United States Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended April 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXHANGE ACT For
the transition period from [ ] to [ ]
Commission File Number 0-21451
BOWLIN Outdoor Advertising & Travel Centers Incorporated
(Exact name of registrant as specified in its charter)
NEVADA 85-0113644
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
150 LOUISIANA NE, ALBUQUERQUE, NM 87108
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 505-266-5985
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
As of June 12, 1998, 4,384,848 shares of the issuer's common stock were
outstanding.
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Page No.
--------
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets as of
April 30, 1998 and January 31, 1998...............................2
Consolidated Statements of Income for the
Three Months Ended April 30, 1998 and 1997........................4
Consolidated Statements of Stockholders'
Equity for the three months ended April 30, 1998..................5
Consolidated Statements of Cash Flows for
the Three Months Ended April 30, 1998 and 1997....................6
Notes to the Consolidated Financial Statements....................8
Item 2. Management's Discussion and
Analysis or Plan of Operation.....................................9
Item 3. Quantitative and Qualitative
Disclosures About Market Risk....................................13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................14
Item 2. Changes in Securities and Use of Proceeds........................14
Item 3. Defaults Upon Senior Securities..................................14
Item 4. Submission of Matters to a Vote of Security Holders..............14
Item 5. Other Information................................................14
Item 6. Exhibits and Reports on Form 8-K.................................14
Signatures ......................................................14
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
Assets
(In thousands, except share data)
April 30, January 31,
1998 1998
(Unaudited) (Audited)
----------- ---------
Current assets:
Cash and cash equivalents $ 3,279 $ 4,054
Accounts receivable, net 688 579
Notes receivable, related parties -
current maturities 15 30
Notes receivable - current maturities 22 7
Inventories 3,929 3,623
Prepaid expenses 506 448
Income taxes 34 90
Other current assets 3 4
----------- -----------
Total current assets 8,476 8,835
Investment and long-term receivables:
Investment in partnership 17 17
Notes receivable, related parties,
less current maturities 43 20
Notes receivable, less current
maturities 14 59
----------- -----------
Total investment and long-term
receivables 74 96
Property & equipment, net 18,196 15,728
Intangible assets, net 1,314 1,200
----------- -----------
Total assets $ 28,060 $ 25,859
=========== ===========
(Continued)
2
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
Liabilities and Stockholders' Equity
(In thousands, except share data)
April 30, January 31,
1998 1998
(Unaudited) (Audited)
----------- -----------
Current liabilities:
Short-term borrowing, bank $ 165 $ 745
Accounts payable 1,393 1,351
Long-term debt, current maturities 1,107 779
Accrued liabilities 359 456
----------- -----------
Total current liabilities 3,024 3,331
Deferred income taxes 215 177
Long-term debt, less current maturities 10,449 8,124
----------- -----------
Total liabilities 13,688 11,632
Stockholders' equity
Common stock, $.001 par value; authorized
100,000,000 shares; issued and outstanding
4,384,848 shares 4 4
Additional paid-in capital 11,604 11,604
Retained earnings 2,764 2,619
----------- -----------
Total stockholders' equity 14,372 14,227
----------- -----------
Total liabilities and stockholders' equity $ 28,060 $ 25,859
=========== ===========
See accompanying notes to consolidated financial statements.
3
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BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands, except share and per share data)
For the Three Months Ended
------------------------------
April 30, April 30,
1998 1997
(Unaudited) (Unaudited)
----------- -----------
Gross sales $ 7,124 6,682
Less discounts on sales 61 77
----------- -----------
Net sales 7,063 6,605
Cost of goods sold 4,548 4,459
----------- -----------
Gross profit 2,515 2,146
General and administrative expenses (1,687) (1,568)
Other operating income 1 32
Depreciation and amortization (409) (218)
----------- -----------
Operating income 420 392
Other non-operating income (expense):
Interest income 28 82
Gain on sale of property and equipment 4 105
Interest expense (214) (154)
----------- -----------
Total other non-operating income (expense), net (182) 33
----------- -----------
Income before income taxes 238 425
Income taxes 93 170
----------- -----------
Net income $ 145 255
=========== ===========
Weighted average common and common dilutive
potential shares outstanding 4,384,848 4,384,848
Earnings per share
Basic and Diluted $ .03 .06
=========== ===========
See accompanying notes to consolidated financial statements.
4
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
(In thousands)
<TABLE>
<S> <C> <C> <C> <C> <C>
For the Three Months Ended
--------------------------
Common Additional
Number stock, pain-in Retained
of shares at par capital earnings Total
--------- ------ ------- -------- -----
Balance at January 31, 1998 4,384,848 $ 4 $ 11,604 $ 2,619 $ 14,227
Net income 145 145
--------- ------ ---------- -------- ---------
Balance at April 30, 1998 4,384,848 $ 4 $ 11,604 $ 2,764 $ 14,372
========= ====== ========== ======== =========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<S> <C> <C>
For the Three Months Ended
--------------------------------
April 30, April 30,
1998 1997
(Unaudited) (Unaudited)
----------- -----------
Cash flows from operating activities:
Net income $ 145 $ 255
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 409 218
Gain on sales of property and equipment (4) (105)
Deferred income taxes 38 13
Imputed interest 8 -
Changes in operating assets and
liabilities (406) (488)
----------- -----------
Net cash provided by (used in) operating activities 190 (107)
Cash flows from investing activities:
Proceeds from sale of assets 8 -
Business acquisitions (note 2) (915) (2,090)
Purchases of property and equipment, net (365) (653)
Proceeds (disbursements) on notes receivable, net 22 (9)
----------- -----------
Net cash used in investing activities (1,250) (2,752)
Cash flows from financing activities:
Borrowings on short-term debt 165 -
Borrowings on long-term debt 1,040 464
Payments on short-term debt (745) (219)
Payments on long-term debt (175) -
----------- -----------
Net cash provided by financing activities 285 245
Net decrease in cash and cash equivalents (775) (2,614)
Cash and cash equivalents at beginning of period 4,054 7,519
----------- -----------
Cash and cash equivalents at end of period 3,279 4,905
=========== ===========
</TABLE>
(Continued)
6
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
(In thousands)
April 30, April 30,
1998 1998
(Unaudited) (Unaudited)
----------- -----------
Supplemental disclosure of cash flow information:
Noncash investing and financing activities:
Acquisition of outdoor advertising assets
in exchange for long-term debt $ 1,650 $ 2,775
=========== ===========
Acquisition of covenants not-to-compete
in exchange for long-term debt $ 130 $ -
=========== ===========
Acquisitions:
Fair value of assets acquired and liabilities
assumed at the date of the acquisitions were
as follows:
Accounts receivable $ 34 $ 74
Prepaid expenses 31 15
Billboards 595 1,090
Vehicles and equipment 55 63
Goodwill - 863
Accounts payable - (15)
=========== ===========
See accompanying notes to consolidated financial statements.
7
<PAGE>
BOWLIN
OUTDOOR ADVERTISING & TRAVEL CENTERS
INCORPORATED AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1. The consolidated financial statements for the three months ended April 30,
1998 and April 30, 1997 are unaudited and reflect all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion
of management, necessary for a fair presentation of the financial position
and operating results for the interim periods. The condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements and notes, together with management's discussion and
analysis of financial condition and results of operations, contained in the
Company's annual report on Form 10-KSB for the fiscal year ended January
31, 1998. Results of operations for interim periods are not necessarily
indicative of results that may be expected for the year as a whole.
