UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended: November 30, 1996
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission file Number: 000-21623
OBIE MEDIA CORPORATION
(Name of small business issuer in its charter)
Oregon 93-0966515
(State of incorporation) (I.R.S. Employer
Identification No.)
1010 Obie Street
Eugene, Oregon 97402
(Address of principal executive offices)
Issuer's telephone number: (541) 686-8401
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, without par value
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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
---
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B contained in this Form 10-KSB, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year: $10,897,890
State the aggregate market value of the voting stock held by
nonaffiliates computed by reference to the price at which the stock was sold, or
the average bid and asked prices of such stock, as of a specified date within 60
days prior to the date of filing: $9,654,225 aggregate market value as of
December 31, 1996, based on the price at which the stock was sold.
Indicate the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: 3,500,000 shares of
Common Stock, without par value, on February 20, 1997.
DOCUMENTS INCORPORATED BY REFERENCE
Part III of this Form 10-KSB incorporates information from the issuer's
definitive proxy statement for the annual meeting of shareholders to be held on
April 17, 1997.
Transitional Small Business Disclosure Format (Check One): Yes ; No X
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TABLE OF CONTENTS
Page
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Part I
Item 1. Description of Business.......................................... 1
Item 2. Description of Properties........................................ 8
Item 3 Legal Proceedings................................................ 9
Item 4. Submission of Matters to a Vote of Security Holders.............. 9
Part II
Item 5. Market for Common Stock and Related
Shareholder Matters..................................... 9
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 10
Item 7. Financial Statements............................................. 16
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.................. 16
Part III
(Items 9, 10, 11 and 12 are incorporated herein by reference from
the Company's definitive Proxy Statement for its 1997 annual
meeting of shareholders.)
Item 9. Directors, Executive Offices, Promoters
and Control Persons; Compliance with Section 16(a)
of the Exchange Act..................................... 16
Item 10. Executive Compensation........................................... 16
Item 11. Security Ownership of Certain Beneficial
Owners and Management................................... 17
Item 12. Certain Relationships and Related Transactions................... 17
Part IV
Item 13. Exhibits and Reports on Form 8-K................................. 17
Signatures................................................................ 20
Financial Statements...................................................... F-1
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FORM 10-KSB
THIS ANNUAL REPORT INCLUDES CERTAIN FORWARD-LOOKING INFORMATION THAT
INVOLVES A NUMBER OF RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE
OR CONTRIBUTE TO SUCH DIFFERENCES INCLUDE THE FOLLOWING: A DECLINE IN THE DEMAND
FOR ADVERTISING IN THE AREAS WHERE THE COMPANY CONDUCTS ITS BUSINESS; A
DETERIORATION OF BUSINESS CONDITIONS GENERALLY IN SUCH AREAS; SLOWER THAN
EXPECTED ACCEPTANCE OF THE COMPANY'S UNIQUE DISPLAY PRODUCTS; COMPETITIVE
FACTORS, INCLUDING INCREASED COMPETITION AND PRICE PRESSURES; CHANGES IN
REGULATORY OR OTHER EXTERNAL FACTORS; AND OTHER FACTORS LISTED FROM TIME TO TIME
IN THE COMPANY'S SEC REPORTS, INCLUDING BUT NOT LIMITED TO, ITS "RISK FACTORS"
DISCUSSION IN THE REGISTRATION STATEMENT IT FILED IN CONNECTION WITH ITS INITIAL
PUBLIC OFFERING (THE "IPO").
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Company Overview
Obie Media Corporation ("Obie Media" or the "Company")is an out-of-home
media company which markets advertising space on outdoor advertising displays
("billboards") and transit vehicles (primarily passenger buses). The Company
owns and operates approximately 685 advertising faces on outdoor advertising
structures located in Washington, Oregon, California and Idaho. The Company also
has agreements with seven local government transit districts pursuant to which
the Company has the exclusive right, for a number of years, to sell advertising
on nearly 1,200 district-owned transit vehicles. The Company also leases
building walls in urban areas for wallscape displays, and the Company owns
approximately 700 transit benches on which it sells advertising.
The Company, formed in 1987, traces its origins to Obie Industries
Incorporated ("Obie Industries"), a family-owned outdoor advertising business,
founded in 1960. In 1979, all the outdoor advertising assets of Obie Industries,
consisting of over 1,700 advertising display faces, were sold to 3M Media
Corporation. Brian B. Obie, the Company's President and Chief Executive Officer,
has worked for Obie Industries since 1962, serving as its President since 1968.
In November 1996, to facilitate the IPO, the Company separated from its parent
corporation (Obie Industries), with the Company then being owned directly by the
shareholders of Obie Industries (the "Spin-Off").
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Company Growth Strategy
The Company intends to expand its presence in other geographic areas in
both transit and outdoor advertising.
The Company intends to expand by obtaining agreements with transit
districts in new markets and by acquiring or building additional outdoor
displays in new and existing markets. The Company intends to establish
additional geographic "hubs" in which sales, design, production and
administrative capabilities are positioned to serve both transit and outdoor
advertising displays in a geographic region, in the same manner as the Company's
operations in Eugene, Oregon serve its current markets. Management believes this
strategy will result in increased operating efficiencies, greater geographic
diversification and increased market penetration.
Management believes the Company has a competitive advantage in obtaining
agreements with transit districts due to the Company's unique advertising
products and sales strategy, which create a greater revenue potential per
vehicle. Expansion of billboards, urban wallscapes and other out-of-home media
products will be concentrated in markets being served by the company at that
time, or through acquisitions.
Industry Background
The out-of-home media industry includes outdoor advertising displays,
displays on buses, trains, taxis, subways, transit benches and shelters, and
wallscapes on urban buildings, as well as displays in shopping centers, malls,
airports, stadiums, movie theaters and supermarkets. The out-of-home media
industry generates annual revenues in excess of $3.0 billion in the United
States and has experienced increased advertiser interest and revenue growth in
recent years.
Advertisers purchase out-of-home advertising for a number of reasons.
Out-of-home advertising offers repetitive impact at a relatively low
cost-per-thousand-impressions, a commonly used media measurement, as compared to
television, radio, newspapers, magazines and direct mail marketing. Because of
its cost-effective nature, out-of-home advertising is a good vehicle to build
"mass market" support. In addition, out-of-home advertising can be used to
target a defined audience in a specific location and, therefore, can be relied
upon by local businesses concentrating on a particular geographic area or where
customers have specific demographic characteristics.
The out-of-home media industry has enjoyed increased consumer exposure at a
time when the audiences of broadcast media have been fragmenting as the number
of radio and television
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networks and other narrowly targeted formats has increased. Out-of-home media
has experienced significant changes in recent years. First, out-of-home
advertising has expanded to include many media, such as those listed above.
Second, the industry has benefitted significantly from improvements in
production technology, including the use of computer printing, vinyl advertising
copy and improved lighting techniques, which have facilitated a more dynamic,
colorful and creative use of the medium. Lastly, the growth in automobile travel
time for business and leisure due to increased highway congestion and continued
demographic shifts of residences and businesses from the cities to outlying
suburbs has increased the exposure for out-of-home advertising.
Products and Markets
Obie Media offers advertisers a wide range of out-of-home media products,
including transit advertising displays, outdoor advertising displays, building
wallscapes, and transit bench displays. This not only provides advertisers with
significant flexibility in their advertising programs, but it also allows the
Company to cross-sell multiple products and to leverage its design and
production capabilities.
Transit Advertising. The Company has agreements with seven transit
districts in Oregon (3), California (3), and Washington (1). Pursuant to these
agreements, the Company is the exclusive seller of advertising on the transit
vehicles operated by those transit districts. In Sacramento, the Company has the
exclusive advertising rights only to light rail vehicles; another company has
exclusive rights to that district's buses.
Agreements with transit districts are awarded through a competitive
process. Each transit district evaluates proposals based on a number of
criteria, primarily on the basis of minimum revenues which the bidder guarantees
to pay to the district. The Company's agreements typically have terms of from
three to five years, with renewals or extensions either unilaterally at the
discretion of the transit district or upon the mutual agreement of the district
and the Company.
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Approximately 37% and 38% of the Company's gross revenues for fiscal 1996
and 1995, respectively, were derived from customers purchasing transit
advertising on vehicles owned by Tri-County Metropolitan Transportation District
of Oregon ("Tri-Met") in Portland, Oregon. The Company's agreement with Tri-Met
has a scheduled expiration date in 2001. Tri-Met has the right to unilaterally
renew the agreement for an additional three-year period, or may terminate the
agreement earlier if it determines that termination is in the public interest.
The Company expects its agreement with Tri-Met to continue to account for a
substantial portion of the Company's revenues for the foreseeable future.
Outdoor Advertising Structures. The Company has approximately 685
advertising faces on outdoor advertising structures in Washington, Oregon,
California and Idaho. The Company leases the property underlying its outdoor
advertising structures, generally pursuant to 10-year leases that give the
Company the right to renew for two additional five-year periods. More than
two-thirds of the Company's structures are illuminated.
Wallscapes and Other Advertising Displays. In addition to transit and
outdoor displays, the Company also leases building walls in urban areas for
wallscape displays. The Company currently leases 6 building walls in
Seattle/Tacoma, and owns a 50% interest in a corporation that leases 16 building
walls in Portland. The Company also owns approximately 700 transit benches in
the Portland area on which the Company sells advertising.
Sales and Service
Obie Media maintains an active sales force in each of its markets. The
Company's intensive sales and service efforts are a key component in achieving
occupancy levels that management believes are higher than industry averages for
both transit and outdoor advertising.
The Company views its aggressive sales and service efforts as an
important part of its culture. In hiring its sales force, the Company vigorously
screens applicants and typically hires college graduates who have demonstrated
their suitability and aptitude to excel in the Company's unique sales culture.
New sales employees undergo extensive training and are supervised by regional
sales managers with substantial advertising sales experience. Each sales
representative and the Company jointly establish sales targets for that sales
representative, and the Company has monthly sales meetings with all its
salespeople to acknowledge and reward individuals who are meeting or exceeding
their targets.
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The Company works directly with companies and with advertising agencies in
coordinating the marketing, production and installation of advertising displays.
The Company's sales personnel also serve as customer service representatives,
maintaining frequent and regular contact with the Company's advertising
customers to resolve customer concerns in the field.
Design, Production and Installation
The Company has a fully staffed and equipped design and production
department located in Eugene, Oregon. These services are used primarily by
direct sales customers that are not represented by advertising agencies. The
design department works with these advertisers and the sales representatives to
create advertising copy, design and layout. The staff of the design department
uses technologically advanced computer hardware and software to create original
design copy and, increasingly, to exchange work product with customers or their
advertising agencies via modem or the Internet. Advertisers that are represented
by advertising agencies generally use preprinted designs that require only
installation.
A local advertiser can purchase customized design and production services
from the Company, in addition to display space, and typically pays for all of
the services as part of a single monthly rate. For the convenience of customers,
the charge to clients for design and production is typically added to the cost
of the space and billed over the life of the advertising contract. The Company
believes that the skills of its design department, combined with its
technological capabilities, provide a significant competitive advantage in its
direct sales to local advertisers.
The Company has separate production facilities for transit and outdoor
advertising displays. The Company views transit advertising design and
production as a distinct activity and attempts to achieve independent
profitability in this operation. The Company uses computer-aided vinyl lettering
or hand paints almost all of its transit and outdoor advertising displays. The
Company outsources its high-pictorial, computer-generated production.
The Company uses self-adhesive vinyl for its transit displays and soft
roll-up vinyl for substantially all its outdoor advertising displays. Due to its
nearly exclusive use of vinyl, the Company can maintain centralized production
facilities, can easily ship the displays to its trained installers, and has
greatly simplified the installation process. The Company
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continues to have a few outdoor advertising structures that have not yet been
converted to vinyl installation. Displays on these structures require more
expensive shipping and more labor-intensive installation.
Customers
A key component of the Company's sales and marketing strategy is to
aggressively market its services to local advertisers. Accordingly, the Company
focuses its direct sales efforts primarily on local companies. Local advertisers
tend to have smaller advertising budgets and rely on the Company's design and
production department for their advertising copy. Local advertisers also require
the Company to expend more effort on educating customers regarding the benefits
of transit and outdoor advertising and helping potential customers develop their
advertising strategy. Although the Company's direct sales are more
labor-intensive than its sales through advertising agencies, the Company
believes its direct sales focus is largely responsible for its high occupancy
and renewal rates.
The Company also maintains a broad base of regional and national
advertising customers, most of which are represented by advertising agencies.
Advertising agencies generally are responsible for the artistic design and
written content of their customers' advertising and will plan and implement the
overall advertising campaign for their customers, including the selection of
advertising media. The Company's sales personnel are trained to work closely
with the advertising agencies in the Company's markets to service these
customers. Customers represented by advertising agencies account for
approximately 50% of the Company's gross revenues. Advertising agencies working
with the Company typically retain 15% of the gross advertising revenues from
their accounts, consistent with standard industry practice.
Historically, manufacturers of cigarettes have been major outdoor
advertisers. In the early 1990s, due to increased regulation, tobacco
manufacturers began substantially reducing their advertising expenditures.
