 (Address and telephone number of registrant's
principal executive offices and principal place of business)
---------------------------
Michael L. Bowlin
Chairman of the Board and President
150 Louisiana N.E.
Albuquerque, New Mexico 87108
(505) 266-5985
(Name, address, and telephone number of agent for service)
---------------------------
Copies to:
Christopher D. Johnson, Esq. Steven D. Pidgeon, Esq.
Squire, Sanders & Dempsey Snell & Wilmer L.L.P.
Two Renaissance Square One Arizona Center
40 North Central Avenue, Suite 2700 Phoenix, Arizona 85004
Phoenix, Arizona 85004 Telephone: (602) 382-6252
Telephone: (602) 528-4046 FAX: (602) 382-6070
FAX: (602) 253-8129
-----------------------------
Approximate date of proposed sale to the public: As soon as practicable from
time to time after this Registration Statement becomes effective.
-----------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, check the following box.|X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering.|_| __________________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering.|_| __________________
If the delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. |_|
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================================
Proposed Proposed Amount of
Title of each Amount to be Maximum Offering Maximum Registration
class of securities to be registered Registered Price Per Share(2) Aggregate Offering Fee
Price(2)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.001 par value per 1,667,500 $9.50 $15,841,250 $5,462.50
share(1)....................................
- -----------------------------------------------------------------------------------------------------------------------------------
Representative's Option..................... 123,250 $0.0008 $100 $1
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock Underlying
Representative's Option(3).................. 123,250 $11.40 $1,405,050 $ 484.50
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TOTAL........................................................................................................ $5,948.00
===================================================================================================================================
</TABLE>
(1) Includes 217,500 shares which the Underwriters have the option to purchase
solely to cover over-allotments, if any.
(2) Estimated solely for purposes of determining the registration fee in
accordance with Rule 457(a) under the Securities Act.
(3) Pursuant to Rule 416, there is also being registered hereunder a presently
undeterminable number of shares of Common Stock that may be issued pursuant
to the anti-dilution provisions of the Representative's Option.
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>
BOWLIN OUTDOOR ADVERTISING & TRAVEL CENTERS INCORPORATED
CROSS REFERENCE SHEET
(Showing Location in the Prospectus of Information
Required by Items 1 through 23, Part I, of Form SB-2)
<TABLE>
<CAPTION>
Item in Form SB-2 Prospectus Caption
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<S> <C> <C>
1. Front of Registration Statement and Outside Front Cover of Facing Page of Registration Statement;
Prospectus............................................................... Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus.................. Inside Front Cover Page of Prospectus;
Additional Information; Outside Back
Cover Page of Prospectus
3. Summary Information and Risk Factors..................................... Prospectus Summary; Risk Factors
4. Use of Proceeds.......................................................... Prospectus Summary; Risk Factors; Use
of Proceeds
5. Determination of Offering Price.......................................... Outside Front Cover Page of
Prospectus; Risk Factors; Underwriting
6. Dilution................................................................. Dilution
7. Selling Security Holders................................................. *
8. Plan of Distribution..................................................... Outside Front Cover Page of
Prospectus; Underwriting
9. Legal Proceedings........................................................ Business
10. Directors, Executive Officers, Promoters and Control
Persons.................................................................. Management
11. Security Ownership of Certain Beneficial Owners and
Management............................................................... Principal Stockholders
12. Description of Securities................................................ Risk Factors; Description of Securities
13. Interest of Named Experts and Counsel.................................... *
14. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities............................................... Executive Compensation; Underwriting
15. Organization Within Last 5 Years......................................... *
16. Description of Business.................................................. Prospectus Summary; Risk Factors;
Business
17. Management's Discussion and Analysis or Plan of Operation................ Management's Discussion and Analysis
of Financial Condition and Results of
Operations
18. Description of Property.................................................. Properties
19. Certain Relationships and Related Transactions........................... Certain Transactions
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
Item in Form SB-2 Prospectus Caption
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<S> <C> <C>
20. Market for Common Equity and Related Stockholder
Matters.................................................................. Outside Front Cover Page of
Prospectus; Prospectus Summary; Risk
Factors; Dividends; Description of
Securities; Underwriting
21. Executive Compensation................................................... Management; Executive Compensation
22. Financial Statements..................................................... Prospectus Summary; Selected
Consolidated Financial Data; Financial
Statements
23. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...................................... Changes in Registrant's Certifying
Accountants
- --------------------------
* Omitted because Item is not applicable.
</TABLE>
iii
<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 SEPTEMBER 27, 1996
Prospectus
[Picture of Company's logo, a
Native American "Zia" symbol]
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS INCORPORATED
1,450,000 Shares of Common Stock
All of the shares of Common Stock, $.001 par value (the "Common
Stock"), being offered hereby (the "Offering") are being sold by Bowlin Outdoor
Advertising & Travel Centers Incorporated (together with its subsidiaries and
predecessor, the "Company" or "Bowlin"). Prior to the Offering, there has been
no public market for the Common Stock. The Company has applied for quotation of
the Common Stock on the Nasdaq National Market ("Nasdaq") under the symbol
"BWLN." It is currently anticipated that the initial public offering price will
be between $8.50 and $9.50 per share. See "UNDERWRITING" for a discussion of
factors considered in determining the initial public offering price.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES AGENCY NOR HAS THE
COMMISSION OR ANY SUCH AGENCY PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------------
THESE SECURITIES INVOLVE SUBSTANTIAL RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 9.
<TABLE>
<CAPTION>
================================================================================================================================
Underwriting Discounts and Proceeds to
Price to Public Commissions(1) Company (2)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Per Share..........................
- --------------------------------------------------------------------------------------------------------------------------------
Total(3)...........................
================================================================================================================================
</TABLE>
(1) Excludes (i) a nonaccountable expense allowance payable by the Company to
HD Brous & Co., Inc. (the "Representative") and (ii) a fee payable by the
Company to its financial consultant. The Company has also agreed to (i)
issue options to the Representative (the "Representative's Option") to
purchase up to 123,250 shares of Common Stock at an exercise price per
share equal to 120% of the initial public offering price and (ii) grant to
the Representative certain registration rights with respect to the
securities underlying the Representative's Option. The Company has agreed
to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended, in connection
with this Offering. See "UNDERWRITING."
(2) Before deducting expenses of the Offering payable by the Company estimated
at $750,000 ($820,000 if the Over-Allotment Option is exercised in full),
including the Representative's nonaccountable expense allowance and the fee
payable to the Company's financial consultant.
(3) Assumes no exercise of the Underwriters' option, exercisable within 30 days
from the date of this Prospectus, to purchase up to 217,500 additional
shares of Common Stock on the same terms, solely to cover over-allotments
(the "Over-Allotment Option"). If the Over-Allotment Option is exercised in
full, the total Price to Public, Underwriting Discounts and Commissions and
Proceeds to Company will be $___________, $___________ and ___________,
respectively. See "UNDERWRITING."
The shares of Common Stock are being offered severally by the Underwriters,
subject to prior sale, when, as and if delivered to and accepted by the
Underwriters and subject to the right to reject any order in whole or in part
and certain other conditions. It is expected that delivery of the shares will be
made against payment therefor at the offices of HD Brous & Co., Inc., Phoenix,
Arizona, or the facilities of the Depository Trust Company, on or about
________________, 1996.
HD BROUS & CO., INC.
The date of this Prospectus is _______________, 1996.
<PAGE>
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED ON THE NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
CITGO(R), Dairy Queen(R), Dairy Queen/Brazier(R), Stuckey's(R), Conoco(R),
Chevron(R), Texaco(R) and Diamond Shamrock(R) and certain other names or marks
contained in this Prospectus are the registered trademarks of entities other
than the Company.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and Consolidated Financial Statements, including the Notes thereto,
appearing elsewhere in this Prospectus. Investors are urged to read this
Prospectus in its entirety, particularly the information set forth in "RISK
FACTORS." Unless otherwise indicated, all information related to the Company in
this Prospectus assumes no exercise of the Over-Allotment Option, the
Representative's Option or any of the options granted under the Company's 1996
Stock Option Plan.
The Company
Company Overview
The Company is a regional leader in the operation of travel centers and
outdoor advertising displays dedicated to serving the traveling public in rural
and smaller metropolitan areas of the Southwestern United States. The Company's
tradition of serving the public dates back to 1912 when the Company's founder,
Claude M. Bowlin, started trading goods and services with Native Americans in
New Mexico. Bowlin currently operates fourteen full-service travel centers and
one free-standing Dairy Queen/Brazier restaurant along interstate highways in
Arizona and New Mexico where there are generally few gas stations, convenience
stores or restaurants. The Company advertises its travel centers through a
network of over 300 outdoor advertising display faces. In addition to a variety
of unique Southwestern merchandise, the Company's travel centers offer brand
name food and gasoline to the traveling public. The Company believes that its
"co-branding" strategy of offering complementary brand name food and gasoline
products results in increased customer traffic and it intends to continue to
actively pursue additional co-branding opportunities.
In addition to its travel centers, the Company operates approximately 1,600
revenue generating outdoor advertising display faces for third party customers
such as hotels and motels, restaurants and retail and consumer product
manufacturers. These display faces are strategically situated along interstate
highways primarily in Arizona and New Mexico and, to a lesser extent, in
Colorado, Oklahoma and Texas. In addition to the leasing of advertising space,
Bowlin provides a comprehensive range of outdoor advertising services to its
clients, including customized design and production services. Although the
Company faces substantial competition in each of its operational areas, the
Company believes that few of its competitors offer the same breadth of products
and services dedicated to the traveling public.
The Company has a consistent history of profitable operations and revenue
growth. The Company's gross revenues have grown from approximately $12.0 million
in fiscal 1986 to in excess of $23.0 million in fiscal 1996. Gross revenues and
net income for the six months ended July 31, 1996 were $12.8 million and
$495,000, respectively, representing increases of 5.9% and 66.6%, respectively,
over the same period in fiscal 1995.
Travel Centers. The Company opened its first travel center in 1953 and has
since expanded to fourteen travel centers and one free-standing Dairy
Queen/Brazier restaurant in Arizona and New Mexico. Each of the Company's travel
centers has a unique Southwestern theme and extensive theme-oriented billboard
advertising is used to attract customers into the travel centers. The Company
periodically upgrades and renovates its travel centers, thereby fostering a
positive image with the traveling public. The Company believes that its
co-branding and facilities upgrade practices
3
<PAGE>
result in greater repeat patronage, and increase the likelihood that customers
will extend their visits and take advantage of the many additional goods and
services available at the travel centers.
Since 1982, the Company has offered brand name food and beverages at
selected travel centers under the Dairy Queen, Dairy Queen/Brazier and Stuckey's
trade names. The food offered at the Company's travel centers ranges from ice
cream and snack foods at some locations to full-service restaurants at others.
Revenues from food sales accounted for 17%, 15% and 14%, respectively, of the
Company's total revenues in fiscal years 1995 and 1996 and the six months ended
July 31, 1996.
The Company offers brand name gasolines such as CITGO, Conoco, Chevron,
Texaco and Diamond Shamrock at its travel centers. Consistent with its emphasis
upon marketing brand name products, the Company recently was granted
distribution rights for CITGO gasoline products. CITGO is one of the fastest
growing brand name gasoline producers in the United States. The Company is
currently in the process of converting six of its existing travel center fuel
facilities to CITGO brand "superpumper" stations. The Company also intends to
pursue wholesale marketing of CITGO gasoline to other distributors and retailers
in Arizona and New Mexico as an additional source of revenues. Revenues from
gasoline sales at the Company's travel centers accounted for approximately 42%
of the Company's total revenues in each of fiscal years 1995 and 1996, and 45%
in the six months ended July 31, 1996.
In addition to offering food and gasoline, each of the Company's travel
center gift shops offers an extensive variety of Southwestern merchandise and
collectibles. The merchandise ranges from inexpensive Southwestern gifts and
souvenirs to unique hand-crafted jewelry, rugs, pottery, kachina dolls and other
gifts crafted and engraved specially for Bowlin by several Native American
tribes. Revenues from merchandise sales at the Company's travel centers
accounted for 30%, 31% and 28%, respectively, of the Company's total revenues in
fiscal years 1995 and 1996 and the six months ended July 31, 1996.
Outdoor Advertising. The Company operates over 1,600 revenue generating
advertising display faces, primarily in Arizona and New Mexico and, to a lesser
extent, in Colorado, Oklahoma and Texas. The Company also offers a complete,
full-service source for graphic design and production for the outdoor
advertising displays it operates. The Company uses local account representatives
who focus on marketing the Company's advertising services to local and regional
advertisers, allowing the Company to maintain a diverse client base and limiting
reliance on national advertising accounts. Unlike many of its competitors, the
Company does not rely to a significant degree upon tobacco advertisers.
The Company's outdoor advertising displays are strategically located in
rural and smaller metropolitan areas in the Southwest, where the dispersion of
population, outdoor lifestyles and leading tourist destinations have created a
strong dependence on highway travel. In these markets, competition for site
acquisitions is less intense, purchase prices are more favorable and government
regulations are generally less onerous as compared to densely populated
metropolitan markets. The outdoor advertising operations of the Company have
experienced consistent growth over the past several years, accounting for 10.5%,
12% and 13%, respectively, of the Company's total revenues in fiscal years 1995
and 1996 and the six months ended July 31, 1996. The Company believes it is one
of the largest outdoor advertising companies in rural Southwestern markets. In
1995, the
4
<PAGE>
Company was ranked by the Outdoor Advertising Association of America ("OAAA") as
one of the top 40 outdoor advertising companies in the United States in terms of
gross revenues.
Growth Strategy
Travel Centers. The Company is committed to expanding its travel center
operations through internal development as well as strategic acquisitions of
travel center assets located in popular tourist destinations, along heavily
traveled interstate corridors and in smaller metropolitan areas. The Company is
currently in the process of developing new full service travel centers with
CITGO superpumper dispensing facilities at Benson and Picacho Peak, Arizona and
near Albuquerque, New Mexico, and expects all three of these centers to be
operational by the end of fiscal 1998. The Company's recently established
distributorship relationship with CITGO creates an additional source of
potentially significant revenues and the Company plans to aggressively market
the CITGO line of petroleum products through its own travel centers and as a
wholesaler to other third party distributors and retailers in New Mexico and
Arizona. The Company also intends to continue to capitalize on its co-branding
strategy by acquiring rights to additional brand name food concepts.
Outdoor Advertising. As in the case of its travel centers, the Company
plans to expand its outdoor advertising operations through internal development
as well as acquisition. Through internal development, the Company plans to add
approximately 100 new structures (representing up to 200 new display faces) to
its operations in fiscal 1997, of which 44 were constructed as of July 31, 1996.
Thereafter, the Company intends to increase the annual rate at which it
constructs additional billboard structures and, by 2001, the Company anticipates
that it will be adding approximately 250 new billboard structures per year to
its operations through internal development. In addition, the Company intends to
pursue strategic acquisitions of existing advertising structures and small to
medium-sized outdoor advertising operators when appropriate. Consistent with its
past practices, the Company intends to pursue expansion in rural and smaller
metropolitan areas that are not included in the 50 largest Designated Market
Areas ("DMAs").
The Company was incorporated in New Mexico in 1953 and reincorporated under
the laws of Nevada in 1996. The Company's principal executive offices are
located at 150 Louisiana N.E., Albuquerque, New Mexico 87108, and its telephone
number is (505) 266-5985.
5
<PAGE>
The Offering
<TABLE>
<S> <C>
Common Stock Offered................................... 1,450,000 shares
Common Stock Outstanding Before
Offering............................................... 3,383,385 shares (1)
Common Stock to be Outstanding
Immediately After the Offering......................... 4,833,385 shares(1)(2)
Use of Proceeds........................................ Net proceeds to the Company are estimated to be
approximately $11.4 million, assuming no
exercise of the Over-Allotment Option, and will
be used to repay certain long-term debt, to
develop and upgrade existing retail operations
and for general corporate purposes, including the
acquisition of additional travel center and outdoor
advertising assets. See "USE OF PROCEEDS."
Risk Factors........................................... Investment in the Common Stock involves a high
degree of risk. See "RISK FACTORS."
Proposed Nasdaq National Market
Symbol................................................. "BWLN"
</TABLE>
- -------------
(1) Based on the number of shares of Common Stock outstanding as of August
31, 1996. Excludes 362,000 shares of Common Stock issuable upon
exercise of options granted or approved for grant upon completion of
the Offering under the Company's 1996 Stock Option Plan. See "EXECUTIVE
COMPENSATION--1996 Stock Option Plan."
(2) Excludes (i) 217,500 shares of Common Stock reserved for issuance upon
exercise of the Over-Allotment Option and (ii) 123,250 shares of Common
Stock reserved for issuance upon exercise of the Representative's
Option. See "DESCRIPTION OF SECURITIES" and "UNDERWRITING."
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(In thousands, except travel center, outdoor advertising,
share and per share data)
<TABLE>
<CAPTION>
Six months ended
Years ended January 31, July 31,
-------------------------- -------------------------
1995 1996 1995 1996
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Selected Statement of Income Data:
Travel Center Operations
Gross sales ................................ $ 19,799 $ 20,467 $ 10,802 $ 11,208
Discounts on sales ......................... 221 292 104 153
----------- ----------- ----------- -----------
Net sales ................................ 19,578 20,175 10,698 11,055
Cost of goods sold ......................... 12,541 12,995 6,969 7,422
----------- ----------- ----------- -----------
Gross profit ............................... 7,037 7,180 3,729 3,633
Operating costs:
General and administrative
expenses....................... 5,161 5,462 2,851 2,615
Depreciation and amortization ..... 451 434 207 176
----------- ----------- ----------- -----------
Operating income ........................... 1,425 1,284 671 842
Outdoor Advertising Operations
Gross income ............................... 2,376 2,770 1,319 1,629
Operating costs:
Direct operating costs ............ 1,715 2,007 933 1,031
General and administrative
expenses ...................... 205 344 137 208
Depreciation and amortization ..... 252 261 125 133
----------- ----------- ----------- -----------
Operating income ........................... 204 158 124 257
Corporate and Other
General and administrative expenses ........ (622) (602) (285) (240)
Depreciation and amortization .............. (118) (161) (62) (76)
Interest expense ........................... (536) (612) (278) (332)
Other income, net .......................... 411 570 325 374
----------- ----------- ----------- -----------
Income before taxes ........................ 764 637 495 825
Income taxes ............................... 295 253 198 330
----------- ----------- ----------- -----------
Net income ................................. $ 469 $ 384 $ 297 $ 495
=========== =========== =========== ===========
Net income per common share
Primary and fully diluted ............... $ 0.17 $ 0.13 $ 0.10 $ 0.15
=========== =========== =========== ===========
Weighted average common shares outstanding
Primary and fully diluted ............... 2,778,680 3,000,618 2,950,094 3,227,883
Selected Travel Center Data:
Number of travel centers (end of period)(1) 16 15 16(2) 15
Average gross revenue per travel center .... $ 1,237,000 $ 1,364,000 $ 675,000(2) $ 747,000
Selected Outdoor Advertising Data:
Number of outdoor advertising display faces
(end of period) ............................ 1,442 1,556 1,508 1,653
</TABLE>
7
<PAGE>
July 31, 1996
---------------------------
Selected Balance Sheet Data: Actual As adjusted
------------ -------------
Cash and cash equivalents......................... $ 2,443 $ 8,829
Working capital................................... 2,770 9,824
Total property and equipment, net................. 9,073 9,073
Total assets...................................... 14,871 21,257
Notes payable .................................... 7,542 2,543
Stockholders' equity.............................. 5,473 16,856
- -------------------
(1) Travel center data includes the information presented as to both the
Company's travel centers and free-standing Dairy Queen/Brazier restaurants.
(2) Includes a Dairy Queen/Brazier restaurant that was disposed of by the
Company during early July 1995 for which revenues have been included in the
average gross revenue per travel center calculation.
8
<PAGE>
RISK FACTORS
An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should carefully consider the following risk factors
in addition to the other information set forth elsewhere in this Prospectus,
including the Consolidated Financial Statements and Notes thereto, prior to
making an investment in the Company.
No Assurance of Successful Expansion. The Company intends to open new
travel centers and to expand its outdoor advertising operations. Although the
Company's existing operations are based primarily in the Southwest, the
Company's current expansion plans include consideration of opportunities in both
the Southwest and other geographic regions of the United States. However, there
can be no assurance that suitable acquisitions can be identified, and the
Company is likely to face competition from other companies for available
acquisition opportunities. There can be no assurance that the Company will have
sufficient capital resources to complete acquisitions or be able to obtain any
required consents of its bank lenders or that acquisitions that are completed
can be integrated successfully into the Company's existing operations. The
success of the Company's expansion program will depend on a number of factors,
including the availability of sufficient capital, the identification of
appropriate expansion opportunities, the Company's ability to attract, train and
retain qualified employees and management, the continuing profitability of
existing operations, the successful management of planned growth and the ability
of the Company to operate new travel centers and outdoor advertising operations
in a profitable manner. There can be no assurance that the Company will achieve
its planned expansion or that any expansion will be profitable. See "BUSINESS --
Growth Strategy."
Dependence on Third Party Relationships. The Company is dependent on a
number of third party relationships pursuant to which it offers brand name and
other products at its travel centers. These brand name relationships include the
Company's distributorship relationship with CITGO, as well as its existing
franchise agreements with Dairy Queen/Brazier and Stuckey's. The Company's
existing operations and plans for future growth anticipate the continued
existence of such relationships. There can be no assurance that the agreements
that govern these relationships will not be terminated. In addition, several of
these agreements contain provisions that prohibit the Company from offering
additional products or services which are competitive to those of its suppliers.
Although the Company does not currently anticipate having to forego a
significant business opportunity in order to comply with such agreements, there
can be no assurance that adherence to these existing agreements will not prevent
the Company from pursuing opportunities that management would otherwise deem
advisable. The Company also relies upon several at will relationships with
various third parties for much of its souvenir and gift merchandise. Although
the Company believes it has good relationships with its suppliers, there can be
no assurance that the Company will be able to maintain relationships with
suppliers of suitable merchandise at appropriate prices and in sufficient
quantities. See "BUSINESS -- Business Operations."
Dependence Upon Key Personnel. The success of the Company will be largely
dependent upon the efforts and abilities of Michael L. Bowlin, the President,
Chief Executive Officer and Chairman of the Board of Directors of the Company,
and upon the efforts and abilities of certain executive officers of the Company.
The Company has an employment agreement with Mr. Bowlin. The loss of the
services of Mr. Bowlin or one or more of the Company's other
9
<PAGE>
executive officers could have a material adverse effect on the Company. See
"MANAGEMENT" and "EXECUTIVE COMPENSATION -- Employment Contracts."
Possible Adverse Impact of Competition. The Company's travel centers face
competition from major and independent oil companies; independent service
station operators; national and independent operators of restaurants, diners and
other eating establishments; and national and independent operators of
convenience stores and other retail outlets. In its outdoor advertising
operations, the Company faces competition for advertising revenues from other
outdoor advertising companies, as well as from other media such as radio,
television, print media and direct mail marketing. The Company also competes
with a wide variety of other out-of-home advertising media, the range and
diversity of which has increased substantially over the past several years,
including advertising displays in shopping centers and malls, airports,
stadiums, movie theaters and supermarkets. Some of the Company's competitors,
including major oil companies and convenience store operators, are substantially
larger, better capitalized and have greater name recognition and access to
greater resources than the Company. There can be no assurance that the Company's
travel centers and outdoor advertising operations will be able to compete
successfully in their respective markets in the future. See "BUSINESS --
Competition."
Seasonality and Other Factors; Quarterly Fluctuations. The travel center
portion of the Company's business is somewhat seasonal, and revenues may be
affected by many factors, including weather, holidays and the price of
alternative travel modes. The Company's revenues and earnings may experience
substantial fluctuations from quarter to quarter. See "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -- Seasonality."
Potential Adverse Effects of Government Regulation of Travel Centers. Each
of the Company's food service operations is subject to licensing and regulation
by a number of governmental authorities, including regulations relating to
health, safety, cleanliness and food handling, as well as federal and state laws
governing such matters as working conditions, overtime and tip credits and
minimum wages. The Company's travel center operations are also subject to
extensive laws and regulations governing the sale of alcohol and tobacco, and
fireworks in its New Mexico travel centers. Such regulations include certain
mandatory licensing procedures and ongoing compliance measures, as well as
special sales tax measures. In June and July of 1996, the state of New Mexico
issued a temporary ban on the sale of fireworks because of the extreme fire
hazard caused by drought conditions in that state. As a result of the ban, the
Company's revenues from its travel center operations decreased. Although such a
ban was unprecedented, similar bans could be imposed in the future. The Company
believes that its operations at its fourteen travel centers and one
free-standing Dairy Queen/Brazier restaurant comply in all material respects
with all applicable licensing and regulatory requirements. However, any failure
to comply with applicable regulations, or the adoption of additional regulations
or changes in existing regulations could impose additional compliance costs on
the Company, require a cessation of certain activities or otherwise have a
material adverse effect on the Company's business and results of operations. See
"BUSINESS -- Regulation."
Environmental Risks. The Company is subject to federal, state and municipal
laws and regulations governing the use, storage, handling and disposal of its
petroleum products. Specifically, the federal government has recently issued
more stringent regulations governing the storage of petroleum products with
which the Company is required to comply by December 1998. Although
10
<PAGE>
the Company believes that its activities comply with the current standards
prescribed by law and the Company has already substantially completed certain
renovations of its facilities to satisfy the federal government's recently
enacted regulations, the risk of accidental contamination to the environment or
injury can not be eliminated. In the event of such an accident, the Company
could be held liable for any damages that result and any such liability could
exceed the available resources of the Company. In addition, the Company could be
required to incur significant costs to comply with environmental laws and
regulations which may be enacted in the future. See "BUSINESS -- Regulation."
Potential Adverse Effects of Government Regulation of Outdoor Advertising.
Outdoor advertising displays are subject to regulation by federal, state and
local governmental agencies. These regulations, in some cases, limit the height,
size and location of billboards and, in limited circumstances, regulate the
content of the advertising copy displayed on the billboards, particularly with
respect to tobacco advertising. Some governmental regulations prohibit the
construction of new billboards or the replacement, relocation, enlargement or
upgrading of existing structures. Some cities have adopted amortization
ordinances under which, after the expiration of a specified period of time,
billboards must be removed at the owner's expense and without the payment of
compensation. Ordinances requiring the removal of a billboard without
compensation, whether through amortization or otherwise, are being challenged in
various state and federal courts with conflicting results. Although, to date,
the Company has been adequately compensated for any of its structures removed at
the direction of governmental authorities, future changes in such regulations as
well as others applicable to the Company's outdoor advertising operations could
have a material adverse effect on the Company's business and results of
operations. See "BUSINESS -- Regulation."
General Economic Conditions. The Company's business is directly related to
conditions in the travel industry, particularly leisure travel, which may be
adversely affected by general economic conditions. In addition, an increasing
portion of the Company's revenues are earned from sales of advertising space,
which can be affected by general economic conditions as well as trends in the
advertising industry. A future economic slowdown or recession could lead to a
reduction in advertising expenditures, or result in decreased leisure travel,
either of which could have a material adverse effect on the Company's business
and results of operations, and on its planned expansion.
Geographic Concentration. The Company's travel centers and one
free-standing Dairy Queen/Brazier restaurant are located in Arizona and New
Mexico, and the Company's advertising operations are currently conducted in
Arizona, Colorado, New Mexico, Oklahoma and Texas. Because of this geographic
concentration, the Company's business may be adversely affected in the event of
a downturn in general economic conditions in the Southwestern United States. See
"BUSINESS."
Control by Management. Upon completion of the Offering, Michael L. Bowlin
and the other executive officers and Directors of the Company will beneficially
own approximately 54% of the outstanding shares of Common Stock (51.7% if the
Over-Allotment Option is exercised in full). Accordingly, senior management of
the Company will have sufficient voting power to control the outcome of any
matter submitted to the stockholders for their approval and to block certain
amendments to the Company's Articles of Incorporation and certain transactions
that require a supermajority vote. See "-- Anti-Takeover Provisions," "PRINCIPAL
STOCKHOLDERS" and "DESCRIPTION OF SECURITIES -- Certain Charter and By-law
Provisions."
11
<PAGE>
Use of Proceeds; Broad Discretion in Application. The proceeds allocated to
each category under "USE OF PROCEEDS" are estimates only and the Company's
management will have broad discretion in the application of such funds without
any action or approval of the Company's stockholders. See "USE OF PROCEEDS."
Anti-Takeover Provisions. The Company's Board of Directors has the
authority to issue up to 10,000,000 shares of preferred stock, $.001 par value
("Preferred Stock"), in one or more series and to determine the price, rights,
preferences and privileges of the shares of each such series without any further
vote or action by the stockholders. The rights of the holders of Common Stock
will be subject to, and may be adversely affected by, the rights of the holders
of any shares of Preferred Stock that may be issued in the future. The issuance
of Preferred Stock could have the effect of making it more difficult for a third
party to acquire a majority of the outstanding voting stock of the Company,
thereby delaying, deferring or preventing a change of control of the Company. In
addition, certain provisions in the Company's Articles of Incorporation and
By-laws relating to supermajority stockholder approval of certain business
combinations by the Company, restrictions on calling special meetings of
stockholders, and restrictions on amendments to the By-laws may discourage or
make more difficult any attempt by a person or group of persons to obtain
control of the Company. See "DESCRIPTION OF SECURITIES - Certain Charter and
By-law Provisions."
Absence of Prior Market for Common Stock; Possible Volatility of Stock
Prices. Prior to this Offering, there has been no public market for the
Company's Common Stock. There can be no assurance that a market for the Common
Stock will develop following this Offering or that, if developed, such market
will be sustained. No assurance can be given that the Common Stock will continue
to be listed on Nasdaq. The price at which the shares of Common Stock are being
offered to the public has been determined by negotiation between the Company and
the Representative and may not necessarily bear any relationship to the price at
which the Common Stock will trade after completion of the Offering, or to the
Company's assets, book value, earnings or any other established criterion of
value. The market price of the Common Stock could also be subject to significant
fluctuations in response to such factors as variations in the anticipated or
actual results of operations of the Company or other companies engaged in
similar businesses, changes in conditions affecting the economy generally,
analyst reports, general trends in the industry or changes in the stock markets
generally. See "UNDERWRITING."
No Dividends. Following completion of this Offering, the Company plans to
retain any earnings to finance the operations and expansion of the Company's
business. Accordingly, it is not anticipated that any dividends will be paid on
the Common Stock in the foreseeable future. See "DIVIDENDS" and "DESCRIPTION OF
SECURITIES."
Shares Eligible for Future Sale. The Company, its executive officers,
Directors and certain of its existing stockholders have agreed, subject to
certain limited exceptions, that they will not sell or otherwise dispose of any
shares of Common Stock without the prior written consent of the Representative
for a period of 180 days after the date of this Prospectus (the "Lock-Up
Period"). Upon expiration of the Lock-Up Period, all but 2.9% of the outstanding
shares of Common Stock
12
<PAGE>
will be eligible for sale in the public market, subject to the notice, manner of
sale, volume limitations and current public reporting requirements imposed by
Rule 144 under the Securities Act of 1933, as amended (the "Securities Act").
Sales of substantial amounts of Common Stock in the open market or the
availability of such shares for sale following the Offering could adversely
affect the market price of the Common Stock and may make it more difficult for
the Company to sell its equity securities in the future on terms it deems
appropriate. See "UNDERWRITING."
Immediate and Substantial Dilution. Purchasers of Common stock offered
hereby will suffer immediate and substantial dilution in the net tangible book
value of the Common Stock from the initial public offering price. See
"DILUTION."
Forward-Looking Statements and Associated Risks. This Prospectus contains
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act of 1934, as amended (the "Exchange
Act"), including statements regarding, among other items, the Company's growth
strategy and anticipated trends in the Company's business. These forward-looking
statements are based largely on the Company's expectations and are subject to a
number of risks and uncertainties, certain of which are beyond the Company's
control. Actual results could differ materially from these forward-looking
statements as a result of the factors described under "RISK FACTORS" and
elsewhere herein, including, among others, regulatory or economic influences. In
light of these risks and uncertainties, there can be no assurance that the
forward-looking information contained in this Prospectus will in fact transpire
or prove to be accurate. All subsequent written and oral forward-looking
statements attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by this section.
DIVIDENDS
The Company paid cash dividends on its Common Stock of approximately
$49,500, $60,300 and $50,600 in fiscal years 1995 and 1996 and the six months
ended July 31, 1996, respectively. However, upon completion of the Offering, the
Company intends to retain all available earnings to finance and expand its
business. Accordingly, the Company presently does not anticipate paying any
dividends on its Common Stock in the foreseeable future. Declaration of
dividends in the future will be at the discretion of the Company's Board of
Directors, which will review its dividend policy periodically. See "RISK
FACTORS" and "DESCRIPTION OF SECURITIES."
13
<PAGE>
DILUTION
The net tangible book value of the Company as of July 31, 1996 was
approximately $5.1 million or $1.52 per share of Common Stock. Net tangible book
value per share is determined by dividing the number of shares of Common Stock
outstanding into the tangible net worth of the Company (tangible assets less
total liabilities). Without taking into account any changes in such net tangible
book value subsequent to July 31, 1996, other than to give effect to the sale of
1,450,000 shares of Common Stock offered hereby at an assumed initial public
offering price of $9.00 per share (after deducting the estimated underwriting
discount and estimated offering expenses payable by the Company), the pro forma
net tangible book value at July 31, 1996, would have been approximately $16.5
million or $3.42 per share. This represents an immediate increase in net
tangible book value of $1.90 per share to existing stockholders and an immediate
dilution of $5.58 per share to persons purchasing shares of Common Stock in this
Offering ("New Investors"). The following table illustrates this per share
dilution:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.................... $9.00
Net tangible book value per share at July 31,
1996.................................................... $1.52
Increase in net tangible book value per share
attributable to the New Investors in the Shares......... $1.90
----
Net tangible book value per share after Offering, as
adjusted................................................ $3.42
----
Dilution per share to New Investors(1)............................. $5.58
=====
</TABLE>
- -----------------------
(1) If the Underwriters exercise the Over-Allotment Option in full, the per
share dilution to New Investors would be $5.38.
Over the last five years, officers, directors and affiliated persons have
purchased an aggregate of 57,411 shares of common stock (including the balance
of fractional shares purchased upon the issuance of Common Stock dividends) at
an average price per share of $1.55, as compared to an assumed initial public
offering price of $9.00 per share.
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the 1,450,000 shares of
Common Stock offered hereby, assuming an offering price of $9.00 per share, and
after deducting underwriting discounts and commissions and estimated offering
expenses payable by the Company, are estimated to be approximately $11.4 million
($13.1 million if the Over-Allotment Option is exercised in full).
The Company anticipates that such net proceeds will be used as follows and
in the following order of priority, assuming the Over-Allotment Option is not
exercised: (i) approximately $5.0 million to repay certain long-term
indebtedness of the Company (described below), (ii) approximately $900,000 to
upgrade existing travel centers and (iii) the balance to be used for general
corporate purposes, including the acquisition or development of additional
travel centers and outdoor advertising operations. Although the Company does not
currently have any agreement to acquire any travel center or outdoor advertising
operations, it routinely engages in discussions with third parties regarding
potential acquisitions. Any additional proceeds received by the Company from the
exercise of the Over-Allotment Option will be used for general corporate
purposes.
The long-term debt to be repaid by the Company bears interest at rates
ranging from 8% to 14.5% per annum and matures at various dates from 1996 to
2010. The Company's indebtedness was incurred over time primarily to fund its
expansion activities and working capital requirements.
Until applied as set forth above, all proceeds will be invested in
short-term investment grade instruments or bank certificates of deposit.
Investment of the net proceeds in short-term investments rather than operations
could adversely affect the Company's overall return on its capital. The
foregoing represents the Company's present intentions with respect to the
allocation of the proceeds of this Offering based upon its present plans and
business conditions. However, the occurrence of certain unforeseen events or
changed business conditions could result in the application of the proceeds of
this Offering in a manner other than as described in this Prospectus. See "RISK
FACTORS."
15
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company as of July
31, 1996, and as adjusted to give effect to the sale of the shares of Common
Stock offered hereby at an assumed offering price of $9.00 per share and the
application of the estimated net proceeds therefrom, assuming no exercise of the
Over-Allotment Option.
<TABLE>
<CAPTION>
July 31, 1996
---------------------------------
Actual As adjusted
-------- -----------
(in thousands)
<S> <C> <C>
Short-term borrowing, bank........................................... 369 124
Long-term debt, current maturities................................... 639 216
------- -------
Total short-term debt......................................... $ 1,008 $ 340
======= =======
Long-term debt, less current maturities.............................. 6,534 2,203
------- -------
Stockholders' Equity:
Preferred Stock, $.001 par value, 10,000,000
shares authorized................................................. --- ---
Common Stock, $.001 par value
100,000,000 shares authorized, 3,383,385
outstanding, actual; 4,833,385 shares
outstanding as adjusted for the Offering(1)....................... 3 5
Paid-In Capital...................................................... 4,330 15,711
Retained Earnings.................................................... 1,140 1,140
------- -------
Total Stockholders' Equity........................................ 5,473 16,856
------- -------
Total Capitalization.............................................. $12,007 $19,059
======= =======
</TABLE>
- ---------------
(1) Excludes (i) 217,500 shares of Common Stock reserved for issuance upon
exercise of the Over-Allotment Option, (ii) 123,250 shares of Common Stock
reserved for issuance upon exercise of the Representative's Option and
(iii) 362,000 shares of Common Stock issuable upon exercise of options
granted or approved for grant upon completion of the Offering under the
Company's 1996 Stock Option Plan. See "EXECUTIVE COMPENSATION -- 1996 Stock
Option Plan," "DESCRIPTION OF SECURITIES" and "UNDERWRITING."
16
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except travel center, outdoor advertising,
share and per share data)
The selected financial data presented below is qualified by reference to,
and should be read in conjunction with, the Company's Consolidated Financial
Statements and the related Notes thereto and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included elsewhere in
this Prospectus. The data presented below under the caption "Selected Statement
of Income Data" for the fiscal year ended January 31, 1996 are derived from the
Consolidated Financial Statements of the Company, which financial statements
have been audited by KPMG Peat Marwick LLP, independent certified public
accountants. The following selected Statement of Income Data for the year ended
January 31, 1995 are derived from the Consolidated Financial Statements of the
Company, audited by Ricci & Ricci, independent certified public accountants. The
following selected Statement of Income Data and Balance Sheet Data as of and for
the periods ended July 31, 1995 and 1996 have been derived from the Company's
unaudited consolidated financial statements for such periods. In the opinion of
management, the following unaudited data reflect all adjustments, consisting
only of normal recurring adjustments, necessary to fairly present the Company's
financial position and results of operations for the periods presented. The
results of operations for any interim period are not necessarily indicative of
results to be expected for a full fiscal year.
<TABLE>
<CAPTION>
Six months ended
Years ended January 31, July 31,
----------------------- -----------------------
1995 1996 1995 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Selected Statement of Income Data:
Travel Center Operations
Gross sales ............................................ $ 19,799 $ 20,467 $ 10,802 $ 11,208
Discounts on sales ..................................... 221 292 104 153
-------- -------- -------- --------
Net sales ............................................ 19,578 20,175 10,698 11,055
Cost of goods sold ..................................... 12,541 12,995 6,969 7,422
-------- -------- -------- --------
Gross profit ........................................... 7,037 7,180 3,729 3,633
Operating costs:
General and administrative expenses .................. 5,161 5,462 2,851 2,615
Depreciation and amortization ........................ 451 434 207 176
-------- -------- -------- --------
Operating income ....................................... 1,425 1,284 671 842
Outdoor Advertising Operations
Gross income ........................................... 2,376 2,770 1,319 1,629
Operating costs:
Direct operating costs .............................. 1,715 2,007 933 1,031
General and administrative expenses ................. 205 344 137 208
Depreciation and amortization ....................... 252 261 125 133
-------- -------- -------- --------
Operating income ....................................... 204 158 124 257
Corporate and Other
General and administrative expenses .................... (622) (602) (285) (240)
Depreciation and amortization .......................... (118) (161) (62) (76)
Interest expense ....................................... (536) (612) (278) (332)
Other income, net ...................................... 411 570 325 374
-------- -------- -------- --------
</TABLE>
17
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Income before taxes .................................... 764 637 495 825
Income taxes ........................................... 295 253 198 330
---------- ---------- ---------- ----------
Net income ............................................. $ 469 $ 384 $ 297 $ 495
========== ========== ========== ==========
Net income per common share
Primary and fully diluted ........................... $ 0.17 $ 0.13 $ 0.10 $ 0.15
========== ========== ========== ==========
Weighted average common shares outstanding
Primary and fully diluted ........................... 2,778,680 3,000,618 2,950,094 3,227,883
Selected Travel Center Data:
Number of travel centers (end of
period)(1) ............................................. 16 15 16(2) 15
Average gross revenue .................................. $1,237,000 $1,364,000 $ 675,000(2) $ 747,000
Selected Outdoor Advertising Data:
Number of outdoor advertising display
faces (end of period) .................................. 1,442 1,556 1,508 1,653
</TABLE>
July 31, 1996
-----------------------------
Selected Balance Sheet Data: Actual As adjusted
------------- --------------
Cash and cash equivalents....................... $ 2,443 $ 8,829
Working capital................................. 2,770 9,824
Total property and equipment, net............... 9,073 9,073
Total assets.................................... 14,871 21,257
Notes payable .................................. 7,542 2,543
Stockholders' equity............................ 5,473 16,856
(1) Travel center data includes the information presented as to both the
Company's travel centers and free-standing Dairy Queen/Brazier restaurants.
(2) Includes a Dairy Queen/Brazier restaurant that was disposed of by the
Company during early July 1995 for which revenues have been included in the
average gross revenue per travel center calculation.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Introduction
The following is a discussion of the consolidated financial condition and
results of operations of the Company for the two fiscal years ended January 31,
1995 and 1996, and for the six month periods ended July 31, 1995 and 1996. This
discussion should be read in conjunction with the Consolidated Financial
Statements of the Company and the related Notes included elsewhere in this
Prospectus and is expressly qualified by the statements set forth under "RISK
FACTORS -- Forward- Looking Statements and Associated Risks." References herein
to specific years refer to the Company's fiscal year ending on January 31 of
such year.
The Company operates in two industry segments, travel centers and outdoor
advertising. In order to permit a meaningful evaluation of the Company's
performance in each of its operating segments, the Company has presented
selected operating data which separately sets forth the revenues, expenses and
operating income attributable to each segment, and also separately sets forth
the corporate expenses of the Company which are not properly allocable to either
of the Company's segments for purposes of determining their respective operating
income. The discussion of results of operations which follows compares such
selected segment operating data and corporate expense data for the fiscal
periods presented.
Results of Operations
The following table presents certain income and expense items derived from
the Consolidated Statements of Income as a percentage of gross revenues for the
two years ended January 31, 1995 and 1996 and the six months ended July 31, 1995
and 1996.
<TABLE>
<CAPTION>
Six Months Ended
Years Ended January 31, July 31,
----------------------- -------------------
1995 1996 1995 1996
------ ------ ------ ------
<S> <C> <C> <C> <C>
Consolidated Gross Sales............................. 100.0% 100.0% 100.0% 100.0%
Travel Center Operations:
Travel center sales
Merchandise............................... 30.4% 31.2% 32.8% 28.2%
Gasoline.................................. 41.7% 41.8% 39.8% 45.4%
Food...................................... 17.2% 14.9% 16.5% 13.7%
Other..................................... 0.0% 0.2% 0.0% 0.0%
Discounts on sales................................... 1.0% 1.3% 0.9% 1.2%
Cost of goods sold................................... 56.7% 55.9% 57.5% 57.8%
General and administrative expenses.................. 23.3% 23.5% 23.5% 20.4%
Depreciation and amortization........................ 2.0% 1.9% 1.7% 1.4%
Operating income..................................... 6.3% 5.5% 5.5% 6.5%
Outdoor Advertising Operations:
Gross income......................................... 10.7% 11.9% 10.9% 12.7%
Operating expenses................................... 7.7% 8.6% 7.7% 8.0%
General and administrative expenses.................. 0.9% 1.5% 1.1% 1.6%
Depreciation and amortization........................ 1.1% 1.1% 1.0% 1.0%
</TABLE>
19
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Operating income..................................... 1.0% 0.7% 1.1% 2.1%
Corporate and Other:
General and administrative expenses.................. 2.8% 2.6% 2.4% 1.9%
Depreciation and amortization........................ 0.5% 0.7% 0.5% 0.6%
Operating income..................................... 4.0% 2.9% 3.7% 6.1%
Interest expense..................................... 2.4% 2.6% 2.3% 2.6%
Other income, net.................................... 1.8% 2.5% 2.7% 2.9%
Income taxes......................................... 1.3% 1.1% 1.6% 2.6%
Net income........................................... 2.1% 1.7% 2.5% 3.8%
</TABLE>
Comparison of Six Months Ended July 31, 1996 and July 31, 1995
Travel Centers. Gross sales for the Company's travel centers increased 3.8%
to $11.2 million for the six months ended July 31, 1996 from $10.8 million for
the same period in fiscal 1995. This increase was despite an 8.8% decline in
merchandise sales to $3.6 million for the six months ended July 31, 1996 from
$4.0 million for the same period in fiscal 1995. The decline in merchandise
sales was primarily attributable to a statewide ban on fireworks sales in the
State of New Mexico that was in effect from May 23, 1996 to July 2, 1996.
Fireworks sales were down approximately $140,000 for the six months ended July
31, 1996 as compared to the same six month period in fiscal 1995. In addition to
the decline in fireworks sales, the ban on such sales also had a negative effect
on restaurant sales, which declined 11.7% to $1.8 million for the six months
ended July 31, 1996 from $2.0 million for the six month period ended July 31,
1995. The decrease in restaurant sales also reflected the Company's decision in
July 1995 to close its Lordsburg, New Mexico restaurant and sublease the
facility to an unrelated third party. Sales for the Lordsburg restaurant were
approximately $105,000 for the six months ended July 31, 1995. Same store
restaurant sales declined 6.8% to $1.8 million for the six months ended July 31,
1996 from $1.9 million for the same fiscal period ended 1995. These declines
were offset by an increase in gasoline sales of 20.5% to $5.8 million for the
six months ended July 31, 1996 from $4.8 million for the same six month period
in fiscal 1995 as a result of increases in both sales volume and retail prices.
In an effort to improve restaurant sales, the Company has hired a food and
beverage manager to oversee the day-to-day operations of the restaurants and
report on them directly to executive management personnel. Furthermore, certain
controls relating to labor, food and paper costs have been enhanced to
strengthen the overall performance of the restaurants.
Cost of goods sold for the travel centers increased 6.5% to $7.4 million
for the six months ended July 31, 1996 from $6.9 million for the same period in
fiscal 1995. As a percentage of gross sales, cost of goods sold increased
slightly to 66.2% for the six months ended July 31, 1996 from 64.5% for the six
months ended July 31, 1995.