2. Acquisitions. On February 1, 1998, the Company acquired the outdoor
advertising assets of Big-Tex Outdoor Advertising (Big-Tex) for 1,559,000.
The Company paid $559,000 from the proceeds of the initial public offering
and financed $1,000,000 with bank debt. Big-Tex owned and operated
approximately 285 poster and painted faces in the Brownwood, Texas metro
area. The Company also entered into a non-compete agreement with the former
principals of Big-Tex for a period of ten years from the date of the
acquisition, payable in ten annual installments of $10,000 beginning in
February 1999. The acquisition was accounted for as a purchase. The results
of Big-Tex's operations have been combined with the Company's since the
date of acquisition. The purchase price was allocated to the assets
acquired based on their estimated fair values and no goodwill was recorded
in connection with the purchase.
On March 3, 1998, the Company acquired the outdoor advertising assets of
Norwood Outdoor, Inc. (Norwood) for $1,006,000. The Company paid $350,000
from the proceeds of the initial public offering, $6,000 cash and financed
$650,000 with bank debt. Norwood owned and operated approximately 140
poster and painted bulletin faces in the Brady, Texas metro area. The
acquisition was accounted for as a purchase. The results of Norwood's
operations have been combined with the Company's since the date of
acquisition. The purchase price was allocated to the assets acquired based
on their estimated fair values and no goodwill was recorded in connection
with the purchase.
The following unaudited proforma consolidated results of operations have
been prepared as if the acquisitions of Big-Tex and Norwood occurred on
February 1, 1998 and 1997.
(in thousands except per share amounts)
Three Months Ended
April 30
(unaudited)
-----------
1998 1997
---- ----
Gross sales $ 7,149 $ 6,892
Net income 140 243
Earnings per basic
and diluted share $ .03 $ .06
========= =========
8
<PAGE>
The proforma information is presented for informational purposes only and
is not necessarily indicative of the results of operations that actually
would have been achieved had the acquisition been consummated as of that
time, nor is it intended to be a projection of future results.
3. Subsequent Events: On May 1, 1998 the Company purchased the outdoor
advertising assets of Edgar Outdoor Advertising Co. for $918,000. The
Company paid $18,000 cash at closing and $900,000 from the proceeds of the
initial public offering. Edgar owned and operated approximately 62 painted
bulletin faces in central Texas.
On June 1, 1998 the Company purchased the outdoor advertising assets of J &
J Sign Company, located in Silver City, New Mexico. The Company paid
$275,000 from the proceeds of the initial public offering and will issue
$100,000 of the Company's stock within 180 days of closing based on the
closing price of the stock on June 1, 1998. J & J owned and operated
approximately 40 painted bulletin faces in Southwestern New Mexico.
4. Available Financing: On May 1, 1998, the Company secured a $3.65 million
loan agreement with one of its existing lenders. The note carries a
variable interest rate based on the bank's prime lending rate (8.5% on May
1, 1998) and matures in May 2005. The primary purpose of the agreement was
to consolidate short-term financing for three outdoor advertising
acquisitions and the construction line of credit.
Item 2. Management's Discussion and Analysis of Consolidated Financial Condition
and Results of Operations.
Overview
The following is a discussion of the consolidated financial condition and
results of operations of the Company as of and for the two fiscal periods ended
April 30, 1998 and 1997. This discussion should be read in conjunction with the
Consolidated Financial Statements of the Company and the related Notes included
in the Company's Form 10-KSB for the fiscal year ended January 31, 1998.
The Company operates in two industry segments, travel centers and outdoor
advertising. In order to perform 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 revenue, 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 operating data and corporate expense data for the interim periods
presented.
The forward-looking statements included in Management's Discussion and Analysis
or Plan of Operation, which reflect management's best judgment based on factors
currently known, involve risks and uncertainties. Actual results could differ
materially from those anticipated in these forward-looking statements as a
result of a number of factors, including but not limited to those discussed.
9
<PAGE>
Results of Operations
The following table presents certain income and expense items derived from the
Consolidated Statements of Income for the three months ended April 30 (unaudited
and amounts in thousands):
% Incr/
1998 1997 (Decr)
---- ---- ------
Travel centers:
Gross sales $ 5,552 $ 5,602 (0.9%)
Discounts on sales 61 77 (20.8%)
-------- --------
Net sales 5,491 5,525 (0.6%)
Cost of sales 3,856 3,903 (1.2%)
-------- --------
1,635 1,622 0.8%
General and administrative expenses 1,325 1,262 5.0%
Depreciation and amortization 141 89 58.4%
-------- --------
Operating income 169 271 (37.6%)
Outdoor advertising:
Gross sales 1,572 1,050 49.7%
Direct operating expenses 692 556 24.5%
-------- --------
880 494 78.1%
General and administrative expenses 251 164 53.0%
Depreciation and amortization 241 99 143.4%
-------- --------
Operating income 388 231 68.0%
Corporate and other:
General and administrative expenses (111) (112) (0.9%)
Depreciation and amortization (27) (30) (10.0%)
Interest expense (214) (154) 39.0%
Other income, net 33 219 (84.9%)
-------- --------
Income before taxes 238 425 (40.0%)
Income taxes 93 170 (45.3%)
-------- --------
Net income $ 145 $ 255 (43.1%)
======== ========
Comparison of the Three Months Ended April 30, 1998 and April 30, 1997
Travel Centers. Gross sales at the Company's Travel Centers decreased slightly
by 0.9% to $5.552 million for the three months ended April 30, 1998 from $5.602
million for the three months ended April 30, 1997. This decrease is primarily
attributable to a 16.6% reduction in restaurant sales which were $639,000 for
the three months ended April 30,1998 compared with $766,000 for the three months
ended April 30,1997. Gasoline sales decreased 3.2% to $2.973 million for the
three months ended April 30, 1998 from $3.071 for the same period in 1997.
Wholesale gasoline sales increased 76.6% to $279,000 for the three months ended
10
<PAGE>
April 30, 1998, as compared to $158,000 for the three months ended April 30,
1997. Merchandise sales increased 2.8% to $1.585 million for three months ended
April 30,1998 as compared to $1.542 million for the three months ended April 30,
1997. Cost of goods sold for the travel centers decreased 1.2% to $3.856 million
for the three months ended April 30, 1998 from $3.903 million for the three
months ended April 30, 1997, primarily as result of the reduction in fuel prices
and restaurant goods which was offset by an increase of wholesale gasoline.
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
increased to $1.325 million for the three months ended April 30, 1998 from
$1.262 million for the three months ended April 30, 1997.
Depreciation and amortization expense increased by 58.4% to $141,000 for the
three months ended April 30, 1998 as compared to $89,000 for the three months
ended April 30, 1998. The increase is attributable to additions of depreciable
assets during the current interim periods.
The above factors contributed to an overall decrease in travel center operating
income of 37.6% to $169,000 for the three months ended April 30,1998 from
$271,000 for the three months ended April 30, 1996. This decrease is primarily
attributable to increases in general and administrative expenses and
depreciation.