However, the Company's revenues have not been materially affected, as tobacco
revenues represent less than 1% of sales.
Competition
The Company competes in each of its markets with other outdoor advertising
companies and with other transit advertising companies that submit proposals for
the exclusive agreements with transit districts. The Company also competes for
revenues with other advertising media, including broadcast and cable television,
radio, print media, direct mail marketers, displays in shopping centers and
malls, airports, stadiums, movie theaters
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and supermarkets, as well as on taxis, trains and subways.
Transit. Transit advertising is fragmented, consisting of a few national
transit advertising companies with operations in multiple markets and numerous
small companies operating under one or a few regional agreements. Competition
among transit advertising companies is primarily in obtaining and retaining
agreements with transit districts. Agreements with transit districts are awarded
primarily on the basis of the minimum revenues the bidder guarantees to the
district. Once an agreement is secured, the company awarded the agreement
generally becomes the exclusive provider of transit advertising within that
transit district. The number of competitors for each agreement depends primarily
on the number of vehicles operated by that transit district. In several of its
markets, the Company has competed for transit agreements with companies having
substantially greater total resources than the Company. The Company believes
that its unique products and sales strategy, which create a greater revenue
potential per vehicle, give the Company a competitive advantage in obtaining
agreements with transit districts. Thus, the Company is able to successfully
compete for transit agreements against larger companies.
Outdoor Advertising. Outdoor advertising also is fragmented. There are
several large outdoor advertising companies with operations in multiple markets
and many more smaller companies operating a limited number of structures in a
single or a few local markets. Although some consolidation has occurred in the
industry over the past few years, the Outdoor Advertising Association of America
recently estimated that there are approximately 396,000 outdoor displays
operated by more than 600 companies. In several of its markets, the Company
encounters direct competition from major outdoor media companies, which have
larger national networks and greater total resources than the Company. The
Company believes its strong emphasis on sales and customer service and its
position as a major provider of advertising services in each of its primary
markets enables it to compete effectively with the other outdoor advertising
companies, as well as other media, within those markets.
Government Regulation
The outdoor advertising industry is subject to extensive governmental
regulation. These laws and regulations limit the growth of outdoor advertising
companies and operate as a substantial barrier to entry in the industry.
Construction of outdoor advertising structures has virtually been
eliminated except in commercial and industrial areas. Many jurisdictions also
have restricted the relocation, location,
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height and size of outdoor advertising structures. Some jurisdictions also
restrict the ability to enlarge or upgrade existing structures, such as
converting from wood to steel or from nonilluminated to illuminated structures,
and/or restrict the reconstruction of structures that are substantially
destroyed as a result of storms or other causes. Most of these laws require the
payment of just compensation whenever legally erected and maintained structures
are required to be removed.
Because most of the Company's outdoor advertising structures have been
designed and installed within the last eight years, management believes its
structures conform to current laws and regulations. When leasing property for
the installation of new outdoor advertising structures, the Company carefully
reviews applicable laws, including building, sign and zoning ordinances. While
these laws and ordinances may restrict the location and size of the structures,
the Company has been successful in strategically locating its structures beside
major highways and arterials.
To date, the Company's experience is that the regulatory environment can be
effectively managed and that the regulations in its markets have not materially
adversely affected its operations. However, the outdoor advertising industry is
heavily regulated, and no assurance can be given that existing or future laws or
regulations will not have a material adverse effect on the Company.
Employees
At November 30, 1996, the Company had 72 full-time and 6 part-time
employees. None of the Company's employees is covered by collective bargaining
agreements, except for three installers in Portland, Oregon. The Company
believes it maintains good employee relations.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company is currently located in three separate facilities in Eugene,
Oregon, all of which are rented from affiliated companies. The Company's rent
payments on these properties were $79,000 and $57,000 during fiscal 1996 and
1995, respectively. One of these sites is currently being renovated to serve as
the Company's new headquarters. The Company expects to spend up to $250,000 on
leasehold improvements for the headquarters building. The 20,000 square foot
facility will include space for the Company's centralized design and production
departments, as well as its accounting, credit, marketing and management
personnel. The renovation is expected to be completed in April 1997, at which
time the Company will vacate the other two Eugene sites. The headquarters
building will be leased from
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Obie Industries at market rates.
The Company leases local operating offices for sales, service and
installation in Spokane, Yakima, Bremerton and Seattle, Washington; Portland and
Salem, Oregon; and Monterey and Lodi, California. The Company also leases
approximately 385 parcels of property beneath outdoor advertising structures.
Total lease expenses in fiscal 1996 and 1995 were $608,000 and $525,000,
respectively. The Company's site leases are generally for a term of 10 years,
with two five-year renewal options at the Company's discretion.
ITEM 3. LEGAL PROCEEDINGS
The Company is not currently subject to any material litigation nor, to the
Company's knowledge, is any material litigation threatened against the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of fiscal 1996, three matters were submitted to
the Company's sole shareholder for approval: (i) on September 30, 1996, the
shareholder approved Restated Articles of Incorporation for the Company; (ii) on
October 2, 1996, the shareholder approved the Company's 1996 Stock Incentive
Plan; and (iii) on November 11, 1996, the shareholder approved an amendment to
the Company's Restated Articles of Incorporation. Each of these actions was
unanimously approved pursuant to consent minutes adopted in lieu of special
shareholder meetings.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
Price Range of Common Stock
The Common Stock began trading on the Nasdaq SmallCap Market on November
21, 1996 under the symbol "OBIE." The following table sets forth for the period
indicated the high and low bid prices of the Common Stock as reported by the
Nasdaq Stock Market, Inc.
Year ended November 30, 1996
High Low
Fourth Quarter (since 11/21/96) 8 7
As of January 26, 1997, there were approximately 45 holders of record of
the Company's Common Stock. The Company believes the number of beneficial owners
is substantially greater than the number of record holders because a large
portion of the Company's
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outstanding Common Stock is held of record in "street name." The Company has not
paid cash dividends on its Common Stock since the IPO and does not anticipate
doing so in the foreseeable future. The Company plans to retain any future
earnings to finance operations.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
The Company has grown significantly through the acquisition of additional
agreements with transit districts, particularly the agreement with Tri-Met,
which began on January 1, 1994, as well as the addition of outdoor advertising
displays in and around existing markets and the improvement of occupancy and
advertising rates.
The Company is seeking agreements with additional transit districts to
expand its operations. The Company believes it is also important to its overall
sales effort to build or acquire additional displays in existing markets and
develop or acquire new products, with respect to both transit and outdoor
advertising, in order to increase revenues.
Net revenues represent gross revenues derived from outdoor and transit
advertising displays less commissions retained by advertising agencies that
contract for the use of advertising displays on behalf of advertisers. Agency
commissions on revenues that are contracted through agencies are typically 15%
of gross revenues. The Company considers agency commissions as a reduction in
gross revenues and measures its operating performance based on a percentage of
net revenues rather than gross revenues. Approximately 50% of the Company's
gross revenues are attributable to advertising sold through advertising
agencies.
Direct advertising expenses consist primarily of occupancy, production and
installation, and sales costs. Occupancy expense is primarily comprised of
payments to transit districts for the use of space on their vehicles and lease
payments to owners of property underlying outdoor advertising structures.
Occupancy expense also includes the cost of illuminating outdoor displays and
property taxes on the outdoor advertising structures.
Production and installation expenses consist primarily of the costs of
producing, shipping and installing the advertising displays. Sales expenses
consist primarily of the cost of staffing the Company's sales force.
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General and administrative expenses include costs related to the individual
market territories, as well as corporate expenses. Expenses related to the
individual market territories include the personnel and facility required to
administer that market. Corporate general and administrative expenses represent
staff and facility costs for the executive offices and centralized accounting
function.
Results of Operations-Comparison of Years Ended November 30, 1996
and 1995
The following table sets forth certain statement of operations information
for the Company for the periods indicated as a percentage of net revenues:
Year Ended
November 30,
----------------
1996 1995
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Net revenues . . . . . . . . . . . . . . . . . 100.0% 100.0%
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Operating expenses:
Direct advertising expenses . . . . . . . . 58.7 58.1
General and administrative expenses . . . . 16.7 15.8
Depreciation and amortization . . . . . . . 5.1 6.4
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Total operating expenses. . . . . . . . . 80.5 80.3
Operating income . . . . . . . . . . . . . 19.5 19.7
Interest expense . . . . . . . . . . . . . (14.7) (17.3)
Other income . . . . . . . . . . . . . . . 1.8
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Income before income taxes . . . . . . . . 6.6 2.4
Income tax benefit (expense) . . . . . . . (.3) 9.4
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Income before extra ordinary item . . . . . 6.3 11.8
Extraordinary item . . . . . . . . . . . . (5.4)
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Net income .9% 11.8%
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Net revenues increased 22% to $10.1 million in the current fiscal year from
$8.3 million in fiscal 1995. Gross revenues from outdoor advertising displays
increased 13% from $4.2 million in 1995 to $4.7 million in 1996, primarily due
to higher rates and increased occupancy. Increased occupancy was the result of
the Company's focused sales efforts and relocation of under-utilized displays
into more attractive markets. Gross revenues from transit displays increased 30%
from $4.7 million in 1995 to $6.2 million in 1996, primarily due to increased
occupancy and rates in most transit districts, including approximately $700,000
of increased revenues in Portland and revenues from operations in
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Monterey which began in August 1995.
Direct advertising expenses increased 23% from $4.8 million in 1995 to $5.9
million in 1996, primarily due to the 22% increase in net revenues. Other than
increased business, the increase in costs was due to increased costs of transit
advertising production, primarily from greater costs of subcontracting portions
of production to meet delivery schedules, and additional occupancy costs from
renewing the Eugene transit agreement. These increased costs were offset in part
by slower growth in sales costs as a result of a change in the composition of
the sales force. Direct advertising expenses increased as a percentage of net
revenues to 58.7% in 1996 from 58.1% in 1995.
General and administrative expenses increased 30%, from $1.3 million in
1995 to $1.7 million in 1996, primarily due to increased payroll costs. General
and administrative expenses increased as a percentage of net revenues, from
15.8% in 1995 to 16.7% in 1996. The Company expects the total amount of general
and administrative expenses to increase in fiscal 1997, as compared to fiscal
1996. The 1997 increase is expected to be caused primarily by increases in lease
and other ongoing expenses of operating in the Company's renovated headquarters
building, as well as the one-time expenses the Company will incur as it
consolidates its Eugene, Oregon operations from three locations to the
headquarters facility.
Depreciation and amortization expense decreased 3% from $529,000 in 1995 to
$514,000 in 1996. Depreciation and amortization decreased, as a percentage of
net revenues, from 6.4% in 1995 to 5.1% in 1996. This decrease as a percentage
of revenue should continue as revenue is growing faster than depreciation and
amortization expense.
Interest expense increased 3%, from $1.4 million in 1995 to $1.5 million in
1996, primarily due to increased borrowing to fund working capital needs and
capital expenditures. Interest expense should decline both in total expense and
as a percentage of revenue due to the repayment of debt from the net proceeds of
the IPO and the refinancing of the primary term debt of the Company. See the
"Liquidity and Capital Resources" discussion below.
Other income of $188,000 in 1996 resulted primarily from the disposition of
an outdoor advertising structure in the state of Washington.
The income tax benefit of $778,000 for 1995 was primarily due to the
recognition of net deferred tax assets for which a valuation allowance had
previously been provided. The income tax expense of $31,000 for 1996 was reduced
by $221,000 due to recognizing the income tax benefit of the carryforward of
prior year's net operating losses.
During 1996, the Company incurred an extraordinary expense as a result of
prepayment penalties related to the early payment of debt and for previously
capitalized loan costs that were written off. The extraordinary expense totaled
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approximately $543,000, net of the related income tax benefit of $342,000.
Liquidity and Capital Resources
The Company's working capital was $380,000 and $273,000 at November 30,
1996 and 1995, respectively. The increase in working capital resulted primarily
from the prodeeds of the Company's IPO net of debt repayment. Traditionally, the
Company satisfied its working capital requirements with cash from operations and
revolving credit borrowings.
Net cash provided by operating activities increased to $1,296,000 in fiscal
1996 from $758,000 in fiscal 1995. The increase in cash provided by operating
activities was primarily due to increased operating income of $336,000 and other
income of $188,000 primarily from the sale of a structure under threat of
condemnation.
The Company's net cash used in investing activities was $1,127,000 in
fiscal 1996 and $528,000 in fiscal 1995, substantially all of which related to
capital expenditures for the development and construction of outdoor advertising
structures. The Company intends to continue to develop new structures. Prior to
the IPO the construction of outdoor advertising structures has been financed
primarily with borrowed funds. The Company intends to finance future
construction primarily from earnings.
The Company's net cash provided by (used in) financing activities was
$252,000 in fiscal 1996 and $(256,000) in fiscal 1995. The cash provided by
financing activities in fiscal 1996 was primarily from the IPO net of debt
repayments. The cash used in financing activities in fiscal 1995 was used
primarily to repay long-term borrowings and advances to affiliates.
At November 30, 1996, the Company had outstanding borrowings of
approximately $7.3 million, all of which were pursuant to long-term credit
agreements.