General and administrative expenses for travel centers consist of salaries,
bonuses and commissions for travel center personnel, property costs and repairs
and maintenance. General and administrative expenses for the travel centers
decreased 8.3% to $2.6 million for the six months ended July 31, 1996 from $2.9
million for the six month period ended July 31, 1995. The decrease is primarily
attributable to the Company's decision not to pay discretionary cash bonuses to
management in fiscal 1997, resulting in the absence of any cash bonuses accrued
for the six months ended July 31, 1996. In
20
<PAGE>
comparison, the Company accrued $151,000 during the same period in fiscal 1995
for discretionary cash bonuses paid to management.
Depreciation and amortization expense for the travel centers declined 15.3%
for the six month period ended July 31, 1996 from the same period in fiscal 1995
to approximately $176,000 from $207,000. During the six months ended July 31,
1996, the Company determined the actual lives for certain property and equipment
were generally longer than the estimated useful lives previously established.
Therefore, the Company extended the useful lives of such assets, effective
February 1, 1996. This change in the useful lives of travel center assets,
together with a change in the use of some assets from the travel centers to
corporate and sales of other assets resulted in a decline in depreciation and
amortization expense for the travel centers for the six month period ended July
31, 1996 as compared to the same period in the prior year.
The factors discussed above resulted in a 25.7% increase in operating
income from the travel centers to $842,000 for the six months ended July 31,
1996 from $671,000 for the same period in fiscal 1995.
Outdoor Advertising. Gross income from the Company's outdoor advertising
operations increased 23.5% to $1.6 million for the six months ended July 31,
1996 from $1.3 million for the same period in fiscal 1995. The increase was
attributable to several small acquisitions in New Mexico, increased construction
of advertising displays and increases in advertising rates.
Operating expenses related to outdoor advertising consist of direct
advertising expenses, which include rental payments to property owners for the
use of land on which advertising displays are located, production expenses and
selling expenses. Production expenses include salaries for operations personnel
and real estate representatives, property taxes, materials and repairs and
maintenance of advertising displays. Selling expenses consist primarily of
salaries and commissions for salespersons and travel and entertainment related
to sales. Direct advertising expenses increased 10.5% to $1.0 million for the
six months ended July 31, 1996 from $933,000 for the same period in fiscal 1995,
principally due to the addition of sales and production personnel.
General and administrative expenses for outdoor advertising consist of
salaries and wages for administrative personnel, insurance, legal fees,
association dues and subscriptions and other indirect operating expenses.
General and administrative expenses increased 52.5% to $208,000 for the six
months ended July 31, 1996 from $137,000 for the same period in fiscal 1995. The
increase was primarily attributable to increases in administrative personnel,
insurance and legal fees. The overall increase was partially offset by a
decrease in general and administrative expenses of $22,000 as a result of the
decision not to pay discretionary cash bonuses to management.
Depreciation and amortization expense increased 6.5% to $133,000 for the
six months ended July 31, 1996 from $125,000 for the same period in fiscal 1995,
as a result of scheduled depreciation of additional display structures and
machinery and equipment.
The above factors contributed to the increase in outdoor advertising
operating income of 106.2% to $257,000 for the six months ended July 31, 1996
from $125,000 for the same period in fiscal 1995.
Corporate and Other. General and administrative expenses for corporate and
other operations of the Company consist primarily of executive and
administrative compensation and benefits and accounting and legal fees. General
and administrative expenses decreased 15.8% to
21
<PAGE>
$240,000 for the six months ended July 31, 1996 from $285,000 for the six
months ended July 31, 1995, primarily as a result of management's decision not
to pay discretionary cash bonuses for the fiscal year ended January 31, 1997. As
such, no accrual for discretionary cash bonuses has been accounted for during
the six months ended July 31, 1996. Of the $285,000 of general and
administrative expenses for the six months ended July 31, 1995, $77,000 was
accrued for discretionary cash bonuses. Other general and administrative
expenses increased during the six month period ended July 31, 1996, as a result
of increased personnel and certain other expenses associated with the Company's
newly expanded corporate headquarters.
Depreciation and amortization expenses for the Company's corporate and
other operations consist primarily of depreciation associated with the corporate
headquarters and furniture and fixtures related thereto. Depreciation and
amortization increased 23.7% to $76,000 for the six months ended July 31, 1996,
from $62,000 for the same period in fiscal 1995. The increase was due to
scheduled depreciation of additional fixed assets.
Interest expense increased 19.3% to $332,000 for the six months ended July
31, 1996 from $278,000 for the six months ended July 31, 1995, as a result of
borrowings to fund outdoor advertising expansion and the conversion of travel
centers' gasoline dispensing equipment to CITGO stations.
Income before taxes increased 66.5% to $825,000 for the six months ended
July 31, 1996 from $495,000 for the same period in fiscal 1995. As a percentage
of gross revenues, income before taxes increased from 4.1% for the six months
ended July 31, 1995 to 6.4% for the six months ended July 31, 1996.
Income taxes were $330,000 for the six months ended July 31, 1996 compared
to $198,000 for the same period in fiscal 1995, as a result of higher pre-tax
income.
The foregoing factors contributed to the Company's increase in net income
for the six months ended July 31, 1996 to $495,000 as compared to $297,000 for
the six month period ended July 31, 1995.
Comparison of Fiscal Years Ended January 31, 1996 and January 31, 1995
Travel Centers. Gross sales at the Company's travel centers increased 3.4%
to $20.5 million for fiscal 1996 from $19.8 million for fiscal 1995. This
increase includes a 7.5% increase in merchandise sales to $7.2 million for the
fiscal year 1996 from $6.7 million for the fiscal year 1995, which was primarily
attributable to increases in general merchandise sales, Mexican import goods,
jewelry and fireworks. In addition, gasoline sales increased 5.1% to $9.7
million for the fiscal year ended January 31, 1996 from $9.2 million for the
fiscal year ended January 31, 1995. These increases were offset by declines in
restaurant sales of 9.2% from $3.8 million for the fiscal year ended January 31,
1995 to $3.5 million for the fiscal year ended January 31, 1996.
Cost of goods sold for the travel centers increased 3.6% to $13.0 million
for the fiscal year ended January 31, 1996 from $12.5 million for the fiscal
year ended January 31, 1995. As a percentage of gross travel center revenues,
cost of sales remained constant at 63% for both fiscal years.
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General and administrative expenses for the travel centers increased 5.8%
to $5.5 million for the fiscal year ended July 31, 1996 from $5.2 million for
the prior fiscal year. The increase was primarily attributable to an overall
increase in hourly wage rates for travel center personnel and certain costs
associated with the Company's compliance with above ground storage tank
installations at some of its travel centers. In addition, the Company expanded
its middle management team to include two Area Supervisors, a Petroleum Manager
and a Food and Beverage Manager.
Depreciation and amortization expense decreased by 3.7% to $434,000 for the
fiscal year ended January 31, 1996 from $451,000 for the fiscal year ended
January 31, 1995. The decrease was primarily attributable to a decline in the
depreciation expense for certain assets due to the use of accelerated methods,
which provide for higher depreciation in earlier periods.
The above factors contributed to a decline in travel center operating
income of 9.9% to $1.23 million for the fiscal year ended January 31, 1996 from
$1.4 million for the fiscal year ended January 31, 1995.
Outdoor Advertising. Gross income from outdoor advertising increased 16.6%
to $2.8 million for the fiscal year ended January 31, 1996 from $2.4 million for
the fiscal year ended January 31, 1995. The increase was attributable to several
small acquisitions in New Mexico and Texas, increased construction of
advertising displays and increases in advertising rates.
Operating expenses increased 17.1% from $1.7 million in fiscal 1995 to $2.0
million in fiscal 1996, primarily due to increases in land lease rent expenses,
production, travel and salaries and wages.
General and administrative expenses for outdoor advertising increased 67.6%
to $344,000 for the fiscal year ended January 31, 1996 from $205,000 for the
same period in fiscal 1995. The increase was primarily attributable to increases
in insurance costs, legal fees and other administrative expenses.
Depreciation and amortization expense increased 3.6% to $261,000 for the
fiscal year ended January 31, 1996 from $252,000 for the year ended January 31,
1995. The increase was due to scheduled depreciation of additional fixed assets.
The above factors contributed to the decrease in outdoor advertising
operating income of 22.5% to $158,000 for the fiscal year ended January 31, 1996
from $204,000 for the fiscal year ended January 31, 1995.
Corporate and Other. General and administrative expenses decreased 3.2% to
$602,000 for the fiscal year ended January 31, 1996 from $622,000 for the fiscal
year ended January 31, 1995, primarily as a result of cost reduction measures
implemented by the Company.
Depreciation and amortization expense increased 36.5% to $161,000 for the
fiscal year ended January 31, 1996 from $118,000 for the fiscal year ended
January 31, 1995. The increase was primarily attributable to the addition of
corporate assets such as the construction of additional office space at the
Company's corporate headquarters.
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Interest expense increased 14.1% to $612,000 for the fiscal year ended
January 31, 1996 from $536,000 for the fiscal year ended January 31, 1995. The
increase is primarily attributable to borrowing required for continued expansion
of the outdoor advertising division and the completion of additional
construction at the Company's corporate offices.
Income before taxes decreased 16.8% to $637,000 for the fiscal year ended
January 31, 1996 from $764,000 for the fiscal year ended January 31, 1995. The
decrease in income before taxes was primarily attributable to an increase in
interest costs and a decline in travel center operating income.
Income taxes decreased 14.2% to $253,000 for the fiscal year ended January
31, 1996 from $295,000 for the fiscal year ended January 31, 1995, as a result
of lower pre-tax income.
The factors described above contributed to the Company's decrease in net
income of 18.1% to $384,000 for the fiscal year ended January 31, 1996 from
$469,000 for the fiscal year ended January 31, 1995.
Liquidity and Capital Resources
At July 31, 1996, the Company had working capital of $2.8 million and a
current ratio of 2.05:1, compared to working capital of $1.8 million and a
current ratio of 1.65:1 at January 31, 1996. The Company's net cash provided by
operating activities increased from $898,000 to $1,242,000 for the fiscal years
ended January 31, 1995 and 1996, respectively. The increase was due primarily to
a decrease in inventories of $380,000 and an increase in accounts payable and
accrued liabilities of $527,000. These increases were partially offset by a
decrease in net income of $85,000. For the six months ended July 31, 1996, the
Company's net cash provided by operating activities decreased to $711,000 from
$1.1 million for the six months ended July 31, 1995. The decrease is primarily
attributable to a decline in inventory levels for the six months ended July 31,
1995 of $419,000 as compared to a decline of $57,000 for the six months ended
July 31, 1996.
Net cash used in investing activities increased from $892,000 in fiscal
1995 to $1,453,000 in fiscal 1996, primarily due to a reduction in temporary
investments in fiscal 1995 of $540,000. Net cash used in investing activities
increased to $623,000 for the six months ended July 31, 1996 from $560,000 for
the six months ended July 31, 1995 as a result of additional purchases of
property and equipment (offset by sales of certain assets) and disbursements of
funds in the form of notes receivable.
Net cash provided by financing activities increased $307,000 to $428,000
from fiscal 1995 to fiscal 1996 due primarily to a reduction in payments on
long-term debt from fiscal 1995 to fiscal 1996 of $317,000. Net cash provided by
financing activities increased to $754,000 for the six months ended July 31,
1996 from $18,000 for the six months ended July 31, 1995. The increase was
primarily attributable to a net increase in borrowings of $800,000 for the six
months ended July 31, 1996. In addition, the Company received proceeds from the
issuance of Common Stock of $222,000. This increase in cash was offset by
disbursements for the Offering of $237,000 and the payment of cash dividends of
approximately $51,000.
As of July 31, 1996, the Company was indebted to two commercial banks in an
aggregate principal amount of $3,454,660 under various term loans. The Company
also has available two revolving lines of credit for $1,000,000 and $150,000,
with two separate banks, of which $268,500 and $100,000, respectively, had been
borrowed as of July 31, 1996. All of the loan facilities are secured by certain
land, buildings, equipment, billboards and inventories of the Company. The term
loans mature at various dates from May 30, 2000 to January 29, 2006 and accrue
interest at a rate of prime plus 1%. The $1,000,000 credit facility matures June
15, 1997 and accrues interest at a rate of prime plus 1%. The $150,000 credit
facility matures June 1, 1997 and accrues interest at a rate of prime plus 1%.
The Company made capital expenditures of $1.5 million, $1.4 million and
$685,000 during the fiscal years ended January 31, 1995 and 1996 and the six
months ended July 31, 1996,
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respectively. These expenditures were made primarily for upgrades to the
Company's travel centers and for the construction and acquisition of additional
billboard structures. The Company anticipates making additional capital
expenditures of approximately $5.0 million during the next twelve months,
including approximately $325,000 for the removal and replacement of underground
storage tanks, $3.5 million for the development of additional travel centers and
the remainder primarily for upgrades and renovations at the Company's existing
travel centers.
The Company believes that the net proceeds of this Offering, internally
generated funds and funds available for borrowing under the revolving line of
credit will be sufficient for at least the next twelve months to satisfy all
debt service obligations and to finance its current operations and anticipated
capital expenditures. The Company may, however, require additional capital to
consummate significant acquisitions in the future and there can be no assurance
that such capital will be available on terms acceptable to the Company.
Inflation
In the last two years, inflation has not had a significant impact on the
Company.
Seasonality
The Company's revenues and operating results have exhibited some degree of
seasonality in past periods. Typically, the Company experiences its strongest
financial performance in the second fiscal quarter when leisure travel tends to
increase, and its lowest revenues in the third fiscal quarter. The Company
expects this trend to continue in the future.
Recent Accounting Pronouncements
The Financial Accounting Standards Board has issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," which established a new accounting principle for accounting for
the impairment of certain loans, certain investments in debt and equity
securities, long-lived assets that will be held and used including certain
identifiable intangibles and goodwill related to those assets and long-lived
assets and certain identifiable intangibles to be disposed of. This statement is
effective for fiscal years beginning after December 15, 1995. While the Company
has not completed its evaluation of the impact that will result from adopting
this statement, it does not believe that such adoption will have a significant
impact on the Company's financial position and results of operations.
The Financial Accounting Standards Board also issued SFAS No. 123,
"Accounting for Stock Based Compensation," effective also for fiscal years
beginning after December 15, 1995. The new statement encourages, but does not
require, companies to measure stock-based compensation cost using a fair value
method, rather than the intrinsic value method prescribed by the Accounting
Principles Board (APB) Opinion No. 25. Companies choosing to continue to measure
stock-based compensation using the intrinsic value method must disclose on a pro
forma basis net earnings per share as if the fair value method were used.
Management is currently evaluating the requirements of SFAS No. 123. Management
does not believe that SFAS No. 123 will have a material impact on the Company's
operating income.
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BUSINESS
Company Overview
The Company is a regional leader in the operation of travel centers and
outdoor advertising displays dedicated to serving the traveling public in rural
and smaller metropolitan areas of the Southwestern United States. The Company's
tradition of serving the public dates back to 1912 when the Company's founder,
Claude M. Bowlin, started trading goods and services with Native Americans in
New Mexico. Bowlin currently operates fourteen full-service travel centers and
one free-standing Dairy Queen/Brazier restaurant along interstate highways in
Arizona and New Mexico where there are generally few gas stations, convenience
stores or restaurants. The Company advertises its travel centers through a
network of over 300 outdoor advertising display faces. In addition to a variety
of unique Southwestern merchandise, the Company's travel centers offer brand
name food and gasoline to the traveling public. The Company believes that its
"co-branding" strategy of offering complementary brand name food and gasoline
products results in increased customer traffic and it intends to continue to
actively pursue additional co-branding opportunities.
In addition to its travel centers, the Company operates over 1,600 revenue
generating outdoor advertising display faces for third party customers such as
hotels and motels, restaurants and retail and consumer products. These display
faces are strategically situated along interstate highways primarily in Arizona
and New Mexico and, to a lesser extent, in Colorado, Oklahoma and Texas. In
addition to the leasing of advertising space, Bowlin provides a comprehensive
range of outdoor advertising services to its clients, including customized
design and production services. Although the Company faces substantial
competition in each of its operational areas, the Company believes that few of
its competitors offer the same breadth of products and services dedicated to the
traveling public.
Industry Overview
Travel Services Industry. The travel services industry in which the Company
competes includes convenience stores which may or may not also offer gasoline,
and fast food and full-service restaurants located along rural interstate
highways. The Company believes that the current trend in the travel services
industry is toward strategic pairings at a single location of complementary
products that are noncompetitive, such as brand name gasoline and brand name
fast food restaurants. This concept, known as "co-branding," has recently seen
greater acceptance by both traditional operators and larger petroleum companies.
The industry has also been characterized in recent periods by consolidation or
closure of smaller operators.
The convenience store industry includes both traditional operators that
focus primarily on the sale of food and beverages but also offer gasoline and
large petroleum companies that offer food and beverages primarily to attract
gasoline customers. In 1995, the convenience store industry sold $46.8 billion
worth of merchandise and services and $66.3 billion worth of petroleum products.
The restaurant segment of the travel services industry is highly
competitive, most notably in the areas of consistency of quality, variety,
price, location, speed of service and effectiveness of marketing. The major
chains are aggressively increasing market penetration by opening new
restaurants, including restaurants at "special sites" such as retail centers,
travel centers and gasoline
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outlets. In addition, smaller quick-service restaurant chains and franchise
operations are focusing on brand and image enhancement and co-branding
strategies.
Outdoor Advertising Industry. According to recent estimates by the OAAA,
outdoor advertising generated total revenues of approximately $1.8 billion in
1995, representing growth of approximately 8.2% over 1994. Although outdoor
advertising represents only slightly over 1% of total U.S. advertising
expenditures, this segment is growing at a faster rate than such traditional
advertising media as radio, television and newspaper, which increased by 7.7%,
6.1% and 5.7%, respectively, during the same period. Outdoor advertising offers
repetitive impact and a relatively low cost-per-thousand impressions as compared
to broadcast media, newspapers, magazines and direct mail marketing, making it
attractive to both local businesses targeting a specific geographic area or set
of demographic characteristics and national advertisers seeking mass market
support. Outdoor advertising services have recently expanded beyond billboards
to include a wide variety of out-of-home advertising media, including
advertising displays in shopping centers, malls, airports, stadiums, movie
theaters and supermarkets, as well as on taxis, trains, buses and subways. The
OAAA estimates that total out-of-home advertising revenues, including
traditional billboard advertising, exceeded $3.5 billion in 1995.
Outdoor advertising provides advertisers with a cost effective means of
reaching large audiences and is often used by businesses as part of an overall
multimedia advertising campaign to reach their target geographic or demographic
markets. In addition to its low cost-per-thousand impressions, because outdoor
advertising reaches potential customers close to the point-of-sale, restaurants,
motels, service stations and similar businesses find outdoor advertising
particularly effective. In addition, repeated viewing by people traveling the
same route on a daily basis makes outdoor advertising especially suitable for
companies, such as banks, insurance companies and soft drink manufacturers that
sell their products by promoting a particular image.
The outdoor advertising industry uses three standardized display formats:
traditional bulletin-style painted billboards (with a typical face size of 14
feet by 48 feet), 30-sheet posters (with a typical face size of 12 feet by 25
feet) and junior or 8-sheet posters (with a typical face size of 6 feet by 12
feet). Generally, the physical advertising structure is owned by the outdoor
advertising company and is built on locations either owned or leased by the
operator or on which it has a permanent easement. Traditionally, outdoor
advertising displays are leased to advertisers on a unit basis. Advertising
rates for outdoor advertising media are based on such factors as the size of the
advertising display, visibility, cost of leasing, construction and maintenance
and the number of people who have the opportunity to see the advertising
message.
The outdoor advertising market is highly fragmented but is dominated in the
larger DMAs by a few sizable firms, several of which are subsidiaries of
diversified companies. In addition to the larger outdoor advertising firms,
there are many smaller regional and local companies operating a limited number
of displays in a single or a few local markets. The OAAA estimates that there
are approximately 1,000 companies in the industry operating a total of
approximately 396,000 displays. There has been a trend toward consolidation in
the outdoor advertising industry in recent years and the Company expects this
trend to continue.
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Business Strategy
Travel Services Business Strategy. The Company opened its first travel
center in 1953 and has since expanded to fourteen travel centers and one
free-standing Dairy Queen/Brazier restaurant. The Company's travel centers are
strategically located along well-traveled interstate highways in Arizona and New
Mexico where there are generally few gas stations, convenience stores or
restaurants. Each of the Company's travel centers has a unique Southwestern
theme, and extensive theme-oriented billboard advertising is used to attract
customers to stop and take advantage of their services.
Most of the Company's travel centers offer food and beverages, ranging from
ice cream and snack foods at some locations to full-service restaurants at
others. Revenues from food sales accounted for 17%, 15% and 14%, respectively,
of the Company's total revenues in fiscal 1995 and 1996 and the six months ended
July 31, 1996. In addition to the Company's one free-standing Dairy
Queen/Brazier restaurant, the Company's food service operations at seven of the
Company's fourteen travel centers operate under the Dairy Queen/Brazier or Dairy
Queen trade names.
The Dairy Queen and Dairy Queen/Brazier restaurants feature the signature
Dairy Queen treat line of soft serve dairy products. In addition, the Dairy
Queen/Brazier restaurants offer a full line of hamburger combinations as well as
specialty chicken, fish and barbecue sandwiches.
The Company's travel centers also offer brand name gasolines such as CITGO,
Conoco, Chevron, Texaco and Diamond Shamrock. Revenues from gasoline sales at
the Company's travel centers accounted for approximately 42% of the Company's
total revenues in each of fiscal years 1995 and 1996 and approximately 45% in
the six month period ended July 31, 1996. Recently, the Company became an
authorized distributor of CITGO Petroleum Corporation, one of the largest and
fastest growing wholesalers of petroleum products in the United States. The
Company is in the process of converting six of its existing locations to CITGO
"superpumper" stations and expects to have the conversion completed by early
fiscal 1998. The Company also intends to actively market CITGO products to other
distributors and retailers in Arizona and New Mexico.
In addition to offering food and gasoline, each of the Company's travel
center gift shops offers an extensive variety of Southwestern merchandise and
collectibles. Four of the Company's travel centers operate under the Stuckey's
brand name. The Stuckey's specialty stores are family oriented shops that
feature the Stuckey's line of pecan confectioneries. Stuckey's is well-known
among travelers as a place to shop for souvenirs, gifts and toys and travel
games for children.
The Company's billboard advertising for its travel centers emphasizes this
wide range of unique Southwestern souvenirs and gifts available at the travel
centers, as well as the availability of gasoline and food. Merchandise at each
of the Company's stores is offered at prices that suit the budgets and tastes of
a diverse traveling population. The merchandise ranges from inexpensive
Southwestern gifts and souvenirs to unique hand-crafted jewelry, rugs, pottery,
kachina dolls and other gifts crafted specially for Bowlin by several Native
American tribes. Some stores offer special categories of collectibles, such as
dolls and music boxes. Merchandise items, which are among the Company's highest
margin items, accounted for approximately 30%, 31% and 28%, respectively, of the
Company's total revenues in fiscal years 1995 and 1996 and the six months ended
July 31, 1996.
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Outdoor Advertising Business Strategy. The Company operates over 1,600
revenue generating advertising display faces, primarily in Arizona and New
Mexico and, to a lesser extent, in Colorado, Oklahoma and Texas. Approximately
94% of these display faces are traditional bulletin style and 6% are assorted
poster styles. The Company's bulletin style displays are located primarily on
interstate highways, while the smaller poster sizes are typically used in local
settings by advertisers who prefer to change the display message regularly. The
Company's outdoor advertising displays are strategically located in rural and
smaller metropolitan areas throughout the Southwest, where the dispersion of
population, outdoor lifestyles and leading tourist destinations have created a
strong dependence on highway travel.
The Company began its outdoor advertising operations in 1980 and has grown
into a regional leader in small to medium-sized outdoor advertising markets. The
Company offers its outdoor advertising customers a complete full-service source
for graphic design and printing for the outdoor billboards operated by the
Company. As a result, the Company is able to attract advertisers that have
historically relied on other media in marketing their products and services. The
Company believes it is one of the largest outdoor advertising companies in rural
interstate markets in the Southwest and, in 1995, the Company was ranked by the
OAAA as one of the top 40 outdoor advertising companies in the United States in
terms of gross revenues.
Most of the Company's advertising displays are travel and tourism oriented.
According to the U.S. Travel Data Center in Washington, D.C., nine out of ten
automobile travelers rely on billboards to locate gas, food, lodging and tourist
attractions. In addition, approximately two-thirds of rural market advertisers
are engaged in the travel-tourism industry and rely on billboards as their
primary means of advertising to the traveling public.
Growth Strategy
Travel Centers. The Company is committed to expanding its travel center
operations through internal development as well as strategic acquisitions. The
Company plans to further expand its travel center operations in popular tourist
destinations, along heavily traveled interstate corridors and in smaller
metropolitan areas. The Company believes that the co-branding concept that it
has implemented at its travel centers has resulted in increased revenues, and
the Company intends to pursue opportunities to acquire rights to additional
brand name products.
The following are the primary components of the Company's strategy for
expanding its travel center operations:
o Continuing to offer high quality brand name food and products in a clean,
safe environment designed to appeal to travelers on interstate highways.
o Continuing to increase sales at existing locations through the upgrading of
facilities and the addition of products and services.
o Pursuing complementary national food and/or merchandise brands to further
implement the Company's co-branding concept.
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o Expanding the Company's travel center operations through internal
development and strategic acquisitions in key tourist destinations, along
heavily traveled interstate highways and in smaller metropolitan areas.
Gasoline Wholesaling. Management believes that gasoline wholesaling
operations represent a potentially significant additional source of revenues to
the Company. The Company was recently granted a distributorship by CITGO, which
is among the top five petroleum producers in the United States and one of the
fastest growing brand names of gasoline products in the country. Bowlin is
converting several of the fuel supply facilities at its existing travel centers
to CITGO superpumpers and, as a wholesaler, intends to actively market CITGO
products to other dealers and retailers in New Mexico and Arizona. The Company
intends to target dealerships with an annual sales volume of 600,000 to 1.2
million gallons of gasoline per year.
The CITGO distribution agreement allows Bowlin to streamline its gasoline
supply arrangements and take advantage of volume-driven pricing by consolidating
purchases from CITGO. Pursuant to the terms of the distribution agreement, the
Company is required to purchase from CITGO certain minimum quantities of
gasoline per month for a period of three years, subject to certain adjustments.
Outdoor Advertising. As in the case of its travel centers, the Company
plans to increase its outdoor advertising through internal development as well
as acquisition. The Company increased its inventory of billboard structures by
49 and 85, respectively, in fiscal years 1995 and 1996. Through internal
development, the Company plans to add approximately 100 new billboard structures
(representing up to 200 display faces) in fiscal 1997, of which 44 had been
constructed at July 31, 1996, and to add new billboard structures at a higher
incremental rate each year thereafter. By 2001, the Company anticipates that it
will be adding approximately 250 new billboard structures per year to its
operations through internal development. In addition, the Company plans to
pursue strategic acquisitions of outdoor advertising assets and small to
medium-sized outdoor advertising operators when appropriate.
Consistent with its past practices, the Company intends to pursue expansion
into markets that are not included in the 50 largest DMAs. The Company believes
that expansion along interstate highways and in smaller metropolitan areas
permits the Company to expand into areas where competition for site acquisitions
is less intense, purchase prices are more favorable and government regulations
are generally less onerous. Marketing efforts in these areas are focused on
local and regional advertisers, thereby allowing the Company to maintain a
diverse client base and limiting reliance on national accounts, including
tobacco advertisers.
The Company plans to expand its outdoor advertising operations primarily
by:
o Continuing to develop the Company's presence along interstate highways in
its existing markets throughout the Southwest.
o Increasing revenues from existing billboards by implementing programs that
maximize advertising rates and occupancy levels.
o Expanding its operations within current markets through new billboard
construction.
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o Making strategic acquisitions of existing outdoor advertising assets and
small to medium-sized outdoor advertising operations in the less populated
areas of the United States with the objective of becoming a leader in this
niche market.
Business Operations
Travel Center Operations. The Company sells food, gasoline and merchandise
through its fourteen travel centers and one free-standing Dairy Queen/Brazier
restaurant located along two interstate highways (I-10 and I-40) in Arizona and
New Mexico. These are key highways for travel to numerous tourist and
recreational destinations as well as arteries for regional traffic among major
Southwestern cities. All of the Company's travel centers are open every day of
the year.
Each of the Company's travel centers maintains a distinct, theme-oriented
atmosphere. In addition to the Southwestern merchandise it purchases from Native
American tribes, the Company also imports some 650 items from Mexico, including
handmade blankets, earthen pottery and wood items. Additional goods, novelties
and imprinted merchandise are imported from several Pacific Rim countries. The
Company has long-standing relationships with many of its vendors and suppliers.
The Company sells food under the Dairy Queen and Dairy Queen/Brazier brand
names and sells snacks and souvenir merchandise under the Stuckey's brand name.
Pursuant to the terms of its agreements with Stuckey's and Dairy Queen, the
Company is obligated to pay these franchisors a franchise royalty and in some
instances a promotion fee, each equal to a percentage of gross sales revenues
derived by the Company from products sold pursuant to such agreements, as well
as comply with certain provisions governing the operation of the franchised
stores.
The Company continuously monitors and upgrades its travel center facilities
to maintain a high level of comfort, quality and appearance. Improvements
include new awnings and facings, new signage and enhanced lighting and
furnishings. The Company is also engaged in upgrading its petroleum storage and
dispensing equipment in order to increase fueling capacity and efficiency and to
satisfy new federal guidelines made mandatory by December 1998. See "--
Regulation" and "RISK FACTORS -- Environmental Risks."
Store managers at the travel centers and restaurants oversee day-to-day
operations at the retail level. The travel centers are grouped by geographic
location and assigned to an Area Supervisor who oversees the management of his
or her assigned facilities. The Area Supervisors report directly to the Senior
Vice President of Retail Operations. In addition, the Company employs a
Merchandise Manager who works closely with the Senior Vice President in
monitoring buying patterns and habits of the customers visiting the various
locations. The Company has an extensive standardized training program for both
its retail and food service employees. The training program focuses on product
knowledge and customer service.
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The Company is currently implementing a central warehouse operation in Las
Cruces, New Mexico, with approximately 27,000 square feet of useable space. The
warehouse will allow the Company to increase its purchasing power and to enhance
its inventory control and distribution capabilities. After completing
implementation of its warehouse distribution procedures, the Company plans to
upgrade its inventory and point-of-sale systems in order to more quickly and
accurately process data used in the purchasing and distribution of goods.
Outdoor Advertising Operations. The outdoor advertising operations of the
Company include leasing of sites, construction of display structures, sales of
advertising space and production and design of display faces. The Company's
leasing department has the responsibility for coordinating land leases with
owners for the right to construct and maintain billboard structures on the
landowner's property. In addition, the leasing department also monitors the
Company's compliance with all government regulations regarding lease rights,
construction and sales of outdoor structures. The Company's construction
division erects billboard structures on any sites acquired by the Company
without a pre-existing structure, with the goal of maximizing the amount of
leasable area on a particular site.
The Company's sales department, through its local account representatives,
sells advertising space to the Company's clients from its inventory of
approximately 1,600 display faces. The account representatives work with the
Company's clients, their advertising agencies and the Company's production
department to provide clients with high quality design and artwork for their
billboards. Although the Company's consistent expansion of its outdoor
advertising inventory results in an advertising occupancy rate of less than
100%, the Company generally has approximately 75% of its inventory under
advertising agreements at any time.
The Company's production staff performs a full range of activities required
to create and install outdoor advertising. Production work includes creating the
advertising copy design and layout, painting the design or coordinating its
printing and installing the design displays. Billboards have historically been
composed of several painted plywood sheets, but recently vinyl facing has begun
to replace plywood in national or regional campaigns using substantially
identical advertisements or requiring high graphics resolution. The increased
use of vinyl and pre-printed advertising copy furnished to the Company by the
advertiser or its agency results in less labor-intensive production work. The
Company believes that this trend may reduce future operating expenses associated
with the Company's production activities.
The Company's advertising customers consist largely of local and regional
advertisers, resulting in a diverse client base and limiting reliance on
national advertising clients. Unlike many of its competitors, the Company does
not rely to a significant extent upon tobacco advertisers, which are subject to
increasing regulation. The following table sets forth the categories of
industries from which the Company derived its outdoor advertising net revenues
for the six months ended July 31, 1996 and the respective percentages of such
net revenues. The top three business categories accounted for approximately 71%
of the Company's total outdoor advertising net revenues and 9% of the Company's
total revenues in the six months ended July 31, 1996. No single advertiser
accounted for more than 2.2% of the Company's total outdoor advertising net
revenues in such period.
32
<PAGE>
Percentage of Net
Advertising Revenues by Category
Hotels and Motels................................... 28.3%
Restaurants......................................... 23.5
Retail/Consumer Products............................ 19.2
Travel & Entertainment.............................. 9.4
Government.......................................... 3.7
Automotive.......................................... 2.7
Services............................................ 2.3
Alcohol............................................. 1.7
Tobacco............................................. *
Other............................................... 9.2
-----
TOTAL 100.0%
=====
----------
*Less than 1%.
Competition
Travel Services Competition. The Company faces competition at its travel
centers from quick-service and full-service restaurants, convenience stores,
gift shops and, to some extent, from truck stops located along interstate
highways in Arizona and New Mexico. Some of the travel centers that the Company
competes with are operated by large petroleum companies, while many others are
small independently owned operations that do not offer brand name food service
or gasoline. Giant Industries, Inc., a refiner and marketer of petroleum
products, operates two travel centers, one in Arizona and one in New Mexico,
which are high volume diesel fueling and large truck repair facilities that also
include small shopping malls, full-service restaurants, convenience stores, fast
food restaurants and gift shops. The Company's principal competition from truck
stops includes Love's Country Stores, Inc., Petro Corporation and Flying J. Many
convenience stores are operated by large, national chains which are
substantially larger, better capitalized and have greater name recognition and
access to greater resources than the Company.
Outdoor Advertising Competition. The Company competes in all of its markets
with other outdoor advertisers as well as other media, including broadcast and
cable television, radio, newspaper and direct mail marketers. The Company has
little competition in its rural markets from other outdoor advertisers, but
encounters direct competition in its smaller metropolitan markets from larger
outdoor media companies, including 3M Media (a division of Minnesota Mining and
Manufacturing Company), WhiteCo Outdoor Advertising and Donrey Outdoor
Advertising, each of which have large national networks and greater resources
than the Company. The Company believes that by concentrating on interstate and
tourist oriented advertising in markets other than the largest 50 DMAs it will
be able to compete more effectively. As the Company expands geographically,
however, it may encounter increased competition from other outdoor advertising
firms, some of whom are substantially larger and have greater name recognition
and access to substantially greater resources than the Company. See "RISK
FACTORS--Competition."
33
<PAGE>
Employees
As of July 31, 1996, the Company had approximately 188 full-time and 117
part-time employees, 64 of which were located in Arizona and 241 of which were
located in New Mexico. As of July 31, 1996, 127 of the Company's employees were
employed in store/retail sales, 100 employees were employed in the Company's
restaurant operations, 32 employees were employed in the Company's outdoor
advertising operations, 9 employees performed certain warehousing and
distribution services for the Company and 37 employees provided managerial and
administrative services to the Company. None of the Company's employees are
covered by a collective bargaining agreement and the Company believes its
relations with its employees are good.
Regulation
Travel Centers. Each of the Company's food service operations is subject to
licensing and regulation by a number of governmental authorities relating to
health, safety, cleanliness and food handling. The Company's food service
operations are also subject to federal and state laws governing such matters as
working conditions, overtime and tip credits and minimum wages. The Company
believes that its operations at its fourteen travel centers and one
free-standing Dairy Queen/Brazier restaurant comply in all material respects
with applicable licensing and regulatory requirements; however, future changes
in existing regulations or the adoption of additional regulations could result
in material increases in the Company's costs. See "RISK FACTORS -- Potential
Adverse Effects of Government Regulation of Travel Centers."
Historically, the Company has incurred ongoing costs to comply with
federal, state and local environmental laws and regulations, primarily relating
to underground storage tanks ("USTs"). These costs include assessment,
compliance and remediation costs, as well as certain ongoing capital
expenditures relating to the Company's gasoline dispensing operations. Under
recently enacted federal regulations, the Company is obligated to upgrade or
replace all non-complying USTs it owns or operates to meet corrosion protection
and overfill/spill containment standards by December 22, 1998. In response to
such programs, the Company has adopted a policy of replacing its USTs with
above-ground storage tanks to minimize the costs associated with leak detection
and compliance with other regulatory programs. Such tanks have been installed at
all but three of the Company's travel centers, and the Company intends to
complete the installation of above-ground storage tanks at all of its existing
travel centers by the end of fiscal 1997.
The Company incurred $191,000 in capital expenditures in fiscal 1996, and
estimates that it will be required to make additional capital expenditures of
approximately $325,000 in the aggregate by December 1998 to comply with current
federal and state UST regulations. The Company's estimates of costs to be
incurred for environmental assessment and remediation and for other regulatory
compliance are based on present and estimated future remediation costs and
results at UST sites. As certain of these factors and assumptions could change
due to modifications of regulatory requirements at either federal, state or
local levels, detection of unanticipated environmental conditions, or other
unexpected circumstances, the actual costs incurred may vary significantly from
these estimates noted above and may vary significantly from year to year. See
"RISK FACTORS -- Environmental Risks."
The Company's travel center operations are also subject to extensive laws
and regulations governing the sale of alcohol and tobacco, and fireworks in its
New Mexico travel centers. Such
34
<PAGE>
regulations include certain mandatory licensing procedures and ongoing
compliance measures, as well as special sales tax measures. These regulations
are subject to change and future modifications may result in decreased revenues
or profit margins at the Company's travel centers as a result of such changes.
In June and July of 1996, the State of New Mexico issued a temporary ban on the
sale of fireworks because of the extreme fire hazard caused by drought
conditions in that state. As a result of the ban, the Company's revenues at its
travel centers from the sale of fireworks decreased by approximately $140,000
during the six months ended July 31, 1996, as compared to the same period of the
prior fiscal year. Ancillary sales of merchandise and food also declined by 8.8%
and 11.7%, respectively, during the six months ended July 31, 1996, as compared
to the same period of the prior fiscal year. Although such a ban was
unprecedented, similar bans could be imposed in the future.
Outdoor Advertising. The outdoor advertising industry is subject to
governmental regulation at the federal, state and local levels. Federal law,
principally the Highway Beautification Act of 1965, as amended (the
"Beautification Act"), encourages states, by the threat of withholding federal
appropriations for the construction and improvement of highways within such
states, to implement legislation to regulate billboards located within 660 feet
of, or visible from, interstate and primary highways except in commercial or
industrial areas. All of the states have implemented regulations at least as
restrictive as the Beautification Act, including the prohibition on the
construction of new billboards adjacent to federally-aided highways and the
removal at the owner's expense and without any compensation of any illegal signs
on such highways. The Beautification Act, and the various state statutes
implementing it, require the payment of just compensation whenever governmental
authorities require legally erected and maintained billboards to be removed from
federally-aided highways.
The states and local jurisdictions have, in some cases, passed additional
and more restrictive regulations on the construction, repair, upgrading, height,
size and location of, and, in some instances, content of advertising copy being
displayed on 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 minimum standards for the height,
size and location of billboards. In some cases, the construction of new
billboards or relocation of existing billboards is prohibited. Some
jurisdictions also have restricted the ability to enlarge or upgrade existing
billboards, such as converting from wood to steel or from non-illuminated to
illuminated structures. From time to time governmental authorities order the
removal of billboards by the exercise of eminent domain. Thus far, the Company
has been able to obtain satisfactory compensation for any of its structures
removed at the direction of governmental authorities, although there is no
assurance that it will be able to continue to do so in the future.
In recent years, there have been movements to restrict billboard
advertising of tobacco products. 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 additional
legislation of this type will be enacted on the national or on a local level in
any of the Company's markets. Revenues from tobacco advertisers accounted for
less than 1% of the Company's total advertising revenues in fiscal 1996.
Amortization of billboards has also been adopted in varying forms in
certain jurisdictions. Amortization permits the billboard owner to operate its
billboard as a non-conforming use for a specified period of time until it has
recouped its investment, after which it must remove or otherwise conform its
billboard to the applicable regulations without any compensation. Amortization
and other
35
<PAGE>
regulations requiring the removal of billboards without compensation have been
subject to vigorous litigation in state and federal courts and cases have
reached differing conclusions as to the constitutionality of these regulations.
To date, amortization and other regulations in the Company's markets have not
materially adversely affected its operations. See "RISK FACTORS--Potential
Adverse Effects of Government Regulation of Outdoor Advertising."
Trademarks
The Company operates its travel centers under a number of its own
trademarks, as well as certain trademarks owned by third parties and licensed to
the Company, such as the Dairy Queen, Dairy Queen/Brazier, Stuckey's and CITGO
trademarks. The Company believes that its trademark rights will not materially
limit competition with its travel centers. The Company also believes that none
of the trademarks it owns is material to the Company's overall business;
however, the loss of one or more of the Company's licensed trademarks could have
an adverse effect on the Company.
Litigation
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 and construction matters. The Company is also involved
in routine administrative and judicial proceedings regarding billboard permits,
fees 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.
Insurance
The Company has comprehensive general liability insurance with a general
aggregate limit of $5,000,000 per occurrence and $5,000,000 annual aggregate
limit per location, including $2,000,000 aggregate coverage for liquor liability
and $1,000,000 personal and advertising injury liability limit. To date, the
Company has not had any material claims against its liability insurance.
36
<PAGE>
PROPERTIES
As of July 31, 1996, the Company operated fourteen travel centers and one
free-standing Dairy Queen restaurant. The Company owns the real estate and
improvements at which five of its travel centers and its one free-standing Dairy
Queen/Brazier restaurant are located, as well as real estate and improvements at
three additional locations, two of which the Company is currently developing
into travel centers and one of which is leased to a third party restaurant
operator. The property at which three of the travel centers owned by the Company
are operated are subject to mortgages. Such mortgages expire at various dates
from June 1999 to January 2006 and accrue interest at rates of between 8.5% and
approximately 9.25% per annum. Nine of the Company's existing travel centers and
one of its travel centers under development are located on real estate that the
Company leases from various third parties. These leases have terms ranging from
five to forty years, assuming exercise by the Company of all renewal options
available under certain leases.
The Company operated over 1,600 revenue generating outdoor display faces
throughout the Southwest, as of July 31, 1996. The Company typically owns the
billboard and related assets and enters into operating leases with the owners of
the real property upon which the billboards are located. These leases typically
have a term of 1 to 5 years and provide for minimum annual rents. As of July 31,
1996, the Company also owned and operated 52 and 275 non-revenue generating
display faces in Arizona and New Mexico, respectively, which are exclusively
dedicated to the advertisement of its fourteen travel centers and one
free-standing Dairy Queen/Brazier restaurant. Listed below are the locations of
the Company's inventory of revenue generating display faces as of July 31, 1996.
30-sheet 8-sheet
Billboards Posters Posters Total
---------- ------- ------- -----
Arizona......... 112 - - 112
Colorado........ 12 - - 12
New Mexico...... 1,339 42 64 1,445
Oklahoma........ 4 - - 4
Texas........... 80 - - 80
---------- ---------- ---------- ----------
TOTAL 1,547 42 64 1,653
========== ========== ========== ==========
The Company's principal executive offices occupy approximately 10,000
square feet of space owned by the Company in Albuquerque, New Mexico. The
Company's principal office space is subject to a mortgage which matures on
January 29, 2000 and the principal balance of which accrues interest at a rate
of prime plus 0.5% per annum, currently 8.75%. In addition, the Company owns
outdoor advertising production plant and warehouse facilities consisting of
approximately 10,000 square feet in Albuquerque, New Mexico and a central
warehouse and distribution facility occupying 27,000 square feet in Las Cruces,
New Mexico. The Las Cruces property is subject to two mortgages which mature on
October 4, 2000 and May 13, 2003 and each accrues interest on the unpaid
principal balance thereof at a rate of 10% per annum. The Company believes that
its headquarters and warehouse facilities are adequate for its operations for
the foreseeable future.
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<PAGE>
The Company owns general and limited partnership interests in two New
Mexico limited partnerships, owns a majority of the voting Stock of Dragoon
Water Company, a New Mexico company ("Dragoon"), and owns and operates a pecan
orchard. One of the partnerships owns and operates an apartment building in Las
Cruces, New Mexico, which is currently subject to a 35-year mortgage which
matures in 2031, and the second partnership currently owns an unencumbered
parcel of undeveloped land located outside of Las Cruces, New Mexico held
primarily for investment purposes. The apartment building was recently
refinanced with a loan in an outstanding principal amount of approximately $1.1
million, which accrues interest at a rate of 8.125% per annum. The voting stock
of Dragoon was purchased by the Company in order to ensure the provision of
water utilities to one of the Company's largest travel centers. The Company has
executed an agreement to sell its shares of stock in Dragoon as of October 1,
1996 pursuant to an agreement which ensures the continued provision of necessary
water utilities following the sale. None of these investments has had a material
effect on the Company's business or results of operations and the Company's
management does not expect them to have such effect in the future.
MANAGEMENT
Directors and Executive Officers
Information concerning the Company's current Directors and executive
officers and persons nominated to become Directors upon the closing of the
Offering is set forth below. A summary of the background and experience of each
of these individuals is set forth after the table.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Michael L. Bowlin(1)(2).......................... 53 Chairman of the Board, President
and Chief Executive Officer
C. Christopher Bess.............................. 49 Executive Vice President, Chief
Operating Officer and Director
William J. McCabe................................ 46 Senior Vice President -
Advertising Services and
Secretary
Anita J. Vachon.................................. 47 Senior Vice President - Retail
Operations
Nina J. Pratz.................................... 44 Chief Administrative Officer,
Treasurer and Director
Michael E. Rising................................ 34 Vice President and Chief
Financial Officer
Robert L. Beckett(1)............................. 70 Director
Harold Van Tongeren(2)........................... 73 Director
Brian McCarty(2)................................. 60 Director - Nominee
James A. Clark(1)................................ 66 Director - Nominee
</TABLE>
(1) Member of Audit Committee
(2) Member of Compensation Committee
Michael L. Bowlin. Mr. Bowlin has served as Chairman of the Board and Chief
Executive Officer of Bowlin since 1991 and as President since 1983. Mr. Bowlin
has been employed by Bowlin since 1968. Mr. Bowlin's father, Claude M. Bowlin,
Sr., founded the business in 1912. Michael L. Bowlin currently is Chairman of
the Board for the OAAA and serves on the Board for
38
<PAGE>
the American Council of Highway Advertisers. Mr. Bowlin also serves as President
and a member of the Board of Directors of Stuckey's Incorporated, a restaurant
and specialty store franchisor (including specialty stores located at four of
the Company's travel centers); however, substantially all of Mr. Bowlin's
professional time is devoted to his duties at the Company. Mr. Bowlin holds a
Bachelor's degree in Business Administration from Arizona State University.
