<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 11, 1996
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
ELLER MEDIA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7312 86-0812139
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
2850 E. CAMELBACK ROAD, SUITE 300
PHOENIX, ARIZONA 85016
(602) 957-8116
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
KARL ELLER
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
ELLER MEDIA CORPORATION
2850 E. CAMELBACK ROAD, SUITE 300
PHOENIX, ARIZONA 85016
(602) 957-8116
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
<TABLE>
<S> <C>
THOMAS W. DOBSON, ESQ. R. W. SMITH, JR., ESQ.
LATHAM & WATKINS PIPER & MARBURY L.L.P.
633 WEST FIFTH STREET, SUITE 4000 36 SOUTH CHARLES STREET
LOS ANGELES, CALIFORNIA 90071 BALTIMORE, MARYLAND 21201
(213) 485-1234 (410) 539-2530
</TABLE>
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
PROPOSED
PROPOSED MAXIMUM
TITLE OF EACH AMOUNT MAXIMUM AGGREGATE AMOUNT OF
CLASS OF SECURITIES TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(2) PRICE(1)(2) FEE
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share... $ $ $200,000,000 $60,606
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes shares subject to an over-allotment option granted to the
Underwriters.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(a) under the Securities Act of 1933.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION
DECEMBER 11, 1996
SHARES
LOGO
ELLER MEDIA CORPORATION
COMMON STOCK
------------------------
Of the shares of Common Stock ("Common Stock") offered hereby (the
"Offering"), shares are being sold by Eller Media Corporation (the
"Company") and shares are being sold by certain selling stockholders
named herein (the "Selling Stockholders"). See "Principal and Selling
Stockholders." The Company will not receive any of the proceeds from the sale of
Common Stock by the Selling Stockholders. Prior to this offering, there has been
no public market for the Common Stock of the Company. It is currently
anticipated that the initial public offering price will be between and
per share. See "Underwriting" for the factors to be considered in
determining the initial public offering price.
The Company has applied to have the Common Stock approved for quotation on
the Nasdaq National Market under the symbol "ELLR."
------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8 HEREOF.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
PRICE UNDERWRITING PROCEEDS PROCEEDS
TO DISCOUNTS AND TO TO SELLING
PUBLIC COMMISSIONS COMPANY(1) STOCKHOLDERS
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share..................... $ $ $ $
- --------------------------------------------------------------------------------------------------
Total(2)...................... $ $ $ $
- --------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>
(1) Before deducting expenses of the Offering, payable by the Company, estimated
at $ .
(2) The Company and the Selling Stockholders have granted the Underwriters a
30-day option to purchase up to additional shares of Common Stock
solely to cover over-allotments, if any. To the extent that the option is
exercised, the Underwriters will offer the additional shares at the Price to
Public shown above. If the option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions, Proceeds to Company and
Proceeds to Selling Stockholders will be $ , $ , $ and $ ,
respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about ,
1997.
ALEX. BROWN & SONS
INCORPORATED
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
FURMAN SELZ
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE> 3
[Map of United States indicating the existing markets in which
the Company owns and operates outdoor advertising display faces/photos]
------------------------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED IN THE NASDAQ NATIONAL MARKET, THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
<PAGE> 4
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. As used herein, "EMC" or the "Company" means Eller
Media Corporation, together with its consolidated subsidiaries, unless the
context otherwise requires. The Company is a holding company and conducts all of
its operations through its subsidiaries, including Eller Media Company
("Eller"), Patrick Media Group, Inc. ("PMG") and the subsidiaries of Eller
Investment Company, Inc. ("EIC"), which collectively operate under the name
"Eller Media Company." PMG and EIC are collectively referred to herein as the
"Predecessors." Unless otherwise specified, the Prospectus assumes, (i) a
for split and reclassification of the Common Stock of the Company which will
be effective immediately prior to the Offering of Common Stock contemplated
hereby and (ii) no exercise of the Underwriters' over-allotment option.
"Operating Cash Flow" has the meaning set forth in footnote 5 on page 7 hereof
and "Operating Cash Flow Margin" has the meaning set forth in footnote 6 on page
7 hereof. The term "market" refers to the geographic area constituting a
Designated Market Area as defined by the A.C. Nielsen Company.
THE COMPANY
Eller Media Corporation is the largest outdoor advertising company in the
United States based on its total U.S. advertising display inventory of
approximately 50,000 display faces. The Company provides outdoor advertising
services in 15 major metropolitan markets located in six operating regions:
Southern California, Texas, the Midwest, Northern California, the Southeast and
the Southwest. The Company believes it is the largest provider of outdoor
advertising services in 12 of its 15 markets based on total display faces. The
markets in which the Company operates represent approximately 22% of the total
U.S. population and approximately 50% of the rapidly growing U.S. Hispanic
population. For the nine month period ended September 30, 1996, the Company had
net revenues, Operating Cash Flow and an Operating Cash Flow Margin of $178.7
million, $70.8 million and 39.6%, respectively. For the fiscal year ended
December 31, 1995, on a pro forma basis as if the acquisition of the
Predecessors had occurred on January 1, 1995, the Company had net revenues,
Operating Cash Flow and an Operating Cash Flow Margin of $218.0 million, $76.2
million and 35.0%, respectively.
According to estimates by the Outdoor Advertising Association of America
(the "OAAA"), the trade association for the outdoor advertising industry,
outdoor advertising generated total revenues of approximately $1.8 billion in
1995, or approximately 1.1% of the total advertising expenditures in the United
States, and the out-of-home advertising industry generated revenues in excess of
$3.0 billion in 1995. Outdoor advertising's 1995 revenues represent growth of
approximately 8.2% over estimated total 1994 revenues, which compares favorably
to the growth of total U.S. advertising expenditures of approximately 7.7%
during the same period. In addition, for the first half of 1996, outdoor
advertising generated total revenues of approximately $915 million, up 7.0% from
the same 1995 period, according to recent estimates by the OAAA. Outdoor
advertising offers repetitive impact and a lower cost-per-thousand impressions,
a commonly used media measurement, as compared to competitive media, including
television, radio, newspapers, magazines and direct mail marketing. As a result,
outdoor advertising is attractive to both national and local advertisers either
seeking mass market exposure or targeting specific geographic areas or sets of
specific demographic characteristics.
3
<PAGE> 5
The following table sets forth for the nine month period ended September
30, 1996 certain information with respect to each of the Company's 15 major
metropolitan markets (dollars in thousands):
<TABLE>
<CAPTION>
PREMIER
PANELS(TM)
AND
PERCENTAGE PREMIER TOTAL
MARKET NET OF NET PLUS(TM) 30-SHEET 8-SHEET TRANSIT DISPLAY
MARKET RANK(1) REVENUES REVENUES BULLETINS PANELS POSTERS POSTERS DISPLAYS FACES
- ----------------------------------- ------- -------- ---------- --------- -------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SOUTHERN CALIFORNIA:
Los Angeles(2)................... 2 $ 39,696 22.5% 722 116 4,875 -- 1,168 6,881
San Diego........................ 15 5,019 2.8 112 125 575 -- -- 812
TEXAS:
Dallas/Ft. Worth................. 7 13,329 7.6 679 84 2,073 135 -- 2,971
Houston.......................... 9 17,091 9.7 557 647 2,215 1,860 -- 5,279
San Antonio...................... 34 8,484 4.8 754 -- 1,374 1,332 -- 3,460
MIDWEST:
Chicago.......................... 3 17,891 10.1 417 17 2,858 -- 3,078 6,370
Cleveland(3)..................... 22 9,821 5.6 261 6 2,007 -- -- 2,274
Milwaukee........................ 28 4,949 2.8 137 30 821 -- -- 988
NORTHERN CALIFORNIA:
San Francisco/Oakland(4)......... 4 23,832 13.5 386 320 1,554 432 6,812 9,504
Sacramento....................... 29 4,101 2.3 91 44 426 -- 142 703
SOUTHEAST:
Miami............................ 11 3,759 2.2 -- -- -- -- 2,088 2,088
Atlanta.......................... 12 8,433 4.8 365 26 1,132 -- -- 1,523
Tampa(5)......................... 21 10,267 5.8 522 45 1,471 -- -- 2,038
SOUTHWEST:
Phoenix.......................... 20 5,683 3.2 365 -- -- -- -- 365
El Paso.......................... 70 4,091 2.3 284 11 545 544 -- 1,384
-------- ----- ----- ----- ------ ----- ------ ------
Total.......................... $176,446(6) 100.0% 5,652(7) 1,471 21,926 4,303 13,288 46,640(8)
======== ===== ===== ===== ====== ===== ====== ======
</TABLE>
- ---------------
(1) Market rank of the largest city in each market.
(2) Includes Los Angeles, Orange, Riverside, San Bernardino and Ventura
counties.
(3) Includes Akron and Canton.
(4) Includes San Francisco, Oakland, San Jose, Santa Cruz and Solano counties.
(5) Includes Sarasota and Bradenton.
(6) Excludes convenience store and other miscellaneous net revenues.
(7) Includes 21 wallscapes.
(8) Excludes 4,086 convenience store displays.
OPERATING STRATEGY
The Company's strategy is to expand its market presence and improve its
operating results by (i) managing the advertising rates and occupancy levels of
its displays to maximize market revenues; (ii) attracting new categories of
advertisers to the outdoor medium through significant investments in sales and
marketing resources; (iii) constructing new displays and upgrading its existing
displays; (iv) taking advantage of technological advances which increase both
sales force productivity and production department efficiency; and (v) acquiring
additional displays in its existing markets and expanding into additional
markets within the country's 35 largest media markets and their surrounding
regional areas. The Company believes this operating strategy enhances its
ability to effectively respond to advertisers' needs.
- Maximizing market revenues. The Company believes that the size,
diversity, and premium location of its display inventory provides it with
substantial pricing flexibility. The Company seeks to maximize revenues
through the optimization of advertising rates and occupancy levels.
4
<PAGE> 6
- Attracting new categories of advertisers. The Company dedicates
substantial resources to target large companies whose advertising
expenditures do not typically include outdoor advertising and introduce
them to the benefits of the outdoor medium. The Company offers
comprehensive sales, marketing, creative and research services to new and
existing customers.
- Constructing new displays and upgrading existing display faces. Since
January 1, 1996, the Company has invested approximately $10.2 million for
new display construction and for ongoing enhancement of its existing
display inventory. Where opportunities are available, the Company intends
to build new displays, continue to convert existing 30-sheet posters into
Premier Panels(TM) and Premier Plus(TM) panels and continue to upgrade
its existing display inventory.
- Capitalizing on technological improvements. The Company intends to take
advantage of advances in production (including the increased use of vinyl
and pre-printed advertising copy) and market research (including the
increased use of mapping and demographic software) in order to achieve
greater efficiencies and to increase the Company's net revenues and
Operating Cash Flow.
- Acquiring additional displays. In addition to internal growth, the
Company seeks to grow by continuing to acquire additional displays in its
existing markets and through the acquisition of other outdoor companies
whose assets have strategic appeal. The Company is focused on expanding
its operations in existing markets and expanding into additional markets
within the country's 35 largest media markets and their surrounding
regional areas. The Company believes that larger markets provide greater
revenue potential per display, improved access to national advertisers,
greater regional advertising benefits and the opportunity to gain a
larger market share from competitive and higher cost (per thousand)
media. The Company is also considering expansion into international
markets.
To support this operating strategy, the Company has decentralized its
operating structure in order to place authority, autonomy and accountability at
the market level and provide local management with the tools necessary to
oversee sales, display development, administration and production and to
identify suitable acquisition candidates. The Company is implementing
centralized accounting and financial controls designed to allow it to closely
monitor the operating and financial performance of its markets. The Company also
maintains a fully-staffed sales and marketing office in New York which services
national accounts and supports the Company's local sales force in each market.
The Company believes that one of its strongest competitive advantages is its
unique blend of highly experienced corporate and local market management.
BACKGROUND AND RECENT DEVELOPMENTS
The Company was formed in August 1995 to acquire PMG and EIC. EIC was
formed in August 1992 for the purpose of acquiring certain outdoor advertising
operations in Phoenix, Arizona. In September 1993, EIC purchased certain outdoor
advertising operations in El Paso, Texas, and in December 1994, EIC purchased
certain outdoor advertising operations in Atlanta, Georgia. In August 1995, the
Company acquired EIC and purchased from General Electric Capital Corporation
("GECC") the outdoor advertising operations of PMG. PMG was the successor to
Foster and Kleiser, the first significant national outdoor advertising company
in the United States, founded at the turn of the century.
Since January 1, 1996, the Company has purchased an aggregate of
approximately 1,550 display faces in 26 in-market purchases for an aggregate
purchase price of approximately $38.0 million. The Company believes that these
purchases strengthen its market position and allow it to capitalize on operating
efficiencies associated with the addition of display faces to its existing
markets. These purchases have included 167 bulletins in the Dallas/Ft. Worth
market and 227 bulletins and 735
5
<PAGE> 7
30-sheet posters in the San Antonio market. In addition, in December 1996, the
Company entered into an agreement to acquire 45 bulletins in the San
Francisco/Oakland market.
In addition to these acquisitions, the Company has initiated several
operational restructuring activities since August 1995, including the (i)
relocation of PMG's Chicago headquarters to Phoenix and (ii) relocation of PMG's
financial operations from Scranton, Pennsylvania to Phoenix. Collectively, these
measures have reduced operating and administrative costs and have helped the
Company to operate more efficiently and respond more quickly to its customers'
needs.
The Company was incorporated in Delaware in 1995 and its principal
executive office is located at 2850 E. Camelback Road, Suite 300, Phoenix,
Arizona 85016, and its telephone number is (602) 957-8116.
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company..................... shares
Common Stock offered by the Selling Stockholders........ shares
Common Stock to be outstanding after the Offering....... shares(1)
Use of Proceeds to the Company.......................... To repay existing bank indebtedness
and for general corporate purposes.
See "Use of Proceeds." The Company
will not receive any proceeds from
the sale of shares by the Selling
Stockholders. See "Principal and
Selling Stockholders."
Nasdaq National Market Symbol........................... ELLR
</TABLE>
- ---------------
(1) Excludes (i) shares of Common Stock issuable upon exercise of
options outstanding on the date hereof, of which will be
immediately exercisable upon consummation of the Offering, (ii)
shares reserved for issuance pursuant to the Company's Equity Plan
(as defined herein), (iii) shares issuable pursuant to the Company's
Phantom Equity Plan (as defined herein) and (iv) shares issuable
pursuant to the terms of a convertible promissory note. See
"Management -- Executive Officers' Stock Options," "Management -- Equity
Plan," "Management -- Phantom Equity Plan" and "Description of Indebtedness
and Other Commitments -- Convertible Promissory Note."
6
<PAGE> 8
SUMMARY FINANCIAL AND OTHER DATA
The following table is derived from the Company's and the Predecessors'
respective financial statements and should be read in conjunction with such
financial statements, "Selected Consolidated Financial and Other Data" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSORS(1) EMC
--------------------- | -----------------------------------------
| NINE
YEAR ENDED | MONTHS ENDED
DECEMBER 31, | YEAR ENDED SEPTEMBER 30,
--------------------- | DECEMBER 31, ---------------------
1993 1994 | 1995 1995 1996
--------- --------- | ----------------- --------- ---------
| PRO
| PRO FORMA(2) FORMA(2)
(DOLLARS IN | ----------------- ---------
THOUSANDS |
EXCEPT PER SHARE |
AMOUNTS) |
<S> <C> <C> | <C> <C> <C>
STATEMENT OF OPERATIONS DATA: |
Gross revenues.................... $ 193,184 $ 216,008 | $ 249,400 $ 185,056 $ 203,995
Net revenues(3)................... 166,210 188,867 | 218,012 161,664 178,728
Cost of sales..................... 76,029 80,683 | 89,006 65,780 68,135
Selling, general and |
administrative expense.......... 43,919 47,226 | 52,760 39,686 39,830
Depreciation and amortization..... 43,630 43,446 | 33,259 22,807 29,372
-------- -------- | -------- -------- --------
Operating income.................. 2,632 17,512 | 42,987 33,391 41,391
Interest expense.................. 47,597 52,962 | 36,542 27,546 26,877
Other (expense) income, net....... (75) 6,859 | (8,354) (6,373) (5,323)
Provision for (benefit from) |
income taxes.................... (27,015) (9,870) | -- -- 2,400
-------- -------- | -------- -------- --------
Income (loss) before extraordinary |
item(4)......................... (18,025) (18,721) | (1,909) (528) 6,791
Net income (loss)................. (18,025) (20,894) | (1,909) (528) 6,791
Net income (loss) per share....... |
Weighted average common and |
equivalent shares outstanding... |
OTHER DATA: |
Operating Cash Flow(5)............ $ 46,262 $ 60,958 | $ 76,246 $ 56,198 $ 70,763
Operating Cash Flow Margin(6)..... 27.8% 32.3% | 35.0% 34.8% 39.6%
Capital expenditures(7)........... 21,319 44,185 | 14,289 9,876 48,151
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
---------------------------
ACTUAL AS ADJUSTED(8)
-------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital(9)............................................... $ 11,164
Total assets..................................................... 668,034
Total debt and capital lease obligations......................... 419,403
Stockholders' equity............................................. 196,016
</TABLE>
- ---------------
(1) See footnote 1 to "Selected Consolidated Financial and Other Data."
(2) See the Unaudited Pro Forma Consolidated Statements of Operations of the
Company included elsewhere in this Prospectus.
(3) Net revenues are gross revenues less agency commissions.
(4) Extraordinary item in 1994 represents loss on early extinguishment of debt.
(5) "Operating Cash Flow" is operating income before depreciation, amortization
and non-cash compensation expense. Operating Cash Flow is not intended to
represent net cash provided by operating activities as defined by generally
accepted accounting principles and should not be considered as an
alternative to net income (loss) as an indicator of the Company's operating
performance or to net cash provided by operating activities as a measure of
liquidity. The Company believes Operating Cash Flow is a measure commonly
reported and widely used by analysts, investors and other interested parties
in the media industry. Accordingly, this information has been disclosed
herein to permit a more complete comparative analysis of the Company's
operating performance relative to other companies in the media industry.
(6) "Operating Cash Flow Margin" is Operating Cash Flow stated as a percentage
of net revenues.
(7) Amount includes purchases and construction of display faces.
(8) Adjusted to reflect the sale of shares of Common Stock by the
Company in the Offering at an assumed initial public offering price of
$ per share and the application of the net proceeds therefrom. See
"Use of Proceeds" and "Capitalization."
(9) Working capital is current assets less current liabilities (excluding
current maturities of long-term debt and capital lease obligations).
7
<PAGE> 9
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered by this Prospectus.
Substantial Leverage; Ability to Service Indebtedness. The Company has
substantial consolidated indebtedness. On a pro forma basis after giving effect
to the application of the net proceeds of the Offering and the refinancing of
the Old Credit Facility (as defined herein), as of September 30, 1996, the
Company's total consolidated long-term debt was approximately $ million, and
on a pro forma basis for the nine months ended September 30, 1996, interest
expense was approximately $ million, or % of consolidated net revenues.
The Company's level of consolidated indebtedness could have important
consequences to the holders of Common Stock, including the following: (i) a
substantial portion of the Company's consolidated cash flow from operations must
be dedicated to the payment of the principal of and interest on indebtedness and
will not be available for other purposes; (ii) the ability of the Company to
obtain financing in the future for working capital needs, capital expenditures,
acquisitions, investments, general corporate purposes or other purposes may be
materially limited or impaired; and (iii) the Company's level of consolidated
indebtedness may reduce the Company's flexibility to respond to changing
business and economic conditions. Subject to certain limitations contained in
its Senior Credit Facility (as defined herein), the Company or its subsidiaries
may incur additional indebtedness to finance working capital or capital
expenditures, investments or acquisitions or for other purposes. See
"Description of Indebtedness and Other Commitments -- Senior Credit Facility."
Although historically the Company's Operating Cash Flow has been sufficient to
service its fixed charges, there can be no assurance that the Company's
Operating Cash Flow will continue to exceed its fixed charges. A decline in
Operating Cash Flow could impair the Company's ability to meet its obligations,
including debt service. In addition, the Company is a holding company and there
is no assurance that its operating subsidiaries will generate sufficient cash
flow to pay dividends or distribute funds to the Company so as to allow it to
pay its expenses or cash dividends on the Common Stock. See "Selected
Consolidated Financial and Other Data" and "Management's Discussion and Analysis
of Financial Condition and Results of Operations."
Restrictions Imposed by the Company's Indebtedness. The banks under the
Senior Credit Facility have a lien on substantially all of the assets of the
Company, including the capital stock of its subsidiaries, to secure the
indebtedness of the Company under such credit facility. In addition, the Company
and its subsidiaries have guaranteed repayment of the indebtedness under the
Senior Credit Facility. The Senior Credit Facility contains restrictions on the
Company's ability to incur additional indebtedness, create liens, pay dividends,
sell assets and make capital expenditures. Furthermore, the Senior Credit
Facility contains certain financial ratio maintenance tests. There can be no
assurance that the Company will be able to comply with the provisions of the
Senior Credit Facility, including compliance by the Company with the financial
ratios contained therein. Breach of any of these covenants or the failure to
fulfill the obligations thereunder and the lapse of any applicable grace periods
would result in an event of default under the Senior Credit Facility, and the
lenders could declare all amounts outstanding to be due and payable immediately.
There can be no assurance that the assets or cash flow of the Company would be
sufficient to repay in full borrowings under the Senior Credit Facility whether
upon maturity or earlier or if such indebtedness were to be accelerated upon an
event of default or that the Company would be able to refinance or restructure
its payments on such indebtedness. If such indebtedness were not so repaid,
refinanced or restructured, the lenders could proceed to realize on their
collateral. See "Description of Indebtedness and Other Commitments -- Senior
Credit Facility."
Acquisition Strategy. The Company was created through acquisitions and one
component of the Company's operating strategy is to continue to enhance its
market presence through acquisitions in new and existing markets. While the
Company believes that the outdoor advertising industry is rapidly consolidating,
there can be no assurance that suitable acquisition candidates can be found.
8
<PAGE> 10
The Company is likely to face competition from other media and outdoor
advertising companies for available acquisition opportunities. In addition, if
the prices sought by sellers of outdoor advertising display faces and companies
continue to rise, the Company may find fewer acceptable acquisition
opportunities. In addition, the purchase price of possible acquisitions could
require additional debt or equity financing on the part of the Company. The
Senior Credit Facility contains certain restrictions on the Company's ability to
incur additional indebtedness. There can be no assurance that the Company will
have sufficient capital resources to complete acquisitions, that acquisitions
can be completed on terms acceptable to the Company or that any acquisitions
that are completed can be integrated successfully into the Company. As part of
its regular on-going evaluation of acquisition opportunities, the Company may
from time to time engage in discussions concerning possible domestic and
international acquisitions, some of which may be material to the Company in
size. The Company cannot predict whether any such acquisitions will be
consummated. See "Business -- Operating Strategy," "Business -- Recent and
Pending Acquisitions" and "Description of Indebtedness and Other
Commitments -- Senior Credit Facility."
Regulation of Outdoor Advertising. Outdoor advertising displays are subject
to governmental regulation at the federal, state and local levels. These
regulations, in some cases, limit the height, size, location and operation of
billboards and, in limited circumstances, regulate the content of the
advertising copy displayed on the billboards. Some governmental regulations
prohibit the construction of new billboards or the replacement, relocation,
enlargement or upgrading of existing structures. Some cities, including one
within the Company's markets (Houston), have adopted amortization ordinances
under which, after the expiration of a specified period of time, billboards must
be removed at the owner's expense and without payment of compensation.
Ordinances requiring the removal of billboards without compensation, whether
through amortization or otherwise, are being challenged in various state and
federal courts with conflicting results. The Houston ordinance has been the
subject of litigation for over five years and is currently not being enforced.
The Company believes that its operations will not be materially affected by the
Houston amortization ordinance even if it is enforced, as a substantial number
of the Company's Houston inventory consists of bulletins and 30-sheet posters
located near federal highways where the Highway Beautification Act of 1965 would
require just compensation in the event of any required removal. In addition,
there can be no assurance that the Company will be successful in negotiating
acceptable arrangements in circumstances in which its displays are subject to
removal or amortization, and what effect, if any, such regulations may have on
the Company's operations. In addition, the Company is unable to predict what
additional regulations may be imposed on outdoor advertising in the future.
Legislation regulating the content of billboard advertisements has been
introduced in Congress from time to time in the past. Changes in laws and
regulations affecting outdoor advertising at any level of government could have
a material adverse effect on the Company. See "-- Tobacco Industry Regulation"
and "Business -- Government Regulation."
Tobacco Industry Regulation. Approximately 13.7% of the Company's 1995 pro
forma net revenues and approximately 16.3% of the Company's net revenues for the
nine months ended September 30, 1996 were derived from tobacco advertising. In
August 1996, the U.S. Food and Drug Administration issued final regulations
governing certain marketing practices in the tobacco industry, including a
prohibition of tobacco product billboard advertisements within 1,000 feet of
schools and playgrounds and a requirement that all tobacco product
advertisements on billboards be in black and white and contain only text. These
regulations will become effective in August 1997. There can be no assurance as
to the effect of these regulations or such legislation on the Company's business
and on its net revenues, Operating Cash Flow and financial position. A reduction
in billboard advertising by the tobacco industry would cause an immediate
reduction in the Company's direct revenue from such advertisers and would
simultaneously increase the available space on the existing inventory of
billboards in the outdoor advertising industry. This could in turn result in a
9
<PAGE> 11
lowering of rates in each of the Company's markets or limit the ability of
industry participants to increase rates for some period of time. Any such
consequence could have a material adverse effect on the Company. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business -- Customers" and "Business -- Government Regulation."
Economic Conditions; Advertising Trends. The Company relies on sales of
advertising space for its revenues and its operating results therefore are
affected by general economic conditions, as well as trends in the advertising
industry. A reduction in advertising expenditures available for the Company's
displays could result from a general decline in economic conditions, a decline
in economic conditions in its markets, particularly California, or a
reallocation of advertising expenditures to other available media by significant
users of the Company's displays.