Until October 31, 1996, the Company had two revolving lines of credit with
Centennial Bank. The maximum available under one of the lines was $600,000, with
the available amount being subject to a borrowing formula based on certain
accounts receivable which were pledged as collateral for the line. The maximum
available on the other line was $850,000, and it was collateralized by outdoor
advertising structures and contracts. The interest rate on these lines was set
at the prime rate (8.25% at October 31, 1996) plus 1.5%. The lines were
guaranteed by Brian B. Obie.
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Until October 31, 1996, the Company's long-term debt was primarily pursuant
to a credit arrangement established in 1988 with Capital Consultants, Inc.
("CCI"). Notes were issued when the Company borrowed from CCI; the notes were
collateralized by outdoor advertising structures and contracts and were
guaranteed by Brian B. Obie. For the first five years of each note, monthly
payments were interest only, interest was 11% fixed plus additional interest
based on a percentage of outdoor advertising revenues. The effective interest
rate for fiscal 1996 (through October 31) was 12.25%. Monthly principal payments
began in the sixth year of each note on a 20-year-level-payment basis with a
balloon payment after 15 years of principal payments. Additional interest was
required to be paid on each note for a minimum of 10 years even if the note was
prepaid. Terms of the credit agreement required the Company to maintain net
worth on a fair value basis, without consideration of estimated income taxes on
asset appreciation, of not less than $5.2 million.
On October 31, 1996, United States National Bank of Oregon ("USNB") made
certain loans to the Company. The Company used the proceeds from the USNB loans
to repay the Company's borrowings from CCI and Centennial Bank. Each of the USNB
loans was guaranteed by Obie Industries and Brian B. Obie. They were due at the
earlier of demand by USNB, completion of the IPO, or April 30, 1997. Included
among such loans was a $12 million six-month bridge loan, the proceeds of which
were used to repay substantially all of the Company's term debt at October 31,
1996. Interest on the bridge loan was based, at the Company's option from time
to time, on IBOR plus 2%, or USNB's prime rate plus .5%. The Company used $5
million of the IPO proceeds to repay a portion of the bridge loan. At November
30, 1996, the Company had long-term debt with USNB of $7 million with interest
based partially on the bank's prime rate plus .5% (8.75%) and partially on IBOR
plus 2% (7.375%). On February 12, 1997, the Company converted the $7 million
bridge loan to a seven-year term loan with interest to be based, at the
Company's option, on USNB's prime rate plus .5%, or IBOR plus 2%.
On October 31, 1996, USNB also provided the Company with a $1.5 million
operating line of credit at USNB's prime rate. As of November 30, 1996, there
were no borrowings on this line of credit, and the Company's available borrowing
capacity based on collaterized accounts was $988,000. This line of credit will
be reviewed at April 30, 1997.
On October 31, 1996, USNB also provided an $800,000 outdoor advertising
construction loan at USNB's prime rate plus .5%. The proceeds of the outdoor
advertising construction loan were used to repay a revolving construction credit
line with Centennial Bank. The USNB construction loan was repaid with funds from
the IPO.
The Company anticipates that total capital expenditures for
14
<PAGE>
fiscal 1997 will be approximately $1.1 million, of which $850,000 will be used
to develop new billboard sites and build or relocate approximately 30 outdoor
advertising structures, and up to $250,000 will be used for leasehold
improvements in connection with the renovation of the Company's headquarters and
other necessary capital expenditures. In addition, the Company may spend
$698,000 if it elects to exercise the option to acquire outdoor advertising
structures currently leased from MO Partners, an affiliated entity.
The Company believes that cash generated from operations and available
borrowings under its credit agreements will be sufficient to finance the
Company's operations, including anticipated capital expenditures, through fiscal
1997.
Seasonality
The Company's transit advertising revenues have exhibited some degree of
seasonality. Typically, the Company experiences its highest revenues in the
fourth fiscal quarter and its lowest revenues in the first fiscal quarter. The
Company expects this trend to continue. A reduction in revenues in any quarter
is likely to result in a period-to-period decline in operating performance and
net income.
New Accounting Pronouncements
New accounting pronouncements are discussed in Note 1 of Notes to
Consolidated Financial Statements.
ITEM 7. FINANCIAL STATEMENTS
The financial statements and supplementary data required by this Item are
included on pages F-1 to F-16 of this Annual Report.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
15
<PAGE>
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE
EXCHANGE ACT
Information with respect to directors and executive officers is included
under "Election of Directors" and "Executive Officers" in the Company's
definitive proxy statement for its 1997 Annual Meeting of Shareholders to be
filed not later than 120 days after the end of the fiscal year covered by this
Annual Report, and such information is incorporated herein by reference.
Information with respect to Section 16(a) of the Securities Exchange Act is
included under "Compliance with Section 16(a)of the Securities Exchange Act" in
the Company's definitive proxy statement for its 1997 Annual Meeting of
Shareholders to be filed not later than 120 days after the end of the fiscal
year covered by this Annual Report, and such information is incorporated herein
by reference.
ITEM 10. EXECUTIVE COMPENSATION
Information with respect to executive compensation is included under
"Executive Compensation" in the Company's definitive proxy statement for its
1997 Annual Meeting of Shareholders filed or to be filed not later than 120 days
after the end of the fiscal year covered by this Annual Report, and such
information is incorporated herein by reference.
16
<PAGE>
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information with respect to security ownership of certain beneficial owners
and management is included under "Principal Shareholders and Management
Ownership" in the Company's definitive proxy statement for its 1997 Annual
Meeting of Shareholders to be filed not later than 120 days after the end of the
fiscal year covered by this Annual Report, and such information is incorporated
herein by reference.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related transactions
with management is included under "Certain Transactions" in the Company's
definitive proxy statement for its 1997 Annual Meeting of Shareholders to be
filed not later than 120 days after the end of the fiscal year covered by this
Annual Report, and such information is incorporated herein by reference.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a)(1) Financial Statements. The Financial Statements are
listed in the Index to Consolidated Financial
Statements on page F-1 of this Annual Report.
(a)(2) Exhibits:
Exhibit Description
3.1 Restated Articles of Incorporation(1)
3.2 Amendment to Restated Articles of Incorporation(2)
3.3 Restated Bylaws(1)
3.4 Amendment to Restated Bylaws(2)
4.1 See Articles 3, 4 and 8 of Exhibit 3.1 and
Articles 1, 2, 5, 6 and 7 of Exhibit 3.3(1)
10.1* Restated 1996 Stock Incentive Plan(2)
10.2* Form of Nonqualified Stock Option Agreement for
use with Restated 1996 Stock Incentive Plan(2)
17
<PAGE>
10.3* Form of Incentive Stock Option Agreement for use
with Restated 1996 Stock Incentive Plan(2)
10.4 Form of Indemnification Agreement between the
Company and its directors(1)
10.5 Form of Indemnification Agreement between the
Company and its officers(1)
10.6 Tri-County Metropolitan Transportation District
of Oregon Professional Services Contract for
Transit Advertising Services between Tri-Met and
the Company, dated July 1, 1996, and related
documents(1)
10.7 Lease between Obie Industries Incorporated and
the Company, dated November 12, 1996(2)
10.8 Loan Agreement, dated October 31, 1996, among
the Company, United States National Bank of
Oregon, Obie Industries Incorporated and Brian
Obie, and related documents(2)
10.9 Amendments, dated December 31, 1996 and February
12, 1997, to Loan Agreement dated October 31,
1996, among the Company, United States National
Bank of Oregon, Obie Industries Incorporated and
Brian Obie, and related documents
10.10 Option Agreement between MO Partners and the
Company, dated effective October 1, 1996(2)
20.1 Portions of Definitive Proxy Statement for 1997
Annual Shareholder Meeting(3)
21.1 List of Subsidiaries(1)
27.1 Financial Data Schedule(4)
- -------------
* Management contract or compensatory plan or arrangement.
(1) Incorporated herein by reference from the Company's
Registration Statement on Form SB-2 (Registration No.
333-5728-LA) filed with the Securities and Exchange
Commission on October 3, 1996.
18
<PAGE>
(2) Incorporated herein by reference from the Company's
Amendment No. 1 to the Registration Statement on Form SB-2
(Registration No. 333-5728-LA) filed with the Securities
and Exchange Commission on November 15, 1996.
(3) To be filed with the Securities and Exchange Commission
within 120 days after the end of the fiscal year covered
by this Annual Report.
(4) This schedule has been submitted in the electronic form
prescribed by EDGAR.
(b) Reports on Form 8-K. During the quarter ended
November 30, 1996, the Company filed no reports on
Form 8-K.
19
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
OBIE MEDIA CORPORATION
Dated: February 24, 1997 By/s/ Brian B. Obie
-----------------
Brian B. Obie
President
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
PRINCIPAL EXECUTIVE OFFICER AND DIRECTOR:
Dated: February 24, 1997 By/s/ Brian B. Obie
-----------------
Brian B. Obie, President,
Chief Executive Officer and
Director
PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER:
Dated: February 25, 1997 By/s/ James W. Callahan
---------------------
James W. Callahan, Chief
Financial Officer and
Treasurer
20
<PAGE>
DIRECTORS:
Dated: February 24, 1997 By/s/ Delores M. Mord
---------------------
Delores M. Mord, Director
Dated: February 24, 1997 By/s/ Randall C. Pape
---------------------
Randall C. Pape, Director
Dated: February 24, 1997 By/s/ Stephen A. Wendell
---------------------
Stephen A. Wendell, Director
Dated: February 24, 1997 By/s/ Richard C. Williams
---------------------
Richard C. Williams, Director
21
<PAGE>
Obie Media Corporation
Index to Consolidated Financial Statements
-------
Page
----
Report of Independent Accountants F-2
Consolidated Balance Sheet as of November 30, 1996 F-3
Consolidated Statements of Income for the years ended
November 30, 1996 and 1995 F-4
Consolidated Statements of Changes in Shareholders' Equity
(Deficit) for the years ended November 30, 1996 and 1995 F-5
Consolidated Statements of Cash Flows for the years ended
November 30, 1996 and 1995 F-6
Notes to Consolidated Financial Statements F-7
F-1
<PAGE>
Report of Independent Accountants
Board of Directors
Obie Media Corporation:
We have audited the accompanying consolidated balance sheet of Obie Media
Corporation as of November 30, 1996, and the related consolidated statements of
income, changes in shareholders' equity (deficit) and cash flows for the years
ended November 30, 1996 and 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Obie Media
Corporation as of November 30, 1996, and the results of their operations and
their cash flows for the years ended November 30, 1996 and 1995 in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
/S/Coopers & Lybrand L.L.P.