C. Christopher Bess. Mr. Bess has served as the Company's Executive Vice
President and Chief Operating Officer since 1983. Mr. Bess has served as a
member of the Company's Board of Directors since 1974. During his 24 years with
the Company, Mr. Bess has also served in such capacities as internal auditor,
Merchandiser for Retail Operations, Retail Operations Manager and as Development
Manager. Mr. Bess is a certified public accountant and holds a Bachelor's degree
in Business Administration from the University of New Mexico.
William J. McCabe. Mr. McCabe has served as the Company's Senior Vice
President - Advertising Services since 1993 and as Secretary since 1996. Mr.
McCabe served as a member of the Board of Directors from 1983 until August,
1996. Prior to 1993, Mr. McCabe served as Vice President of Outdoor Operations
from 1988 and as Vice President of Accounting from 1984 to 1987. Mr. McCabe has
been employed by Bowlin since 1976 in such additional capacities as a Staff
Accountant and Controller. Mr. McCabe holds a Bachelor's degree in Business
Administration from New Mexico State University.
Anita J. Vachon. Ms. Vachon has served as the Company's Senior Vice
President - Retail Operations since 1993 and was a member of the Board of
Directors from 1991 until August, 1996. Since 1982, Ms. Vachon has been employed
by the Company in such positions as staff accountant, Purchasing Department
Manager and Vice President of Merchandising. Ms. Vachon holds an Associate's
degree in Accounting.
Nina J. Pratz. Ms. Pratz has served as the Company's Treasurer since 1977
and as Chief Administrative Officer since 1988. In addition, Ms. Pratz has
served as a member of the Company's Board of Directors since 1976. She has been
employed by the Company for over 20 years. Ms. Pratz holds a Bachelor's degree
in Business Administration from New Mexico State University.
Michael E. Rising. Mr. Rising has served as Vice President and Chief
Financial Officer since May 1996. Mr. Rising first joined Bowlin in July 1995 as
the Corporate Controller and served as a member of the Board of Directors from
April 1996 until August 1996. From 1993 to 1995, Mr. Rising was the Controller
for Sunrise Healthcare Corporation, a $750 million long-term care division of
Sun Healthcare Group, Inc., a publicly traded company on the New York Stock
Exchange. From 1991 to 1993, Mr. Rising attended the University of Texas at
Arlington. Mr. Rising was employed by Arthur Andersen LLP as an Audit Manager
from 1985 to 1991 and from 1992 to 1993. Mr. Rising is a certified public
accountant and holds a Bachelor's degree in Business Administration from
Southern Methodist University.
Harold Van Tongeren. Mr. Van Tongeren has served as a member of the Board
of Directors of Bowlin since 1988. Mr. Van Tongeren has also served as Chairman
of the Board of Directors and President of Herk and Associates, a representative
of domestic gift and jewelry wholesalers, since 1952. In addition, Mr. Van
Tongeren serves as a key contact to the Company regarding potential acquisition
opportunities in the travel and tourism industry. Mr. Van Tongeren
39
<PAGE>
attended Hope College and Dennison University, and served as a First Sergeant in
the United States Marine Corps for four years.
Robert L. Beckett. Mr. Beckett has served as a member of the Board of
Directors of Bowlin since 1974. Mr. Beckett has also been President and a
Director of The Cooper Agency, Inc., a consumer loan company, since 1964. In
addition to serving as a Director and executive officer of various private
entities, Mr. Beckett formerly served as Mayor of the City of Deming, New
Mexico.
Brian McCarty. Mr. McCarty will become a Director upon the closing of the
Offering. Mr. McCarty has served since 1994 as Chairman of the Board and Chief
Executive Officer of Business Location Research, a company specializing in the
design and development of advanced geographic information systems. From 1990 to
1993, Mr. McCarty served as President and Chief Executive Officer of Naegele
Outdoor Advertising ("Naegele"). Prior to his employment at Naegele, Mr. McCarty
served as President of Ackerley Communications, a publicly traded company
engaged in the operation of outdoor advertising, radio and television
broadcasting properties. Mr. McCarty holds a Bachelor's degree in Marketing from
Lewis University.
James A. Clark. Mr. Clark will become a Director of the Company upon the
closing of the Offering. Mr. Clark is currently retired from full-time
employment. Mr. Clark served as President and Chief Executive Officer of First
Interstate Bank of Albuquerque from 1985 to 1991. Prior to 1991, Mr. Clark
served in several capacities at various banking and financial services entities
for over 25 years. Mr. Clark holds a Certificate of Graduation from the Stonier
Graduate School of Banking at Rutgers University.
Messrs. Bowlin and Bess currently have employment agreements with the
Company, and the remaining executive officers serve at the pleasure of the Board
of Directors. See "EXECUTIVE COMPENSATION -- Employment Contracts." There are no
family relationships among the Directors and executive officers.
Upon the closing of the Offering, the Board of Directors will consist of
seven members classified into three classes with each class holding office for a
three-year period. The terms of Mr. Van Tongeren and Ms. Pratz expire in 1997;
the terms of Messrs. Bess and Clark expire in 1998; and the terms of Messrs.
Beckett, McCarty and Bowlin expire in 1999.
The Company's Articles of Incorporation and By-laws limit the liability of
directors under certain circumstances. See "EXECUTIVE COMPENSATION --
Indemnification and Limitation of Liability" and "DESCRIPTION OF SECURITIES --
Certain Charter and By-law Provisions."
Committees of the Board of Directors
Upon the closing of the Offering, the Company will have a Compensation
Committee of the Board of Directors that will consist of Messrs. Bowlin, McCarty
and Van Tongeren. The Compensation Committee makes recommendations to the Board
of Directors regarding option grants under the Company's 1996 Stock Option Plan
and addresses matters relating to executive compensation.
Upon the closing of the Offering, the Company will have an Audit Committee
of the Board of Directors that will consist of Messrs. Bowlin, Clark and
Beckett. The Audit Committee is
40
<PAGE>
responsible for reviewing and making recommendations regarding the employment of
independent auditors, the annual audit of the Company's financial statements and
the Company's internal accounting controls, practices and policies.
41
<PAGE>
EXECUTIVE COMPENSATION
The following table summarizes all compensation paid to the Company's Chief
Executive Officer and to the Company's other most highly compensated executive
officers other than the Chief Executive Officer whose total annual salary and
bonus exceeded $100,000 (collectively, the "Named Executive Officers"), for
services rendered in all capacities to the Company during the fiscal year ended
January 31, 1996.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
-------------------------------------------------------------
Name and Other Annual
Principal Position Salary(1)($) Bonus(2)($) Compensation($)
- ------------------ ------------ ----------- ---------------
<S> <C> <C> <C>
Michael L. Bowlin......................... 78,000(3) 150,050 14,452(4)(5)
Chairman of the Board,
President and
Chief Executive Officer
C. Christopher Bess....................... 78,000(3) 150,375 7,998(4)(6)
Executive Vice President and
Chief Operating Officer
Anita J. Vachon........................... 43,250 75,075 4,731(7)
Senior Vice President - Retail
Operations
</TABLE>
- ----------------
(1) Includes amounts deferred at the election of each officer to be contributed
to his or her respective 401(k) Profit Sharing Plan account.
(2) The Company decided not to pay discretionary cash bonuses in fiscal 1997
and to grant stock options to its executive officers in lieu thereof. On
September 27, 1996, Messrs. Bowlin and Bess and Ms. Vachon were each
granted options to purchase 50,000, 40,000 and 30,000 shares of Common
Stock, respectively, under the 1996 Stock Option Plan.
(3) On September 27, 1996, the Company entered into employment agreements with
Messrs. Bowlin and Bess which provide for annual base salaries of $195,000
and $145,000, respectively. See "--Employment Contracts."
(4) See the discussion under the caption "-- Employment Contracts" regarding
certain other compensation the named officer may be entitled to upon
certain specified events, including a change in control of the Company.
(5) Includes (i) $5,487 of the Company's discretionary matching contributions
allocated to Mr. Bowlin's 401(k) Profit Sharing Plan account, (ii) $7,723
for premiums on term life, auto and disability insurance policies of which
Mr. Bowlin or his wife is the owner and (iii) $1,242 for Mr. Bowlin's use
of a vehicle owned by the Company.
(6) Includes $5,582 of the Company's discretionary matching contributions
allocated to Mr. Bess' 401(k) Profit Sharing Plan account and $2,416 for
premiums on auto and disability insurance policies of which Mr. Bess is the
owner.
(7) Includes $4,497 of the Company's discretionary matching contributions
allocated to Ms. Vachon's 401(k) Profit Sharing Plan account and $234 for
premiums on a disability policy of which Ms. Vachon is the owner.
Compensation of Directors
Directors who are not employees of the Company are entitled to receive
$1,000 per each meeting of the Board of Directors, or any committee thereof,
attended plus
42
<PAGE>
reimbursement of reasonable expenses. Non-employee Directors also receive an
option to purchase 6,000 shares of Common Stock upon their election to the Board
of Directors and an annual grant of 2,000 shares of Common Stock during each
year of service, all under the Company's 1996 Stock Option Plan. Directors who
are employees of the Company do not receive any additional compensation for such
services.
Indemnification and Limitation of Liability
The Company's Articles of Incorporation and By-laws require the Company to
indemnify each of its officers and Directors against liabilities and reasonable
expenses incurred in any action or proceeding, including stockholders'
derivative actions, by reason of such person being or having been an officer or
Director of the Company, or of any other corporation for which he or she serves
as such at the request of the Company, to the fullest extent permitted by Nevada
law. Pursuant to Nevada law, the Company has adopted provisions in its Articles
of Incorporation and By-laws that eliminate the personal liability of its
Directors and officers to the Company or its stockholders for monetary damages
incurred as a result of the breach of their duty of care. These provisions
neither limit the availability of equitable remedies nor eliminate Directors' or
officers' liability for engaging in intentional misconduct or fraud, knowingly
violating a law or unlawfully paying a distribution.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to Directors, officers and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable.
Employment Contracts
On August 23, 1996, the Board of Directors approved employment agreements
with Michael L. Bowlin for services as Chairman of the Board, President and
Chief Executive Officer and with C. Christopher Bess for services as Executive
Vice President and Chief Operating Officer (Messrs. Bowlin and Bess are
sometimes collectively referred to herein as the "Employee"). These agreements
provide for base annual salaries for Messrs. Bowlin and Bess of $195,000 and
$145,000, respectively, subject to annual increases at the discretion of the
Board of Directors, but at least equal to the corresponding increase in the
Consumer Price Index. In addition, the Employee is entitled to receive bonuses
at the discretion of the Board of Directors in accordance with the Company's
bonus plans in effect from time to time. Each of the agreements has a perpetual
five-year term, such that on any given date, each agreement has a five-year
remaining term. The agreements may not be unilaterally terminated by the
Company, except for "Cause," which includes (i) conviction of a felony that
substantially impairs the Employee's ability to perform his duties to the
Company or (ii) willful failure to diligently cure a specified deficiency in the
Employee's performance for 30 days.
Each of the agreements provides that if the Employee is terminated by the
Company other than for Cause or disability, or by the Employee for good reason
(as defined in the agreements), which includes certain changes in the Employee's
duties following a change in control of the Company, the Company shall pay to
the Employee (i) his salary through the termination date plus any accrued but
unpaid bonuses and (ii) a payment equal to the sum of five years of the
Employee's annual salary and an amount equal to all bonuses paid to the Employee
in the five years immediately preceding termination, which the Company has the
option to pay over five years. In addition, the Company must maintain until
43
<PAGE>
the first to occur of (i) the Employee's attainment of substitute employment or
(ii) five years from the date of termination, the Employee's benefits under the
Company's benefit plans to which the Employee and his eligible beneficiaries
were entitled immediately prior to the date of termination. If the Employee
requests, the Company must also assign to the Employee any assignable insurance
policy on the life of the Employee owned by the Company at the end of the period
of coverage. In addition, all options or warrants to purchase Common Stock held
by the Employee on the date of termination become exercisable on the date of
termination, regardless of any vesting provisions, and remain exercisable for
the longer of one year from the date of termination or the then remaining
unexpired term of such warrants or options. If the Employee is terminated for
Cause or if the Employee terminates his employment other than for good reason
(as defined in the agreement), the Company's only obligation is to pay the
Employee his base salary and accrued vacation pay through the date of
termination.
If the Employee is incapacitated due to physical or mental illness during
the term of his or her employment, the agreements provide that the Company shall
pay to the Employee a lump sum equal to two years of the Employee's base
compensation and all bonuses paid to the Employee in the two years preceding the
date of termination due to illness. If the Employee dies during his employment,
his salary through the date of his death, any accrued but unpaid bonuses and any
benefits payable pursuant to the Company's survivor's benefits insurance and
other applicable programs and plans then in effect are payable to his estate.
If the Employee's employment is terminated, the Company has agreed to
indemnify the Employee for claims and expenses associated with certain personal
guarantees, if any, made by the Employee. The Company also has agreed to use its
best efforts to secure the release of such personal guarantees following the
Offering. In addition, the Company has agreed to indemnify the Employee against
all costs incurred in enforcing his rights under the agreement following a
change in control of the Company. See "CERTAIN TRANSACTIONS."
Profit-Sharing 401(k) Plan
Under the Company's 401(k) plan, effective July 1, 1990, as amended (the
"401(k) Plan"), eligible employees may direct that a portion of their
compensation, up to a legally established maximum, be withheld by the Company
and contributed to their account. All 401(k) Plan contributions are placed in a
trust fund and invested by the 401(k) Plan's trustee. It is the Company's policy
that all of the 401(k) Plan funds be invested in a single fund that is
identified by the Plan's trustee or administrator. The 401(k) Plan permits the
Company to make discretionary matching contributions in an amount to be
determined on an annual basis by the Company's Board of Directors. Amounts
contributed to participant accounts are generally not subject to federal income
tax until distributed to the participant and may not be withdrawn until death,
retirement or termination of employment.
1996 Stock Option Plan
The Company's 1996 Stock Option Plan (the "1996 Plan") authorizes the Board
to grant options to Directors and employees of the Company to purchase in the
aggregate an amount of shares of Common Stock equal to 10% of the shares of
Common Stock issued and outstanding from time to time. Directors, officers and
other employees of the Company who, in the opinion of the Board of Directors,
are responsible for the continued growth and development and the financial
success of the Company are eligible to be granted options under the 1996 Plan.
Options may be nonqualified options, incentive stock options, or any combination
of the foregoing. In general, options granted under the 1996 Plan are not
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<PAGE>
transferable and expire ten years after the date of grant. The per share
exercise price of an incentive stock option granted under the 1996 Plan may not
be less than the fair market value of the Common Stock on the date of grant and
no options granted under the 1996 Plan may have an exercise price per share less
than the initial public offering price. Incentive stock options granted to
persons who have voting control over 10% or more of the Company's capital stock
are granted at 110% of the fair market value of the underlying shares on the
date of grant and expire five years after the date of grant. No option may be
granted after August 23, 2006.
The 1996 Plan provides the Board of Directors with the discretion to
determine when options granted thereunder will become exercisable. Generally,
such options may be exercised after a period of time specified by the Board of
Directors at any time prior to expiration, so long as the optionee remains
employed by the Company. No option granted under the 1996 Plan is transferable
by the optionee other than by will or the laws of descent and distribution, and
each option is exercisable during the lifetime of the optionee only by the
optionee. On September 27, 1996, the Board of Directors granted options to
purchase an aggregate of 338,000 shares of Common Stock to 58 employees and
officers, including options to purchase 120,000 shares which were granted to its
Named Executive Officers. See "EXECUTIVE COMPENSATION -- Summary Compensation
Table." On September 27, 1996, the Board of Directors also approved the grant of
options to purchase 6,000 shares to each of its four non-employee Directors and
Director-Nominees, effective as of the closing date of the Offering. All of the
options granted or approved have an exercise price per share equal to the
initial public offering price and provide for a three-year vesting period.
45
<PAGE>
CERTAIN TRANSACTIONS
Michael L. Bowlin is the President and Chairman of the Board of, and a 25%
stockholder in, Stuckey's Corporation ("Stuckey's"), a franchisor of restaurants
and specialty stores, including specialty stores located at four of the
Company's travel centers. In each of fiscal years 1995 and 1996, aggregate
franchise and other related fees paid by the Company to Stuckey's equalled
approximately $36,600.
Michael L. Bowlin and C. Christopher Bess each have perpetual five-year
employment agreements with the Company that provide for an annual base salary of
$195,000 and $145,000, respectively, during their terms of employment, as well
as certain rights to indemnification. See "EXECUTIVE COMPENSATION - Employment
Contracts."
Approximately $5.0 million of the proceeds to be received by the Company
from the Offering will be used to repay indebtedness to various financial
institutions, all of which indebtedness has been personally guaranteed by
Michael L. Bowlin.
On August 23, 1996, the Company obtained a term loan from a commercial bank
with an aggregate principal amount of approximately $535,000 that was used to
prepay promissory notes payable to certain officers and Directors of the Company
and their respective affiliates. This loan matures on February 28, 1997 and
accrues interest at a rate of prime plus 1% per annum (currently at 9.25%).
Since February 1, 1994, C. Christopher Bess made seven loans to the Company
in an aggregate principal amount of $261,000. Each of these loans was evidenced
by a promissory note made payable by the Company to Mr. Bess, which accrues
interest on the unpaid principal amounts at a rate of 10% per annum, and matured
or matures at various dates from April 1996 until October 2005. One of such
notes is also secured by a real estate mortgage. All of the proceeds from such
loans were used by the Company for working capital or the acquisition of assets
in the ordinary course of business. As of the date of this Prospectus, all of
such loans, together with accrued interest, have been repaid in their entirety.
Since February 1, 1994, Michael L. Bowlin made three loans to the Company
in an aggregate principal amount of $180,000. Each of these loans was evidenced
by a promissory note made payable by the Company to Mr. Bowlin, which accrues
interest at a rate of 10% per annum, and matured or matures at various dates
from January 1996 until January 1998. All of the proceeds of these loans were
used for general working capital purposes of the Company. As of the date of this
Prospectus, all of such loans, together with accrued interest, have been repaid
in their entirety.
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth, as of August 31, 1996, the number and
percentage of outstanding shares of Common Stock owned by (i) each Director and
Director-nominee of the Company; (ii) the Named Executive Officers of the
Company; (iii) all Directors and executive officers of the Company as a group;
and (iv) all persons known by the Company to be the beneficial owners of more
than 5% of the outstanding shares of Common Stock.
<TABLE>
<CAPTION>
Shares Beneficially Owned Shares Beneficially Owned
Prior to Offering (1) After Offering (1)
Name and address of ----------------------- -------------------
Beneficial Owner (4) Number Percent Number (2) Percent (3)
- -------------------- -------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Michael L. Bowlin (5) 1,630,397 48.2% 1,630,397 33.7%
C. Christopher Bess (6) 562,315 16.6 562,315 11.6
Anita J. Vachon 42,200 1.2 42,200 *
Nina J. Pratz 122,802 3.6 122,802 2.5
Robert L. Beckett 123,646 3.7 123,646 2.6
Harold Van Tongeren (7) 40,099 1.3 40,099 *
Brian McCarty __ __ __ __
James A. Clark __ __ __ __
Monica A. Bowlin (8) 1,630,397 48.2 1,630,397 33.7
Valkyrie L. Bowlin 171,332 5.1 171,332 3.5
Kimberly M. Bowlin 171,332 5.1 171,332 3.5
Emily M. Bowlin 171,332 5.1 171,332 3.5
Evelyn H. McClure 442,211 12.5 422,211 8.7
All directors, director-nominees and executive 2,610,180 77.0% 2,610,180 54.0%
officers as a group
(10 persons)
(3)(5)(6)(7)(8)
</TABLE>
- ------------
*Less than 1%
47
<PAGE>
(1) Each stockholder possesses sole voting and investment power with respect to
the shares listed, except as otherwise indicated or under applicable laws.
In accordance with the rules of the Commission, each stockholder is deemed
to beneficially own any shares subject to stock options which are currently
exercisable or which will become exercisable or convertible within 60 days
after August 31, 1996. The inclusion herein of shares listed as
beneficially owned does not constitute an admission of beneficial
ownership. The number and percentage of outstanding shares owned after the
Offering assumes none of the listed stockholders will purchase additional
shares in this Offering.
(2) Number of shares outstanding after the Offering includes the 1,450,000
shares of Common Stock that are being offered by the Company hereby but
excludes (i) 217,500 shares which are subject to the Over-Allotment Option,
(ii) 123,250 shares which are subject to the Representative's Option and
(iii) 362,000 shares reserved for issuance upon the exercise of options
granted or approved for issuance by the Company upon completion of the
Offering under the Company's 1996 Stock Option Plan. See "EXECUTIVE
COMPENSATION -- 1996 Stock Option Plan." As of August 31, 1996, the Company
had not granted any options to purchase shares of Common Stock under its
1996 Stock Option Plan.
(3) Assumes no exercise of the Over-Allotment Option or the Representative's
Option. The issuance of any such shares would proportionately decrease the
respective percentages set forth.
(4) All of these holders have an address at c/o the Company, 150 Louisiana
N.E., Albuquerque, NM 87108.
(5) Includes 445,843 shares held by Mr. Bowlin's wife and 171,332 shares held
by each of his two minor daughters.
(6) Includes 73,006 shares held by Mr. Bess' wife and 19,623 shares held by Mr.
Bess' minor daughter.
(7) All of such 44,099 shares are held by Mr. Van Tongeren jointly with his
wife.
(8) Includes 841,890 shares held by Mrs. Bowlin's husband and 171,332 shares
held by each of her two minor daughters.
48
<PAGE>
DESCRIPTION OF SECURITIES
Common Stock
Holders of shares of Common Stock are entitled to one vote per share on all
matters to be voted on by stockholders and do not have cumulative voting rights.
As of August 31, 1996, there were 3,383,385 shares of Common Stock outstanding,
held by 20 record holders. Subject to the rights of holders of outstanding
shares of Preferred Stock, if any, the holders of Common Stock are entitled to
receive such dividends, if any, as may be declared from time to time by the
Board of Directors in its discretion from funds legally available therefor, and
upon liquidation, dissolution, or winding up are entitled to receive all assets
available for distribution to the stockholders. The Common Stock has no
preemptive or other subscription rights, and there are no conversion rights or
redemption or sinking fund provisions with respect to such shares. All of the
outstanding shares of Common Stock are, and the shares of Common Stock offered
hereby will be upon completion of the Offering, fully paid and nonassessable.
Preferred Stock
The Board of Directors, without any vote or action of the stockholders, has
the authority to issue up to 10,000,000 shares of Preferred Stock in one or more
series and to fix the rights, preferences, privileges, qualifications,
limitations and restrictions thereof, including dividend rights, conversion and
voting rights, terms of redemption, redemption prices, liquidation preferences
and the number of shares constituting any series or the designation of such
series. The issuance of preferred stock may have the effect of delaying,
deterring or preventing a change in control of the Company. Further, the
issuance of Preferred Stock with voting and conversion rights may adversely
affect the voting power of the holders of Common Stock, including the loss of
voting control to others. The Company has no present plans to issue any shares
of Preferred Stock.
Representative's Option; Registration Rights
Concurrently with the closing of the Offering, the Company will issue a
five-year non-redeemable option (the "Representative's Option") to purchase up
to 123,250 shares of Common Stock at an exercise price per share equal to 120%
of the initial public offering price of the Common Stock. The Representative's
Option is to be issued to HD Brous & Co., Inc. (the "Representative")
individually and not in its capacity as the Representative. The Representative's
Option may be exercised, in part or whole, at any time beginning one year from
the effective date (the "Effective Date") of the Registration Statement of which
this Prospectus forms a part. The Representative's Option terminates five years
from the date of issuance, and may not be transferred, sold, assigned or
hypothecated for one year from the Effective Date, subject to certain limited
exceptions. Any exercise of the Representative's Option by the Representative
may result in dilution of the interests in the Company of then present
stockholders, hinder efforts by the Company to arrange future financings on
behalf of the Company and have an adverse effect on the market price of the
Company's Common Stock. The Representative's Option provides for certain demand
and "piggyback" registration rights with respect to the securities issuable
thereunder. See "UNDERWRITING."
49
<PAGE>
Certain Charter and By-law Provisions
The Company's Articles of Incorporation and By-laws contain a number of
provisions relating to corporate governance and the rights of stockholders.
These provisions: (i) establish a classified Board of Directors; (ii) permit the
removal of Directors only for cause and only by vote of stockholders owning
two-thirds of the voting power of the Company; (iii) impose conditions on the
ability of stockholders to nominate persons for the position of Director; (iv)
prohibit stockholders from calling special meetings; and (v) require the consent
of the Board of Directors or the "disinterested" members thereof and/or the
affirmative vote of two-thirds of the Company's voting stock, excluding stock
owned by interested stockholders, to effect certain business combinations with
interested stockholders. An interested stockholder for purposes of this
provision means a person who, together with affiliates or associates,
beneficially owns, or beneficially owned within the preceding two-year period,
10% or more of the Company's combined voting power. For purposes of these
provisions, at August 31, 1996, four of the Company's stockholders were deemed
to be interested stockholders. The provisions included in the Company's Articles
of Incorporation and certain provisions in the By-laws may not be amended or
repealed without the affirmative vote of two-thirds of the Company's voting
stock, excluding, with respect to the business combination provision, stock
owned by interested stockholders. See "EXECUTIVE COMPENSATION" for a discussion
of certain indemnification provisions included in the Articles of Incorporation
and By-laws.
The Company believes that these provisions promote the stability and
continuity of the Board of Directors of the Company and assure that stockholders
will receive adequate notice of and an opportunity to consider actions by
stockholders that could materially affect the Company. However, these provisions
could have the effect of deterring unsolicited takeovers or delaying or
preventing changes in control or management of the Company, including
transactions in which stockholders might otherwise receive a premium for their
shares over then-current market prices. In addition, these provisions may limit
the ability of stockholders to approve transactions that they may deem to be in
their best interest.
Transfer Agent
The Transfer Agent for the Common Stock is Norwest Bank Minnesota, N.A.,
161 North Concord Exchange Street, P.O. Box 738, South Saint Paul, Minnesota
55075-0738.
50
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
underwriters named below (the "Underwriters") for whom HD Brous & Co., Inc. is
acting as Representative, have severally agreed to purchase from the Company,
and the Company has agreed to sell to the Underwriters, the respective number of
shares of Common Stock set forth opposite each Underwriter's name below:
Number of
Underwriter Shares
- ----------- ---------
HD Brous & Co., Inc.................................................
---------
Total............................................. 1,450,000
=========
The Underwriting Agreement provides that the obligations of the several
Underwriters thereunder are subject to certain conditions precedent, including
the absence of any material adverse change in the Company's business and the
receipt of certain certificates, opinions and letters from the Company and its
counsel and the Company's independent certified public accountants. The nature
of the Underwriters' obligations is such that they are committed to purchase and
pay for all the shares of Common Stock if any are purchased (exclusive of the
shares of Common Stock subject to the Over-Allotment Option described below).
The Company has been advised by the Representative that the Underwriters
propose to offer the shares of Common Stock directly to the public at the
initial public offering price set forth on the cover page of this Prospectus and
to certain securities dealers at such price less a concession not in excess of
$_____ per share. The Underwriters may allow, and selected dealers may reallow,
a discount not in excess of $_____ per share to certain brokers and dealers.
After the initial public offering of the shares, the public offering price and
selling terms may be changed by the Representative. No change in such terms
shall change the amount of proceeds to be received by the Company as set forth
on the cover page of this Prospectus.
The Company has granted an option to the Underwriters, exercisable for a
period of 30 days after the date of this Prospectus, to purchase up to an
additional 217,000 shares of Common Stock solely for the purpose of covering
over-allotments in the sale of 1,450,000 shares of Common Stock initially
offered hereby. To the extent that the option is exercised, the Underwriters
will be committed, subject to certain conditions, to purchase the additional
shares of Common Stock in approximately the same proportion as set forth in the
above table and to offer such additional shares of Common Stock to the public,
all at the same prices and on the same terms as those applicable to the shares
of Common Stock initially offered hereby.
The Company has agreed, upon completion of the Offering, to sell to the
Representative, individually and not in its capacity as Representative of the
Underwriters, for an aggregate price of $100, a five-year non-redeemable option
to purchase up to 123,250 shares of Common Stock (the
51
<PAGE>
"Representative's Option"). The Representative's Option will be exercisable at
any time during the four-year period commencing one year after the Effective
Date of the Registration Statement of which this Prospectus is a part at an
exercise price per share equal to 120% of the initial public offering price. The
Representative's Option is not transferable for the one-year period following
the Effective Date, subject only to certain limited exceptions. If the Company
files a registration statement under the provisions of the Securities Act
relating to an offering of securities at any time during the seven-year period
following the Effective Date, the holders of the Representative's Option or the
underlying securities will have the right, subject to certain conditions, to
include in such registration statement, at the Company's expense, all or part of
the Common Stock underlying the Representative's Option. Additionally, at any
time after the one-year period following the Effective Date and within the
following four-year period, the Representative may require the Company to
register or qualify for sale the issued Common Stock or issuable Common Stock
underlying the Representative's Option up to two times, one of which shall be at
the Company's expense. The number of shares of Common Stock covered by the
Representative's Option and the exercise price thereof are subject to adjustment
upon certain events to prevent dilution.
For the term of the Representative's Option, the holders will have the
opportunity to profit from a rise in the market price of the Company's Common
Stock above the exercise price of the Representative's Option. Any profit
realized by the holders upon the sale of the Representative's Option or the
securities issuable thereunder may be deemed additional underwriting
compensation. If the Representative's Option is exercised, the voting and equity
interests of the Company's stockholders will be diluted. The Company may find
that the terms on which it could obtain additional capital may be adversely
affected while the Representative's Option remains outstanding.
The Company has agreed to pay the Representative a non-accountable expense
allowance equal to 0.25% of the aggregate public offering price of the Common
Stock, including Common Stock sold pursuant to the Over-Allotment Option, if and
to the extent it is exercised, of which the sum of $10,000 has been paid. The
Representative's expenses in excess of such allowance will be borne by the
Representative. To the extent that the expenses of the Representative are less
than the non-accountable expense allowance, the excess may be deemed to be
compensation to the Representative.
The Underwriting Agreement also (i) obligates the Company and its
Affiliates (as defined therein), for a two-year period, to advise the
Representatives of any intention to publicly offer or privately place any of the
Company's securities and (ii) grants to the Representative a two-year right of
first refusal to participate, as the managing underwriter, co-managing
underwriter or placement agent, on terms available to the Company from others,
in any public offering or private placement of the Company's securities.
The Underwriting Agreement provides that the Company will indemnify the
Underwriters and their controlling persons against certain liabilities under the
Securities Act or will contribute to payments the Underwriters and their
controlling persons may be requested to make in respect thereof. The Company has
been advised that, in the opinion of the Commission, such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable.
The Company, its officers, directors and certain stockholders have each
agreed not to offer or sell any of the Company's securities for a period of 180
days from the date of this Prospectus, without the prior written consent of the
Representative.
The price at which the shares of Common Stock are being offered to the
public has been determined by negotiation between the Company and the
Representative. Among the factors considered
52
<PAGE>
in determining the price of the Common Stock were the Company's current
financial condition and prospects and the general condition of the securities
markets. However, the public offering price of the Common Stock does not
necessarily bear any relationship to the Company's assets, book value, earnings
or any other established criterion of value.
The foregoing is a brief summary of certain provisions of the Underwriting
Agreement and Representative's Option and does not purport to be a complete
statement of its terms and conditions. A copy of the Underwriting Agreement and
Representative's Option are on file with the Commission as exhibits to the
Registration Statement of which this Prospectus forms a part. See "ADDITIONAL
INFORMATION."
The Company has executed a consulting agreement with Miller Capital
Corporation ("Miller") dated as of April 26, 1996. Pursuant to this agreement,
Miller agreed to review the Company's business plan and corporate structure and,
based upon such review, provide consultation services for purposes of assisting
the Company in connection with an initial public offering. Under the agreement,
the Company has issued to Miller 98,537 shares of Common Stock for services
rendered by Miller, and agreed to pay Miller a fee equal to 3% of the gross
proceeds of the Offering. Thus, assuming an initial public offering price of
$9.00 per share, upon closing of the Offering, the Company will be obligated to
pay Miller $391,500, or $450,225 if the Over-Allotment Option is exercised in
full. In addition, the Company has agreed to retain Miller as its exclusive
investor relations advisor for the twelve month period commencing upon the date
of this Prospectus for a fee of $5,500 per month. The agreement also requires
the Company and Miller to indemnify each other against certain customary
liabilities.
LEGAL MATTERS
Certain legal matters will be passed upon for the Company by Squire,
Sanders & Dempsey, of Phoenix, Arizona. Certain legal matters will be passed
upon for the Underwriters by Snell & Wilmer L.L.P. of Phoenix, Arizona.
EXPERTS
The Consolidated Financial Statements of the Company as of and for the
twelve month period ended January 31, 1996 have been included herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.
The Consolidated Financial Statements of the Company as of and for the
twelve month period ended January 31, 1995 have been included herein and in the
Registration Statement in reliance upon the report of Ricci & Ricci, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
53
<PAGE>
CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS
The Company has engaged KPMG Peat Marwick LLP as its independent auditors
for the fiscal year ended January 31, 1996 and the fiscal year ending January
31, 1997, to replace the firm of Arthur Andersen LLP, which was dismissed as the
Company's independent auditors effective as of August 19, 1996. The report of
Arthur Andersen LLP on the Company's financial statements for the past fiscal
year did not contain an adverse financial opinion or a disclaimer of opinion and
was not qualified or modified as to uncertainty, audit scope, or accounting
principles. In connection with the audit of the Company's financial statements
for the fiscal year ended January 31, 1996, and in subsequent interim periods,
there were no disagreements with Arthur Andersen LLP on any matters of
accounting principles or practices, financial statement disclosure or auditing
scope and procedure which, if not resolved to the satisfaction of Arthur
Andersen LLP, would have caused Arthur Andersen LLP to make reference to the
matter in their report. The Company has authorized Arthur Andersen LLP to
respond fully to any inquiries from KPMG Peat Marwick LLP. The Company requested
Arthur Andersen LLP to furnish it a letter addressed to the Commission stating
whether it agrees with the above statements. A copy of that letter, dated
September 12, 1996, is on file with the Commission as Exhibit 16.1 to the
Registration Statement of which this Prospectus forms a part. See "ADDITIONAL
INFORMATION."
The Company engaged Arthur Andersen LLP as its independent auditors for the
fiscal year ended January 31, 1996 to replace the firm of Ricci & Ricci, which
was dismissed as the Company's independent auditors at the same time. The report
of Ricci & Ricci for the fiscal year ended January 31, 1995 did not contain an
adverse financial opinion or a disclaimer of opinion and was not qualified or
modified as to uncertainty, audit scope, or accounting principles. In connection
with the audit of the Company's financial statements for the fiscal year ended
January 31, 1995, and in subsequent interim periods, there were no disagreements
with Ricci & Ricci on any matters of accounting principles or practices,
financial statement disclosure or auditing scope and procedure which, if not
resolved to the satisfaction of Ricci & Ricci, would have caused Ricci & Ricci
to make reference to the matter in their report. The Company authorized Ricci &
Ricci to respond fully to any inquiries from Arthur Andersen LLP. The Company
requested Ricci & Ricci to furnish it a letter addressed to the Commission
stating whether it agrees with the above statements. A copy of that letter,
dated September 25, 1996, is on file with the Commission as Exhibit 16.2 to the
Registration Statement of which this Prospectus forms a part. See "ADDITIONAL
INFORMATION."
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
SB-2 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus constitutes a part of the Registration Statement and does not
contain all of the information set forth therein and in the exhibits thereto,
certain portions of which have been omitted as permitted by the rules and
regulations of the Commission. For further information with respect to the
Company and the Common Stock offered hereby, reference is hereby made to such
Registration Statement and exhibits. Statements contained in this Prospectus as
to the contents of any document are not necessarily complete and in each
instance are qualified in their entirety by reference to the copy of the
appropriate document filed with the Commission.
The Registration Statement and the reports and other information to be
filed by the Company following the Offering in accordance with the Exchange Act
can be inspected and copied at the principal office of the Commission at Room
1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the following regional offices of the Commission: 7 World Trade Center, New
York, NY
54
<PAGE>
10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL
60601. Copies of such materials may be obtained from the Public Reference
Section of the Commission at its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549, upon payment of the fees prescribed by the Commission.
In addition, the Commission maintains a web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants, such as the Company, that file electronically with the
Commission.
The Company intends to provide its stockholders with annual reports
containing financial statements audited by independent auditors and quarterly
reports for the first three fiscal quarters of each year containing unaudited
summary consolidated financial information.
55
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
This Index relates to the consolidated financial statements set forth in
this Prospectus of BOWLIN Outdoor Advertising & Travel Centers Incorporated, and
subsidiaries.
Page
----
Independent Auditors' Report of KPMG Peat Marwick LLP............F-2
Independent Auditors' Report of Ricci & Ricci....................F-3
Consolidated Financial Statements
Consolidated Balance Sheets.................................F-4
Consolidated Statements of Income...........................F-5
Consolidated Statements of Stockholders' Equity.............F-6
Consolidated Statements of Cash Flows.......................F-7
Notes to Consolidated Financial Statements.......................F-8
<PAGE>
KPMG Peat Marwick LLP
6565 Americas Parkway, #700
Albuquerque, New Mexico 87190
Independent Auditors' Report
----------------------------
The Board of Directors
BOWLIN Outdoor Advertising
& Travel Centers Incorporated:
We have audited the accompanying consolidated balance sheet of BOWLIN Outdoor
Advertising & Travel Centers Incorporated and subsidiaries as of January 31,
1996, and the related consolidated statement of income, stockholders' equity,
and cash flows for the year then ended. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our 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 consolidated financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of BOWLIN Outdoor
Advertising & Travel Centers Incorporated and subsidiaries as of January 31,
1996, and the results of their operations and their cash flows for the year then
ended, in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Albuquerque, New Mexico
September 9, 1996
F-2
<PAGE>
Board of Directors
Bowlin Outdoor Advertising &
Travel Centers Incorporated
Albuquerque, New Mexico
Independent Auditor's Report
----------------------------
We have audited the accompanying consolidated statements of income,
stockholders' equity and cash flows of Bowlin Outdoor Advertising & Travel
Centers Incorporated and subsidiaries as of January 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Bowlin Outdoor Advertising & Travel Centers Incorporated and subsidiaries as of
January 31, 1995 in conformity with generally accepted accounting principles.
/s/ Ricci & Ricci
Albuquerque, New Mexico
April 5, 1995
F-3
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
July 31,
January 31, 1996
Assets 1996 (unaudited)
------ ---- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,601,830 2,442,530
Accounts receivable 193,982 158,493
Notes receivable, related parties (note 2) 10,012 76,080
Notes receivable, current maturities (note 2) 2,762 16,432
Inventories 2,403,020 2,345,768
Prepaid expenses 328,576 330,542
Other current assets 6,288 43,583
------------ ----------
Total current assets 4,546,470 5,413,428
------------ ----------
Investment and long-term receivables:
Investment in partnership 16,259 3,259
Notes receivable, less current maturities (note 2) 12,838 38,242
------------ ----------
Total investment and long-term receivables 29,097 41,501
------------ ----------
Property and equipment, net (note 3) 8,910,470 9,072,907
Franchise fees, at cost less accumulated amortization of $97,691
in January 1996 and $102,973 (unaudited) in July 1996 111,809 106,527
Deferred registration costs - 236,564
------------ ----------
Total assets $ 13,597,846 14,870,927
============ ==========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Short-term borrowing, bank (note 5) $ 149,000 368,500
Accounts payable 1,177,878 889,333
Long-term debt, current maturities (note 6) 768,929 639,372
Accrued liabilities 663,762 542,734
Income taxes payable - 203,480
------------ ----------
Total current liabilities 2,759,569 2,643,419
Long-term debt, less current maturities (note 6) 5,808,503 6,534,459
------------ ----------
Total liabilities 8,568,072 9,177,878
------------ ----------
Minority interest 226,591 220,374
------------ ----------
Stockholders' equity:
Common stock, $.001 par value; authorized 100,000,000
shares; outstanding 3,050,427 shares in January 1996 and
3,383,385 (unaudited) shares in July 1996 3,051 3,384
Additional paid-in capital 3,806,220 4,329,783
Retained earnings 993,912 1,139,508
------------ ----------
Total stockholders' equity 4,803,183 5,472,675
Commitments and contingencies (note 9)
------------ ----------
Total liabilities and stockholders' equity $ 13,597,846 14,870,927
============ ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
<TABLE>
<CAPTION>
Years ended Six months
January 31, ended July 31,
----------- --------------
1995 1996 1995 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Travel center operations:
Gross sales $ 19,798,283 20,467,455 10,801,653 11,207,589
Less discounts on sales 220,766 292,484 103,398 152,726
------------ ------------ ------------ ------------
Net sales 19,577,517 20,174,971 10,698,255 11,054,863
Cost of goods sold 12,540,560 12,995,314 6,969,494 7,422,274
------------ ------------ ------------ ------------
Gross profit 7,036,957 7,179,657 3,728,761 3,632,589
------------ ------------ ------------ ------------
Outdoor advertising operations:
Gross income 2,376,415 2,769,713 1,319,118 1,629,391
Operating costs 1,714,661 2,007,422 933,006 1,030,927
------------ ------------ ------------ ------------
Gross profit 661,754 762,291 386,112 598,464
General and administrative expenses (5,988,485) (6,407,736) (3,273,049) (3,062,759)
Other income 420,256 489,653 283,417 313,981
Depreciation and amortization (821,164) (856,608) (393,872) (385,027)
------------ ------------ ------------ ------------
Operating income 1,309,318 1,167,257 731,369 1,097,248
------------ ------------ ------------ ------------
Other income (expense):
Interest income 72,934 85,147 42,340 49,391
Gain (loss) on equipment sale (82,552) (4,378) - 10,392
Interest expense (536,025) (611,590) (278,289) (332,082)
------------ ------------ ------------ ------------
Total other income
(expense), net (545,643) (530,821) (235,949) (272,299)
------------ ------------ ------------ ------------
Income before
income taxes 763,675 636,436 495,420 824,949
Income taxes (note 7) 294,719 252,817 198,396 329,980
------------ ------------ ------------ ------------
Net income $ 468,956 383,619 297,024 494,969
============ ============ ============ ============
Earnings per common share $ .17 .13 .10 .15
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
For the years ended January 31, 1995 and 1996
and the six months ended July 31, 1996 (unaudited)
<TABLE>
<CAPTION>
Common Additional
Number stock, paid-in Retained
of shares at par capital earnings Total
--------- ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance at January 31, 1994 2,613,024 $ 2,613 3,119,294 947,191 4,069,098
Net income -- -- -- 468,956 468,956
Cash dividends on common
stock, $.02 per share -- -- -- (49,536) (49,536)
Issuance of common stock 1,688 2 2,622 -- 2,624
Stock dividends issued on common stock
and sale of fractional shares 212,055 212 329,428 (327,915) 1,725
---------- ---------- ---------- ---------- ----------
Balance at January 31, 1995 2,826,767 2,827 3,451,344 1,038,696 4,492,867
Net income -- -- -- 383,619 383,619
Cash dividends on common
stock, $.02 per share -- -- -- (60,287) (60,287)
Stock dividends issued on common stock
and sale of fractional shares 232,522 233 368,937 (368,116) 1,054
Purchase of 42 shares of common stock (8,862) (9) (14,061) -- (14,070)
---------- ---------- ---------- ---------- ----------
Balance at January 31, 1996 3,050,427 3,051 3,806,220 993,912 4,803,183
Net income (unaudited) -- -- -- 494,969 494,969
Cash dividends on common stock, $.02 per
share (unaudited) -- -- -- (50,600) (50,600)
Issuance of common stock (unaudited) 141,159 141 221,967 -- 222,108
Stock dividends issued on common stock
and sale of fractional shares (unaudited) 191,799 192 301,596 (298,773) 3,015
---------- ---------- ---------- ---------- ----------
Balance at July 31, 1996 (unaudited) 3,383,385 $ 3,384 4,329,783 1,139,508 5,472,675
========== ========== ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years ended Six months
January 31, ended July 31,
----------- --------------
1995 1996 1995 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 468,956 383,619 297,024 494,969
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 821,164 856,608 393,872 385,027
Income from partnership investment (883) (1,737) -- --
Loss (gain) on sale of equipment 82,552 4,378 -- (10,392)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (21,040) (65,923) (11,814) 35,489
(Increase) decrease in inventories (131,556) (379,907) 418,968 57,252
(Increase) decrease in prepaid expenses (27,786) (60,478) 59,115 (1,966)
Decrease (increase) in other current assets 2,624 (2,101) (31,809) (37,295)
(Decrease) increase in accounts payable (51,462) 391,524 (123,687) (288,545)
(Decrease) increase in accrued liabilities (215,793) 135,090 116,804 (121,028)
(Decrease) increase in income taxes payable (17,859) (4,997) 41,521 203,480
Decrease in minority interest (11,064) (14,090) (5,630) (6,217)
----------- ----------- ----------- -----------
Net cash provided by operating
activities 897,853 1,241,986 1,154,364 710,774
----------- ----------- ----------- -----------
Cash flows from investing activities:
Capital (contributed to) received from partnership (1,750) (875) (12,083) 13,000
Proceeds from sale/condemnation of assets 70,259 24,230 -- 153,057
Purchases of property and equipment (1,529,934) (1,494,717) (552,162) (684,847)
Reduction of temporary investments 540,229 -- -- --
Disbursements on notes receivable (20,000) -- -- (106,489)
Collections on notes receivable 48,980 18,746 4,255 1,347
----------- ----------- ----------- -----------
Net cash used in investing
activities (892,216) (1,452,616) (559,990) (623,932)
----------- ----------- ----------- -----------
Cash flows from financing activities:
Payments on long-term debt (1,121,897) (805,049) (431,384) (2,310,370)
Proceeds from borrowings 1,287,745 1,306,100 449,253 3,126,269
Disbursements for deferred offering costs -- -- -- (236,564)
Proceeds from issuance of common stock 2,624 -- -- 222,108
Proceeds from sale of fractional shares of common
stock sold in conjunction with stock dividend 1,725 1,054 -- 3,015
Treasury stock acquisition -- (14,070) -- --
Dividends paid (49,536) (60,287) -- (50,600)
----------- ----------- ----------- -----------
Net cash provided by financing
activities 120,661 427,748 17,869 753,858
----------- ----------- ----------- -----------
Net increase in cash and cash equivalents 126,298 217,118 612,243 840,700
Cash and cash equivalents at beginning of period 1,258,414 1,384,712 1,384,712 1,601,830
----------- ----------- ----------- -----------
Cash and cash equivalents at end of period $ 1,384,712 1,601,830 1,996,955 2,442,530
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
January 31, 1996 and July 31, 1996
(Information as of July 31, 1996 and for the six months
ended July 31, 1995 and 1996 is unaudited)
(1) Summary of Significant Accounting Policies
------------------------------------------
(a) Description of Business
-----------------------
Bowlin Outdoor Advertising & Travel Centers Incorporated and
subsidiaries (the Company) are located in Albuquerque, New
Mexico. On August 28, 1996, Bowlin Outdoor Advertising &
Travel Centers, Inc. (BOATC) was incorporated in the state of
Nevada. Pursuant to an agreement and plan of merger effective
September 27, 1996, Bowlin's, Inc. (BI), which was
incorporated in the state of New Mexico on February 20, 1953,
was merged with and into BOATC. Under the terms of the
agreement, BI shareholders received 211 of the Company's
shares for each BI share. Accordingly, the Company issued
approximately 3.4 million shares of its common stock for all
the outstanding shares of BI stock and all references to the
number of shares of common stock have been retroactively
restated to reflect the exchange for all periods presented.