Outdoor Advertising. Gross sales from the Company's Outdoor Advertising
increased 49.7% to $1.572 million for the three months ended April 30, 1998 from
$1.050 million for the three months ended April 30, 1997. The increase was
primarily attributable to increased usage of available sign inventory, increases
in rates and the continual assimilation of the Company's acquisitions.
Direct operating expenses related to outdoor advertising consist of 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 operating costs increased
24.5% to $692,000 for the three months ended April 30, 1998 from $556,000 for
the three months ended April 30, 1997, principally due to the addition of
production personnel, the assimilation of direct operating costs associated with
the acquisitions and increased costs related to repairs and maintenance of
existing advertising displays.
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, as a result of additional personnel, increased 53.0% to
$251,000 for the three months ended April 30, 1998 from $164,000 for the three
months ended April 30, 1997.
Depreciation and amortization expense increased 143.4% to $241,000 for the three
months ended April 30, 1998 from $99,000 for the three months ended April 30,
1997. The increase is attributable to scheduled depreciation of advertising
display structures and machinery and equipment primarily associated with
acquisitions as well as the amortization of goodwill and non-compete covenants.
The above factors contributed to the increase in outdoor advertising operating
income of 68.0% to $388,000 for the three months ended April 30, 1998 from
$231,000 for the three months ended April 30, 1997. In addition, earnings before
interest, taxes, depreciation and amortization (EBITDA) for outdoor advertising
increased 90.6% to $629,000 for the three months ended April 30, 1998 from
$330,000 for the three months ended April 30, 1997. The EBITDA margin for
outdoor advertising increased to 40.0% for the three months ended April 30, 1998
as compared to 31.4% for the three months ended April 30, 1997.
11
<PAGE>
Corporate and Other. General and administrative expenses for corporate and other
operations of the Company consist primarily of executive and administrative
compensation and benefits, accounting, legal and investor relations fees.
General and administrative expenses decreased slightly to $111,000 for the three
months ended April 30, 1998 as compared to $112,000 for the three months ended
April 30, 1997.
Depreciation and amortization expenses for the Company's corporate and other
operations consist of depreciation associated with the corporate headquarters,
furniture and fixtures and vehicles. Depreciation and amortization expenses
decreased to $27,000 for the three months ended April 30, 1998 as compared to
$30,000 for the three months ended April 30, 1997.
Interest expense increased by 39.0% to $214,000 for the three months ended April
30, 1998 as compared to $154,000 for the three months ended April 30, 1997. The
increase is primarily attributable to the increase in debt associated with the
Company's acquisitions.
Other income, net, primarily includes operating rental revenues from the
Company's former subsidiary, gains and/or losses from the sales of assets, and
interest income. Other income, net, decreased 84.9% to $33,000 for the three
months ended April 31, 1998 as compared to $219,000 for the three months ended
April 30, 1997. The decrease is due to certain non-operating gains in 1997 not
present in 1998 and a decrease in interest income.
Income before taxes decreased 44.0% to $238,000 for the three months ended April
30, 1998 as compared to $425,000 for the three months ended April 30, 1997. As a
percentage of gross revenues, income before taxes decreased to 3.3% for the
three months ended April 30, 1998 as compared to 6.4% for the three months ended
April 30, 1997.
Income taxes were $93,000 for the three months ended April 30, 1998 as compared
to $170,000 for the three months ended April 30, 1997, as the result of lower
pretax income.
The foregoing factors contributed to the Company's decrease in net income for
the three months ended April 30, 1998 to $147,000 as compared to $255,000 for
the three months ended April 30, 1997.
Liquidity and Capital Resources
At April 30, 1998, the Company had working capital of $5.452 million and a
current ratio of 2.8:1, compared to working capital of $5.504 million and a
current ratio of 2.7:1 at January 31, 1998. Net cash provided by operating
activities was $190,000 for the three months ended April 30, 1998 as compared to
net cash used by operating activities of $107,000 for the three months ended
April 30, 1997. Net cash provided in the current quarter is primarily
attributable to increased depreciation and amortization from acquisitions and
decreases in operating assets and liabilities. Net cash used in the prior
quarter was primarily the result of greater operating assets and liabilities and
gains on the sale of property and equipment.
Net cash used for investing activities for the three months ended April 30, 1998
was $1.250 million, of which $915,000 was used in the purchase of the outdoor
advertising assets of Big-Tex and Norwood and $365,000 was used for purchases of
property and equipment. For the three months ended April 30, 1997, net cash used
for investing activities was $2.752 million, of which $2.090 million was used
for acquisitions. In addition, $300,000 was used for the purchase of land for
the construction of a new travel center complex.
Net cash provided by financing activities for the three months ended April 30,
1998 was $285,000 as compared to $245,000 for the three months ended April 30,
1997. At April 30, 1998 and 1997 financing activities were a result of
borrowings and payments on debt.
12
<PAGE>
On May 1, 1998 the Company purchased the outdoor advertising assets of Edgar
Outdoor Advertising Co. for $918,000. The Company paid $18,000 cash at closing
and $900,000 from the proceeds of the initial public offering. Edgar owned and
operated approximately 62 painted bulletin faces in central Texas.
On June 1, 1998 the Company purchased the outdoor advertising assets of J & J
Sign Company, located in Silver City, New Mexico. The Company paid $275,000 from
the proceeds of the initial public offering and will issue warrants for $100,000
of the Company's stock within 180 days of closing based on the closing price of
the stock on June 1, 1998. J & J owned and operated approximately 40 painted
bulletin faces in Southwestern New Mexico
On May 1, 1998, the Company secured a $3.65 million loan agreement with one of
its existing lenders. The note carries a variable interest rate based on the
bank's prime lending rate (8.5% on May 1, 1998) and matures in May 2005. The
primary purpose of the agreement was to consolidate short-term financing for
three outdoor advertising acquisitions and the construction line of credit.
Groundbreaking has commenced on the construction of a new travel center located
approximately 20 miles west of Albuquerque, New Mexico, on interstate 40. The
new travel center is scheduled to open in the fall of 1998. In addition, the
Company expects to complete the upgrade of one travel center by July of 1998.
Although the Company does not have any agreements in place, it will continue
discussions with acquisition candidates throughout the Southwestern United
States. The Company has not executed a letter of intent or other agreement,
binding or non-binding, to make such acquisitions. Any such acquisition would be
subject to the negotiation and execution of definitive agreements, appropriate
financing arrangements, performance of due diligence, approval of the Company's
Board of Directors, receipt by the Company of unqualified audited financial
statements, and the satisfaction of other customary closing conditions. The
Company would likely finance any such acquisitions with cash, additional
indebtedness or a combination of the two. To the extent that any such
acquisition would be paid for by the Company in cash, the Company could decide
to use a portion of the remaining net proceeds from the IPO, use funds from its
ongoing operations, seek additional financing from a commercial lender or some
combination of the foregoing. Any commercial financing obtained for purposes of
acquiring additional assets is likely to impose certain financial and other
restrictive covenants upon the Company and increase the Company's interest
expense.
Item 3. Quantitative and Qualitative Disclosures About Market Risk. Not
required.
13
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings. None.
Item 2. Changes in Securities and Use of Proceeds. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submissions of Matters to a Vote of Security Holders. None.
Item 5. Other Information. None.
Item 6. Exhibits and Reports on Form 8-K.
(a). Exhibit No. Exhibit Name
----------- ------------
2.5 Purchase Agreement dated May 1, 1998 between the
Registrant and Edgar Outdoor Advertising Co.