Eugene, Oregon
January 22, 1997, except for Note 6, as
to which the date is February 12, 1997
F-2
<PAGE>
Obie Media Corporation
Consolidated Balance Sheet
November 30,
1996
ASSETS
Current assets:
Cash $ 474,940
Accounts receivable, net of allowance for doubtful
accounts of $90,000 1,550,193
Prepaid expenses and other current assets 812,450
Deferred tax assets 709,000
-------------
Total current assets 3,546,583
Property and equipment, net 8,458,014
Other assets 147,987
Deferred tax assets 380,000
$ 12,532,584
=============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 743,973
Accounts payable 757,020
Accrued expenses 1,070,440
Deferred revenue 595,302
-------------
Total current liabilities 3,166,735
Long-term debt, less current portion 6,554,587
-------------
Total liabilities 9,721,322
-------------
Minority interest in subsidiary 27,407
Commitments (Note 9)
Shareholders' equity:
Preferred stock, without par value, 10,000,000 shares
authorized, no shares issued and outstanding -
Common stock, without par value; 20,000,000 shares
authorized, 3,500,000 shares issued and outstanding 6,161,992
Accumulated deficit (3,378,137)
-------------
Total shareholders' equity 2,783,855
-------------
Total liabilities and shareholders' equity $ 12,532,584
-------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
Obie Media Corporation
Consolidated Statements of Income
Year Ended
November 30
---------------------------
1996 1995
Revenues:
Outdoor advertising $ 4,747,634 $ 4,199,649
Transit advertising 6,150,256 4,733,065
Less agency commissions (827,632) (674,075)
------------- -------------
Net revenues 10,070,258 8,258,639
Operating expenses:
Direct advertising expenses 5,907,038 4,801,118
General and administrative 1,685,135 1,300,738
Depreciation and amortization 513,775 528,853
Operating income 1,964,310 1,627,930
Other (income) expense:
Interest expense 1,480,237 1,432,183
Minority interest in subsidiary 2,138 12,308
Other (188,365) (11,437)
------------- -------------
Income before income taxes and
extraordinary item 670,300 194,876
(Provision) benefit for income taxes (31,000) 778,000
------------- -------------
Income before extraordinary item 639,300 972,876
Extraordinary item - early debt payoff penalty
and write-off of loan fees, net of income
tax benefit of $342,000 (543,355)
------------- -------------
Net income $ 95,945 $ 972,876
============= =============
Income per share before extraordinary item $ .25 $ .39
Extraordinary item, net of tax (.21) -
------ ------
Net earnings per share $ .04 $ .39
====== ======
Weighted average number of common
shares outstanding 2,526,480 2,500,000
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
Obie Media Corporation
Consolidated Statements of Changes in Shareholders' Equity (Deficit)
<TABLE>
<CAPTION>
Receivable
From
Affiliates, Accumulated
Shares Amount Net Deficit Total
Balances at December 1,
<S> <C> <C> <C> <C> <C>
1994 2,500,000 $ 250,000 $ (1,021,748) $ (2,694,478) $ (3,466,226)
Net income 972,876 972,876
Net withdrawals (158,174) (158,174)
--------- ------------- ------------- ------------- -------------
Balances at November 30,
1995 2,500,000 250,000 (1,179,922) (1,721,602) (2,651,524)
Issuance of common stock
on November 21, 1996 1,000,000 5,911,992 5,911,992
Net income 95,945 95,945
Net withdrawals (572,558) (572,558)
Distributions 1,752,480 (1,752,480)
--------- ------------- ------------- ------------- -------------
Balances at November 30,
1996 3,500,000 $ 6,161,992 $ - $ (3,378,137) $ 2,783,855
========= ============= ============= ============= =============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-5
<PAGE>
Obie Media Corporation
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended
November 30
---------------------------
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 95,945 $ 972,876
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 513,775 528,853
Extraordinary item 885,355
Gain on disposition of property and equipment (183,175)
Deferred income taxes (311,000) (778,000)
Minority interest in subsidiary 2,138 12,308
Change in assets and liabilities:
(Increase) decrease in:
Accounts receivable (208,940) (197,365)
Prepaid expenses and other assets (321,451) (96,079)
Increase (decrease) in:
Accounts payable 262,529 48,325
Accrued expenses 524,416 87,055
Deferred revenue 36,304 180,145
------------ ------------
Net cash provided by operating activities 1,295,896 758,118
Cash flows from investing activities:
Capital expenditures (1,363,131) (533,001)
Proceeds from disposition of property and equipment 235,700 5,300
------------ ------------
Net cash used in investing activities (1,127,431) (527,701)
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of common stock 7,000,000
Cost to issue common stock (1,088,008)
Net payments on lines of credit (88,429) (184,744)
Book overdraft (378,043) 378,043
Proceeds from long-term borrowings 12,000,000 732,406
Payments on long-term debt (15,917,001) (1,024,018)
Net advances to affiliates (572,558) (158,174)
Early debt payoff penalty (704,054)
------------ ------------
Net cash provided by (used in) financing
activities 251,907 (256,487)
------------ ------------
Net increase (decrease) in cash 420,372 (26,070)
Cash, beginning of year 54,568 80,638
------------ ------------
Cash, end of year $ 474,940 $ 54,568
============ ============
Supplemental Disclosures of Cash Flow Information:
Noncash investing and financing activities:
Interest capitalized $ 45,439 $ 24,435
Accrued loan fees capitalized 90,938
Acquisition of vehicle with capital lease obligation 28,901
Distribution of receivable to affiliates 1,752,480
Cash paid for interest 1,470,967 1,445,630
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
F-6
<PAGE>
Obie Media Corporation
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies:
Company: Obie Media Corporation (the "Company"), formerly Obie Outdoor
Advertising, Inc., is a full service out-of-home advertising company with
agreements with transit districts in Oregon, Washington, and California
and outdoor advertising structures in Washington, Oregon, California and
Idaho.
On November 21, 1996, the Company completed an initial public offering
(the "Offering") of one million shares of its common stock, raising
$5,911,992, net of expenses of $1,088,008. The net proceeds were used to
reduce previously outstanding debt (see Note 6).
Spin Off: Prior to November 20, 1996, the Company was a subsidiary of
Obie Industries Incorporated. To facilitate the Offering, the Company was
spun-off as a separate entity.
Basis of Presentation: The consolidated financial statements include the
Company and its subsidiary. All significant intercompany accounts and
transactions between the Company and its subsidiary have been eliminated
in consolidation.
The Company engaged in various transactions with affiliates under common
control. These transactions primarily include advances of working capital
needs for a discontinued business and capital expenditures. Such
transactions resulted in a net receivable consisting of amounts
receivable from and payable to affiliated companies. As part of the spin
off, the net receivable from affiliates totaling $1,752,480 was
distributed by the declaration of a dividend and, accordingly, increased
the Company's accumulated deficit.
There are common administrative costs of Obie Industries, its
subsidiaries and the Company. General and administrative expenses include
the Company's portion of such costs totaling $326,839 and $547,942 for
the years ended November 30, 1996 and 1995, respectively.
Use of Estimates: The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Revenue Recognition: The Company has contracts to provide future
advertising to its customers. Advertising revenue is recognized ratably
over the period the advertising is displayed. Payments received for
advertising revenue in advance of display are deferred. Costs incurred
for the production and installation of outdoor advertising displays,
which are not specifically recoverable in the event the related contract
is canceled, are expensed as incurred. Costs incurred for the production
and installation of displays for transit advertising, which are paid for
by the customer ratably over the term of the advertising contract and are
specifically recoverable in the event the related contract is canceled,
are deferred and recognized as expense as the related revenue is
recognized over the life of respective contracts.
Continued
F-7
<PAGE>
Obie Media Corporation
Notes to Consolidated Financial Statements, Continued
1. Summary of Significant Accounting Policies, Continued:
Concentration of Credit Risk: Financial instruments that potentially
subject the Company to concentrations of credit risk consist principally
of cash and accounts receivable. The Company places its cash with high
credit quality financial institutions. Concentrations of credit risk with
respect to accounts receivable are not significant due to the large
number of customers, and their dispersion across different industries and
geographic areas.
At November 30, 1996, the Company had agreements with seven transit
districts. Customers advertising on transit vehicles owned by one of
these districts represented 37% and 38% of the Company's total revenues
for the years ended November 30, 1996 and 1995, respectively. Transit
agreements range from one to five years and are subject to renewal either
at the discretion of the transit district or upon the mutual agreement of
the Company and the transit district. Generally, these agreements require
the Company to pay the transit district the greater of a percentage of
the related advertising revenues, net of the advertising production
charges, or a guaranteed minimum amount.
Fair Value of Financial Instruments: The fair value of current assets and
current liabilities are estimated to be equal to their reported carrying
value. The carrying value of long-term debt approximates fair value on
discounted future cash flows. The resulting estimates of fair value
require subjective judgments and are approximations. Changes in the
methodologies and assumptions could significantly affect the estimates.
Cash: Cash consists of demand deposits with two federally insured banks.
At times, balances may exceed amounts insured.
Property and Equipment: Property and equipment are stated at cost.
Depreciation is provided on the straight-line method over the estimated
useful lives. Normal repairs and maintenance are expensed as incurred.
The cost and accumulated depreciation of assets sold or otherwise retired
are removed from the accounts and the resulting gain or loss is
recognized. Interest is capitalized in connection with the construction
of properties and equipment.
Other Assets: Other assets consist primarily of loan costs, which are
stated at cost and amortized over the life of the loan.
Income Taxes: The Company uses the liability method to record deferred
tax assets and liabilities that are based on the difference between the
tax bases of assets and liabilities and their carrying amounts for
financial reporting purposes. These temporary differences result from the
use of different accounting methods for financial statement and tax
reporting purposes.
Continued
F-8
<PAGE>
Obie Media Corporation
Notes to Consolidated Financial Statements, Continued
1. Summary of Significant Accounting Policies, Continued:
Income Per Share: Income per common share is computed on the weighted
average number of common shares outstanding during the period after
consideration of the dilutive effect of stock options. Such amounts have
been retroactively adjusted to reflect the 10-for-1 stock split as
discussed in Note 8, and the granting of stock options.
November 30
--------------------
1996 1995
Issued and outstanding shares (weighted average) 2,524,657 2,500,000
Stock options 1,823
--------- ---------
2,526,480 2,500,000
========= =========
New 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. Management
believes that adoption of the Statement will not 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", also effective for fiscal
years beginning after December 15, 1995. The new Statement encourages,
but does not require, companies to measure stock-based compensation cost
using the 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. While the
Company is reviewing the adoption and impact of SFAS No. 123, it expects
to adopt the disclosure-only alternative and, accordingly, this Standard
will have no material impact on the Company's results of operations or
financial position.
F-9
<PAGE>
Obie Media Corporation
Notes to Consolidated Financial Statements, Continued
2. Prepaid Expenses and Other Current Assets:
Prepaid expenses and other current assets consist of the following:
November 30,
1996
Prepaid leases $ 291,149
Transit advertising production costs 394,290
Other 127,011
-----------
$ 812,450
===========
3. Property and Equipment:
Property and equipment consist of the following:
November 30, Asset
1996 Lives
Outdoor advertising structures $ 9,860,227 20 years
Other equipment and leaseholds 1,431,589 5-20 years
------------
11,291,816
Less accumulated depreciation 2,833,802
-----------
$ 8,458,014
===========
Assets acquired during 1996 included an acquisition of bus benches that
display advertisements. The total cost of these assets was approximately
$180,000.
The Company also disposed of a billboard during the year, resulting in a
gain of approximately $183,000, which is included in other income.
4. Other Assets:
Other assets consist of the following:
November 30,
1996
Loan fees $ 90,938
Other 57,049
-----------
$ 147,987
===========
F-10
<PAGE>
Obie Media Corporation
Notes to Consolidated Financial Statements, Continued
5. Accrued Expenses:
Accrued expenses consist of the following:
November 30,
1996
Transit district fees $ 552,538
Payroll and related items 425,044
Other 92,858
------------
$ 1,070,440
============
6. Long-term Debt:
Long-term debt consists of the following:
November 30
1996
Note payable to United States National Bank, as
described below $ 7,000,000
Note payable in annual payments of $12,000 plus
interest at 10%, with collateral of outdoor
advertising structures, due October 1999 36,000
Note payable in monthly payments of $5,900 including
interest at 10%, guaranteed by Brian B. Obie, due
April 2000 202,698
Notes payable in monthly payments of $2,219
including interest ranging from 9% to 9.98%, with
collateral of several vehicles, maturing through
November 2002 59,862
------------
7,298,560
Less current portion 743,973
------------
$ 6,554,587
============
Continued
F-11
<PAGE>
Obie Media Corporation
Notes to Consolidated Financial Statements, Continued
6. Long-term Debt, Continued:
The aggregate principal payments due on the above debt subsequent to
November 30, 1996 are:
1997 $ 743,973
1998 858,993
1999 1,161,166
2000 1,131,820
2001 1,105,496
Thereafter 2,297,112
------------
$ 7,298,560
In October 1996, the Company received a $12,000,000 bridge loan from
United States National Bank of Oregon ("USNB") which was used to
refinance substantially all of the Company's then existing debt. In
connection with refinancing of the long-term debt, the Company incurred
an extraordinary expense of $885,355 for prepayment penalties related to
the early extinguishment of debt and for previously capitalized loan
costs that were written off.
Upon the completion of the Offering, the outstanding balance on this loan
was reduced to $7,000,000. Effective February 12, 1997, the outstanding
loan balance was converted to a seven-year term loan, due April 30, 2004,
with interest to be based, at the Company's option, on USNB's prime rate
plus .5%, or the Inter-Bank Offering Rate ("IBOR") plus 2%. The loan is
collateralized by substantially all of the Company's assets. The weighted
average interest rate for short-term borrowings outstanding at year end
is approximately 8.5%.
The Company also has a $1,500,000 operating line of credit with USNB. The
interest rate is at USNB's prime rate (8.25% at November 30, 1996) and it
is collateralized by receivables. The operating line will be reviewed on
April 30, 1997. There was no outstanding balance on this line of credit
at November 30, 1996.
7. Income Taxes:
The components of the income tax provision (benefit) before extraordinary
item are as follows:
Year Ended
November 30
--------------------------
1996 1995
Deferred:
Federal $ 25,200 $ (637,000)
State 5,800 (141,000)
----------- ------------
$ 31,000 $ (778,000)
=========== ============
Continued
F-12
<PAGE>
Obie Media Corporation
Notes to Consolidated Financial Statements, Continued
7. Income Taxes, Continued:
The components of the income tax benefit related to the extraordinary
item are as follows:
Year Ended
November 30,
------------
1996
Deferred:
Federal $ (280,000)
State (62,000)
------------
$ (342,000)
The tax effects of temporary differences that give rise to deferred tax
assets and liabilities are as follows:
Year Ended
November 30
--------------------------
1996 1995
Current deferred tax assets:
Deferred revenue $ 417,000 $ 257,000
Prepaid commissions 225,000 259,000
Allowance for uncollectible accounts 35,000 23,000
Net operating loss carryforwards 176,000
Accrued expenses and other 37,000
----------- -----------
Total current deferred tax assets 890,000 539,000
Current deferred tax liabilities:
Prepaid fees (181,000) (32,000)
----------- -----------
$ 709,000 $ 507,000
=========== ===========
Noncurrent deferred tax assets:
Property and equipment $ 145,000 $ 271,000
Net operating loss carryforwards 235,000
----------- -----------
$ 380,000 $ 271,000
=========== ===========
Based on management's assessment, it is more likely than not that the net
deferred tax assets will be realized through future taxable earnings. The
Company has net operating loss carryforwards totaling approximately
$1,140,000, which are available to offset future taxable income, of which
approximately $600,000 was previously expected to be used by Obie
Industries prior to or in connection with the spin-off transaction as
discussed in Note 1. These carryovers expire as follows: 2003 - $25,000;
2004 - $421,000; 2005 - $130,000; 2006 - $6,000; 2007 - $27,000; 2008 -
$15,000; and 2011 - $516,000.