The transaction has been accounted for in a manner similar to
a pooling of interests.
The Company's principal business activities include the operation
of full-service travel centers and restaurants which offer
brand name food and gasoline and a unique variety of
Southwestern merchandise to the traveling public in the
Southwestern United States. In addition to the travel centers,
the Company operates outdoor billboard advertising displays
which are situated on interstate highways, primarily in the
Southwestern United States.
Dragoon Water Company, Inc. (Dragoon), a majority owned
subsidiary, was incorporated on December 12, 1962 and acquired
by the Company in 1986. The Company's primary reason for
purchasing Dragoon was to ensure water utilities would be
provided to one of its largest retail locations in Arizona.
(see Note 13) Dragoon's fiscal year end is December 31.
The Company acquired all of the outstanding stock of another
subsidiary, BMI Inc. (BMI) in November 1993. BMI's business
activities have historically been the acquisition of inventory
in Mexico which has been sold to the Company for the purpose
of resale in the United States. BMI has a January 31 fiscal
year end.
Neither Dragoon nor BMI is considered material to the overall
operations of the Company.
The Company also holds a majority general partnership interest in
the Los Cuatros Apartments Limited Partnership (Los Cuatros)
together with a limited partnership interest. The partnership
owns and leases an apartment complex in Las Cruces, New
Mexico. The partnership was formed in January 1991 and has a
December 31 fiscal year end.
(Continued)
F-8
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(b) 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 significantly from those
estimates.
(c) Principles of Consolidation
---------------------------
The accompanying consolidated financial statements include the
accounts of the Company, its wholly owned subsidiary BMI and
its majority owned subsidiaries Dragoon and Los Cuatros. All
material intercompany transactions have been eliminated or
disclosure has been made of the effect of intervening events
from December 31 to January 31, if any, related to the
differing fiscal year ends for Dragoon and Los Cuatros.
(d) Cash and Cash Equivalents
-------------------------
The Company considers all liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
(e) Accounts Receivable and Allowance for Doubtful Accounts
-------------------------------------------------------
Trade receivables are stated at face amount with no allowance for
doubtful accounts. An allowance for doubtful accounts is not
considered necessary by management due to the Company's
history of a relatively low occurrence of bad debts.
(f) Financial Instruments
---------------------
Statement of Financial Accounting Standards No. 107, Disclosures
About Fair Value of Financial Instruments, requires the fair
value of financial instruments be disclosed. The Company's
financial instruments are cash and cash equivalents, accounts
receivable, notes receivable, accounts payable, short-term
borrowings, and long-term debt. The carrying amounts of cash
and cash equivalents, accounts receivable, notes receivable,
accounts payable, short-term borrowings, and long-term debt,
approximate fair value.
(g) Inventories
-----------
Inventories consist primarily of merchandise and gasoline for
resale and are stated at the lower of cost or market value,
with cost being determined using the first-in, first-out
(FIFO) method.
(Continued)
F-9
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(h) Property and Equipment
----------------------
Property and equipment are carried at cost. Maintenance and
repairs, including the replacement of minor items, are
expensed as incurred, and major additions to property and
equipment are capitalized.
Depreciation is provided by the Company using primarily
straight-line, as well as accelerated methods. The estimated
useful lives of the assets range from 10-40 years for
buildings and improvements; 3-10 years for machinery and
equipment, autos, trucks, and mobile homes; and 15-20 years
for billboards.
(i) Franchise Fees
--------------
Franchise fees are amortized on a straight-line basis over the
shorter of the life of the related franchise agreements or the
periods estimated to be benefited, ranging from 15-25 years.
(j) Deferred Registration Costs
---------------------------
On April 26, 1996, the Board of Directors of the Company
authorized management to proceed with the registration of its
common stock under the Securities Act of 1933, as amended. The
net proceeds from the offering are expected to be
approximately $11,386,500. If successful, the proceeds will be
used to retire existing long-term debt, upgrade existing
travel centers and for general corporate purposes including
the acquisition or development of additional travel centers
and outdoor advertising operations.
Costs associated with this offering have been deferred and will
be deducted from the offering proceeds, if the offering is
successful, or charged to results of operations, if it is
unsuccessful.
(k) Sales and Cost Recognition
--------------------------
Sales of merchandise are recognized at the time of sale and the
associated costs of the merchandise are included in cost of
sales. Revenues from rental of billboard space are accounted
for as operating leases with rental assets recorded at cost
less accumulated depreciation; and the rent is recorded as
income ratably over the life of the lease contract.
(l) Reclassification
----------------
Certain reclassifications have been made to the 1995 financial
statements to conform to the 1996 presentation.
(Continued)
F-10
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(m) Earnings Per Common Share
-------------------------
Earnings per common share are computed by dividing net income by
the weighted average number of common shares outstanding
during the period presented.
The number of shares used in the earnings per share computations
are as follows:
<TABLE>
<CAPTION>
Years ended Six months ended
January 31, July 31,
----------- --------
1995 1996 1995 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Weighted average common
shares outstanding 2,778,680 3,000,618 2,950,094 3,227,883
========= ========= ========= =========
</TABLE>
(n) Unaudited Interim Financial Statements
--------------------------------------
The unaudited interim financial statements include all
adjustments, consisting of normal recurring adjustments, which
are, in the opinion of management, necessary for a fair
presentation of the financial position and the results of
operations of the Company.
(2) Notes Receivable
----------------
Notes receivable consist of the following:
<TABLE>
<CAPTION>
July 31,
January 31, 1996
1996 (unaudited)
---- -----------
<S> <C> <C>
Related parties:
Stockholder, receivable in annual installments of
approximately $12,000, plus interest at 7%, unsecured $ 10,012 10,012
Employees, receivable in annual installments ranging from
$875 to $5,308, plus interest at 10%, unsecured - 66,068
-------- ------
$ 10,012 76,080
======== ======
Other:
Individual, receivable in monthly installments
of $350, including interest at 10%, secured by land $ 15,600 14,253
Unrelated entities - 40,421
-------- ------
15,600 54,674
Less current maturities 2,762 16,432
-------- ------
$ 12,838 38,242
======== ======
</TABLE>
(Continued)
F-11
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3) Property and Equipment
----------------------
Property and equipment consist of the following:
<TABLE>
<CAPTION>
July 31,
January 31, 1996
1996 (unaudited)
---- -----------
<S> <C> <C>
Land $ 2,020,130 1,896,129
Buildings and improvements 6,892,891 6,851,834
Machinery and equipment 4,110,231 4,483,608
Autos, trucks and mobile homes 1,517,111 1,553,756
Billboards on operating leases 3,696,682 3,953,538
Billboards 774,349 774,349
------------- ------------
Subtotal, at cost 19,011,394 19,513,214
Less accumulated depreciation 10,287,215 10,662,607
Construction in progress 186,291 222,300
------------- ------------
Total property and equipment $ 8,910,470 9,072,907
============= ============
</TABLE>
During the six months ended July 31, 1996, the Company determined the
actual lives for certain asset categories were generally longer than
the estimated useful lives previously established for depreciation
purposes. Therefore, the Company extended the estimated useful lives
of certain categories of property and equipment, effective February 1,
1996. The effect of this change in accounting estimate reduced
depreciation expense for the six months ended July 31, 1996 by $32,100
(unaudited) and increased net income by $19,260 (unaudited)($.006 per
share).
(4) Billboard Rental Income
-----------------------
Included in property and equipment in the consolidated balance sheets of
the Company are billboards on operating leases. The billboards are
owned by the Company and the advertising space is leased to others.
See Note 9 regarding land leased from others by the Company for
billboard use.
Minimum future rentals to be received on noncancelable billboard leases
are as follows:
1997 $ 1,277,494
1998 1,520,943
1999 258,191
2000 20,164
2001 38,862
-----------
Total $ 3,115,654
===========
(Continued)
F-12
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Short-term Borrowing, Bank
--------------------------
Short-term borrowing, bank is as follows:
<TABLE>
<CAPTION>
July 31,
January 31, 1996
1996 (unaudited)
---- -----------
<S> <C> <C>
$150,000 line of credit with bank, variable interest payable monthly at
prime rate plus 1% (9.25% at January 31,
1996), balance due June 1997; unsecured $ 149,000 100,000
$1,000,000 line of credit with bank, variable interest
payable monthly, at prime rate plus 1% (9.25% at
July 31, 1996), balance due June 1997; unsecured - 268,500
--------- -------
Total short-term borrowing, bank $ 149,000 368,500
========= =======
</TABLE>
The average balance outstanding on the lines of credit was approximately
$114,000 during the fiscal year ended January 31, 1996. The highest
balance outstanding during the same period was $149,000 and the
average interest rate for outstanding borrowings was 9.75 percent.
The average balance outstanding on the lines of credit was approximately
$258,750 (unaudited) during the six months ended July 31, 1996. The
highest balance outstanding during the same period was $368,500
(unaudited) and the average interest rate for outstanding borrowings
was 9.25 percent.
(6) Long-term Debt
--------------
Long-term debt is as follows:
<TABLE>
<CAPTION>
July 31,
January 31, 1996
1996 (unaudited)
---- -----------
<S> <C> <C>
Due banks and other financing companies, with maturity dates ranging
from 1996 to 2002. Most bearing interest at adjustable rates
ranging from 8.75% to 10.75%, with certain fixed rate notes
ranging from 8% to 14.5%. Monthly payment amounts range from $186
to $28,831. Secured by land, buildings, equipment, billboards,
inventories, and a mortgage note $ 4,897,505 5,805,240
=========== =========
</TABLE>
(Continued)
F-13
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
<TABLE>
<CAPTION>
July 31,
January 31, 1996
1996 (unaudited)
---- -----------
<S> <C> <C>
Due individuals, various payment schedules with maturity dates ranging
from 1996 to 2004, including interest ranging from 8% to 12%.
Monthly payment amounts range from $360 to $2,687. Secured by
land, buildings, and billboards $ 996,013 852,805
Due stockholders and related individuals, various payment
schedules, including interest ranging from 10% to 12%. Monthly
payment amounts range from $75 to $1,662.
The notes are partially secured by land and buildings 559,981 515,786
Due individual by Dragoon, ten annual payments
through fiscal 1997 computed as 10% of gross annual
revenue from selected water sales. In April 1996, the
unpaid balance was transferred to a contribution in aid
of construction of a subsidiary 123,933 -
----------- ---------
6,577,432 7,173,831
Less current maturities 768,929 639,372
----------- ---------
$ 5,808,503 6,534,459
=========== =========
</TABLE>
Future maturities of long-term debt are as follows:
1997 $ 768,929
1998 760,563
1999 594,585
2000 562,181
2001 2,132,986
Thereafter 1,758,188
------------
Total $ 6,577,432
============
Duebanks and other financing companies includes a note payable of Los
Cuatros which has an outstanding balance as of January 31, 1996 of
$1,117,958, and matured August 1, 1996. Subsequent to year end, the
Company completed a refinancing of the note payable and, therefore, it
is not included in current maturities of long-term debt. The new note
payable has an outstanding principal balance of $1,096,500 at a fixed
rate of 8.125 percent and matures in 2031.
(Continued)
F-14
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Income Taxes
------------
Income tax from continuing operations consists of the following:
January 31,
-----------
1995 1996
---- ----
Federal income taxes $ 249,322 214,780
State income taxes 45,397 38,037
-------- -------
$ 294,719 252,817
========= =======
Financial statement income and income for tax purposes closely
approximate each other with immaterial temporary differences;
therefore, no deferred taxes are included in the consolidated balance
sheets.
Income tax expense differed from the amounts computed by applying the
U.S. federal income tax rate of 34 percent to pretax income from
continuing operations as a result of the following factors:
January 31,
-----------
1995 1996
---- ----
Computed "expected" tax $ 259,650 216,388
State income taxes, net of federal
tax benefit 29,962 25,104
Other 5,107 11,325
--------- -------
Total $ 294,719 252,817
========= =======
The Company acquired Dragoon in 1986. Dragoon had a net operating loss
carryforward of $38,301 which expired December 31, 1995. The original
net operating loss arose in 1980 prior to acquisition by the Company.
Dragoon files a separate tax return from the Company and the net
operating loss applied to that tax return.
(8) Profit Sharing Plan
-------------------
The Company maintains a qualified defined contribution profit sharing
plan that covers substantially all employees. The plan year end is
December 31. The elected salary reduction is subject to limits as
defined by the Internal Revenue Code. The Company provides a matching
contribution and additional discretionary contributions as determined
by resolution of the Board of Directors. Legal and accounting expenses
related to the plan are absorbed by the Company and were approximately
$1,500 and $8,250 for fiscal 1995 and 1996, respectively. Prior to
fiscal 1996, the Company's profit sharing plan was self-administered.
The Company contributed $84,926 to the profit sharing plan in fiscal
1995 and $84,845 in fiscal 1996.
(Continued)
F-15
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(9) Commitments and Contingencies
-----------------------------
The Company leases land at several of its retail operating locations.
Included in general and administrative expenses in the accompanying
consolidated statements of income for the years ended January 31, 1995
and 1996, is rental expense for these land leases of $253,858 and
$269,627, respectively.
The leasing agreements for the various locations include 5-35 year leases
with remaining lives on those leases ranging from approximately 5-25
years at January 31, 1996. Renewal options vary, with the most
extensive including three 5-year renewal options. Contingent rentals
are generally based on percentages of specified gross receipts.
Several leases include terms for computation of rent expense as the
greater of a percent of gross receipts or a percent of land value as
defined by the lease. In most cases, the Company is responsible for
certain repairs and maintenance, insurance, property taxes or property
tax increases, and utilities.
Future minimum rental payments under these leases are as follows:
1997 $ 86,576
1998 63,900
1999 54,900
2000 34,100
2001 27,550
Thereafter 432,298
----------
Total $ 699,324
==========
TheCompany has entered into various land operating leases for billboard
space. These leases require minimum annual rentals and range from
terms of 1-5 years. Rent expense was $394,438 and $458,461 for the
years ended January 31, 1995 and 1996, respectively. At January 31,
1996 and July 31, 1996, the Company had prepaid on these leases in the
amounts of $237,361 and $280,282 (unaudited), respectively. See note 4
regarding billboard advertising space leased to others by the Company.
Future minimum rental payments under these leases are as follows:
1997 $ 442,027
1998 277,449
1999 233,354
2000 202,664
2001 151,542
Thereafter 202,496
------------
$ 1,509,532
============
(Continued)
F-16
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Related Party Transactions (See also notes 1, 2, 4, 6 and 9)
------------------------------------------------------------
The following interest transactions took place with related parties during
the periods presented as follows:
<TABLE>
<CAPTION>
Years ended Six months ended
January 31, July 31,
----------- --------
1995 1996 1995 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Interest income $ 4,900 4,314 - -
Interest expense 63,000 65,753 32,875 29,313
======== ====== ====== ======
</TABLE>
An individual who is an officer and stockholder in the Company is also an
officer and stockholder in Stuckey's Corporation (Stuckey's). The
Company paid Stuckey's franchise fees for four stores in the amount of
$36,618 and $36,612 for January 31, 1995 and 1996, respectively.
Franchise fees are included in general and administrative expenses on
the accompanying consolidated statements of income.
A stockholder of the Company is a 1 percent stockholder in Dragoon.
(11) Cash Flow Disclosures
---------------------
Cash paid for interest and income taxes was as follows:
<TABLE>
<CAPTION>
Years ended Six months ended
January 31, July 31,
----------- --------
1995 1996 1995 1996
---- ---- ---- ----
(unaudited)
<S> <C> <C> <C> <C>
Interest $ 608,104 537,163 332,082 278,289
Income taxes 257,817 315,256 126,500 151,878
======= ======= ======= =======
</TABLE>
Supplemental disclosures of noncash investing and financing activities
are as follows:
The Company finances a significant portion of property and
equipment. During the years ending January 31, 1995 and 1996,
respectively, approximately $1,288,000 and $1,306,000 of
additional long-term debt was obtained, most of which can be
directly associated with fixed asset and land acquisitions.
During the six months ended July 31, 1995 and 1996, respectively,
approximately $449,000 (unaudited) and $370,000 (unaudited) of
additional long-term debt was obtained, most of which can be
directly associated with fixed asset and land acquisitions and
expansion of the outdoor advertising division.
(Continued)
F-17
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
For the year ended January 31, 1995, the Company issued 212,055
shares of stock dividends at approximately $1.56 per share,
totaling $327,915. For the year ended January 31, 1996, the
Company issued 232,522 shares of stock dividends at approximately
$1.59 per share, totaling $368,116. The book value of shares
distributed as stock dividends approximates fair market value.
During the six months ended July 31, 1996, the Company issued
191,799 (unaudited) shares of stock dividends at approximately
$1.56 per share, totaling $298,773 (unaudited). The book value of
shares distributed as stock dividends approximates fair market
value.
(12) Industry Segment Information
----------------------------
The Company's major operations are in the retail sale of merchandise,
food and gasoline to the traveling public (travel center operations)
and outdoor advertising operations. Revenue, operating income,
identifiable assets, depreciation and amortization, and capital
expenditures pertaining to the industries in which the Company
operates are presented below (in thousands of dollars) for each of the
fiscal years ended January 31.
<TABLE>
<CAPTION>
Travel Outdoor
center advertising Corporate
operations operations and other Consolidated
---------- ---------- --------- ------------
<S> <C> <C> <C> <C>
1995:
Net sales $ 19,578 2,376 - 21,954
Operating income 1,425 204 (320) 1,309
Identifiable assets 5,285 2,424 2,734 10,443
Depreciation and
amortization 451 252 118 821
Capital expenditures 342 556 618 1,516
======== ===== ===== ======
1996:
Net sales $ 20,175 2,770 - 22,945
Operating income 1,284 158 (275) 1,167
Identifiable assets 5,896 2,888 2,723 11,507
Depreciation and
amortization 434 261 162 857
Capital expenditures 576 691 149 1,416
======== ===== ===== ======
</TABLE>
Other income represents income from wholly and majority owned
subsidiaries, sales from crops owned by the Company and other
immaterial items which are not identifiable to the travel centers or
outdoor advertising segments.
(Continued)
F-18
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) Subsequent Events
-----------------
Subsequent to January 31, 1996, the Company entered into a consolidating
note agreement with a financial institution. The new note agreement
consolidated approximately $1,700,000 of the Company's existing debt
and provides for $1,000,000 of new debt. The new debt is to be used
primarily for the expansion of the Company's outdoor advertising
operations and continuing improvements of existing travel centers. The
notes have a variable interest rate of prime plus 1 percent and mature
in March 2006 and March 2003, respectively.
In addition, the Company secured a line of credit for $1,000,000 having a
variable interest rate of prime plus 1 percent. The line matures in
June 1997 and is secured by billboards and inventory.
Subsequent to January 31, 1996, the Company paid in full its indebtedness
to stockholders and officers of the Company. The balance was
approximately $535,000 at the date of payoff ($560,000 at January 31,
1996). In order to pay its stockholders and officers, the Company
secured a note payable with a financial institution in the amount of
$535,000 with a variable interest rate of prime plus 1 percent. The
note matures in February 1997.
In addition, the Company has an agreement in principle for the sale of
Dragoon to an unrelated third party which provides for the continued
provision of adequate water utilities to the Company following such
sale. The closing date for the sale is scheduled for October 1, 1996.
The Company does not anticipate recognizing any losses from the sale
of Dragoon.
<PAGE>
- --------------------------------------------------------------------------------
No dealer, salesman or other person is authorized to give any information or
make any representations not contained in this Prospectus with respect to the
offering made hereby. This Prospectus does not constitute an offer to sell any
of the securities offered hereby in any jurisdiction where, or to any person to
whom, it is unlawful to make such an offer. 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 information set forth herein or
in the business of the Company since the date hereof.
----------------------
TABLE OF CONTENTS Page
Prospectus Summary.............................................................3
Risk Factors...................................................................9
Dividends.....................................................................13
Dilution......................................................................14
Use of Proceeds...............................................................15
Capitalization................................................................16
Selected Consolidated Financial Data..........................................17
Management's Discussion and Analysis
of Financial Condition and Results
of Operations..............................................................19
Business......................................................................26
Properties....................................................................37
Management....................................................................38
Executive Compensation........................................................42
Certain Transactions..........................................................46
Principal Stockholders........................................................47
Description of Securities.....................................................49
Underwriting..................................................................51
Legal Matters.................................................................53
Experts.......................................................................53
Changes in Registrant's Certifying
Accountants................................................................54
Additional Information........................................................54
Financial Statements.........................................................F-1
Until _________, 1996 (25 days after the date of this Prospectus), all dealers
effecting transactions in the registered securities, 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
acting as underwriters and with respect to their unsold allotments or
subscriptions.
- --------------------------------------------------------------------------------
1,450,000 Shares of
Common Stock
[Picture of the Company's logo, a Native American "Zia" symbol]
BOWLIN OUTDOOR
ADVERTISING &
TRAVEL CENTERS
INCORPORATED
-------------------------
PROSPECTUS
--------------------------
HD BROUS & CO., INC.
_______________, 1996
<PAGE>
PART II TO FORM SB-2
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 24. Indemnification of Directors and Officers.
Article 12 of the Company's Articles of Incorporation and Article X of the
Company's By-laws limit, to the fullest extent permitted by the Nevada General
Corporation Law, as amended ("NGCL"), directors' personal liability to the
Company or its stockholders for monetary damages or breach of fiduciary duty.
Section 78.751 of the NGCL enables a corporation to eliminate or limit personal
liability of members of its board of directors for violations of their fiduciary
duties. However, Nevada law does not permit the elimination of a director's
liability for engaging in any transaction from which the director derived an
improper personal benefit or for unlawfully paying a distribution. The statute
has no effect on the availability of equitable remedies, such as an injunction
or rescission, for breach of fiduciary duty.
Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the estimated costs and expenses of the
Company in connection with the Offering other than underwriting discounts.
SEC Registration Fee...................................................$ 5,948
NASD Filing Fee........................................................ 2,225
Nasdaq National Market Listing Fee*.................................... 31,390
Legal Fees and Expenses*............................................... 90,000
Accounting Fees and Expenses*.......................................... 55,000
Representative's Nonaccountable Expense
Allowance**......................................................... 32,625
Financial Consultant Fee***............................................ 391,500
Printing and Engraving Expenses*....................................... 35,000
Blue Sky Fees and Expenses*............................................ 15,000
Miscellaneous*......................................................... 91,312
--------
Total*..............................................................$750,000
========
- --------------------
* Estimated
** $39,603 if the Over-Allotment Option is exercised in full.
*** $450,225 if the Over-Allotment Option is exercised in full.
II-1
<PAGE>
Item 26. Recent Sales of Unregistered Securities.
On December 31, 1993, the Company issued 2,321 shares of Common Stock to
Harold and Lidia Van Tongeren, jointly, for an aggregate consideration of
$3,531.
On January 15, 1995, the Company issued 1,688 shares of Common Stock to
Harold and Lidia Van Tongeren, jointly, for an aggregate consideration of
$2,624.
On April 26, 1996, the Company issued (i) 633 shares of Common Stock to
Harold and Lidia Van Tongeren, jointly, for an aggregate consideration of $996,
(ii) 4,220 shares of Common Stock to William J. McCabe for an aggregate
consideration of $6,640, (iii) 12,238 shares of Common Stock to Anita J. Vachon
for an aggregate consideration of $19,256, (iv) 25,531 shares of Common Stock to
Michael E. Rising for an aggregate consideration of $40,172 and (v) 98,537
shares of Common Stock to Miller Capital Corporation as compensation for certain
financial consulting services rendered with a value of approximately $155,044.
On September 27, 1996, the Company granted options to purchase an aggregate
of 338,000 shares of Common Stock to 62 officers and employees of the Company
and approved the grant of options to directors to purchase 24,000 shares
effective upon completion of the Offering pursuant to its 1996 Stock Option
Plan. All of such options have an exercise price per share equal to the initial
public offering price. None of such options have been exercised to date.
No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Section 4(2) thereof relative to sales by an
issuer not involving any public offering and the rules and regulations
thereunder or, in the case of options granted under the Company's 1996 Stock
Option Plan, Rule 701 of the Securities Act. All of foregoing securities are
deemed restricted securities for purposes of the Securities Act.
II-2
<PAGE>
Item 27. Exhibits
(a) Exhibits.
<TABLE>
<CAPTION>
Exhibit Method of
Number Description Filing
------ ----------- ------
<S> <C> <C>
1.1 Form of Underwriting Agreement **
1.2 Form of Agreement Among Underwriters **
3.1 Articles of Incorporation of Registrant *
3.2 By-laws of Registrant *
4 Specimen of Common Stock Certificate **
5 Opinion of Squire, Sanders & Dempsey **
10.1 Form of Billboard Outdoor Advertising Agreement *
10.2 Form of Poster Outdoor Advertising Agreement *
10.3 Distributor Franchise Agreement, dated as of July 19, *
1995, between the Registrant and CITGO Petroleum
Corporation
10.4 Form of Representative's Option **
10.5 Employment Agreement, dated as of September
27, 1996, between the Registrant and Michael L. Bowlin **
10.6 Employment Agreement, dated as of September
27, 1996, between the Registrant and C. Christopher Bess **
10.7 Loan Agreement, dated as of January 31, 1995, between
the Registrant and First Security Bank of New Mexico, **
N.A. ("First Security Bank")
10.8 Loan Agreement, dated as of May 16, 1995, between the **
Registrant and First Security Bank
10.9 Promissory Note, dated as of May 16, 1995, payable to **
First Security Bank in the aggregate principal amount of
$900,000
10.10 Revolving Promissory Note, dated as of June 1, 1996, **
payable by the Registrant to First Security Bank in the
aggregate principal amount of $150,000
10.11 Revision Agreement, dated as of May 16, 1995, between **
the Registrant and First Security Bank
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
Number Description Filing
------ ----------- ------
<S> <C> <C>
10.12 Continuing Guaranty, dated as of May 31, 1995, by **
Michael L. Bowlin in favor of First Security Bank
10.13 Business Loan Agreement, dated as of February 5, 1996, **
between the Registrant and Norwest Bank New Mexico,
National Association ("Norwest Bank")
10.14 Promissory Note, dated as of February 5, 1996, payable **
by the Registrant to Norwest Bank in the aggregate
principal amount of $1,000,000
10.15 Promissory Note, dated as of February 5, 1996, payable **
by the Registrant to Norwest Bank in the aggregate
principal amount of up to $1,000,000
10.16 Commercial Guaranty, dated as of February 5, 1996, by **
Michael L. Bowlin in favor of Norwest Bank
10.17 Lease, dated as of November 22, 1966, between Clara **+
May Basset and the Registrant, as amended
10.18 Lease, dated as of January 12, 1987, between Janet **+
Prince and the Registrant
10.19 Commercial Lease, dated as of September 21, 1986, **+
between State of Arizona and the Registrant, as amended
10.20 Business Lease, dated March 16, 1995, between the New **+
Mexico Commissioner of Public Lands and the Registrant,
as amended
10.21 Lease, dated as of June 3, 1974, between the Registrant **+
and Elbert and Iva Jean Roundy, as amended
10.22 Lease Agreement, dated as of January 1, 1993, between **+
the Registrant and Rex Kipp, Jr., as amended
10.23 Lease, dated as of September 29, 1983, between J.T. and **+
Idra M. Turner and the Registrant
10.24 Business Lease, dated as of October 1, 1991, between the **+
Registrant and New Mexico Commissioner of Public
Lands
10.25 Commercial Lease, dated as of September 21, 1986, **+
between the Registrant and the State of Arizona, as
amended
10.26 Commercial Lease, dated as of June 11, 1986, between **+
the Registrant and the State of Arizona, as amended
10.27 1996 Stock Option Plan *
10.28 Profit-Sharing 401(k) Plan and Trust *
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Exhibit Method of
Number Description Filing
------ ----------- ------
<S> <C> <C>
10.29 Letter of Agreement, dated as of April 26, 1996, between *
the Registrant and Miller Capital Corporation
10.30 Promissory Note, dated as of August 23, 1996, payable **
by the Registrant to Norwest Bank in the aggregate
principal amount of $535,000
10.31 Stuckey's Corporation Franchise Agreement, dated **
March 1, 1987
11 Computation of Per Share Earnings *
15 Letter on Unaudited Interim Financial Information **
16.1 Letter from Arthur Andersen LLP on Change in *
Certifying Accountant
16.2 Letter from Ricci & Ricci on Change in Certifying *
Accountant
21 List of Subsidiaries *
23.1 Consent of KPMG Peat Marwick LLP *
23.2 Consent of Ricci & Ricci *
23.3 Consent of Squire, Sanders & Dempsey To be included in
Exhibit 5
24 Powers of Attorney See Signature
Page
99.1 Consent of James A. Clark *
99.2 Consent of Brian McCarty *
- ------------------
* Filed herewith.
** To be filed by Amendment.
+ Confidential treatment to be requested as to certain portions of this exhibit.
</TABLE>
Item 28. Undertakings
1. Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the"Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the
II-5
<PAGE>
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the small business issuer in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the small business issuer will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question of 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.
2. The undersigned small business issuer will: (i) for determining any
liability under the Act, treat the information omitted from the form of
prospectus filed as a part of this registration statement in reliance upon Rule
430A and contained in a form of prospectus filed by the small business issuer
under Rule 424(b)(1), or (4) or 497(h) under the Act as part of this
registration statement as of the time the Commission declared it effective and
(ii) for determining any liability under the Act, treat each post-effective
amendment that contains a form of prospectus as a new registration statement,
and that offering of the securities at that time as the initial bona fide
offering of those securities.
3. The undersigned small business issuer will:
(1) File, during any period in which it offers or
sells securities, a post-effective amendment to
this registration statement to:
(i) Include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or
events which, individually or together,
represent a fundamental change in the
information in the registration statement.
Notwithstanding the foregoing, any
increase or decrease in volume of
securities offered (if the total dollar
volume of securities offered would not
exceed that which was registered) and any
deviations from the low or high end of the
estimated maximum offering range may be
reflected in the form of prospectus filed
with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes
in the volume and price represent no more
than a 20% change in the maximum aggregate
offering price set forth in the
"Calculation of Registration Fee" table in
the effective registration statement;
(iii) Include any additional or changed material
information on the plan of distribution.
II-6
<PAGE>
(2) For determining liability under the Securities
Act, treat each post-effective amendment as a new
registration statement of the securities offered,
and the offering of the securities at that time to
be the initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain
unsold at the end of the offering.
4. The undersigned small business issuer will provide to the underwriter at
the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriter to
permit prompt delivery to each purchaser.
II-7
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Phoenix
and State of Arizona on September 27, 1996.
BOWLIN OUTDOOR ADVERTISING & TRAVEL
CENTERS INCORPORATED, a Nevada corporation
By /s/ Michael L. Bowlin
-----------------------------------
Michael L. Bowlin, President
SPECIAL POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned, constitutes
and appoints MICHAEL L. BOWLIN and C. CHRISTOPHER BESS and each of them, his or
her true and lawful attorney-in-fact and agent with full power of substitution
and resubstitution, for him or her and in his or her name, place and stead, in
any and all capacities, to sign any and all pre and post-effective amendments
(including all amendments filed pursuant to Rule 462(b)) to this Form SB-2
Registration Statement, and to file the same with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting such attorneys-in-fact and agents, and each of them, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully and to all intents and purposes
as he or she might or could do in person, hereby ratifying and confirming all
that such attorneys-in-fact and agents, or each them, may lawfully do or cause
to be done by virtue hereof.
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement was signed below by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Michael L. Bowlin Chairman of the Board, Chief September 27 , 1996
- -------------------------------------------- Executive Officer and President
Michael L. Bowlin (Principal Executive Officer)
/s/ Michael E. Rising Chief Financial Officer (Principal September 27 , 1996
- -------------------------------------------- Financial Officer; Principal
Michael E. Rising Accounting Officer)
/s/ C. Christopher Bess Executive Vice President, September 27 , 1996
- -------------------------------------------- Chief Operating Officer and
C. Christopher Bess Director
</TABLE>
SB-1
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Nina J. Pratz
- -------------------------------------------- Corporate Treasurer, September 27 , 1996
Nina J. Pratz Chief Administrative Officer and
Director
/s/ Robert L. Beckett
- -------------------------------------------- Director September 27 , 1996
Robert L. Beckett
/s/ Harold Van Tongeren
- -------------------------------------------- Director September 27 , 1996
Harold Van Tongeren
</TABLE>
SB-2
ARTICLES OF INCORPORATION
OF
BOWLIN OUTDOOR ADVERTISING & TRAVEL CENTERS INCORPORATED
1. The name of the Corporation is BOWLIN Outdoor Advertising & Travel
Centers, Incorporated.
2. Its principal office in the State of Nevada is located at One East
First Street, Reno, Washoe County, Nevada 89501. The name and address of its
resident agent is the Corporation Trust Company of Nevada, One East First
Street, Reno, Nevada 89501.
3. The purpose for which the Corporation is organized is the
transaction of any and all lawful activities for which corporations may be
incorporated under the laws of the State of Nevada, as the same may be amended
from time to time.
4. The total authorized capital stock of the Corporation is One Hundred
Million (100,000,000) shares of common stock, $.001 par value and Ten Million
(10,000,000) shares of preferred stock, $.001 par value. Such shares may be
issued by the Corporation from time to time for such consideration as may be
fixed by the Board of Directors.
As to the preferred stock of the Corporation, the power to issue any
shares of preferred stock of any class or any series of any class and
designations, voting powers, preferences, and relative participating, optional
or other rights, if any, or the qualifications, limitations, or restrictions
thereof, shall be determined by the Board of Directors.
5. The governing board of this Corporation shall be known as directors,
and the number of directors may from time to time be increased up to ten (10) or
decreased in such manner as shall be provided by the Bylaws of this Corporation.
The first Board of Directors shall consist of five (5) directors.
The number of Directors shall be divided into three (3) classes, as
nearly equal in number as may be, to serve in the first instance until the
first, second and third annual meetings of the stockholders to be held,
respectively, and until their successors shall be elected and shall qualify. In
the case of any increase in the number of Directors of the Corporation, the
additional Directors shall be so classified that all classes of Directors shall
be increased equally as nearly as may be, and the additional Directors shall be
elected as provided in the Bylaws. In case of any decreases in the number of
Directors of the Corporation, all classes of Directors shall be decreased
equally, as nearly as may be. Election of Directors shall be conducted as
provided in these Articles, by law or in the Bylaws.
The names and mailing addresses of the first Board of Directors who are
to serve until the first, second and third annual meetings of the stockholders
and until their successors are elected and qualified, and the class designation
and term of office of each director is as follows:
<PAGE>
NAME CLASS & TERM POST OFFICE ADDRESS
- ---- ------------- -------------------
Michael L. Bowlin III, Term Ending 1999 150 Louisiana NE
Albuquerque, NM 87108
C. Christopher Bess II, Term Ending 1998 P.O. Box 1409
Mesilla Park, NM 88047
Nina J. Pratz I, Term Ending 1997 7001 Seminole NE
Albuquerque, NM 87110
Robert L. Beckett III, Term Ending 1999 P.O. Box 2621
Deming, NM 88031
Harold Van Tongeren II, Term Ending 1997 2000 E. 12th Street
Denver, CO 80206
6. The capital stock, after the amount of the subscription price or par
value has been paid in, shall not be subject to assessment to pay the debts of
the Corporation.
7. The name and post office address of each of the incorporators
signing the Articles of Incorporation are as follows:
NAME POST OFFICE ADDRESS
- ---- -------------------
Terry L. Bates 3225 N. Central Avenue
Phoenix, Arizona 85012
Loren D. Bates 3225 N. Central Avenue
Phoenix, Arizona 85012
Amelia Castillo 3225 N. Central Avenue
Phoenix, Arizona 85012
8. The Corporation is to have perpetual existence.
9. The fiscal year of the Corporation shall initially end on January 31
and begin on February 1 of each year; provided, however, that such date may be
changed from time to time as determined by the Board of Directors to be in the
best interest of the Corporation.
10. Meetings of stockholders may be held within or without the State of
Nevada, as the Bylaws may provide. The books of the Corporation may be kept
(subject to any provision contained in the Nevada statutes, or the rules and
regulations promulgated thereunder) outside the State of Nevada at such place or
places as may be designated from time to time by the Board of Directors or in
the Bylaws of the Corporation.
11. To the fullest extent permitted by the laws of the State of Nevada,
as the same exist or may hereinafter be amended, no director or officer of the
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of
2
<PAGE>
fiduciary duty as a director or officer; provided, however, that nothing
contained herein shall eliminate or limit the liability of a director or officer
of the Corporation to the extent provided by applicable laws (i) for acts or
omissions which involve intentional misconduct, fraud or knowing violation of
law or (ii) for authorizing the payment of dividends in violation of Nevada
Revised Statutes Section 78.300. The limitation of liability provided herein
shall continue after a director or officer has ceased to occupy such position as
to acts or omissions occurring during such director's or officer's term or terms
of office. No repeal, amendment or modification of this Article, whether direct
or indirect, shall eliminate or reduce its effect with respect to any act or
omission of a director or officer of the Corporation occurring prior to such
repeal, amendment or modification.
12. The Corporation shall indemnify, defend and hold harmless any
person who incurs expenses, claims, damages or liability by reason of the fact
that he or she is, or was, an officer, director employee or agent of the
Corporation, to the fullest extent allowed pursuant to Nevada law.
13. Pursuant to Nevada Revised Statutes Section 78.378, the Corporation
elects not to be governed by the provisions of Nevada Revised Statutes Sections
78.378 to 78.3793, inclusive, as the same may be amended from time to time; and
further, pursuant to Nevada Revised Statutes Section 78.434, the Corporation
elects not to be governed by the provisions of Nevada Revised Statutes Sections
78.411 to 78.444, inclusive, as the same may be amended from time to time.
14. Any Business Combination (as hereinafter defined) with an
Interested Stockholder (as hereinafter defined) shall be subject to the
following requirements:
(a) In addition to any affirmative vote required by law or
these Articles of Incorporation or the Bylaws of the Corporation, and except as
otherwise expressly provided in paragraph (b) of this Article 14, a Business
Combination involving an Interested Stockholder or any Affiliate or Associate
(as hereinafter defined) of any Interested Stockholder or any person who
thereafter would be an Affiliate or Associate of such Interested Stockholder
shall require the affirmative vote of not less than sixty-six and two-thirds
percent (66 2/3%) of the votes entitled to be cast by the holders of all the
then outstanding shares of Voting Stock, voting together as a single class,
excluding Voting Stock beneficially owned by such Interested Stockholder. Such
affirmative vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage or separate class vote may be specified,
by law or in any agreement with any national securities exchange or otherwise.
(b) The provisions of paragraph (a) of this Article 14 shall
not be applicable to any particular Business Combination, and such Business
Combination shall require only such affirmative vote, if any, as is required by
law or by any other provision of these Articles of Incorporation or the Bylaws
of the Corporation, or any agreement with any national securities exchange, if
all of the conditions specified in either of the following Paragraphs 1 or 2 are
met or, in the case of a Business Combination not involving the payment of
consideration to the holders of the Corporation's outstanding Capital Stock (as
hereinafter defined), if the conditions specified in both Paragraphs 1 and 2 are
met:
1. The Business Combination shall have been approved,
either specifically or as a transaction which is within an approved category of
transactions, by a
3
<PAGE>
majority (whether such approval is made prior to or subsequent to the
acquisition of, or announcement of or public disclosure of the intention to
acquire, beneficial ownership of the Voting Stock that caused the Interested
Stockholder to become an Interested Stockholder) of the Continuing Directors (as
hereinafter defined).
2. All of the following conditions shall have been
met:
A. The aggregate amount of cash and the Fair
Market Value (as hereinafter defined) as of the date of the consummation of the
Business Combination of consideration other than cash to be received per share
by holders of Common Stock in such Business Combination shall be at least equal
to the highest amount determined under clauses (i) and (ii) below:
(i) (if applicable) the highest per
share price (including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested Stockholder for any share
of Common Stock in connection with the acquisition by the Interested Stockholder
of beneficial ownership of shares of Common Stock (x) within the two-year period
immediately prior to the first public announcement of the proposed Business
Combination (the "Announcement Date") or (y) in the transaction in which such
person became an Interested Stockholder (the "Determination Date"), whichever is
higher, in either case as adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with respect to Common Stock; and
(ii) the Fair Market Value per share
of Common Stock on the Announcement Date or on the Determination Date, whichever
is higher, as adjusted for any subsequent stock split, stock dividend,
subdivision or reclassification with respect to Common Stock.
B. The aggregate amount of cash and the Fair
Market Value, as of the date of the consummation of the Business Combination, of
consideration other than cash to be received per share by holders of shares of
any class or series of outstanding Capital Stock, other than Common Stock, shall
be at least equal to the highest amount determined under clauses (i) and (ii)
below:
(i) (if applicable) the highest per
share price (including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by or on behalf of the Interested Stockholder for any share
of such class or series of Capital Stock in connection with the acquisition by
the Interested Stockholder of beneficial ownership of shares of such class or
series of Capital Stock (x) within the two-year period immediately prior to the
Announcement Date or (y) in the transaction in which such person became an
Interested Stockholder, whichever is higher in either case as adjusted for any
subsequent stock split, stock dividend, subdivision or reclassification with
respect to such class or series of Capital Stock; and
(ii) the Fair Market value per share
of such class or series of Capital Stock on the Announcement Date or on the
Determination Date, whichever is higher, as adjusted for any subsequent stock
split, stock dividend, subdivision or reclassification with respect to such
class or series of Capital Stock.
4
<PAGE>
The provisions of this Paragraph (b)2.B
shall be required to be met with respect to every class or series of outstanding
Capital Stock, whether or not the Interested Stockholder has previously acquired
beneficial ownership of any shares of a particular class or series of Capital
Stock.
C. The consideration to be received by
holders of a particular class or series of outstanding Capital Stock shall be in
cash or in the same form as previously has been paid by or on behalf of the
Interested Stockholder in connection with the Interested Stockholder's direct or
indirect acquisition of beneficial ownership of shares of such class or series
of Capital Stock. If the consideration so paid for shares of any class or series
of Capital Stock varied as to form, the form of consideration for such class or
series of Capital Stock shall be either cash or the form used to acquire
beneficial ownership of the largest number of shares of such class or series of
Capital Stock previously acquired by the Interested Stockholder.
D. After the Determination Date and prior to
the consummation of such Business Combination: (i) except as approved by a
majority of the Continuing Directors, there shall have been no failure to
declare and pay at the regular date therefor any dividends (whether or not
cumulative) payable in accordance with the terms of any outstanding Capital
Stock; (ii) there shall have been no reduction in the annual rate of dividends
paid on the Common Stock (except as necessary to reflect any stock split, stock
dividend or subdivision of the Common Stock), except as approved by a majority
of the Continuing Directors; (iii) there shall have been an increase in the
annual rate of dividends paid on the Common Stock as necessary to reflect any
reclassification (including any reverse stock split), recapitalization,
reorganization or any similar transaction that has the effect of reducing the
number of outstanding shares of Common Stock, unless the failure so to increase
such annual rate is approved by a majority of the Continuing Directors; and (iv)
such Interested Stockholder shall not have become the beneficial owner of any
additional shares of Capital Stock except as part of the transaction that
results in such Interested Stockholder becoming an Interested Stockholder and
except in a transaction that, after giving effect thereto, would not result in
any increase in the Interested Stockholder's percentage of beneficial ownership
of any class or series of Capital Stock.
E. After the Determination Date, such
Interested Stockholder shall not have received the benefit, directly or
indirectly (except proportionately as a stockholder of the Corporation), of any
loans, advances, guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the Corporation, whether in
anticipation of or in connection with such Business Combination or otherwise.
F. A proxy or information statement
describing the proposed Business Combination and complying with the requirements
of the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Act") (or any subsequent provisions replacing such
Act, rules or regulations) shall be mailed to all stockholders of the
Corporation at least thirty (30) days prior to the consummation of such Business
Combination (whether or not such proxy or information statement is required to
be mailed pursuant to such Act or subsequent provisions). The proxy or
information statement shall contain on the first page thereof, in a prominent
place, any statement as to the advisability (or inadvisability) of the Business
Combination that the Continuing Directors, or any of them, may choose to make
and, if deemed advisable by a majority of the Continuing Directors, the opinion
of an investment banking firm selected by a majority of the Continuing Directors
as to the fairness (or not) of the
5
<PAGE>
terms of the Business Combination from a financial point of view to the holders
of the outstanding shares of Capital Stock other than the Interested Stockholder
and its Affiliates or Associates, such investment banking firm to be paid a
reasonable fee for its services by the Corporation.
G. Such Interested Stockholder shall not
have made any major change in the Corporation's business or equity capital
structure without the approval of a majority of the Continuing Directors.
(c) For the purposes of this Article 14:
1. The term "Business Combination" shall mean:
A. any merger or consolidation of the
Corporation or any Subsidiary (as hereinafter defined) with (i) any Interested
Stockholder or (ii) any other Corporation (whether or not itself an Interested
Stockholder) which is or after such merger or consolidation would be an
Affiliate or Associate of an Interested Stockholder; or
B. any sale, lease, exchange, mortgage,
pledge, transfer or other disposition or security arrangement, investment, loan,
advance, guarantee, agreement to purchase, agreement to pay, extension of
credit, joint venture participation or other arrangement (in one transaction or
a series of transactions) with or for the benefit of any Interested Stockholder
or any Affiliate or Associate of any Interested Stockholder involving any assets
or securities or commitments of the Corporation, any Subsidiary or any
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder which, together with all other such arrangements (including all
contemplated future events) has an aggregate Fair Market Value and/or involves
aggregate commitments of $10,000,000 or more or constitutes more than ten
percent (10%) of the book value of the total assets (in the case of transactions
involving assets or commitments other than Capital Stock) or ten percent (10%)
of the stockholders' equity (in the case of transactions in Capital Stock) of
the entity in question (the "Substantial Part"), as reflected in the most recent
fiscal year end consolidated balance sheet of such entity existing at the time
the stockholders of the Corporation would be required to approve or authorize
the Business Combination involving the assets, securities, obligations and/or
commitments constituting any Substantial Part; or
C. the adoption of any plan or proposal for
the liquidation or dissolution of the Corporation or for any amendment to these
Articles of Incorporation or the Bylaws proposed by or on behalf of an
Interested Stockholder or any Affiliate or Associate of any Interested
Stockholder; or
D. any reclassification of securities
(including any reverse stock split), or recapitalization of the Corporation, or
any merger or consolidation of the Corporation with any of its Subsidiaries or
any other transaction (whether or not with or otherwise involving an Interested
Stockholder) that has the effect, directly or indirectly, of increasing the
proportionate share of any class or series of Capital Stock, or any securities
convertible into Capital Stock or into equity securities of any Subsidiary, that
is beneficially owned by any Interested Stockholder or any Affiliate or
Associate of any Interested Stockholder; or
6
<PAGE>
E. any agreement, contract or other
arrangement providing for any one or more of the actions specified in the
foregoing clauses A to D.