Competition. The Company faces competition for advertising revenues from
other media such as radio, television, print media and direct mail marketing, as
well as from other outdoor advertising companies. The Company also competes with
a wide variety of other out-of-home advertising media, the range and diversity
of which have increased substantially over the past several years, including
advertising displays in shopping centers and malls, airports, stadiums, movie
theaters and supermarkets, and on taxis, trains, buses and subways. Some of the
Company's competitors are substantially larger, better capitalized and have
access to greater resources than the Company. There can be no assurance that
outdoor advertising media will be able to compete with other types of media, or
that the Company will be able to compete either within the outdoor advertising
industry or with other media. See "Business -- Competition."
Reliance on Key Personnel. The Company's success depends to a significant
extent upon the continued services of its executive officers and other key
management and sales personnel, including, in particular, Karl Eller, the
Company's Chairman and Chief Executive Officer. Although the Company believes it
has incentive and compensation programs designed to retain key employees,
including options to purchase shares of the Company's Common Stock, the Company
has an employment agreement with only one employee, and few of its employees are
bound by non-competition agreements. The Company maintains key man insurance on
Karl Eller but not on any of its other executives. The unavailability of the
continuing services of Mr. Eller or one or more of the Company's other executive
officers and other key management and sales personnel could have a material
adverse effect on the Company. See "Management."
The Company's operating strategy is based in significant part on
decentralization and reliance on managers in local markets to operate
autonomously, subject to centralized strategic direction and administrative
controls. Accordingly, the Company's success is dependent upon its ability to
attract and retain qualified local managers and on the ability of those managers
to properly perform on a basis consistent with the Company's strategic goals and
objectives. Any failure of performance by local managers or any inability of the
Company to properly direct and control such managers could have a material
adverse effect on the Company.
Challenges of Business Integration. The Company was formed in August 1995
to acquire PMG and EIC. Since August 1995, the Company has initiated several
operational restructuring activities designed to reduce operating and
administrative costs and implement the Company's decentralized operating
philosophy, subject to centralized accounting and financial controls. The
Company is in the process of relocating PMG's financial operations from
Scranton, Pennsylvania to Phoenix, and is delegating the functions performed by
that staff both to the regional and local markets and also to the corporate
office in Phoenix. Included in this process is the installation of a new
accounting system which has been completed for 11 of the Company's markets.
There can be no assurance that the Company will complete these restructuring
projects and administrative changes in a timely fashion, that the expected cost
savings will be realized or that the new accounting system can be implemented
without disruption to the operations and controls of the Company.
History of Net Losses. The Predecessors historically recorded net losses
resulting in significant part from substantial depreciation and amortization
expenses relating to acquired assets and
10
<PAGE> 12
goodwill, interest expense associated with acquisition related indebtedness and
other charges. Although the Company has recorded net income for the nine months
ended September 30, 1996, it will incur a write-off of deferred financing
charges as a result of the refinancing of the Old Credit Facility and will
experience significant non-cash charges for compensation expenses in the fourth
quarter of 1996. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Fourth Quarter 1996 Charges." There can
be no assurance that the Company will generate net income in the future.
Environmental Matters. As the owner, lessee or operator of various real
properties and facilities, the Company is subject to various federal, state and
local environmental laws and regulations. Historically, compliance with such
laws and regulations has not had a material adverse effect on the Company's
business. There can be no assurance, however, that compliance with existing or
new environmental laws and regulations will not require the Company to make
significant expenditures in the future.
Seasonality. The Company's revenues and operating results have exhibited
some degree of seasonality in past periods. Typically, the Company experiences
its strongest financial performance in the second and third quarters and its
lowest revenues in the first and fourth quarters. The Company expects this trend
to continue in the future, and, as a result, the Company is likely to experience
a net loss for the quarter ended March 31, 1997. Because a significant portion
of the Company's expenses are fixed, a reduction in revenues in any quarter is
likely to result in a period-to-period decline in operating performance and net
income. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Seasonality and Quarterly Information."
Control by Executive Officers, Directors and Affiliates. Upon consummation
of the Offering, the Company's executive officers, directors and their
respective affiliates will beneficially own (including for this purpose options
exercisable within 60 days after the date of this Prospectus and shares over
which such persons have voting control) approximately % of the outstanding
shares of the Company's Common Stock. See "Principal and Selling Stockholders."
Such persons, if acting together, would have sufficient voting power to control
the outcome of corporate actions submitted to the stockholders for approval and
to control the management and affairs of the Company, including the election of
the Board of Directors of the Company. As a result of such control, certain
transactions may not be possible without the approval of such stockholders,
including proxy contests, mergers involving the Company and tender offers or
other purchases of Common Stock that could give stockholders of the Company the
opportunity to realize a premium over the then-prevailing market price for their
shares of Common Stock. See "Principal and Selling Stockholders" and
"Description of Capital Stock -- Special Provisions of the Certificate of
Incorporation, Bylaws and Delaware Law."
Anti-Takeover Provisions. The level of stock ownership of the Company's
executive officers, directors and their respective affiliates, as well as the
provisions of the Delaware General Corporation Law and the Company's Certificate
of Incorporation and Bylaws (each as defined in "Description of Capital Stock"),
may have the effect of deterring hostile takeovers, delaying or preventing
changes in control or changes in management, or limiting the ability of
stockholders to approve transactions that they may deem to be in their best
interests. In accordance with the terms of the Company's Certificate of
Incorporation, effective upon consummation of the Offering, the terms of office
of the Board of Directors will be divided into three classes serving staggered
three-year terms. In addition, under the Company's Certificate of Incorporation,
the Board of Directors has the authority to issue shares of preferred stock and
establish the rights and preferences thereof without obtaining stockholder
approval. The Company has no present plans to issue any shares of preferred
stock. See "Description of Capital Stock."
Absence of Public Market. Prior to this Offering, there has been no public
market for the Common Stock of the Company. There can be no assurance that,
following this Offering, an active
11
<PAGE> 13
trading market for the Common Stock will develop or be sustained or that the
market price of the Common Stock will not decline below the initial public
offering price. The initial public offering price will be determined by
negotiations among the Company, the Selling Stockholders and the Representatives
(as defined herein) of the Underwriters (as defined herein) and will not
necessarily be indicative of the market price of the Common Stock after this
Offering. See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price. From time to time, the stock
market experiences significant price and volume volatility, which may affect the
market price of the Common Stock for reasons unrelated to the Company.
Immediate and Substantial Dilution. Purchasers of the Common Stock offered
hereby will suffer an immediate and substantial dilution in the net tangible
book value of the Common Stock from the initial public offering price. See
"Dilution."
Shares Eligible for Future Sale. Sales of the Company's Common Stock in the
public market after the Offering could adversely affect the market price of the
Company's Common Stock. Upon completion of this Offering, the Company will have
outstanding shares of Common Stock (excluding (i) shares of
Common Stock issuable upon the exercise of the Underwriters' over-allotment
option, (ii) shares of Common Stock issuable upon the exercise of
options outstanding on the date hereof, of which will be immediately
exercisable upon consummation of the Offering, (iii) shares reserved
for issuance pursuant to the Equity Plan, (iv) shares issuable pursuant to
the Phantom Equity Plan and (v) shares issuable pursuant to the terms
of a convertible promissory note). Of these shares, the shares
( shares if the Underwriters' over-allotment option is exercised in
full) of Common Stock sold in this Offering will be freely tradable without
restriction under the Securities Act of 1933, as amended (the "Securities Act"),
except for any shares purchased by "affiliates," as that term is defined in the
Securities Act, of the Company. The remaining shares are "restricted
securities" within the meaning of Rule 144 adopted under the Securities Act.
Such shares generally may not be sold unless they are registered under the
Securities Act or are sold pursuant to an exemption from registration, such as
the exemption provided by Rule 144 under the Securities Act. Approximately
outstanding shares of Common Stock will become eligible for sale in
August 1997 pursuant to Rule 144, subject to volume and manner of sale
restrictions. Certain of the Company's stockholders and all of its executive
officers and directors, with the power to dispose of a total of
shares, have agreed not to offer, sell or otherwise dispose of any shares of
Common Stock for a period of 180 days after the date of this Prospectus without
the prior written consent of Alex. Brown & Sons Incorporated on behalf of the
Underwriters. In addition, the Company intends to file a registration statement
on Form S-8 under the Securities Act to register shares to be issued upon
exercise of options outstanding on the date hereof and options granted pursuant
to the Equity Plan. See "Management -- Executive Officers' Stock Options,"
"Management -- Equity Plan," "Description of Indebtedness and Other
Commitments -- Convertible Promissory Note," and "Shares Eligible for Future
Sale."
Absence of Dividends. The Company has not paid dividends on its Common
Stock and does not anticipate paying dividends on its Common Stock in the
foreseeable future. In addition, the Senior Credit Facility prohibits the
Company from paying cash dividends or making any other distribution on its
Common Stock. The Senior Credit Facility also requires that a portion of the
Company's excess cash flow be applied to prepay the term loans under such credit
facility. See "Dividend Policy" and "Description of Indebtedness and Other
Commitments -- Senior Credit Facility."
12
<PAGE> 14
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Company believes that this Prospectus contains certain forward-looking
statements, including statements containing the words "believes," "anticipates,"
"expects" and words of similar import. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company, or industry results,
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: adverse changes in national or local economic
conditions, competition from other outdoor advertising companies or other media,
changes in the availability, cost and terms of financing, changes in operating
expenses, adverse changes in governmental regulations and other factors
referenced in this Prospectus. Certain of these factors are discussed in more
detail elsewhere in this Prospectus, including without limitation under the
captions "Prospectus Summary," "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business." Given
these uncertainties, prospective investors are cautioned not to place undue
reliance on such forward-looking statements. The Company disclaims any
obligation to update any such factors or to publicly announce the result of any
revisions to any of the forward-looking statements contained herein to reflect
future events or developments.
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of
Common Stock offered by the Company hereby are estimated to be approximately
$ million (or approximately $ million if the Underwriters'
overallotment option is exercised in full), assuming an initial public
offering price of $ per share, after deducting estimated underwriting
discounts and commissions and offering expenses.
The Company intends to use approximately $ million of such proceeds to
repay the revolving credit amounts (the "Revolver") outstanding under its $550
million senior secured credit facility (the "Senior Credit Facility"). As of
December 10, 1996 approximately $412 million was outstanding under the Senior
Credit Facility, including $62 million outstanding under the Revolver, which
amount bore interest at a rate of approximately 7.35% per annum. Amounts under
the Revolver were incurred for acquisitions and working capital and are due and
payable on September 30, 2003. See "Description of Indebtedness and Other
Commitments -- Senior Credit Facility." The Company will use the remaining
proceeds from this Offering, estimated to be approximately $ million ($
million if the Underwriters' over-allotment option is exercised in full), for
general corporate purposes.
The Company will not receive any proceeds from the sale of Common Stock by
the Selling Stockholders.
DIVIDEND POLICY
The Company has not paid dividends on its Common Stock and does not
anticipate paying dividends on its Common Stock in the foreseeable future. The
Company intends to retain any future earnings for reinvestment in the Company.
In addition, the Senior Credit Facility prohibits the Company from paying cash
dividends or making any other distribution on its Common Stock. The Senior
Credit Facility also requires that a portion of the Company's excess cash flow
be applied to prepay the term loans under such credit facility beginning in
1999. See "Description of Indebtedness and Other Commitments -- Senior Credit
Facility." Any future determination as to the payment of dividends will be
subject to such prohibitions and limitations and will be at the discretion of
the Company's Board of Directors and will depend on the Company's results of
operations, financial condition, capital requirements and other factors deemed
relevant by the Board of Directors.
13
<PAGE> 15
DILUTION
The net tangible book value of the Company's Common Stock as of September
30, 1996 was approximately $48.3 million, or $ per share of Common
Stock. The net tangible book value per share of Common Stock represents the
amount of the Company's common stockholders' equity, less intangible assets,
divided by shares of Common Stock outstanding as of September 30,
1996.
Net tangible book value dilution per share of Common Stock represents the
difference between the amount per share paid by purchasers of Common Stock in
this Offering and the net tangible book value per share of Common Stock
immediately after completion of this Offering. After giving effect to the sale
by the Company of shares of Common Stock in this Offering at an
assumed initial public offering price of $ per share and the application
of the estimated net proceeds therefrom, the net tangible book value of the
Common Stock as of September 30, 1996 would have been $ , or $ per
share of Common Stock. This represents an immediate decrease in the net tangible
book value of $ per share of Common Stock to purchasers of Common Stock
in this Offering. The following table illustrates this dilution in the net
tangible book value per share to new investors:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share...................... $
Net tangible book value per share of Common Stock at September 30,
1996............................................................ $
Increase per share of Common Stock attributable to new investors...
Pro forma net tangible book value per share of Common Stock after
this Offering......................................................
--------
Dilution per share to new investors.................................. $
========
</TABLE>
The following table sets forth, as of September 30, 1996, the number of
shares of Common Stock issued by the Company, the total consideration paid and
the average price per share paid by existing stockholders and by new investors
purchasing shares of Common Stock in this Offering:
<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- ------------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
------- ---------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)(2)... % $191,600,000 % $
New investors(2).............. $
--
----- --- -----
Total....................... 100.0% $ 100.0%
== ===== === =====
</TABLE>
- ------------------------
(1) Excludes (i) shares of Common Stock issuable upon exercise of options
outstanding on the date hereof, of which will be immediately
exercisable upon consummation of the Offering, (ii) shares reserved for
issuance pursuant to the Equity Plan, (iii) shares issuable pursuant to
the Phantom Equity Plan and (iv) shares issuable pursuant to the terms
of a convertible promissory note. See "Management -- Executive Officers'
Stock Options," "Management -- Equity Plan," "Management -- Phantom Equity
Plan" and "Description of Indebtedness and Other Commitments -- Convertible
Promissory Note."
(2) Sales by the Selling Stockholders in this Offering will reduce the number of
shares of Common Stock held by existing stockholders to , or %,
of the total number of shares of Common Stock to be outstanding after this
Offering, and will increase the number of shares of Common Stock to be
purchased by new investors to , or %, of the total number of
shares of Common Stock to be outstanding after this Offering.
The computations in the table set forth above assume no exercise of stock
options outstanding on the date hereof. On the date of this Prospectus, there
were outstanding options to purchase shares of Common Stock at a
weighted average exercise price of $ per share. Assuming the exercise
of all such options, the per share dilution to new investors would be
$ as compared to $ presented above.
14
<PAGE> 16
CAPITALIZATION
The following table sets forth (i) the actual capitalization of the Company
at September 30, 1996, (ii) the pro forma capitalization of the Company at
September 30, 1996 after giving effect to the refinancing and replacement of the
Old Credit Facility with the Senior Credit Facility and (iii) the pro forma as
adjusted capitalization of the Company at September 30, 1996 after giving
additional effect to the sale by the Company of shares of Common Stock
in the Offering at an assumed initial public offering price of $ per
share and the application of the estimated net proceeds to the Company therefrom
as set forth under "Use of Proceeds." The table should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Company's consolidated financial statements and the related
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
-------- --------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current maturities of long-term debt and
capital lease obligations............................ $ 21,081 $ 1,331 $
-------- -------- --------
Long-term debt:
Old Credit Facility:
Tranche A loans................................... $226,750 --
Tranche B loans................................... 124,000 --
Line of credit facility........................... 43,500 --
Other................................................ 2,003 2,003
-------- -------- --------
Total existing long-term debt................ 396,253 2,003
-------- -------- --------
Senior Credit Facility:
Tranche A loans................................... -- 200,000
Tranche B loans................................... -- 150,000
Line of credit facility........................... -- 66,730
-------- -------- --------
Total Senior Credit Facility................. -- 416,730
-------- -------- --------
Capital lease obligations.............................. 2,069 2,069
-------- -------- --------
Total long-term debt and capital
lease obligations.......................... 398,322 420,802
-------- -------- --------
Stockholders' equity:
Preferred Stock, $.01 par value...................... -- --
Common Stock, $.01 par value......................... 1 1
Additional paid in capital........................... 191,758 191,758
Retained earnings (deficit).......................... 4,257 (414)
-------- -------- --------
Total stockholders' equity(1)..................... 196,016 191,345
-------- -------- --------
Total capitalization......................... $615,419 $613,478 $
======== ======== ========
</TABLE>
- ---------------
(1) Excludes (i) shares of Common Stock issuable upon exercise of
options outstanding on the date hereof, of which will be
immediately exercisable upon consummation of the Offering,
(ii) shares reserved for issuance pursuant to the Equity Plan,
(iii) shares issuable pursuant to the Phantom Equity Plan and
(iv) shares issuable pursuant to the terms of a convertible
promissory note. See "Management -- Executive Officers' Stock Options,"
"Management -- Equity Plan," "Management -- Phantom Equity Plan" and
"Description of Indebtedness and Other Commitments --Convertible Promissory
Note."
15
<PAGE> 17
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
The selected financial data presented below for the nine-months ended
September 30, 1996 is derived from the consolidated financial statements of the
Company. The selected financial data for the period from January 1, 1995 to
August 17, 1995 is derived from the consolidated financial statements of PMG and
the combined financial statements of EIC. The selected financial data for the
period from August 18, 1995 to December 31, 1995 is derived from the
consolidated financial statements of the Company. The pro forma selected
financial data for the nine and twelve months ended September 30, 1995 and
December 31, 1995, respectively, is derived from the Unaudited Pro Forma
Consolidated Statements of Operations of the Company. The remaining selected
financial data for the years ended December 31, 1991, 1992, 1993 and 1994 are
derived from the consolidated financial statements of PMG and the combined
financial statements of EIC.
The selected financial data of the Company as of December 31, 1995 and for
the period from August 18, 1995 to December 31, 1995, the selected financial
data of the Predecessors from January 1, 1995 to August 17, 1995, and the
selected financial data of EIC as of and for the year ended December 31, 1994,
were derived from financial statements audited by Arthur Andersen LLP,
independent public accountants, as indicated in their reports included elsewhere
in this Prospectus. The selected financial data of PMG as of and for the two
years ended December 31, 1994 was derived from financial statements audited by
KPMG Peat Marwick LLP, independent public accountants, as indicated in their
report included elsewhere in this Prospectus.
The selected financial data as of September 30, 1995 and 1996 was derived
from the respective unaudited consolidated or combined financial statements
referred to above. These respective unaudited consolidated or combined financial
statements were prepared on a basis consistent with that of the audited
consolidated or combined financial statements and, in the opinion of management,
contain all adjustments necessary for a fair presentation. Results for periods
of less than one year are not necessarily indicative of results for a full year.
The data set forth below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical and unaudited pro forma consolidated financial statements,
including the notes thereto, appearing elsewhere in this Prospectus.
16
<PAGE> 18
<TABLE>
<CAPTION>
PREDECESSORS(1)
-------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
1991 1992 1993 1994
--------- ------------------ ------------------- ------------------
PMG PMG EIC PMG EIC PMG EIC
--------- -------- ------- -------- -------- -------- -------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gross revenues.......................................... $ 198,808 $174,123 $ 2,287 $187,003 $ 6,181 $203,065 $12,943
Net revenues(3)......................................... 166,846 147,640 1,978 160,822 5,388 177,275 11,592
Cost of sales........................................... 77,415 65,698 976 73,163 2,866 75,427 5,256
Selling, general and administrative expense............. 45,890 39,600 242 43,262 657 45,859 1,367
Depreciation and amortization........................... 37,833 34,615 298 42,756 874 41,733 1,713
--------- -------- -------- -------- -------- ------- --------
Operating income........................................ 5,708 7,727 462 1,641 991 14,256 3,256
Interest expense........................................ 64,674 43,429 705 45,695 1,902 50,325 2,637
Other (expense) income, net............................. (50,355) (34,751) 7 38 (113) 7,064 (205)
Provision for (benefit from) income taxes............... -- 20,461 -- (27,015) -- (9,950) 80
--------- -------- -------- -------- -------- ------- --------
Income (loss) before extraordinary item(4).............. (109,321) (90,914) (236) (17,001) (1,024) (19,055) 334
Net income (loss)....................................... 79,551 (90,914) (236) (17,001) (1,024) (19,055) (1,839)
Net income (loss) per share.............................
Weighted average common and equivalent shares
outstanding............................................
OTHER DATA:
Operating Cash Flow(5).................................. $ 43,541 $ 42,342 $ 760 $ 44,397 $ 1,865 $ 55,989 $ 4,969
Operating Cash Flow Margin(6)........................... 26.1% 28.7% 38.4% 27.6% 34.6% 31.6% 42.9%
Capital expenditures(7)................................. 6,048 7,249 31 21,205 114 21,573 22,612
<CAPTION>
EMC
------------------------------------------
JANUARY 1, AUGUST 18, NINE MONTHS
TO TO YEAR ENDED ENDED
AUGUST 17, DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
------------------- ------------ ------------- ------------
1995 1995 1995 1995
------------------- ------------ ------------- ------------
PMG EIC PRO PRO
-------- -------- FORMA(2) FORMA(2)
------------- --------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gross revenues.......................................... $141,778 $ 15,439 $ 92,183 $ 249,400 $185,056
Net revenues(3)......................................... 123,615 13,719 80,678 218,012 161,664
Cost of sales........................................... 50,456 5,796 32,754 89,006 65,780
Selling, general and administrative expense............. 31,480 1,903 19,377 52,760 39,686
Depreciation and amortization........................... 22,769 2,148 14,468 33,259 22,807
-------- -------- -------- -------- --------
Operating income........................................ 18,910 3,872 14,079 42,987 33,391
Interest expense........................................ 27,629 3,240 13,616 36,542 27,546
Other (expense) income, net............................. (4,860) (497) (2,997) (8,354) (6,373)
Provision for (benefit from) income taxes............... (3,858) -- -- -- --
-------- -------- -------- -------- --------
Income (loss) before extraordinary item(4).............. (9,721) 135 (2,534) (1,909) (528)
Net income (loss)....................................... (9,721) 135 (2,534) (1,909) (528)
Net income (loss) per share.............................
Weighted average common and equivalent shares
outstanding............................................
OTHER DATA:
Operating Cash Flow(5).................................. $ 41,679 $ 6,020 $ 28,547 $ 76,246 $56,198
Operating Cash Flow Margin(6)........................... 33.7% 43.9% 35.4% 35.0% 34.8%
Capital expenditures(7)................................. 8,218 409 5,662 14,289 9,876
<CAPTION>
EMC
-----------
NINE MONTHS
ENDED
SEPTEMBER 30,
-------------
1996
--------
STATEMENT OF OPERATIONS DATA:
Gross revenues.......................................... $203,995
Net revenues(3)......................................... 178,728
Cost of sales........................................... 68,135
Selling, general and administrative expense............. 39,830
Depreciation and amortization........................... 29,372
--------
Operating income........................................ 41,391
Interest expense........................................ 26,877
Other (expense) income, net............................. (5,323)
Provision for (benefit from) income taxes............... 2,400
--------
Income (loss) before extraordinary item(4).............. 6,791
Net income (loss)....................................... 6,791
Net income (loss) per share.............................
Weighted average common and equivalent shares
outstanding............................................
OTHER DATA:
Operating Cash Flow(5).................................. $ 70,763
Operating Cash Flow Margin(6)........................... 39.6%
Capital expenditures(7)................................. 48,151
</TABLE>
<TABLE>
<CAPTION>
PREDECESSORS(1)
------------------------------------------------
DECEMBER 31,
------------------------------------------------
1991 1992 1993
--------- --------------------- --------
PMG PMG EIC PMG
--------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(8).......................................................... $ (69,410) $ 6,007 $ (1,824) $ 16,596
Total assets................................................................ 370,020 584,081 17,547 555,226
Total debt and capital lease obligations.................................... 475,601 565,823 14,695 590,171
Stockholders' equity (deficit).............................................. (206,885) (31,702) (236) (48,713)
<CAPTION>
PREDECESSORS(1)
-----------------------------------------------------
DECEMBER 31,
-------------------------------- EMC
1993 1994 ------------
-------- --------------------- DECEMBER 31,
EIC PMG EIC 1995
-------- -------- -------- ------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital(8).......................................................... $ (312) $ 9,085 $ 178 $ 7,228
Total assets................................................................ 14,308 513,024 45,999 643,846
Total debt and capital lease obligations.................................... 13,195 562,040 40,221 407,510
Stockholders' equity (deficit).............................................. (1,559) (67,969) (1,666) 189,126
<CAPTION>
EMC
------------
SEPTEMBER 30,
1996
-------------
BALANCE SHEET DATA:
Working capital(8).......................................................... $ 11,164
Total assets................................................................ 668,034
Total debt and capital lease obligations.................................... 419,403
Stockholders' equity (deficit).............................................. 196,016
</TABLE>
See Notes to Selected Consolidated Financial and Other Data.
17
<PAGE> 19
NOTES TO SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(1) The historical information set forth herein represents the separate
financial performance of PMG and EIC. Fiscal year 1991 includes only PMG
since EIC was formed on August 20, 1992. The following table sets forth
combined statements of operations and other data for the Predecessors for
the periods indicated, representing the sum of the corresponding amounts
appearing in the respective historical statements of operations of the
Predecessors appearing herein, without pro forma or other adjustments.
Because the Predecessors had different accounting policies, cost basis and
capital structures, the combined statements are not in all respects
comparable, with respect to matters such as depreciation, amortization,
interest expense and other items, to the financial statements of the
Company, nor are the Predecessors' financial statements in all respects
comparable to each other. Such combined statements do not represent the
results which would have been achieved or reported had the Predecessors been
acquired by the Company or otherwise combined at the beginning of the
periods presented.
<TABLE>
<CAPTION>
PREDECESSORS
---------------
PREDECESSORS
------------------------------------------ JANUARY 1,
TO
YEAR ENDED DECEMBER 31, AUGUST 17,
------------------------------------------ ---------------
1991 1992 1993 1994 1995
--------- -------- -------- -------- ---------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Gross revenues..................................................... $ 198,808 $176,410 $193,184 $216,008 $ 157,217
Net revenues(3).................................................... 166,846 149,618 166,210 188,867 137,334
Cost of sales...................................................... 77,415 66,674 76,029 80,683 56,252
Selling, general and administrative expense........................ 45,890 39,842 43,919 47,226 33,383
Depreciation and amortization...................................... 37,833 34,913 43,630 43,446 24,917
--------- -------- -------- -------- --------
Operating income................................................... 5,708 8,189 2,632 17,512 22,782
Interest expense................................................... 64,674 44,134 47,597 52,962 30,869
Other (expense) income, net........................................ (50,355) (34,744) (75) 6,859 (5,357)
Provision for (benefit from) income taxes.......................... -- 20,461 (27,015) (9,870) (3,858)
--------- -------- -------- -------- --------
Income (Loss) before extraordinary item(4)......................... (109,321) (91,150) (18,025) (18,721) (9,586)
Net income (loss).................................................. 79,551 (91,150) (18,025) (20,894) (9,586)
OTHER DATA:
Operating Cash Flow(5)............................................. $ 43,541 $ 43,102 $ 46,262 $ 60,958 $ 47,699
Operating Cash Flow Margin(6)...................................... 26.1% 28.8% 27.8% 32.3% 34.7%
Capital expenditures(7)............................................ 6,048 7,280 21,319 44,185 8,627
</TABLE>
(2) See the Unaudited Pro Forma Consolidated Statements of Operations of the
Company included elsewhere in this Prospectus.