Continued
F-13
<PAGE>
Obie Media Corporation
Notes to Consolidated Financial Statements, Continued
7. Income Taxes, Continued:
Income tax expense (benefit) for the years ended November 30, 1995 and
1996 differs from the amounts computed by applying the U.S. federal
income tax rate of 34% to pretax income, considering the effect of the
extraordinary item as follows:
<TABLE>
<CAPTION>
Year Ended
November 30
------------------------
1996 1995
<S> <C> <C>
Computed "expected" tax expense (benefit) $ (73,119) $ 66,260
Increase (reduction) in income taxes resulting from:
Change in beginning of the year balance of the
valuation allowance for deferred tax assets (857,855)
Increase in net operating losses available to the
Company as discussed above (220,986)
State and local taxes, net of federal income tax
benefit (13,638) 7,015
Other differences, net (3,257) 6,580
----------- -----------
Actual income tax expense (benefit) $ (311,000) $ (778,000)
=========== ===========
</TABLE>
8. Shareholders' Equity:
The Company's Restated Articles of Incorporation (the "Articles")
authorize the issuance of up to 20,000,000 shares of Common Stock and
10,000,000 shares of preferred stock issuable in series ("Preferred
Stock").
In connection with the Company's Offering, the Company's Articles of
Incorporation were amended and restated on October 1, 1996 to authorize a
10-for-1 stock split. All share and per share amounts have been
retroactively adjusted to reflect the stock split.
Preferred Stock: The Board of Directors is authorized, without further
shareholder authorization, to issue Preferred Stock in one or more series
and to fix the terms and provisions of each series, including dividend
rights and preferences, conversion rights, voting rights, redemption
rights, and rights on liquidation, including preferences over Common
Stock.
Common Stock: Holders of Common Stock are entitled to one vote per share
on all matters on which holders of Common Stock are entitled to vote.
Holders of Common Stock are entitled to receive dividends when and as
declared by the Board of Directors out of any funds lawfully available
therefore and, in the event of liquidation or distribution of assets, are
entitled to participate ratably in the distribution of such assets
remaining after payment of liabilities, in each case subject to any
preferential rights granted to any series of Preferred Stock that may
then be outstanding.
Continued
F-14
<PAGE>
Obie Media Corporation
Notes to Consolidated Financial Statements, Continued
8. Shareholders' Equity, Continued:
1996 Stock Incentive Plan: On October 2, 1996, the Company's Board of
Directors and shareholder adopted the 1996 Stock Incentive Plan, which
provides for the issuance of 300,000 shares of Common Stock pursuant to
incentive stock options ("ISOs"), nonqualified stock options ("NQOs"),
stock bonuses and stock sales to key managers, employees, directors and
consultants of the Company. ISOs may be issued only to employees of the
Company and will have a maximum term of 10 years from the date of grant.
The exercise price for ISOs may not be less than 100% of the fair market
value of the Common Stock at the time of the grant, and the aggregate
fair market value (as determined at the time of the grant) of shares
issuable upon the exercise of ISOs for the first time in any one calendar
year may not exceed $100,000. In the case of ISOs granted to holders of
more than 10% of the voting power of the Company, the exercise price may
not be less than 110% of the fair market value of the Common Stock at the
time of the grant, and the term of the option may not exceed five years.
NQOs may be granted at not less than 85% of the fair market value of the
Common Stock at the date of grant. Options become exercisable in whole or
in part from time to time as determined by the Compensation Committee,
which will administer the 1996 Stock Incentive Plan. Stock options
covering 116,500 shares of Common Stock options were outstanding at
November 30, 1996, with an exercise price of $6.65 per share. As of
November 30, 1996, no options were exercisable.
9. Commitments:
Operating Leases: The Company leases outdoor advertising structures from
an affiliated partnership. The lease agreement requires monthly payments
of a minimum base rent plus additional rent equal to 5% of the gross
revenues derived from advertising displayed on the structures. Future
minimum base rent payments are $8,500 per month through December 1996,
and increase to $9,000 per month for the following calendar year. The
lease expires December 31, 1997. Total lease expense pursuant to this
lease was $107,945 and $101,784 for the years ended November 30, 1996 and
1995, respectively.
The Company also rents office and production space from affiliates. Such
rents totaled $78,897 and $56,900 for the years ended November 30, 1996
and 1995, respectively.
The Company leases parcels of property beneath outdoor advertising
structures. These leases are generally for a term of up to ten years,
with two five-year renewal options at the Company's discretion. The
Company also leases facilities for sales, service and installation for
its operating offices. Total rent expense pursuant to these leases was
$607,566 and $524,904 for the years ended November 30, 1996 and 1995,
respectively. Future minimum lease payments for these leases for the
years ending November 30 are as follows:
Continued
F-15
<PAGE>
Obie Media Corporation
Notes to Consolidated Financial Statements, Continued
9. Commitments, Continued:
1997 $ 498,852
1998 454,492
1999 376,279
2000 316,687
2001 266,128
Thereafter 655,793
Debt Guarantees: The Company has guaranteed the debt of an affiliated
partnership totaling $423,514 at November 30, 1996.
10. Employee Benefit Plan:
Substantially all of the Company's employees who have met vesting
requirements participate in a defined contribution benefit plan which
provides for discretionary annual contributions by the Company. During
1996 the Company accrued $51,020 as a contribution to the plan. The
Company intends to contribute 5,000 shares of its common stock to the
plan and the balance in cash. During 1995 the Company contributed $41,733
in cash to the Obie Industries plan that covered the Company's employees.
F-16
<PAGE>
EXHIBIT INDEX
Exhibit*
10.9 Amendments, dated December 31, 1996
and February 12, 1997, to Loan
Agreement dated October 31, 1996,
among the Company, United States
National Bank of Oregon, Obie
Industries Incorporated and Brian
Obie, and related documents
27.1 Financial Data Schedule
- -----------
* See Item 13(a)(2) of this Annual Report for a list of all exhibits, including
those incorporated by reference.
EXHIBIT 10.9
------------
FIRST AMENDMENT OF SECURITY AGREEMENT
PARTIES:
OBIE MEDIA CORPORATION, an Oregon corporation (Grantor)
UNITED STATES NATIONAL BANK OF OREGON (Lender)
RECITAL:
On October 31, 1996, the parties entered into a certain Commercial Security
Agreement in which Grantor granted to Lender a security interest in
substantially all of the assets of Grantor, to secure all Indebtedness of
Grantor to Lender (the Security Agreement). Except as otherwise defined in this
amendment, all capitalized terms have the meanings assigned in the Security
Agreement.
AGREEMENTS:
1. REMOVAL OF COLLATERAL. The last sentence of Paragraph 4.e. of the
Security Agreement is modified to read as follows:
"To the extent that the Collateral consists of vehicles, or other
titled property, Grantor shall not take or permit any action which
would require application for certificates of title for the vehicles
outside the states of Oregon, Washington or California, without the
prior written consent of Lender."
2. HAZARDOUS SUBSTANCES. The first sentence of Paragraph 4.l. of the
Security Agreement is modified to read as follows:
"Grantor represents and warrants that, to the best of Grantor's
knowledge, the Collateral never has been, and never will be, so long as
this Agreement remains a lien on the Collateral, used for the
generation, manufacture, improper storage, transportation, treatment,
disposal, release or threatened release of any Hazardous Substance."
3. COUNTERPARTS; EXECUTION BY FACSIMILE. This amendment may be executed in
several counterparts, each of which will be deemed to be an original and all of
which together constitute one and the same instrument. Delivery of an executed
copy of this amendment by telecopy, telex or other means of electronic
communication producing a printed copy will be deemed to be an execution and
delivery of this amendment on the date of such communication by the parties so
delivering such a copy. The party so delivering such a
Page 1--FIRST AMENDMENT OF SECURITY AGREEMENT
<PAGE>
copy via electronic communication shall deliver an executed original of this
amendment to the other party within one (1) week of the date of delivery of the
copy sent via electronic communication.
4. EFFECT. Except as specifically modified by this amendment, the Security
Agreement remains in full force and effect.
DATED as of the 31st day of December, 1996.
OBIE MEDIA CORPORATION UNITED STATES NATIONAL BANK
OF OREGON
By:/s/Brian Obie By:/s/Kenneth Carson
----------------------- --------------------------
Brian Obie, President Kenneth Carson, Assistant
Vice President
Page 2--FIRST AMENDMENT OF SECURITY AGREEMENT
<PAGE>
FIRST AMENDMENT OF LOAN AGREEMENT
PARTIES:
OBIE MEDIA CORPORATION, an Oregon corporation formerly known as Obie
Outdoor Advertising Inc. (Borrower)
OBIE INDUSTRIES INCORPORATED, an Oregon corporation (Indus- tries)
BRIAN OBIE (Brian)
UNITED STATES NATIONAL BANK OF OREGON (Bank)
RECITALS:
A. On October 31, 1996, the parties entered into a certain Loan Agreement
pursuant to which Bank made available to Borrower a Revolving Loan in the
maximum amount of One Million Five Hundred Thousand Dollars ($1,500,000), a
Bridge Loan in the amount of Twelve Million Dollars ($12,000,000), and a
Construction Loan in the maximum amount of Eight Hundred Thousand Dollars
($800,000) (the Loan Agreement). Except as specifically set forth in this
amendment, all capitalized terms have the meaning assigned in the Loan
Agreement.
B. The Reorganization and IPO have been completed. The net capital raised
by Borrower from the IPO exceeded Five Million Dollars ($5,000,000). Portions of
the proceeds from the IPO have been applied to reduce the Principal Balance of
the Bridge Loan to Seven Million Dollars ($7,000,000), and to pay the
Construction Loan in full.
C. Pursuant to Paragraph 2.e. of the Loan Agreement, the Principal Balance
of the Bridge Loan is currently due and payable. Certain of the conditions
precedent to Bank's obligations to make Term Loan A to Borrower have been
satisfied, but others have not. Because the net capital raised by Borrower from
the IPO exceeded Five Million Dollars ($5,000,000), the conditions precedent to
Bank's obligation to make Term Loan B cannot be satisfied.
D. Bank is prepared to extend the maturity of the Bridge Loan to February
3, 1997 to allow additional time for Borrower to satisfy all conditions
precedent to Bank's obligation to make Term Loan A. In addition, the parties
desire to make various additional changes to the Loan Agreement, as set forth in
this amendment.
Page 1--FIRST AMENDMENT OF LOAN AGREEMENT
<PAGE>
AGREEMENTS:
1. DEFINITIONS. In Paragraph 1.n., the definition of Eligible Account,
subparagraph (xiv) is amended to read as follows:
"(xiv) payment is due from the United States government or any agency
thereof; or"
2. BRIDGE LOAN. The Principal Balance of the Bridge Loan is currently a
Prime Borrowing Rate Amount of Seven Million Dollars ($7,000,000). In
modification of Paragraph 2.e. of the Loan Agreement, promptly following
execution of this amendment:
a. Sixty Thousand Dollars ($60,000) of that Principal Balance shall be
continued as a Prime Borrowing Rate Amount, and shall be due and payable on
January 15, 1997.
b. Six Million Nine Hundred Forty Thousand Dollars ($6,940,000) of
that Principal Balance shall be converted to an IBOR Borrowing Rate Amount with
a one (1) month IBOR Interest Period expiring not later than February 3, 1997,
and shall be due and payable on February 3, 1997. If that IBOR Interest Period
expires prior to February 3, 1997, then upon expiration that portion of the
Principal Balance shall be converted to a Prime Borrowing Rate Amount.
3. CONSTRUCTION LOAN. The Construction Loan was paid in full with the
proceeds of the IPO, and no amounts are currently outstanding. The Construction
Loan is terminated, effective immediately.
4. TERM LOAN A.
a. MAXIMUM AMOUNT. Paragraph 6.a. of the Loan Agreement is amended to
read as follows:
"a. AMOUNT. If the conditions precedent to Bank's obligation to make
Term Loan A are satisfied or waived by Bank on or before February 3, 1997,
then subject to the terms and conditions of this Agreement, on February 3,
1997 Bank shall make Term Loan A to Borrower in a principal amount of Six
Million Nine Hundred Forty Thousand Dollars ($6,940,000)."
b. SPECIAL CONDITIONS. Bank's obligation to close Term Loan A remains
subject to the special conditions set forth in Paragraph 6.b. of the Loan
Agreement, except:
Page 2--FIRST AMENDMENT OF LOAN AGREEMENT
<PAGE>
(1) Bank acknowledges that the condition set forth in Paragraph
6.b.(1) has been satisfied.
(2) The condition set forth in Paragraph 6.b.(2) is modified to
read as follows:
"(2) Term Loan A shall close on February 3, 1997."