10.45 Promissory Note dated as of May 1, 1998, payable by
the Registrant to Norwest Bank in the aggregate
amount of $3,650.000.
27 Financial Data Schedule
(b). No reports were filed on Form 8-K during the three months ended
April 30, 1998.
Signatures
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: June 12, 1998
BOWLIN
Outdoor Advertising & Travel Centers Incorporated
/s/ Michael L. Bowlin
-----------------------------------------
Michael L. Bowlin, Chairman of the Board,
President and Chief Executive Officer
/s/ Nina J. Pratz
-----------------------------------------
Nina J. Pratz, Chief Financial Officer
(Principal Financial and Accounting Officer)
ASSET PURCHASE AGREEMENT
THIS AGREEMENT is hereby made this, April 30, 1998 by and between Edgar Outdoor
Advertising Co., a Texas corporation ("Edgar" or the "Company"), Michael T.
Edgar, individually, the sole shareholder of Edgar Outdoor ("Shareholder"), and
Bowlin Outdoor Advertising & Travel Centers Incorporated, a Nevada corporation
("Bowlin").
Purpose of Agreement
Bowlin desires to purchase and Edgar desires to sell certain tangible and
intangible assets that comprise a certain portion of Edgar's business known as
"Edgar Outdoor Advertising Co." Therefore, in consideration of the premises and
of the mutual representations, warranties and covenants herein contained, the
parties hereby agree as follows:
Terms and Conditions
Purchase Price
The purchase price shall be a total of $900,000 paid at closing.
In addition to the amount specified above, Bowlin will pay to Edgar at closing:
(a) an amount equal to the amount of any prepaid rents, leases, permits and
taxes as specified in attached Exhibit E and incorporated for all purposes
herein
The purchase price, and payments noted above, shall be the sole considerations
paid by Bowlin under this agreement.
Date of Closing
The parties contemplate that Closing shall take place on May 1, 1998. If Closing
does not occur by that date, it will occur as soon thereafter as Bowlin is able
to complete its due diligence investigation. The parties agree that Bowlin's
obligation to complete this purchase is contingent upon Bowlin being satisfied,
in its sole discretion, that all representations made to it concerning Edgar's
assets are true; that the financial condition, books, and accounts of Edgar are
sound; that the land leases, outdoor advertising permits and advertising
contracts are of satisfactory condition to Bowlin; and that the value of the
assets being transferred is not less than the purchase price. Transfer of Assets
to Bowlin, and Transfer of Funds to Michael T. Edgar shall take place on May 1,
1998.
1
<PAGE>
Transfer of Assets
At closing, Edgar will sell, transfer, assign, convey and deliver to Bowlin free
and clear of any liens, debts, or encumbrances, and Bowlin will purchase, accept
and acquire from Edgar all of the Assets listed in Exhibit A attached hereto and
incorporated for all purposes herein.
In addition to the Assets listed in Exhibit A, Edgar will sell, transfer,
assign, convey and deliver to Bowlin the right to use the names "Edgar" and
"Edgar Outdoor Advertising Co." and variants of those names for a period of six
months or longer if circumstances require for Bowlin's to have time to change
identifications on the signs acquired.
Instruments of Transfer
(a) Edgar and Shareholder's Deliveries. At the closing, Edgar shall
deliver to Bowlin:
i. A bill of sale transferring to Bowlin title to the Assets as
provided herein, in form and substance acceptable to Bowlin;
ii. A ten (10) year non-competition agreement for Michael T. Edgar
(See attached Exhibit B);
iii. Letter(s) from Edgar and Shareholder to the Texas Department of
Transportation regarding transfer of the applicable outdoor
advertising permits from Shareholder to Bowlin in the form of
attached Exhibit F;
iv. Assignment of land lease agreements pertinent to sign sites
located on property owned by third parties (See attached Exhibit
G);
v. Such other bills of sale, titles and other instruments of
assignment, transfer and conveyance as Bowlin shall reasonably
request, in recordable form, where appropriate, and properly
executed, evidenced and notarized where appropriate in such form
as shall be necessary or appropriate to vest in Bowlin good title
to the Assets.
vi. A Corporate resolution signed by Edgar and Shareholder
authorizing Michael T. Edgar to act on behalf of the corporation
and sell assets thereof.
(b) Bowlin's Deliveries. At the closing, Bowlin shall deliver to Edgar:
i. A wire transfer for the cash portion of the purchase price as
specified herein;
ii. Checks in an amount sufficient to pay the net amount due for
items listed in Exhibit E, and
iii. A check payable to the Texas Highway Beautification Fund in the
amount of $1075.00 for the transfer of Edgar's outdoor
advertising permits (see attached Exhibit F).
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<PAGE>
(c) Other Transfer Instruments. Following the Closing, at the request of
Bowlin, Edgar shall deliver any further Instruments and take all
reasonable action as may be necessary or appropriate to vest in Bowlin
all of Edgar's title to the assets.
No Assumption of Liabilities
It is expressly understood and agreed by the parties hereto that Bowlin
assumes no debts, liabilities (including tax liabilities) or obligations
(contractual or otherwise) of Edgar or Shareholder or any other debts,
liabilities or obligations related to the conduct of Edgar's business.
Representations and Warranties
Edgar and Shareholder represent and warrant to Bowlin as of the date hereof
and on the closing date as follows (all representations and warranties
being joint and several):
(a) Authority. Edgar has the legal authority to sell, transfer, and
deliver to Bowlin the tangible and intangible assets of the business
known as "Edgar Outdoor Advertising Co."
(b) Title. Edgar has good and indefeasible title to all properties, assets
and leasehold estates, real and personal, tangible and intangible, to
be transferred pursuant to this Agreement subject to no mortgage,
pledge, lien, conditional sales agreement, encumbrance or charge
except for mortgages, liens or encumbrances on the real property fee
simple estates of the ground lessors.
(c) Omitted
(d) Violations, Suits, Claims, etc. Edgar is not in default under any law
or regulation, or under any order of any court or federal, state,
municipal or other governmental department, commission, board, bureau,
agency or instrumentality wherever located, and to Edgar's knowledge
and belief there are (1) no claims, actions, suits or proceedings
instituted or filed and (2) no claims actions, suits or proceedings
threatened presently or which in the future may be threatened or
asserted against or affecting Edgar at law or in equity, or before or
by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality wherever located,
and (3) there are no potential claims, demands, liens, encumbrances,
or debts with regard to the assets that are the subject of this sale
or that may create for Bowlin any environmental or regulatory
liability except for signs #110-#111-#128.
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<PAGE>
(e) Tax Returns. Edgar has filed or will file all requisite federal, state
and other tax returns due for all fiscal periods ended on or before
the date of this agreement. There are no claims against Edgar for
federal, state or other taxes for any period or periods to and
including the date of this agreement.
(f) Sole Shareholder. Shareholder is the sole owner of all issued and
outstanding capital stock of the Company, and no other person has any
right to acquire shares of capital stock of the Company.
(g) Organization, Good Standing, Power, etc. Edgar (a) is a corporation
duly organized, validly existing and in good standing under the laws
of the State of Texas; and (b) has the requisite power and authority
to own, lease and operate its properties and to carry on its business
as currently conducted.