(3) Net revenues are gross revenues less agency commissions.
(4) Extraordinary item in 1991 represents gain on early extinguishment of debt,
and extraordinary item in 1994 represents loss on early extinguishment of
debt.
(5) Operating Cash Flow is operating income before depreciation, amortization
and non-cash compensation expense. See footnote 5 to "Summary Financial and
Other Data."
(6) Operating Cash Flow Margin is Operating Cash Flow stated as a percentage of
net revenues.
(7) Amount includes purchases and construction of display faces.
(8) Working capital is current assets less current liabilities (excluding
current maturities of long-term debt and capital lease obligations).
18
<PAGE> 20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of the consolidated results of operations of the
Company and the Predecessors for the three years ended December 31, 1995 and the
nine months ended September 30, 1995 and September 30, 1996 and financial
condition at December 31, 1995 and September 30, 1996 should be read in
conjunction with the respective financial statements of the Company and the
Predecessors and the related notes thereto included elsewhere in this
Prospectus.
BACKGROUND
The Company was formed in August 1995 to acquire PMG and EIC. EIC was
formed in August 1992 for the purpose of acquiring certain outdoor advertising
operations in Phoenix, Arizona. In September 1993, EIC purchased certain outdoor
advertising operations in El Paso, Texas, and in December 1994, EIC purchased
certain outdoor advertising operations in Atlanta, Georgia. In August 1995, the
Company acquired EIC and purchased from GECC the outdoor advertising operations
of PMG. PMG was the successor to Foster and Kleiser, the first significant
national outdoor advertising company in the United States, founded at the turn
of the century.
The Company financed the purchase of PMG with a combination of a $440
million credit facility, consisting of two term loans and a revolving credit
facility (the "Old Credit Facility"), and an equity investment of approximately
$163 million from Hellman & Friedman Capital Partners III, L.P., H&F Orchard
Partners III, L.P. and H&F International Partners III, L.P. and other
co-investors.
Since the Company's formation, management has actively pursued purchases of
outdoor advertising displays which have increased its presence in major
metropolitan markets. Since January 1, 1996, the Company has purchased an
aggregate of approximately 1,550 display faces in 26 in-market purchases for an
aggregate purchase price of approximately $38.0 million. The Company has
financed such acquisitions with borrowings under the Old Credit Facility and
cash from operations. The Company's financial results for the nine months ended
September 30, 1996 do not reflect the full impact of these purchases.
GENERAL
Revenues are a function of the number of displays operated by the Company,
as well as the occupancy levels of the Company's display faces and the rates
that the Company charges for their use. The Company focuses its sales efforts on
maximizing the yield of its display inventory by optimizing its rates and
occupancy levels to best meet demand in each market. The Company utilizes
sophisticated demographic research, substantial creative resources and strategic
developmental sales and marketing techniques to generate demand for out-of-home
media products, often targeting customers currently using other forms of media.
The Company has emphasized the development of new display locations in
growth areas of its existing markets in order to generate additional revenues.
Additionally, the Company has expanded its product offering to include transit
displays and other out-of-home media products in order to better serve
customers' needs and generate additional demand. The Company has also developed
creative new display types to meet advertiser needs and attract new customers to
outdoor advertising, including Premier Panels(TM) and Premier Plus(TM) panels.
These new display types permit the Company to enhance its rate structure on its
existing display inventory by increasing the square footage of advertising
displays and expanding the format of its outdoor advertising displays to
accommodate more diverse advertising copy.
19
<PAGE> 21
Net revenues represent gross revenues less commissions paid to advertising
agencies and brokers that contract for the use of advertising displays on behalf
of advertisers. Agency commissions on revenues which are contracted through
advertising agencies are typically 15% of gross revenues. Not all revenues are
contracted through advertising agencies. An increasing portion of revenues are
derived directly from advertisers or are contracted through an advertising
agency that is being compensated on a fixed fee basis rather than on a
commission based program. As a result, agency commissions as a percentage of
gross revenues have decreased over the past several years to approximately 12.4%
of gross revenues in the nine months ended September 30, 1996.
The Company considers agency commissions as a reduction in gross revenues
and measures its operating performance based upon percentages of net revenues
rather than gross revenues. The Company's sales incentive programs are focused
on net revenues as well.
The Company's cost of sales consists of direct expenses, maintenance and
operations expenses and site leases. Direct expenses include costs directly
associated with the Company's displays, including copy, production and
installation costs and illumination expense. Maintenance and operations expenses
include minor repairs, vehicle upkeep and other miscellaneous operating
expenses. Site leases consist mainly of rental payments to owners of real estate
underlying the signs. For the nine months ended September 30, 1996, these
expenses amounted to the following approximate percentages of net revenues:
direct 8.8%, maintenance and operations 8.4% and site leases 20.8%.
Selling, general and administrative expenses occur at both the market and
corporate level. At the market level, these expenses consist of various items of
office overhead pertaining to both personnel and facilities, including
accounting and administrative expenses and direct sales and marketing costs. At
the corporate level, these costs represent staff and facility expenses for the
executive office, the Company's incentive bonus pool, the New York sales and
marketing office and the corporate accounting and MIS functions.
The Company's decentralized operating structure places authority, autonomy
and accountability at the market level and provides local management with the
tools necessary to effectively manage their operations on a day-to-day basis.
The corporate, executive and administrative functions focus on providing
strategic direction and oversight to the markets while maintaining specific
financial controls to monitor market progress. The Company's bonus expense is
accounted for at the corporate level since executive management exercises
substantial discretion in determining market compensation levels, and since
executive management is responsible for administering the program.
20
<PAGE> 22
RESULTS OF OPERATIONS -- THE COMPANY
NINE MONTHS ENDED SEPTEMBER 30, 1996 ("INTERIM 1996") COMPARED TO PRO FORMA
NINE MONTHS ENDED SEPTEMBER 30, 1995 ("INTERIM 1995")
The following table presents certain operating statement items of the
Company as a percentage of net revenues.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------
PRO FORMA
1995(1) 1996
--------- -----
<S> <C> <C>
Net revenues............................................................ 100.0% 100.0%
Cost of sales........................................................... 40.7 38.1
Selling, general and administrative expenses............................ 24.5 22.3
--------- -----
Operating Cash Flow..................................................... 34.8 39.6
Depreciation and amortization........................................... 14.1 16.4
--------- -----
Operating income........................................................ 20.7 23.2
Interest expense........................................................ 17.0 15.0
Net income.............................................................. (0.3) 3.8
--------- -----
</TABLE>
- ---------------
(1) See the Unaudited Pro Forma Consolidated Statements of Operations of the
Company included elsewhere in this Prospectus.
Net revenues increased 10.6% from $161.7 million in Interim 1995 to $178.7
million in Interim 1996. The increase reflects higher advertising rates and
occupancy levels, particularly in the Texas, Southern California and Northern
California regions. To a substantially lesser extent, the increase reflects the
purchase of advertising display faces in the San Antonio, Dallas and Houston
markets.
Cost of sales increased 3.6% from $65.8 million in Interim 1995 to $68.1
million in Interim 1996 primarily as a result of increased net revenues. As a
percentage of net revenues, cost of sales decreased from 40.7% in Interim 1995
to 38.1% in Interim 1996 as a result of economies of scale associated with
increased revenues.
Selling, general and administrative expenses increased 0.4% from $39.7
million in Interim 1995 to $39.8 million in Interim 1996. As a percentage of net
revenues, these expenses decreased from 24.5% in Interim 1995 to 22.3% in
Interim 1996, reflecting reduced headcount at the corporate level due to cost
reduction programs, as well as economies of scale associated with the increased
revenues.
Operating Cash Flow increased 25.9% from $56.2 million in Interim 1995 to
$70.8 million in Interim 1996 as a result of the above factors. As a percentage
of net revenues, Operating Cash Flow increased from 34.8% in Interim 1995 to
39.6% in Interim 1996.
Depreciation and amortization expenses increased 28.8% from $22.8 million
in Interim 1995 to $29.4 million in Interim 1996 reflecting additional
depreciation associated with advertising displays purchased and capital
expenditures made after August 1995.
Interest expense remained relatively constant at $26.9 million in Interim
1996 as compared to $27.5 million in Interim 1995.
As a result of the above factors, the Company recorded net income of $6.8
million in Interim 1996 as compared to a net loss of $0.5 million in Interim
1995.
PRO FORMA YEAR ENDED DECEMBER 31, 1995
Pro forma net revenues for 1995 were $218.0 million. This represents an
increase of 15.4% from the combined net revenues for EIC and PMG of $188.9
million for the year ended December 31,
21
<PAGE> 23
1994. The increase was primarily attributable to increases in rate and occupancy
in the California and Midwest regions, and to a lesser extent, due to additional
revenues from the Atlanta market which was acquired by EIC in December 1994.
Pro forma cost of sales was $89.0 million in 1995, an increase of 10.3%
over the combined cost of sales of $80.7 million for EIC and PMG in 1994. As a
percentage of net revenues, pro forma cost of sales was 40.8% in 1995 as
compared to 42.7% for combined EIC and PMG in 1994, reflecting economies of
scale associated with the increased revenues.
Pro forma selling, general and administrative expenses were $52.8 million
in 1995, an increase of 11.7% over the combined selling, general and
administrative expenses of $47.2 million for EIC and PMG in 1994. As a
percentage of net revenues, these pro forma expenses were 24.2% in 1995 as
compared to 25.0% for combined EIC and PMG in 1994, primarily due to decreased
headcount in PMG's corporate headquarters and the increase in revenues.
Due to the above factors, pro forma Operating Cash Flow was $76.2 million
in 1995, an increase of 25.1% over the combined Operating Cash Flow of $61.0
million for EIC and PMG in 1994. As a percentage of net revenues, pro forma
Operating Cash Flow was 35.0% in 1995 as compared to 32.3% for combined EIC and
PMG in 1994, reflecting the economies of scale associated with revenue
increases.
Pro forma depreciation and amortization expense was $33.3 million in 1995
and pro forma interest expense was $36.5 million in 1995, reflecting the site
and structure depreciation, goodwill amortization and interest expense on
acquisition-related debt arising from the Company's acquisitions of EIC and PMG.
The above factors resulted in a pro forma loss of $1.9 million in 1995.
RESULTS OF OPERATIONS -- PREDECESSORS
The following table presents certain operating statement items of the
Predecessors as a percentage of net revenues:
<TABLE>
<CAPTION>
JANUARY 1, TO
YEAR ENDED DECEMBER 31, AUGUST 17,
-------------------------------------- ---------------
1993 1994 1995
----------------- ---------------- ---------------
PMG EIC PMG EIC PMG EIC
------ ------ ------ ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Net revenues........................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales....................... 45.5 53.2 42.5 45.3 40.8 42.2
Selling, general and administrative
expenses.......................... 26.9 12.2 25.9 11.8 25.5 13.9
------ ------ ------ ----- ----- -----
Operating Cash Flow................. 27.6 34.6 31.6 42.9 33.7 43.9
Depreciation and amortization....... 26.6 16.2 23.5 14.8 18.4 15.7
------ ------ ------ ----- ----- -----
Operating income.................... 1.0 18.4 8.0 28.1 15.3 28.2
Interest expense.................... 28.4 35.3 28.4 22.7 22.4 23.6
Net income (loss) before
extraordinary item................ (10.6) (19.0) (10.7) 2.9 (7.9) 1.0
------ ------ ------ ----- ----- -----
</TABLE>
JANUARY 1, 1995 TO AUGUST 17, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
The following is a discussion of the results of operations of EIC and PMG
for the period from January 1, 1995 to August 17, 1995 as compared to the year
ended December 31, 1994. Because the 1995 period is only for eight and one-half
months, and EIC completed the Atlanta transaction in December 1994 and results
from the Atlanta market are reflected only in the 1995 period, the two periods
generally are not comparable. Accordingly, the discussion primarily addresses
relative changes in certain items as a percentage of net revenues and not
absolute changes. Items which are not comparable are not discussed.
22
<PAGE> 24
EIC
Net revenues increased 18.3% from $11.6 million in 1994 to $13.7 million
during the abbreviated 1995 period despite the fact that the 1995 time period
was considerably shorter than the 1994 period for purposes of comparison. The
increase was primarily attributable to the Atlanta transaction which was
completed by EIC in December 1994. To a lesser extent, the increase was
attributable to rate and occupancy increases in the El Paso and Phoenix markets.
As a percentage of net revenues, cost of sales decreased from 45.3% in 1994
to 42.2% during the abbreviated 1995 period. The decrease was attributable to
the economies of scale associated with increased revenues in the El Paso and
Phoenix markets coupled with the high level of profitability of the acquired
Atlanta operations. As a percentage of net revenues, selling, general and
administrative expenses increased from 11.8% in 1994 to 13.9% during the
abbreviated 1995 period, primarily as a result of increased levels of corporate
and market overhead which were required to support the addition of the Atlanta
operations.
Depreciation and amortization expense was $2.1 million during the
abbreviated 1995 period and interest expense was $3.2 million during the
abbreviated 1995 period.
The above factors resulted in net income of $135,000 during the abbreviated
1995 period.
PMG
Net revenues decreased 30.3% from $177.3 million in 1994 to $123.6 million
in the abbreviated 1995 period entirely as a result of the abbreviation of the
1995 period for comparative purposes.
As a percentage of net revenues, cost of sales decreased from 42.5% in 1994
to 40.8% in the abbreviated 1995 period primarily as a result of economies of
scale and productivity improvements associated with increased usage of vinyl and
computer painting processes in the bulletin segment of the business. As a
percentage of net revenues, selling, general and administrative expenses
remained relatively flat at approximately 26% due to the fixed nature of the
majority of these costs.
Depreciation and amortization expense was $22.8 million during the
abbreviated 1995 period and interest expense was $27.6 million during the
abbreviated 1995 period.
The above factors resulted in a net loss of $9.7 million during the
abbreviated 1995 period.
EIC YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Net revenues increased 115.1% from $5.4 million in 1993 to $11.6 million in
1994 primarily as a result of the inclusion of the El Paso market in the 1994
financial results. To a far lesser extent, the net revenues increase was
attributable to increased advertising rates and occupancy levels in the Phoenix
market.
Cost of sales increased 83.4% from $2.9 million in 1993 to $5.3 million in
1994 primarily as a result of the inclusion of the El Paso market in the 1994
results. As a percentage of net revenues, cost of sales decreased from 53.2% in
1993 to 45.3% in 1994 as a result of the high level of profitability of the El
Paso market, and to a lesser extent, as a result of the economies of scale
associated with increased revenues in the Phoenix market.
Selling, general and administrative expenses increased 108.1% from $0.7
million in 1993 to $1.4 million in 1994 primarily as a result of the inclusion
of the El Paso market in the 1994 results. As a percentage of net revenues,
selling, general and administrative expenses decreased from 12.2% in 1993 to
11.8% in 1994 due to the high level of profitability of the El Paso market and
economies of scale associated with the increased revenues.
Operating Cash Flow increased 166.4% from $1.9 million in 1993 to $5.0
million in 1994 primarily as a result of the inclusion of the El Paso market in
the 1994 results.
23
<PAGE> 25
Depreciation and amortization expense increased from $0.9 million in 1993
to $1.7 million in 1994 primarily as a result of the inclusion of depreciation
from the El Paso market assets in the 1994 results.
Interest expense increased from $1.9 million in 1993 to $2.6 million in
1994 primarily as a result of the increased indebtedness associated with the
purchase of the El Paso market.
Net losses increased from $1.0 million in 1993 to $1.8 million in 1994
primarily due to an extraordinary loss on extinguishment of debt of $2.2 million
in 1994, partially offset by the factors discussed above.
PMG YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Net revenues increased 10.3% from $160.8 million in 1993 to $177.3 million
in 1994. The growth was primarily attributable to increases in advertising rate
and occupancy levels in the California, Midwest and Texas regions, partially
offset by the divestiture of the Rochester, New York market in 1994.
Cost of sales increased 3.1% from $73.2 million in 1993 to $75.4 million in
1994, primarily as a result of increased net revenues. As a percentage of net
revenues, cost of sales decreased from 45.5% in 1993 to 42.5% in 1994 reflecting
economies of scale associated with increased revenues. The Company's increased
use of computer painted bulletins helped reduce direct bulletin expenses.
Selling, general and administrative expenses increased 6.0% from $43.3
million in 1993 to $45.9 million in 1994. As a percentage of net revenues, these
expenses decreased from 26.9% in 1993 to 25.9% in 1994, reflecting economies of
scale associated with the increased revenues.
Operating Cash Flow increased 26.1% from $44.4 million in 1993 to $56.0
million in 1994 as a result of the above factors.
Depreciation and amortization expenses decreased 2.4% from $42.8 million in
1993 to $41.7 million in 1994 due to a reduced asset base which resulted from
the divestiture of the Rochester, New York market in 1994.
Interest expense increased 10.1% from $45.7 million in 1993 to $50.3
million in 1994 as a result of an increased interest allocation from GECC.
As a result of the above factors and the tax benefit recognized, net losses
increased from $17.0 million in 1993 to $19.1 million in 1994.
SEASONALITY AND QUARTERLY INFORMATION
The following table sets forth certain quarterly financial information of
the Company for each quarter of 1995 and for the first three quarters of 1996.
The information has been derived from the quarterly financial statements of the
Company and the Predecessors which are unaudited but which, in the opinion of
management, have been prepared on the same basis as the financial statements
included herein and include all adjustments (consisting only of normal recurring
items) necessary for a fair presentation of the financial results for such
periods. The information for the three quarters in the period ended September
30, 1995 have been prepared on a basis consistent with the Unaudited Pro Forma
Consolidated Statements of Operations of the Company appearing elsewhere in this
Prospectus. All of this information should be read in conjunction with the
Company's and the Predecessors' respective financial statements and the notes
thereto and the other financial information appearing elsewhere in this
Prospectus. The operating results for any quarter are not necessarily indicative
of results for any future period.
The Company's revenues and operating results have exhibited some degree of
seasonality in past periods. Typically the Company experiences its strongest
financial performance in the second and third quarters and its lowest revenues
in the first and fourth quarters. The Company expects this trend to continue in
the future, and, as a result, the Company is likely to experience a net loss for
the quarter ended March 31, 1997. Because a significant portion of the Company's
expenses are fixed, a
24
<PAGE> 26
reduction in revenues in any quarter is likely to result in a period to period
decline in operating performance and net earnings.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------------------------------------------------------------------------
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31, MARCH 31, JUNE 30, SEPTEMBER 30,
1995(1) 1995(1) 1995(1) 1995 1996 1996 1996
--------- -------- ------------- ------------ --------- -------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................. $ 45,660 $ 57,850 $58,154 $ 56,348 $51,210 $ 62,267 $65,251
Operating income............ 3,559 14,273 15,559 9,597 10,233 14,830 16,328
Net income (loss)........... (5,488 ) 2,581 2,379 (1,380) (4,110) 4,844 6,056
PERCENTAGE OF NET REVENUES:
Operating income............ 7.8% 24.7% 26.8% 17.0% 20.0% 23.8% 25.0%
Net income (loss)........... (12.0 )% 4.5% 4.1% (2.4)% (8.0)% 7.8% 9.3%
OTHER DATA:
Operating Cash Flow......... $ 11,115 $ 21,836 $23,247 $ 20,048 $16,852 $ 26,236 $27,676
Operating Cash Flow
Margin.................... 24.3 % 37.7% 40.0% 35.6% 32.9% 42.1% 42.4%
</TABLE>
- ---------------
(1) See the Unaudited Pro Forma Consolidated Statements of Operations of the
Company included elsewhere in this Prospectus.
FOURTH QUARTER 1996 CHARGES
In the fourth quarter of 1996, the Company will record a one-time, non-cash
pre-tax charge of $7.7 million, reflecting the write-off of the remaining
unamortized debt incurrence expenses arising as a result of the refinancing of
the Old Credit Facility. In addition, the Company will record a one-time,
non-cash pre-tax charge of $ million in connection with the vesting of
certain employee stock options. See "Management -- Executive Officers' Stock
Options." The Company will also record non-cash compensation expense of
approximately $ in the fourth quarter of 1996 in connection with
modifications to its Phantom Equity Plan, and expects to record continuing
annual non-cash compensation expense under the Phantom Equity Plan of
approximately $ in fiscal years 1997 through 2000 and $ in
fiscal year 2001. See "Management -- Phantom Equity Plan."
LIQUIDITY AND CAPITAL RESOURCES
Since its formation, the Company has satisfied its working capital
requirements with cash generated from operations and to a lesser extent from
borrowings under the Old Credit Facility. Purchases of outdoor advertising
displays have been financed primarily with borrowings under the Old Credit
Facility and, to a lesser extent, with cash generated from operations.
In November 1996, the Company completed the refinancing of the Old Credit
Facility used to fund both the acquisition of PMG and subsequent display
purchases. The Old Credit Facility was increased to $550 million, comprised of
(i) a $200 million revolving credit facility (of which approximately $65 million
was drawn upon the consummation of the refinancing, and, subsequently,
approximately $ million of which will be repaid with the proceeds from this
Offering), (ii) a $200 million seven year term loan and (iii) a $150 million
eight year term loan. See "Description of Indebtedness and Other
Commitments -- Senior Credit Facility."
Net cash provided by operating activities was $36.0 million for the nine
months ended September 30, 1996. Net cash used in investing activities was $47.5
million for the nine months ended September 30, 1996, resulting primarily from
the purchases of displays and other capital expenditures. Net cash provided by
financing activities was $12.0 million for the nine months ended September 30,
1996 resulting primarily from net increases in amounts outstanding under the
Company's borrowing facilities. The Company anticipates its capital expenditures
for construction of new displays and normal maintenance of its displays and
other physical assets to range from approximately $13 million to $15 million in
1997.
25
<PAGE> 27
The Company believes that its cash from operations together with proceeds
from the Offering and the increased availability under the Senior Credit
Facility will be sufficient to satisfy cash requirements for the foreseeable
future, including capital expenditures for existing operations. However, in the
event cash and borrowings are not sufficient, the Company may incur additional
indebtedness to finance operations and may choose to seek additional debt or
equity capital to finance acquisitions. There can be no assurance that such
additional debt or equity capital will be available.
INFLATION
Inflation has not had a significant impact on the Company over the past
three years. The floating rate on the Senior Credit Facility could increase in
an inflationary environment, but management believes that because a significant
portion of the Company's costs are fixed, inflation will not have a material
adverse effect on its operations. However, there can be no assurance that a high
rate of inflation in the future will not have an adverse effect on the Company's
operations.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121 ("SFAS 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. The implementation of SFAS 121 did not materially affect the
Company's financial position.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards, No. 123 ("SFAS 123"), Accounting For Stock-Based
Compensation, which allows a company to record stock-based compensation on the
basis of fair value. Under the provisions of SFAS 123, the Company is
encouraged, but not required, to measure compensation costs related to its
employee stock compensation under the fair value method. If the Company elects
not to recognize compensation expense under this method, it is required to
disclose the pro forma effects based on the SFAS 123 methodology. The Company
will disclose the pro forma effects of SFAS 123 beginning in its December 31,
1996 financial statements.
26
<PAGE> 28
BUSINESS
GENERAL
Eller Media Corporation is the largest outdoor advertising company in the
United States based on its total U.S. advertising display inventory of
approximately 50,000 display faces. The Company provides outdoor advertising
services in 15 major metropolitan markets located in six operating regions:
Southern California, Texas, the Midwest, Northern California, the Southeast and
the Southwest. The Company believes it is the largest provider of outdoor
advertising services in 12 of its 15 markets based on total display faces. The
markets in which the Company operates represent approximately 22% of the total
U.S. population and approximately 50% of the rapidly growing U.S. Hispanic
population. The Company has a significant presence in eight of the ten largest
U.S. Hispanic markets, including Los Angeles, Miami, Chicago and San Antonio.
INDUSTRY OVERVIEW
The outdoor advertising industry has experienced increased advertiser
interest and revenue growth in recent years. Outdoor advertising generated total
revenues of approximately $1.8 billion in 1995, or approximately 1.1% of the
total advertising expenditures in the United States, and the out-of-home
advertising industry generated revenues in excess of $3.0 billion in 1995,
according to estimates by the OAAA. Outdoor advertising's 1995 revenues
represent growth of approximately 8.2% over estimated total 1994 revenues, which
compares favorably to the growth of total U.S. advertising expenditures of
approximately 7.7% during the same period. In addition, for the first half of
1996, outdoor advertising generated total revenues of approximately $915
million, up 7.0% from the same 1995 period, according to recent estimates by the
OAAA.
Advertisers purchase outdoor advertising for a number of reasons. Outdoor
advertising offers repetitive impact and a lower cost-per-thousand impressions,
a commonly used media measurement, as compared to competitive media, including
television, radio, newspapers, magazines and direct mail marketing. Accordingly,
because of its cost-effective nature, outdoor advertising is a good vehicle to
build mass market support. In addition, outdoor 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 where
customers have specific demographic characteristics. For instance, restaurants,
motels, service stations and similar roadside businesses may use outdoor
advertising to reach potential customers close to the point of sale and provide
directional information. Other local businesses such as television and radio
stations and consumer products companies may wish to appeal more broadly to
customers and consumers in the local market. National brand name advertisers may
use the medium to attract customers generally and build brand awareness. In all
cases, outdoor advertising can be combined with other media such as radio and
television to reinforce messages being provided to consumers.