(3) Paragraph 6.b.(8) is amended to read as follows:
"(8) Except for the effect of the Reorganization on Industries, no
material adverse change shall have occurred in the financial condition of
any Borrower or Guarantor since the date of this Agreement."
c. FIXED RATE - REPAYMENT OF PRINCIPAL AND INTEREST. Paragraph 6.e.(4)
of the Loan Agreement is amended to read as follows:
"(4) REPAYMENT OF PRINCIPAL AND INTEREST. Term Loan A shall be due and
payable in eighty-three monthly installments of principal and interest. The
first monthly installment shall be due and payable on February 15, 1997,
and an additional monthly installment shall be due and payable on the
fifteenth (15th) day of each calendar month thereafter, to and including
Decem- ber 15, 2003, when the unpaid balance of Term Loan A, principal and
interest, shall be paid in full. The first fifty-nine (59) monthly
installments shall be the amount necessary to amortize Six Million Nine
Hundred Forty Thousand Dollars ($6,940,000), together with interest at the
Initial Fixed Rate, over a term of eighty-three (83) months. The final
twenty-four (24) monthly installments shall be in the amount necessary to
amortize the greater of (i) the Principal Balance of Term Loan A
immediately following the fifty-ninth (59th) monthly installment or (ii)
the Principal Balance of Term Loan A that would exist immediately following
the fifty-ninth (59th) monthly installment if all the payments were made
precisely when due, together with interest at the Adjusted Fixed Rate, over
a term of twenty-four (24) months."
d. PRIME AND/OR IBOR BORROWING RATE - REPAYMENT OF PRINCIPAL.
Paragraph 6.f.(5) of the Loan Agreement is amended to read as follows:
Page 3--FIRST AMENDMENT OF LOAN AGREEMENT
<PAGE>
"(5) REPAYMENT OF PRINCIPAL. The Principal Balance of Term Loan A
shall be paid in eighty-three (83) monthly installments. The first monthly
installment shall be due and payable on February 15, 1997, and an
additional monthly installment shall be due and payable on the fifteenth
(15th) day of each calendar month therafter, to and including December 15,
2003, when the unpaid balance of Term Loan A, principal and interest, shall
be paid in full. The first eleven (11) monthly installments shall be in the
amount of Sixty Thousand Dollars ($60,000) each. The next twelve (12)
monthly installments shall be in the amount of Sixty-five Thousand Dollars
($65,000) each. The next fifty-nine (59) monthly installments shall be in
the amount of Ninety-one Thousand Six Hundred Sixty-seven Dollars ($91,667)
each. The final monthly installment shall be in the amount of Ninety-one
Thousand Six Hundred Forty-seven Dollars ($91,647)."
e. FEE. Paragraph 6.i. of the Loan Agreement is amended to read as
follows:
"i. FEE. At the time of closing of Term Loan A, Borrower shall pay to
Bank a fee of Thirty-five Thousand Dollars ($35,000)."
5. TERM LOAN B. The conditions precedent to Bank's obligation to make Term
Loan B cannot be satisfied. Accordingly, Term Loan B is terminated, effective
immediately.
6. FEE. Contemporaneously with the execution of this amendment, Borrower
shall pay to Bank a fee in the amount of Twenty-five Thousand Dollars ($25,000).
7. RELEASE OF STOCK. Bank hereby releases from the Collateral all stock in
Borrower and all stock in Industries. All continuing obligations of the parties
under the Stock Pledge Agreements executed contemporaneously with the Loan
Agreement are terminated. Contemporaneously with the execution of this
amendment, Bank shall return the following documents, which were delivered to
Bank at the time of execution of those Stock Pledge Agreements:
a. To Brian, Certificate No. 10 of Industries and the original Stock
Power with respect to that certificate; and
b. To Industries, the original Stock Power with respect to Certificate
No. 2 of Borrower.
Page 4--FIRST AMENDMENT OF LOAN AGREEMENT
<PAGE>
Borrower and Guarantor acknowledge that neither Certificate No. 2 nor any other
certificate representing shares of Borrower was ever delivered to Bank, and
accordingly Bank has no obligation to return any such certificate.
8. RELEASE OF GUARANTORS. Paragraph 9.d.(2) of the Loan Agreement is
amended to read as follows:
"(2) RELEASE OF GUARANTORS. Effective upon any closing of Term Loan A:
(a) Industries and Brian shall be released from any further
liability under their Guaranties, and Bank shall return those original
Guaranties to them.
(b) Except as provided in the following subparagraph (d),
Industries and Brian shall be released from all obligations as parties to
this Agreement.
(c) Industries and Brian shall not be neces- sary parties to any
future amendments of the Loan Documents.
(d) Industries and Brian shall remain fully liable to Bank under
this Agreement to the extent that any warranty, representation or statement
made or furnished to Bank by or on behalf of Borrower or Guarantor at or
prior to closing of Term Loan A proves to have been false or misleading in
any material respect when made or furnished."
9. REPRESENTATIONS.
a. ADVERTISING BUSINESS. Bank acknowledges that MO Partners is the
owner of the Billboards and Billboard Site Leases listed on the attached Exhibit
A, and O.B. Walls is the owner of the Billboards and Billboard Site Leases
listed on the attached Exhibit B. The representation of Borrower and Guarantor
in Paragraph 11.d. of the Loan Agreement is amended to include a disclosure of
those ownership interests.
b. COMPLIANCE WITH LAWS. The first sentence of Paragraph 11.l. of the
Loan Agreement is amended to read as follows:
"Each of Borrower, Guarantor and their Affiliates is in material compliance
with all applicable Laws."
Page 5--FIRST AMENDMENT OF LOAN AGREEMENT
<PAGE>
Subsection (c) of the second sentence of Paragraph 11.l. is amended
to read as follows:
"(c) to the best of their actual knowledge, no Hazardous Substance has
been released or discharged from any of those premises or is otherwise
present in the soil or water of, or improperly stored at, any of those
premises, and"
10. AFFIRMATIVE COVENANTS.
a. FINANCIAL INFORMATION. In Paragraph 12.g.(3) of the Loan Agreement,
"thirty (30) days" is amended to "forty-five (45) days."
11. NEGATIVE COVENANTS.
a. GUARANTIES. As an exception to the covenant in Paragraph 13.b.(1)
of the Loan Agreement, Borrower and Guarantor may guarantee that certain loan
made on June 1, 1988 by Oregon Laborers-Employers Pension Trust Fund to MO
Partners in the principal amount of Four Hundred Fifty Thousand Dollars
($450,000). As an exception to the covenant in Paragraph 13.b.(2) of the Loan
Agreement, Borrower and Guarantor may make loans in an aggregate principal
amount not to exceed at any one time outstanding the amount of Fifty Thousand
Dollars ($50,000).
12. ADDITIONAL DOCUMENTS. Contemporaneously with the execution of this
amendment, Borrower and Guarantor shall deliver to Bank, in form and substance
satisfactory to Bank, the following:
a. A modification of the Bridge Note evidencing the change in the
Maturity of the Bridge Loan.
b. A modification of the Commercial Security Agreement between
Borrower and Bank.
c. The written opinion of Gleaves, Swearingen, Larsen, Potter, Scott &
Smith and/or Tonkon, Torp, Galen, Marmaduke and Booth, the counsel for Borrower
and Guarantor, dated as of the date of this amendment and addressed to Bank, in
form and substance satisfactory to Bank.
d. Any other documents that Bank may reasonable request.
13. REPRESENTATIONS AND WARRANTIES. To induce Bank to enter into this
amendment, Borrower and Guarantor represent and warrant to Bank that, except as
otherwise disclosed in this amendment:
Page 6--FIRST AMENDMENT OF LOAN AGREEMENT
<PAGE>
a. All representations and warranties of Borrower and Guarantor
contained in the Loan Agreement continue to be true and complete as of the date
of this amendment.
b. No Event of Default has occurred or is continuing, and no event has
occurred and is continuing that, with the giving of notice or the passage of
time, or both, would be an Event of Default under the Loan Agreement.
c. Except for the effect of the Reorganization on Industries, no
material adverse change has occurred in the financial condition of any Borrower
or Guarantor since the date of the Loan Agreement.
d. Each of Borrower's and Guarantor's execution, delivery and
performance of this amendment and all documents executed pursuant to this
amendment have been duly authorized by all necessary action, do not contravene
any Law binding on it or its organizational documents, and do not contravene the
provisions of or constitute a default under any agreement or instrument to which
it is a party or by which it may be bound or affected.
e. This amendment and all documents executed pursuant to this
amendment are, and when delivered will be, valid, binding and enforceable in
accordance with their respective terms.
14. CONSENT. Borrower and Guarantor specifically consent to the execution
and delivery of this amendment, and acknowledges that this amendment does not
prejudice or diminish any guaranty or other obligation of Borrower or any
Guarantor in any manner. This amendment shall not be construed as having created
a custom in any way contrary to the specific provisions of any agreement between
Bank and Borrower or any Guarantor, or as having in any way modified or waived
the same. Specifically, but without limitation, Bank's right to deal with
Borrower in any manner in which Bank sees fit in connection with any obligations
to Bank, now or hereafter created, without any further consent or authorization
from any Guarantor being necessary, remains in full force and effect.
15. COUNTERPARTS; EXECUTION BY FACSIMILE. This amendment may be executed in
several counterparts, each of which will be deemed to be an original and all of
which together constitute one and the same instrument. Delivery of an executed
copy of this amendment by telecopy, telex or other means of electronic
communication producing a printed copy will be deemed to be an execution and
delivery of this amendment on the date of such communication by the parties so
delivering such a copy. The party so delivering such a copy via electronic
communication shall deliver an executed original of this amendment to the other
party within one (1) week
Page 7--FIRST AMENDMENT OF LOAN AGREEMENT
<PAGE>
of the date of delivery of the copy sent via electronic communica-
tion.
16. EFFECT. Except as specifically modified by this amendment, or any
document executed pursuant to this amendment, the Loan Documents remain in full
force and effect.
17. DISCLOSURE. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS
MADE BY A BANK AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT
EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED
SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND
BE SIGNED BY THE BANK TO BE ENFORCEABLE.
Dated as of December 31, 1996.
OBIE MEDIA CORPORATION UNITED STATES NATIONAL BANK
OF OREGON
By:/s/Brian Obie By:/s/Kenneth Carson
---------------------- -------------------------
Brian Obie, President Kenneth Carson, Assistant
Vice President
OBIE INDUSTRIES INCORPORATED
By:/s/Brian Obie
----------------------
Brian Obie, President
/s/Brian Obie
- -------------------------
Brian Obie, An Individual
Page 8--FIRST AMENDMENT OF LOAN AGREEMENT
<PAGE>
SECOND AMENDMENT OF LOAN AGREEMENT
PARTIES:
OBIE MEDIA CORPORATION, an Oregon corporation formerly known
as Obie Outdoor Advertising Inc. (Borrower)
OBIE INDUSTRIES INCORPORATED, an Oregon corporation (Indus-
tries)
BRIAN OBIE (Brian)
UNITED STATES NATIONAL BANK OF OREGON (Bank)
RECITALS:
A. On October 31, 1996, the parties entered into a certain Loan
Agreement (the Original Loan Agreement). On December 31, 1996, the parties
entered into a certain First Amendment of Loan Agreement (the First Amendment).
The Original Loan Agreement, as modified by the First Amendment is referred to
in this amendment as the Loan Agreement. Except as specifically set forth in
this amendment, all capitalized terms have the meanings assigned in the Loan
Agreement.
B. Contemporaneously with the execution of this amendment, the parties are
closing Term Loan A.
AGREEMENTS:
1. TERM LOAN A.
a. INTEREST RATE ELECTION. Pursuant to Paragraph 6.d. of the Loan
Agreement, Borrower elects to have Term Loan A bear interest at Prime and/or
IBOR Borrowing Rates.
b. APPLICATION OF PROCEEDS. The proceeds of Term Loan A shall be
applied first to pay the Bridge Loan in full, principal and interest, next to
the fee described in the following subpara- graph c., and any excess proceeds
shall be disbursed to Borrower.
c. FEE. Contemporaneously with the execution of this amendment,
Borrower shall pay to Bank a fee of Thirty-five Thousand Dollars ($35,000).
Page 1--SECOND AMENDMENT OF LOAN AGREEMENT
<PAGE>
2. RELEASE OF GUARANTORS. Effective upon execution of this amendment:
a. Industries and Brian are released from any further liability under
their Guaranties, and Bank shall return those original Guaranties to them.
b. Except as provided in the following subparagraph d., Industries and
Brian are released from all obligations as parties to the Loan Agreement.
c. Industries and Brian are not necessary parties to any future
amendments of the Loan Documents.
d. Industries and Brian shall remain fully liable to Bank under the
Loan Agreement to the extent that any warranty, representation or statement made
or furnished to Bank, by or on behalf of Borrower or Guarantor, at or prior to
the execution of this amendment, proves to have been false or misleading in any
material respect when made or furnished.