2. The term "Capital Stock" shall mean all capital
stock of the Corporation authorized to be issued from time to time under Article
4 of these Articles of Incorporation.
3. The term "person" shall mean any individual, firm,
Corporation or other entity and shall include any group comprised of any person
and any other person with whom such person or any Affiliate or Associate of such
person has any agreement, arrangement or understanding, directly or indirectly,
for the purpose of acquiring, holding, voting or disposing of Capital Stock.
4. The term "Interested Stockholder" shall mean any
person (other than the Corporation or any Subsidiary and other than any
profit-sharing, employee stock ownership or other employee benefit plan of the
Corporation or any Subsidiary or any trustee of, or fiduciary with respect to,
any such plan when acting in such capacity) who (a) is or has announced or
publicly disclosed a plan or intention to become the beneficial owner of Voting
Stock representing ten percent (10%) or more of the votes entitled to be cast by
the holders of all the then outstanding shares of Voting Stock; or (b) is an
Affiliate or Associate of the Corporation and at any time within the two-year
period immediately prior to the date in question, was the beneficial owner of
Voting Stock representing ten percent (10%) or more of the votes entitled to be
cast by the holders of all the then outstanding shares of Voting Stock.
5. A person shall be a "beneficial owner" of any
Capital Stock (a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; (b) which such person or any of its
Affiliates or Associates has, directly or indirectly, (i) the right to acquire
(whether such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or
understanding; or (c) which is beneficially owner, directly or indirectly, by
any other person with which such person or any of its Affiliates or Associates
has any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any shares of Capital Stock. For the purposes of
determining whether a person is an Interested Stockholder pursuant to Paragraph
4 of this Section (c), the number of shares of Capital Stock deemed to be
outstanding shall include shares deemed beneficially owned by such person
through application of this Paragraph 5, but shall not include any other shares
of Capital Stock that may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants or options, or
otherwise.
6. The terms "Affiliate" and "Associate" shall have
the respective meanings ascribed to such terms in Rule 12b-2 under the Act as in
effect on the date that these Articles of Incorporation are accepted for filing
by the Nevada Secretary of State (the term "registrant" in said Rule 12b-2
meaning in this case, the Corporation).
7. The term "Subsidiary" means any company of which a
majority of any class of equity security is beneficially owned by the
Corporation; provided, however, that for the purposes of the definition of
Interested Stockholder set forth in Paragraph 4 of this
7
<PAGE>
Section (c), the term "Subsidiary" shall mean only a company of which a majority
of each class of equity security is beneficially owned by the Corporation.
8. The term "Continuing Director" means (i) any
member of the Board of Directors on the date of the filing of these Articles of
Incorporation with the Nevada Secretary of State, and (ii) any member of the
Board of Directors who thereafter becomes a member of the Board of Directors
while such person is a member of the Board of Directors, who is not an Affiliate
or Associate or representative of the Interested Stockholder and was a member of
the Board of Directors prior to the time that the Interested Stockholder became
an Interested Stockholder, and (iii) a successor of a Continuing Director while
such successor is a member of the Board of Directors, who is not an Affiliate or
Associate or representative of the Interested Stockholder and is recommended or
elected to succeed the Continuing Director by a majority of Continuing
Directors.
9. The term "Fair Market Value" means (a) in the case
of cash, the amount of such cash; (b) in the case of stock, the highest closing
sale price during the 30-day period immediately preceding the date in question
of a share of such stock on the principal United States securities exchange
registered under the Act on which such stock is listed, or, if such stock is not
listed on any such exchange, the highest closing bid quotation with respect to a
share of such stock during the 30-day period immediately preceding the date in
question on the Nasdaq National Market or any similar system then in use, or if
no such quotations are available, the fair market value on the date in question
of a share of such stock as determined by a majority of the Continuing Directors
in good faith; and (c) in the case of property other than cash or stock, the
fair market value of such property on the date in question as determined in good
faith by a majority of the Continuing Directors.
10. In the event of any Business Combination in which
the Corporation survives, the phrase "consideration other than cash to be
received," as used in Paragraphs 2.A and 2.B of Section (b) of this Article 14,
shall include the shares of Common Stock and/or the shares of any other class or
series of Capital Stock retained by the holders of such shares.
11. The term "Voting Stock" means stock of any class
or series entitled to vote generally in the election of directors.
(d) A majority of the Continuing Directors shall have the
power and duty to determine for the purposes of this Article 14 on the basis of
information known to them after reasonable inquiry, (1) whether a person is an
Interested Stockholder, (2) the number of shares of Capital Stock or other
securities beneficially owned by any person, (3) whether a person is an
Affiliate or Associate, (4) whether the proposed action is with, or proposed by,
or on behalf of, an interested Stockholder or an Affiliate or Associate of an
Interested Stockholder, (5) whether the assets that are the subject of any
Business Combination have, or the consideration to be received for the issuance
or transfer of securities by the Corporation or any Subsidiary in any Business
Combination has, an aggregate Fair Market Value of $10,000,000 or more and (6)
whether the assets or securities that are the subject of any Business
Combination constitute a Substantial Part. Any such determination made in good
faith shall be binding and conclusive on all parties.
(e) Nothing contained in this Article 14 shall be construed to
relieve any Interested Stockholder from any fiduciary obligation imposed by law.
8
<PAGE>
(f) The fact that any Business Combination complies with the
provisions of Section (b) of this Article 14 shall not be construed to impose
any fiduciary duty, obligation or responsibility on the Board of Directors, or
any member thereof, to approve such Business Combination or recommend its
adoption or approval to the stockholders of the Corporation, nor shall such
compliance limit, prohibit or otherwise restrict in any manner the Board of
Directors, or any member thereof, with respect to evaluations of or actions and
responses taken with respect to such Business Combination.
(g) For the purposes of this Article 14, a Business
Combination or any proposal to amend, repeal or adopt any provision of these
Articles of Incorporation inconsistent with this Article 14 (collectively, the
"Proposed Action") is presumed to have been proposed by, or on behalf of, an
Interested Stockholder or an Affiliate or Associate of an Interested Stockholder
or a person who thereafter would become such if (1) after the Interested
Stockholder became such, the Proposed Action is proposed following the election
of any director of the Corporation who, with respect to such Interested
Stockholder, would not qualify to serve as a Continuing Director or (2) such
Interested Stockholder, Affiliate, Associate or person votes for or consents to
the adoption of any such Proposed Action, unless as to such Interested
Stockholder, Affiliate, Associate or person, a majority of the Continuing
Directors makes a good faith determination that such Proposed Action is not
proposed by or on behalf of such Interested Stockholder, Affiliate, Associate or
person, based on information known to them after reasonable inquiry.
15. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in these Articles of Incorporation or in the
Bylaws of the Corporation, in the manner now or hereafter previously prescribed
by statute, and all rights conferred upon stockholders herein are granted
subject to this reservation, provided, however, that notwithstanding anything to
the contrary in these Articles of Incorporation to the contrary, the affirmative
vote of sixty-six and two-thirds percent (66 2/3%) of the outstanding shares of
stock of this Corporation entitled to vote shall be required to amend, alter,
change or repeal, or adopt any provision inconsistent with, these Articles.
WE, THE UNDERSIGNED, being each of the incorporators hereinbefore
named, for the purpose of forming a Corporation pursuant to the General
Corporation Law of the State of Nevada, do make and file these Articles of
Incorporation, hereby declaring and certifying that the facts herein stated are
true, and accordingly have hereunto set our hands this 28th of August, 1996.
/s/ Terrie L. Bates
--------------------------------
Terrie L. Bates
/s/ Loren D. Bates
--------------------------------
Loren D. Bates
/s/ Amelia Castillo
--------------------------------
Amelia Castillo
9
<PAGE>
STATE OF ARIZONA )
) ss.
County of Maricopa)
On this 28th day of August, 1996, before me, a Notary Public,
personally appeared Terrie L. Bates, Loren D. Bates and Amelia Castillo who
acknowledged that they executed the above instrument.
/s/ Cindy L. Parrinello
----------------------------
Notary Public
(Notary Seal)
My commission expires:
April 14, 1998
- ----------------------
10
BYLAWS
OF
BOWLIN OUTDOOR ADVERTISING & TRAVEL CENTERS INCORPORATED
ARTICLE I
OFFICES
-------
1. Principal Office.
-----------------
The principal office shall be in the City of Reno, County of Washoe,
State of Nevada.
2. Other Offices.
--------------
The Corporation may also have offices at such other places both within
and without the State of Nevada as the Board of Directors may from time to time
determine or the business of the Corporation may require.
ARTICLE II
STOCKHOLDERS
------------
1. Annual Meeting.
---------------
The annual meeting of the stockholders shall be held on such date and
at such time and place each year as the Board of Directors (the "Board") shall
determine, for the purpose of electing Directors and for the transaction of such
other business as may properly come before the meeting. If the election of
Directors is not held on the day designated by the Board for any annual meeting
of the stockholders, or any adjournment thereof, the Board shall cause the
election to be held at a special meeting of the stockholders as soon thereafter
as convenient.
2. Special Meetings.
-----------------
Special meetings of the stockholders may be called for any purpose or
purposes at any time by a majority of the Board of Directors, Chairman of the
Board or the President. No special meeting may be called at the request of a
stockholder. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice thereof.
3. Place of Meetings.
------------------
Annual and special meetings of the stockholders may be held at such
time and place within or without the State of Nevada as shall be stated in the
notice of the meeting, or in a duly executed waiver of notice thereof.
<PAGE>
4. Notice of Meeting.
------------------
Written notice stating the place, date and hour of the meeting and, in
the case of a special meeting, the purpose or purposes for which the meeting is
called, shall be delivered to each stockholder of record entitled to vote at
such meeting not less than ten (10) nor more than sixty (60) days before the
date of the meeting. Notice may be delivered either personally or by first
class, certified or registered mail, postage prepaid, and signed by an officer
of the Corporation at the direction of the person or persons calling the
meeting. If mailed, notice shall be deemed to be delivered when mailed to the
stockholders at his or her address as it appears on the stock transfer books of
the Corporation. Delivery of any such notice to any officer of a corporation or
association, or to any member of a partnership shall constitute delivery of such
notice to such corporation, association or partnership. In the event of the
transfer of stock after delivery or mailing of the notice of and prior to the
holding of the meeting it shall not be necessary to deliver or mail notice of
the meeting to the transferee. Notice need not be given of an adjourned meeting
if the time and place thereof are announced at the meeting at which the
adjournment is taken, provided that such adjournment is for less than thirty
(30) days and further provided that a new record date is not fixed for the
adjourned meeting, in either of which events, written notice of the adjourned
meeting shall be given to each stockholder of record entitled to vote at such
meeting. At any adjourned meeting, any business may be transacted which might
have been transacted at the meeting as originally noticed. A written waiver of
notice, whether given before or after the meeting to which it relates, shall be
equivalent to the giving of notice of such meeting to the stockholder or
stockholders signing such waiver. Attendance of a stockholder at a meeting shall
constitute a waiver of notice of such meeting, except when the stockholder
attends for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened.
5. Fixing Date for Determination of Stockholders Record.
-----------------------------------------------------
In order that the Corporation may determine the stockholders entitled
to notice of and to vote at any meeting of stockholders or any adjournment
thereof, or to express consent to corporate action in writing without a meeting,
or to receive payment of any dividend or other distribution or allotment of any
rights, or to exercise any rights in respect of any other change, conversion or
exchange of stock or for the purpose of any other lawful action, the Board of
Directors may fix in advance a record date, which shall not be more than sixty
(60) nor less than ten (10) days prior to the date of such meeting or such
action, as the case may be. If the Board of Directors has not fixed a record
date for determining the stockholders entitled to notice of and to vote at a
meeting of stockholders, the record date shall be at close of business on the
day next preceding the day on which notice is given, or if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held. If the Board of Directors has not fixed a record date for determining the
stockholders entitled to express consent to corporate action in writing without
a meeting, when no prior action by the Board of Directors is necessary, the
record date shall be the day on which the first written consent is expressed by
any stockholder. If the Board of Directors has not fixed a record date for
determining stockholders for any other purpose, the record date shall be at the
close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
2
<PAGE>
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
6. Record of Stockholders.
-----------------------
The Secretary or other officer having charge of the stock transfer
books of the Corporation shall make, or cause to be made, at least ten (10) days
before every meeting of stockholders, a complete record of the stockholders
entitled to vote at a meeting of stockholders or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
registered in the name of each stockholder. Such list shall be open to the
examination of any stockholder, for any purpose germane to the meeting, during
ordinary business hours, for a period of at least ten (10) days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof and may be inspected by any stockholder who is present.
7. Quorum and Manner of Acting.
----------------------------
At any meeting of the stockholders, the presence, in person or by
proxy, of the holders of a majority of the outstanding stock entitled to vote
shall constitute a quorum for the transaction of business except as otherwise
provided by the Nevada General Corporation Law or by the Articles of
Incorporation. All shares represented and entitled to vote on any single subject
matter which may be brought before the meeting shall be counted for quorum
purposes. Only those shares entitled to vote on a particular subject matter
shall be counted for the purpose of voting on that subject matter. Business may
be conducted once a quorum is present and may continue to be conducted until
adjournment sine die, notwithstanding the withdrawal or temporary absence of
stockholders leaving less than a quorum. Except as otherwise provided in the
Nevada General Corporation Law, the Articles of Incorporation or these Bylaws,
the affirmative vote of the holders of a majority of the shares of stock then
represented at the meeting and entitled to vote thereat shall be the act of the
stockholders; provided, however, that if the shares of stock so represented are
less than the number required to constitute a quorum, the affirmative vote must
be such as would constitute a majority if a quorum were present, except that the
affirmative vote of the holders of a majority of the shares of stock then
present is sufficient in all cases to adjourn a meeting.
8. Voting of Shares of Stock.
--------------------------
Each stockholder shall be entitled to one vote or corresponding
fraction thereof for each share of stock or fraction thereof standing in his,
her or its name on the books of the Corporation on the record date. A
stockholder may vote either in person or by valid proxy, as defined in Section
12 of this Article II, executed in writing by the stockholder or by his, her or
its duly authorized attorney in fact. Shares of its own stock belonging to the
Corporation or to another corporation, if a majority of the shares entitled to
vote in the election of directors of such other corporation is held, directly or
indirectly, by the Corporation, shall neither be entitled to vote nor counted
for quorum purposes; provided, however, that the foregoing shall not limit the
right of any corporation to vote stock, including but not limited to its own
stock, when held
3
<PAGE>
by it in a fiduciary capacity. Shares of stock standing in the name of another
corporation may be voted by such officer, agent or proxy as the bylaws of such
other corporation may prescribe or, in the absence of such provision, as the
Board of Directors of such other corporation may determine. Unless demanded by a
stockholder present in person or by proxy at any meeting of the stockholders and
entitled to vote thereat, or unless so directed by the chairman of the meeting,
the vote thereat on any question need not be by ballot. If such demand or
direction is made, a vote by ballot shall be taken, and each ballot shall be
signed by the stockholder voting, or by his or her proxy, and shall state the
number of shares voted.
9. Organization.
-------------
At each meeting of the stockholders, the Chairman of the Board, or, if
he or she is absent therefrom, the President, or, if he or she is absent
therefrom, another officer of the Corporation chosen as chairman of such meeting
by stockholders holding a majority of the shares present in person or by proxy
and entitled to vote thereat, or, if all the officers of the Corporation are
absent therefrom, a stockholder of record so chosen, shall act as chairman of
the meeting and preside thereat. The Secretary, or, if he or she is absent from
the meeting or is required pursuant to the provisions of this Section 9 to act
as chairman of such meeting, the person (who shall be an Assistant Secretary, if
any and if present) whom the chairman of the meeting shall appoint shall act as
secretary of the meeting and keep the minutes thereof.
10. Order of Business.
------------------
The order of business at each meeting of the stockholders shall be
determined by the chairman of such meeting, but the order of business may be
changed by the vote of stockholders holding a majority of the shares present in
person or by proxy at such meeting and entitled to vote thereat.
11. Voting.
-------
At all meetings of stockholders, each stockholder entitled to vote
thereat shall have the right to vote, in person or by proxy, and shall have, for
each share of stock registered in his, her or its name, the number of votes
provided by the Articles of Incorporation or these Bylaws in respect of stock of
such class. Stockholders shall not have cumulative voting rights with respect to
the election of Directors.
12. Voting by Proxy.
----------------
At any meeting of the stockholders, any stockholder may be represented
and vote by a proxy or proxies appointed by an instrument in writing, In the
event that any such instrument in writing shall designate two (2) or more
persons to act as proxies, a majority of such persons present at the meeting,
or, if only one shall be present, then that one shall have and may exercise all
of the powers conferred by such written instrument upon all of the persons so
designated unless the instrument shall otherwise provide. No such proxy shall be
valid after the expiration of six (6) months from the date of its execution,
unless coupled with an interest, or unless the person executing it specifies
therein the length of time for which it is to continue in force, which in no
case shall exceed seven (7) years from the date of its execution. Subject to
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the above, any proxy duly executed is not revoked and continues in full force
and effect until an instrument revoking it or a duly executed proxy bearing a
later date is filed with the Secretary of the Corporation.
13. Action By Stockholders Without a Meeting.
-----------------------------------------
Any action required or permitted to be taken at a meeting of the
stockholders may be taken without a meeting without notice and without a vote,
if a consent in writing, setting forth the action so taken, is signed by the
holders of outstanding stock having not less than the number of votes that would
have been necessary to authorize such action at a meeting at which all shares
entitled to vote were present and voted. Such written consent shall not be valid
unless it is (a) signed by the stockholder, (b) dated, as to the date of such
stockholder's signature, and (c) delivered to the Corporation personally or by
certified or registered mail, return receipt requested, to the Corporation's
principal place of business, principal office in the State of Nevada or officer
or agent who has custody of the book in which the minutes of meetings of
stockholders are recorded, within sixty (60) days after the earliest date that a
stockholder signed the written consent. Prompt notice of the taking of any such
action shall be given to any such stockholder entitled to vote who has not so
consented in writing.
14. Nomination of Directors. Only persons who are nominated in accordance with
the following procedures shall be eligible for election as directors. Nomination
for election to the Board of Directors of the Corporation at a meeting of
stockholders may be made by the Board of Directors or by any stockholder of the
Corporation entitled to vote for the election of directors at such meeting who
complies with the notice procedures set forth in this Section 14. Such
nominations, other than those made by or on behalf of the Board of Directors,
shall be made by notice in writing delivered or mailed by first class United
States mail, postage prepaid, to the Secretary of the Corporation, and received
not less than thirty (30) days nor more than sixty (60) days prior to such
meeting; provided, however, that if less than forty-five (45) days' notice or
prior public disclosure of the date of the meeting is given or made to
stockholders, such nomination shall have been mailed or delivered to the
Secretary not later than the close of business on the 10th day following the
date on which the notice of the meeting was mailed or public disclosure was
made, whichever occurs first. Such notice shall set forth (a) as to each
proposed nominee (i) the name, age, business address and, if known, residence
address of each such nominee, (ii) the principal occupation or employment of
each such nominee, (iii) the number of shares of stock of the Corporation which
are beneficially owned by each such nominee, and (iv) any other information
concerning the nominee that must be disclosed to as nominees in proxy
solicitations pursuant to Regulation 14A under the Securities Exchange Act of
1934, as amended (including such person's written consent to be named as a
nominee and to serve as a director if elected); (b) as to the stockholder giving
the notice (i) the name and address, as they appear on the Corporation's books,
of such stockholder, and (ii) the class and number or shares of the Corporation
which are beneficially owned by such stockholder; and (c) as to the beneficial
owner, if any, on whose behalf the nomination is made, (i) the name and address
of such person and (ii) the class and number of shares of the Corporation which
are beneficially owned by such person.
The Chairman presiding at a meeting of stockholders may, if the facts
warrant, determine and declare to the meeting that a nomination was not made in
accordance with the foregoing
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procedure, and if he should so determine, he shall so declare to the meeting and
the defective nomination shall be disregarded.
Nothing in the foregoing provision shall obligate the Corporation or
the Board of Directors to include in any proxy statement or other stockholder
communication distributed on behalf of the Corporation or the Board of Directors
information with respect to any nominee for directors submitted by a
stockholder.
ARTICLE III
BOARD OF DIRECTORS
------------------
1. General Powers.
---------------
The business and affairs of the Corporation shall be managed by the
Board of Directors.
2. Number, Term of Office and Qualifications.
------------------------------------------
Subject to the requirements of the Nevada General Corporation Law or
the Articles of Incorporation, the Board of Directors may from time to time
determine the number of Directors. Until the Board of Directors shall otherwise
determine, the number of Directors shall be that number comprising the initial
Board of Directors as set forth in the Articles of Incorporation. Each director
shall hold office until his or her successor is duly elected or until his or her
earlier death or resignation or removal in the manner hereinafter provided.
Directors need not be stockholders.
3. Place of Meeting.
-----------------
The Board of Directors may hold its meetings, either within or without
the State of Nevada, at such place or places as it may from time to time by
resolution determine or as shall be designated in any notices or waivers of
notice thereof. Any such meeting, whether regular or special, may be held by
telephone conference or similar communications equipment by means of which all
persons participating in the meeting can hear each other, and participation in a
meeting in such manner shall constitute presence in person at such meeting. Each
person participating in a telephonic meeting shall sign the minutes thereof,
which may be signed in counterparts.
4. Annual Meetings.
----------------
As soon as practicable after each annual election of Directors, the
Board of Directors shall meet for the purpose of organization and the
transaction of other business at the place where regular meetings of the Board
of Directors are held, and no notice of such meeting shall be necessary in order
to legally hold the meeting, provided that a quorum is present. If such meeting
is not held as provided above, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for a special
meeting of the Board of Directors, or in the event of waiver of notice as
specified in the written waiver of notice.
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5. Regular Meetings.
-----------------
Regular meetings of the Board of Directors may be held without notice
at such times as the Board of Directors shall from time to time by resolution
determine.
6. Special Meetings; Notice.
-------------------------
Special meetings of the Board of Directors shall be held, either within
or without the State of Nevada, whenever called by the Chairman of the Board or
a majority of the Directors at the time in office. Notice shall be given, in the
manner hereinafter provided, of each such special meeting, which notice shall
state the time and place of such meeting, but need not state the purposes
thereof. Except as otherwise provided in Section 9 of this Article III, notice
of each such meeting shall be mailed to each Director, addressed to him or her
at his or her residence or usual place of business, at least two (2) days before
the day on which such meeting is to be held, or shall be sent addressed to him
or her at such place by facsimile, cable, wireless or other form of recorded
communication or delivered personally or by telephone not later than the day
before the day on which such meeting is to be held. A written waiver of notice,
whether given before or after the meeting to which it relates, shall be
equivalent to the giving of notice of such meeting to the Director or Directors
signing such waiver. Attendance of a Director at a special meeting of the Board
of Directors shall constitute a waiver of notice of such meeting, except when he
or she attends the meeting for the express purpose of objecting to the
transaction of any business because the meeting is not lawfully called or
convened.
7. Quorum and Manner of Acting.
----------------------------
A majority of the whole Board of Directors shall be present in person
at any meeting of the Board of Directors in order to constitute a quorum for the
transaction of business at such meeting, and except as otherwise specified in
the Articles of Incorporation or these Bylaws, and except also as otherwise
expressly provided by the Nevada General Corporation Law, the vote of a majority
of the Directors present at any such meeting at which a quorum is present shall
be the act of the Board of Directors. In the absence of a quorum from any such
meeting, a majority of the Directors present thereat may adjourn such meeting
from time to time to another time or place, without notice other than
announcement at the meeting, until a quorum shall be present thereat. The
Directors shall act only as a Board of Directors and the individual Directors
shall have no power as such.
8. Organization.
-------------
At each meeting of the Board of Directors, the Chairman of the Board,
or, if he or she is absent therefrom, the President, or if he or she is absent
therefrom, a Director chosen by a majority of the Directors present thereat,
shall act as chairman of such meeting and preside thereat. The Secretary, or if
he or she is absent, the person (who shall be an Assistant Secretary, if any and
if present) whom the chairman of such meeting shall appoint, shall act as
Secretary of such meeting and keep the minutes thereof.
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9. Action by Directors Without a Meeting.
--------------------------------------
Any action required or permitted to be taken at a meeting of the Board
of Directors may be taken without a meeting, without prior notice and without a
vote, if a consent in writing, setting forth the action so taken, is signed by
all Directors and such consent is filed with the minutes of the proceedings of
the Board of Directors.
10. Resignations.
-------------
Any Director may resign at any time by giving written notice of his or
her resignation to the Corporation. Any such resignation shall take effect at
the time specified therein, or, if the time when it shall become effective is
not specified therein, it shall take effect immediately upon its receipt by the
Chairman of the Board, the President or the Secretary; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
11. Removal of Directors.
---------------------
Directors may be removed only for cause, as provided from time to time
by the Nevada General Corporation Law as then in effect, and by affirmative vote
of stockholders representing at least sixty-six and two thirds percent (66 2/3%)
of the outstanding stock entitled to vote thereon.
12. Vacancies.
----------
Vacancies and newly created directorships resulting from any increase
in the authorized number of Directors elected by all of the stockholders having
the right to vote as a single class may be filled by a majority of the Directors
then in office, although less than a quorum, or by a sole remaining Director. If
at any time, by reason of death or resignation or other cause, the Corporation
has no Directors in office, then any officer or stockholder or an executor,
administrator, trustee or guardian of a stockholder, may call a special meeting
of stockholders for the purpose of filling vacancies in the Board of Directors.
If one or more Directors shall resign from the Board of Directors, effective at
a future date, a majority of the Directors then in office, including those who
have so resigned, shall have the power to fill such vacancy or vacancies, the
vote thereon to take effect when such resignation or resignations shall become
effective, and each Director so chosen shall hold office as provided in this
section in the filling of other vacancies.
13. Compensation.
-------------
Unless otherwise expressly provided by resolution adopted by the Board
of Directors, no Director shall receive any compensation for his or her services
as a Director. The Board of Directors may at any time and from time to time by
resolution provide that the Directors shall be paid a fixed sum for attendance
at each meeting of the Board of Directors or a stated salary as Director. In
addition, the Board of Directors may at any time and from time to time by
resolution provide that Directors shall be paid their actual expenses, if any,
of attendance at each meeting of the Board of Directors. Nothing in this section
shall be construed as precluding any
8
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Director from serving the Corporation in any other capacity and receiving
compensation therefor, but the Board of Directors may by resolution provide that
any Director receiving compensation for his or her services to the Corporation
in any other capacity shall not receive additional compensation for his or her
services as a Director.
ARTICLE IV
OFFICERS
--------
1. Number.
-------
The Corporation shall have the following officers: a Chairman of the
Board (who shall be a Director), a President, a Vice President, a Secretary and
a Treasurer. At the discretion of the Board of Directors, the Corporation may
also have additional Vice Presidents, one or more Assistant Vice Presidents, one
or more Assistant Secretaries and one or more Assistant Treasurers. Any two (2)
or more offices may be held by the same person.
2. Election and Term of Office.
----------------------------
The officers of the Corporation shall be elected annually by the Board
of Directors. Each such officer shall hold office until his or her successor is
duly elected or until his or her earlier death or resignation or removal in the
manner hereinafter provided.
3. Agents.
-------
In addition to the officers mentioned in Section 1 of this Article IV,
the Board of Directors may appoint such agents as the Board of Directors may
deem necessary or advisable, each of which agents shall have such authority and
perform such duties as are provided in these Bylaws or as the Board of Directors
may from time to time determine. The Board of Directors may delegate to any
officer or to any committee the power to appoint or remove any such agents.
4. Removal.
--------
Any officer may be removed, with or without cause, at any time by
resolution adopted by a majority of the whole Board of Directors.
5. Resignations.
-------------
Any officer may resign at any time by giving written notice of his or
her resignation to the Board of Directors, the Chairman of the Board, the
President or the Secretary. Any such resignation shall take effect at the times
specified therein, or, if the time when it shall become effective is not
specified therein, it shall take effect immediately upon its receipt by the
Board of Directors, the Chairman of the Board, the President or the Secretary;
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
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<PAGE>
6. Vacancies.
----------
A vacancy in any office due to death, resignation, removal,
disqualification or any other cause may be filled for the unexpired portion of
the term thereof by the Board of Directors.
7. Chairman of the Board.
----------------------
The Chairman of the Board shall be the chief executive officer of the
Corporation and shall have, subject to the control of the Board of Directors,
general and active supervision and direction over the business and affairs of
the Corporation and over its several officers. The Chairman of the Board shall:
(a) preside at all meetings of the stockholders and at all meetings of the Board
of Directors; (b) make a report of the state of the business of the Corporation
at each annual meeting of the stockholders; (c) see that all orders and
resolutions of the Board of Directors are carried into effect; (d) sign, with
the Secretary or an Assistant Secretary, certificates for stock of the
Corporation; (e) have the right to sign, execute and deliver in the name of the
Corporation all deeds, mortgages, bonds, contracts or other instruments
authorized by the Board of Directors, except in cases where the signing,
execution or delivery thereof is expressly delegated by the Board of Directors
or by these Bylaws to some other officer or agent of the Corporation or where
any of them are required by law otherwise to be signed, executed or delivered;
and (f) have the right to cause the corporate seal, if any, to be affixed to any
instrument which requires it. In general, the Chairman of the Board shall
perform all duties incident to the office of the Chairman of the Board and such
other duties as from time to time may be assigned to him or her by the Board of
Directors.
8. President.
----------
The President shall have, subject to the control of the Board of
Directors and the Chairman of the Board, general and active supervision and
direction over the business and affairs of the Corporation and over its several
officers. At the request of the Chairman of the Board, or in case of his or her
absence or inability to act, the President shall perform the duties of the
Chairman of the Board and, when so acting, shall have all the powers of, and be
subject to all the restrictions upon, the Chairman of the Board. He may sign,
with the Secretary or an Assistant Secretary, certificates for stock of the
Corporation. He may sign, execute and deliver in the name of the Corporation all
deeds, mortgages, bonds, contracts or other instruments authorized by the Board
of Directors, except in cases where the signing, execution or delivery thereof
is expressly delegated by the Board of Directors or by these Bylaws to some
other officer or agent of the Corporation or where any of them are required by
law otherwise to be signed, executed or delivered, and he may cause the
corporate seal, if any, to be affixed to any instrument which requires it. In
general, the President shall perform all duties incident to the office of the
President and such other duties as from time to time may be assigned to him or
her by the Board of Directors or the Chairman of the Board.
9. Vice President.
---------------
The Vice President and any additional Vice Presidents shall have such
powers and perform such duties as the Chairman of the Board, the President or
the Board of Directors may from time to time prescribe and shall perform such
other duties as may be prescribed by these
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Bylaws. At the request of the President, or in case of his or her absence or
inability to act, the Vice President shall perform the duties of the President
and, when so acting, shall have all the powers of, and be subject to all the
restrictions upon, the President.
10. Secretary.
----------
The Secretary shall: (a) record all the proceedings of the meetings of
the stockholders, the Board of Directors and the Executive Committee, if any, in
one or more books kept for that purpose; (b) see that all notices are duly given
in accordance with the provisions of these Bylaws or as required by law; (c) be
the custodian of all contracts, deeds, documents, all other indicia of title to
properties owned by the Corporation and of its other corporate records (except
accounting records) and of the corporate seal, if any, and affix such seal to
all documents the execution of which on behalf of the Corporation under its seal
is duly authorized; (d) sign, with the Chairman of the Board, the President, the
Executive Vice President or a Vice President, certificates for stock of the
Corporation; (e) have charge, directly or through the transfer clerk or transfer
clerks, transfer agent or transfer agents and registrar or registrars appointed
as provided in Section 3 of Article VII of these Bylaws, of the issue, transfer
and registration of certificates for stock of the Corporation and of the records
thereof, such records to be kept in such manner as to show at any time the
amount of the stock of the Corporation issued and outstanding, the manner in
which and the time when such stock was paid for, the names, alphabetically
arranged, and the addresses of the holders of record thereof, the number of
shares held by each, and the time when each became a holder of record; (f) upon
request, exhibit or cause to be exhibited at all reasonable times to any
Director such records of the issue, transfer and registration of the
certificates for stock of the Corporation; (g) see that the books, reports,
statements, certificates and all other documents and records required by law are
properly kept and filed; and (h) see that the duties prescribed by Section 6 of
Article II of these Bylaws are performed. In general, the Secretary shall
perform all duties incident to the office of Secretary and such other duties as
from time to time may be assigned to him or her by the Chairman of the Board,
the President or the Board of Directors.
11. Treasurer.
----------
If required by the Board of Directors, the Treasurer shall give a bond
for the faithful discharge of his or her duties in such sum and with such surety
or sureties as the Board of Directors shall determine. The Treasurer shall: (a)
have charge and custody of, and be responsible for, all funds, securities, notes
and valuable effects of the Corporation; (b) receive and give receipt for monies
due and payable to the Corporation from any sources whatsoever; (c) deposit all
such monies to the credit of the Corporation or otherwise as the Board of
Directors, the Chairman of the Board or the President shall direct in such
banks, trust companies or other depositories as shall be selected in accordance
with the provisions of Article VI of these Bylaws; (d) cause such funds to be
disbursed by checks or drafts on the authorized depositories of the Corporation
signed as provided in Article VI of these Bylaws; (e) be responsible for the
accuracy of the amounts of, and cause to be preserved proper vouchers for, all
monies so disbursed; (f) have the right to require from time to time reports or
statements giving such information as he or she may desire with respect to any
and all financial transactions of the Corporation from the officers or agents
transacting the same; (g) render to the Chairman of the Board, the President or
the Board of Directors, whenever they, respectively, shall request him
11
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or her so to do, an account of the financial condition of the Corporation and of
all his or her transactions as Treasurer; and (h) upon request, exhibit or cause
to be exhibited at all reasonable times the cash books and other records to the
Chairman of the Board, the President or any of the Directors of the Corporation.
In general, the Treasurer shall perform all duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him or
her by the Chairman of the Board, the President or the Board of Directors.
12. Assistant Officers.
-------------------
Any persons elected as assistant officers shall assist in the
performance of the duties of the designated office and such other duties as
shall be assigned to them by any Vice President, the Secretary or the Treasurer,
as the case may be, or by the Board of Directors, the Chairman of the Board, or
the President.
13. Compensation.
-------------
The salaries of all officers and agents of the Corporation shall be
fixed by the Board of Directors.
14. Combination of Offices.
-----------------------
Any two of the offices hereinabove enumerated may be held by one and
the same person, if such person is so elected or appointed, except the offices
of President and Secretary.
ARTICLE V
COMMITTEES
----------
1. Executive Committee; How Constituted and Powers.
------------------------------------------------
The Board of Directors, by resolution adopted by a majority of the
whole Board of Directors, may designate one or more of the Directors then in
office, who shall include the Chairman of the Board, to constitute an Executive
Committee, which shall have and may exercise between meetings of the Board of
Directors all the delegable powers of the Board of Directors to the extent not
expressly prohibited by the Nevada General Corporation Law or by resolution of
the Board of Directors. The Board of Directors may designate one or more
Directors as alternate members of the Committee who may replace any absent or
disqualified member at any meeting of the Committee. Each member of the
Executive Committee shall continue to be a member thereof only during the
pleasure of a majority of the whole Board of Directors.
2. Executive Committee; Organization.
----------------------------------
The Chairman of the Board shall act as chairman at all meetings of the
Executive Committee and the Secretary shall act as secretary thereof. In case of
the absence from any meeting of the Chairman of the Board or the Secretary, the
Committee may appoint a chairman or secretary, as the case may be, of the
meeting.
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3. Executive Committee; Meetings.
------------------------------
Regular meetings of the Executive Committee may be held without notice
on such days and at such places as shall be fixed by resolution adopted by a
majority of the Committee and communicated to all its members. Special meetings
of the Committee shall be held whenever called by the Chairman of the Board or a
majority of the members thereof then in office. Notice of each special meeting
of the Committee shall be given in the manner provided in Section 6 of Article
III of these Bylaws for special meetings of the Board of Directors. Notice of
any such meeting of the Executive Committee, however, need not be given to any
member of the Committee if waived by him or her in writing or by facsimile,
cable, wireless or other form of recorded communication either before or after
the meeting, or if he or she is present at such meeting, except when he or she
attends for the express purpose of objecting to the transaction of any business
because the meeting is not lawfully called or convened. Subject to the
provisions of this Article V, the Committee, by resolution adopted by a majority
of the whole Committee, shall fix its own rules of procedure and it shall keep a
record of its proceedings and report them to the Board of Directors at the next
regular meeting thereof after such proceedings have been taken. All such
proceedings shall be subject to revision or alteration by the Board of
Directors; provided, however, that third parties shall not be prejudiced by any
such revision or alteration.
4. Executive Committee; Quorum and Manner of Acting.
-------------------------------------------------
A majority of the Executive Committee shall constitute a quorum for the
transaction of business, and, except as specified in Section 3 of this Article
V, the act of a majority of those present at a meeting thereof at which a quorum
is present shall be the act of the Committee. The members of the Committee shall
act only as a committee, and the individual members shall have no power as such.
5. Other Committees.
-----------------
The Board of Directors, by resolution adopted by a majority of the
whole Board, may constitute other committees, which shall in each case consist
of one or more of the Directors and, at the discretion of the Board of
Directors, such officers who are not Directors. The Board of Directors may
designate one or more Directors or officers who are not Directors as alternate
members of any committee who may replace any absent or disqualified member at
any meeting of the committee. Each such committee shall have and may exercise
such powers as the Board of Directors may determine and specify in the
respective resolutions appointing them; provided, however, that (a) unless all
of the members of any committee shall be Directors, such committee shall not
have authority to exercise any of the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and (b) if any
committee shall have the power to determine the amounts of the respective fixed
salaries of the officers of the Corporation or any of them, such committee shall
consist of not less than three (3) members and none of its members shall have
any vote in the determination of the amount that shall be paid to him or her as
a fixed salary. A majority of all the members of any such committee may fix its
rules of procedure, determine its action and fix the time and place of its
meetings and specify what notice thereof, if any, shall be given, unless the
Board of Directors shall otherwise by resolution provide.
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6. Committee Minutes.
------------------
The Executive Committee and any other committee shall keep regular
minutes of their proceedings and report the same to the Board of Directors when
required.
7. Action by Committees Without a Meeting.
---------------------------------------
Any action required or permitted to be taken at a meeting of the
Executive Committee or any other committee of the Board of Directors may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, is signed by all members of the
committee and such consent is filed with the minutes of the proceedings of the
committee.
8. Resignations.
-------------
Any member of the Executive Committee or any other committee may resign
therefrom at any time by giving written notice of his or her resignation to the
Chairman of the Board, the President or the Secretary. Any such resignation
shall take effect at the time specified therein, or if the time when it shall
become effective is not specified therein, it shall take effect immediately upon
its receipt by the Chairman of the Board or the Secretary; and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective.
9. Vacancies.
----------
Any vacancy in the Executive Committee or any other committee shall be
filled by the vote of a majority of the whole Board of Directors.
10. Compensation.
-------------
Unless otherwise expressly provided by resolution adopted by the Board
of Directors, no member of the Executive Committee or any other committee shall
receive any compensation for his or her services as a committee member. The
Board of Directors may at any time and from time to time by resolution provide
that committee members shall be paid a fixed sum for attendance at each
committee meeting or a stated salary as a committee member. In addition, the
Board of Directors may at any time and from time to time by resolution provide
that such committee members shall be paid their actual expenses, if any, of
attendance at each committee meeting. Nothing in this section shall be construed
as precluding any committee member from serving the Corporation in any other
capacity and receiving compensation therefor, but the Board of Directors may by
resolution provide that any committee member receiving compensation for his or
her services to the Corporation in any other capacity shall not receive
additional compensation for his or her services as a committee member.
11. Dissolution of Committees; Removal of Committee Members.
--------------------------------------------------------
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The Board of Directors, by resolution adopted by a majority of the
whole Board, may, with or without cause, dissolve the Executive Committee or any
other committee, and, with or without cause, remove any member thereof.
ARTICLE VI
MISCELLANEOUS
1. Execution of Contracts.
-----------------------
Except as otherwise required by law or by these Bylaws, any contract or
other instrument may be executed and delivered in the name of the Corporation
and on its behalf by the Chairman of the Board, the President, or any Vice
President. In addition, the Board of Directors may authorize any other officer
of officers or agent or agents to execute and deliver any contract or other
instrument in the name of the Corporation and on its behalf, and such authority
may be general or confined to specific instances as the Board of Directors may
by resolution determine.
2. Attestation.
------------
Any Vice President, the Secretary, or any Assistant Secretary may
attest the execution of any instrument or document by the Chairman of the Board,
the President, or any other duly authorized officer or agent of the Corporation
and may affix the corporate seal, if any, in witness thereof, but neither such
attestation nor the affixing of a corporate seal shall be requisite to the
validity of any such document or instrument.
3. Checks, Drafts.
---------------
All checks, drafts, orders for the payment of money, bills of lading,
warehouse receipts, obligations, bills of exchange and insurance certificates
shall be signed or endorsed (except endorsements for collection for the account
of the Corporation or for deposit to its credit, which shall be governed by the
provisions of Section 4 of this Article VI) by such officer or officers or agent
or agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
4. Deposits.
---------
All funds of the Corporation not otherwise employed shall be deposited
from time to time to the credit of the Corporation or otherwise as the Board of
Directors, the Chairman of the Board, or the President shall direct in general
or special accounts at such banks, trust companies, savings and loan
associations, or other depositories as the Board of Directors may select or as
may be selected by any officer or officers or agent or agents of the Corporation
to whom power in that respect has been delegated by the Board of Directors. For
the purpose of deposit and for the purpose of collection for the account of the
Corporation, checks, drafts and other orders for the payment of money which are
payable to the order of the Corporation may be endorsed, assigned and delivered
by any officer or agent of the Corporation. The Board of Directors may make such
special rules and regulations with respect to such accounts, not inconsistent
with the provisions of these Bylaws, as it may deem expedient.
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5. Proxies in Respect of Stock or Other Securities of Other Corporations.
----------------------------------------------------------------------
Unless otherwise provided by resolution adopted by the Board of
Directors, the Chairman of the Board, the President, or any Vice President may
exercise in the name and on behalf of the Corporation the powers and rights
which the Corporation may have as the holder of stock or other securities in any
other corporation, including without limitation the right to vote or consent
with respect to such stock or other securities.
6. Fiscal Year.
------------
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors, and may thereafter be changed from time to time by action of
the board of Directors. Initially, the fiscal year shall begin on February 1 and
end on January 31.
ARTICLE VII
STOCK
-----
1. Certificates.
-------------
Every holder of stock in the Corporation shall be entitled to have a
certificate signed by or in the name of the Corporation by the Chairman of the
Board, the President, or a Vice President and by the Secretary or an Assistant
Secretary. The signatures of such officers upon such certificate may be
facsimiles if the certificate is manually signed by a transfer agent or
registered by a registrar, other than the Corporation itself or one of its
employees. If any officer who has signed or whose facsimile signature has been
placed upon a certificate has ceased for any reason to be such officer prior to
issuance of the certificate, the certificate may be issued with the same effect
as if that person were such officer at the date of issue. All certificates for
stock of the Corporation shall be consecutively numbered, shall state the number
of shares represented thereby and shall otherwise be in such form as shall be
determined by the Board of Directors, subject to such requirements as are
imposed by the Nevada General Corporation Law. The names and addresses of the
persons to whom the shares represented by certificates are issued shall be
entered on the stock transfer books of the Corporation, together with the number
of shares and the date of issue, and in the case of cancellation, the date of
cancellation. Certificates surrendered to the Corporation for transfer shall be
canceled, and no new certificate shall be issued in exchange for such shares
until the original certificate has been canceled; except that in the case of a
lost, stolen, destroyed or mutilated certificate, a new certificate may be
issued therefor upon such terms and indemnity to the Corporation as the Board of
Directors may prescribe.
2. Transfer of Stock.
------------------
Transfers of shares of stock of the Corporation shall be made only on
the stock transfer books of the Corporation by the holder of record thereof or
by his or her legal representative or attorney in fact, who shall furnish proper
evidence of authority to transfer to the Secretary, or a transfer clerk or a
transfer agent, and upon surrender of the certificate or certificates for such
shares properly endorsed and payment of all taxes thereon. The person in whose
name
16
<PAGE>
shares of stock stand on the books of the Corporation shall be deemed the owner
thereof for all purposes as regards the Corporation.
3. Regulations.
------------
The Board of Directors may make such rules and regulations as it may
deem expedient, not inconsistent with these Bylaws, concerning the issue,
transfer and registration of certificates for stock of the Corporation. The
Board of Directors may appoint, or authorize any officer or officers or any
committee to appoint, one or more transfer clerks or one or more transfer agents
and one or more registrars, and may require all certificates for stock to bear
the signature or signatures of any of them.
4. Lost Certificates.
------------------
The Board of Directors may direct a new certificate or certificates to
be issued in place of any certificate or certificates theretofore issued by the
Corporation alleged to have been lost or destroyed, upon the making of an
affidavit of the fact by the person claiming the certificate of stock to be lost
or destroyed. When authorizing such issue of a new certificate or certificates,
the Board of Directors may, in its discretion and as a condition precedent to
the issuance thereof, require the owner of such lost or destroyed certificate or
certificates, or his legal representative, to advertise the same in such manner
as it shall require and/or give the Corporation a bond in such sum as it may
direct as indemnity against any claim that may be made against the Corporation
with respect to the certificate alleged to have been lost or destroyed.
5. Registered Stockholders.
------------------------
The Corporation shall be entitled to recognize the exclusive right of a
person registered on its books as the owner of shares to receive dividends, and
to vote as such owner, and hold liable for calls and assessments a person
registered on its books as the owner of shares, and shall not be bound to
recognize any equitable or other claim to or interest in such share or shares on
the part of any other person, whether or not it shall have express or other
notice thereof, except as otherwise provided by the laws of Nevada.
ARTICLE VIII
DIVIDENDS
---------
The Board of Directors may from time to time declare, and the
Corporation may pay, dividends on its outstanding shares of stock in the manner
and upon the terms and conditions provided in the Nevada General Corporation
Law.
17
<PAGE>
ARTICLE IX
SEAL
----
A corporate seal shall not be requisite to the validity of any
instrument executed by or on behalf of the Corporation. Nevertheless, if in any
instance a corporate seal is used, the same shall be in the form of a circle and
shall bear the full name of the Corporation and the year and state of
incorporation, or words and figures of similar import.
ARTICLE X
INDEMNIFICATION OF DIRECTORS AND OFFICERS
-----------------------------------------
1. General.
--------
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with the action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, does not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and that, with respect to any criminal action or
proceeding, he had reasonable cause to believe that his conduct was unlawful.