The outdoor advertising industry has experienced significant change in
recent periods due to a number of factors. First, the out-of-home advertising
category has expanded to include, in addition to traditional billboards and
roadside displays, displays in shopping centers and malls, airports, stadiums,
movie theaters and supermarkets, as well as on taxis, trains, buses, blimps and
subways. Second, while the outdoor advertising industry has experienced a
decline in the use of outdoor advertising by tobacco companies, it has increased
its visibility with and attractiveness to local advertisers as well as national
retail and consumer product-oriented companies. Third, the industry has
benefitted significantly from improvements in production technology, including
the use of computer-generated images for printing, vinyl advertising copy and
improved lighting techniques, which have facilitated a more dynamic, colorful
and creative use of the medium. These technological advances have permitted the
outdoor advertising industry to respond more promptly and cost effectively to
the changing needs of its advertising customers and make greater use of
advertising copy used in other media. Lastly, the outdoor advertising industry
has benefitted from 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. The Company
27
<PAGE> 29
believes that these trends demonstrate that consumer exposure to existing
billboard structures also increased during this period.
A relatively new opportunity within the out-of-home advertising industry is
transit advertising. Increasing numbers of local governments are providing
transit shelters and benches to enhance the service and image of local transit
systems. These locations, as well as buses, are increasingly being used for
out-of-home advertising.
The outdoor advertising industry is comprised of several large outdoor
advertising and media companies with operations in multiple markets, as well as
many smaller and local companies operating a limited number of structures in a
single or few local markets. While the industry has experienced some
consolidation within the past few years, the OAAA estimates that there are still
approximately 1,000 companies in the outdoor advertising industry operating
approximately 396,000 billboard displays. The Company expects the trend of
consolidation in the outdoor advertising industry to continue.
OPERATING STRATEGY
The Company's strategy is to expand its market presence and improve its
operating results by (i) managing the advertising rates and occupancy levels of
its displays to maximize market revenues; (ii) attracting new categories of
advertisers to the outdoor medium through significant investments in sales and
marketing resources; (iii) constructing new displays and upgrading its existing
displays; (iv) taking advantage of technological advances which increase both
sales force productivity and production department efficiency; and (v) acquiring
additional displays in its existing markets and expanding into additional
markets within the country's 35 largest media markets and their surrounding
regional areas. The Company believes this operating strategy enhances its
ability to effectively respond to advertisers' needs.
- Maximizing market revenues. The Company believes that the size,
diversity, and premium location of its display inventory provides it with
substantial pricing flexibility. The Company seeks to maximize revenues
through the optimization of advertising rates and occupancy levels.
- Attracting new categories of advertisers. The Company dedicates
substantial resources to target large companies whose advertising
expenditures do not typically include outdoor advertising and introduce
them to the benefits of the outdoor medium. The Company offers
comprehensive sales, marketing, creative and research services to new and
existing customers.
- Constructing new displays and upgrading existing display faces. Since
January 1, 1996, the Company has invested approximately $10.2 million for
new display construction and for ongoing enhancement of its existing
display inventory. Where opportunities are available, the Company intends
to build new displays, continue to convert existing 30-sheet posters into
Premier Panels(TM) and Premier Plus(TM) panels and continue to upgrade
its existing display inventory.
- Capitalizing on technological improvements. The Company intends to take
advantage of advances in production (including the increased use of vinyl
and pre-printed advertising copy) and market research (including the
increased use of mapping and demographic software) in order to achieve
greater efficiencies and to increase the Company's net revenues and
Operating Cash Flow.
- Acquiring additional displays. In addition to internal growth, the
Company seeks to grow by continuing to acquire additional displays in its
existing markets and through the acquisition of other outdoor companies
whose assets have strategic appeal. The Company is focused on expanding
its operations in existing markets and expanding into additional markets
within the country's 35 largest media markets and their surrounding
regional areas. The Company
28
<PAGE> 30
believes that larger markets provide greater revenue potential per
display, improved access to national advertisers, greater regional
advertising benefits and the opportunity to gain a larger market share
from competitive and higher cost (per thousand) media. The Company is
also considering expansion into international markets.
To support this operating strategy, the Company has decentralized its
operating structure in order to place authority, autonomy and accountability at
the market level and provide local management with the tools necessary to
oversee sales, display development, administration and production and to
identify suitable acquisition candidates. The Company is implementing
centralized accounting and financial controls designed to allow it to closely
monitor the operating and financial performance of its markets. The Company also
maintains a fully-staffed sales and marketing office in New York which services
national accounts and supports the Company's local sales force in each market.
The Company believes that one of its strongest competitive advantages is its
unique blend of highly experienced corporate and local market management.
RECENT AND PENDING ACQUISITIONS
Since January 1, 1996, the Company has purchased an aggregate of
approximately 1,550 display faces in 26 in-market purchases for an aggregate
purchase price of approximately $38.0 million. The Company believes that these
purchases strengthen its market position and allow it to capitalize on operating
efficiencies associated with the addition of display faces to its existing
markets. These purchases have included 167 bulletins in the Dallas/Ft. Worth
market purchased in September 1996 for a purchase price of $11.6 million and 227
bulletins and 735 30-sheet posters in the San Antonio market purchased in July
1996 for an aggregate purchase price of $11.0 million. The Company believes
these acquisitions have further strengthened its position in the Dallas/Ft.
Worth and San Antonio markets, respectively.
In December 1996, the Company entered into an agreement with ADCO Outdoor
Advertising ("ADCO") to purchase 45 bulletins in the San Francisco/Oakland
market for an aggregate purchase price of $9.5 million, payable pursuant to the
terms of a secured convertible promissory note. See "Description of Indebtedness
and Other Commitments -- Convertible Promissory Note." The Company believes this
acquisition will enhance its position in this market.
29
<PAGE> 31
MARKETS
Each of the Company's markets possess demographic characteristics that are
attractive to national advertisers, allowing the Company to package its displays
in several of its markets in a single contract for advertisers in national and
regional campaigns. Each market also has unique local industries, businesses,
sports franchises and special events that are frequent users of outdoor
advertising. The following table sets forth for the nine month period ended
September 30, 1996 certain information with respect to each of the Company's 15
major metropolitan markets (dollars in thousands):
<TABLE>
<CAPTION>
PREMIER
PERCENTAGE PANELS(TM) TOTAL
MARKET NET OF NET AND PREMIER 30-SHEET 8-SHEET TRANSIT DISPLAY
MARKET RANK(1) REVENUES REVENUES BULLETINS PLUS(TM) PANELS POSTERS POSTERS DISPLAYS FACES
- ----------------------------- ------- -------- ---------- --------- ---------------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
SOUTHERN CALIFORNIA:
Los Angeles(2)............. 2 $ 39,696 22.5% 722 116 4,875 -- 1,168 6,881
San Diego.................. 15 5,019 2.8 112 125 575 -- -- 812
TEXAS:
Dallas/Ft. Worth........... 7 13,329 7.6 679 84 2,073 135 -- 2,971
Houston.................... 9 17,091 9.7 557 647 2,215 1,860 -- 5,279
San Antonio................ 34 8,484 4.8 754 -- 1,374 1,332 -- 3,460
MIDWEST:
Chicago.................... 3 17,891 10.1 417 17 2,858 -- 3,078 6,370
Cleveland(3)............... 22 9,821 5.6 261 6 2,007 -- -- 2,274
Milwaukee.................. 28 4,949 2.8 137 30 821 -- -- 988
NORTHERN CALIFORNIA:
San Francisco/Oakland(4)... 4 23,832 13.5 386 320 1,554 432 6,812 9,504
Sacramento................. 29 4,101 2.3 91 44 426 -- 142 703
SOUTHEAST:
Miami...................... 11 3,759 2.2 -- -- -- -- 2,088 2,088
Atlanta.................... 12 8,433 4.8 365 26 1,132 -- -- 1,523
Tampa(5)................... 21 10,267 5.8 522 45 1,471 -- -- 2,038
SOUTHWEST:
Phoenix.................... 20 5,683 3.2 365 -- -- -- -- 365
El Paso.................... 70 4,091 2.3 284 11 545 544 -- 1,384
-------- ----- ----- ----- ------ ----- ------ ------
Total.................... $176,446(6) 100.0% 5,652(7) 1,471 21,926 4,303 13,288 46,640(8)
======== ===== ===== ===== ====== ===== ====== =====
</TABLE>
- ---------------
(1) Market rank of the largest city in each market.
(2) Includes Los Angeles, Orange, Riverside, San Bernardino and Ventura
counties.
(3) Includes Akron and Canton.
(4) Includes San Francisco, Oakland, San Jose, Santa Cruz and Solano counties.
(5) Includes Sarasota and Bradenton.
(6) Excludes convenience store and other miscellaneous net revenues.
(7) Includes 21 wallscapes.
(8) Excludes 4,086 convenience store displays.
INVENTORY
The Company operates the following types of outdoor advertising billboards
and displays:
- Bulletins generally are 14 feet high by 48 feet wide (672 square feet) or
20 feet high by 60 feet wide (1,200 square feet) and consist of panels on
which advertising copy is displayed. Bulletin advertising copy is either
printed with computer-generated graphics on a single sheet of vinyl that
is "wrapped" around the structure, or is hand painted onto the panels at
the facilities of the outdoor advertising company in accordance with
design specifications supplied by the advertiser and attached to the
outdoor advertising structure. Bulletins also include "wallscapes" that
are painted on vinyl surfaces or directly on the sides of buildings,
typically four stories or less. The Company also offers bulletin
advertisements that can be moved to a different location every 60 days,
providing the opportunity to reach an entire region during the course of
a 12-month contract. Because of their greater impact and higher
30
<PAGE> 32
cost, bulletins are usually located on major highways and freeways. In
addition, wallscapes are located on major freeways, commuter and tourist
routes and in downtown business districts.
- Premier Panels(TM) generally are 12 feet high by 25 feet wide (300 square
feet) and have vinyl wrapped around the display face. Premier Panels(TM)
are built on superior 30-sheet poster locations that deliver a
"bulletin-like" display. The Company also offers unique Premier Plus(TM)
panels, 25 feet high by 25 feet wide (625 square feet), that consist of
two stacked 30-sheet posters which are converted into one larger
individual display face. Where opportunities are available, the Company
plans to continue to convert existing 30-sheet posters into Premier
Panels(TM) and Premier Plus(TM) panels.
On occasion, to attract more attention, some bulletins, Premier
Panels(TM) and Premier Plus(TM) panels may extend beyond the linear edges
of the display face and may include three-dimensional embellishments.
- 30-sheet posters generally are 12 feet high by 25 feet wide (300 square
feet) and are the most common type of billboard. Advertising copy for
30-sheet posters consists of lithographed or silk-screened paper sheets
supplied by the advertiser that are pasted and applied like wallpaper to
the face of the display. Thirty-sheet posters are typically concentrated
on major surface arteries.
- Junior (8-sheet) posters usually are 6 feet high by 12 feet wide (72
square feet). Displays are prepared and mounted in the same manner as
30-sheet posters. Most junior posters, because of their smaller size, are
concentrated on city streets targeting pedestrian traffic.
- Transit displays are lithographed or silk-screened paper sheets located
on bus and commuter train exteriors, commuter rail terminals, interior
train cars, bus shelters and subway platforms. The Company's transit
customers include the San Francisco Bay Area Rapid Transit (BART) and the
Metropolitan Rail (METRA) in Chicago. In the last few years, transit
displays have experienced substantial growth as additional municipalities
have begun to permit this type of advertising. Bus shelters and other
transit displays are an attractive product to advertisers using
"vertical" advertising copy, such as magazines and movie posters, because
the advertising copy is easily adapted for use in such displays. In
addition, bus shelters can target a specific audience, provide coverage
in market areas which cannot be reached by traditional billboards or
achieve other micro-marketing objectives.
- Convenience store displays generally are 68 inches high by 47 inches wide
and are printed on polystyrene. These displays are installed in aluminum
frames that may be affixed to the wall or window of a convenience store,
or may be free-standing on an 18 inch pedestal.
Billboards generally are mounted on structures owned by the outdoor
advertising company and located on sites that are either owned or leased by it
or on which it has acquired a permanent easement. Bus shelters are usually
constructed, owned and maintained by the outdoor service provider under
revenue-sharing arrangements with a municipality or transit authority. Billboard
structures are durable, have long useful lives and generally do not require
substantial maintenance. When disassembled, they typically can be relocated to
new sites. The Company's outdoor advertising structures are made of steel and
other durable materials built to withstand variable climates. Since January 1,
1996, the Company has invested approximately $10.2 million for new display
construction and for ongoing enhancement of its existing display inventory. Over
90% of the Company's bulletin inventory has been retrofitted for vinyl.
SALES AND MARKETING
The Company is able to capitalize on its strong presence in major
metropolitan markets through its sales and marketing office in New York staffed
with 11 sales and marketing people who have strong relationships with customers
and advertising agencies. The Company's significant presence in
31
<PAGE> 33
geographically diverse markets enables major national advertisers to build brand
support and create national brand awareness through the purchase of "national
buys" and other unique advertising packages. The Company believes these efforts
allow it to offer superior service to its large base of national advertisers and
gain a larger market share from competitive media. In addition to its New York
sales and marketing force, the Company maintains a team of local sales
representatives headed by a sales manager in each of its markets. Karl Eller,
the Company's Chairman and Chief Executive Officer, Scott Eller, the Company's
Executive Vice President, and all of the Company's regional and market
presidents are significantly involved with the Company's sales and marketing
activities. The Company devotes considerable time and resources to recruiting,
training and coordinating the activities of its sales force, which is
compensated primarily on a commission basis to maximize incentive to perform.
In addition to the sales staff, the Company has established creative,
marketing and research departments in each of its principal markets. The
creative staff uses technologically advanced computer hardware and software to
develop original design copy for both local and national accounts. The various
creative departments exchange work via modem or over the Internet directly with
clients or their agencies. As a result, many customers turn to the Company for
the creation of their outdoor campaigns. In addition, the Company's research and
development departments utilize state-of-the-art software to provide inventory
management, mapping and other demographic information. The Company believes that
the implementation of continuing technological improvements by its creative,
marketing and research departments provides a significant competitive advantage
in the sales and service area.
OPERATIONS
In each of its principal markets, the Company maintains a complete outdoor
advertising operation including a sales office, a production, construction and
maintenance facility, a creative department equipped with advanced technology, a
real estate unit, a public affairs and marketing department and support staff.
The Company conducts its outdoor advertising operations through these local
offices, consistent with senior management's belief that an organization with
decentralized sales and operations is more responsive to local market conditions
and provides greater incentives to employees. The Company is implementing
centralized accounting and financial controls to allow it to closely monitor the
operating and financial performance of each market. The Company has a regional
or divisional president in each major market. They report directly to the Chief
Executive Officer and are responsible for the day-to-day market operations,
including sales, display development, administration, production and the
identification of suitable acquisition candidates. The regional and divisional
presidents are compensated according to the financial performance of their
respective markets.
Although site leases for land underlying advertising structures are
administered from the Company's headquarters in Phoenix, each local office is
responsible for locating and ultimately procuring leases for appropriate sites
in its market. Each office maintains a leasing department, with an extensive
database containing information on local property ownership, lease contract
terms, zoning ordinances and permit requirements. The Company's experienced
lease teams have been successful in developing new advertising display face
inventory in each of its markets by utilizing these databases. Each team's
primary responsibility is the procurement of sites for new locations.
CUSTOMERS
Advertisers usually contract for outdoor displays through advertising
agencies, which are responsible for the artistic design and written content of
the advertising as well as the choice of media and the planning and
implementation of the overall campaign. The Company pays commissions to the
agencies for advertising contracts that are procured by or through those
agencies. Advertising rates are based on a particular display's exposure (or
number of "impressions" delivered) in relation to the demographics of the
particular market and its location within that market. The number of
"impressions" delivered by a display is measured by the number of vehicles
32
<PAGE> 34
passing the site during a defined period and is weighted to give effect to such
factors as its proximity to other displays, the speed and viewing angle of
approaching traffic, the national average of adults riding in vehicles and
whether the display is illuminated. The number of impressions delivered by a
display is verified by independent auditing companies.
The Company has a diversified customer base of over 3,000 advertisers and
advertising agency clients. The size and geographic diversity of the Company's
markets allow it to attract national advertisers, often by packaging displays in
several of its markets in a single contract to allow a national advertiser to
simplify its purchasing process and present its message in several markets.
National advertisers generally seek wide exposure in major markets and therefore
tend to make larger purchases. The Company competes for national advertisers
primarily on the basis of price, location of displays, availability and service.
In addition, the Company believes that its outdoor advertising inventory reaches
approximately 50% of the rapidly growing U.S. Hispanic population. The Company
has a significant presence in eight of the ten largest U.S. Hispanic markets,
including Los Angeles, Miami, Chicago and San Antonio.
The Company also focuses its efforts on local sales. Local advertisers tend
to have smaller advertising budgets and require greater assistance from the
Company's production and creative personnel to design and produce advertising
copy. In local sales, the Company often expends more sales efforts on educating
customers regarding the benefits of outdoor media and helping potential
customers develop an advertising strategy using outdoor advertising. While price
and availability are important competitive factors, service and customer
relationships are also critical components of local sales.
Tobacco revenues have historically accounted for a significant portion of
outdoor advertising revenues. In 1991 and 1992, the leading tobacco companies
substantially reduced their expenditures for outdoor advertising due to a
declining population of smokers, societal pressures, consolidation in the
tobacco industry and price competition from generic brands. Since tobacco
advertisers often utilized some of the industry's prime inventory, the decline
in tobacco-related advertising expenditures has made space available for other
advertisers, including those that had not traditionally utilized outdoor
advertising. As a result of this decline in tobacco-related advertising revenues
and the increased use of outdoor advertising by other advertisers, such as
entertainment companies, retailers, financial institutions and other businesses,
the range of the Company's advertisers has become quite diverse. The following
table illustrates the diversity of the Company's advertising base:
1995 PRO FORMA NET REVENUES BY CATEGORY
<TABLE>
<CAPTION>
PERCENTAGE OF
PRO FORMA
NET REVENUES
-------------
<S> <C>
Entertainment/Travel........................................... 16.0%
Tobacco........................................................ 13.7
Business & Consumer Services................................... 11.5
Autos, Accessories & Equipment................................. 10.0
Publishing & Media............................................. 6.5
Beer & Wine.................................................... 7.5
Retail......................................................... 5.0
Insurance & Real Estate........................................ 2.6
Food, Snacks & Soft Drinks..................................... 4.3
Health Products................................................ 2.4
Apparel, Footwear & Accessories................................ 2.7
Other.......................................................... 17.8
-----
Total................................................ 100.0%
=====
</TABLE>
33
<PAGE> 35
PRODUCTION
The Company has internal production facilities and staff to perform the
full range of activities required to develop, create and install outdoor
advertising in all of its markets. Production work includes creating the
advertising copy design and layout, painting the design or coordinating its
printing and installing the designs on its displays. The Company usually
provides its full range of production services to local advertisers and to
advertisers that are not represented by advertising agencies, since national
advertisers and advertisers represented by advertising agencies often use
preprinted designs that require only installation. However, the Company's
creative and production personnel frequently are involved in production
activities even when advertisers are represented by agencies due to the
development of new designs or the adaptation of copy from other media for use on
billboards. The Company's artists also assist in the development of marketing
presentations, demonstrations and strategies to attract new advertisers.
With the increased use of vinyl and pre-printed advertising copy furnished
to the outdoor advertising company by the advertiser or its agency, outdoor
advertising companies are becoming less responsible for labor-intensive
production work since vinyl and pre-printed copy is typically produced by the
advertiser or its agency and can be installed quickly. The vinyl sheets are
reusable, thereby reducing the Company's production costs, and are easily
transportable. Due to the geographic proximity of the Company's principal
markets and the transportability of vinyl sheets, the Company can shift
materials among markets to promote efficiency. The Company believes that this
trend over time will reduce operating expenses associated with production
activities. Because of its quick installation and high reproduction quality, the
Company believes that the use of vinyl has increased occupancy rates and
attracted new advertisers to the medium.
COMPETITION
The Company competes in each of its markets with other media, including
broadcast and cable television, radio, print media and direct mail marketers, as
well as other outdoor advertisers. In addition, the Company also competes with a
wide variety of other out-of-home media, including advertising in shopping
centers and malls, airports, stadiums, movie theaters and supermarkets, as well
as on taxis, trains, buses and subways. Advertisers compare relative costs of
available media and cost-per-thousand impressions, particularly when delivering
a message to customers with distinct demographic characteristics. In competing
with other media, outdoor advertising relies on its lower cost-per-thousand
impressions and its ability to reach a broad segment of the population in a
specific market or to target a particular geographic area or population with a
particular set of demographic characteristics within that market.
The outdoor advertising industry is highly fragmented, consisting of
several large outdoor advertising and media companies with operations in
multiple markets as well as smaller and local companies operating a limited
number of structures in single or a few local markets. Although some
consolidation has occurred over the past few years, according to the OAAA there
are approximately 1,000 companies in the outdoor advertising industry operating
approximately 396,000 billboard displays. In several of its markets, the Company
encounters direct competition from other major outdoor media companies,
including Outdoor Systems, Inc., Universal Outdoor, Inc. and 3M National
Advertising Co. (a division of Minnesota Mining and Manufacturing Company). The
Company believes that its broad national coverage, strong emphasis on sales and
customer service, the location of its displays in major markets and its position
as a major provider of advertising services enable it to compete effectively
with other media, as well as other outdoor advertising companies. The Company
also competes with other outdoor advertising companies for sites on which to
build new structures. See "Risk Factors -- Competition."
34
<PAGE> 36
GOVERNMENT REGULATION
The outdoor advertising industry is subject to governmental regulation at
the federal, state and local level. Federal law, principally the Highway
Beautification Act of 1965, encourages states, by the threat of withholding
federal appropriations for the construction and improvement of highways within
such states, to implement legislation to restrict billboards located within 660
feet of, or visible from, interstate and primary highways except in commercial
or industrial areas. All of the states have implemented regulations at least as
restrictive as the Highway Beautification Act, including the prohibition on the
construction of new billboards adjacent to federally-aided highways and the
removal at the owner's expense and without any compensation of any illegal signs
on such highways. The Highway Beautification Act, and the various state statutes
implementing it, require the payment of just compensation whenever governmental
authorities require legally erected and maintained billboards to be removed from
federally-aided highways.
The states and local jurisdictions have, in some cases, passed additional
and more restrictive regulations on the construction, repair, upgrading, height,
size and location of, and, in some instances, content of advertising copy being
displayed on outdoor advertising structures adjacent to federally-aided highways
and other thoroughfares. Such regulations, often in the form of municipal
building, sign or zoning ordinances, specify minimum standards for the height,
size and location of billboards. In some cases, the construction of new
billboards or relocation of existing billboards is prohibited. Some
jurisdictions also have restricted the ability to enlarge or upgrade existing
billboards, such as converting from wood to steel or from non-illuminated to
illuminated structures, and Houston restricts the reconstruction of billboards
which are substantially destroyed as a result of storms or other causes. From
time to time governmental authorities order the removal of billboards by the
exercise of eminent domain. Thus far, the Company has been able to obtain
satisfactory compensation for any of its structures removed at the direction of
governmental authorities, although there is no assurance that it will be able to
continue to do so in the future.
In recent years, there have been movements to restrict billboard
advertising of certain products, including tobacco and alcohol. No bills have
become law at the federal level except those requiring health hazard warnings
similar to those on cigarette packages and print advertisements. It is uncertain
whether additional legislation of this type will be enacted on the national
level or in any of the Company's markets.
In August 1996, the U.S. Food and Drug Administration issued final
regulations governing certain marketing practices in the tobacco industry,
including a prohibition of tobacco product billboard advertisements within 1,000
feet of schools and playgrounds and a requirement that all tobacco product
advertisements on billboards be in black and white and contain only text. These
regulations will become effective in August 1997. A reduction in billboard
advertising by the tobacco industry would cause an immediate reduction in the
Company's direct revenue from such advertisers and would simultaneously increase
the available space on the existing inventory of billboards in the outdoor
advertising industry. See "Business -- Customers" and "Risk Factors -- Tobacco
Industry Regulation."
Amortization of billboards has also been adopted in varying forms in
certain jurisdictions. Amortization permits the billboard owner to operate its
billboard as a non-conforming use for a specified period of time until it has
recouped its investment, after which it must remove or otherwise conform its
billboard to the applicable regulations at its own cost without any
compensation. Amortization and other regulations requiring the removal of
billboards without compensation have been subject to vigorous litigation in
state and federal courts and cases have reached differing conclusions as to the
constitutionality of these regulations. To date, regulations in the Company's
markets have not materially adversely affected its operations. However, the
outdoor advertising industry is heavily regulated and at various times and in
various markets can be expected to be subject to varying degrees of regulatory
pressure affecting the operation of advertising displays. Accordingly, although
the Company's experience to date is that the regulatory environment can be
35
<PAGE> 37
managed, no assurance can be given that existing or future laws or regulations
will not materially adversely affect the Company. None of the Company's markets
other than Houston currently has an amortization ordinance or regulation. The
Houston ordinance has been the subject of litigation for over five years and
currently is not being enforced. The Company believes that its operations will
not be materially affected by the Houston amortization ordinance even if it is
enforced, as a substantial number of the Company's Houston inventory consists of
bulletins and 30-sheet posters located near federal highways where the Highway
Beautification Act of 1965 would require just compensation in the event of any
required removal. See "Risk Factors -- Regulation of Outdoor Advertising."
OUTDOOR ADVERTISING PROPERTIES; OFFICE AND PRODUCTION FACILITIES
Outdoor Advertising Sites. The Company owns or has permanent easements on
relatively few parcels of real property that serve as the sites for its outdoor
displays. The Company's remaining approximately 18,343 billboard sites are
leased. The Company's leases are for varying terms ranging from month-to-month
or year-to-year to terms of ten years or longer, and many provide for renewal
options. There is no significant concentration of displays under any one lease
or subject to negotiation with any one landlord. The Company believes that an
important part of its management activity is to negotiate suitable lease
renewals and extensions.
Office Facilities. The Company's principal executive offices are located in
Phoenix, Arizona. In addition, the Company has 15 divisional offices in Arizona,
California, Florida, Georgia, Illinois, Ohio, Texas and Wisconsin, substantially
all of which are leased. The divisional offices include front office
administration and sales office space, as well as back-shop poster and bulletin
production space. The Company considers its facilities to be well maintained and
adequate for its current and reasonably anticipated future needs.