3. FINANCIAL COVENANTS. Until payment in full of all payment obligations
of, and performance of all other obligations of, Borrower under the Loan
Documents, Borrower agrees that:
a. CURRENT RATIO. Borrower shall maintain a ratio of Current Assets to
Current Liabilities of not less than 1 to 1 as of the end of each fiscal quarter
of Borrower, commencing February 28, 1997. For purposes of this paragraph:
(1) "Current Assets" means the assets of Borrower that may be
properly classified as current assets in accordance with GAAP, but excluding all
loans to, and notes and receivables from, any Affiliate of Borrower, or from
officers, employees, directors, shareholders, partners or members of Borrower or
any Affiliate of Borrower; and
(2) "Current Liabilities" means the liabilities of Borrower that
may be properly classified as current liabilities in accordance with GAAP.
b. CASH FLOW COVERAGE RATIO. Borrower shall maintain a ratio of Cash
Flow to Cash Requirements of:
(1) Not less than 1 to 1 for the twelve (12) month periods ending
on November 30, 1997 and February 28, 1998;
Page 2--SECOND AMENDMENT OF LOAN AGREEMENT
<PAGE>
(2) Not less than 1.1 to 1 for the twelve (12) month periods
ending on May 31, 1998 and August 31, 1998; and
(3) Not less than 1.25 to 1 for the twelve (12) month period
ending on November 30, 1998, and, thereafter, for each twelve (12) month period
ending on the last day of each fiscal quarter of Borrower.
For purposes of this paragraph:
(1) "Cash Flow" means, for the applicable period, (a) Borrower's
net income after taxes; plus (b) amortization, depreciation and other non-cash
expenses deducted in calculating that net income; minus (c) any amounts paid by
Borrower for the purchase or capital lease of tangible or intangible assets that
are not funded by long-term debt (but not less than zero); all as reasonably
determined by Bank in accordance with GAAP.
(2) "Cash Requirements" means, for the applicable period, (a) the
regularly scheduled payments of principal by Borrower upon long-term debt
(including the Loan); plus (b) any prepayments of principal by Borrower upon
long-term debt (excluding the Loan); plus (c) any dividends or other
distributions paid by Borrower to its shareholders; all as reasonably determined
by Bank in accordance with GAAP.
4. NEGATIVE COVENANTS. Paragraph 13.c. of the Loan Agreement is amended to
read as follows:
"LIENS. Borrower shall not, at any time, grant a security interest or
other encumbrance on all or any of its presently owned or hereafter
acquired Collateral, except to Bank; provided, however, that Borrower may
grant purchase money security interests to secure purchase money
indebtedness that does not exceed Sixty Thousand Dollars ($60,000) in the
aggregate in any fiscal year of Borrower."
5. ADDITIONAL DOCUMENTS. Contemporaneously with the execution of this
amendment, Borrower shall deliver to Bank, in form and substance satisfactory to
Bank, the following:
a. Term Note A.
b. Any other documents that Bank may reasonable request.
Page 3--SECOND AMENDMENT OF LOAN AGREEMENT
<PAGE>
6. REPRESENTATIONS AND WARRANTIES. To induce Bank to enter into this
amendment, Borrower and Guarantor represent and warrant to Bank that:
a. All representations and warranties of Borrower and Guarantor
contained in the Loan Agreement continue to be true and complete as of the date
of this amendment.
b. No Event of Default has occurred or is continuing, and no event has
occurred and is continuing that, with the giving of notice or the passage of
time, or both, would be an Event of Default under the Loan Agreement.
c. No material adverse change has occurred in the financial condition
of Borrower since the date of the First Amendment.
d. Each of Borrower's and Guarantor's execution, delivery and
performance of this amendment and all documents executed pursuant to this
amendment have been duly authorized by all necessary action, do not contravene
any Law binding on it or its organizational documents, and do not contravene the
provisions of or constitute a default under any agreement or instrument to which
it is a party or by which it may be bound or affected.
e. This amendment and all documents executed pursuant to this
amendment are, and when delivered will be, valid, binding and enforceable in
accordance with their respective terms.
7. COUNTERPARTS; EXECUTION BY FACSIMILE. This amendment may be executed in
several counterparts, each of which will be deemed to be an original and all of
which together constitute one and the same instrument. Delivery of an executed
copy of this amendment by telecopy, telex or other means of electronic
communication producing a printed copy will be deemed to be an execution and
delivery of this amendment on the date of such communication by the parties so
delivering such a copy. The party so delivering such a copy via electronic
communication shall deliver an executed original of this amendment to the other
party within one (1) week of the date of delivery of the copy sent via
electronic communication.
8. EFFECT. Except as specifically modified by this amendment, or any
document executed pursuant to this amendment, the Loan Documents remain in full
force and effect.
Page 4--SECOND AMENDMENT OF LOAN AGREEMENT
<PAGE>
9. DISCLOSURE. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS
MADE BY A BANK AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT
EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED
SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND
BE SIGNED BY THE BANK TO BE ENFORCEABLE.
Dated as of February 12, 1997.
OBIE MEDIA CORPORATION UNITED STATES NATIONAL BANK
OF OREGON
By:/s/Brian Obie By:/s/Larry Johnson
---------------------- -----------------------------
Brian Obie, President Larry Johnson, Vice President
OBIE INDUSTRIES INCORPORATED
By:/s/Brian Obie
----------------------
Brian Obie, President
/s/Brian Obie
- -------------------------
Brian Obie, An Individual
Page 5--SECOND AMENDMENT OF LOAN AGREEMENT
<PAGE>
FIRST AMENDMENT OF PROMISSORY NOTE
PARTIES:
OBIE MEDIA CORPORATION, an Oregon corporation (Borrower)
UNITED STATES NATIONAL BANK OF OREGON (Bank)
RECITAL:
A. On October 31, 1996, Borrower executed and delivered to Bank a
Promissory Note in the face amount of Twelve Million Dollars ($12,000,000) (the
Bridge Note). Except as otherwise defined in this amendment, all capitalized
terms have the meanings assigned in the Bridge Note.
B. On the date of this amendment, the Principal Balance of the Bridge Note
is Seven Million Dollars ($7,000,000).
AGREEMENTS:
1. Paragraph 2. of the Bridge Note is modified to read as follows:
"2. PAYMENT OF PRINCIPAL. The Principal Balance of this note shall be
paid as follows:
a. The Principal Balance shall be reduced to Six Million Nine
Hundred Forty Thousand Dollars ($6,940,000) on January 15, 1997.
b. The entire remaining Principal Balance of this note shall be
due and payable on February 3, 1997."
2. COUNTERPARTS; EXECUTION BY FACSIMILE. This amendment may be executed in
several counterparts, each of which will be deemed to be an original and all of
which together constitute one and the same instrument. Delivery of an executed
copy of this amendment by telecopy, telex or other means of electronic
communication producing a printed copy will be deemed to be an execution and
delivery of this amendment on the date of such communication by the parties so
delivering such a copy. The party so delivering such a copy via electronic
communication shall deliver an executed original of this amendment to the other
party within one (1) week of the date of delivery of the copy sent via
electronic communication.
3. EFFECT. Except as specifically modified by this amendment, the Bridge
Note remains in full force and effect.
Page 1--FIRST AMENDMENT OF PROMISSORY NOTE
<PAGE>
4. DISCLOSURE. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMITMENTS
MADE BY A BANK AFTER OCTOBER 3, 1989, CONCERNING LOANS AND OTHER CREDIT
EXTENSIONS WHICH ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED
SOLELY BY THE BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND
BE SIGNED BY THE BANK TO BE ENFORCEABLE.
DATED as of the 31st day of December, 1996.
OBIE MEDIA CORPORATION UNITED STATES NATIONAL BANK
OF OREGON
By:/s/Brian Obie By:/s/Kenneth Carson
----------------------- --------------------------
Brian Obie, President Kenneth Carson, Assistant
Vice President
Page 2--FIRST AMENDMENT OF PROMISSORY NOTE
<PAGE>
PROMISSORY NOTE
(Term Note A)
$6,940,000 Eugene, Oregon February 12, 1997
PARTIES:
OBIE MEDIA CORPORATION, an Oregon corporation (Borrower)
UNITED STATES NATIONAL BANK OF OREGON (Bank)
AGREEMENTS:
1. PROMISE TO PAY. For value received, Borrower promises to pay to Bank, or
its order, the principal amount of Six Million Nine Hundred Forty United States
Dollars ($6,940,000), together with interest thereon at the rates specified in
this note.
2. PAYMENT OF PRINCIPAL. The Principal Balance of this note shall be paid
in eighty-three (83) monthly installments. The first (1st) monthly installment
shall be due and payable on February 15, 1997, and an additional monthly
installment shall be due and payable on the fifteenth (15th) day of each
calendar month thereafter, to and including December 15, 2003, when the unpaid
balance of this note, principal and interest, shall be paid in full. The first
eleven (11) monthly installments shall be in the amount of Sixty Thousand
Dollars ($60,000) each. The next twelve (12) monthly installments shall be in
the amount of Sixty-five Thousand Dollars ($65,000) each. The next fifty-nine
(59) monthly installments shall be in the amount of Ninety-one Thousand Six
Hundred Sixty-seven Dollars ($91,697) each. The final monthly installment shall
be in the amount of Ninety-one Thousand Sixty Hundred Forty-seven Dollars
($91,647). All regularly scheduled payments of principal shall be applied:
a. First to any Prime Rate Borrowing Amounts, in such order as
Borrower may designate, or in the absence of such designation, in such order as
Bank may determine in Bank's absolute discretion; and
b. Second, to any IBOR Borrowing Rate Amounts, in such order as
Borrower may designate, or in the absence of such designation, in such order as
Bank may determine in Bank's absolute discretion.
Page 1--PROMISSORY NOTE
<PAGE>
3. INTEREST RATES AND PAYMENT OF INTEREST.
a. DEFINITIONS. As used in this note, the following terms have the
following meanings:
(1) "Business Day" means any day other than a Saturday, Sunday or
other day that commercial banks in Portland, Oregon, or New York, New York, are
authorized or required by law to close.
(2) "IBOR Borrowing Rate" means the IBOR Rate plus two percent
(2%). The IBOR Borrowing Rate for each IBOR Borrowing Rate Amount shall be
determined pursuant to Paragraph 3.c., as of the beginning of the applicable
IBOR Interest Period, based on the then current IBOR Rate, and, except as
provided in Paragraph 3.d., shall remain fixed during that IBOR Interest Period.
(3) "IBOR Borrowing Rate Amount(s)" means those portions of the
Principal Balance that, at any time, are accruing interest at an IBOR Borrowing
Rate.
(4) "IBOR Interest Period" means, as to any IBOR Borrowing Rate
Amount, a period of one, two, three or six months commencing on the date the
IBOR Borrowing Rate becomes applicable; provided, however, that (1) no IBOR
Interest Period shall be selected which would extend beyond Maturity; (2) any
IBOR Interest Period which would otherwise expire on a day which is not a
Business Day, shall be extended to the next succeeding Business Day, unless the
results of such extension would be to extend such IBOR Interest Period into
another calendar month, in which event the IBOR Interest Period shall end on the
immediately preceding Business Day; and (3) any IBOR Interest Period that begins
on the last Business Day of a calendar month (or a day for which there is no
numerically corresponding day in the calendar month at the end of such IBOR
Interest Period) shall end on the last Business Day of a calendar month.
(5) "IBOR Rate," means, for any IBOR Interest Period, the rate
per annum (computed on the basis of a 360 day year and the actual number of days
elapsed) equal to the arithmetic average (rounded upward to the nearest 1/16 of
1%) of the rates per annum determined by Bank, as of the time Borrower obtains
an IBOR Borrowing Rate quote from Bank on the date two (2) Business Days prior
to the first date of an IBOR Interest Period, as the rates offered to Bank by
three Eurodollar money market dealers in such Eurodollar markets as may be
selected by Bank for U.S. dollar deposits to be delivered on the first day of
such IBOR Interest Period for the number of months therein; provided, however,
that Bank's IBOR Rate shall be adjusted to take into account the maximum
reserves required to be maintained for Eurocurrency liabilities by banks during
each such IBOR Interest Period as specified in
Page 2--PROMISSORY NOTE
<PAGE>
Regulation D of the Board of Governors of the Federal Reserve
System or any successor regulation.
(6) "Maturity" means the time when the entire unpaid Principal
Balance becomes due and payable, whether by agreement, acceleration or
otherwise.
(7) "Prime Borrowing Rate" means the Prime Rate plus one-half of
one percent (0.50%). The Prime Borrowing Rate shall be adjusted without notice
effective on each date the Prime Rate changes.
(8) "Prime Rate" means the rate identified and publicly announced
by the Bank from time to time as its prime rate and does not necessarily mean,
for example, the lowest rate of interest which the Bank collects for any
borrower or group of borrowers.
(9) "Prime Borrowing Rate Amount" means that portion of the
Principal Balance that, at any time, is accruing interest at the Prime Borrowing
Rate.
(10) "Principal Balance" means, at any time, the unpaid principal
balance of this note.
(11) "Related Documents" means, without limitation, all loan
agreements, mortgages, deeds of trust, security agree- ments, guaranties, and
all other instruments, agreements and documents, whether now or hereafter
existing, relating to the indebtedness evidenced by this note.
b. PRIME BORROWING RATE. Except for portions of the Principal Balance
that are accruing interest at an IBOR Borrowing Rate, Borrower shall pay
interest on the Principal Balance at the Prime Borrowing Rate. The Prime
Borrowing Rate shall be adjusted without notice effective on each day the Prime
Rate changes.
c. IBOR BORROWING RATE.