2. Derivative Actions.
-------------------
The Corporation shall indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including amounts paid in
settlement and attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of the action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Corporation and except that no indemnification shall be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged by a court of competent jurisdiction after exhaustion of all
appeals therefrom to be liable to the Corporation or for amounts paid in
settlement to the Corporation unless and only to the extent that the court in
which such action or suit was brought or other
18
<PAGE>
court of competent jurisdiction shall determine upon application that, in view
of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
3. Indemnification in Certain Cases.
---------------------------------
To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in Sections 1 and 2 of this Article X, or
in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith.
4. Procedure.
----------
Any indemnification under Sections 1 and 2 of this Article X (unless
ordered by a court or advanced pursuant to Section 5 of this Article X) shall be
made by the Corporation only as authorized in the specific case upon a
determination that indemnification of the director, officer, employee or agent
is proper in the circumstances. Such determination shall be made (a) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (b) if such a quorum is
not obtainable, or, even if obtainable a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by the
stockholders.
5. Advances for Expenses.
----------------------
Expenses incurred by a director, officer, employee, or agent of the
Corporation in defending a civil or criminal action, suit or proceeding shall be
paid by the Corporation as they are incurred and in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of the director, officer, employee or agent to repay the amount if
it shall be ultimately determined by a court of competent jurisdiction that he
is not entitled to be indemnified by the Corporation as authorized in this
Article X.
6. Rights Not-Exclusive.
---------------------
The indemnification and advancement of expenses authorized in or
ordered by a court pursuant to the other Sections of this Article X shall not be
deemed exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any law, bylaw, agreement, vote of
stockholders or disinterested directors or otherwise, for either an action in
his official capacity or an action in another capacity while holding such
office, except that indemnification, unless ordered by a court pursuant to
Section 2 of this Article X or for advancement of expenses made pursuant to
Section 5 of this Article X, may not be made to or on behalf of any director or
officer if a final adjudication establishes that his acts or omissions involved
intentional misconduct, fraud or a knowing violation of the law and was material
to the cause of action.
19
<PAGE>
7. Insurance.
----------
The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise against any liability asserted against him
and liability and expenses incurred by him in any such capacity, or arising out
of his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article X.
8. Definition of Corporation.
--------------------------
For the purposes of this Article X, references to "the Corporation"
include, in addition to the resulting corporation, all constituent corporations
(including any constituent of a constituent) absorbed in consolidation or merger
which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees and agents so that any
person who is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, shall stand in the same position under
the provisions of this Article X with respect to the resulting or surviving
corporation as he would have with respect to such constituent corporation if its
separate existence had continued.
9. Other Definitions.
------------------
For purposes of this Article X, references to "other enterprises" shall
include employee benefit plans; references to "fines" shall include any excise
taxes assessed on a person with respect to an employee benefit plan; and
references to "serving at the request of the Corporation" shall include any
service as a director, officer, employee or agent of the Corporation which
imposes duties on, or involves services by, such director, officer, employee, or
agent with respect to an employee benefit plan, its participants, or
beneficiaries; and a person who acted in good faith and in a manner he
reasonably believed to be in the interest of the participants and beneficiaries
of an employee benefit plan shall be deemed to have acted in a manner "not
opposed to the best interests of the Corporation" as referred to in this Article
X.
10. Continuation of Rights.
-----------------------
The indemnification and advancement of expenses provided by, or granted
pursuant to this Article X shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such person. No amendment to or repeal of
this Article X shall apply to or have any effect on, the rights of any director,
officer, employee or agent under this Article X which rights come into existence
by virtue of acts or omissions of such director, officer, employee or agent
occurring prior to such amendment or repeal.
20
<PAGE>
ARTICLE XI
AMENDMENTS
----------
These Bylaws may be repealed, altered or amended by the affirmative
vote of the holders of a majority of the stock issued and outstanding and
entitled to vote at any meeting of stockholders or by resolution duly adopted by
the affirmative vote of not less than a majority of the Directors in office at
any annual or regular meeting of the Board of Directors or at any special
meeting of the Board of Directors if notice of the proposed repeal, alteration
or amendment be contained in the notice of such special meeting; provided,
however, that an affirmative vote of sixty-six and two-thirds percent (66 2/3%)
of the stock issued and outstanding and entitled to vote thereon is required to
repeal, alter or amend Section 14 of Article II, Section 11 of Article III or
Article X.
I, THE UNDERSIGNED, being the Secretary of BOWLIN Outdoor Advertising &
Travel Centers Incorporated, DO HEREBY CERTIFY the foregoing to be the Bylaws of
the Corporation, as adopted by the Board of Directors on the 28th day of August,
1996.
/s/ William J. McCabe
----------------------------
William J. McCabe
Secretary
21
Bowlin Contract #: ______________
OUTDOOR ADVERTISING Sales Rep: _____________
A division of Bowlin's Incorporated
[ ] 150 Louisiana NE o Albuquerque, NM 87108
Office (505)266-5985 o Fax: (505)266-7821
[ ] P.O. Box 1409 o Mesilla Park, NM 88047
3415 S. Harrelson St. o Las Cruces, NM 88005
Office: (505) 523-0222 o Fax: (505) 523-1013
- --------------------------------------------------------------------------------
Advertiser: ____________________________________________
Agency: ______________________________________________
Billing Address: _____________________________________
_____________________________________
_____________________________________
Contact Person:
Contract: _________________________ Phone #:___________
Payments: ________________________ Fax #: ____________
- --------------------------------------------------------------------------------
New [ ] Renewal [ ]
Account #: ______________________________
Effective Date: _________________________
Expiration Date: ________________________
Production Costs $ _________
Production costs are listed for valuation purposes only. These costs
are included in the monthly display cost noted below unless otherwise
specified.
Net Monthly Contract
Amount Due $__________
(From line 7 below)
- --------------------------------------------------------------------------------
Bowlin Outdoor Advertising (the Company), subject to the provisions and
statements noted on both sides of this contract form, will paint and install one
advertising display for ____________________(_____) months, beginning on the
effective date noted above.
<TABLE>
<CAPTION>
Location:
- ----------------------------------------------------------------------------------------------------------------------------------
Highway Sign Number Description Size Reflectorized Lighted Other
- ----------------------------------------------------------------------------------------------------------------------------------
<S><C>
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
<TABLE>
<CAPTION>
Summary of Costs
<S> <C> <C>
1. Monthly Display Cost (includes applicable state and/or local taxes) .......................................$____________
2. Agency Commission...........................................................................................$____________
3. Net Monthly Display cost (line 1 - line 2)..................................................................$____________
4 Reflectorization Charges
Sq ft. used @ $_______ per Sq. ft. = $ __________ = total cost $ ______________
[ ] One Time Payment of $____________
[ ] Monthly Payments............................................................................................$____________
Total Cost divided by number of months remaining on contract
5. Lighting Charges
[ ] Dusk to Midnight (standard).................................................................................$____________
[ ] Dusk to Dawn (additional charges required).................................
6. Other Charges (Specify):....................................................................................$____________
[ ] One Time Payment of $_____________
[ ] Monthly Payments............................................................................................$____________
Total Cost divided by number of months remaining on contract
7. Total Monthly Amount Due (includes applicable state and/or local taxes).....................................$____________
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Signed and Accepted: Signature(s) below indicate agreement with and acceptance
of all terms and conditions of this contract as detailed on both sides of this
document.
Advertiser:
------------------------------------------ -------------------------
Signature Date
------------------------------------------ -------------------------
Printed Fed. Tax ID or SSN
---------------------------------------------------------------------
Authority
Agency:
---------------------------------------------- -------------------------
Signature Date
-------------------------------------------- -------------------------
Printed Fed. Tax ID or SSN
BOWLIN OUTDOOR ADVERTISING:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This contract is not valid until accepted by an authorized
representative of the Company.
Date:________________________________
Advertising Display Contract FORM #A110a Revised 4/96
Advertising Display Contract Contract Number:______________
Form #A110a Sales Rep:____________________
Bowlin
Outdoor Advertising
A Division of Bowlin's Incorporated
[ ] 150 Louisiana Blvd. NE, Albuquerque, NM 87108
Office (505)266-5985 Fax: (505)266-7821
[ ] P.O. Box 1409 Mesilla Park, NM 88047
3415 S. Harrelson St. Las Cruces, NM 88005
Office: (505) 523-0222 Fax: (505) 523-1013
Advertiser:
---------------------------------------------------
Agency:
-------------------------------------------------------
Billing
Address:
------------------------------------------------------
------------------------------------------------------
Contact Person:
Phone
Contract: Number:
------------------------------------------ --------------------
Fax
Payments: Number:
-------------------------------------------- --------------------
New: [ ] Renewal: [ ]
Account #:_____________________
Effective Date:________________
Expiration Date:_______________
Production Costs $_____________
Production costs are listed for valuation
purposes only. These costs are included in
the monthly display cost noted below unless
specified.
Net Monthly Contract
Amount Due $____________
================================================================================
Bowlin Outdoor Advertising (the Company), subject to the provisions and
statements noted on both sides of this contract form, will post and maintain
advertising display(s) for ________( ) months, beginning on the effective date
noted above.
<TABLE>
<CAPTION>
POSTER PANELS
- -----------------------------------------------------------------------------------------------------------------------------------
Market Showing Size Number of Panels Rate per Month Number of Months TOTAL
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
YEAR JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC
- -----------------------------------------------------------------------------------------------------------------------------------
Posting Months
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
================================================================================
Signed and Accepted: Signature(s) below indicate agreement with and acceptance
of all terms and conditions of this contract as detailed on both sides of this
document.
Advertiser:
------------------------------------------ -------------------------
Signature Date
------------------------------------S.S.N.---------------------------
Printed
---------------------------------------------------------------------
Authority
Agency:
---------------------------------------------- -------------------------
Signature Date
--------------------------------------S.S.N.---------------------------
Printed
BOWLIN OUTDOOR ADVERTISING:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
This contract is not valid until accepted by an authorized
representative of the Company.
Date:________________________________
<PAGE>
STANDARD CONDITIONS
The terms "Company", "Advertiser", and "Agency", as used herein shall reference
the parties designated on the reverse side.
(1) EFFECTIVE DATE:
In the event posters arrive after posting date, the company must charge
for the full period of time beginning with the original posting date.
(2) EXPIRATION DATE:
a) This display contract shall remain in full force and effect at the
contracted rate until such time that the Company receives written notice of
intent to terminate display contract from Advertiser. Advertiser shall notify
the Company in writing not less than sixty (60) days prior to the expiration
date of this display contract of Advertiser's intent to terminate contract. Upon
receipt of notice to terminate, The Company shall recognize the termination date
of this display contract to be sixty (60) days from the Ist of the month
immediately following date of receipt of notice to terminate. If the notice to
terminate is received on the I st of the month, the expiration date shall be
sixty days from date of receipt.
b) The Company shall have the option to terminate this contract at the
end of any monthly period, after the end of the original term.
(3) ARTWORK
a) If there is no Agency discount allowed on this contract, The Company
will provide artwork as part of the production costs associated with this
contract. The artwork will be approved in advance of production by the
Advertiser.
b).All parties acknowledge that the Agency discount is allowed because
the Agency performs certain duties relevant to the proper execution of this
contract. A substantial portion of those duties include preparation of correct
and Advertiser approved artwork. If there is an Agency discount allowed as part
of this contract, the Agency will be responsible for providing The Company with
completed =d approved artwork. 'Me artwork must be submitted to The Company with
all details and colors specified and in the proper scale as required by The
Company.
c) Advertiser and Agency each individually warrant that they have
diligently verified the originality and authenticity of rights to all materials,
logos or ideas submitted for use pertinent to this contract. Advertiser and
Agency each individually also warrant that they have obtained specific
permission from the rightful owner, for the use of any materials, trademarks,
trade names or ideas submitted to the Company as artwork or for the Company's
use in generating artwork pertinent to this contract. Advertiser and Agency each
individually agree to indemnify and hold harmless the Company from any damages
or lawsuits that may result from the improper or unauthorized use of such
material, trademarks, trade names or ideas.
(4) REPRODUCTION:
The Company agrees to reasonably and professionally reproduce all
designs submitted, and to maintain all displays in good condition.
(5) LOSS OF LOCATION
If a location, which is specified in this contract is lost for any
reason, the parties agree that it may be replaced by a similar location of at
least equal advertising value with consent of the Advertiser. If, within 90 days
after loss of location, no replacement location has been agreed upon, this
contract becomes null and void without penalty to either party.
(6) LOSS OF SERVICE
Should loss of service, or delay in execution of this contract by the
Company result from Acts of God, or any other cause beyond the control of the
Company, (to include work stoppage, strike, etc.) Agency or Advertiser are not
entitled to cancel but rather the Advertiser shall be granted a prorated credit
as computed on a thirty (30) day basis.
(7) ILLUMINATED DISPLAYS:
Illumination is considered to be an enhancement to the advertising
display and therefore non operational lighting does not affect the amount due
for the advertising display portion of this contract.
(8) POSTING LEEWAY
A leeway of 5 working days before and after accepted posting date is
required to complete poster snowing. Paper should arrive at least ten days prior
to posting date.
(9) REPLACEMENT POSTERS
It is recommended that advertiser agency supply 10% additional posters
to be used, should replacements become necessary.
(10) PAYMENT:
The parties agree that the total contract price shall be the Total
Monthly Display Contract Price (as noted on the reverse side) multiplied by the
total number of months specified in the terms of agreement . The contract price
is to be paid in monthly installments within 10 days after each invoice date. In
the event of non-payment, the Company will notify the Advertiser of the
delinquent account status and the date that the Company intends to remove the
advertising display. If the delinquent status is not cleared by the date
specified, the display will be removed and the structure made available to other
Advertisers. The Advertiser will be in default on this contract and the
Advertiser and/or its Agency will be held jointly and severally liable for cost
of production of the display (as noted on the reverse side) and for all monthly
display charges unpaid prior to removal of said display. Advertiser and/or its
agency shall also be liable for all attomey's fees and other costs incurred by
the Company in pursuit of collection of debt. In case of litigation, the venue
shall be Bemalillo County, NM.
(11) AGENCY
a) The Agency, if any, warrants that it is duly authorized by the
Advertiser to execute this contract on the Advertiser's behalf and Agency agrees
to accept full and complete responsibility for any artwork supplied by it to The
Company pursuant to this contract.
b) All parties acknowledge that the Agency discount is allowed because
the Agency performs certain duties relevant to the proper execution of this
contract. Those duties include making certain that payments on the account are
made in a timely manner. Tne Agency discount will be disallowed if payments in
full are not received by the Company within thirty (30) days after date shown on
statement.
(12) ADVERTISER
Advertiser warrants that Agency is its dully authorized Agent and that,
if applicable, the individual signing for the Advertiser is dully authorized to
do so.
(13) INDEMNIFICATION
The Company will be responsible for any and all loss or damage
resulting to persons or property caused by the Company, its subsidiaries or
subcontractors, in the construction, existence, maintenance or removal of any
advertising displays or related structures. The Company does further agree to
protect and defend the Advertiser and/or Agency against all claims and demands
arising from the foregoing and agrees to hold each of them harmless from any
loss or damage resulting therefrom.
(14) COPY APPROVAL
The Company reserves the right to reject any copy, pictorial or
otherwise that The Company, in it's sole judgment, deems to be offensive or
inappropriate in any manner.
(15) INTEREST:
Interest will accrue at the rate of 1 1/2 % per month on all
outstanding balances in excess of 30 days past due.
(16) MISCELLANEOUS:
a) The Company is not bound by any stipulations, representation, or
agreements not printed or written in this contract.
b) This contract may only be modified or amended in writing and
acknowledged by all parties to the contract at the time of the amendment or
modification.
c) This contract is binding on the heirs, successors and assigns of the
parties involved, however the liability of the original Advertiser and Agency
shall not terminate at that time, but shall continue, even after transfer of
responsibility. until the completion of the contract's origina term.
CITGO Petroleum Corporation
CITGO
DISTRIBUTOR FRANCHISE AGREEMENT
Between CITGO Petroleum Corporation and BOWLIN'S INCORPORATED
----------------------------------------
NOTICE
As a Franchised Distributor, under this agreement you will be entitled to the
Protections of the Petroleum Marketing Practices Act, a federal law which was
enacted on June 19, 1978. Title I of this law is intended to protect you against
any arbitrary or discriminatory termination or non-renewal of your Franchise.
CITGO Petroleum Corporation, as a Franchisor, is required to provide you with a
summary of title I of the Petroleum Marketing Practices Act whenever
notification of termination or non-renewal of your franchise is given. However,
CITGO wishes to ensure that you are totally familiar with your rights in this
regard even prior to executing this Franchise Agreement. Accordingly, on page i
through iii herein we have produced the concise summary of the provisions of
Title I as prepared and published by the secretary of energy in the Federal
Register. Please review this summary carefully. You should resolve with your
lawyer or other appropriate parties any questions you might have, prior to
executing this franchise.
1
<PAGE>
A 3128-0l
OFFICE OF THE SECRETARY
SUMMARY OF TITLE I OF THE PETROLEUM
MARKETING PRACTICES ACT
AGENCY: Department of Energy.
ACTION: Notice
SUMMARY: This notice contains a summary of title I of the Petroleum Marketing
Practices Act, a new Federal law enacted on June 19. 1978. The law is intended
to protect franchised distributors and retailers of gasoline and diesel
motor-fuel against arbitrary or discriminatory termination or non-renewal of
franchises. The summary describes the reasons for which a franchise may be
terminated or not renewed under the new law, the responsibilities of
franchisors. and the remedies and relief available to franchisees. Franchisors
must give franchisees copies of their summary contained in this notice whenever
notification of termination or nonrenewal of a franchise is given.
FOR FURTHER INFORMATION CONTACT:
William C. Lane, Jr., Office of Competition. Department of Energy. 20
Massachusetts Avenue NW., Room 7123. Washington, D.C. 20845,202-376-9495.
Michael Paige or Judith H. Garfield, Office of General Counsel, Department
of Energy, 12th and Pennsylvania Avenue NW., Room 5134, Washington, D.C.
20461, 202-566-9565 or 202-566-2085.
SUPPLEMTARY INFORMATION: Title I of the Petroleum Marketing Practices Act. Pub-
L. 95-297 (the "Act"), enacted on June 19, 1978, provides for the protection of
franchised distributors and retailers of motor fuel by establishing minimum
Federal standards governing the termination of franchises and the nonrenewal of
franchise relationships by the franchisor or distributor of such fuel. Section
104(d)(1) of the Act provides that the Secretary of Energy shall prepare and
publish in the FEDERAL REGISTER. not later than 30 days after enactment of the
Act, a simple and concise summary of the provisions of title 1, including a
statement of the respective responsibilities of; and the remedies and relief
available to. franchisors and franchisees. under that title.
As required by section 104(d)(1) of the Act, the following is a summary
statement of the respective responsibilities of. and the remedies and relief
available to. franchisors and franchisees. Franchisors must give copies of this
summary statement to their franchisees when entering an agreement to terminate
the franchise or of to renew the franchise relationship, and when giving
notification of termination or nonrenewal. In addition to the summary of the
provisions of title 1, a more detailed description of the definition contained
in the Act and of the legal remedies available to franchisees is also included
in this notice, following the summary statement.
NOTICES
SUMMARY OF LEGALS RIGHTS OF MOTOR
FUEL FRANCHISES
This is a summary of the franchise protection provisions of the Federal
Petroleum Marketing Practices Act. This summary must be given to you. as a
person holding a franchise for the sale. consignment or distribution of gasoline
or diesel motor fuel. in connection with any termination or nonrenewal of your
franchise by your franchising company (referred to in this summary as your
supplier).
The franchise protection provisions of the Act apply to a variety of
franchise arrangements- The term "franchise" is broadly defined as a license to
use a motor fuel trademark which is owned or controlled by a refiner, and it
includes secondary arrangements such as leases of real property and motor fuel
supply agreements which have existed continuously since May 15, 1973 regardless
of a subsequent withdrawal of a trademark. Thus, if you have lost the use of a
trademark previously granted by your supplier but have continued to receive
motor fuel supplies through a continuation of a supply agreement with your
supplier, you are protected under the Act.
You should read this summary carefully, and refer to the act if necessary,
to determine whether a proposed termination or nonrenewal of your franchise is
lawful, and what legal remedies are available to you if you think the proposed
termination or failure to renew is not lawful. In addition. if you think your
supplier has failed to comply with the Act. you may wish to consult an attorney
in order to enforce your legal rights.
The Act is intended to protect you, whether you are a distributor or a
retailer, from arbitrary of discriminatory termination or nonrenewal of your
franchise agreement. To accomplish this, the Act first lists the reasons for
which termination or nonrenewal is permitted. Any notice of termination or
nonrenewal must state the precise reason, as listed in the Act, for which the
particular termination or nonrenewal is being made. These reasons are described
below under the headings "Reasons for Termination" and "Reasons for Nonrenewal."
You should note that the Act does not restrict the reasons which may be
given for the termination of a franchise agreement entered into before the June
19, 1978 effective date of the Act. However. any nonrenewal of such a terminated
franchise must be based on one of the reasons for nonrenewal summarized below.
The Act also requires your supplier to give you a written notice of
termination or intention not to renew the franchise within certain time periods.
These requirements are summarized below. under the heading "Notice Requirements
for Termination or Nonrenewal."
The Act allows trial and interim franchise agreements, which are described
below under the heading "Trial and Interim Franchises "below under the heading
"Trial and Interim Franchises."
The Act gives you certain legal rights if your supplier terminates or does
not renew your franchise in a way that is not permitted by the Act. These legal
rights are described below under the heading .. "Your Legal Rights."
This summary is intended as a simple and concise description of the general
nature of your rights under the Act. For a more detailed description of these
rights, You should read the text of the Petroleum Marketing Practices Act itself
(Pub. L. 95-297. 92 Stat. 322. 15 U.S.C. 2801).
1. REASONS FOR TERMINATION
The following is a list of the only reasons for which your franchise is
permitted to be terminated by the Act. One or more of these reasons must be
specified if your franchise was entered into on or after June 19, 1978 and is
being terminated. If your franchise was entered into before June 19, 1978. as
discussed above, there is no statutory restriction on the reasons for which it
may be terminated. If such a franchise is terminated, however, the Act required
the supplier to renew the franchise relationship unless one of the reasons
listed under this heading or one of the additional reasons for nonrenewal
described below under the heading "Reasons for Nonrenewal" exists.
If your supplier attempts to terminate a franchise which you entered into
on or after June 19. 1978 for a reason that is not listed under this heading.
you can take the legal action against your supplier that is described below
under the heading "Your Legal Rights."
Noncompliance with franchise agreement. Your supplier may terminate your
franchise if you do not comply with a reasonable and important requirement of
the franchise relationship. In order to use this reason, your supplier must have
learned of this non-compliance recently. The Act limits the time period within
which your supplier must have learned of your non-compliance to various periods.
the longest of which is 120 days. before you receive notification of the
termination.
Lack of good faith efforts. Your supplier may terminate your franchise if
you have not made good faith efforts to carry out the requirements of the
franchise, provided you are not first notified in writing that you are not
meeting a requirement of the franchise and you are given an opportunity to make
a -good faith effort to carry out the requirement. This reason can be used by
your supplier only if you fail to make good faith efforts to carry out the
requirements of the franchise for a period of 180 days before you, receive the
notice of termination.
Mutual agreement to terminate the franchise. A franchise can be terminated
by an agreement in writing between you and your supplier if the agreement is
entered into not more than 180 days before the effective date of the termination
and you receive a copy of this
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agreement, toghether with this Summary statement of your rights under the Act.
You may cancel the agreement to terminate within 7 days after you receive a copy
of the agreement. by mailing (by certified mail) a written statement to this
effect to your supplier.
Withdrawal from the market area. Under certain conditions. the Act permits
your supplier to terminate your franchise if your supplier is withdrawing from
marketing activities in the entire geographic area in which you operate. You
should read the Act for a more detailed description of the conditions under
which market withdrawal terminations are permitted.
Other events permitting a termination. If your supplier learns within the
time period specified in the Act (which in no case is more than 120 days prior
to the termination notice) that one of the following events has occurred, your
supplier may terminate your franchise agreement:
(1) Fraud or criminal misconduct by you that relates to the operation of
your marketing premises.
(2) You declare bankruptcy or a court determines that you are insolvent.
(3) You have a severe physical or mental disability lasting at least 3
months which makes you unable to provide forthe continued proper operation of
the marketing premises.
(4) Expiration of your supplier's underlying lease to the leased marketing
premises, if you were given written notice before the beginning of the term in
the franchise of the duration of the underlying lease and that the underlying
lease might expire and not be renewed during the term of the franchise.
(5) Condemnation or other taking by the government, in whole or in part of
the marketing premises pursuant to the power of eminent domain. If the
termination is based on a condemnation or other taking. your supplier must give
you a fair share of any compensation which he receives for any loss of business
opportunity or good will,
(6) Loss of your supplier's right to grant the use of the trademark that is
the subject of the franchise. unless the loss was because of bad faith actions
by your supplier relating to trademark abuse violation of Federal or State law,
or other fault or negligence.
(7) Destruction (other than by your supplier) of all or a substantial part
of your marketing premises. If their termination is based on the destruction of
the marketing premises and if the premises are rebuilt or replaced by your
supplier and operated under a franchise. your supplier must give you a right of
first refusal to this new franchise.
(8) Your failure to make payments to your supplier of any sums to which
your supplier is legally entitled.
(9) Your failure to operate the marketing premises for 7 consecutive days,
or any shorter period of time which taking into account facts and circumstances,
amounts to an unreasonable period of time not to operate.
(10) Your intentional adulteration. mislabeling or misbranding of motor
fuels or other trademark violations.
(11) Your failure to Comply with Federal. State. or local laws or
regulations of which you have knowledge and that relate to the operation of the
marketing premises.
(12) Your conviction of any felony involving moral turpitude.
(13) Any event that affects the franchise relationship and as a result of
which termination is reasonable.
II. REASONS FOR NONRENEWAL
If your supplier gives notice that he does not intend to renew any
franchise agreement. the act requires that the reason for nonrenewal must be
either one of the reasons for termination listed immediately above. or one of
the reasons for nonrenewal listed below.
Failure to agree on changes or additions to franchise. If you and your
supplier fail to agree to changes in the franchise that your supplier in good
faith has determined are required. and your supplier's insistence on the changes
is not for the purpose of preventing renewal of the franchise. your supplier may
decline to renew the franchise.
Customer complaints. If your supplier has received numerous customer
complaints relating to the condition of your marketing premises or to the
conduct of any of your employees, and you have failed to take prompt corrective
action after having been notified of these complaints, your supplier may decline
to renew the franchise.
Unsafe or unhealthful operations. If you have failed repeatedly to operate
your marketing premises in a clean. safe and healthful manner after repeated
notices from your supplier. your supplier may decline to renew the franchise.
Operation of franchise is uneconomical. Under certain conditions specified
in the act. your supplier may decline to renew your franchise if he has
determined that renewal of the franchise is likely to be uneconomical. Your
supplier may also decline to renew your franchise if he has decided to convert
your marketing premises to a use other than for the sale of motor fuel. to sell
the premises. or to materially alter, add to, or replace the premises.
III. NOTICE REQUIREMENTS FOR
TERMINATION OR NONRENEWAL
The following is a description of the requirements for the notice which
your supplier must give you before he may terminate your franchise or decline to
renew your franchise relationship. These notice requirements apply to all
franchise terminations, including franchises entered into before June 19. 1978
and trial and interim franchises. as well as to all nonrenewals of franchise
relationships.
How much notice is required. In most cases. your supplier must give you
notice of termination or nonrenewal at least 90 days before the termination or
nonrenewal takes effect.
In circumstances where it would not be reasonable for your supplier to give
you 90 days notice, he must give you notice as soon as he can do so. In
addition. if the franchise involves leased marketing premises. your supplier may
not establish a new franchise relationship involving the same premises until 30
days after notice was given to you or the date the termination or nonrenewal
takes effect. whichever is later. If the franchise agreement permits. your
supplier may repossess the premises and. in reasonable circumstances. operate
them through his employees or agents.
If the termination or nonrenewal is based upon a determination to withdraw
from the marketing of motor fuel in the area. your supplier must give You notice
at least 180 days before the termination or nonrenewal takes effect.
Manner and contents of notice. To be valid. the notice must be in writing
and must be sent by certified mail or personally delivered to you. It must
contain:
(1) A statement of your supplier's intention to terminate the franchise or
not to renew the franchise relationship. together with his reasons for this
action:
(2) The date the termination or nonrenewal takes effect: and
(3) A copy of this summary.
IV. TRIAL FRANCHISES AND INTERIM FRANCHISES
The following is a description of the special requirements that apply to
trial and interim franchises.
Trial franchises. A trial franchise is a franchise, entered into on or
after June 19. 1978. in which the franchisee has not previously been a party to
a franchise with the franchisor and which has an initial term of 1 year or less.
A trial franchise must be in writing and must make certain disclosures,
including that it is a trial franchise. and that the franchisor has the right
not to renew the franchise relationship at the end of the initial term by giving
the franchisee proper notice.
The unexpired portion of a transferred franchise (other than a trial
franchise. as described above) does not qualify as described above) does not
qualify as a trial franchise.
In exercising his right not to renew a trial franchise at the end of its
initial term. your supplier must comply with the notice requirements described
above under the heading "Notice Requirements for Termination or Nonrenewal."
Interim franchises. An interim franchise is a franchise, entered into on or
after June 19, 1978, the duration of which, when combined with the terms of all
prior interim franchises between the franchisor and the franchisee. does not
exceed 3 years. and which begins immediately after the expiration of a prior
franchise involving the same marketing premises which was not renewed. based
upon a lawful determination by the franchisor to withdraw from marketing
activities in the geographic area in which the franchisee operates.
An interim franchise must be in writing and must make certain disclosures.
including that it is an interim franchise and that the franchisor has the right
not to
FEDERAL REGISTER. VOL. 43, NO. 169 - WEDNESDAY, AUGUST 30,1978
ii.
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renew the franchise at the end of the term based upon a lawful determination to
withdraw from marketing activities in the geographic area in which the
franchisee operates.
In exercising his right not to renew a franchise relationship under an
interim franchise at the end of its term, your supplier must comply with the
notice requirements described above under the heading "Notice Requirements for
Termination or Nonrenewal."
V. YOUR LEGAL RIGHTS
Under the enforcement provision of the Act, you have the right to sue your
supplier if he fails to comply with the requirements of the Act. The courts are
authorized to grant whatever equitable relief is necessary to remedy the effects
of your supplier's failure to comply with the requirements of the Act, including
or judgment, mandatory or prohibitive injunctive relief. and interim equitable
relief. Actual damages, exemplatry (punitive) damages under certain
circumstances and reasonable attorney and expert witness fees are also
authorized. For a more detailed description of these legal remedies you should
read the text of the Act.
FURTHER DISCUSSION OF TITLE I DEFINITIONS AND LEGAL REMEDIES
1. DEFINITIONS
Section 101 of the Petroleum Marketing Practices Act sets forth definitions
of the key terms used throughout the franchise protection provisions of the Act.
The definitions from the Act which are listed below are of those terms which are
most essential for purposes of the foregoing summary statement. (You should
consult section 101 of the Act for addition of definitions not included here.)
Franchise. A franchise is any contract between a refiner and a distributor,
between a refiner and a retailer, between a distributor and another distributor,
between a distributor and a retailer. under which a refiner or distributor (as
the case may be) authorizes or permits a retailer or distributor to use, in
connection with the sale, consignment, or distribution of motor fuel, a
trademark which is owned or controlled by such refiner or by a refiner which
supplies motor fuel to the distributor which authorizes or permits such use.
The term "franchise" includes any contract under which a retailer or
distributor (as the case may be) is authorized or permitted to occupy leased
marketing premises, which premises are to be employed in connection with the
sale. consignment, or distribution of motor fuel under a trademark which is
owned or controlled by such refiner or by a refiner which supplies motor fuel to
the distributor which authorizes or permits such occupancy. The term also
includes any contract pertaining to the supply of motor fuel which is to be
sold. consigned or distributed under a trademark owned or controlled by a
refiner. or under a contract which has existed continuously since May 15. 1973.
and pursuant to which. on May 15. 1973. motor fuel was sold. consigned or
distributed under a trademark owned or controlled on such date by a refiner. The
unexpired portion of a transferred franchise is also included in the definition
of the term.
Franchise relationship. The term "franchise relationship" refers to the
respective motor fuel marketing or distribution obligations and responsibilities
of a franchisor and a franchisee which result from the marketing of motor fuel
under a franchise.
Franchisee. A franchisee is a retailer or distributor who is authorized or
permitted under a franchise to use a trademark in connection with the sale.
consignment. or distribution of motor fuel.
Franchisor. A franchisor is a refiner or distributor who authorizes or
permits. under a franchise. a retailer or distributor to use a trademark in
connection with the sat . e. consignment. or distribution of motor fuel.
Marketing premises. Marketing premises are the premises which, under a
franchise. are to be employed by the franchisee in connection with the sale.
consignment. or distribution of motor fuel.
Leased Marketing premises. Leased marketing premises are marketing premises
owned, leased, or in any way controlled by a franchisor and which the franchisee
is authorized or permitted. under the franchise. to employ in connection with
the sale. consignment. or distribution of motor fuel.
Fail to renew and nonrenewal. The terms "fail to renew" and "nonrenewal"
refer to a failure to reinstate, continue, or extend a franchise relationship
(1) at the conclusion of the term, or on the expiration date, stated in the
relevant franchise, (2) at any time, in the case of the relevant which does not
state a term of duration or an expiration date, or (3) following a termination
(on or after June 19, 1978) of the relevant franchise which was entered into
prior to June 19, 1978 and has not been renewed after such date.
II. LEGAL REMEDIES AVAILABLE TO
FRANCHISEE
The following is a more detailed description of the remedies available to
the franchisee if a franchise is terminated or not renewed in a way that fails
to comply with the Act.
Franchisee's right to sue. A franchisee may bring a civil action in United
States District Court against a franchisor who does not comply with the
requirements of the Act. The action must be brought within one year after the
date of termination or nonrenewal or the date the franchisor fails to comply
with the requirements of the law. whichever is later.
Equitable relief. Courts are authorized to grant whatever equitable relief
is necessary to remedy the effects of a violation of the law's requirements.
Courts are directed to grant a preliminary injunction if the franchisee shows
that there are sufficiently serious questions, going to the merits of the case,
to make them a fair ground for litigation, and if, on balance. the hardship
which the, franchisee would suffer if the preliminary injunction is not granted
will be greater than the hardship which the franchisor would suffer if such
relief is granted.
Courts are not required to order continuation or renewal of the franchise
relationship if the action was brought after the expiration of the period during
which the franchisee was on notice concerning the franchisor's intention to
terminate or not renew the franchise agreement.
Burden of proof. In an action under the Act. the franchisee has the burden
of proving that the franchise was terminated or not renewed. The franchisor has
the burden of proving, as an affirmative defense, that the termination or
nonrenewal was permitted under the Act and, if applicable, that the franchisor
complied with certain other requirements relating to terminations and
nonrenewals based on condemnation or destruction of the marketing premises.
Damages. A franchise who prevails in an action under the Act is entitled to
actual damages and reasonable attorney and expert witness fees. If the action
was based upon conduct of the franchisor which was in willful disregard of the
law's requirements or the franchisee's rights under the law, exemplary
(Punitive) damages may be awarded where appropriate. The court, and not the
jury. will decide whether to award exemplary damages and, if so, in what amount.
On the other hand, if the court finds that the franchisee's action is
frivolous, it may order the franchisee to pay reasonable attorney and expert
witness fees.
Franchisor's defense to permanent injunctive relief. Courts may not order a
continuation or renewal of a franchise relationship if the franchisor shows that
the basis of the nonrenewal of the franchise relationship was a determination
made in good faith and in the normal course of business:
(1) To convert the leased marketing premises to a use other than the sale
or distribution of motor fuel:
(2) To materially alter. add to. or replace such premises:
(3) To sell such premises:
(4) To withdraw from marketing activities in the geographic area in which
such premises are located: or
(5) That renewal of the franchise relationship is likely to be uneconomical
to the franchisor despite any reasonable changes or additions to the franchise
provisions which may be acceptable to the franchisee.
In making this defense, the franchisor also must show that he has complied
with the notice requirements of the Act.
This defense to to permanent injunctive relief, however, does not affect
the franchisee's right to recover actual damages and reasonable attorney and
expert witness fees if the nonrenewal is otherwise prohibited under.
Issued in Washington. D.C. on August 23, 1978.
JOHN F. O'LEARY.
Deputy Secretary.
(FR Doc 78-24419 Filed 8028078. 9:15 am)
FEDERAL REGISTER. VOL 43, NO. 169 - WEDNESDAY, AUGUST 30,1978
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DISTRIBUTOR FRANCHISE AGREEMENT
It is agreed this 19th day of July, 1995 between CITGO Petroleum
Corporation, a Delaware corporation, having a place of business at One Warren
Place, Box 3758, Tulsa, Oklahoma, 74102, hereinafter called "CITGO,"
and BOWLIN'S INCORPORATED
--------------------------------------
--------------------------------------
a New Mexico
--------------------------------------
corporation, having a principal
office and place of business at 150 LOUISIANA BLVD N.E
------------------------------------
ALBUQUERQUE, NM 87108
--------------------------------------
hereinafter called "FRANCHISEE."
WITNESSETH:
WHEREAS, CITGO and Franchisee intend by this Agreement to create a
"franchise relationship" within the meaning of the Petroleum Marketing Practices
Act; the parties expressly do not intend by this Agreement to create a
"franchise" within the meaning of any state law relating to franchises; and
WHEREAS, CITGO and Franchisee desire to provide for Franchisee's purchase
from CITGO of certain petroleum products for resale by Franchisee under CITGO's
trademark to consumers and retailers in a manner that will serve the interest of
the consuming public and be of benefit to CITGO and Franchisee;
NOW, THEREFORE, CITGO and Franchisee agree as follows:
1. TERM. This Agreement shall be effective for the term of three (3) years,
beginning 10/1/95 and expiring on 9/30/98. Unless validly terminated or non
renewed as provided for in the Petroleum Marketing Practices Act, this Agreement
shall automatically renew for successive three (3) year periods.
2. QUANTITIES. Franchisee shall purchase and accept hereunder quantities of
products as set forth below during the respective monthly periods and CITGO
shall sell and deliver the specified quantities of products during the
respective monthly periods. Franchisee hereby acknowledges and agrees that the
purchase and ratable lifting of the monthly quantities of product specified
herein by Franchisee are reasonable, important and of material significance to
the franchise relationship. Franchisee understands and agrees that any failure
by Franchisee to purchase and accept a minimum of ninety percent (90%) of the
monthly quantity of gasoline or diesel fuel listed below during any month on a
ratable basis shall be a violation of this Agreement. Franchisee shall have the
right to purchase up to one hundred and ten percent (110%) of the monthly
quantity of gasoline and/or diesel fuel as set forth below. However, CITGO shall
have no obligation at any time to provide more than one hundred and ten percent
(1 10%) of such volumes during any month. The monthly quantities of product set
forth below are based on the sales of motor fuels projected by the Franchisee at
locations that CITGO has approved for branding with the CITGO trade name and
trademark. In the event that CITGO agrees to brand additional locations, the
monthly quantities of products set forth below shall automatically be increased
by the projected sales of motor fuels at the newly branded locations. Likewise,
if any location is debranded, the monthly quantities of product set forth below
shall automatically be decreased by the projected sales at such formerly branded
location. These automatic increases/decreases shall be effective beginning with
the month in which the installation, or removal and return, of the CITGO sign
and equipment is completed, and shall be confirmed by an Amendment to this
Agreement. Franchisee and CITGO agree that they will review the addition or
deletion of branded outlets at least on an annual basis. Franchisee agrees that
the monthly quantity of gasoline set forth below shall be purchased and be
lifted on a ratable basis during the month in the following ratio:
Unleaded Regular 075 % Mid-grade Unleaded 010 %
----------- -------------
Premium Unleaded 015 % %
---------- ------------------ -------------
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Franchisee shall have the right to request a variation of the ratio of gasoline
grades set forth above by making a written request to CITGO. Timely requests to
modify the gasoline grade ratio shall be honored by CITGO to the best of its
ability.
GASOLINE
January 150,000
February 150,000
March 175,000
April 200,000
May 275,000
June 275,000
July 50,000
August 50,000
September 75,000
October 75,000
November 100,000
December 100,000
-----------
TOTAL 1,675,000
Quantities shall be determined at time and place of loading. All
measurements with regard to deliveries into marine vessel, pipeline or tank car
shall be corrected to 60" F. in accordance with prevailing ASTM procedures. With
respect to all other deliveries under this Agreement, Franchisee elects to have
quantities determined by liquid measure Gross Gallons/Temperature Corrected
(delete inappropriate method) method. In any jurisdiction where applicable law
dictates the method of measurement, such method shall be used.
3. DELIVERY OF PRODUCTS. Products will be made available at terminals or other
locations selected by CITGO or, at CITGO's election, may be delivered to
destination by transportation selected by CITGO. Franchisee shall strictly
comply with all applicable rules and regulations of terminals and facilities at
which Franchisee receives motor fuel from CITGO. Except as otherwise provided
herein, deliveries shall be made in such quantities and at such times as may be
reasonably directed by Franchisee, subject to CITGO's right to adequate notice
in advance of desired delivery date. Franchisee shall ensure that all trucks,
tankers and lines are clean and ready to receive CITGO's motor fuel, so that
said fuel is not mixed, blended or adulterated with any other substance or
product. CITGO may refuse to make delivery into any vehicle which, in the sole
judgment of CITGO, is unsafe or inadequate. Franchisee agrees to provide such
proof of insurance as required by CITGO covering Franchisee's liability for any
negligent or willful acts it commits in connection with the loading,
transporting and delivery of products. Title and risk of loss on all products
covered by this Agreement shall pass to Franchisee at the time and place of
delivery. Time and place of delivery shall be when and at the point that
products pass connections between CITGO's truck rack or pipeline flange and
Franchisee or its agent's receiving connections, transport trucks, tank cars, or
vessels.
4. PRICES. Franchisee shall pay CITGO's distributor prices in effect at time and
place of delivery. Such prices will be established by CITGO on an F.O.B.
terminal basis, or other point of sale basis, including at CITGO's election, on
a delivered basis. Franchisee shall also pay CITGO amounts equivalent to any
tax, duty or impost now or hereafter imposed by the United States and/or any
state and/or municipality, and/or any other governmental authority.
5. TERMS OF PAYMENT. Franchisee agrees to pay CITGO in accordance with such
terms as CITGO's Credit Department in its sole discretion may from time to time
prescribe in writing. These terms of payment are set forth on all CITGO
invoices. At the present time, CITGO's credit terms are one percent (1%)
Electronic Funds Transfer (EFT) twelve (12) days. The failure by Franchisee to
pay any invoice within the terms then prescribed by CITGO's Credit Department
may result in the restriction of credit, the denial of access to the petroleum
terminals from which Franchisee is authorized to obtain its supply of petroleum
products, and shall constitute grounds for termination and/or non-renewal of
this Agreement. Franchisee agrees to provide CITGO's Credit Department with a
current, audited or certified financial statement within ninety (90) days after
the end of each fiscal year, and such other business related information as may
be requested by CITGO's Credit Department from time to time.
6. BRANDS AND TRADE NAMES. Subject to the following, CITGO hereby grants to
Franchisee, for the term of this Agreement, the right to use CITGO's applicable
brand names, trademarks and other forms of CITGO's identification, in the manner
established by CITGO from time to time, in connection with the resale by
Franchisee of products acquired under CITGO's brand names.
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(a) CITGO reserves the right to control fully the quality and branding of
products which may, from time to time, be sold and/or distributed under CITGO's
brands and trade names, including the right to terminate or add to such
products, or to change the name or names of any products. Franchisee shall sell
all branded products delivered hereunder under such brand names, trademarks and
trade names of CITGO as may be in use at the time of sale thereof. Franchisee
shall not change or alter by any means whatsoever the nature, quality or
appearance of any of the products purchased hereunder. However, if Franchisee
elects to sell product(s) not purchased or acquired under this Agreement,
Franchisee shall not allow nor permit the use of CITGO's brand names,
trademarks, trade dress, and all other forms of CITGO identification, in
connection with the resale of such product(s). CITGO's "brand names and
trademarks," as used herein, include CITGO's logos, brand identification,
product and service advertising, credit cards, product names and service marks
CITGO's "trade dress" refers to the manner and style of advertising material,
including color graphics and art work on product labels, point of sale material,
buildings, signs, pumps and other equipment. Any other product(s) shall be
clearly identified and labeled in such language. and print at least comparable
in size to CITGO's brand names, trademarks, trade dress, and other forms of
CITGO identification, used on identical or similar product(s) to make it
unmistakably clear that CITGO brand product(s) are not sold and to preclude any
likelihood of confusion, mistake or deception of the public. As an example, but
not by way of limitation, if a Franchisee sells from a product dispenser a fuel
which was not purchased or acquired under this Agreement, the Franchisee shall
completely obliterate the CITGO brand names, trademarks, trade dress, and all
other forms of CITGO identification with the following designation in print at
least comparable in size to the largest CITGO identification which is being used
on any similar product dispenser: "NO BRAND, THIS IS NOT A CITGO PRODUCT."
Franchisee agrees that if a customer of the Franchisee requests a CITGO
product(s) and such product(s) is not available, the customer of the Franchisee
will be orally advised by the Franchisee that such CITGO product(s) is not
available. Franchisee hereby agrees to defend, indemnify and hold CITGO harmless
from any and all claims, damages, actions or fines (including costs and
attorneys' fees actually incurred) arising out of Franchisee's purchase, storage
or sale of non-CITGO products.
(b) Franchisee recognizes that the identification, trademark and brand
names of CITGO are the property of CITGO and that CITGO's requirements as herein
stated relating to the use of such identification and distributor's advertising
(to include motor vehicles and dispensing equipment) are reasonable and of
material significance to the franchise relationship. Accordingly, it is further
agreed that a failure by the Franchisee to comply with the terms and provisions
of this Section 6 shall constitute grounds for termination and/or non-renewal of
this Agreement.
(c) All signs, poles and identification items furnished or leased to
Franchisee by CITGO, for display at premises through which Franchisee supplies
products for resale, shall be erected, installed and maintained in accordance
with CITGO's specifications, shall remain the property of CITGO and shall be
detached by the Franchisee, or by CITGO (at Franchisee's expense), at CITGO's
option, from the premises and be safely stored and made available for
repossession by CITGO upon CITGO's request. Franchisee agrees to obtain written
acknowledgment on forms satisfactory to CITGO, from the owner and/or occupant at
each of said premises, of CITGO's ownership of said signs, poles and
identification items and of the right of Franchisee or CITGO or their agents to
remove same from the premises at any time. Franchisee understands and agrees
that CITGO identification items will only be provided for those premises that
fulfill CITGO's standards and requirements. Therefore, Franchisee shall not make
available or erect any such CITGO identification items at any location that has
not been approved in writing by CITGO nor shall Franchisee relocate any CITGO
identification items without CITGO's prior written consent. Franchisee hereby
agrees to install all said signs, poles and identification items in accordance
with CITGO's specifications and to maintain all said equipment in good repair.