EMPLOYEES
As of September 30, 1996, the Company employed approximately 980 people, of
whom, approximately 193 were primarily engaged in sales and marketing, 552 were
engaged in painting, bill posting and construction and maintenance of displays
and the balance were employed in financial, administrative and other capacities.
The Company is a party to 21 collective bargaining agreements covering 267
employees. The Company is currently negotiating new collective bargaining
agreements with several of the unions. The Company believes that its relations
with its employees, including its unionized employees, are good.
LITIGATION
The Company from time to time is involved in litigation in the ordinary
course of business, including disputes involving advertising contracts, site
leases, employment claims and construction matters. The Company is also involved
in routine administrative and judicial proceedings regarding billboard permits,
fees and compensation for condemnations. The Company is not a party to any
lawsuit or proceeding which, in the opinion of management, is likely to have a
material adverse effect on the Company.
36
<PAGE> 38
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The table below sets forth certain information with respect to the
directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION(1)
- ------------------------------ --- ----------------------------------------------
<S> <C> <C>
Karl Eller 68 Chairman and Chief Executive Officer (Class
III Director)
Scott S. Eller 40 Executive Vice President/Secretary
Timothy J. Donmoyer 31 Executive Vice President/Chief Financial
Officer
Paul J. Meyer 54 Executive Vice President/General Counsel
John L. Bunce, Jr.(2) 38 Class III Director
H. Irving Grousbeck(3) 62 Class II Director
Bruce T. Halle 67 Class I Director
F. Warren Hellman 62 Class III Director
Arthur H. Kern(2) 50 Class II Director
Joseph M. Niehaus(3) 33 Class II Director
Patricia Salas Pineda(3) 44 Class I Director
Richard Reiss, Jr.(2) 52 Class I Director
</TABLE>
- ---------------
(1) Each director holds office until his resignation or removal and until his
successor shall have been duly elected and qualified. Elections with respect
to the Class I Directors, Class II Directors and Class III Directors will be
held at the annual meeting of stockholders in 1997, 1998, and 1999,
respectively. Executive officers of the Company are elected by the Board of
Directors on an annual basis and serve at the discretion of the Board of
Directors (subject to the terms of any employment agreement).
(2) Member of Compensation Committee.
(3) Member of Audit Committee.
The principal occupations and positions for the past five years, and in
certain cases prior years, of the directors and executive officers named above
are set forth below. References to service with the Company include service with
Eller and with the Predecessors.
Mr. Karl Eller, the founder of the Company, has served as Chairman and
Chief Executive Officer of the Company since its organization. An entrepreneur
and veteran of the outdoor advertising industry for over 40 years, Mr. Eller
began his career in 1952 as a leasing representative for the Tucson, Arizona
branch of Foster and Kleiser. Mr. Eller has held a variety of executive
positions, including President and Chief Executive Officer of Combined
Communications Corporation, member of the Office of Chief Executive and Board of
Directors of Gannett Company, Inc., Chairman of the Board of Mediacom
Industries, Inc. (Canada), President and member of the Board of Directors of
Columbia Pictures Industries and Chairman and Chief Executive Officer of the
Circle K Corporation. Mr. Eller serves on the Boards of Directors of El Dorado
Investment Company and the Phoenix Suns. Mr. Eller received his B.A. in Business
from the University of Arizona, which named its Eller Graduate School of
Management in his honor.
Mr. Scott S. Eller has served as Executive Vice President and Secretary of
the Company since its organization. Mr. Eller is responsible for all corporate
development, developmental marketing, human resources, public affairs, real
estate and operational functions of the Company. Mr. Eller served as President
of EIC and SunVen Entertainment Company, Inc. from 1992 to 1995. Prior to 1992,
for ten years, Mr. Eller served as President and co-founder of SunVen Capital
Corporation, a venture capital company which invested in the media,
communications and entertainment industries. Prior to 1983, Mr. Eller served in
various capacities with Hambrecht and Quist Venture Group
37
<PAGE> 39
and First Interstate Bank. Mr. Eller is Vice Chairman of the OAAA and serves on
several Boards of Directors of private companies. Scott Eller is the son of Karl
Eller.
Mr. Donmoyer has served as the Executive Vice President and Chief Financial
Officer of the Company since September 1995. Mr. Donmoyer came to the Company
from Bear Stearns & Co. Inc., where he was employed for seven years and held the
position of Associate Director in the investment banking department,
specializing in mergers, acquisitions and financing for the outdoor advertising
industry. Mr. Donmoyer also owned and operated Aztec Outdoor, a small painted
bulletin company in Chicago, which was acquired by PMG in 1994. Mr. Donmoyer is
a director of BLR, a Tucson-based company which provides mapping, traffic and
demographic data to the outdoor industry and the Traffic Audit Bureau.
Mr. Meyer has served as the Executive Vice President and General Counsel of
the Company since April 1996. Before joining the Company, Mr. Meyer maintained a
corporate transactional practice with the law firm of Meyer, Hendricks, Bivens
and Moyes, and its predecessor firms, where he also served as managing partner
for more than 20 years. Mr. Meyer also served as the senior law clerk to Chief
Justice Earl Warren of the United States Supreme Court during Chief Justice
Warren's final term.
Mr. Bunce has served as a director of the Company since August 1995. Mr.
Bunce is a General Partner of Hellman & Friedman, a private investment firm. Mr.
Bunce is a director of Western Wireless Corporation, MobileMedia Corporation and
numerous private companies.
Mr. Grousbeck has served as a director of the Company since September 1995.
Mr. Grousbeck is a Consulting Professor of Management at Stanford Business
School, where he began teaching in 1985. From 1981 to 1985, Mr. Grousbeck was a
Lecturer at Harvard University, Graduate School of Business Administration. Mr.
Grousbeck was a co-founder of Continental Cablevision, Inc. where he served as
President from 1964 to 1980 and Chairman of the Board of Directors from 1980 to
1985. Mr. Grousbeck is currently a director of numerous private companies.
Mr. Halle has served as a director of the Company since September 1995. Mr.
Halle has been the Chairman and CEO of Discount Tire Company since 1969.
Mr. Hellman has served as a director of the Company since September 1995.
Mr. Hellman is a General Partner of Hellman & Friedman. Mr. Hellman is a
director of Williams-Sonoma, Inc., Levi Strauss Associates, Inc., Franklin
Resources, Inc., APL Limited, MobileMedia Corporation and numerous private
companies.
Mr. Kern has served as a director of the Company since September 1995. Mr.
Kern is Chairman and CEO of American Media, a company he started in 1981 which
owns and operates commercial radio stations. Mr. Kern is a director of Yahoo!
Inc. and Total Entertainment Network, a new on-line game company.
Mr. Niehaus has served as a director of the Company since August 1995. Mr.
Niehaus is a General Partner of Hellman & Friedman. Mr. Niehaus is a director of
Hoyts Cinemas Limited, Hoyts Cinemas America Limited and numerous private
companies.
Ms. Pineda has served as a director of the Company since July 1996. Ms.
Pineda has been a practicing attorney for nineteen years. Ms. Pineda is
presently the Vice President and Corporate Secretary of New United Motor
Manufacturing, Inc. (NUMMI) with primary responsibility for the Legal,
Environmental and Government Relations Departments. Ms. Pineda has been with
NUMMI since its inception in 1984. Ms. Pineda also serves as director of Levi
Strauss Associates, Inc., Trustee of RAND and director of The James Irvine
Foundation.
Mr. Reiss has served as a director of the Company since September 1995. Mr.
Reiss has been a Managing Partner of Cumberland Associates, a private investment
firm, since 1982. Mr. Reiss is currently a director of O'Charley's, the Lazard
Funds, Inc. and Page One Communications, Ltd.
38
<PAGE> 40
For their services as directors, the members of the Board of Directors who
are not employees of the Company are paid $7,500 annually, plus $2,500 per
meeting and $1,000 per committee meeting. Prior to the Offering, Messrs.
Hellman, Bunce and Niehaus did not receive director fees. In addition, Messrs.
Halle, Reiss, Grousbeck and Kern and Ms. Pineda have been granted certain
non-qualified options to purchase Common Stock. All directors are reimbursed for
reasonable expenses associated with their attendance at meetings of the
Company's Board of Directors and committees thereof.
EXECUTIVE COMPENSATION
The Company was formed to acquire the Predecessors in August 1995. Prior to
its acquisition by the Company, EIC paid no salaries to executive officers, but
did pay a management fee to Red River Resources, Inc., a company controlled by
Karl Eller and in which Scott Eller has a 49% indirect interest, of $100,000 in
1993, $200,000 in 1994, and $497,000 in 1995. The following table sets forth
certain information regarding compensation paid or accrued from August 1995 to
December 31, 1995 to or on behalf of the Company's Chief Executive Officer, the
only executive officer whose total compensation exceeded $100,000 for such
period:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
1995 COMPENSATION
---------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY BONUS COMPENSATION
- --------------------------------------------------- -------- --------- ------------
<S> <C> <C> <C>
Karl Eller......................................... $107,685 $ 0 (1)
Chairman and Chief Executive Officer
</TABLE>
(1) Other annual compensation did not exceed the lesser of $50,000 or 10% of the
total salary and bonuses of Mr. Eller. See "-- Employment Agreement."
EXECUTIVE OFFICERS' STOCK OPTIONS
The following table sets forth information concerning individual grants of
stock options made by the Company during the fiscal year ended December 31, 1995
to each executive officer.
OPTION GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT
INDIVIDUAL GRANTS ASSUMED ANNUAL RATES
------------------------------------------------------------------- OF
PERCENT OF STOCK PRICE
NUMBER OF TOTAL APPRECIATION
SECURITIES OPTIONS GRANTED EXERCISE OR FOR OPTION TERM(2)
UNDERLYING TO EMPLOYEES BASE PRICE EXPIRATION --------------------
NAME OPTIONS GRANTED(#) IN FISCAL YEAR ($/SH) DATE 5%($) 10%($)
- ----------------------- ------------------ --------------- ----------- -------------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Karl Eller(3).......... 95.4% August 2002
Chairman and Chief
Executive Officer
Timothy J.
Donmoyer(4).......... 4.6% November 2002
Executive Vice
President/Chief
Financial Officer
</TABLE>
- ---------------
(1) All options are non-qualified options with an exercise price equal to the
fair market value of the Common Stock on the date of grant, as determined by
the Board of Directors.
(2) The potential realizable value is calculated in accordance with instructions
of the Securities and Exchange Commission (the "Commission") based on the
term of the option at the date of its grant or assignment and assuming that
the stock price appreciates from the date of grant or assignment at the
indicated annual rate, compounded annually for the entire term of the
option. The actual realizable value of the options, assuming an initial
public offering price of $ per share, will substantially exceed the
potential realizable value shown in the table.
39
<PAGE> 41
(3) Mr. Eller was granted options for shares of Common Stock which
become exercisable in annual installments ("Base Options"), and options for
shares of Common Stock which become exercisable upon the
satisfaction of performance conditions ("Performance Options"). Upon
consummation of the Offering, the Base Options will be 80% exercisable and
the Performance Options will be fully exercisable. Mr. Eller has assigned
his right to Base Options and Performance Options to certain
executive officers and a director, subject to possible revesting of certain
of such options in Mr. Eller upon the occurrence of certain contingencies.
The assigned options are included in the table.
(4) Mr. Donmoyer was granted options for shares of Common Stock which
become exercisable in annual installments. In addition, Mr. Eller assigned
to Mr. Donmoyer his rights with respect to shares under the Base
Options, and shares under the Performance Options. Upon
consummation of the Offering, the assigned Performance Options will be fully
exercisable and all other options will be 70% exercisable.
The following table sets forth the number and value as of December 31, 1995
of shares underlying unexercised options held by each of the executive officers.
Prior to the Offering, no stock options will be exercised by any executive
officers.
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED "IN-THE-MONEY"
OPTIONS AS OF OPTIONS AS OF
DECEMBER 31, 1995 DECEMBER 31, 1995(1)
NAME AND ----------------------------- -----------------------------
PRINCIPAL POSITION EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------------------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Karl Eller.......................................
Chairman and Chief Executive Officer
Timothy J. Donmoyer..............................
Executive Vice President/Chief Financial
Officer
</TABLE>
- ---------------
(1) Based on the estimated fair market value of the Common Stock at December 31,
1995 of $ per share, less the exercise price payable upon exercise
of such options. Such estimated fair market value as of December 31, 1995 is
substantially lower than the assumed initial public offering price of $
per share.
EQUITY PLAN
In October 1996, the Company adopted the Eller Media Corporation 1996
Equity Participation Plan (the "Equity Plan"). The Equity Plan was approved by
the stockholders of the Company as of October 29, 1996. The principal purposes
of the Equity Plan are to provide incentives for officers, employees and
consultants of the Company and its subsidiaries through granting of options,
restricted stock and other awards ("Awards"), thereby stimulating their personal
and active interest in the Company's development and financial success, and
inducing them to remain in the Company's employ. In addition to Awards made to
officers, employees or consultants, the Equity Plan permits the granting of
options ("Director Options") to the Company's independent non-employee
directors.
On the date hereof, the Company intends to grant at the public offering
price to certain executive officers options to purchase an aggregate of
shares of Common Stock.
Under the Equity Plan, not more than shares of Common Stock (or
the equivalent in other equity securities) are authorized for issuance upon
exercise of options, stock appreciation rights ("SARs"), and other Awards, or
upon vesting of restricted or deferred stock awards. Furthermore, the maximum
number of shares which may be subject to options or stock appreciation rights
granted under the Equity Plan to any individual in any calendar year cannot
exceed .
40
<PAGE> 42
The principal features of the Equity Plan are summarized below, but the
summary is qualified in its entirety by reference to the Equity Plan, which is
filed as an exhibit to the registration statement of which this Prospectus is a
part.
Administration
Prior to the closing of the Offering, the Board will administer the Equity
Plan. After the closing of the Offering, the Compensation Committee of the Board
or another committee thereof (the "Committee") will administer the Equity Plan
with respect to grants to employees or consultants of the Company and the full
Board will administer the Equity Plan with respect to Director Options. The
Committee will consist of at least two members of the Board, each of whom is a
"non-employee director" for purposes of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended ("Rule 16b-3") and, with respect to options and SAR's
which are intended to constitute performance-based compensation under Section
162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), an
"outside director" for the purposes of Section 162(m) of the Code. Subject to
the terms and conditions of the Equity Plan, the Board or Committee has the
authority to select the persons to whom Awards are to be made, to determine the
number of shares to be subject thereto and the terms and conditions thereof, and
to make all other determinations and to take all other actions necessary or
advisable for the administration of the Equity Plan. Similarly, the Board has
discretion to determine the terms and conditions of Director Options and to
interpret and administer the Equity Plan with respect to Director Options. The
Committee (and the Board) are also authorized to adopt, amend and rescind rules
relating to the administration of the Equity Plan.
Eligibility
Options, SARs, restricted stock and other Awards under the Equity Plan may
be granted to individuals who are then officers or other employees of the
Company or any of its present or future subsidiaries. Such Awards also may be
granted to consultants of the Company selected by the Board or Committee for
participation in the Equity Plan. Non-employee directors of the Company may be
granted NQSOs (as defined herein) by the Board.
Awards under the Equity Plan
The Equity Plan provides that the Committee may grant or issue stock
options, SARs, restricted stock, deferred stock, dividend equivalents,
performance awards, stock payments and other stock related benefits, or any
combination thereof. Each Award will be set forth in a separate agreement with
the person receiving the Award and will indicate the type, terms and conditions
of the Award.
Nonqualified Stock Options ("NQSOs") will provide for the right to purchase
Common Stock at a specified price which, except with respect to NQSOs intended
to qualify as performance-based compensation under Section 162(m) of the Code,
may be less than fair market value on the date of grant (but not less than par
value), and usually will become exercisable (in the discretion of the Board or
Committee) in one or more installments after the grant date, subject to the
participant's continued employment with the Company and/or subject to the
satisfaction of individual or Company performance targets established by the
Board or Committee. NQSOs may be granted for any term specified by the Board or
Committee.
Incentive Stock Options ("ISOs") will be designed to comply with the
provisions of the Code and will be subject to certain restrictions contained in
the Code. Among such restrictions, ISOs must have an exercise price not less
than the fair market value of a share of Common Stock on the date of grant, may
only be granted to employees, must expire within a specified period of time
following the optionee's termination of employment, and must be exercised within
the ten years after the date of grant; but may be subsequently modified to
disqualify them from treatment as ISOs. In the case of an ISO granted to an
individual who owns (or is deemed to own) at least 10% of the total combined
voting power of all classes of stock of the Company, the Equity Plan provides
that the exercise price
41
<PAGE> 43
must be at least 110% of the fair market value of a share of Common Stock on the
date of grant and the ISO must expire upon the fifth anniversary of the date of
its grant.
Restricted Stock may be sold to participants at various prices (but not
below par value) and made subject to such restrictions as may be determined by
the Board or Committee. Restricted stock, typically, may be repurchased by the
Company at the original purchase price if the conditions or restrictions are not
met. In general, restricted stock may not be sold, or otherwise transferred or
hypothecated, until restrictions are removed or expire. Purchasers of restricted
stock, unlike recipients of options, will have voting rights and will receive
dividends prior to the time when the restrictions lapse.
Deferred Stock may be awarded to participants, typically without payment of
consideration, but subject to vesting conditions based on continued employment
or on performance criteria established by the Board or Committee. Like
restricted stock, deferred stock may not be sold, or otherwise transferred or
hypothecated, until vesting conditions are removed or expire. Unlike restricted
stock, deferred stock will not be issued until the deferred stock award has
vested, and recipients of deferred stock generally will have no voting or
dividend rights prior to the time when vesting conditions are satisfied.
Stock Appreciation Rights may be granted in connection with stock options
or other Awards, or separately. SARs granted by the Board or Committee in
connection with stock options or other Awards typically will provide for
payments to the holder based upon increases in the price of the Company's Common
Stock over the exercise price of the related option or other Awards, but
alternatively may be based upon criteria such as book value. Except as required
by Section 162(m) of the Code with respect to a SAR intended to qualify as
performance-based compensation as described in Section 162(m) of the Code, there
are no restrictions specified in the Equity Plan on the exercise of SARs or the
amount of gain realizable therefrom, although restrictions may be imposed by the
Board or Committee in the SAR agreements. The Board or Committee may elect to
pay SARs in cash or in Common Stock or in a combination of both.
Dividend Equivalents represent the value of the dividends per share paid by
the Company, calculated with reference to the number of shares covered by the
stock options, SARs or other Awards held by the participant.
Performance Awards may be granted by the Board or Committee on an
individual or group basis. Generally, these Awards will be based upon specific
performance targets and may be paid in cash or in Common Stock or in a
combination of both. Performance Awards may include "phantom" stock Awards that
provide for payments based upon increases in the price of the Company's Common
Stock over a predetermined period. Performance Awards may also include bonuses
which may be granted by the Board or Committee on an individual or group basis
and which may be payable in cash or in Common Stock or in a combination of both.
Stock Payments may be authorized by the Board or Committee in the form of
shares of Common Stock or an option or other right to purchase Common Stock as
part of a deferred compensation arrangement in lieu of all or any part of
compensation, including bonuses, that would otherwise be payable in cash to the
key employee or consultant.
Securities Laws and Federal Income Taxes
Securities Laws. The Equity Plan is intended to conform to the extent
necessary with all provisions of the Securities Act and the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and any and all regulations and
rules promulgated by the Securities and Exchange Commission thereunder,
including without limitation Rule 16b-3. The Equity Plan will be administered,
and options will be granted and may be exercised, only in such a manner as to
conform to such laws, rules and regulations. To the extent permitted by
applicable law, the Equity Plan and
42
<PAGE> 44
options granted thereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
General Federal Tax Consequences. Under current federal laws, in general,
recipients of awards and grants of nonqualified stock options, stock
appreciation rights, restricted stock, deferred stock, dividend equivalents,
performance awards, and stock payments under the Equity Plan are taxable under
Section 83 of the Code upon their receipt of Common Stock or cash with respect
to such awards or grants and, subject to Section 162(m) of the Code, the Company
will be entitled to an income tax deduction with respect to the amounts taxable
to such recipients. Under Sections 421 and 422 of the Code, recipients of ISOs
are generally not taxable on their receipt of Common Stock upon their exercises
of ISOs if the ISOs and option stock are held for certain minimum holding
periods and, in such event, the Company is not entitled to income tax deductions
with respect to such exercises. Participants in the Equity Plan will be provided
with detailed information regarding the tax consequences relating to the various
types of awards and grants under the plan.
Section 162(m) Limitation. In general, under Section 162(m) of the Code
("Section 162(m)"), income tax deductions of publicly-held corporations may be
limited to the extent total compensation (including base salary, annual bonus,
stock option exercises and non-qualified benefits paid) for certain executive
officers exceeds $1 million (less the amount of any "excess parachute payments"
as defined in Section 280G of the Code) in any one year. However, under Section
162(m), the deduction limit does not apply to certain "performance-based
compensation" established by an independent compensation committee which is
adequately disclosed to, and approved by, stockholders. In particular, stock
options and SARs will satisfy the "performance-based compensation" exception if
the awards are made by a qualifying compensation committee, the plan sets the
maximum number of shares that can be granted to any person within a specified
period and the compensation is based solely on an increase in the stock price
after the grant date (i.e. the option exercise price is equal to or greater than
the fair market value of the stock subject to the award on the grant date).
Under a Section 162(m) transition rule for compensation plans of corporations
which are privately held and which become publicly held in an initial public
offering, the Equity Plan will not be subject to Section 162(m) until the
earlier of (i) the material modification of the Equity Plan, (ii) the issuance
of all employer stock and other compensation that has been allocated under the
Equity Plan, or (iii) the first meeting of stockholders at which directors are
to be elected that occurs after December 31, 1999 (the "Transition Date"). After
the Transition Date, rights or awards granted under the Equity Plan, other than
options and SARs, will not qualify as "performance-based compensation" for
purposes of Section 162(m) unless such rights or awards are granted or vest upon
preestablished objective performance goals, the material terms of which are
disclosed to and approved by the stockholders of the Company. Thus, the Company
expects that such other rights or awards under the Equity Plan will not
constitute "performance-based compensation" for purposes of Section 162(m).
The Company has attempted to structure the Equity Plan in such a manner
that, after the Transition Date, the remuneration attributable to stock options
and SARs granted thereunder may qualify as performance-based compensation which
will not be subject to the $1,000,000 limitation. The Company has not, however,
requested a ruling from the IRS or an opinion of counsel regarding this issue.
EMPLOYMENT AGREEMENT
The Company entered into an employment agreement, dated August 18, 1995,
with Karl Eller for a term of four years pursuant to which the Company agreed to
employ Mr. Eller as the Chairman of the Board of Directors and Chief Executive
Officer of the Company and its respective subsidiaries. Pursuant to the terms of
the agreement, the Company pays Mr. Eller an initial base salary of $400,000 per
year and granted him certain stock options (described above in "-- Executive
Officers' Stock Options"). Mr. Eller's initial base salary is increased annually
by the percentage increase in the Consumer Price Index, if any. In addition, Mr.
Eller may be granted bonus compensation at the
43
<PAGE> 45
discretion of the Board of Directors. Pursuant to the terms of the agreement,
Mr. Eller's employment is terminable by the Company at any time for "Cause." For
purposes of the agreement, "Cause" includes (i) willful misconduct or gross
negligence, (ii) commission of a crime involving moral turpitude, (iii) disloyal
or dishonest conduct that materially harms the Company or materially undermines
the confidence of the Board of Directors in Mr. Eller, or (iv) willful breach of
the agreement. Pursuant to the terms of the agreement, Mr. Eller may terminate
his employment for "Good Reason" by giving thirty (30) days' written notice. For
purposes of the agreement, "Good Reason" exists only if (i) Mr. Eller is removed
or not reappointed as the Company's Chief Executive Officer, unless such
termination is due to death or disability, (ii) Mr. Eller is assigned duties or
authority is withdrawn from Mr. Eller inconsistent with his authority or without
his consent, or (iii) the Company breaches any of its material obligations under
the agreement. If Mr. Eller terminates his employment for Good Reason or if the
Company terminates Mr. Eller's employment without Cause, Mr. Eller is entitled
to receive all compensation and benefits owed for the remainder of the term of
the agreement. The employment agreement obligates Mr. Eller for one year
following termination of his employment with the Company, to refrain from
engaging in competition with the Company and from influencing any person to give
up an employment or business relationship with the Company.
401(K) PLANS
The Company sponsors two 401(k) plans that allow contributions of 1% to 15%
of base compensation for eligible employees. Participation in these plans is
available to salaried employees and to certain groups of hourly employees.
Employees covered by collective bargaining units are not eligible. The Company
matches the employee's contribution, at its discretion, in amounts up to
approximately 15% of the employee's contribution. The Company also contributes,
at its discretion, an annual contribution based on the Company's results of
operations, subject to certain limitations under the Code. See Note 9 to the
consolidated financial statements of the Company.
PHANTOM EQUITY PLAN
The Company maintained a phantom equity plan (the "Phantom Equity Plan")
for certain key employees pursuant to which it granted to such employees an
aggregate of 90 units of phantom Common Stock (with each unit equivalent to
approximately shares of Common Stock). The units vest at the end of a
five-year period after their grant, subject to continued employment and
achievement of certain financial performance criteria, and are payable in cash
in an amount equal to the value at vesting of a number of shares of Common Stock
equivalent to the number of units. In October 1996 the Company determined that,
upon consummation of the Offering, it would not grant further units under the
Phantom Equity Plan, it would eliminate the performance criteria and, at
vesting, outstanding units would be paid with Common Stock.
AUDIT COMMITTEE; COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Board of Directors formed an Audit Committee in October 1996 which is
responsible for reviewing the Company's accounting controls and recommending to
the Board of Directors the engagement of the Company's outside auditors. The
members of the Company's Audit Committee are Messrs. Grousbeck and Niehaus and
Ms. Pineda.