(h) Authorizations and Enforceability. Edgar has all requisite power and
authority to execute, deliver and perform this Agreement and the other
agreements and instruments delivered pursuant hereto and to consummate
the transactions contemplated hereby. This Agreement and the other
agreements and instruments delivered pursuant hereto have been duly
and validly authorized, executed and delivered by Edgar and
constitutes the valid and binding obligations of Edgar, fully
enforceable in accordance with their terms.
(i) Effect of Agreement. The execution, delivery and performance of this
Agreement by Edgar and Shareholder and the consummation of the
transactions contemplated hereby will not, with or without the giving
of notice or the lapse of time, or both: (a) violate any material
provision of law, statute, rule or regulation to which Company is
subject; (b) violate any judgment, order, writ or decree of any court,
arbitrator or governmental agency applicable to Company; or (c) result
in a material breach of or material conflict with any term, covenant,
condition or provision of, result in the modification or termination
of, constitute a material default under, or result in the creation or
imposition of, any lien, security interest, charge or encumbrance upon
any of the Assets pursuant to any charter, bylaw, commitment, contract
or other agreement or instrument, to which Company is a party or by
which any of its Assets is bound.
(j) Permits, Licenses, Compliance with Applicable Laws and Court Orders.
Company has all requisite corporate power and authority, and all
permits, licenses and approvals of governmental and administrative
authorities, to own, lease and operate its properties and to carry on
its business as presently conducted; all such permits, licenses and
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<PAGE>
approvals material to the conduct of the business of Company are in
full force and effect. Company's conduct of its business does not
materially violate or infringe any applicable law, statute, ordinance
or regulation. Company is not in default in any respect under any
executive, legislative, judicial, administrative or private (such as
arbitration) ruling, order, writ, injunction or decree. EXCEPT AS
LISTED: City of Gainesville permits for #110 and #111 have not been
paid for 1997 and have not been invoiced for 1998. No state permit was
required when these signs were built. The following signs were
acquired from other companies and no city permits were required when
the signs were built, but may now be required for new signs. These
signs are as follows: City of Athens:
#301-#302-#303-#304-#306-#307-#308-#309-#311-#313, Ennis #122-#123,
Rice -#124, and Corsicana -#125-#126-#127.
(k) Financial Information. All financial information relating to the
Assets or the business and provided to Bowlin by Edgar have been
prepared from the books and records of seller in accordance with
generally accepted accounting principles and fairly and accurately
present the financial condition of Edgar and the business relating to
the Assets as of the date of such information.
(l) Absence of Undisclosed Liabilities. Edgar has no liabilities other
than those that are expressly disclosed in the financial information
provided to Bowlin. Between the date of this Agreement and the
Closing, there will be no material change in the financial position of
Edgar.
(m) Agreements, Plans, Arrangements, etc. Except as set forth in Exhibit
A, Company is not a party to, nor is Company or any of the Assets
bound or affected by, any oral or written:
(1) lease agreement (whether as lessor or lessee) relating to real or
personal property;
(2) license agreement, assignment or other contract (whether as
licensor or licensee, assignor or assignee) relating to
trademarks, trade names, patents, copyrights (or applications
therefor);
(3) agreement with any business broker with respect to this
transaction;
(4) agreement with any supplier, distributor, franchisor, dealer,
sales agent or representative;
(5) joint venture or partnership agreement with any other person;
(6) agreement with any bank, factor, finance company or similar
organization regarding the financing of accounts receivable or
other extensions of credit;
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(7) agreement granting any lien, security interest or mortgage on any
Asset or other property of Company, including, without
limitation, any factoring agreement for the assignment of
accounts receivable;
(8) agreement for the Construction or modification of any Asset or
leasehold interest of Company except #148 is still under
construction but will be finished by Edgar as soon as possible
with all associated liabilities paid;
(9) agreement with any employee, consultant, or independent
contractor providing personal services to Company.
(n) Acquisition Agreements. There are no agreements relating to the
acquisition of the stock, business or Assets of Company to which
Company is a party, other than this Agreement.
(o) Status of Real Property. Neither Company nor Shareholder has received
any notice of noncompliance with respect to real property on which any
of the Assets are located (the "Real Property") with any applicable
statutes, laws, codes, ordinances, regulations or requirements
relating to fire, safety, health or environmental matters or
noncompliance with any covenants, conditions and restrictions (whether
or not of record) or local, municipal, regional, state or federal
requirements or regulations. To the best of Company's and
Shareholder's knowledge, there has been no release or discharge on or
under the Real Property by the Company of any toxic or hazardous
substance, material or waste which is or has been regulated by any
governmental or quasi-governmental authority or is or has been listed
as toxic or hazardous under any applicable local, state or federal
law. To the best of the Company's and Shareholder's knowledge, there
are no subsurface or other conditions related to toxic or hazardous
waste affecting the Real Property or any portion or component thereof,
and there are no underground storage tanks located on the Real
Property.
(p) Defects. To the best of Company's and Shareholder's knowledge, there
are no structural or operational defects in any of the Assets.
(q) Leases Current. All obligations of the Company under all existing
lease agreements which are required by such agreements to have been
performed by Company have been fulfilled by the Company, including the
payment by the Company of all lease payments due and payable through
the date hereof, except for the following: Lease #110 (Gainsville -
not paid) -#113-#128 (Corsicana - no contact) -#124 (Month to Month
lease-new land owner as of April wants to renegotiate)-#144 (Palmer -
has not paid).
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Bowlin represents and warrants to Edgar and Shareholder as of the date hereof
and the Closing date as follows:
(a) Organization. Bowlin is a validly existing corporation organized under
the laws of the State of Nevada and has all requisite corporate power
and authority to own, operate and lease its properties and assets.
(b) Authority. Bowlin has full corporate power, authority and legal rights
to execute and deliver, and to perform its obligations under this
Agreement, and has taken all necessary action to authorize the
purchase hereunder on the terms and conditions of this Agreement and
to authorize the execution, delivery and performance of this
Agreement. This Agreement has been duly executed by Bowlin, and
constitutes a legal, valid and binding obligation of Bowlin
enforceable in accordance with its terms.
(c) Compliance with Instruments, Consents, Adverse Agreements. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will conflict with or result in any
violation of or constitute a default under the articles of
incorporation or the by-laws of Bowlin, or any Law, Instrument, lien
or other Contract by which Bowlin is bound. Bowlin is not a party or
subject to any Contract, or subject to any article or other corporate
restriction or any Law which materially and adversely affect the
business operation, prospects, properties, assets or condition,
financial or otherwise, of Bowlin.
(d) Litigation. There is no suit, action or litigation, administrative,
arbitration, or other proceeding or governmental investigation pending
or, to the knowledge of Bowlin, threatened which might, severally or
in the aggregate materially and adversely affect the financial
condition or prospects of Bowlin or Bowlin's ability to acquire the
Assets as contemplated by this Agreement.
(e) Brokers. All negotiations relative to the Agreement and the
transactions contemplated hereby have been carried on by Bowlin is
such manner without giving rise to any valid claim against Edgar for a
finder's fee, brokerage commission or other like payment.