Franchisee shall bear all responsibility for costs involved in such maintenance
and repair as well as removal. Franchisee agrees to purchase insurance
sufficient to cover the repair and/or replacement value of all sa7id signs,
poles and identification hems. CITGO retains title and all ownership rights in
all such signs, poles and identification items. Franchisee agrees that all such
signs, poles and identification items will remain at the designated CITGO
branded location until such time as CITGO grants its permission in writing to
relocate same. Franchisee hereby grants to CITGO the right to enter upon
Franchisee's property and each CITGO branded location for the purpose of
installing, repairing, maintaining, or removing all signs, poles and
identification items at any time during reasonable business hours. Franchisee
further agrees to indemnify and hold CITGO harmless from any and all damages
and/or claims for damages arising out of the installation, use, repair,
maintenance, or removal of all signs, poles and identification items furnished
or leased to Franchisee by CITGO.
(d) In the event that Franchisee terminates this Agreement, or breaches
this Agreement which breach results in termination, Franchisee shall reimburse
CITGO for its costs and expenses, including costs for material and installation
incurred for branding Franchisee's or its customers' service stations and
convenience stores (the "Branding Costs"). The amount of Branding Costs to be
reimbursed shall be equal to the amount of Branding Costs incurred for a
station/store multiplied by a fraction, the numerator being 36 minus the number
of months that the station/store was branded CITGO subsequent to the Completion
Date and the denominator being 36. For purposes herein, the Completion Date
shall mean the date that the station/store was approved by CITGO as a CITGO
branded outlet.
7. MINIMUM STANDARDS. Franchisee shall operate or cause to operate retail
facilities including all buildings, equipment, restrooms, and driveways which
are owned, operated, supplied, leased, licensed or franchised by Franchisee in a
clean, neat, safe, lawful and healthful manner, and not in violation of CITGO's
rules and image standards. CITGO shall have the right to debrand or require
Franchisee to debrand any retail facility failing to meet the provisions of this
Section 7.
8. ALLOCATION. If CITGO, because of a shortage of crude oil, raw materials,
products, or refining capacity, either of its own, or of its other regular
sources of supply, or in the industry generally, or because of governmental
regulations, or for any reason, deems that it may be unable to meet all of its
supply requirements, CITGO may allocate its products equitably among its various
customers pursuant to a plan, method or formula as CITGO believes fair and
reasonable. Franchisee agrees to be bound by any such allocation. During the
period of such allocation, the provisions of Paragraph 2 relating to volume
requirements shall not be effective, and the quantity deliverable under this
Agreement shall then be such quantity as CITGO determines it can equitably
allocate to Franchisee. Upon cessation of any such period of allocation neither
CITGO nor Buyer shall be obligated to make up any quantities omitted pursuant to
the provisions herein.
9. CLAIMS. Any claim for defect or variance in quality of product furnished
hereunder shall be made in writing directed to CITGO as herein provided within
five (5) days after discovery of the defect or variance. CITGO shall be
furnished samples adequate to test the products claimed to be defective and
shall be afforded the opportunity to take its own samples. Any and all claims
not made within the time and in the manner herein provided shall be deemed
waived and released by the Franchisee.
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10. CREDIT CARDS. During the term of this franchise, Franchisee shall be
entitled to grant credit to holders of credit cards which may be issued by CITGO
and/or issued by other companies listed in CITGO's then current credit card
regulations, a copy of which has been provided to Franchisee. It is specifically
understood that the granting of credit shall be pursuant to the terms and
conditions set forth in such credit card regulations including that such credit
extension shall be only in conjunction, with the sale of CITGO products and that
CITGO shall have the right in its sole discretion to amend or terminate such
regulations and discontinue it's credit card program at any time. Franchisee
agrees that all credit card invoices which it may transmit and assign to CITGO
shall be in conformity with CITGO's credit card regulations and that CITGO may
reject or charge back any credit card invoices not conforming to said
instructions. Franchisee further agrees that upon such rejection or charge back,
the value of the credit card invoices which were rejected or charged back shall
become immediately due and owing from Franchisee to CITGO and may be deducted
from subsequent checks for payment of credit card invoices. All credit card
invoices shall be forwarded by registered mail or other means authorized by
CITGO to such place(s), and at such, time intervals, as CITGO may designate,
from time to time. Franchisee expressly agrees that CITGO shall have the right
but not the obligation to apply the proceeds of credit card invoices or any
other credits which may be owing to Franchisee toward the payment of any
indebtedness owed by Franchisee to CITGO. Franchisee grants to CITGO a security
interest in all credit card invoices and proceeds from such credit card invoices
to secure the payment of product purchases from CITGO, and agrees to execute
documents reasonably necessary to perfect such security interest.
11. FORCE MAJEURE. In the event that either party hereto is hindered, delayed or
prevented by "force majeure" in the performance of this Agreement, the
obligation of the party so affected shall be suspended and proportionally abated
during the continuance of the force majeure condition and the party so affected
shall not be liable in damages or otherwise for its failure to perform. The term
"force majeure" as used herein shall mean any cause whatsoever beyond the
control of either party hereto, including, but not limited to (a) act of God,
flood, fire, explosion, war, riot, strike and other labor disturbance; (b)
failure in, or inability to obtain on reasonable terms, raw materials, finished
products, transportation facilities, storage facilities and/or manufacturing
facilities; (c) diminution, nonexistence or redirection of supplies as a result
of compliance by CITGO, voluntary or otherwise, with any request, order,
requisition or necessity of the government or any governmental officer, agent or
representative purporting to act under authority, or with any governmental or
industry rationing, allocation or supply program; and (d) CITGO's inability to
meet the demand for its products at CITGO's normal and usual source points for
supplying Franchisee, regardless of whether CITGO may have been forced to divert
certain supplies from such source points in order to alleviate shortages at
other distribution points.
If by reason of any force majeure condition CITGO shall be unable to supply
the requirements of all of its customers of any product covered by this
Agreement, CITGO's obligation while such condition exists shall, at its option,
be reduced to the extent necessary in its sole judgment and discretion to
apportion fairly and reasonably among CITGO's customers the amount of product
which it is able to supply. Franchisee shall not hold CITGO responsible in any
manner for any losses or damages which Franchisee may claim as a result of any
such apportionment. CITGO shall not be required to make up any deficiency in any
product not delivered as a result of any such apportionment. In no event shall
any force majeure condition affect Franchisee's obligation to pay for product
when due.
12. TERMINATION AND NON-RENEWAL CITGO's rights to terminate or elect not to
renew this franchise relationship are as specified in Title I of the Petroleum
Marketing Practices Act as same may be amended from time to time.
13. HANDLING OF PRODUCTS. (a) Franchisee acknowledges that the petroleum
products being sold under this franchise, by their nature, require special
precautions in handling and that Franchisee, its employees and agents are fully
informed as to governmental regulations and approved procedures relating
thereto. Franchisee is solely responsible for compliance with all laws, rules,
regulations and orders relative to receiving, transporting, storing, pricing,
selling and distributing products covered hereunder. Franchisee is also solely
responsible for the proper disposal of waste materials generated at any of the
Franchisee's facilities. Franchisee shall also inject into the gasoline such
additives and in such amounts as requested by CITGO.
(b) Franchisee agrees and understands that the regulations of the
Environmental Protection Agency require that where motor gasoline is marketed as
"unleaded gasoline" such gasoline will not contain more than 0.05 grams of lead
per gallon at the retail level and that such regulations may lead to imposition
of substantial penalties whenever violations occur. CITGO hereby agrees that it
will utilize all necessary and appropriate testing procedures to ensure that the
lead concentration in "unleaded gasoline" CITGO sells to Franchisee does not
exceed legally acceptable limits. Franchisee agrees that insofar as ft sells
unleaded gasoline under CITGO's brand name or trademark, Franchisee will
regularly and frequently test its transportation means and all storage tanks
from which such product is dispensed so as to ensure that the lead content of
such gasoline at no time exceeds the legal limits. Franchisee further covenants
that insofar as its aforementioned tests should, at any time reflect that the
lead content of such gasoline exceeds 0.04 grams per gallon, it will immediately
notify CITGO and take such further action with respect to said gasoline as CITGO
may request. Franchisee further agrees to comply with all applicable posting and
labeling laws and regulations, including but not limited to those pertaining to
octane ratings, lead and oxygenates.
(c) Franchisee further agrees to comply or to require compliance with all
laws, rules and regulations, whether federal, state or local, pertaining to
underground storage tanks and lines which hold petroleum products sold t6
Franchisee pursuant to this Agreement including but not limited to those of
financial responsibility and/or pollution insurance requirements.
(d) Franchisee further agrees to indemnify and hold CITGO harmless from any
and all damages and/or claims for damages arising out of any violation of this
Section 13.
14. INDEMNITY.
(a) Franchisee hereby releases and agrees to indemnify and hold CITGO, its
agents, servants, employees, successors and assigns, harmless from and against
any and all claims, suits, losses, obligations, liabilities, injuries, and
damages, including attorneys' fees and costs of litigation, for death, personal
injury, property damage or other claim arising out of any failure by Franchisee
to perform, fulfill or observe any obligation or liability of Franchisee set
forth herein or any negligent act or omission by Franchisee or any cause or
condition of any kind directly or indirectly arising in connection with the use,
occupancy, maintenance, upkeep, repair, replacement or operation of any place of
business, service station or marketing premises (including but not limited to
adjacent sidewalks, drives, curbs, signs, poles and all other fixtures and
equipment located thereon) which place of business, service station or marketing
premise is or was either directly or indirectly owned, leased, operated,
supplied, franchised, or licensed by or through Franchisee.
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(b) Franchisee hereby releases and agrees to indemnify and hold CITGO, its
agents, servants, employees, successors and assigns, harmless from and against
any and all claims, suits, losses, injuries, liabilities and damages, including
attorneys' fees and costs of litigation, resulting from the shipment, delivery,
use, storage, handling, and sale of petroleum products, including, but not
limited to, the seepage or leakage of any petroleum products and fire or
explosion at any place of business, service station or marketing premises,
including, but not limited to, the storage tanks, piping and pumps located
thereon which place of business, service station or marketing premises is or was
either directly or indirectly owned, leased, operated, supplied, franchised or
licensed by or through Franchisee.
(c) Franchisee shall defend, indemnify and hold CITGO, its agents,
servants, employees, successors and assigns, harmless from and against any
fines, penalties, taxes, judgments, charges, or expenses, (including attorneys'
fees and costs of litigation), for violations of any law, ordinance or
regulation caused by any act or omission. whether negligent or otherwise, of
Franchisee or its agents. servants, employees, contractors, dealers, franchisees
or licensees.
(d) Notwithstanding the foregoing provisions, Franchisee will not be
responsible for violations of any law, ordinance or regulation by CITGO, nor for
any acts or omissions arising from the sole negligence of CITGO, its agents, or
employees.
15. INSURANCE. (a) Franchisee shall obtain and maintain, at its own expense,
insurance through an insurer acceptable to CITGO. Such insurance shall include:
(1) Worker's Compensation Insurance covering Franchisee's employees; and
Employer's Liability Insurance with a minimum limit of FIVE HUNDRED THOUSAND
DOLLARS ($500,000) per occurrence.
(2) Commercial General Liability Insurance, including contractual liability and
products-completed operations liability, explosion, and collapse liability, as
well as coverage on all contractor's equipment (other than motor vehicles
licensed for highway use) owned, hired, or used in performance of this Agreement
having a minimum combined single limit of ONE MILLION DOLLARS ($1,000,000) each
occurrence (or the equivalent) for bodily injury and property damage including
personal injury.
(3) Automobile Liability Insurance, including contractual liability covering all
motor vehicles owned, hired, or used in the performance of this Agreement, with
a minimum combined single limit of ONE MILLION DOLLARS ($1,000,000) each
occurrence (or the equivalent) for bodily injury and property damage.
(b) The foregoing are minimum insurance requirements only and may not
adequately meet the entire insurance needs of Franchisee. Franchisee shall list
CITGO as an additional insured on all insurance policies described in subsection
(2) and (3) above and such insurance shall not be subject to other insurance
clauses. Franchisee shall furnish to CITGO upon request with certificates of
insurance acceptable to CITGO, which provide that coverage will not be canceled
or materially changed prior to thirty (30) working days' advance written notice
to CITGO.
(c) Franchisee shall require its dealers, who are handling CITGO product,
to maintain the insurance described herein.
16. ASSIGNMENT/TRANSFER. This Agreement may not be assigned by Franchisee except
with CITGO's prior written consent which will not be unreasonably withheld. In
the event more than thirty-five percent (35%) of the ownership interest of
Franchisee's business is sold, transferred, or otherwise disposed of, then CITGO
reserves the right to deem such a transfer an attempt to assign this Agreement.
In any event, Franchisee must notify CITGO thirty (30) days prior to the
transfer of any ownership interest in Franchisee's business.
17. RELATIONSHIP OF THE PARTIES. Franchisee is an independent contractor
operating an independent business and is not authorized to act as an agent or
employee of CITGO or to make any commitments or incur any expense or obligations
of any kind on behalf of CITGO, unless expressly authorized by CITGO in writing.
18. GENERAL PROVISIONS. This Agreement shall bind the executors, administrators,
personal representatives, assigns and successors of the respective parties. The
right of either party to require strict performance by the other party hereunder
shall not be affected by any previous waiver, forbearance or course of dealing.
No delay or omission of CITGO in exercising or enforcing any right or power
accruing upon any breach of this Agreement by Franchisee shall impair any such
Light or power, or shall be construed to be a waiver of any breach of this
Agreement, or any acquiescence therein. All notices hereunder shall be deemed to
have been sufficiently given if and when presented or mailed by certified mail
to the parties at the addresses above or such other addresses as may be
furnished to the other in writing by certified mail. All understandings and
agreements relating to the subject matter hereof either verbal or written,
except insofar as incorporated in this Agreement, are hereby canceled and
withdrawn. CITGO has made no promises, claims or representations to Franchisee
which are not contained in this Agreement. This Agreement constitutes the entire
agreement of the parties with respect to the subject matter hereof and may be
altered only by writing signed by the parties hereto. This Agreement shall not
be binding upon CITGO until it has been duly accepted by CITGO as evidenced by
the signature of its Vice President or other authorized designee. Commencement
of dealing between the parties shall not be deemed a waiver of this requirement.
This Agreement shall be governed by the laws of the State of Oklahoma.
IN WITNESS WHEREOF, the parties have caused this instrument to be duly executed
the day and year first above written.
CITGO PETROLEUM CORPORATION
Firm: BOWLIN'S INCORPORATED
By /s/ Michael L. Bowlin By /s/ Signature Illegible
-------------------------------- ----------------------------
Title: President Title: Region Manager
/s/ Nina J. Pratz /s/ Signature Illegible
- ----------------------------------- --------------------------
Witness Witness
BOWLIN'S INCORPORATED
1996 STOCK OPTION PLAN
-------------------------
1. Purposes of the Plan. The purposes of this Stock Option
Plan are to attract and retain the best available personnel for positions of
substantial responsibility to provide successful management of the Company's
business, to provide additional incentive to the Employees of the Company, and
to promote the success of the Company's business through the grant of options to
purchase shares of the Company's Common Stock.
Options granted hereunder may be either "Incentive Stock
Options," as defined in Section 422 of the Code, or "Non-Statutory Stock
Options," at the discretion of the Board and as reflected in the terms of the
written option agreement.
2. Definitions. As used herein, the following definitions
shall apply:
(a) "Board" shall mean the Board of Directors of the
Company or the Committee, if one has been appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986,
as amended, and the rules and regulations promulgated
thereunder.
(c) "Common Stock" shall mean the common stock of the
Company described in the Company's Articles of Incorporation,
as amended.
(d) "Company" shall mean Bowlin's Incorporated, a New
Mexico corporation, and shall include any parent or subsidiary
corporation of the Company as defined in Sections 424(e) and
(f), respectively, of the Code.
(e) "Committee" shall mean the Committee appointed by the
Board in accordance with paragraph (a) of Section 4 of the
Plan, if one is appointed.
(f) "Director" shall mean a member of the Board.
(g) "Employee" shall mean any person, including officers
and directors, employed by the Company. The payment of a
director's fee by the Company shall not be sufficient to
constitute "employment" by the Company.
(h) "Exchange Act" shall mean the Securities and Exchange
Act of 1934, as amended.
(i) "Fair Market Value" shall mean, with respect to
the date a given Option is granted or exercised, the value of
the Common Stock determined by the Board in such manner as it
may deem equitable for Plan purposes but, in the case
<PAGE>
of an Incentive Stock Option, no less than is required by
applicable laws or regulations; provided, however, that where
there is a public market for the Common Stock, the Fair Market
Value per Share shall be the mean of the bid and asked prices
of the Common Stock on the date of grant, as reported in the
Wall Street Journal (or, if not so reported, as otherwise
reported by the National Association of Securities Dealers
Automated Quotation System) or, in the event the Common Stock
is listed on the New York Stock Exchange, the American Stock
Exchange or The Nasdaq National Market, the Fair Market Value
per Share shall be the closing price on such exchange on the
date of grant of the Option, as reported in the Wall Street
Journal.
(j) "Incentive Stock Option" shall mean an Option which is
intended to qualify as an incentive stock option within the
meaning of Section 422 of the Code.
(k) "Non-Statutory Option" shall mean all Options which
are not Incentive Stock Options.
(l) "Option" shall mean a stock option granted under the
Plan.
(m) "Optioned Stock" shall mean the Common Stock subject
to an Option.
(n) "Optionee" shall mean an Employee or Director of the
Company who has been granted one or more Options.
(o) "Parent" shall mean a "parent corporation," whether
now or hereafter existing, as defined in Section 424(e) of the
Code.
(p) "Plan" shall mean this Stock Option Plan.
(q) "Share" shall mean a share of the Common Stock, as
adjusted in accordance with Section 11 of the Plan.
(r) "Subsidiary" shall mean a "subsidiary corporation,"
whether now or hereafter existing, as defined in Section
424(f) of the Code.
(s) "Tax Date" shall mean the date an Optionee is required
to pay the Company an amount with respect to tax withholding
obligations in connection with the exercise of an Option.
3. Common Stock Subject to the Plan. Subject to the provisions
of Section 11 of the Plan, the maximum aggregate number of Shares which may be
optioned and sold under the Plan shall be equal to 10% of the Shares of Common
Stock issued and outstanding from time to time. The Shares which may be optioned
and sold under the Plan may be authorized, but unissued, or previously issued
Shares acquired or to be acquired by the Company and held in treasury.
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<PAGE>
If an Option should expire or become unexercisable for any
reason without having been exercised in full, the unpurchased Shares covered by
such Option shall, unless the Plan shall have been terminated, be available for
future grants of Options.
4. Administration of the Plan.
(a) Procedure.
(i) The Board shall administer the Plan; provided,
however, that the Board may appoint a Committee consisting solely of two (2) or
more "Non-Employee Directors" to administer the Plan on behalf of the Board, in
accordance with Rule 16b-3.
(ii) Once appointed, the Committee shall continue to
serve until otherwise directed by the Board. From time to time the Board may
increase the size of the Committee and appoint additional members thereof,
remove members (with or without cause), and appoint new members in substitution
therefor or fill vacancies however caused; provided, however, that at no time
may any person serve on the Committee if that person's membership would cause
the Committee not to satisfy the requirements of Rule 16b-3.
Any reference herein to the Board shall, where
appropriate, encompass a Committee appointed to administer the Plan in
accordance with this Section 4.
(b) Powers of the Board. Subject to the provisions of the
Plan, the Board shall have the authority, in its discretion: (i) to grant
Incentive Stock Options, in accordance with Section 422 of the Code, and to
grant Non-Statutory Stock Options; (ii) to determine, upon review of relevant
information and in accordance with Section 2(i) of the Plan, the Fair Market
Value of the Common Stock; (iii) to determine the exercise price per Share of
Options to be granted, which exercise price shall be determined in accordance
with Section 8(a) of the Plan; (iv) to determine the Directors and Employees to
whom, and the time or times at which, Options shall be granted and the number of
Shares to be represented by each Option; (v) to interpret the Plan; (vi) to
prescribe, amend and rescind rules and regulations relating to the Plan; (vii)
to determine the terms and provisions of each Option granted (which need not be
identical) and, with the consent of the Optionee thereof, modify or amend each
Option; (viii) to accelerate or defer (with the consent of the Optionee) the
exercise date of any Option; (ix) to authorize any person to execute on behalf
of the Company any instrument required to effectuate the grant of an Option
previously granted by the Board; (x) to accept or reject the election made by an
Optionee pursuant to Section 17 of the Plan; and (xi) to make all other
determinations deemed necessary or advisable for the administration of the Plan.
(c) Effect of Board's Decision. All decisions,
determinations and interpretations of the Board shall be final and binding on
all Optionees and any other holders of any Options granted under the Plan.
5. Eligibility.
(a) Consistent with the Plan's purposes, Options may be
granted only to Directors and key Employees of the Company as determined by the
Board. An Optionee who
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<PAGE>
has been granted an Option may, if he is otherwise eligible, be granted an
additional Option or Options. Incentive Stock Options may be granted only to
those Employees who meet the requirements applicable under Section 422 of the
Code.
(b) With respect to Incentive Stock Options granted under
the Plan, the aggregate fair market value (determined at the time the Incentive
Stock Option is granted) of the Common Stock with respect to which Incentive
Stock Options are exercisable for the first time by the Employee during any
calendar year (under all plans of the Company and its parent and subsidiary
corporations) shall not exceed One Hundred Thousand Dollars ($100,000).
The Plan shall not confer upon any Optionee any right with
respect to continuation of employment with the Company, nor shall it interfere
in any way with his right or the Company's right to terminate his employment at
any time.
6. Board Approval and Effective Date. The Plan shall take
effect on August 23, 1996, the date on which the Board approved the Plan. No
Option may be granted after August 23, 2006 (ten (10) years from the effective
date of the Plan); provided, however, that the Plan and all outstanding Options
shall remain in effect until such Options have expired or until such Options are
canceled.
7. Term of Option. Unless otherwise provided in the Stock
Option Agreement, the term of each Option shall be ten (10) years from the date
of grant thereof. In no case shall the term of any Incentive Stock Option exceed
ten (10) years from the date of grant thereof. Notwithstanding the above, in the
case of an Incentive Stock Option granted to an Employee who, at the time the
Incentive Stock Option is granted, owns ten percent (10%) or more of the Common
Stock as such amount is calculated under Section 422(b)(6) of the Code ("Ten
Percent Shareholder"), the term of the Incentive Stock Option shall be five (5)
years from the date of grant thereof or such shorter time as may be provided in
the Stock Option Agreement.
8. Exercise Price and Payment.
(a) Exercise Price. The per Share exercise price for the
Shares to be issued pursuant to exercise of an Option shall be determined by the
Board, but in the case of an Incentive Stock Option shall be no less than one
hundred percent (100%) of the Fair Market Value per share on the date of grant;
provided, further, that in the case of an Incentive Stock Option granted to an
Employee who, at the time of the grant of such Incentive Stock Option, is a Ten
Percent Shareholder, the per Share exercise price shall be no less than one
hundred ten percent (110%) of the Fair Market Value per Share on the date of
grant.
(b) Payment. The price of an exercised Option and any
taxes attributable to the delivery of Common Stock under the Plan, or portion
thereof, shall be paid:
(i) In United States dollars in cash or by check,
bank draft or money order payable to the order of the Company;
or
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<PAGE>
(ii) At the discretion of the Board, through the
delivery of shares of Common Stock, with an aggregate Fair Market Value, equal
to the option price; or
(iii) By a combination of (i) and (ii) above; or
(iv) In the manner provided in subsection (c) below.
The Board shall determine acceptable methods for
tendering Common Stock as payment upon exercise of an Option and may impose such
limitations and prohibitions on the use of Common Stock to exercise an Option as
it deems appropriate. With respect to Non-Statutory Options, at the election of
the Optionee pursuant to Section 16, the Company may satisfy its withholding
obligations by retaining such number of shares of Common Stock subject to the
exercised Option which have an aggregate Fair Market Value on the exercise date
equal to the Company's aggregate federal, state, local and foreign tax
withholding and FICA and FUTA obligations with respect to income generated by
the exercise of the Option by Optionee.
(c) Financial Assistance to Optionees. The Board may
assist Optionees in paying the exercise price of Options granted under this Plan
in the following manner:
(i) The extension of a loan to the Optionee by the
Company; or
(ii) A guaranty by the Company of a loan obtained by
the Optionee from a third party.
The terms of any loans, installment payments or
guarantees, including the interest rate and terms of repayment, and collateral
requirements, if any, shall be determined by the Board, in its sole discretion.
Subject to applicable margin requirements, any loans, installment payments or
guarantees authorized by the Board pursuant to the Plan may be granted without
security, but the maximum credit available shall not exceed the exercise price
for the Shares for which the Option is to be exercised, plus any federal and
state income tax liability incurred in connection with the exercise of the
Option.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any
Option granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible under
the terms of the Plan. Unless otherwise determined by the Board at the time of
grant, an Option may be exercised in whole or in part. An Option may not be
exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written
notice of such exercise has been given to the Company in accordance with the
terms of the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the
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<PAGE>
Option is exercised has been received by the Company. Full payment may, as
authorized by the Board, consist of any consideration and method of payment
allowable under Section 7(b) of the Plan. Until the issuance (as evidenced by
the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company) of the stock certificate evidencing such Shares,
no right to vote or receive dividends or any other rights as a shareholder shall
exist with respect to the Optioned Stock, notwithstanding the exercise of the
Option. No adjustment will be made for a dividend or other right for which the
record date is prior to the date the stock certificate is issued, except as
provided in Section 10 of the Plan.
Exercise of an Option in any manner shall result in a
decrease in the number of Shares which thereafter may be available, both for
purposes of the Plan and for sale under the Option, by the number of Shares as
to which the Option is exercised.
(b) Termination of Status as an Employee. Unless otherwise
provided in a Stock Option Agreement relating to an Option that is not an
Incentive Stock Option, if an Employee's employment by the Company is
terminated, except if such termination is voluntary or occurs due to retirement
with the consent of the Board, death or disability, then the Option, to the
extent not exercised, shall cease on the date on which Employee's employment by
the Company is terminated. If an Employee's termination is voluntary or occurs
due to retirement with the consent of the Board, then the Employee may, but only
within thirty (30) days (or such other period of time not exceeding three (3)
months as is determined by the Board) after the date he ceases to be an Employee
of the Company, exercise his Option to the extent that he was entitled to
exercise it at the date of such termination. To the extent that he was not
entitled to exercise the Option at the date of such termination, or if he does
not exercise such Option (which he was entitled to exercise) within the time
specified herein, the Option shall terminate.
(c) Disability. Unless otherwise provided in an Option
Agreement relating to an Option that is not an Incentive Stock Option,
notwithstanding the provisions of Section 8(b) above, in the event an Employee
is unable to continue his employment with the Company as a result of his
permanent and total disability (as defined in Section 22(e)(3) of the Code), he
may, but only within three (3) months (or such other period of time not
exceeding twelve (12) months as it is determined by the Board) from the date of
termination, exercise his Option to the extent he was entitled to exercise it at
the date of such termination. To the extent that he was not entitled to exercise
the Option at the date of termination, or if he does not exercise such Option
(which he was entitled to exercise) within the time specified herein, the Option
shall terminate.
(d) Death of Optionee. Unless otherwise provided in an
Option Agreement relating to an Option, if Optionee dies during the term of the
Option and is at the time of his death an Employee of the Company who shall have
been in continuous status as an Employee since the date of grant of the Option,
the Option may be exercised, at any time within one (1) year following the date
of death (or such other period of time as is determined by the Board), by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent that Optionee was entitled to
exercise the Option on the date of death. To the extent that Optionee was not
entitled to exercise the Option on the date of death, or if the Optionee's
estate, or person who acquired the right to exercise the Option
6
<PAGE>
by bequest or inheritance, does not exercise such Option (which he was entitled
to exercise) within the time specified herein, the Option shall terminate.
10. Non-transferability of Options. An Option may not be sold,
pledged, assigned, hypothecated, transferred, or disposed of in any manner other
than by will or by the laws of descent or distribution, or pursuant to a
"qualified domestic relations order" under the Code and ERISA, and may be
exercised, during the lifetime of the Optionee, only by the Optionee.
11. Adjustments upon Changes in Capitalization or Merger.
Subject to any required action by the shareholders of the Company, the number of
Shares covered by each outstanding Option, and the number of Shares which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per Share covered by each such
outstanding Option, shall be proportionately adjusted for any increase or
decrease in the number of issued Shares resulting from a stock split, reverse
stock split, stock dividend, combination or reclassification of the Common
Stock, or any other increase or decrease in the number of issued shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no
issuance by the Company of shares of stock of any class, or securities
convertible into shares of stock of any class, shall affect, and no adjustment
by reason thereof, shall be made with respect to the number or price of Shares
subject to an Option.
In the event of the proposed dissolution or liquidation of
the Company, the Option will terminate immediately prior to the consummation of
such proposed action, unless otherwise provided by the Board. The Board may, in
the exercise of its sole discretion in such instances, declare that any Option
shall terminate as of a date fixed by the Board and give each Optionee the right
to exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, the Option shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the Optionee shall have the right to exercise
the Option as to all of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable. If the Board makes an Option fully
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Board shall notify the Optionee that the Option shall be
fully exercisable for a period of thirty (30) days from the date of such notice
(but not later than the expiration of the term of the Option under the Option
Agreement), and the Option will terminate upon the expiration of such period.
12. Time of Granting Options. The date of grant of an Option
shall, for all purposes, be the date on which the Board makes the determination
granting such Option. Notice
7
<PAGE>
of the determination shall be given to each Employee to whom an Option is so
granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or
terminate the Plan from time to time in such respects as the Board may deem
advisable; provided, however, that the following revisions or amendments shall
require approval of the holders of a majority of the outstanding Shares of the
Company entitled to vote:
(i) Any increase in the number of Shares subject to
the Plan, other than in connection with an adjustment under
Section 11 of the Plan;
(ii) Any change in the designation of the class of
employees eligible to be granted Options; or
(iii) If the Company has a class of equity security
registered under Section 12 of the Exchange Act at the time of
such revision or amendment, any material increase in the
benefits accruing to participants under the Plan.
(b) Effect of Amendment or Termination. Any such amendment
or termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.
14. Conditions Upon Issuance of Shares. Shares shall not be
issued pursuant to the exercise of an Option unless the exercise of such Option
and the issuance and delivery of such Shares pursuant thereto shall comply with
all relevant provisions of law, including, without limitation, the Securities
Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company
may require the person exercising such Option to represent and warrant at the
time of any such exercise that the Shares are being purchased only for
investment and without any present intention to sell or distribute such Shares
if, in the opinion of counsel for the Company, such a representation is required
by any of the aforementioned relevant provisions of law.
In the case of an Incentive Stock Option, any Optionee who
disposes of Shares of Common Stock acquired on the exercise of an Option by sale
or exchange (a) either within two (2) years after the date of the grant of the
Option under which the Common Stock was acquired or (b) within one (1) year
after the acquisition of such Shares of Common Stock shall notify the Company of
such disposition and of the amount realized upon such disposition.
8
<PAGE>
15. Reservation of Shares. The Company, during the term of
this Plan, will at all times reserve and keep available such number of Shares as
shall be sufficient to satisfy the requirements of the Plan.
Inability of the Company to obtain authority from any
regulatory body having jurisdiction, which authority is deemed by the Company's
counsel to be necessary to the lawful issuance and sale of any Shares hereunder,
shall relieve the Company of any liability in respect of the failure to issue or
sell such Shares as to which such requisite authority shall not have been
obtained.
16. Option Agreement. Options shall be evidenced by written
Stock Option Agreements in such form as the Board shall approve.
17. Withholding Taxes. Subject to Section 4(b)(x) of the Plan
and prior to the Tax Date, the Optionee may make an irrevocable election to have
the Company withhold from those Shares that would otherwise be received upon the
exercise of any Non-Statutory Stock Option, a number of Shares having a Fair
Market Value equal to the minimum amount necessary to satisfy the Company's
federal, state, local and foreign tax withholding obligations and FICA and FUTA
obligations with respect to the exercise of such Option by the Optionee.
18. Miscellaneous Provisions.
(a) Plan Expense. Any expenses of administering this Plan
shall be borne by the Company.
(b) Use of Exercise Proceeds. The payment received from
Optionees from the exercise of Options shall be used for the general corporate
purposes of the Company.
(c) Construction of Plan. The validity, construction,
interpretation, administration and effect of the Plan and of its rules and
regulations, and rights relating to the Plan, shall be determined in accordance
with the laws of the State of Nevada and where applicable, in accordance with
the Code.
(d) Taxes. The Company shall be entitled if necessary or
desirable to pay or withhold the amount of any tax attributable to the delivery
of Common Stock under the Plan from other amounts payable to the Employee after
giving the person entitled to receive such Common Stock notice as far in advance
as practical, and the Company may defer making delivery of such Common Stock if
any such tax may be pending unless and until indemnified to its satisfaction.
(e) Indemnification. In addition to such other rights of
indemnification as they may have as members of the Board, the members of the
Board shall be indemnified by the Company against all costs and expenses
reasonably incurred by them in connection with any action, suit or proceeding to
which they or any of them may be party by reason of any action taken or failure
to act under or in connection with the Plan or any Option, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such
9
<PAGE>
action, suit or proceeding, except a judgment based upon a finding of bad faith;
provided that upon the institution of any such action, suit or proceeding a
Board member shall, in writing, give the Company notice thereof and an
opportunity, at its own expense, to handle and defend the same before such Board
member undertakes to handle and defend it on her or his own behalf.
(f) Gender. For purposes of this Plan, words used in the
masculine gender shall include the feminine and neuter, and the singular shall
include the plural and vice versa, as appropriate.
10
================================================================================
PROFIT-SHARING 401(k) PLAN AND TRUST
FOR EMPLOYEES OF
BOWLIN'S INCORPORATED
PREPARED BY
MODRALL. SPERLING, ROEHL, HARRIS & SISK
A PROFESSIONAL ASSOCIATION
Albuquerque Santa Fe Las Cruces
(505) 848-1800
================================================================================
MODRALL, SPERLING, ROEHL, HARRIS & SISK, P.A.
PROTOTYPE DEFINED CONTRIBUTION PLAN AND TRUST
<PAGE>
MODRALL, SPERLING, ROEHL, HARRIS & SISK, P.A.
PROTOTYPE DEFINED CONTRIBUTION PLAN
401(k) PROFIT-SHARING PLAN
ADOPTION AGREEMENT
------------------
(NONSTANDARDIZED)
1. Employer. The following business entity (hereinafter called the
Employer), hereby adopts the Defined Contribution Plan consisting of this
Adoption Agreement and the Prototype Defined Contribution Plan document having
Internal Revenue Service approval letter D8751016.
a. Employer Name:
BOWLIN'S INCORPORATED
/ x / a New Mexico business corporation
/ / a New Mexico non-profit corporation
/ / a New Mexico professional corporation
/ / a New Mexico partnership
/ / a New Mexico proprietorship
/ / other (Specify)______________________
b. Mailing Address:
136 Louisiana Blvd., N.E.
Albuquerque, New Mexico 87108
c. Telephone Number: (505) 266-5985
d. Federal Employer Identification No.
85-0113644
e. Plan Number: 002
<PAGE>
2. Effective Date.
a. / / This Plan is adopted as a new plan, effective
___________, 19___.
b. / x / This Plan is adopted as an amendment and
restatement of a pre-existing plan of the Employer
with an original effective date of January 1.
1981, and this amendment and restatement is to be
effective January 1, 1989 except as earlier
required by law,
3. Plan Year.
a. / x / The Employer's fiscal year beginning on January 1,
and ending on December 31.
b. / / The twelve (12) month period beginning on
______________, and ending on _____________.
c. / / (Check if applicable) Provided, however that the
initial Plan Year shall be a short year beginning
____________, 19___ and ending ______________,
19___.
4. Eligibility for Participation.
a. All Employees meeting the minimum service and age.
requirements specified below are eligible to participate in
the Plan, except the following:
i. / / Employees included in a unit of employees
covered by a collective bargaining agreement
between the Employer and Employee
representatives, if retirement benefits were
the subject of good faith bargaining. For this
purpose, the term "Employee representatives"
does not include any organization more than
half of whose members are Employees who are
owners, officers, or executives of the
Employer.
ii. / / Leased Employees, as defined in Section 414(n)
of the Code.
iii. / / Other_________________________________________
______________________________________________
______________________________________________
(Must be limited such that Plan meets the
requirements of Section 410 of the Code.)
-2-
<PAGE>
b. Service required for Participation:
i. / x / 1 Years of Service (not more than one (l)
year.) (EMPLOYER REGULAR ACCOUNT.)
ii. / x / 6 Months of Service (not more than twelve (12)
months), or completed one (1) Year of Service.
An Employee shall accrue one (1) Month of
Service for each calendar month in which an
Employee performs at least one (1) Hour of
Service. (SALARY REDUCTION AND MATCHING
CONTRIBUTION ACCOUNTS.)
iii. / / None.
c. Attained Age required for Participation:
i. / x / Minimum age of 21 years (not greater than
twenty-one (21)).
ii. / / None.
d. Eligibility Computation Periods:
i. / x / Shifting.
For purposes of determining Years of Service
and One Year Breaks in Service for purposes of
eligibility to participate, Computation Period
shall mean a twelve (12) consecutive month
period beginning with the date the Employee
first performs an Hour of Service and ending
with the first anniversary date thereof, and
any Plan Year beginning with the Plan Year
which includes the first anniversary date of
the date the Employee first performs an Hour
of Service. An Employee who is credited with
one thousand (1,000) Hours of Service in both
the initial eligibility Computation Period and
the Plan Year which includes the first
anniversary of the date on which the Employee
first performs an Hour of Service will be
credited with two (2) Years of Service for
purposes of eligibility to participate.
-3-
<PAGE>
ii. / / Non-Shifting
For purposes of determining Years of Service
and one Year Breaks in Service for purposes of
eligibility to participate, Computation Period
shall mean a twelve (12) consecutive month
period beginning with the date the Employee
first performs an Hour of Service, or any
anniversary date thereof. If two (2) Years of
Service are required for participation in the
Plan, an Employee incurring a One Year Break
in Service prior to completing two (2) Years
of Service shall receive no credit for
eligibility purposes for any Years of Service
prior to such One Year Break in Service.
e. Additional Requirement for Initial Plan Year:
i. / / In the initial Plan Year, employment by the
Employer on the last day of such Plan Year is
required for participation in the Plan.
ii. / x / Not applicable.
f. Participation by Current Employees:
i. / / Notwithstanding (b) and (c) above, any person
not excluded under (a) above who is an
Employee on the Effective Date and who
normally works for the Employer at least
twenty (20) hours per week shall become a
Participant on the Effective Date.
ii. / x / Not applicable.
-4-
<PAGE>
5. Entry Date.
a. / / Single Entry Date (Preceding). An Employee who
first fulfills the eligibility requirements after
the Effective Date shall become a Participant in
the Plan as of the first day of the Plan Year in
which such requirements were first met.
b. / / Single Entry Date (Flexible). An Employee who
first fulfills the eligibility requirements after
the Effective Date but during the first six (6)
months of a Plan Year, shall become a Participant
in the Plan as of the Entry Date preceding the
date on which such requirements were first met. An
Employee who first fulfills the eligibility
requirements after the Effective Date but during
the last six (6) months of a Plan Year, shall
become a Participant as of the Entry Date
following the date on which such requirements were
first met.
c. / / Single Entry Date (Following). An Employee who
first fulfills the eligibility requirements after
the Effective Date shall become a Participant in
the. Plan as of the first day of the Plan Year
following the date on which such requirements were
first met. (May be utilized only when service
required for participation does not exceed six (6)
months of Credited Service and minimum age
required for participation does not exceed twenty
and one-half (20 1/2.))
d. / x / Dual Entry Dates. An Employee who first fulfills
the eligibility requirements after the Effective
Date shall become a Participant in the Plan as of
the Entry Date coincident with or next following
the date on which such requirements were first
met.
-5-
<PAGE>
6. Annual Compensation. Annual Compensation for any Plan Year shall
mean all of each Participant's
a. / / W-2 earnings (Note: May be selected only if Plan
Year is calendar year.)
b. / x / Annual Compensation, as defined in the Plan.
i. / x / actually paid
ii. / / accrued within such Plan Year.
/ x / Annual Compensation shall also include any amount which is
contributed by the Employer pursuant to a salary reduction agreement and which
is not includable in the gross income of the Participant under Sections 125,
402(a)(8), 402(h) and 403(b) of the Code.
7. Computation of Hours of Service. The Employer elects to have Hours
of Service computed for each Employee for purposes of determining Years of
Service by the following methods:
a. / x / Actual number of Hours of Service.
b. / / 10 Hours of Service shall be credited for each day
during which the Employee is credited with one
Hour of Service.
c. / / 45 Hours of Service shall be credited for each
week during which the Employee is credited with
one Hour of Service.
d. / / 95 Hours of Service shall be credited each
semi-monthly pay period during which the Employee
is credited with one Hour of Service.
e. / / 190 Hours of Service shall be credited for each
calendar month during which the Employee is
credited with one Hour of Service.
-6-
<PAGE>
8. Credited Service. For purpose of determining a Participant's years
of Credited Service for vesting purposes under the Plan, the following Years of
Service shall not be considered (check all applicable):
a. / / Years of Service during any period for which the,
Employer did not maintain the Plan or a
predecessor plan.
b. / / Years of Service before the Participant attained
the age of eighteen (18) years, unless a
Participant before reaching the age of eighteen
(18) years.
c. / / Years of Service before any Break in Service if
the number of years of consecutive One Year Breaks
in Service equals or exceeds the greater of five
(5) or the aggregate number of Years of service
prior to the commencement of such break, if the
Participant does not have any nonforfeitable right
to the Employer Contribution Account.
d. / / Years of Service after five (5) consecutive One
Year Breaks in Service for purposes of determining
vested, nonforfeitable benefits derived from'
Employer contributions which accrued before such
five (5) year period. if this option is selected,
there shall be maintained separate accounts for
pre-break and post break account balances as
provided in Treasury Regulation Section
1.411(b)-l(e)(2),
Credited Service shall include Years of Service for the following
predecessor employers:__________________________________________________________
________________________________________________________________________________
9. Voluntary Nondeductible Participant Contributions.
/ x / Voluntary Nondeductible Participant contributions are
permitted.
/ / Voluntary Nondeductible Participant contributions are
not permitted.
-7-
<PAGE>
10. Contributions
a. Employer Regular Contribution Formula. The amount of the
contribution shall be determined by the Employer. The contribution may be fixed
in terms of dollars or as a percentage of Net Profit; provided, however, in no
event shall such contribution for any Plan Year, when added to the Employer
Salary Reduction Contribution and Employer Matching Contribution, exceed the
maximum amount deductible from the Employer's income for such year under Section
404(a)(3)(A) of the Internal Revenue Code.
b. Cash Option Election. Prior to contribution of the Employer's
Regular Contribution to the Trust a Participant may elect, on a form provided by
and filed with the Plan Administrator, to receive in cash up to percent ( %) of
the amount which would otherwise represent the employer Regular Contribution on
behalf of such Participant for the Plan Year with respect to which the election
is filed. A new election must be filed for each Plan Year. Once filed, a Cash
Option Election is irrevocable, and amounts the Participant elects to take in
cash shall be paid directly to the Participant, shall not be contributed to the
Trust, and the allocation of the Employer Regular Contribution otherwise
required with respect to Participant shall be reduced by the amount of the cash
distribution.
c. Salary Reduction Contribution. In addition to the Cash Option
Election which may be filed pursuant to Paragraph 8(b) above, the Participant
may elect to enter into a. written Salary Reduction Agreement with the Employer
which will be applicable to all payroll periods after the effective date of the
Salary Reduction Agreement. The Salary Reduction Agreement shall provide that
the Participant agrees to accept a reduction in salary from the Employer of a
stated whole percentage of Annual Compensation for the Plan Year, not less than
one percent (1%) nor more than fifteen percent (15%) [NOT GREATER THAN FIFTEEN
PERCENT (15%) for Highly Compensated Employees and not less than one percent
(1%) nor more than fifteen percent (15%) [NOT GREATER THAN FIFTEEN PERCENT
(15%)] for all other Employees. (The maximum percentage contribution allowable
for Highly Compensated Employees shall not exceed the maximum percentage
contribution allowable for all other Employees.) The Employer shall for each
Plan Year make an Employer Salary Reduction Contribution on behalf of each
Participant in an amount equal to the amount of salary reduction selected by
such Participant for such Plan Year.
-8-
<PAGE>
d. Limit on Elective Deferrals. No Cash Option Election or
Salary Reduction Agreement may be entered which would cause the total Elective
Deferrals by a Participant under this Plan, or any other qualified plan
maintained by the Employer, to exceed the dollar limitation contained in
Section 402(g) of the Code in effect at the beginning of such calendar year.
Other dollar limitations may apply under Section 402(g) of the Code to the
extent that a Participant makes Elective Deferrals to other arrangements (see
also Sections 402(h)(1)(B), 403(b), 457, and 501(c)(18) of the Code).
e. Rights of Participants to Change Rate of Salary Reduction
or to Discontinue Salary Reduction. The Salary Reduction election of a
Participant is entirely optional, and the Participant may initiate, discontinue,
or change the rate of contribution to the Plan as provided in a uniform and
nondiscriminatory policy adopted by the Plan Administrator. No election to
initiate, discontinue, or change the rate of contribution to the Plan may be
retroactive. The Participant desiring to initiate, discontinue, or change the
rate of contribution or to discontinue contributions to the Plan must notify the
Plan Administrator thereof, in writing, on forms approved and designated by the
Plan Administrator. Having once discontinued contributions to the Plan, a
Participant may not resume such contributions until after the expiration of the
Plan Year in which such contributions were discontinued.
f. Employer Revision of Salary Reduction Agreements. The
Employer may amend or revoke a Salary Reduction Agreement with any Participant
at any time, if the Employer determines, that such revocation or amendment is
necessary to insure that the amount of a Participant's salary reduction will not
cause the Maximum Permissible Amount to be exceeded or to insure that the
limitation of Paragraph 8(d) is not exceeded.
g. Employer Matching Contribution. The Employer shall make an
Employer Matching Contribution for each Plan Year to:
/ x / All Participants
/ / All Participants who are Non-Highly Compensated
Employees
in an amount equal to the percentage determined in accordance with the schedule
below of all Employer Salary Reduction Contributions made for Participants for
the Plan Year. (If no matching contributions are to be made, enter "None" in
schedule below.)
-9-
<PAGE>
Employer Salary Reduction Employer Matching
Contribution as a Percentage Contribution as a percentage
of Participant's Annual of Participant's Annual
Compensation Compensation
In accordance with a schedule related to Salary Reduction Contribution
and announced prior to first day of the Plan Year.
The Employer Matching Contribution schedule shall not have the effect
of discriminating in favor of highly compensated employees. No matching
contribution shall be made for any Participant who is not employed by the
Employer on the last day of the Plan Year for which the contribution is being
made.
h. The Employer may make Qualified Non-elective Contributions
to the Plan. If the Employer does make such contributions to the Plan, then the
amount of such contributions for each Plan Year shall be an amount determined by
the Employer.