During 1995, the Company's Board of Directors did not have a compensation
committee or other committee performing similar functions. All compensation
decisions concerning the Company's executive officers during 1995 were made by
the entire Board of Directors. The Board of Directors formed a Compensation
Committee in October 1996 which is responsible for reviewing and approving the
amount and type of consideration to be paid to senior management and for
administering the Company's stock option plans. See "-- Executive Officers'
Stock Options" and "-- Equity Plan." The members of the Company's Compensation
Committee are Messrs. Bunce, Kern and Reiss.
44
<PAGE> 46
LIMITATIONS ON LIABILITY; INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company has entered into, or intends to enter into, agreements to
provide indemnification for the Company's directors and executive officers.
These agreements, among other things, will indemnify the Company's directors and
executive officers for certain expenses (including attorney's fees), and all
losses, claims, liabilities, judgments, fines and settlement amounts incurred by
such person arising out of or in connection with such person's service as a
director or officer of the Company to the fullest extent permitted by applicable
law. The Company has also obtained director and officer liability insurance that
insures the Company's directors and officers against certain liabilities. In
addition, the Certificate of Incorporation limits the personal liability of
directors to the Company and its stockholders, and the Bylaws provide that the
Company shall indemnify the Company's directors and officers, in each case, to
the fullest extent permissible under Delaware General Corporation Law. See
"Description of Capital Stock -- Special Provisions of the Certificate of
Incorporation, Bylaws and Delaware Law."
45
<PAGE> 47
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock outstanding immediately prior to the
Offering and as adjusted to reflect the sale of Common Stock offered hereby by:
(i) each person known by the Company to own beneficially 5% or more of the
Common Stock; (ii) each director and executive officer of the Company identified
under "Management -- Executive Compensation"; (iii) each Selling Stockholder and
(iv) all directors and executive officers of the Company as a group. Except as
otherwise indicated, each stockholder listed below has informed the Company that
such stockholder has (i) sole voting and investment power with respect to such
stockholder's shares of stock, except to the extent that authority is shared by
spouses under applicable law, and (ii) record and beneficial ownership with
respect to such stockholder's shares of stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
PRIOR TO OFFERING(1) AFTER OFFERING(1)(2)
---------------------- NUMBER OF ----------------------
NAME AND ADDRESS OF BENEFICIAL NUMBER OF PERCENT SHARES NUMBER OF PERCENT
OWNER SHARES OF CLASS OFFERED SHARES OF CLASS
- ----------------------------------- --------- -------- --------- --------- --------
<S> <C> <C> <C> <C> <C>
Hellman & Friedman Capital
Partners III, L.P.
("Capital Partners")(3).......... 74.55%
H&F Orchard Partners III, L.P.
("Orchard")(3)................... 5.49
H&F International Partners III,
L.P.
("International")(3)............. 1.65
Loel Ranches, Inc. ("LRI")(4)(5)... 8.29
El Dorado Investment Company(6).... *
Steven G. Mihaylo(7)............... 1.13
Karl Eller(4)(5)(8)................ 15.67
Scott S. Eller(4).................. 4.51
Timothy J. Donmoyer(4)(8).......... 1.26
Paul J. Meyer(4)(8)................ *
John L. Bunce, Jr.(3)(9)........... *
H. Irving Grousbeck(10)............ *
Bruce T. Halle(11)................. *
F. Warren Hellman(3)............... 81.69
Arthur H. Kern(12)................. *
Joseph M. Niehaus(3)(9)............ *
Patricia Salas Pineda(13).......... *
Richard Reiss, Jr.(5)(8)(14)....... 1.36
All directors and executive
officers
as a group (12 persons).......... 99. %
</TABLE>
- ---------------
* Less than 1%.
(1) A person is deemed as of any date to have "beneficial ownership" of any
security that such person has a right to acquire within 60 days after such
date. Shares which each identified stockholder has the right to acquire
within 60 days of the date of the table set forth above are deemed to be
outstanding in calculating the percentage ownership of such stockholder,
but are not deemed to be outstanding as to any other person.
(2) For purposes of this table, information as to shares of Common Stock
assumes that (i) the persons in the table do not purchase shares in the
Offering and (ii) no exercise of the Underwriters' over-allotment option.
46
<PAGE> 48
(3) The address of such persons is One Maritime Plaza, Suite 1200, San
Francisco, CA 94111. Capital Partners, Orchard and International, and their
collective general partner, F. Warren Hellman, individually and as a
trustee of The Hellman Family Revocable Trust dated December 17, 1984 (the
"Hellman Trust"), and Tully M. Friedman, individually and as the trustee of
The Tully M. Friedman Revocable Trust UAD January 3, 1980 (the "Friedman
Trust"), may be deemed to constitute a "group" within the meaning of
Section 13(d)(3) of the Exchange Act. As a group, these individuals and
entities own directly , or %, of the outstanding shares of Common
Stock. Capital Partners, Orchard and International are entities indirectly
controlled by the Hellman Trust and the Friedman Trust. A trustee of the
Hellman Trust is F. Warren Hellman, and the trustee of the Friedman Trust
is Tully M. Friedman. Messrs. Hellman and Friedman, individually and as
trustees of the respective trusts, share voting and investment power with
respect to the shares of Common Stock held by Capital Partners, Orchard and
International, and, as a result, may be deemed to be the beneficial owner
of 100% of the shares of Common Stock held by those entities.
(4) The address of such persons is c/o Eller Media Company, 2850 East Camelback
Road, Suite 300, Phoenix, AZ 85016.
(5) Karl Eller indirectly exercises voting and investment power over
shares of Common Stock owned by LRI. Richard Reiss, Jr. has an exercisable
option to acquire of the shares of Common Stock held by LRI.
(6) The address of such entity is 400 East Van Buren, Suite 700, Phoenix, AZ
85004.
(7) The address of such person is P.O. Box 5350, Incline Village, NV 89450.
(8) Includes for Karl Eller, Timothy J. Donmoyer and Richard Reiss, Jr.
, , and shares, respectively, issuable under
options exercisable within 60 days. Of such number for Mr. Eller,
of such options have been assigned to other executive officers
and a director, subject to revesting in Mr. Eller upon the occurrence of
certain contingencies. Mr. Reiss' total includes shares which may be
acquired upon exercise of the LRI option described in Note 5.
(9) Messrs. Bunce and Niehaus, directors of the Company, serve as officers of
the ultimate corporate general partner of Capital Partners, Orchard and
International and may be deemed beneficial owners of certain shares owned
by those partnerships. Messrs. Bunce and Niehaus each disclaim beneficial
ownership of the shares of Common Stock held by such entities.
(10) The address of such person is c/o Stanford University, Graduate School of
Business Administration, Room L336, Stanford, CA 94305.
(11) The address of such person is c/o Discount Tire Company, 14631 North
Scottsdale Road, Scottsdale, AZ 85254.
(12) The address of such person is c/o American Media, 1940 Webster Street, San
Francisco, CA 94115.
(13) The address of such person is c/o 606 Stagecoach Court, Lafayette, CA
94549.
(14) The address of such person is c/o Cumberland Associates, 1114 Avenue of the
Americas, New York, NY 10036.
47
<PAGE> 49
DESCRIPTION OF CAPITAL STOCK
Upon consummation of the Offering, the Company's authorized capital stock
will consist of shares of Common Stock, $.01 par value per share, and
shares of preferred stock, $.01 par value per share ("Preferred
Stock"). The following summary of the Company's capital stock is qualified in
its entirety by reference to the Company's Restated Certificate of Incorporation
(the "Certificate of Incorporation") and Restated Bylaws (the "Bylaws"), each of
which is filed as an exhibit to the registration statement of which this
Prospectus is a part.
COMMON STOCK
Upon consummation of the Offering, the Company will be authorized to issue
shares of Common Stock. Following the Offering, shares of
Common Stock will be issued and outstanding (assuming no exercise of the
over-allotment option and excluding (i) shares of Common Stock
issuable upon the exercise of options outstanding on the date hereof, of which
will be immediately exercisable upon consummation of the Offering,
(ii) shares reserved for issuance pursuant to the Company's Equity
Plan, (iii) shares issuable pursuant to the Phantom Equity Plan and
(iv) shares of Common Stock issuable pursuant to the terms of a
convertible promissory note). See "Capitalization."
Holders of Common Stock are entitled to one vote per share on all matters
on which the holders of Common Stock are entitled to vote. Because holders of
Common Stock do not have cumulative voting rights and the Company has a
classified Board of Directors, the holders of a majority of the shares of Common
Stock voting for the election of directors can elect all of the members of the
Board of Directors standing for election at any particular meeting. The Common
Stock is not redeemable and has no conversion or preemptive rights. All of the
outstanding shares of Common Stock are, and all of the shares of Common Stock
sold in this Offering will be, when issued and paid for, fully paid and
nonassessable. In the event of the liquidation or dissolution of the Company,
the holders of Common Stock are entitled to share pro rata in any of the
corporate assets available for distribution to them. The Company may pay
dividends if, when and as declared by the Board of Directors from funds legally
available therefor, subject to the restrictions set forth in the Senior Credit
Facility. See "Dividend Policy."
PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more series. Subject to the provisions of the
Certificate of Incorporation and limitations prescribed by law, the Board of
Directors is expressly authorized to adopt resolutions to issue the shares, to
fix the number of shares and to change the number of shares constituting any
series, and to provide for or change the voting powers, designations,
preferences and relative, participating, optional or other special rights,
qualifications, limitations or restrictions thereof, including dividend rights
(including whether dividends are cumulative), dividend rates, terms of
redemption (including sinking fund provisions), redemption prices, conversion
rights and liquidation preferences of the shares constituting any series of the
Preferred Stock, in each case without any further action or vote by the
stockholders. The Company has no current plans to issue any additional shares of
Preferred Stock of any class or series.
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of Preferred Stock pursuant to the Board of Directors'
authority described above may adversely affect the rights of the holders of
Common Stock. For example, Preferred Stock issued by the Company may rank prior
to the Common Stock as to dividend rights, liquidation preference or both, may
have full or limited voting rights and may be convertible into shares of Common
Stock. Accordingly, the issuance of shares of Preferred Stock may
48
<PAGE> 50
discourage bids for the Common Stock or may otherwise adversely affect the
market price of the Common Stock.
SPECIAL PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW
Certificate of Incorporation and Bylaws. Certain provisions of the
Certificate of Incorporation and Bylaws as well as certain provisions of
Delaware law may be deemed to have an anti-takeover effect or may delay, defer
or prevent a tender offer or takeover attempt that a stockholder might consider
in such stockholder's best interest, including those attempts that might result
in a premium over the market price for the shares held by a stockholder. In
addition, the Certificate of Incorporation eliminates the ability of the
stockholders to act by written consent and consequently stockholders may only
act at meetings thereof. The Certificate of Incorporation also provides that a
special meeting of the Company's stockholders may only be called by certain
officers of the Company or by the Board of Directors; no such meeting may be
called by stockholders. Any amendment of the Bylaws and certain provisions of
the Certificate of Incorporation by stockholders will require the affirmative
vote of at least 66 2/3% of the shares of Common Stock then outstanding.
The Certificate of Incorporation provides that no director of the Company
shall be personally liable to the Company or its stockholders for monetary
damages for breach of duty as a director, except for liability (i) for any
breach of the director's duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or that involve intentional
misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the
Delaware General Corporation Law or (iv) for any transaction from which the
director derived an improper personal benefit. The effect of these provisions is
to eliminate the rights of the Company and its stockholders (through
stockholders' derivative suits on behalf of the Company) to recover monetary
damages against a director for breach of fiduciary duty as a director (including
breaches resulting from grossly negligent behavior), except in the situations
described above.
The Bylaws provide that the Company will indemnify its directors and
officers to the fullest extent permissible under Delaware General Corporation
Law. These indemnification provisions require the Company to indemnify such
persons against certain liabilities and expenses to which they may become
subject by reason of their service as a director or officer of the Company. The
provisions also set forth certain procedures, including the advancement of
expenses, that apply in the event of a claim for indemnification.
Delaware Anti-Takeover Law. Section 203 of the Delaware General
Corporation Law ("Section 203") generally provides that a person who, together
with affiliates and associates owns, or within three years did own, 15% or more
of the outstanding voting stock of a corporation (an "Interested Stockholder")
but less than 85% of such stock may not engage in certain business combinations
with the corporation for a period of three years after the date on which the
person became an Interested Stockholder unless (i) prior to such date, the
corporation's board of directors approved either the business combination or the
transaction in which the stockholder became an Interested Stockholder (as was
the case with respect to Capital Partners, Orchard and International) or (ii)
subsequent to such date, the business combination is approved by the
corporation's board of directors and authorized at a stockholders' meeting by a
vote of at least two-thirds of the corporation's outstanding voting stock not
owned by the Interested Stockholder. Section 203 defines the term "business
combination" to encompass a wide variety of transactions with or caused by an
Interested Stockholder, including mergers, asset sales, and other transactions
in which the Interested Stockholder receives or could receive a benefit on other
than a pro rata basis with other stockholders.
The provisions of Section 203, coupled with the Board's authority to issue
Preferred Stock without further stockholder action, could delay or frustrate the
removal of incumbent directors or a change in control of the Company. The
provisions also could discourage, impede or prevent a merger, tender offer or
proxy contest, even if such event would be favorable to the interests of
49
<PAGE> 51
stockholders. The Company's stockholders, by adopting an amendment to the
Certificate of Incorporation, may elect not to be governed by Section 203 which
election would be effective 12 months after such adoption. Neither the
Certificate of Incorporation nor the Bylaws exclude the Company from the
restrictions imposed by Section 203.
CLASSIFIED BOARD OF DIRECTORS
The Certificate of Incorporation classifies the Board of Directors into
three classes. The first class consists of three directors whose initial term
expires in 1997. The second class consists of three directors whose initial term
expires in 1998. The third class consists of three directors whose initial term
expires in 1999. At each annual meeting, the number of directors equal to the
number of directors in the class whose terms expire at the time of such meeting
shall be elected to hold office until the third succeeding annual meeting. As a
result of this classification of directors, no stockholder or group of
stockholders would be able to elect a majority of the Board of Directors at any
single meeting for the election of directors. In addition, the Delaware General
Corporation Law prohibits the removal of a director of a classified board
without cause. This could discourage a proxy contest for control of the Board of
Directors.
NOTICE PROVISIONS
The Bylaws provide that only business or proposals, including director
nominations, properly brought before an annual meeting of stockholders may be
conducted at such meeting. In order to bring business or a proposal before an
annual meeting, a stockholder is required to provide written notice to the
Company at least 60 days prior to the annual meeting which describes the
business or proposal to be brought before the annual meeting, the name and
address of the stockholder proposing the business, the class and number of
shares of stock held by such stockholder, and any material interest of the
stockholder in the business to be brought before the meeting. These procedures
may operate to limit the ability of stockholders to bring business before the
annual meeting, including with respect to the nomination of directors or
considering any transaction that could result in a change of control of the
Company.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is LaSalle National
Trust, N.A.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the Offering, there has been no public market for the Common Stock
of the Company. No prediction can be made as to the effect, if any, that market
sales of shares of Common Stock or the availability of shares of Common Stock
for sale will have on the market price prevailing from time to time.
Nevertheless, sales of substantial amounts of Common Stock of the Company in the
public market after the restrictions described below lapse could adversely
affect the prevailing market price of the Common Stock and the ability of the
Company to raise equity capital in the future.
Upon completion of the Offering, the Company will have outstanding
shares of Common Stock (excluding (i) shares of Common Stock issuable upon
the exercise of the Underwriters' over-allotment option, (ii) shares of
Common Stock issuable upon the exercise of options outstanding on the date
hereof, of which will be immediately exercisable upon consummation of the
Offering, (iii) shares reserved for issuance pursuant to the Company's
Equity Plan, (iv) shares issuable pursuant to the Phantom Equity Plan and
(v) shares of Common Stock issuable pursuant to the terms of a
convertible promissory note). See "Capitalization," "Description of Capital
Stock" and "Description of Indebtedness and Other Commitments -- Convertible
Promissory Note." Of these shares, the shares ( shares if the
Underwriters' over-allotment option is exercised in full) of Common Stock sold
in this Offering will be freely tradable without restriction under the
Securities Act except for any shares purchased by "affiliates,"
50
<PAGE> 52
as that term is defined in the Securities Act, of the Company. The remaining
shares are "restricted securities" within the meaning of Rule 144 adopted
under the Securities Act (the "Restricted Shares"). The Restricted Shares
generally may not be sold unless they are registered under the Securities Act or
are sold pursuant to an exemption from registration, such as the exemption
provided by Rule 144 under the Securities Act.
Certain of the Company's stockholders and all of its executive officers and
directors, with the power to dispose of a total of shares, have agreed
not to offer, sell or otherwise dispose of any shares of Common Stock for a
period of 180 days after the date of this Prospectus (the "Lock-up Period")
without the prior written consent of Alex. Brown & Sons Incorporated on behalf
of the Underwriters. See "Underwriting." Following the Lock-up Period, these
shares will not be eligible for sale in the public market without registration
unless such sales meet the conditions and restrictions of Rule 144 as described
below.
In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated), including an affiliate, who has beneficially owned
shares for a period of at least two years (as computed under Rule 144) is
entitled to sell, within any three-month period, a number of shares that does
not exceed the greater of (i) 1% of the then-outstanding shares of Common Stock
(approximately shares after giving effect to this Offering) and (ii)
the average weekly trading volume in the Company's Common Stock during the four
calendar weeks immediately preceding the date on which the notice of such sale
on Form 144 is filed with the Commission. Sales under Rule 144 are also subject
to certain provisions relating to notice and manner of sale and the availability
of current public information about the Company. In addition, a person (or
persons whose shares are aggregated) who has not been an affiliate of the
Company at any time during the 90 days immediately preceding a sale, and who has
beneficially owned the shares at least three years (as computed under Rule 144),
would be entitled to sell such shares under Rule 144(k) without regard to the
volume limitation and other conditions described above. The foregoing summary of
Rule 144 is not intended to be a complete description thereof. Approximately
outstanding shares of Common Stock will become eligible for sale in
August 1997, pursuant to Rule 144, subject to volume and manner of sale
restrictions described above.
The Company has reserved an aggregate of shares of Common Stock
for issuance pursuant to the Equity Plan. As of the date hereof, the Company has
issued options to purchase an aggregate of shares of Common Stock,
of which remain unexercised. The Company intends to file a
registration statement on Form S-8 under the Securities Act to register shares
to be issued upon exercise of such options and options granted pursuant to the
Equity Plan. To the extent not held by affiliates or subject to a lock-up
agreement, shares of Common Stock issued under the stock option plan after the
effective date of the registration statement covering the Equity Plan will be
available for sale in the public market without restriction. See "Management --
Executive Officers' Stock Options" and "Management -- Equity Plan."
51
<PAGE> 53
DESCRIPTION OF INDEBTEDNESS AND OTHER COMMITMENTS
SENIOR CREDIT FACILITY
The Senior Credit Facility was made available to the Company pursuant to
the Amended and Restated Credit Agreement dated as of November 19, 1996, as
amended (the "Credit Agreement"), among the Company and each of its
subsidiaries, the several banks and other financial institutions (collectively,
the "Lenders") from time to time parties thereto and The Chase Manhattan Bank
("Chase"), as administrative agent for the Lenders. The Senior Credit Facility
provides for revolving credit loans, letters of credit, and term loans.
Capitalized terms used below without definition shall have the meanings ascribed
to them in the Credit Agreement.
Revolving Credit Loans. The Senior Credit Facility provides for revolving
credit loans of up to $200 million, including a $15 million sublimit available
for issuance of letters of credit. The revolving credit loan commitment
automatically reduces to zero in quarterly installments commencing on September
30, 2000, and continuing until September 30, 2003. The Company may prepay
revolving credit loans in whole or in part, without premium or penalty, and it
may reborrow subject to the scheduled reductions and subject to compliance with
the terms of the Credit Agreement. LIBOR loans may only be paid at the end of
interest periods. See "Capitalization" and "Use of Proceeds."
Term Loans. The Senior Credit Facility provides for term loans designated
as "Tranche A" and "Tranche B" term loans. The Tranche A commitment is $200
million and the Tranche B commitment is $150 million. See "Capitalization." The
term loans are payable in quarterly installments commencing on September 30,
1997.
Letters of Credit. Chase has agreed to issue letters of credit under the
Senior Credit Facility for the account of the Company or its subsidiaries during
the revolving credit commitment period (which expires September 30, 2003) up to
the letter of credit commitment amount of $15 million (but only to the extent
there is available revolving credit commitment which is not being utilized for
revolving credit loans). The Company is required to pay fees in connection with
the letter of credit commitment and to reimburse Chase for amounts drawn under
any letter of credit.
General Terms. The revolving credit loans and term loans are subject to
the following terms:
Interest. With respect to revolving credit loans and term loans, the
interest rate charged on outstanding loans is payable quarterly in arrears in
the case of Base Rate Borrowings, or at the end of interest periods in the case
of LIBOR Borrowings. Interest will be calculated on the basis of the Base Rate
or LIBOR, as the case may be, plus a premium based on the Company's leverage
ratio, adjusted quarterly.
Security. Obligations under the Senior Credit Facility are secured by a
pledge of 100% of the stock of Eller and its subsidiaries, secured by all
personal property of the Company and its subsidiaries and guaranteed by the
Company and its subsidiaries.
Covenants. The Senior Credit Facility contains customary covenants,
including the following: (i) limitations on additional indebtedness of the
Company and its subsidiaries; (ii) limitations on mergers; (iii) limitations on
sale, lease or other disposition of stock of any subsidiary or of other assets,
provided that the foregoing restrictions do not apply to, among other things,
sales, leases or other dispositions of property in the ordinary course of
business; (iv) limitations on investments and capital expenditures; (v)
limitations on transactions with affiliates; (vi) prohibition on dividends and
other distributions by the Company (other than stock dividends); and (vii)
limitation on liens. The Senior Credit Facility also requires the Company to
meet certain financial tests, including a total leverage ratio, an interest
expense coverage ratio and a fixed charges coverage ratio, and to enter into
certain interest rate hedging agreements.
52
<PAGE> 54
Events of Default and Restrictions. The Senior Credit Facility contains
customary events of default, including the following: (i) failure to pay
principal or interest when due; (ii) breach of any covenant, representation or
warranty; (iii) cross-default provisions; (iv) certain events of bankruptcy,
insolvency or reorganization and (v) the levy of certain judgments against the
Company or any of its subsidiaries. The occurrence of an event of default
permits the Lenders to terminate the commitments and accelerate the indebtedness
under the Senior Credit Facility.
Mandatory Prepayments. The Senior Credit Facility requires prepayment of
the term loans equal to 50% of Excess Cash Flow, less voluntary prepayments of
the term loans, for each fiscal year starting with the fiscal year ended
December 31, 1998, to be paid in fiscal year 1999 and following years.
CONVERTIBLE PROMISSORY NOTE
In connection with the acquisition of display faces from ADCO (see
"Business -- Recent and Pending Acquisitions"), the Company will issue a 6.25%
secured convertible promissory note (the "ADCO Note") in the principal amount of
$9.5 million for the assets to be acquired (the "ADCO Assets"). Repayment of the
ADCO Note will be secured by a first lien on the ADCO Assets. The principal
under the ADCO Note will be due and payable on January 3, 2002.
The holder of the ADCO Note will be able to convert, at a price per share
of Common Stock equal to the Price to Public on the cover page of this
Prospectus, all or a portion of the ADCO Note into shares of Common Stock of the
Company at any time after January 3, 1998 and prior to maturity or earlier
redemption after January 2000 of the ADCO Note.
The holder of the ADCO Note will also be entitled to certain "piggy-back"
registration rights with respect to any shares of Common Stock acquired upon
conversion of the ADCO Note in the event the Company registers additional shares
of Common Stock.
53
<PAGE> 55
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their representatives,
Alex. Brown & Sons Incorporated, Bear, Stearns & Co. Inc., Donaldson, Lufkin &
Jenrette Securities Corporation and Furman Selz LLC (the "Representatives"),
have severally agreed to purchase from the Company and the Selling Stockholders,
the following respective number of shares of Common Stock at the initial public
offering price less the underwriting discounts and commissions set forth on the
cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER
OF
UNDERWRITER SHARES
-------------------------------------------------------------------------- -------
<S> <C>
Alex. Brown & Sons Incorporated...........................................
Bear, Stearns & Co. Inc...................................................
Donaldson, Lufkin & Jenrette Securities Corporation.......................
Furman Selz LLC...........................................................
Total...........................................................
======
</TABLE>
The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all shares of the Common Stock offered hereby if any
of such shares are purchased.
The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the initial public
offering price set forth on the cover page of this Prospectus and to certain
dealers at such price less a concession not in excess of $ per share.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $ per share to certain other dealers. After the initial
public offering, the offering price and other selling terms may be changed by
the Representatives.
The Company and the Selling Stockholders have granted to the Underwriters
an option, exercisable not later than 30 days after the date of this Prospectus,
to purchase up to additional shares of Common Stock at the initial
public offering price less the underwriting discounts and commissions set forth
on the cover page of this Prospectus. To the extent that the Underwriters
exercise such option, each of the Underwriters will have a firm commitment to
purchase approximately the same percentage thereof that the number of shares of
Common Stock to be purchased by it shown in the above table bears to ,
and the Company and the Selling Stockholders will be obligated, pursuant to the
option, to sell such shares to the Underwriters. The Underwriters may exercise
such option only to cover over-allotments made in connection with the sale of
Common Stock offered hereby. If purchased, the Underwriters will offer such
additional shares on the same terms as those on which the shares are
being offered.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act.
Certain of the Company's stockholders and all of its executive officers and
directors, with the power to dispose of a total of shares, have agreed
not to offer, sell or otherwise dispose of any shares of Common Stock for a
period of 180 days after the date of this Prospectus without the prior written
consent of Alex. Brown & Sons Incorporated on behalf of the Underwriters. See
"Principal and Selling Stockholders" and "Shares Eligible for Future Sale."
The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.
Prior to this Offering, there has been no public market for the Common
Stock of the Company. Consequently, the initial public offering price for the
Common Stock will be determined through
54
<PAGE> 56
negotiation among the Company, the Selling Stockholders and the Representatives.
Among the factors to be considered in such negotiations will be prevailing
market conditions, the results of operations of the Company in recent periods,
the market capitalizations and stages of development of other companies which
the Company and the Representatives believe to be comparable to the Company,
estimates of the business potential of the Company, the present state of the
Company's development and other factors deemed relevant.