Covenants
Between the date of this agreement and the closing date:
(a) Edgar's officers will cause Company to:
(1) Carry on its outdoor advertising business in substantially the
same manner as it has heretofore and not introduce any material
new method of management, operation or accounting;
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(2) Maintain their properties and facilities in as good working order
and condition as at present, ordinary wear and tear excepted;
(3) Perform all material obligations under agreements relating to or
affecting its assets, properties and rights;
(4) Omitted; and
(5) Use its best efforts to maintain and preserve its assets intact,
and maintain its relationships with suppliers, customers and
others having business relations with it.
(b) Edgar's officers will not permit Edgar without the prior written
consent of Bowlin to:
(1) Enter into any contract or commitment or incur or agree to incur
any liability or make any capital expenditures except in the
normal course of business as to the assets purchased pursuant to
this agreement.
(2) Create, assume or permit to exist any mortgage, pledge or other
lien or encumbrance upon any assets or properties transferred
under this agreement, whether now owned or hereafter acquired; or
(3) Sell, assign, lease or otherwise transfer or dispose of any
property or equipment subject to this agreement except in the
normal course of business.
Competition
Simultaneously with the execution of this Agreement, Michael T. Edgar will
execute and deliver to Bowlin a Non-Competition Agreement in the form and
on the terms as set forth in Exhibit B attached hereto and incorporated by
reference herein for all purposes.
Conditions to Bowlin's Obligations
The obligations of Bowlin hereunder are subject to the fulfillment, at or
prior to the Closing, of each of the following conditions, any or all of
which may be waived in writing by Bowlin, in its sole discretion:
(a) Accuracy of Representations and Warranties. Each of the
representations and warranties of Edgar and Shareholder contained in
this Agreement shall be true on and as of the Closing Date with the
same force and effect as though made on and as of the Closing Date,
except as affected by transactions contemplated hereby.
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(b) Performance of Covenants. Edgar shall have performed and complied with
all covenants, obligations and agreements to be performed or complied
with by it on or before the Closing Date pursuant to this Agreement.
(c) No Litigation or Claims. No claim, action, suit, proceeding,
arbitration, investigation or hearing or notice of hearing shall be
pending or threatened against or affecting Edgar which: (a) might
foreseeably result, or has resulted, either in an action to enjoin or
prevent or delay the consummation of the transactions contemplated by
this Agreement or in such an injunction; or (b) could, in the
determination of Bowlin, have an adverse effect on the assets to be
transferred hereunder.
(d) No Violations. No material violation of Edgar shall exist, or be
alleged by any governmental authority to exist, of any law, statute,
ordinance or regulation, the enforcement of which would adversely
affect the financial condition, results of operations, properties or
business of Edgar except for City of Gainesville permits for 1997 on
signs #110-#111 that have not been paid.
(e) Consents and Assignments. Edgar shall have delivered to Bowlin all
consents and assignments of all persons and entities necessary for the
performance of the transactions contemplated by this Agreement,
including the transfer of all assets and the assignment of leases, and
Edgar shall have obtained the consents of: any lender to Edgar, or, in
the alternative, the release of all liens held by such lender, with
respect to the sale and transfer of the assets; and any other consents
of third parties deemed necessary or appropriate by Bowlin.
(f) Certificate. Bowlin shall have received a certificate signed by Edgar
and Shareholder, dated the Closing Date, satisfactory in form and
substance to Bowlin and its counsel, certifying as to the fulfillment
of the conditions specified above.
(g) Satisfactory Completion of Due Diligence. Bowlin shall be satisfied in
its sole discretion with the content of the final Exhibits hereto and
other related documents for closing and shall otherwise be satisfied
in its sole discretion with the results of its due diligence review,
including the right to terminate this agreement with no penalty in the
event that the land leases, outdoor advertising permits and
advertising contracts are not of satisfactory condition to Bowlin.
9
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Indemnification
(a) Indemnification of Bowlin by Edgar and Shareholder. Edgar and
Shareholder, jointly and severally, agree to indemnify and hold
harmless Bowlin and any person claiming by or through it or its
successors and assigns from, against and in respect of any and all
losses, claims, and liabilities incurred by or asserted against Bowlin
or its successors or assigns in connection with any breach of any
representation or warranty of Edgar or Shareholder;
(i) any breach of any representation or warranty of Edgar or
Shareholder;
(ii) any breach of any covenant or agreement made by Edgar or
Shareholder in this Agreement;
(iii)any liability, debt or obligation of Edgar or lien or
encumbrance on the Assets or (iv) any claim arising out of the
use, sale or operation of the Assets by Edgar or Shareholder
and/or the operation of the business of Edgar or Shareholder
prior to the Closing.
(b) Indemnification of Edgar and Shareholder by Bowlin. Bowlin agrees to
indemnify and hold harmless Edgar and Shareholder and any person
claiming by or through it or its successors and assigns from, against
and in respect of any and all losses, claims, and liabilities incurred
by or asserted against Edgar or Shareholder or its successors or
assigns in connection with:
(i) any breach of any representation or warranty of Bowlin;
(ii) any breach of any covenant or agreement made by Bowlin in this
Agreement;
(iii)any act or omission of Bowlin after Closing, and
(iv) any claim arising out of the use, sale or operation of the Assets
by Bowlin and/or the operation of the business by Bowlin after
Closing.
Taxes
Real Estate and personal property taxes, if any, assessed or to be assessed
for the current calendar or fiscal year, regardless of when payable, shall
be prorated between Bowlin and Edgar as of the closing date.
Risk of Loss
The risk of loss or destruction of or damage to the assets transferred
hereunder from any cause whatsoever at all times on or subsequent to the
execution of this document but before closing shall be borne by Edgar.
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Bowlin's Remedies
Bowlin shall be entitled, without limitation, to all incidental and
consequential damages resulting from a breach of any warranty or
representation or covenant of Edgar or Shareholder made herein including,
but not limited to, all costs of litigation incurred, including reasonable
attorney's fees.
Arbitration Dispute Resolution
In the event of any dispute arising from this agreement, Texas law shall
apply. Any claims or controversy between Edgar or its officers or
shareholders, on the one hand, and Bowlin, on the other hand, arising out
of or relating to this agreement or the sale and purchase of assets, shall
be decided by arbitration at Dallas, TX in accordance with Commercial
Arbitration Rules of the American Arbitration Association by a single
arbitrator appointed in accordance with the rules in effect when
arbitration is first demanded by any party. The award rendered by the
arbitrator shall be final and judgment may be entered into any court having
jurisdiction.
Miscellaneous
(a) Expenses. Except as otherwise provided herein, whether or not the
transactions contemplated by this Agreement are consummated, each
party hereto shall pay its own expenses and the fees and expenses of
its counsel and accountants and other experts. Furthermore, Bowlin
shall be responsible for payment to the business broker retained by
it.
(b) Survival of Representations and Warranties. The representations,
warranties, covenants and agreements set forth in this Agreement and
any other written representation in any ancillary document shall
survive the Closing.
(c) Waivers. The waiver by any party hereto of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach.
(d) Binding Effect; Benefits. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective
successors and assigns.
(e) Notices. All notices, requests, demands and other communications which
are required to be or may be given under this Agreement shall be in
writing and shall be deemed to have been duly given when delivered in
person or transmitted by fax or five (5) days after deposit in the
U.S. mails by certified or registered first class mail, postage
prepaid, return receipt requested, addressed to the party to whom the
same is so given or made.