Allocation of Qualified Non-elective Contributions shall be
made to the accounts of:
1. / x / All Participants.
2. / / only Participants who are Non-highly Compensated
Employees.
Allocation of Qualified Non-elective Contributions shall be
made in the ratio which each Participant's Annual Compensation for the Plan Year
bears to the total Annual Compensation of all Participants eligible for
Qualified Nonelective Contributions for such Plan Year, or in an alternate
manner determined by the Employer in accordance with Treasury Regulations.
i. Limit on Employer Contributions; Actual Deferral Percentage
Test. The Employer Contributions for a Plan Year must meet either of the
following deferral percentage tests of Section 401(k)(3) of Code:
i. The Actual Deferral Percentage ("ADP") for
Participants who are Highly Compensated Employees for the Plan Year is not more
than the ADP of all other Eligible Participants multiplied by 1.25; or
-10-
<PAGE>
ii. The excess of the ADP for Participants who are
Highly Compensated Employees over that of all other Eligible Participants is not
more than two (2) percentage points, and the ADP for Participants who are Highly
Compensated Employees is not more than the ADP of all other Eligible
Participants multiplied by two (2).
In determining the ADP for a group, the following special rules shall
apply:
A. The ADP for any Participant who is a
Highly Compensated Employee for the Plan Year and who is eligible to have
Elective Deferrals (and Qualified Non-elective Contributions or Qualified
Matching Contributions, or both, if treated as Elective Deferrals for purposes
of the ADP test) allocated to his or her accounts under two (2) or more
arrangements described in Section 401(k) of the Code, that are maintained by the
Employer, shall be determined as if such Elective Deferrals (and, if applicable,
such Qualified Non-elective Contributions or Qualified Matching Contributions,
or both) were made under a single arrangement. If a Highly Compensated Employee
participates in two (2) or more cash or deferred arrangements that have
different Plan Years, all cash or deferred arrangements ending with or within
the same calendar year shall be treated as a single arrangement.
B. In the event that this Plan satisfies the
requirements of Section 401(k), 401(a)(4), or 410(b) of the Code only if
aggregated with one or more other plans, or if one or more other plans satisfy
the requirements of such Sections of Code only if aggregated with this Plan,
then this Section shall be applied by determining the ADP of the Employees as if
all such plans were a single plan. For Plan Years beginning after December 31,
1989, plans may be aggregated in order to satisfy Section 401(k) of the Code
only if they have the same Plan Year.
C. For purposes of determining the ADP of a
Participant who is a Five Percent (5%) owner or one of the ten (10) most highly
paid Highly Compensated Employees, the Elective Deferrals (and Qualified
Non-elective Contributions or Qualified Matching Contributions, or both, if
treated as Employer contributions for purposes of the ADP test) and the Annual
Compensation of such Participant shall include the Elective Deferrals (and, if
applicable, Qualified Non-elective Contributions and Qualified Matching
Contributions, or both) and the Annual Compensation for the Plan Year of Family
Members (as defined in Section 414(q)(6) of the Code). Family Members, with
respect to Highly Compensated Employees, shall be disregarded as separate
employees in determining the ADP both for Participants who are Non-highly
Compensated Employees and for Participants who are Highly Compensated Employees.
-11-
<PAGE>
D. For purposes of determining the ADP test,
Elective Deferrals, Qualified Non-elective Contributions and Qualified Matching
Contributions must be made before the last day of the twelve (12) month period
immediately following the Plan Year to which contributions relate.
E. The Employer shall maintain records
sufficient to demonstrate satisfaction of the ADP test and the amount of
Qualified Non-elective Contributions or Qualified Matching Contributions, or
both, used in such test.
F. The determination and treatment of the
ADP amounts of any Participant shall satisfy such other requirements as may be
prescribed by the Secretary of the Treasury.
In the event the deferrals under Cash Option Elections or Salary
Reduction Agreements for a Plan Year are such that neither deferral percentage
test is met, the Excess Contributions shall be distributed as provided in
Paragraph 10(j),
j. Distribution of Excess Contributions and Excess Elective
Deferrals; Recharacterization.
i. Notwithstanding any other provision of the Plan,
Excess Contributions, plus any income and minus any loss allocable thereto,
shall be distributed no later than the last day of each Plan Year to
Participants to whose accounts such Excess Contributions were allocated for the
preceding Plan Year. If such excess amounts are distributed more than two and
one-half (2 1/2) months after the last day of the Plan Year in which such excess
amounts arose, a ten percent (10%) excise tax will be imposed on the Employer-
maintaining the Plan with respect to such amounts. Such distributions shall be
made to Highly Compensated Employees on the basis of the respective portions of
the Excess Contributions attributable to each of such Employees. Excess
Contributions shall be allocated to Participants who are subject to the family
member aggregation rules of Section 414(q)(6) of the Code in the manner
prescribed by the Treasury Regulations.
ii. Notwithstanding any other provision of the Plan,
Excess Elective Deferrals, plus any income and minus any loss allocable thereto,
shall be distributed no later than April 15 to any Participant to whose account
Excess Elective Deferrals were assigned for the preceding year and who claims
Excess Elective Deferrals for such taxable year. Participants participating in
two or more qualified plans under which elective deferrals are made shall be
able to specify additional amounts to be distributed in order that such
Participant meet
-12-
<PAGE>
the deferral limitation of Section 402(g) of the Code, provided such designation
is made prior to February 15, to allow sufficient administrative time for
distribution within the limitation of this paragraph.
iii. No Employer Matching Contribution shall be made
with respect to an Excess Contribution or Excess Elective Deferral distributed
to a Participant. Excess Contributions and Excess Elective Deferrals shall be
adjusted for income or loss up to the date of distribution.
iv. The income or loss allocable to Excess
Contributions and Excess Elective Deferrals is the sum of (i) income or loss
allocable to the Participant's Elective Deferral account for the taxable year
multiplied by a fraction, the numerator of which is such Participant's Excess
Elective Deferrals for the year and the denominator is the Participant's account
balance attributable to Elective Deferrals without regard to any income or loss
occurring during such taxable year; and (ii) ten percent (10%) of the amount
determined under (i) multiplied by the number of whole calendar months between
the end of the Participant's taxable year and the date of distribution, counting
the month of distribution if distribution occurs after the 15th of such month.
v. Excess Contributions shall be distributed from the
Participant's Elective Deferral account and Qualified Matching Contributions
account (if applicable) in proportion to the Participant's Elective Deferrals
and Qualified Matching Contributions (to the extent used in the ADP test) for
the Plan Year. Excess Contributions shall be distributed from the Participant's
Qualified Non-elective Contribution account only to the extent that such Excess
Contributions exceed the-balance in the Participant's Elective Deferral account
and Qualified Matching Contribution account.
vi. If Voluntary Nondeductible Participant
Contributions are allowed, a Participant may treat Excess Contributions as an
amount distributed to the Participant and then contributed by the Participant to
the Plan as a voluntary Nondeductible Participant Contribution. Recharacterized
amounts will remain nonforfeitable and subject to the same distribution
requirements as Elective Deferrals. Amounts may not be recharacterized by a
Highly Compensated Employee to the extent that such amount in combination with
other Employee contributions made by that Employee would exceed any stated
limited under the Plan on Employee contributions. Recharacterization must occur
no later than two and one-half (2 1/2) months after the last day of the Plan
Year in which such Excess Contributions arose and is deemed to occur no earlier
than the
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<PAGE>
date the last Highly Compensated Employee is informed in writing of the amount
recharacterized and the consequences thereof. Recharacterized amounts will be
taxable to the Participant for the Participant's tax year in which the
Participant would have received them in cash.
k. Limitation on Employer Matching Contributions; Distribution
of Excess Aggregate Contributions. The Average Contribution Percentage ("ACP")
for Participants who are Highly Compensated Employees for each Plan Year and the
ACP for Participants who are Non-highly Compensated Employees for the same Plan
Year must satisfy one of the following tests:
i. The ACP for Participants who are Highly
Compensated Employees for the Plan Year shall not exceed the ACP for
Participants who are Non-highly Compensated Employees for the same Plan Year
multiplied by 1.25; or
ii. The ACP for Participants who are Highly
Compensated Employees for the Plan Year shall not exceed the ACP for
Participants who are Non-highly Compensated Employees for the same Plan Year
multiplied by two (2), provided that the ACP for Participants who are Highly
Compensated Employees also does not exceed the ACP for Participants who are
Non-highly Compensated Employees by more than two (2) percentage points.
iii. In determining the ACP, the following special
rules shall apply:
A. If one or more Highly Compensated
Employees participate in a Plan maintained by the Employer and subject to both
the ADP test and the ACP test and the sum of the ADP and ACP of those Highly
Compensated Employees subject to such tests exceeds the Aggregate Limit, then
the ACP of those Highly Compensated Employees who also participate in the
arrangement subject to the ADP test will be reduced (beginning with such Highly
Compensated Employee whose ACP is the highest) so that the limit is not
exceeded. The amount by which each Highly Compensated Employee's Contribution
Percentage Amounts is reduced shall be treated as an Excess Aggregate
Contribution. The ADP and ACP of the Highly Compensated Employees are determined
after any corrections required to meet the ADP and ACP tests. Multiple use does
not occur if both the ADP and ACP of the Highly Compensated Employees does not
exceed 1.25 multiplied by the ADP and ACP of the Non-highly Compensated
Employees.
B. For purposes of this Paragraph, the
Contribution Percentage for any Participant who is a Highly Compensated Employee
and who is eligible to have Contribution
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<PAGE>
Percentage Amounts allocated to his or her account under two or more plans
described in Section 401(a) of the Code, or arrangements described in Section
401(k) of the Code, that are maintained by the Employer, shall be determined as
if the total of such Contribution Percentage Amounts was made under each Plan.
If a Highly Compensated Employee participates in two or more cash or deferred
arrangements that have different plan years, all cash or deferred arrangements
ending with or within the same calendar year shall be treated as a single
arrangement.
C. In the event that this Plan satisfies the
requirements of Sections 410(b), 401(a)(4) and 410(b) of the Code only if
aggregated with one or more other plans, or if one or more other plans satisfy
the requirements of Sections 410(b), 401(a)(4) and 410(b) of the Code only if
aggregated with this plan, then this Paragraph shall be applied by determining
the Contribution Percentage of Employees as if all such plans were a single
Plan. For plan years beginning after December 31, 1989, plans may be aggregated
in order to satisfy Section 401(m) of the Code only if they have the same Plan
Year.
D. For purposes of determining the
Contribution Percentage of a Participant who is a Five Percent (5%) Owner or one
of the ten (10) most highly paid Highly Compensated Employees, the Contribution
Percentage Amounts and Annual Compensation of such Employee shall include the
Contribution Percentage Amounts and Annual Compensation for the Plan Year of
Family Members (as defined in Section 414(q)(6) of the Code). Family Members,
with respect to Highly Compensated Employees, shall be disregarded as separate
Employees in determining the Contribution Percentage both for Employees who are
Non-highly Compensated Employees and for Employees who are Highly Compensated
Employees.
E. For purposes of determining the
Contribution Percentage test, Employee Contributions are considered to have been
made in the Plan Year in which contributed to the Trust. Matching Contributions
and Qualified Non-elective Contributions will be considered made for a Plan Year
if made by no later than the end of the twelve (12) month period beginning on
the day after the close of the Plan Year.
F. The Employer shall maintain records
sufficient to demonstrate satisfaction of the ACP test and the amount of
Qualified Non-elective Contributions or Qualified Matching Contributions, or
both, used in such test.
G. The determination and treatment of the
Contribution Percentage of any Employee shall satisfy such other requirements as
may be prescribed in regulations by the Secretary of the Treasury.
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<PAGE>
iv. Notwithstanding any other provision of the Plan,
all Excess Aggregate Contributions plus the income and minus the losses
allocable thereto, shall be forfeited, if otherwise forfeitable under the terms
of the Plan, or if not forfeitable, distributed on a pro-rata basis from the
Participant's Employee Contribution account, Matching Contribution account, and
Qualified Matching Contribution account (and, if applicable, the Participant's
Qualified Non-elective Contribution account or Elective Deferral account, or
both) within the first two and one-half (2 1/2) months of each Plan Year to
Participants to whose accounts such Excess Aggregate Contributions were
allocated for the preceding Plan Year.
v. Excess Aggregate Contributions shall be allocated
to Participants who are subject to the family member aggregation rules of
Section 414(q)(6) of the Code in the manner prescribed by Treasury Regulations.
vi. If such Excess Aggregate Contributions are
distributed more than two and one-half (2 1/2) months after the last day of the
Plan Year in which such excess amounts arose, a ten percent (10%) excise tax
will be imposed on the Employer maintaining the Plan with respect to those
amounts. Excess Aggregate Contributions shall be treated as annual additions.
vii. Excess Aggregate Contributions shall be adjusted
for any income or loss up to the date of distribution. The in-come or loss
allocable to Excess Aggregate Contributions is the sum of (i) income or loss
allocable to the Participant's Employee Contribution account, Matching
Contribution account (if any, and if all amounts therein are not used in the ADP
test) and, if applicable, Qualified Non-elective Contribution account and
Elective Deferral account for the Plan Year multiplied by a fraction, the
numerator of which is such Participant's Excess Aggregate Contributions for the
year and the denominator is the Participant's Account balance(s) attributable to
Contribution Percentage Amounts without regard to any income or loss occurring
during such Plan Year; and (ii) ten percent (10%) of the amount determined under
(i) multiplied by the number of whole calendar months between the end of the
Plan Year and the date of distribution, counting the month of distribution if
distribution occurs after the 15th of such month.
viii. In lieu of distributing Excess Contributions or
Excess Aggregate Contributions as provided, the Employer may make Qualified
Non-elective Contributions on behalf of Non-highly Compensated Employees that
are sufficient to satisfy either the ADP test or the ACP test, or both, pursuant
to Treasury Regulations.
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<PAGE>
1 . Aggregate Limitation. If both Elective Deferrals and
Matching Contributions are provided under the Plan, both the ADP test and the
ACP test shall be deemed to be satisfied if such contributions satisfy the
aggregate test in proposed Treasury Regulation Section 1.401(m)-2, or any final
Treasury Regulation adopted in substitution therefor.
m. Definitions. For the purpose of this Paragraph only, the
following terms shall have the following meanings:
i. "Actual Deferral Percentage" or "ADP" for a Plan
Year shall mean, with respect to a specified group of Participants for a Plan
Year, the average of the ratios (calculated separately for each Participant in
such group) of
A. The amount of Employer Contributions (as
defined in Paragraph 10(m)(x) actually paid over to the Trust on behalf of such
Participant for such Plan Year, to
B. The Participant's Annual Compensation for
such Plan Year (whether or not the Employee was a Participant for the entire
Plan Year).
For purposes of computing Actual Deferral Percentages, an Employee who would be
a Participant but for the failure to make Elective Deferrals shall be treated as
a Participant on whose behalf no Elective Deferrals are made.
ii. "Aggregate Limit" shall mean the sum of (i). one
hundred twenty-five percent (125%) of the greater of the ADP of the Non-highly
Compensated Employees for the Plan Year or the ACP of Non-highly Compensated
Employees under the Plan subject to Section 401(m) of the Code for the Plan Year
beginning with or within the Plan Year of the 401(k) arrangement and (ii) the
lesser of two hundred percent (200%) or two (2) plus the lesser of such ADP or
ACP.
iii. "Annual Compensation" shall mean compensation as
described in Section 414(s) of the Code.
iv. "Average Contribution Percentage" "ACP" shall
mean the average (expressed as a percentage) of the Contribution Percentages of
the Eligible Participants in a group.
v. "Contribution Percentage" shall mean the ratio
(expressed as a percentage) of the Participant's Contribution Percentage Amounts
to the Participant's Annual Compensation for the Plan Year (whether or not the
Employee was a Participant for the entire Plan Year).
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<PAGE>
vi. "Contribution Percentage Amounts" shall mean the
sum of the Employee Contributions, Matching Contributions, and Qualified
Matching Contributions (to the extent not taken into account for purposes of the
ADP test) under the Plan on behalf of the Participant for the Plan Year. Such
Contribution Percentage Amounts shall include forfeitures of Excess Aggregate
Contributions or Matching Contributions allocated to the Participant's account,
which shall be taken into account in the year in which such forfeiture is
allocated. The Employer may include, in the Contribution, Percentage Amounts,
Qualified Non-elective Contributions. The Employer also may elect to use
Elective Deferrals in the Contribution Percentage Amounts so long as the ADP
test is met before the Elective Deferrals are used in the ACP test and continues
to be met following the exclusion of those Elective Deferrals that are used to
meet the ACP test.
vii. "Elective Deferrals" shall mean any Employer
contributions made to the Plan at the election of the Participant, in lieu of
cash compensation, and shall include contributions made pursuant to a salary
reduction agreement or other deferral mechanism. With respect to any taxable
year, a Participant's Elective Deferral is the sum of all Employer contributions
made on behalf of such Participant pursuant to an election to defer under any
qualified cash or deferred arrangement as described in Section 401(k) of the
Code, any simplified employee pension cash or deferred arrangement as described
in Section 402(h)(1)(B) of the Code, any eligible deferred compensation plan
under Section 457 of the Code, any plan as described under Section 501(c)(18) of
the Code, and any Employer contributions made on behalf of a Participant for the
purchase of an annuity contract under Section 403(b) of the Code pursuant to a
salary reduction agreement.
viii. "Eligible Participant" shall mean any Employee
who is eligible to make an Employee Contribution, or an Elective Deferral (if
the Employer takes such contributions into account in the calculation of the
Contribution Percentage), or to receive a Matching Contribution (including
forfeitures) or a Qualified Matching Contribution.
ix. "Employee Contribution" shall mean any
contribution made to the Plan by or on behalf of a Participant that is included
in the Participant's gross income in the year in which made and that is
maintained under a separate account to which earnings and losses are allocated.
<PAGE>
x. "Employer Contributions" for a Plan Year shall mean:
A. All Employer contributions made for such
Plan Year pursuant to the Participant's Salary Reduction Agreement; plus the
elective portion of the Employer Cash option Contribution which the Participant
elected to defer for such Plan Year including Excess Elective Deferrals, but
excluding Elective Deferrals that are taken into account in the ACP test
(provided the ADP test is satisfied both with and without such excluded Elective
Deferrals); and
B. At the election of the Employer,
Qualified Employer Matching Contributions and Qualified Nonelective
Contributions.
The amount of Qualified Matching Contributions taken into
account as Employer Contributions for purposes of calculating the ADP or ACP,
subject to such other requirements as may be prescribed in regulations by the
Secretary of the Treasury, shall be such Qualified Matching Contributions that
are needed to meet the ADP or ACP test.
The amount of Qualified Non-elective Contributions taken into
account as Employer Contributions for purposes of calculating the ADP or ACP
test, subject to such other requirements as may be prescribed in regulations by
the Secretary of the Treasury, shall be such Qualified Non-elective
Contributions that are needed to meet the ADP or ACP test.
xi. "Eligible Participant" shall mean any Employee
who is eligible to make an Employee Contribution, or an Elective Deferral (if
the Employer so takes into account in the calculation of the Contribution
Percentage), or to receive a Matching Contribution (including forfeitures) or a
Qualified Matching Contribution. If an Employee Contribution is required as a
condition of participation in the Plan, an Employee who would be a Participant
in the Plan if such Employee made such a contribution shall be treated as an
eligible Employee on behalf of whom no Employee Contributions are made.
xii. "Excess Aggregate Contributions" shall mean,
with respect to any Plan Year, the excess of:
A. The aggregate Contribution Percentage
Amounts taken into account in computing the numerator of the Contribution
Percentage actually made on behalf of Highly Compensated Employees for such Plan
Year, over
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<PAGE>
B. The maximum Contribution Percentage
Amounts permitted by the ACP test or the aggregate test, whichever is applicable
(determined by reducing contributions made on behalf of Highly compensated
Employees in order of their Contribution Percentages beginning with the highest
of such percentages).
Such determination shall be made after first determining
Excess Elective Deferrals and then determining Excess Contributions.
xiii. "Excess Contributions" shall mean, with respect
to any Plan Year, the excess of:
A. The aggregate amount of Employer
contributions actually taken into account in computing the ADP of Highly
Compensated Employees for such Plan Year, over
B. The maximum amount of such contributions
permitted by the ADP test or the aggregate test, whichever is applicable
(determined by reducing contributions made on behalf of Highly Compensated
Employees in order of the ADPS, beginning with the highest of such percentages).
Excess Contributions (including the amounts recharacterized) shall be treated as
annual additions made under the Plan.
xiv. "Excess Elective Deferrals" shall mean those
Elective Deferrals that are includible in a Participant's gross income under
Section 402(j) of the Code to the extent such Participant's Elective Deferrals
for a taxable year exceed the dollar limitation under such Section. Excess
Elective Deferrals shall be treated as annual additions under the Plan.
XV. "Family Member" shall mean an individual
described in Section 414(q)(6)(B) of the Code.
xvi. "Highly Compensated Employee" shall mean any
Participant who is a "highly compensated employee" as defined in Section 414(q)
of the Code.
xvii. "Matching Contribution" shall mean an Employer
contribution made to the Plan, or to a contract described in Section 403(b) of
the Code, on behalf of a Participant on account of an Employee Contribution made
by such Participant, or on account of a Participant's Elective Deferral, under a
Plan maintained by the Employer.
xviii. "Non-highly Compensated Employee" shall mean
an Employee of the Employer who is neither a Highly Compensated Employee nor a
Family Member.
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<PAGE>
xix. "Qualified Matching Contributions" shall mean
Employer Contributions that are made to the Plan, pursuant to Section 401(m) of
the Code, which are subject to the distribution and nonforfeitability
requirements under Section 401(k) of the Code when made.
xx. "Qualified Non-elective Contributions" shall mean
contributions (other than Matching Contributions or Qualified Matching
Contributions) made by the Employer and allocated to Participants' accounts that
the Participants may not elect to receive in cash until distributed from the
Plan; that are nonforfeitable when made; and that are distributable only in
accordance with distribution provisions that are applicable to Elective
Deferrals and Qualified Matching Contributions.
n. Intent. It is the intent of this Plan to qualify as a Cash
or Deferred Arrangement and/or a Salary Reduction Arrangement under Section
401(k) of the Code and the provisions of the Plan shall be applied and
interpreted in accordance with Section 401(k) of the Code and any Treasury
Regulations promulgated in final form thereunder. Elective Deferrals, Qualified
Non-elective Contributions, and Qualified Matching Contributions, and income
allocable to each, shall not be distributable to a participant or his or her
beneficiary or beneficiaries, in accordance with such participant's or
beneficiary's or beneficiaries' election, earlier than upon separation from
service, death, or disability.
o. Payment to Trustee.
i. The Employer shall make payment in full of the
elective portion of its contribution for each Plan Year directly to the Trustee
not later than the end of the twelve (12) month period beginning the day after
the close of the Plan Year for which the contribution is made; provided,
however, the contribution shall be made not later than the time provided in
Section 404(a)(3) of the Code.
ii. Neither the Trustee nor the Plan Administrator
shall be under any duty to inquire into the correctness of the amounts
contributed and paid over to the Trustee hereunder nor shall either the Trustee
or the Plan Administrator be under any duty to enforce payment of any
contribution to be made hereunder by the Employer.
iii. Separate subaccounts within the Employer
Contribution Account shall be maintained for each Participant's (a) elective
deferrals, (b) qualified nonelective deferrals and matching contributions used
to satisfy the test of Paragraph 10(i), and (c) matching contributions not used
to satisfy the test of Paragraph 10(h).
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<PAGE>
P. Top Heavy Limitation. Neither Elective Deferrals nor
Matching Contributions may be considered as Employer contributions in satisfying
the minimum contribution requirements of Section 416 of the Code.
11. Forfeitures. Any amounts forfeited (other than forfeitures of Excess
Aggregate Contributions and Matching Contributions) under the Plan during a Plan
Year shall be allocated to the remaining Participants' Employer Contribution
Accounts in the same manner as Employer Regular Contributions for such year.
Forfeitures of Excess Aggregate Contributions and Matching Contributions shall
be applied to reduce Employer contributions.
12. Allocation to Certain Participants.
a. Participants Not Accruing a Year of Service. Participants
who fail to accrue a Year of Service for a Plan Year
i. / / shall share in the Employer contribution
or forfeitures for such Plan Year.
ii. / x / shall not share in the Employer
contribution or forfeitures for such Plan
Year, except to the minimum extent
necessary to meet the requirements of
Section 401(a)(26) and Section 410(b) of
the Code. The minimum extent necessary to
meet the requirements of Section
401(a)(26) and Section 410(b) of the Code
shall be determined by providing an
allocation of Employer contributions and
forfeitures to such otherwise excluded
Participants as necessary to meet the
requirements of Section 401(a)(26) and
Section 410(b) of the Code, beginning
with the otherwise excluded Participants
with the lowest amount of Annual
Compensation for the Plan Year and
continuing with otherwise excluded
Participants in ascending order of Annual
Compensation for the Plan Year.
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<PAGE>
b. Terminated Participants. A Participant whose employment is
terminated prior to the end of a Plan Year but after the Participant has
completed one thousand (1,000) Hours of Service during such Plan Year:
i. / x / shall share in the Employer contribution
for such Plan Year.
ii. / / shall not share in the Employer
contribution for such Plan Year unless,
after application of the provisions of
paragraph (a) above, such exclusion shall
cause the Plan to fail to meet the
requirements of Section 401(a)(26) or
Section 410(b) of the Code.
13. Allocation Formula. The Employer Regular Contribution shall be
allocated in the ratio that each Participant's Annual Compensation for the Plan
Year bears to the total Annual Compensation of all Participants for such Plan
Year, provided, however, that the allocation to each Participant shall be
reduced by the amount of the Participant's Cash Option Election. The Employer
Salary Reduction Contribution shall be allocated in accordance with the Salary
Reduction Agreements entered into between the Employer and Participants.
Employer Matching Contributions shall be allocated to the accounts of the
Participants for whom such contributions are made, in accordance with the method
whereby such contributions are determined.
14. Early Retirement Age and Service.
a. / / Early Retirement is not permitted
b. / x / Early Retirement Age is 55, with 10 Years of
Credited Service
15. Normal Retirement Age and Service. Age and Participation required
for Normal Retirement Benefits
Later of:
a. Age:
/ x / Age 65
/ / Age (not to exceed 65)
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or
b. Participation:
/ x / No minimum Participation Required
/ / (not to exceed 5th) anniversary of the participation
commencement date. The participation commencement date is
the first Plan Year in which the Participant commenced
participation in the Plan.
16. Additional Distribution Events.
a. In addition to the distribution events set out in Section
7.01, of the Plan, Elective Deferrals, Qualified Non-elective Contributions, and
Qualified Matching Contributions, and income allocable to each are earlier
distributable to a Participant or Beneficiary in accordance with such
Participant's or Beneficiary's election upon:
i. Termination of the Plan without the establishment
of another defined contribution plan.
ii. The disposition by the Employer to an unrelated
corporation of substantially all of the assets (within the meaning of Section
409(d)(2) of the Code) used in a trade or business of the Employer if such
corporation continues to maintain this Plan after the disposition, but only with
respect to employees who continue employment with the corporation acquiring such
assets.
iii. The disposition by the Employer to an unrelated
entity of the Employer's interest in a subsidiary (within the meaning of Section
409(d)(3) of the Code) if such corporation continues to maintain this Plan, but
only with respect to Employees who continue employment with such subsidiary.
iv. The attainment of age fifty-nine and one half (59
1/2) in the case of a profit-sharing plan.
v. The hardship of the Participant as limited below.
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<PAGE>
b. / x / No Hardship Distributions allowed.
/ / Distribution of Elective Deferrals (and earnings
thereon accrued as of December 31, 1988) may be
made to a Participant in the event of hardship.
For the purposes of this Section, hardship is
defined as an immediate and heavy financial need
of the Employee where such Employee lacks other
available resources. The following are the only
financial needs considered immediate and heavy:
deductible medical expenses (within the meaning of
Section 213(d) of the Code) of the Employee, the
Employee's Spouse, children, or dependents; the
purchase (excluding mortgage payments) of a
principal residence for the employee; payment of
tuition for the next quarter or semester of
post-secondary education for the Employee, the
Employee's Spouse, children or dependents; or the
need to prevent the eviction of the Employee from,
or a fore closure on the mortgage of, the
Employee's principal residence.
A distribution will be considered as necessary to satisfy an
immediate and heavy financial need of the Employee only if-
i. The Employee has obtained all distributions, other
than hardship distributions, and all nontaxable loans under all plans maintained
by the Employer;
ii. All plans maintained by the Employer provide that
the Employee's Elective Deferrals (and Employee Contributions) will be suspended
for twelve (12) months after the receipt of the hardship distribution:
iii. The distribution is not in excess of the amount
of an immediate and heavy financial need; and
iv. All plans maintained by the Employer provide that
the Employee may not -make Elective Deferrals for the Employee's taxable year
immediately following the taxable year of the hardship distribution in excess of
the applicable limit under Section 402(g) of the Code for such taxable year less
the amount of such Employee's Elective Deferrals for the taxable year of the
hardship distribution.
c. All distributions that may be made pursuant to one or more
of the foregoing distributable events are subject to the Spousal and Participant
consent requirements (if applicable) contained in Sections 401(a)(11) and 417 of
the code.
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<PAGE>
17. Normal Vesting of Nonforfeitable Interests.
a. / / 100% upon becoming a Participant.
b. / / Years of Nonforfeitable
Credited Service Interest
---------------- --------
Less than 5 years 0%
5 years or more 100%
c. / / Years of Nonforfeitable
Credited Service Interest
---------------- --------
Less than 3 years 0%
3 20%
4 40%
5 60%
6 80%
7 years or more 100%
d. / x / Years of Nonforfeitable
Credited Service Interest
---------------- --------
Less than 3 years 0%
3 years or more 100%
(Selected schedule must meet the requirements of
Sections 401(a)(4) and 411 of the Code.)
Notwithstanding anything to the contrary herein or in the
Plan, Participant's accounts derived from Elective Deferrals, Qualified
Non-elective Contributions, Employee Contributions, and Qualified Matching
Contributions are nonforfeitable. Separate accounts for Elective Deferrals,
Qualified Nonelective Contributions, Employee Contributions, Matching
Contributions, and Qualified Matching Contributions will be maintained for each
Participant. Each account will be credited with the applicable contributions and
earnings thereon.
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18. Vesting of Employer Matching Contributions.
a. / / Employer Matching Contributions shall be
nonforfeitable when made and shall be subject to
the distribution limitations of Section 401(k) of
the Code, so as to constitute Qualified Matching
Contributions.
b. / x / Employer Matching Contributions shall be subject
to the same Normal and Top-Heavy Vesting Schedules
as Employer Regular Contributions.
19. Top-Heavy Vesting of Nonforfeitable Interests.
a. / / 100% upon becoming a Participant. (This must be
selected if two year eligibility is selected).
b. / / Years of Nonforfeitable
Credited Service Interest
---------------- --------
Less than 2 years 0%
2 20%
3 40%
4 60%
5 80%
6 years or more 100%
c / x / Years of Nonforfeitable
Credited Service Interest
Less than 3 years 0%
3 years or more 100%
20. Present Value. For purposes of establishing present value to
compute the Top-Heavy Ratio, any benefit shall be discounted only for mortality
and interest based on the following:
a. / x / Interest Rate: 6%
Mortality Table: 1983a
b. / / Interest Rate:______ %
Mortality Table: _______________
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<PAGE>
21. Cash-out as an Optional Form of Benefit.
a. / x / Cash in a single lump sum shall be permitted as an
optional form of benefit.
b. / / Cash in a single lump sum shall not be permitted
as an optional form of benefit.
c. / / Notwithstanding the provisions of Section 7.02 of
the Plan, all benefits shall be payable only in
the form of cash in a single lump sum. (Must
select no Rollovers.)
22. Rollovers.
a. / x / Rollovers are permitted as provided in the Plan.
b. / / Rollovers are not permitted.
23. Direction of Investments.
a. / x / Investments Directed by Trustee.
b. / / Investments Directed by Plan Administrator.
c. / / Investments Directed by Participant.
24. Life Insurance Investments.
a. / / The Trustee may not invest in individual life
insurance policies.
b. / x / The Trustee may invest in individual life
insurance policies as limited by the Plan.
25. Trustee.
a. Name: M.L. BOWLIN
b. Address: 136 Louisiana Blvd., N.E.
Albuquerque, New Mexico 87108
c. Telephone Number: 505) 255-5985
d. EIN:___________________________________
-28-
<PAGE>
26. Custodian of Assets (if other than Trustee or if Plan is a
Custodial Account Under Section 401(f) of the Code.)
a. Name: N/A
b. Address:______________________________________________________
______________________________________________________
c. Telephone Number: ( )_______________________________________
d. EIN:__________________________________________________________
/ / The Plan is funded through a Custodial Account as provided in
Section 401(f) of the Code. All references to "Trust" shall
mean the Custodial Account, and all references to "Trustee"
shall mean the Custodian.
27. Plan Administrator.
/ x / The Employer
Responsible Person: WILLIAM J. McCABE
/ / The following named individual:
/ / Plan Administrative Committee. The members of the
Committee are appointed pursuant to the provisions
of the Plan.
28. Sponsoring organization. This prototype plan is sponsored by:
Modrall, Sperling, Roehl, Harris & Sisk, P.A.
P.O. Box 2168
Albuquerque, New Mexico 87103
Telephone (505) 848-1800.
-29-
<PAGE>
29. Coordination With Other Plans. If the Employer maintains or ever
maintained another qualified plan in which any Participant in this Plan is (or
was) a Participant or could possibly become a Participant, the Employer must
complete his section. The Employer must also complete this section if, after
December 31, 1985, it maintains a welfare benefit fund a defined in Section
419(e) of the Code, or an individual medical account as defined in Section
415(l)(2) of the Code, under which amounts are treated as annual additions with
respect to any Participant in this Plan.
a. / x / Coordination for purposes of Sections 415 and 416
of the Code as provided in the basic plan
documents.
b. / / Other coordination, (Specify)
____________________________________________________________
____________________________________________________________
____________________________________________________________
____________________________________________________________
30. Other Matters.
a. Failure to properly fill out this Adoption Agreement may
result in disqualification of the Plan.
b. The Sponsoring Organization will inform the Employer of any
amendments made to the Prototype Plan, or of the discontinuance or abandonment
of the Prototype Plan. Failure to maintain the Plan in accordance with any such
amendments may result in disqualification of the Plan.
-30-
<PAGE>
31. Independent Counsel. The Employer has consulted with and been
advised by its attorney concerning the meaning of the provisions of the Plan and
Trust and the effect of entry into the Plan and Trust.
32. Reliance. Adopting Employers may not rely on the notification
letter issued by the Internal Revenue Service with respect to the qualification
of the Plan and should apply to the appropriate key district f ' or a
determination letter in order to obtain reliance. An Employer who has ever
maintained or who later adopts any plan (including, after December 31, 1985, a
welfare benefit fund, as defined in Section 419(e) of the Code which provides
post-retirement medical benefits allocated to separate accounts for Key
Employees, as defined in Section 419A(d)(3)), in addition to this Plan may not
rely on the opinion letter issued by the Internal Revenue Service as evidence
that this Plan is qualified under Section 401 of the Code. If the Employer who
adopts or maintains multiple plans wishes to obtain reliance that such plans are
qualified, application for a determination letter should be made to the
appropriate Key District Director of Internal Revenue. The Adoption Agreement
may only be utilized in connection with basic plan document number 01-905.
IN WITNESS WHEREOF, the Employer, the Trustee, and the Plan
Administrator have caused this instrument to be duly executed in its name and
behalf by its duly authorized representatives this 14th day of December, 1990.
BOWLIN'S INCORPORATED
By:/s/ M.L. BOWLIN
-----------------------------------
M.L. BOWLIN
/s/ M.L. BOWLIN
--------------------------------------
M.L. BOWL IN, Trustee
AGREED TO AND ACCEPTED BY SPONSORING
ORGANIZATION
By: /s/ JAMES M. PARKER
---------------------------------
-31-
THE MILLER GROUP
LETTER OF AGREEMENT
This letter will confirm and constitute the agreement ("Agreement") as
of the 26th day of April, 1996 between Bowlin's Incorporated (hereinafter
"BOWLIN'S" or the "COMPANY") and Miller Capital Corporation dba The Miller Group
("TMG") pursuant to which TMG will furnish to the Company certain management
consulting and financial advisory services.
1. TMG Services.
-------------
TMG will perform the following services for the Company: (i) a due
diligence review of the Company's business plan and corporate structure; (ii)
financial consultation with respect to the Company's funding requirements and
projected associated costs to include preparation of reports and valuation
meaningful to a public equity funding; and (iii) advice and consultation with
respect to financial structure, markets and placement of any equity offering.
It is expressly acknowledged and agreed by the parties hereto that
TMG's obligations do not insure the successful negotiation of or obtaining of
any type of Financing for the Company and any efforts by TMG for obtaining
Funding for the Company shall be done on a "best efforts" basis only. TMG is not
a NASD registered broker/dealer.
It is expressly acknowledged and agreed by the parties hereto that TMG
and employees of TMG are independent contractors and are not employees or
officers of the Company.
2. Provision of Information by the Company.
----------------------------------------
The Company acknowledges that TMG, in order to perform its services
effectively under this Agreement and to satisfy such obligations, requires
prompt receipt of all material information with respect to the Company, its
operations and prospects. Accordingly, the Company will furnish to TMG copies of
all financial statements, tax returns, reports and agreements executed in
relation to the Company's business. The Company recognizes the necessity of
promptly notifying, and will promptly notify, TMG of all material developments
concerning the Company, its business and prospects and will supply TMG with
information sufficient to enable TMG to make a determination as to its
compliance with its own procedures as well as any legal requirements.
<PAGE>
Bowlin's Incorporated
April 22, 1996
Page 2
TMG will have access to the Company's legal and accounting
professionals and with prior approval from the Company access to outside legal
counsel and accounting professionals at the Company's expense.
TMG will accept and hold such Information in complete confidence for
their use as contemplated hereby. The confidentiality obligations assumed by TMG
hereunder will not apply to any Information which is presently in or
subsequently becomes part of the public domain or is otherwise generally known
or is obtained from any third party which is in possession of such Information
through no fault of TMG.
3. Compensation to TMG.
--------------------
For services rendered under this Agreement, TMG shall be paid:
A. TMG will receive $25,000 for the preparation of a Due
Diligence Review and Report to include a proposed valuation
analysis of the Company with $25,000 due upon execution of
this Agreement. The Report serves as the foundation from which
TMG will negotiate with potential financial advisors;
B. The term of this Agreement shall be for a minimum of six (6)
months for which the Company will pay to TMG a monthly
financial consulting fee of $5,500 starting with the execution
of this Agreement and payable monthly in advance thereafter.
In addition, out-of-pocket expenses incurred by TMG in
connection with the services to be performed by it hereunder
will be payable by the Company upon submission by TMG of
monthly invoices delineating such expense. Any expense over
$500 must be approved by the Company in advance;
C. TMG will receive a success fee ("Success Fee") in the form of
a cash payment in the amount of three (3%) percent of the
gross proceeds of any public Financing, including any form of
equity, convertible debt, debt with warrants, debt with equity
incentives to the lender, or any other form of equity, debt or
guarantees obtained by or invested in Bowlin's, payable upon
closing or receipt of funds by Bowlin's. In the event Bowlin's
sells more than five (5%) percent of Bowlin's to any party,
within twelve (12) months of this Agreement, TMG will be
entitled to a cash payment in the amount of three (3%) percent
of the gross proceeds of the investment. In addition, TMG will
be retained for an additional twelve (12) months as investor
relations advisor at the rate of $5,500 per month once the
Company becomes a public company;
<PAGE>
Bowlin's Incorporated
April 22, 1996
Page 3
D. Bowlin's shall have sole discretion in determining what
constitutes an acceptable Financing as contemplated by this
Agreement. TMG shall earn the Success Fee only upon the
closing or receipt of funds from a Financing as described in
3.C., above, and not merely for presenting a financing option
or prospective investor which in Bowlin's sole discretion is
unacceptable; and
E. In consideration of the services to be provided hereunder,
Bowlin's hereby agree to sell TMG (or its designee) 467 shares
of Bowlin's common stock, effective as of the date hereof, for
the sum of $100. The number of shares purchased shall be
subject to adjustment to prevent dilution in the event of (i)
any subdivision or combination of Bowlin's outstanding stock,
other than a public offering or (ii) any distribution by
Bowlin of a stock dividend to holders of Bowlin's Common Stock
or (iii) for any issuance of additional shares for any purpose
other than a cash sale of Bowlin's Common Stock.
4. Exclusivity.
------------
From the effective date of this Agreement, the Company and its officers
will not engage any other person or entity to serve as its agent or
representative to provide services similar to those to be provided by TMG
through the term of this Agreement without the prior written consent of TMG.
5. Company Covenant re TMG Employees.
----------------------------------
The Company recognizes that client service officers and other employees
of TMG are necessary for the continued servicing by TMG of its several clients.
Accordingly, the Company will not, during the term of this Agreement, and for a
period of two years after its termination, employ any client service officer,
account executive or other employee of TMG in any capacity.
6. Assignment.
-----------
TMG recognizes the personal nature of the services to be performed by
it and shall not transfer or assign to any other person, firm or corporation its
responsibilities and obligations under this Agreement without prior approval of
the Company. In the event that a merger, sale of assets or change of control of
the Company or TMG shall occur, this Agreement shall be binding upon the
successor and assigns of such party.
<PAGE>
Bowlin's Incorporated
April 22, 1996
Page 4
7. Integration.
------------
This writing constitutes the full and complete agreement of the
parties, which Agreement may not be modified by any method other than another
writing signed by the parties.
8. Headings.
---------
The paragraph headings have been inserted for convenience and shall not
be construed in a manner contrary to the text of this Agreement.
9. Attorney Fees.
--------------
In the event of any action or proceeding to enforce the provisions of
this Agreement, the prevailing party shall be entitled to its reasonable
attorney fees, such fees to be set by a judge and not by a jury and to be
included in any judgment entered in such action or proceeding.
10. Indemnification.
----------------
Both TMG and the Company agree to indemnify the other company's
respective directors, officers and employees against all losses and claims as is
customary in advisory engagements. The provisions of this section shall survive
any termination of the engagement that is the subject of this letter.
11. Effective Date.
---------------
This Agreement shall be effective as of the date and year first set
forth above.
<PAGE>
Bowlin's Incorporated
April 22, 1996
Page 5
AGREED AND ACCEPTED:
Please confirm that the foregoing correctly sets forth our mutual
understanding by signing and returning the copy of this Agreement provided for
that purpose.
Bowlin's Incorporated Miller Capital Corporation
Michael L. Bowlin Rudy R. Miller
By: /s/ M.L. Bowlin By: /s/ Rudy R. Miller
------------------- -------------------------------
Title: President & CEO Title: Chairman of the Board & CEO
----------------- -----------------------------
Date: 4/26/96 Date: 4/24/96
----------------- ------------------------------
BOWLIN
Outdoor Advertising and Travel Centers Incorporated and Subsidiaries
Schedule of Computation of Earnings per Share
Years ended January 31,
-----------------------
1995 1996
---- ----
Net Earnings $ 468,956 $ 383,619
=========== ==========
Weighted average common shares outstanding 2,778,680 3,000,618
Net Earnings per Share $ 0.17 $ 0.13
=========== ==========
Six months ended July 31,
-------------------------
1995 1996
---- ----
Net Earnings $ 297,024 $ 494,969
=========== ==========
Weighted average common shares outstanding 2,950,094 3,227,883
Net Earnings per Share $ 0.10 $ 0.15
=========== ==========
Note: Fully diluted earnings per share is equivalent to primary earnings per
share.
ARTHUR
ANDERSEN
September 12, 1996
Mr. Michael H. Sutton, Chief Accountant
Securities and Exchange Commission
450 Fifth Street N.W.
Washington, D.C. 20549
Dear Mr. Sutton:
We have read the section titled "Changes in Registrant's Certifying Accountants"
included in the Registration Statement on Form SB-2 dated September 27, 1996 of
BOWLIN Outdoor Advertising & Travel Centers Incorporated filed with the
Securities and Exchange Commission and are in agreement with the statements
contained therein.
Very truly yours,
ARTHUR ANDERSEN LLP
By /s/ Bradley J. Preber
Bradley J. Preber
DJA/p\bfm\rpt\bowlin\sec
Copy to:
Mr. Mike Rising
BOWLIN Outdoor Advertising & Travel Centers Incorporated
[RICCI & RICCI LETTERHEAD]
6400 Indian School Road NE
Suite 200
Albuquerque, New Mexico 8710
September 25, 1996
Mr. Michael H. Sutton, Chief Accountant
Securities and Exchange Commission
450 Fifth Street NW
Washington, D.C. 20549
Dear Mr. Sutton:
We have read the section titled "Changes in Registrant's Certifying Accountants"
included in the Registration Statement on form SB-2 dated September 25, 1996 of
Bowlin Outdoor Advertising & Travel Centers Incorporated filed with the
Securities and Exchange Commission and are in agreement with the statements
contained therein.
Very truly yours,
RICCI & RICCI
/s/ Sandra K. Ricci
Sandra K. Ricci, CPA
Partner
LIST OF SUBSIDIARIES
Dragoon Water Company, Inc.
BMI Inc.
Los Cuatros Apartments Limited Partnership
Independent Auditors' Consent
-----------------------------
The Board of Directors
BOWLIN Outdoor Advertising
& Travel Centers Incorporated:
We consent to the use of our reports included herein and to the reference to our
firm under the headings "Selected Consolidated Financial Data," "Experts" and
"Changes in Registrant's Certifying Accountants" in the prospectus.
KPMG Peat Marwick LLP
Albuquerque, New Mexico
September 26, 1996
[RICCI & RICCI LETTERHEAD]
6400 Indian School Road NE.,
Suite 200
Albuquerque, New Mexico 87110
Board of Directors
Bowlin Outdoor Advertising &
Travel Centers Incorporated
Independent Auditors' Consent
We consent to the use of our reports included herein and to the reference to our
firm under the headings "Selected Consolidated Financial Data," "Experts," and
"Changes in Registrant's Certifying Accountants" in the prospectus.
/s/ Ricci & Ricci
Albuquerque, New Mexico
Septenber 25, 1996
Exhibit 99.1
CONSENT OF JAMES A. CLARK
I, James A. Clark, do hereby consent to be named as a nominee to the
Board of Directors of BOWLIN Outdoor Advertising & Travel Centers Incorporated,
a Nevada corporation (the "Company"), in the Company's Registration Statement on
Form SB-2, including any pre-effective and post-effective amendments thereto, to
be filed with the Securities and Exchange Commission.
/s/ James A. Clark
James A. Clark
Exhibit 99.2
CONSENT OF BRIAN MCCARTY
I, Brian McCarty, do hereby consent to be named as a nominee to the
Board of Directors of BOWLIN Outdoor Advertising & Travel Centers Incorporated,
a Nevada corporation (the "Company"), in the Company's Registration Statement on
Form SB-2, including any pre-effective and post-effective amendments thereto, to
be filed with the Securities and Exchange Commission.
/s/ Brian McCarty
Brian McCarty