CERTAIN LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered hereby
will be passed upon for the Company by Latham & Watkins, Los Angeles,
California. Piper & Marbury L.L.P., Baltimore, Maryland, will pass on certain
legal matters related to this Offering for the Underwriters.
EXPERTS
The consolidated financial statements of the Company as of December 31,
1995 and for the period from August 18, 1995 through December 31, 1995, together
with the consolidated financial statements of PMG and the combined financial
statements of EIC for the period from January 1, 1995 through August 17, 1995,
in this Prospectus have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their report with respect thereto and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
The consolidated financial statements of PMG as of December 31, 1994 and
for each of the two years then ended in this Prospectus have been so included in
reliance on the report of KPMG Peat Marwick LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
The combined financial statements of EIC as of and for the period ended
December 31, 1994 in this Prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto and are included herein in reliance upon the authority of said firm as
experts in giving said reports.
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement (which
term shall include all amendments thereto) on Form S-1 under the Securities Act,
with respect to the Common Stock offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the Commission.
Statements contained in this Prospectus as to the contents of any contract,
agreement or other document referred to herein are not necessarily complete.
With respect to each report or other information filed with the Commission
pursuant to the Exchange Act, and such contract, agreement or document filed as
an exhibit to the Registration Statement, reference is made to such exhibit for
a more complete description, and each such statement is deemed to be qualified
in all respects by such reference. The Registration Statement and reports and
other information filed by the Company may be inspected, without charge, at the
offices of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and
at its regional offices at Seven World Trade Center, New York, New York 10048,
and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
materials may be obtained form the public reference section of the Commission at
its Washington address upon payment of the prescribed fee. The
55
<PAGE> 57
Commission maintains a World Wide Web site that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission and the address of such site is
http://www.sec.gov.
The Company intends to distribute to the holders of its shares of Common
Stock annual reports containing consolidated financial statements audited by an
independent accountant and quarterly reports containing unaudited condensed
consolidated financial information for the first three quarters of each year.
56
<PAGE> 58
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ELLER MEDIA CORPORATION PRO FORMA
Unaudited Pro Forma Consolidated Statements of Operations........................... F-2
Notes to Unaudited Pro Forma Consolidated Statements of Operations.................. F-5
ELLER MEDIA CORPORATION
Report of Independent Public Accountants (Arthur Andersen LLP)...................... F-6
Consolidated Balance Sheets......................................................... F-7
Consolidated Statements of Operations............................................... F-8
Consolidated Statements of Stockholders' Equity..................................... F-9
Consolidated Statements of Cash Flows............................................... F-10
Notes to Consolidated Financial Statements.......................................... F-11
PMG HOLDINGS, INC.
Report of Independent Public Accountants (KPMG Peat Marwick LLP).................... F-20
Consolidated Balance Sheet.......................................................... F-21
Consolidated Statements of Operations............................................... F-22
Consolidated Statements of Changes in Stockholders' Deficit......................... F-23
Consolidated Statements of Cash Flows............................................... F-24
Notes to Consolidated Financial Statements.......................................... F-25
ELLER INVESTMENT COMPANY, INC.
Report of Independent Public Accountants (Arthur Andersen LLP)...................... F-33
Combined Balance Sheet.............................................................. F-34
Combined Statement of Operations.................................................... F-35
Combined Statement of Stockholders' Deficit......................................... F-36
Combined Statement of Cash Flows.................................................... F-37
Notes to Combined Financial Statements.............................................. F-38
</TABLE>
F-1
<PAGE> 59
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The following sets forth unaudited pro forma consolidated statements of
operations for the Company. The unaudited pro forma consolidated statements of
operations for the twelve and nine months ended December 31, 1995 and September
30, 1995 respectively give effect to the acquisition of PMG Holding, Inc. and
Subsidiaries ("PMG") and Eller Investment Company ("EIC") (the "Acquisitions")
as if they had occurred on January 1, 1995.
The unaudited pro forma consolidated statements of operations do not
purport to present the actual results of operations of the Company had the
Acquisitions taken place at the beginning of the year, nor are they necessarily
indicative of the results of operations that may be achieved in the future. The
unaudited pro forma consolidated statements of operations are based on certain
assumptions and adjustments described in the notes thereto and should be read in
conjunction therewith. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations," the consolidated financial statements of
the Company and the notes thereto, the consolidated financial statements of PMG
and the notes thereto, and the combined financial statements of EIC and the
notes thereto, included elsewhere in this Prospectus.
F-2
<PAGE> 60
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSORS
PERIOD FROM
JANUARY 1, 1995 TO ELLER MEDIA CORPORATION
AUGUST 17, 1995 PERIOD FROM
------------------ AUGUST 18, 1995 TO PRO FORMA
PMG EIC DECEMBER 31, 1995 ADJUSTMENTS PRO FORMA
-------- ------- ----------------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Gross revenues............ $141,778 $15,439 $92,183 $249,400
Net revenues.............. 123,615 13,719 80,678 218,012
Cost of sales............. 50,456 5,796 32,754 89,006
Selling, general and
administrative
expense................. 31,480 1,903 19,377 52,760
Depreciation and
amortization............ 22,769 2,148 14,468 21,404(1)
(29,776)(2)
2,246(3) 33,259
-------- ------- ------- --------
Operating income.......... 18,910 3,872 14,079 42,987
Interest expense.......... 27,629 3,240 13,616 22,926(4)
(30,869)(5) 36,542
Other expense, net........ 4,860 497 2,997 8,354
-------- ------- ------- --------
Income (loss) before
provision for income
taxes................... (13,579) 135 (2,534) (1,909)
Provision for (benefit
from) income taxes...... (3,858) -- -- 3,858(6) --
-------- ------- ------- --------
Net income (loss)......... $ (9,721) $ 135 $(2,534) $ (1,909)
======== ======= ======= ========
Per share............................................................................. $
========
Weighted average shares outstanding...................................................
========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statements of Operations.
F-3
<PAGE> 61
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSORS
PERIOD FROM
JANUARY 1, 1995 TO ELLER MEDIA CORPORATION
AUGUST 17, 1995 PERIOD FROM
------------------ AUGUST 18, 1995 TO PRO FORMA
PMG EIC SEPTEMBER 30, 1995 ADJUSTMENTS PRO FORMA
-------- ------- ----------------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
Gross revenues............ $141,778 $15,439 $27,839 $185,056
Net revenues.............. 123,615 13,719 24,330 161,664
Cost of sales............. 50,456 5,796 9,528 65,780
Selling, general and
administrative
expense................. 31,480 1,903 6,303 39,686
Depreciation and
amortization............ 22,769 2,148 4,016 21,404(1)
(29,776)(2)
2,246(3) 22,807
-------- ------- ------- --------
Operating income.......... 18,910 3,872 4,483 33,391
Interest expense.......... 27,629 3,240 4,620 22,926(4)
(30,869)(5) 27,546
Other expense, net........ 4,860 497 1,016 6,373
-------- ------- ------- --------
Income (loss) before
provision for income
taxes................... (13,579) 135 (1,153) (528)
Provision for (benefit
from) income taxes...... (3,858) -- -- 3,858(6)
--
-------- ------- ------- --------
Net income (loss)......... $ (9,721) $ 135 $(1,153) $ (528)
======== ======= ======= ========
Per share............................................................................. $
========
Weighted average shares outstanding...................................................
========
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statements of Operations.
F-4
<PAGE> 62
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
The following describe the adjustments to present the pro forma statements
of operations of the Company, for the twelve and nine months ended December 31,
1995 and September 30, 1995, respectively, as if the Acquisitions had occurred
on January 1, 1995:
<TABLE>
<S> <C> <C>
1. Record additional depreciation expense for the period from January
1, 1995 to August 17, 1995........................................ $ 21,404
2. Remove depreciation expense incurred by EIC and PMG from January 1,
1995 to August 17, 1995........................................... $(29,776)
3. Record additional amortization of goodwill for the period from
January 1, 1995 to August 17, 1995................................ $ 2,246
4. Record additional interest expense for the period from January 1,
1995 to August 17, 1995........................................... $ 22,926
5. Remove interest expense incurred by EIC and PMG from January 1, 1995
to August 17, 1995................................................ $(30,869)
6. Remove income tax benefit recorded by PMG........................... $ 3,858
</TABLE>
F-5
<PAGE> 63
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of
Eller Media Corporation:
We have audited the accompanying consolidated balance sheet of ELLER MEDIA
CORPORATION ("EMC") (a Delaware corporation), formerly EMC Group, Inc., and
subsidiaries as of December 31, 1995, and the related consolidated statements of
operations, stockholders' equity and cash flows for the period from inception
(August 18, 1995) to December 31, 1995. In addition, we have audited the
accompanying combined statement of operations of Eller Investment Company, Inc.
("EIC") and the accompanying consolidated statement of operations of PMG
Holdings, Inc. and subsidiaries ("PMG"), the predecessors of EMC, for the period
from January 1, 1995 to August 17, 1995. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 financial statements referred to above present fairly,
in all material respects, the financial position of Eller Media Corporation and
subsidiaries as of December 31, 1995, and the results of their operations and
their cash flows for the period from inception (August 18, 1995) to December 31,
1995, and the combined statement of operations of EIC and the consolidated
statement of operations of PMG for the period from January 1, 1995 to August 17,
1995, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Phoenix, Arizona
March 15, 1996.
F-6
<PAGE> 64
ELLER MEDIA CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PAR VALUE AND SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS:
Cash......................................................... $ 2,453 $ 2,948
Accounts receivable, net of allowance for doubtful accounts
of $2,274 and $2,399 at December 31, 1995 and September
30, 1996, respectively.................................... 30,510 36,556
Prepaid land leases and other assets......................... 10,077 11,898
-------- --------
Total current assets...................................... 43,040 51,402
PREPAID LAND LEASES AND OTHER, net of current portion.......... 4,593 3,651
PROPERTY AND EQUIPMENT, net (Note 4)........................... 448,345 465,309
DEFERRED LOAN FEES, net of accumulated amortization of $422 and
$1,363 at December 31, 1995 and September 30, 1996,
respectively (Note 5)........................................ 8,725 7,784
GOODWILL, net of accumulated amortization of $1,334 and $4,236
at December 31, 1995 and September 30, 1996, respectively.... 139,143 139,888
-------- --------
$643,846 $ 668,034
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable............................................. $ 5,930 $ 3,873
Accrued liabilities.......................................... 25,652 33,701
Current portion of long-term debt (Note 5)................... 10,176 19,955
Current portion of capitalized lease obligations (Note 6).... 1,039 1,126
Accrued interest............................................. 4,229 2,664
-------- --------
Total current liabilities................................. 47,026 61,319
LONG-TERM DEBT, net of current portion (Note 5)................ 394,336 396,253
CAPITALIZED LEASE OBLIGATIONS, net of current portion (Note
6)........................................................... 1,960 2,069
OTHER LIABILITIES.............................................. 11,399 12,377
COMMITMENTS AND CONTINGENCIES (Notes 9 and 10)
STOCKHOLDERS' EQUITY (Notes 2 and 7):
Preferred stock; $.01 par value; 2,000 shares authorized..... -- --
Class A common stock; $.01 par value; 10,000 shares
authorized, 1,916 and 1,917 shares issued and outstanding
at December 31, 1995 and September 30, 1996,
respectively.............................................. 1 1
Additional paid-in capital................................... 191,659 191,758
Retained earnings (deficit).................................. (2,534) 4,257
-------- --------
Total stockholders' equity................................ 189,126 196,016
-------- --------
$643,846 $ 668,034
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-7
<PAGE> 65
ELLER MEDIA CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PREDECESSORS
---------------------------
EIC PMG
JANUARY 1, JANUARY 1, AUGUST 18, NINE
1995 1995 1995 MONTHS ENDED
TO TO TO SEPTEMBER
AUGUST 17, AUGUST 17, DECEMBER 31, 30,
1995 1995 1995 1996
---------- ------------ ------------ ------------
(UNAUDITED)
<S> <C> <C> <C> <C>
GROSS REVENUES....................................... $ 15,439 $141,778 $ 92,183 $203,995
AGENCY COMMISSIONS................................... (1,720) (18,163) (11,505) (25,267)
------- -------- -------- --------
Net revenues................................ 13,719 123,615 80,678 178,728
OPERATING EXPENSES, excluding depreciation and
amortization:
Cost of sales...................................... 5,796 50,456 32,754 68,135
Selling, general and administrative expense........ 1,903 31,480 19,377 39,830
------- -------- -------- --------
OPERATING INCOME BEFORE DEPRECIATION AND
AMORTIZATION....................................... 6,020 41,679 28,547 70,763
DEPRECIATION AND
AMORTIZATION....................................... 2,148 22,769 14,468 29,372
------- -------- -------- --------
Operating income............................ 3,872 18,910 14,079 41,391
INTEREST EXPENSE..................................... 3,240 27,629 13,616 26,877
OTHER EXPENSE, net................................... 497 4,860 2,997 5,323
------- -------- -------- --------
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES...... 135 (13,579) (2,534) 9,191
(BENEFIT) PROVISION FOR INCOME TAXES................. -- (3,858) -- 2,400
------- -------- -------- --------
Net income (loss)........................... $ 135 $ (9,721) $ (2,534) $ 6,791
======= ======== ======== ========
NET INCOME (LOSS) PER SHARE....................................................... $ (1,154) $ 3,093
======== ========
WEIGHTED AVERAGE SHARES OUTSTANDING............................................... 2,195.42 2,195.42
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-8
<PAGE> 66
ELLER MEDIA CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS, EXCEPT SHARES)
<TABLE>
<CAPTION>
CLASS A
PREFERRED STOCK COMMON STOCK
------------------ --------------- ADDITIONAL RETAINED TOTAL
PREFERRED COMMON PAID-IN EARNINGS STOCKHOLDERS'
SHARES STOCK SHARES STOCK CAPITAL (DEFICIT) EQUITY
------ --------- ------ ------ -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE,
August 18, 1995 (inception)........ -- $-- -- $ -- $ -- $ -- $ --
Issuance of common stock......... -- -- 1,916 1 191,659 -- 191,660
Net loss......................... -- -- -- -- -- (2,534) (2,534)
----- ----- ----- ----- -------- -------- --------
BALANCE,
December 31, 1995................ -- -- 1,916 $ 1 $191,659 $ (2,534) $ 189,126
Issuance of common stock -- -- 1 -- 98 -- 99
(unaudited)....................
Net income (unaudited)........... -- -- -- -- -- 6,791 6,791
----- ----- ----- ----- -------- -------- --------
BALANCE,
September 30, 1996 (unaudited)... -- $-- 1,917 $ 1 $191,758 $ 4,257 $ 196,016
===== ===== ===== ===== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-9
<PAGE> 67
ELLER MEDIA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
EIC PMG NINE
JANUARY 1, JANUARY 1, AUGUST 18, MONTHS ENDED
1995 1995 1995 SEPTEMBER 30,
TO TO TO 1996
AUGUST 17, AUGUST 17, DECEMBER 31, -------------
1995 1995 1995
---------- ---------- ------------ (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).......................................... $ 135 $ (9,720) $ (2,534) $ 6,791
Adjustments to reconcile net income (loss) to net cash
provided by operating activities --
Depreciation and amortization.......................... 2,728 22,768 14,467 29,372
Loss on disposal of fixed assets....................... 4,860 2,928 4,564
Changes in assets and liabilities, net of effect of
acquisitions --
Accounts receivable, net................................. (54) (7,089) 1,453 (6,047)
Prepaid land leases and other assets..................... (210) 31,004 2,561 (4,049)
Accounts payable, accrued and other liabilities.......... (129) (5,172) (1,681) 5,406
------- -------- --------- --------
Net cash provided by operating activities........... 2,470 36,651 17,194 36,037
------- -------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment........................ (409) (8,218) (5,662) (48,151)
Proceeds from sale of fixed assets......................... -- 9,711 531 615
Purchase of PMG and EIC, net of cash acquired (Note 2)..... -- -- (520,441) --
------- -------- --------- --------
Net cash used in investing activities............... (409) 1,493 (525,572) (47,536)
------- -------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt................................. (1,175) (37,315) (12,300) (4,500)
Principal payments on capitalized lease obligations........ (176) (442) (431) (1,395)
Proceeds from issuance of common stock..................... 163,160 100
Proceeds from issuance of debt............................. 360,402 17,789
------- -------- --------- --------
Net cash provided by financing activities........... (1,351) (37,757) 510,831 11,994
------- -------- --------- --------
NET INCREASE IN CASH......................................... 709 387 2,453 495
CASH, beginning of period.................................... 491 -- -- 2,453
------- -------- --------- --------
CASH, end of period.......................................... $ 1,200 $ 387 $ 2,453 $ 2,948
======= ======== ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-10
<PAGE> 68
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION:
The accompanying consolidated financial statements include the accounts of
Eller Media Corporation (the "Company") and its subsidiaries Eller Investment
Co. ("EIC") and PMG Holdings, Inc. and subsidiaries ("PMG"). The Company is
engaged in the business of providing rental space on outdoor advertising
structures and production services for outdoor advertisements in major
metropolitan areas in the United States.
EIC and PMG were acquired by the Company on August 18, 1995 (the "Purchase
Date"). The Company's consolidated statement of operations and cash flows for
the year ended December 31, 1995 include the operations of the Company since its
inception (August 18, 1995) and the operations of EIC and PMG since the Purchase
Date. Accordingly, the accompanying financial statements for the period January
1, 1995 to August 17, 1995 of EIC and PMG (the "Predecessors"), and the Company
are not comparable in all material respects since those financial statements
report results of operations and cash flows for separate entities.
Interim Financial Information
The accompanying condensed interim financial statements have been prepared
by the Company without audit. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles. See Note 11 for a discussion of the Company's
Phantom Stock Plan adopted effective June 1, 1996. The accompanying interim
financial statements should be read in conjunction with the Company's historical
financial statements and notes.
The accompanying unaudited interim financial statements reflect, in the
opinion of management, all adjustments, which are of a normal and recurring
nature, necessary for a fair presentation of the financial position and results
of operations for the periods presented. The results of operations for the
interim periods are not necessarily indicative of the results for the entire
year.
(2) FORMATION OF THE COMPANY:
Acquisition of EIC, PMG and Initial Capitalization
On August 18, 1995, the Company was formed to acquire EIC and PMG. The
Company exchanged 284 shares of common stock for all the outstanding stock of
EIC in a transaction that was valued at approximately $28.5 million. Prior to
its acquisition by the Company, EIC was an outdoor advertising firm with
operations in Phoenix, Arizona, Atlanta, Georgia, and El Paso, Texas with annual
net revenues of approximately $22.0 million. The shares issued to the former
owners of EIC represent approximately 15% of the issued and outstanding stock of
the Company. Simultaneously, with the acquisition of EIC, the Company issued
1,632 shares of common stock (approximately 85% of the issued and outstanding
stock of the Company) in exchange for cash totaling approximately $163.1
million.
The acquisition of EIC was accounted for using the purchase method of
accounting. The purchase price of approximately $28.5 million was allocated to
assets and liabilities based on their estimated fair values as of the date of
acquisition. The cost in excess of fair values was approximately $32.4 million
and is recorded as goodwill in the accompanying consolidated balance sheets.
The Company, concurrent with its formation on August 18, 1995, executed a
stock purchase agreement with General Electric Capital Corporation to purchase
all of the stock of PMG for $519.2 million in cash. Prior to its acquisition by
EMC, PMG was an outdoor advertising firm with operations in several major cities
in the United States with annual net revenues of approximately $177.0 million.
This transaction was accounted for using the purchase method of accounting. The
purchase price was allocated to assets and liabilities based on their estimated
fair values as of the date of
F-11
<PAGE> 69
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
acquisition. The cost in excess of fair values was approximately $107.9 million
and is recorded as goodwill in the accompanying consolidated balance sheets.
The Chase Manhattan Bank, N.A., as an agent for a group of banks, provided
the Company with $440.0 million in senior secured facilities comprised of a
seven year $65.0 million revolving line of credit facility, a seven year $250.0
million term loan facility, and an eight-and-a-half year $125.0 million term
loan facility to finance a portion of the acquisition of PMG, to refinance
certain existing indebtedness, and to provide for general corporate purposes
(see Note 5).
Pro Forma Results of Operations
The following sets forth an unaudited pro forma consolidated statement of
operations for the Company. The unaudited pro forma consolidated statement of
operations for the twelve months ended December 31, 1995 gives effect to the
acquisitions of PMG and EIC as if they had occurred at January 1, 1995 (dollars
in thousands).
<TABLE>
<CAPTION>
(UNAUDITED)
JANUARY AUGUST PRO FORMA
1, 18, JANUARY 1,
1995 1995 1995
TO TO TO
AUGUST DECEMBER DECEMBER
17, 31, PRO FORMA 31,
1995 1995 ADJUSTMENTS 1995
-------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Gross Revenues............................... $157,217 $ 92,183 $ 249,400
Agency commissions and discounts............. (19,883) (11,505) (31,388)
-------- -------- ---------
Net revenues................................. 137,334 80,678 218,012
Operating Expenses:
Cost of sales.............................. 56,252 32,754 89,006
Selling, general and administrative
expense................................. 33,383 19,377 52,760
Depreciation and amortization................ 24,917 14,468 (6,126)(1) 33,259
-------- -------- ---------
Operating income............................. 22,782 14,079 42,987
Interest expense............................. 30,869 13,616 (7,943)(2) 36,542
Other expense, net........................... 5,357 2,997 8,354
-------- -------- ---------
Loss before provision of income taxes........ (13,444) (2,534) (1,909)
Benefit for income taxes..................... (3,858) -- 3,858(3) --
-------- -------- ---------
Net Loss..................................... $ (9,586) $ (2,534) $ (1,909)
======== ======== =========
</TABLE>
- ---------------
(1) Records the Company's amortization and depreciation for the period from
January 1, 1995 to August 17, 1995, net of depreciation expense incurred by
EIC and PMG from January 1, 1995 to August 17, 1995.
(2) Records the Company's interest expense for period from January 1, 1995 to
August 17, 1995, net of interest expense incurred by EIC and PMG from
January 1, 1995 to August 17, 1995.
(3) Removes income tax benefit recorded by PMG.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash and Cash Equivalents
The Company considers all highly liquid investments with an initial
maturity of three months or less to be cash equivalents.
F-12
<PAGE> 70
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The carrying values of cash and cash equivalents, receivables, accounts
payable and accrued expenses approximate fair values due to the short-term
maturities of these instruments.
Revenue Recognition
The Company provides outdoor advertising services under the terms of
contracts covering periods up to 36 months, which are generally billed monthly.
Revenues for outdoor advertising space rental are recognized ratably over the
contract terms. Revenues from design, production and certain other services are
recognized as the services are provided. All costs are recognized in the period
in which the related services are provided.
Prepaid Land Leases
Prepaid land leases represent amounts paid in advance for leases of land
occupied by outdoor advertising structures. Prepaid land leases are amortized on
a straight line basis over the term of the related lease period.
Property and Equipment
<TABLE>
<S> <C>
Property and equipment are recorded at cost. Depreciation is computed on
a straight-line basis over the following useful lives:
Buildings.......................................................... 40 years
Advertising displays and structures................................ 5-16 years
Machinery and equipment............................................ 3-5 years
Vehicles........................................................... 3-4 years
Furniture, fixtures, computers and equipment....................... 3 years
</TABLE>
Goodwill
Goodwill represents the excess of consideration paid over the fair market
values of identifiable net assets acquired. Goodwill is amortized on a
straight-line basis over 40 years. Goodwill and other long-lived assets are
periodically evaluated for impairment in accordance with the provisions of
Statement of Financial Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.
Supplemental Cash Flow Information
Cash paid for interest for the period January 1, 1995 through August 17,
1995 was approximately $2,155,072 and $161,960 for EIC and PMG, respectively. In
addition, capital lease obligations incurred by PMG during that period was
approximately $678,304. Cash paid for interest for the period August 18, 1995
through December 31, 1995, was approximately $9.7 million. In addition, capital
lease obligations incurred by the Company during that period totaled
approximately $504,000 for various equipment. In connection with the acquisition
of EIC, the Company issued 284 shares of stock in exchange for all of the
outstanding stock of EIC, which was valued at approximately $28.5 million. The
Company also obtained financing in connection with the acquisition of PMG, and
refinanced approximately $44.6 million of existing debt, warrants and preferred
stock with a portion of the proceeds. In addition, approximately $9.1 million of
the proceeds were used to pay loan costs related to the financing.
F-13
<PAGE> 71
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles necessarily 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 reported
period. Actual amounts may differ from these estimates.
Recently Issued Accounting Standards
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 121 ("SFAS 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. The implementation of SFAS 121 did not materially affect the
Company's financial position.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 123 ("SFAS 123"), Accounting For Stock-Based
Compensation, which allows a company to record stock-based compensation on the
basis of fair value. Under the provisions of SFAS 123, the Company is
encouraged, but not required, to measure compensation costs related to its
employee stock compensation under the fair value method. If the Company elects
not to recognize compensation expense under the method, it is required to
disclose the pro forma effects based on the SFAS 123 methodology. The Company
will disclose the pro forma effects of SFAS 123 beginning in its December 31,
1996 financial statements.
(4) PROPERTY AND EQUIPMENT:
Property and equipment consist of the following at December 31, 1995
(dollars in thousands):
<TABLE>
<S> <C>
Advertising structures................................................... $412,110
Land................................................................ 7,676
Buildings........................................................... 16,917
Vehicles............................................................ 6,891
Machinery and equipment............................................. 4,429
Furniture and fixtures.............................................. 6,187
Construction-in-process............................................. 6,847
------------
461,057
Less: accumulated depreciation...................................... 12,712
------------
$448,345
============
</TABLE>
Included in other expense are losses from the disposition (takedowns) of
certain advertising structures. Total losses on takedowns for the Company for
the period August 18, 1995 through December 31, 1995, were $2.9 million. In
addition, total losses on takedowns for PMG for the period January 1, 1995
through August 17, 1995, were approximately $4.9 million.