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if to Edgar or Shareholder to:
Michael T. Edgar
P.O. Box 92593
Southlake, TX 76092
if to Bowlin to:
Bowlin Outdoor Advertising and Travel Centers Incorporated
150 Louisiana Blvd. N.E.
Albuquerque, New Mexico 87108
Attention: Michael L. Bowlin, President
or to such other address or Fax Number as any party may designate by giving
notice to the other parties hereto.
(f) Further Assurances. The Company and Shareholder shall, from time to
time at or after the Closing, at the request of Bowlin, and without
further consideration, execute and deliver such other instruments and
take such other actions as may be required to confer to Bowlin and its
assignees the benefits contemplated by this Agreement.
(g) Entire Agreement. This document contains the entire agreement between
the parties and supersedes all prior agreements between the parties,
if any, written or oral, with respect to the subject matter thereof.
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AGREED and ACCEPTED:
BOWLIN OUTDOOR ADVERTISING & TRAVEL CENTERS INCORPORATED
By: /s/ C. CHRISTOPHER BESS
------------------------------------
C. C. Bess, Executive Vice President
EDGAR OUTDOOR ADVERTISING CO.
By: /s/ MICHAEL T. EDGAR
------------------------------------
Michael T. Edgar, President
By: /s/ MICHAEL T. EDGAR
------------------------------------
Michael T. Edgar, Individually
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Acknowledgment for Corporations
STATE OF TEXAS )
) ss.
COUNTY OF _____________ )
The foregoing instrument was acknowledged before me this [ ] day of
[ ], 199[ ], by C. C. Bess, Executive Vice President of Bowlin
Outdoor Advertising & Travel Centers Incorporated, a Nevada Corporation, on
behalf of the corporation.
--------------------------------
Notary Public
My commission expires:
- ----------------------
Acknowledgment for Corporations
STATE OF TEXAS )
) ss.
COUNTY OF ____________ )
The foregoing instrument was acknowledged before me this [ ] day of
[ ], 199[ ] by Michael T. Edgar, President of Edgar Outdoor
Advertising Co., a Texas Corporation, on behalf of the corporation.
--------------------------------
Notary Public
My commission expires:
- ----------------------
<PAGE>
Acknowledgment for Individual
STATE OF TEXAS )
) ss.
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this [ ] day of
[ ], 199[ ] by Michael T. Edgar, Individually.
--------------------------------
Notary Public
My commission expires:
- ----------------------
PROMISSORY NOTE
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Principal Loan Date Maturity Loan No Call Collateral Account Officer Initials
$3,650,000 05-01-1998 04-15-2005 9006 252,0169434 M0089 MP
Borrower: Bowlin Outdoor Advertising & Travel Lender: Norwest Bank New Mexico, National Association
Centers, Incorporated Journal Center Business Banking
150 Louisiana NE P.O. Box 1081
Albuquerque, NM 87108 7412 Jefferson Blvd. NE
Albuquerque, NM 87109
</TABLE>
Principal Amount: $3,650,000 Initial Rate: 8.50% Date of Note: May 1, 1998
PROMISE TO PAY. Bowlin Outdoor Advertising & Travel Centers, Incorporated
("Borrower") promises to pay to Norwest Bank New Mexico, National Association
("Lender"), or order, In lawful money of the United States of America, the
principal amount of Three Million Six Hundred Fifty Thousand & 00/100 Dollars
($3,650,000), together with Interest on the unpaid principal balance from May 1,
1998, until paid in full.
PAYMENT. Subject to any payment changes resulting from changes in the Index, the
Borrower will pay this loan in 84 payments of $57,819.47 each payment.
Borrower's first payment is due May 15, 1998, and all subsequent payments are
due on the same day of each month after that. Borrower's final payment will be
due on April 15, 2005, and will be for all principal and all accrued interest
not yet paid. Payments include principal and interest. The annual interest rate
on this Note is computed on a 365/366 basis; that is, by applying the ratio of
the annual interest rate over a year of 360 days, multiplied by the outstanding
principal balance, multiplied by the actual number of days the principal balance
is outstanding. Borrower will pay Lender at Lender's address shown above or at
such other place as Lender may designate in writing. Any regular payment will be
applied first to billed interest and then to principal, unless the Lender
determines (after an event of default or otherwise) that the regular payment
will be applied in some other manner or unless applicable law requires the
Lender to apply the payment in some other manner.
VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from
time to time based on changes in an independent Index which is the NORWEST BANK
MINNESOTA, N.A. BASE LENDING RATE (the 'Index'). The Index is not necessarily
the lowest rate charged by Lender on Its loans. If the Index becomes unavailable
during the term of this loan, Lender may designate a substitute index after
notice to Borrower. Lender will tell Borrower the current Index rate upon
Borrower's request. Borrower understands that Lender may make loans based on
other rates as well. The Interest rate change will not occur more often than
each QUARTER. The Index currently is 8.500% per annum. The Interest rate to be
applied to the unpaid principal balance of this Note will be at a rate equal to
the Index, resulting In an Initial rate of 8.500% per annum. NOTICE: Under no
circumstances will the interest rate on this Note be more than the maximum rate
allowed by applicable law. Whenever increases occur in the interest rate,
Lender, at its option, may do one of more of the following: (a) increase
Borrower's payments to ensure Borrower's loan will pay off by its original final
maturity date, (b) increase Borrower's payments to cover accruing interest, (c)
increase the number of Borrower's payments, and (d) continue Borrower's payments
at the same amount and increase Borrower's final payment.
PREPAYMENT. Borrower agrees that all loan fees and other prepaid finance charges
are earned fully as of the date of the loan and will not be subject to refund
upon early payment (whether voluntary or as a result of default), except as
otherwise required by law. Except for the foregoing, Borrower may pay without
penalty all or a portion of the amount owed earlier than it is due. Early
payments will not, unless agreed to by Lender in writing, relieve Borrower of
Borrower's obligation to continue to make payments under the payment schedule.
Rather, they will reduce the principal balance due and may result in Borrower
making fewer payments.
LATE PAYMENTS. It any payment is not received by Lender within five calendar
days after the payment is due as provided in this Note (the "Due Date'), then
additional interest will accrue beginning on the sixth calendar day on the
entire unpaid principal balance at the rate of three percent (3%) per year (the
"Additional Interest') until all past-due payments and any Additional Interest
are paid in full.
<PAGE>
05-01-1998 PROMISSORY NOTE
Page 2
Loan No 9006 (Continued)
DEFAULT. Borrower will be in default if any of the following happens: (a)
Borrower fails to make any payment when due. (b) Borrower breaks any promise
Borrower has made to Lender, or Borrower fails to comply with or to perform when
due any other term, obligation, covenant, or condition contained in the Note or
any agreement related to this Note, or in any other agreement or loan Borrower
has with Lender. (c) Borrower defaults under any loan, extension of credit,
security agreement, purchase or sales agreement, or any other agreement, in
favor of any other creditor or person that may materially affect any of
Borrower's property or Borrower's ability to repay this Note or perform
Borrower's obligations under this Note or any of the Related Documents. (d) Any
representation or statement made or furnished to Lender by Borrower or on
Borrower's behalf is false or misleading in any material respect either now or
at the time made or furnished. (e) Borrower becomes insolvent, a receiver is
appointed for any part of Borrower's property, Borrower makes an assignment for
the benefit of creditors, or any proceeding is commenced either by Borrower or
against Borrower under any bankruptcy or insolvency laws. (f) Any creditor tries
to take any of Borrower's property on or in which Lender has a lien or security
interest. This includes a garnishment of any of Borrower's accounts with Lender.