(1) Borrower may obtain IBOR Borrowing Rate quotes from Bank
between 8:00 a.m. and 11:00 a.m. (Portland, Oregon, time) on any Business Day.
Borrower may request conversion of a portion of the Principal Balance to an IBOR
Borrowing Rate Amount only by giving Bank notice in accordance with Paragraph
3.c.(2). not later than 11:00 a.m. on such date.
(2) Whenever Borrower desires to use the IBOR Borrowing Rate
option, Borrower shall give Bank irrevocable notice (either in writing or
orally) between 8:00 a.m. and 11:00 a.m. (Portland, Oregon, time) two (2)
Business Days in advance of the desired effective date of such rate. Any oral
notice shall be
Page 3--PROMISSORY NOTE
<PAGE>
given by, and any written notice or confirmation of an oral notice shall be
signed by, a person authorized to execute and deliver promissory notes to Bank
on behalf of Borrower, and shall specify the effective date of the rate, the
IBOR Interest Period, and whether Borrower is requesting conversion of a portion
of the Principal Balance bearing interest at the Prime Borrowing Rate to an IBOR
Borrowing Rate Amount or a new IBOR Interest Period for an IBOR Borrowing Rate
Amount whose IBOR Interest Period is expiring. Bank may, but need not, require
that all oral notices be confirmed in writing. Notwithstanding any other term of
this note, Borrower may elect an IBOR Borrowing Rate Amount only in the minimum
principal amount of Five Hundred Thousand Dollars ($500,000) and in larger
integral multiples of One Hundred Thousand Dollars ($100,000). Except as
provided in Paragraph 3.d., the IBOR Borrowing Rate for each IBOR Borrowing Rate
Amount shall remain fixed for the applicable IBOR Interest Period.
(3) If at any time Bank's IBOR Rate is unascertain- able or
unavailable to Bank or if IBOR Rate loans become unlawful, the option to select
the IBOR Borrowing Rate shall terminate immediately. If any IBOR Borrowing Rates
are then in effect (i) each shall terminate automatically with respect to the
applicable IBOR Borrowing Rate Amount (a) on the last day of the applicable IBOR
Interest Period, if Bank may lawfully continue to maintain such loans, or (b)
immediately if Bank may not lawfully continue to maintain such loans through
such day, and (ii) the Prime Borrowing Rate automatically shall become effective
as to such amounts upon termination.
(4) If at any time after the date of this note (i) any revision
in or adoption of any applicable law, rule or regulation or in the
interpretation or administration thereof (a) shall subject Bank or its
Eurodollar lending office to any tax, duty or other charge, or change the basis
of taxation of payments to Bank with respect to any loans bearing interest based
on Bank's IBOR Rate or (b) shall impose or modify any reserve, insurance,
special deposit or similar requirements against assets of, deposits with or for
the account of, or credit extended by Bank or its Eurodollar lending office, or
impose on Bank or its Eurodollar lending office any other condition affecting
any such loans, and (ii) the result of the foregoing is (x) to increase the cost
to Bank of making or maintaining any such loans or (y) to reduce the amount of
any sum receivable under this note by Bank or its Eurodollar lending office,
Borrower shall pay Bank within fifteen (15) days after demand by Bank such
additional amount as will compensate Bank for such increased cost or reduction.
The determination hereunder by Bank of such additional amounts shall be
conclusive in the absence of manifest error. If Bank demands compensation under
this paragraph, Borrower may, upon three (3) Business Days notice to Bank, pay
the accrued interest on all IBOR Borrowing Rate Amounts as may be affected,
together with any
Page 4--PROMISSORY NOTE
<PAGE>
additional amounts payable under Paragraph 3.c.(5). Upon Borrower's paying such
accrued interest and additional costs, the Prime Borrowing Rate immediately
shall be effective with respect to the unpaid principal balance of such IBOR
Borrowing Rate Amounts.
(5) Upon any termination of any IBOR Borrowing Rate (including
but not limited to conversion to another rate) or payment of all or any portion
of any IBOR Borrowing Rate Amount on a date other than the last day of the then
applicable IBOR Interest Period, as the case may be, including, without
limitation, (i) payment under Paragraph 2., (ii) prepayment under Paragraph 4.,
(iii) acceleration under Paragraph 7. or (iv) repayment in response to a notice
under Paragraph 3.c.(4), Borrower shall pay to Bank on demand a yield
maintenance charge calculated pursuant to the attached Exhibit A.
(6) If Borrower chooses the IBOR Borrowing Rate, Borrower shall
pay interest based on such rate, plus any other applicable taxes or charges
hereunder, even though Bank may have obtained the funds loaned to Borrower from
sources other than the applicable Eurodollar market. Bank's determination of the
IBOR Borrowing Rate and any such taxes or charges shall be conclusive in the
absence of manifest error.
(7) Notwithstanding any other term of this note, Borrower may not
select the IBOR Borrowing Rate if an event has occurred that constitutes an
Event of Default or that, with the giving of notice or the passage of time or
both, would constitute an Event of Default.
d. DEFAULT INTEREST RATE. Notwithstanding anything in this note to the
contrary, upon the occurrence of an Event of Default, the Prime Borrowing Rate
Amount shall thereafter accrue interest at a Prime Borrowing Rate equal to the
Prime Rate plus five and one-half percent (5.50%), and each outstanding IBOR
Borrowing Rate Amount shall accrue interest at an IBOR Borrowing Rate equal to
the IBOR Rate previously determined by Bank for that IBOR Borrowing Rate Amount
plus seven percent (7.00%).
e. PAYMENTS OF INTEREST. Borrower shall pay accrued interest on the
fifteenth (15th) day of February, 1997 and on the fifteenth (15th) day of every
calendar month thereafter. In addition, with respect to all IBOR Borrowing Rate
Amounts, accrued interest shall be paid on the last day of the applicable IBOR
Interest Period.
f. COMPUTATION OF INTEREST. All interest will be computed at the
applicable rate based on a 360 day year and applied to the actual number of days
elapsed.
Page 5--PROMISSORY NOTE
<PAGE>
g. USURY. Notwithstanding anything in this note to the contrary, at no
time shall the Prime Borrowing Rate or any IBOR Borrowing Rate exceed the
maximum rate permitted by applicable law.
4. PREPAYMENT. Prepayment may be made in whole or in part at any time. All
prepayments shall be applied:
a. First to any Prime Rate Borrowing Amounts, in such order as
Borrower may designate, or in the absence of such designation, in such order as
Bank may determine in Bank's absolute discretion;
b. Second, to any IBOR Borrowing Rate Amounts, in such order as
Borrower may designate, or in the absence of such designation, in such order as
Bank may determine in Bank's absolute discretion; and
c. Then to accrued interest.
Prepayments of principal shall be applied to the remaining
installments of principal in the inverse order of maturity.
5. LATE CHARGE. If a payment is nineteen (19) or more days past due,
Borrower will pay a late charge of five percent (5%) of the delinquent payment,
but not more than the maximum amount authorized by law.
6. DEFAULT. Each of the following shall constitute an Event of Default
under this note:
a. Borrower fails to make any payment within ten (10) days after it is
due.
b. Any default under any Related Document or under any other agreement
between Bank and Borrower.
7. ACCELERATION. Upon any Event of Default, Bank may, without notice,
declare the entire Principal Balance and all accrued interest immediately due
and payable.
8. NOTICES. Any notices required or permitted to be given under the terms
of this note shall be in writing and may be given by personal delivery; first
class mail; certified mail, return receipt requested; or nationally recognized
overnight courier; directed to the parties at the following addresses, or such
other address as any party may designate in writing prior to the time of the
giving of such notice, or in any other manner authorized by law:
Borrower: 1010 Obie Street
Eugene, OR 97402
Page 6--PROMISSORY NOTE
<PAGE>
Bank: Oregon Corporate Banking
555 S.W. Oak
PL-7 Corporate Loan Servicing Center
Portland, OR 97204
With a copy to: Attn: Larry Johnson
800 Willamette Street, Third Floor
Eugene, OR 97401
Any notice given shall be effective when actually received; or if given by
certified mail, then forty-eight (48) hours after deposit of such notice in the
United States mail with postage prepaid; or if given by overnight courier, then
twenty-four (24) hours after the deposit of such notice with the overnight
courier with delivery charges prepaid.
9. ARBITRATION.
a. Either Bank or Borrower may require that all disputes, claims,
counterclaims, and defenses, including those based on or arising from any
alleged tort ("Claims") relating in any way to this note, be settled by binding
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association and Title 9 of the U.S. Code. All Claims will be subject
to the statutes of limitation applicable if they were litigated. This provision
is void if the note, at the time of the proposed submission to arbitration, is
secured by real property located outside of Oregon or Washington, or if the
effect of the arbitration procedure (as opposed to any Claims of Borrower) would
be to materially impair Bank's ability to realize on any collateral securing
this note.
b. If arbitration occurs and each party's Claim is less than $100,000,
one neutral arbitrator will decide all issues; if any party's Claim is $100,000
or more, three neutral arbitrators will decide all issues. All arbitrators will
be active Oregon State Bar members in good standing. All arbitration hearings
will be held in Eugene, Oregon. In addition to all other powers, the arbitra-
tor(s) shall have the exclusive right to determine all issues of arbitrability.
Judgment on any arbitration award may be entered in any court with jurisdiction.
c. If either party institutes any judicial proceeding relating to this
note, such action shall not be a waiver of the right to submit any Claim to
arbitration. In addition, each has the right before, during, and after any
arbitration to exercise any number of the following remedies, in any order or
concurrently: (i) setoff; (ii) self-help repossession; (iii) judicial or
non-judicial foreclosure against real or personal property collateral; (iv)
provisional remedies, including injunction, appointment of receiver, attachment,
claim and delivery and replevin.
Page 7--PROMISSORY NOTE
<PAGE>
10. COLLECTION COSTS AND ATTORNEY FEES. Borrower agrees to pay upon demand
all of Bank's reasonable costs and expenses, including attorneys' fees and
Bank's legal expenses, incurred in connection with the enforcement of this note.
Costs and expenses include Bank's attorneys' fees and legal expenses whether or
not there is a lawsuit, including attorneys' fees and legal expenses for
bankruptcy proceedings (and including efforts to modify or vacate any automatic
stay or injunction), appeals, and any anticipated post-judgment collection
services. Borrower also shall pay all court costs and such additional fees as
may be directed by the court.
11. WAIVERS. Each maker, co-maker, endorser or guarantor of this note,
waives diligence, demand, presentment for payment, notice of non-payment,
protest and notice of protest and consents to all extensions of time and
renewals hereof, whether or not the extensions or renewals are longer than the
original period of the note, to any exchange or release of any security for the
indebted- ness evidenced by this note, and to any release of any party liable on
this note or any Related Document.
12. GENERAL PROVISIONS. Time is of the essence of this note. All
obligations of any maker, co-maker, endorser or guarantor of this note are joint
and several. This note shall be governed by and construed and enforced in
accordance with the laws of the State of Oregon without regard to conflicts of
law principles. Bank's rights and remedies under this note and under any Related
Documents are cumulative.
13. UNDER OREGON LAW, MOST AGREEMENTS, PROMISES AND COMMIT- MENTS MADE BY
BANK AFTER OCTOBER 3, 1989 CONCERNING LOANS AND OTHER CREDIT EXTENSIONS WHICH
ARE NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES OR SECURED SOLELY BY THE
BORROWER'S RESIDENCE MUST BE IN WRITING, EXPRESS CONSIDERATION AND BE SIGNED BY
BANK TO BE ENFORCEABLE.
OBIE MEDIA CORPORATION
By:/s/Brian Obie
-----------------------------
Brian Obie, President
UNITED STATES NATIONAL BANK OF
OREGON
By:/s/Larry Johnson
-----------------------------
Larry Johnson, Vice President
Page 8--PROMISSORY NOTE
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary
financial information extracted
from the financial statements of
Obie Media Crpoation which are
included in its annual report, Form
10-KSB, for the year ended
November 30, 1996 and is qualified
in its entireity by reference to
such financial statments.
</LEGEND>
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> Nov-30-1996
<CASH> 474,940
<SECURITIES> 0
<RECEIVABLES> 1,640,193
<ALLOWANCES> 90,000
<INVENTORY> 0
<CURRENT-ASSETS> 3,546,583
<PP&E> 11,291,816
<DEPRECIATION> 2,833,802
<TOTAL-ASSETS> 12,532,584
<CURRENT-LIABILITIES> 3,166,735
<BONDS> 7,298,560
0
0
<COMMON> 6,161,992
<OTHER-SE> (3,378,137)
<TOTAL-LIABILITY-AND-EQUITY> 12,532,584
<SALES> 0
<TOTAL-REVENUES> 10,070,258
<CGS> 0
<TOTAL-COSTS> 5,907,038
<OTHER-EXPENSES> 513,775
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,480,237
<INCOME-PRETAX> 670,300
<INCOME-TAX> (31,000)
<INCOME-CONTINUING> 639,300
<DISCONTINUED> 0
<EXTRAORDINARY> (543,355)
<CHANGES> 0
<NET-INCOME> 95,945
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
<FN>
Information regarding Inventory and Loss Provision not
included in Financial Statements
</FN>
</TABLE>