(g) any guarantor dies or any of the other events described in this default
section occurs with respect to any guarantor or this Note. (h) A material
adverse change occurs in Borrower's financial condition.
LENDER'S RIGHTS. Upon default, and after Lender has notified borrower of said
Default and if such Default shall not be remedied within 15 days after such
notification then, Lender may declare the entire unpaid principal balance on
this Note and all accrued unpaid interest immediately due, without notice, and
then Borrower will pay that amount. Upon default, Including failure to pay upon
final maturity, Lender, at its option, may also, if permitted under applicable
law, increase the variable Interest rate on this Note to 5.000 percentage points
over the Index. The interest rate will not exceed the maximum rate permitted by
applicable law. Lender may hire or pay someone else to help collect this Note if
Borrower does not pay. Borrower also will pay Lender that amount. This includes,
subject to any limits under applicable law, Lender's attorneys' fees and
Lender's legal expenses whether or not there is a lawsuit, including attorneys'
fees and legal expenses for bankruptcy proceedings (including efforts to modify
or vacate any automatic stay or injunction), appeals, and any anticipated
post-judgment collection services. If not prohibited by applicable law, Borrower
also will pay any court costs, in addition to all other sums provided by law.
This Note has been delivered to Lender and accepted by Lender in the State of
New Mexico. If there is a lawsuit, Borrower agrees upon Lender's request to
submit to the jurisdiction of the courts of Bernalillo County, the State of New
Mexico. This Note shall be governed by and construed in accordance with the laws
of the State of New Mexico.
RIGHT OF SETOFF. Borrower grants to Lender a contractual possessory security
interest in, and hereby assigns, conveys, delivers, pledges, and transfers to
Lender all Borrower's right, title and interest in and to, Borrower's accounts
with Lender (whether checking, savings, or some other account), including
without limitation all accounts held jointly with someone else and all accounts
Borrower may open in the future, excluding however all IRA, Keogh, and trust
accounts for which the grant of a security interest would be prohibited by law.
Borrower authorizes Lender, to the extent permitted by applicable law, to charge
or setoff all sums owing on this Note against any and all such accounts.
FINANCIAL STATEMENTS. Borrower agrees to provide to Lender, upon request, any
financial statements or information Lender may deem necessary. Borrower warrants
that all financial statements and information Borrower provide to Lender are or
will be accurate, correct and complete.
ARBITRATION. Lender and Borrower agree that, except for "Core Proceedings' under
the United States Bankruptcy Code, all disputes, claims and controversies
between them, whether individual, joint, or class In nature, arising from this
Note or otherwise, including, without limitation, contract and tort disputes,
shall be arbitrated pursuant to the Commercial Arbitration rules of the American
Arbitration Association (the "AAA'), upon request of either party. No act to
take or dispose of any collateral securing this Note shall constitute a waiver
of this arbitration agreement or be prohibited by this arbitration agreement.
This includes, without limitation, obtaining injunctive relief or a temporary
restraining order; invoking a power of sale under any deed of trust or mortgage;
obtaining a writ of attachment or imposition of a receiver; or exercising any
rights relating to personal property, including taking or disposing of such
property with or without judicial process pursuant to Article 9 of the uniform
Commercial Code.
Any disputes, claims or controversies concerning the lawfulness or
reasonableness of any act, or exercise of any right, concerning any collateral
securing this Note, Including any claim to rescind, reform or otherwise modify
<PAGE>
05-01-1998 PROMISSORY NOTE
Page 3
Loan No 9006 (Continued)
any agreement relating to the collateral securing this Note. shall also be
arbitrated, provided however that no arbitrator shall have the right or the
power to enjoin or restrain any act of any party. Judgment upon any award
rendered by any arbitrator may be entered in any court having jurisdiction.
Nothing in this Note shall preclude any party from seeking equitable relief from
a court of competent jurisdiction. The statute of limitations, estoppel, waiver,
laches and similar doctrines which would otherwise be applicable in an action
brought by a party shall be applicable in any arbitration proceeding, and the
commencement of an arbitration proceeding shall be deemed the commencement of an
action for these purposes. The Federal Arbitration Act shall apply to the
construction, interpretation and enforcement of this arbitration provision.
Any arbitration hereunder shall be conducted before one arbitrator who shall be
an attorney who has practiced in the area of commercial law for at least ten
(10) years or a retired judge at the District Court or an appellate court level.
The parties to the dispute or their representatives shall obtain from AAA a list
of persons meeting the criteria outlined above and the parties shall select the
person in the manner established by the AAA.
In any arbitration hereunder: (1) the arbitrator shall decide (by documents only
or with a hearing, at the arbitrator's discretion) any pre-hearing motions which
are substantially similar to pre-hearing motions to dismiss for failure to state
a claim or motions for summary adjudication; (2) discovery shall be permitted,
but shall be limited as provided in the New Mexico Rules of Civil Procedure,
with all discovery to be completed no later than 20 days before the hearing date
and within 180 days of the commencement of arbitration proceedings; and any
requests for an extension of the discovery periods, or any discovery disputes
shall be subject to final determination by the arbitrator; and (3) the
arbitrator shall award costs and expenses of the arbitration proceeding in
accordance with the Lender's Rights provisions of this Note.
BUSINESS LOAN AGREEMENT. This Note is subject to that certain Business Loan
Agreement dated 05-01-98 and any renewals, replacements, extensions or
amendments thereof.
GENERAL PROVISIONS. Lender may delay or forgo enforcing any of its rights or
remedies under this Note without losing them. Borrower and any other person who
signs, guarantees or endorses this Note, to the extent allowed by law, waive
presentment, demand for payment, protest and notice of dishonor. Upon any change
in the terms of this Note, and unless otherwise expressly stated in writing, no
party who signs this Note, whether as maker, guarantor, accommodation maker or
endorser, shall be released from liability. All such parties agree that Lender
may renew or extend (repeatedly and for any length of time) this loan, or
release any party or guarantor or collateral; or impair, fail to realize upon or
perfect Lender's security interest in the collateral; and take any other action
deemed necessary by Lender without the consent of or notice to anyone. All such
parties also agree that Lender may modify this loan without the consent of or
notice to anyone other than the party with whom the modification is made.
PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF
THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISION. BORROWER AGREES TO
THE TERMS OF THE NOTE AND ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THE NOTE.
BORROWER:
BOWLIN OUTDOOR ADVERTISING & TRAVEL CENTERS, INCORPORATED
By: /s/ MICHAEL L. BOWLIN
----------------------------
Michael L. Bowlin, President
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<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> APR-30-1998
<CASH> 3279000
<SECURITIES> 0
<RECEIVABLES> 688000
<ALLOWANCES> 0
<INVENTORY> 3929000
<CURRENT-ASSETS> 8476000
<PP&E> 30062000
<DEPRECIATION> 11866000
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0
0
<COMMON> 4385
<OTHER-SE> 14372000
<TOTAL-LIABILITY-AND-EQUITY> 28060000
<SALES> 7063000
<TOTAL-REVENUES> 7124000
<CGS> 4548000
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<INCOME-PRETAX> 238000
<INCOME-TAX> 93000
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