(5) LONG-TERM DEBT:
In connection with the financing discussed in Note 2, on August 18, 1995,
the Company entered into A and B Tranche Notes with a group of banks for whom
the Chase Manhattan Bank, N.A. acted as agent ("Agent"). The Tranche A Note
matures in June 2002, with interest payable quarterly, at the
F-14
<PAGE> 72
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Agent's prime rate plus 1.25% (9.75% at December 31, 1995), or at LIBOR plus
2.50% (blended rate of 8.28% at December 31, 1995). The Tranche B Note, matures
in December 2003, with interest payable quarterly, at the Lender's prime rate
plus 2.00% (10.50% at December 31, 1995), or at LIBOR plus 3.25% (blended rate
of 9.13% at December 31, 1995). Use of the prime or LIBOR based rates is at the
Company's option, selected periodically, in advance. Borrowings may be used for
general corporate purposes, including working capital requirements, acquisitions
and refinancing existing indebtedness.
The Company also entered into a separate credit facility, due June 2002,
with the same Agent and group of banks, which consists of a revolving line of
credit, providing for up to $65.0 million in borrowings that may be used for
general corporate purposes, including working capital requirements, acquisitions
and refinancing existing indebtedness. Interest is payable quarterly at the
Agent's prime rate plus 1.25% (9.75% at December 31, 1995), or at LIBOR plus
2.50% (blended rate of 8.29% at December 31, 1995).
As part of the credit facility the Company may issue letters of credit to
be used for various vendor contracts. As of December 31, 1995, total letters of
credit outstanding were approximately $11.7 million.
As a result of the financings, the Company has entered into interest rate
swap, interest rate collar and interest rate cap agreements to reduce the impact
of changes in interest rates on its floating rate long-term debt. At December
31, 1995, the Company had outstanding agreements with various institutions,
having a total notional principal amount of $303.4 million. Those agreements
effectively change the Company's interest rate exposure on a portion of its
$402.0 million floating rate notes to a fixed rate ceiling of up to
approximately 12.50%, and mature through the year 1999. As a result of the
interest rate agreements and interest rates on debt not protected by such
agreements, the Company incurred interest cost at an average rate of
approximately 8.80% for the period August 18, 1995 through December 31, 1995.
The Company is exposed to credit loss in the event of nonperformance by the
other parties to the interest rate agreements (various banks). However,
management believes that, based on the high credit worthiness of these
counterparties, nonperformance is unlikely.
The fair value of interest rate swaps, caps and collars (used for hedging
purposes) are based on quoted market prices, where available. If quoted market
prices are not available, fair values are based on quoted market prices of
comparable instruments. The fair value of these instruments was approximately
$630,000 at December 31, 1995.
The financings restrict the Company and its subsidiaries from, among other
things (i) incurring additional indebtedness, (ii) creating liens, (iii) paying
dividends (other than dividends paid to the Company by its subsidiaries), and
(iv) permitting any part of the Company's business to be sold, leased or
conveyed to an unrelated party. The financings also restrict the Company's
ability to make capital expenditures and investments, and require that certain
financial ratios be met.
The Company has granted a security interest in substantially all of its
assets to the Agent in connection with the financings.
As part of the financings the Company paid approximately $9.1 million in
loan costs, which are being amortized on a straight-line basis over the maturity
period of the financings.
F-15
<PAGE> 73
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Long-term debt consists of the following at December 31, 1995 (dollars in
thousands):
<TABLE>
<S> <C>
Tranche A term loan notes................................................ $250,000
Tranche B term loan notes................................................ 125,000
Revolving line of credit................................................. 27,000
Various notes payable, bearing interest from 6% to 8.5%, maturing through
July 2000; partially secured by certain assets of the
Company................................................................ 2,512
------------
404,512
Less: current maturities................................................. 10,176
------------
$394,336
============
</TABLE>
The carrying amount of the long-term debt is estimated to approximate fair
value as the actual interest rates are consistent with rates estimated to be
currently available for debt of similar terms and remaining maturities.
Aggregate principal payments on long-term debt for the years ending
December 31 are as follows (dollars in thousands):
<TABLE>
<S> <C>
1996..................................................................... $ 10,176
1997..................................................................... 20,000
1998..................................................................... 50,565
1999..................................................................... 51,500
2000..................................................................... 60,272
Thereafter............................................................... 212,000
------------
$404,511
============
</TABLE>
(6) CAPITALIZED LEASE OBLIGATIONS:
The Company leases certain equipment under capital leases. As such, the
equipment has been capitalized and is being depreciated over the lease term or
the estimated useful life of the equipment, in accordance with Statement of
Financial Accounting Standards No. 13, Accounting for Leases.
Future minimum lease payments under capitalized lease obligations for the
years ending December 31 are as follows (dollars in thousands):
<TABLE>
<S> <C>
1996...................................................................... $ 1,242
1997...................................................................... 1,026
1998...................................................................... 712
1999...................................................................... 269
2000...................................................................... 112
-----------
Total minimum lease payments.............................................. 3,361
Less: amount representing interest (at rates ranging from 6.9% to
12.5%).................................................................. (363)
-----------
Present value of minimum lease payments................................... 2,998
Less: current portion..................................................... (1,039)
-----------
$ 1,960
===========
</TABLE>
F-16
<PAGE> 74
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(7) STOCK OPTIONS:
As of December 31, 1995 the Company has granted to certain key employees
non-qualified options to purchase 121.098 shares of Common Stock at an exercise
price of $100,000 per share, which approximated fair value at the date of grant.
These options are subject to various vesting provisions through 1999 and expire
in 2002. The Company has also granted Performance Options to a key employee to
purchase 89.614 shares of Common Stock which also have an exercise price of
$100,000 per share and expire in 2002. The Performance Options, however, become
exercisable only when certain performance conditions relating to investor rate
of return are met. As of December 31, 1995, none of the performance conditions
have been met.
(8) INCOME TAXES:
The Company computes its taxes in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS No. 109"), Accounting for Income Taxes.
Deferred income taxes are provided for differences between results of operations
for financial reporting purposes and income tax purposes.
The components of net deferred taxes as of December 31, 1995 were as
follows (dollars in thousands):
<TABLE>
<S> <C>
Deferred Tax Asset
Depreciation........................................................ $ 931
Allowance for Doubtful Accounts..................................... 38
Restricted Covenant................................................. 36
Prepaid License..................................................... 39
Goodwill Amortization............................................... 162
NOL Carryover....................................................... 977
Noncompetes......................................................... 8
Other, Net.......................................................... 249
------
Subtotal....................................................... $ 2,440
------
Deferred Tax Liability
Deferred Loan Costs................................................. 955
Other............................................................... 8
------
Subtotal....................................................... (963)
------
Valuation Allowance................................................... (1,477)
------
Net Deferred Tax Asset................................................ $ --
======
</TABLE>
F-17
<PAGE> 75
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate to income before income taxes. The sources
and tax effects of the differences for the period from August 18, 1995 to
December 31, 1995 were as follows (dollars in thousands):
<TABLE>
<S> <C>
Federal Income Tax
Provision at statutory rate........................................... (855)
State taxes, net of federal benefit..................................... (122)
Net Operating Loss Carryover............................................ (83)
Amortization of nondeductible goodwill.................................. 244
Other, net.............................................................. (661)
Valuation Allowance..................................................... 1,477
-----
Provision for income taxes.............................................. $ --
=====
</TABLE>
(9) RETIREMENT PLANS:
The Company has two defined benefit plans covering substantially all union
employees in four of its branches. Benefits provided by these plans are based
primarily on years of service. Assets are invested in insurance deposit annuity
contracts. As of December 31, 1994 (the most recent data available), the total
projected benefit obligation was approximately $853,000, and the fair value of
the plans' assets was approximately $795,000.
The Company also sponsors two 401(k) plans that allow contributions of 1%
to 15% of base compensation for eligible employees. Participation in these plans
is available to salaried employees and to certain groups of hourly employees.
Employees covered by collective bargaining units are not eligible. The Company
matches the employee contribution, at its discretion, in amounts up to
approximately 15% of the employee's contribution. The Company also contributes,
at its discretion, an annual contribution based on the Company's year end
results up to certain IRS limits.
The Company made payments to the 401(k) and defined benefit plans in the
sum of $548,000 for the period August 18, 1995 through December 31, 1995.
(10) COMMITMENTS AND CONTINGENCIES:
In the normal course of business, the Company is subject to certain
administrative proceedings and litigation. In management's opinion, the outcome
of such matters will not materially affect the financial position or results of
operations of the Company.
In various areas in which the Company operates, outdoor advertising is the
object of restrictive and, in some cases, prohibitive zoning and other
regulatory provisions, either enacted or proposed. The impact to the Company of
loss of displays due to governmental action has been somewhat mitigated by
federal and state laws mandating compensation for such loss and constitutional
restraints. Although the Company cannot predict the outcome of existing
litigation or the enactment of zoning and other regulatory provisions concerning
outdoor advertising, the Company, to date, has incurred no significant losses
from the removal of outdoor advertising structures resulting from litigation or
governmental enactments without just compensation. The Company leases its
offices, paint shop facilities and the majority of the land occupied by its
advertising structures under operating lease agreements. Rent expense under
operating leases of approximately $17.9 million was recorded for the period from
August 18, 1995 through December 31, 1995. In addition, rent expense under
operating leases for the period January 1, 1995 through August 17, 1995, of
approximately $3.1 and $26.7 million were recorded for EIC and PMG,
respectively. Future
F-18
<PAGE> 76
ELLER MEDIA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
minimum lease payments under these building and billboard operating leases for
the years ended December 31 are expected to be as follows (dollars in
thousands):
<TABLE>
<S> <C>
1996..................................................................... $ 35,824
1997..................................................................... 35,642
1998..................................................................... 35,165
1999..................................................................... 34,517
2000..................................................................... 33,251
------------
$174,399
============
</TABLE>
(11) SUBSEQUENT EVENTS (UNAUDITED):
The Company expects to complete an initial public offering (the "IPO") of
its Common Stock in the first quarter of 1997.
The Company established a phantom stock plan, effective June 1, 1996, for
certain key employees pursuant to which it granted to such employees an
aggregate of 90 units of phantom Common Stock equivalent to 8.62 shares of
Common Stock. The units vest at the end of a five year period after their grant
date, subject to continued employment and achievement of certain financial
performance criteria, and are payable in cash in an amount equal to the value at
vesting of the number of shares of Common Stock equivalent to the number of
units. In October 1996 the Company determined that, upon consummation of the
IPO, it would not grant further units under the plan, it would eliminate the
performance criteria and, at vesting, the outstanding units would be paid with
Common Stock.
In November 1996, the Company refinanced its $440.0 million credit facility
used to fund the August 1995 acquisition of PMG and subsequent acquisitions of
display faces. The original facility was increased to $550.0 million, comprised
of (i) a $200.0 million revolving credit facility, (ii) a $200.0 million seven
year term loan and (iii) a $150.0 million eight year term loan. In connection
with the consummation of this refinancing, the Company wrote-off the remaining
deferred loan fees included in the accompanying balance sheet in November 1996.
In the fourth quarter of 1996, the Company expects to record a
non-recurring significant non-cash compensation expense in connection with the
expected acceleration of vesting of certain Performance Options and annual
non-cash compensation expenses related to expected modifications to its Phantom
Stock Plan.
F-19
<PAGE> 77
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
PMG Holdings, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheet of PMG
HOLDINGS, INC. AND SUBSIDIARIES as of December 31, 1994, and the related
consolidated statements of operations, changes in stockholders' deficit and cash
flows for each of the years in the two year period then ended. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these 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 PMG
Holdings, Inc. and subsidiaries as of December 31, 1994, and the results of
their operations and their cash flows for each of the years in the two year
period then ended in conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
April 27, 1995.
F-20
<PAGE> 78
PMG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Accounts receivable:
Trade, net of allowance for doubtful accounts of $1,980..................... $ 27,210
Other.......................................................................... 880
Prepaid expenses............................................................... 7,709
Other current assets........................................................... 807
--------
Total current assets................................................... 36,606
--------
PROPERTY, PLANT AND EQUIPMENT:
Advertising structures......................................................... 396,544
Site and building leases....................................................... 114,658
Furniture, fixtures and equipment.............................................. 15,893
Yard stores and work-in-process................................................ 5,366
Land........................................................................... 6,689
Buildings and improvements..................................................... 3,218
--------
542,368
LESS:
Accumulated depreciation....................................................... 74,932
Reserve for structure takedown (Note 3)........................................ 24,453
--------
Net property, plant and equipment...................................... 442,983
DEFERRED TAX ASSET (Note 7)...................................................... 29,622
OTHER ASSETS..................................................................... 3,813
--------
$513,024
========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable............................................................... $ 5,664
Accrued expenses............................................................... 21,363
Other current liabilities...................................................... 494
Current portion of long-term debt (Note 4)..................................... 1,387
--------
Total current liabilities.............................................. 28,908
LONG-TERM DEBT (Note 4).......................................................... 3,231
NOTE PAYABLE (Note 4)............................................................ 557,422
GECC INTERCOMPANY ACCOUNT........................................................ (9,188)
ACCRUED LIABILITIES.............................................................. 620
--------
Total liabilities...................................................... 580,993
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' DEFICIT (Note 1):
Common stock................................................................... --
Preferred stock................................................................ 2
Additional paid-in capital..................................................... 248
Accumulated deficit............................................................ (68,219)
--------
Total stockholders' deficit............................................ (67,969)
--------
$513,024
========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-21
<PAGE> 79
PMG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1993 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994
-------- --------
<S> <C> <C>
REVENUE:
Gross revenue...................................................... $187,003 $203,065
Less commissions and continuity discounts.......................... 26,181 25,790
-------- --------
Net revenue................................................ 160,822 177,275
-------- --------
OTHER INCOME, NET.................................................... 38 7,064
COSTS AND EXPENSES:
Operating.......................................................... 73,163 75,427
Selling, general and administrative................................ 43,262 45,859
Depreciation and amortization...................................... 42,756 41,733
Interest expense................................................... 45,695 50,325
-------- --------
Total costs and expenses................................... 204,876 213,344
-------- --------
LOSS BEFORE TAXES.................................................. (44,016) (29,005)
TAX BENEFIT (Note 7)............................................... 27,015 9,950
-------- --------
Net loss................................................... $(17,001) $(19,055)
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-22
<PAGE> 80
PMG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
YEARS ENDED DECEMBER 31, 1993 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PREFERRED PAID-IN ACCUMULATED
STOCK STOCK CAPITAL DEFICIT TOTAL
------ --------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1993..... $ 8 $ 2 $340 $ (32,052) $(31,702)
Preferred dividend paid........ -- -- -- (10) (10)
Net loss....................... -- -- -- (17,001) (17,001)
-
--- ---- -------- --------
Balance at December 31, 1993... 8 2 340 (49,063) (48,713)
Merger with New PMG Group,
Inc.......................... (8) -- (92) (101) (201)
Net loss....................... -- -- -- (19,055) (19,055)
-
--- ---- -------- --------
Balance at December 31, 1994... $ -- $ 2 $248 $ (68,219) $(67,969)
=== = ==== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-23
<PAGE> 81
PMG HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993 AND 1994
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
1993 1994
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss........................................................... $(17,001) $(19,055)
Adjustments to reconcile net loss to net cash provided by operating
activities --
Depreciation and amortization................................... 42,756 41,733
Provision for doubtful accounts................................. 431 1,035
Gain on disposition of assets................................... (38) (2,264)
Interest capitalized............................................ 176 214
Changes in assets and liabilities --
Increase in net accounts receivable, trade...................... (6,467) (1,924)
Decrease (increase) in other receivables........................ (7,276) 6,908
(Increase) decrease in prepaid expenses......................... 553 (1,885)
Decrease (increase) in other assets............................. (1,863) 3,146
Decrease in deferred tax assets................................. 22,848 8,497
Increase in accounts payable.................................... 199 4,112
(Decrease) increase in accrued expenses......................... 285 (5,135)
Increase (decrease) in other liabilities........................ (559) 382
-------- --------
Net cash provided by operating activities.................. 34,044 35,764
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment................ 1,000 12,783
Purchase of property, plant and equipment.......................... (6,494) (10,124)
Acquisition of outdoor entities.................................... (14,711) (11,449)
-------- --------
Net cash used for investing activities..................... (20,205) (8,790)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net change in GECC intercompany account............................ (36,130) 1,808
Net change in note payable to GECC................................. 20,454 (27,212)
Repayment of debt and capital leases............................... (818) (1,369)
Repurchase of common stock......................................... -- (201)
-------- --------
Net cash used in financing activities...................... (16,494) (26,974)
-------- --------
Net decrease in cash................................................. (2,655) --
Cash at beginning of year............................................ 2,655 --
-------- --------
Cash at end of year.................................................. $ -- $ --
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for interest to third parties............ $ 194 $ 99
======== ========
Cash paid during the year for interest to GECC on motor vehicle
leases.......................................................... $ 189 $ 238
======== ========
Cash paid (received) during the year for taxes to (from) third
parties......................................................... $ 18,399 $ (7,427)
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-24
<PAGE> 82
PMG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
(1) ORGANIZATION AND DESCRIPTION OF BUSINESS:
PMG Holdings, Inc. and subsidiaries (the "Company") is a wholly-owned
subsidiary of General Electric Capital Corporation ("GECC"). The Company's
primary operating subsidiary is Patrick Media Group, Inc. ("Group").
The Company entered into the PMG Agreement and Plan of Restructuring on
March 28, 1991 (the "Restructuring Agreement") with GECC and other stock and
noteholders. Pursuant to the Restructuring Agreement, GECC received 1 share of
new Class C common stock of the Company (having supermajority voting power) and
warrants to purchase (for a nominal exercise price) additional shares of Class C
common stock representing 75% of the equity of the Company.
The Company continued to be in default on its debt obligations to GECC
under the Restructuring Agreement and on September 23, 1992, GECC began a series
of recapitalizations whereby it first exercised its warrants and acquired a
direct equity interest of approximately 79% in the Company. After exercising its
warrants, GECC held all of the 1,616,001 issued shares of the Class C common
stock and 107,733 shares of the Class B common stock of the Company. The
remaining 323,200 shares of Class B common stock were held by various third
party investors. Additionally, Group assumed the debt and other obligations owed
to GECC by the Company, which obligations were then guaranteed by the Company,
in a taxable exchange for the discharge of certain intercompany notes between
Group and the Company. GECC then acquired 2,500 shares of preferred stock (par
value $1.00) issued by Group for $250.
The transaction was accounted for as a purchase as of September 30, 1992.
Property, plant and equipment was recorded at its net fair market value of
$520,896 based upon an independent appraisal. All other assets were stated at
their carrying value. GECC increased its direct equity interest in the Company
to 81% in January 1993.
On September 28, 1994, the Company was again recapitalized in a non-taxable
transaction by merging with New PMG Group, Inc., a wholly-owned subsidiary of
GECC, pursuant to an Agreement and Plan of Merger dated September 28, 1994 (the
"Merger Agreement"). Pursuant to the Merger Agreement: (i) each of the 430,933
outstanding shares of Class B common stock of the Company were converted into
the right to receive $0.46 per share, and subsequently canceled and retired;
(ii) all of the 100 outstanding shares of common stock issued by New PMG Group,
Inc. held by GECC, were converted into 100 shares of common stock of the
Company; and (iii) the issued and outstanding shares of Class C common stock of
the Company, all of which were owned by GECC, were canceled and retired. The
Company was the surviving entity in the merger.
Also pursuant to the Merger Agreement, the capitalization of the Company
was amended such that the total authorized capital of the Company at December
31, 1994 is 1,000 shares of common stock with par value of $0.01 (100 shares
issued and held by GECC), and 1,000 shares of preferred stock with par value of
$1.00 (all unissued).
On March 1, 1995, the Company, Group and GECC entered into the
Recapitalization Loan Amendment (the "Recapitalization") to further the
recapitalization of the Company. Prior to the Recapitalization, Group's issued
stock consisted of 1,000 shares of common stock (par value $1.00) and 2,500
shares of preferred stock (par value $1.00). Pursuant to the Recapitalization,
the Company surrendered 991 shares of common stock in Group to Group which were
subsequently canceled, and GECC contributed all of the 2,500 shares of preferred
stock in Group together with approximately $190,000 of Group's outstanding debt
obligations, to Group in exchange for 991 shares of common stock issued by Group
in a non-taxable transaction. The 2,500 shares of preferred stock in
F-25
<PAGE> 83
PMG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Group were also canceled. The debt obligation of Group to GECC as of March 1,
1995 was approximately $375,000 after giving effect to the Recapitalization
which continues to be in default.
As of December 31, 1994, the Company had issued outstanding warrants to
purchase 1,280 shares of Class B common stock, all of which were held by one
employee as discussed in note 11.
On March 10, 1995, GECC purchased pursuant to a foreclosure sale, all of
the outstanding warrants from the employee, at which time the warrants were
returned to the Company and deemed canceled.
Description of the Business
The Company provides outdoor advertising displays primarily to advertisers
in major metropolitan areas in the United States.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Presentation
The accompanying consolidated financial statements of the Company include
the accounts and results of operations of the Company and its wholly owned
subsidiaries, and Target Media Group LLP, a partnership in which the Company
indirectly holds a 83.127% interest. All significant intercompany transactions
have been eliminated.
Under the terms of the partnership agreement, all income will be allocated
based upon ownership percentage while any losses will accrue only to PMG Target
Media Holdings, Inc., a wholly owned subsidiary of the Company and the general
partner of Target Media Group LLP.
Revenue
Consistent with industry practice, the portion of December billings
pertaining to January space sales has been recognized in operating income of
December.
Deferred revenue is recorded for the fair value of assets received in
non-monetary transactions. Revenue is recognized on a monthly basis over the
showing period.
Property, Plant and Equipment
Property, plant and equipment is carried at allocated cost. As discussed in
note 1, property, plant and equipment in place at September 30, 1992 was fair
valued and a new cost basis was established. The fair value for site leases was
computed by valuing the differential between the site lease rentals and the
corresponding fair market rental over the estimated lease term including
expected renewals. Depreciation is provided on the straight-line method over the
estimated useful lives of the respective assets as follows:
<TABLE>
<S> <C>
Buildings................................................................. 40 years
Shelters.................................................................. 10 years
Structure faces, transit displays......................................... 5 years
Advertising structures.................................................... 16 years
Leasehold improvements.................................................... 5 years
Furniture, fixtures, computers and equipment.............................. 5 years
Software applications..................................................... 5 years
Trucks and autos.......................................................... 4 years
</TABLE>
F-26
<PAGE> 84
PMG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Site leases are amortized straight-line over their composite estimated
remaining useful lives, generally 23 years. The capitalized excess of fair
market value of building leases greater than future payments are amortized
straight-line over 16 years.
Losses on structures which existed at September 30, 1992 are charged
against a reserve which was initially established at $26,000 in purchase
accounting at September 30, 1992. $8,000 of additional reserves were provided in
each of the years 1993 and 1994.
The Company allocates the excess of purchase price over the estimated fair
value of net assets acquired to structure and site leases in acquisitions
accounted for as a purchase.
Taxes
General Electric Company, the ultimate parent of GECC, files a consolidated
U.S. federal income tax return which includes the Company and its subsidiaries.
The provisions for estimated taxes payable/receivable include the effect of the
Company and its subsidiaries on the consolidated return.
Prepaid Expenses
Prepaid expenses primarily represent site lease rentals which have been
paid in advance. Rental payments are made according to the contractual terms of
individual leases and are amortized to site lease rental expense over the
payment period.
Supplier Rebates
Rebates and discounts from suppliers are recognized as a reduction of
operating expenses in the period of utilization.
(3) RESERVE FOR STRUCTURE TAKEDOWN:
A summary of activity for the reserve for structure takedown is as follows:
<TABLE>
<CAPTION>
1994
-------
<S> <C>
Balance at beginning of the year.......................................... $23,974
Reserves added during the year............................................ 8,000
Losses incurred during the year........................................... (7,521)
-------
Balance at end of year.................................................... $24,453
=======
</TABLE>
F-27
<PAGE> 85
PMG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
(4) DEBT:
Debt at December 31, 1994, consists of the following:
<TABLE>
<CAPTION>
1994
--------
<S> <C>
8.5% note payable by Target Media Group LLP.............................. $ 1,663
6.0% promissory notes payable, due 1996.................................. 701
Installment note payable, prime plus 1.5%, due 1996...................... 218
Capitalized leases....................................................... 2,019
Other, due in 1995....................................................... 17
--------
Total.......................................................... 4,618
Less current term installments, including $622 for capitalized leases.... 1,387
--------
Long-term debt........................................................... $ 3,231
========
Note payable to GECC..................................................... $557,422
========
</TABLE>
The Company's note facility with GECC was established under the Revolving
Credit, Term Loan and Deferred Interest Loan Agreement dated September 15, 1986.
As discussed in note 1 the Company continues to be in default on its debt
obligations to GECC. All amounts due to GECC were consolidated into the
outstanding note facility. The debt obligation is treated as if it were a demand
note and is repaid based on the availability of the free cash flow of the
Company.
Interest on the note facility is paid quarterly in arrears in an amount
equal to 1.50% plus the greater of (i) the highest prime or base rate of
interest published by any of five major commercial banks, as defined, or (ii)
the most recent published annual yield on 90-day commercial paper. Such rate
shall be determined quarterly on the last day of each preceding quarter. The
effective interest rate on the note facility for the year ended December 31,
1994, was 9.25%.
On March 1, 1995, in connection with the recapitalization begun in 1992,
described in note 1, GECC converted approximately $190,000 of the outstanding
note facility to equity, with the remaining debt obligation being approximately
$375,000 as of that date after giving effect to the Recapitalization.
Under the terms of a note agreement between Target Media Group LLP and a
lender, all repayments of principal are deferred until 2000. Payments for
interest, at 8.50% of the outstanding loan balance and unpaid interest, are
deferred up to an aggregate balance of $1,770, at which time interest on the
balance above $1,770 must be paid. The repayment of the note is guaranteed by
the minority partner. Interest payments deferred were $215 in 1994.
The promissory notes were issued in connection with the acquisition of Blue
Wallscapes, Inc. in April 1993. The notes are repayable in equal monthly
installments, plus interest, through May 1996.
The installment note was issued in connection with the acquisition of
Mobile Outdoor Media in March 1993. The note is repayable in 36 equal monthly
installments, plus interest through March 1996. Principal balances outstanding
under the promissory and installment notes may be reduced by certain amounts
upon the occurrence of specified events as defined in the note agreements.
F-28
<PAGE> 86
PMG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The aggregate maturities of term debt and capital leases, for the five
years subsequent to December 31, 1994 are as follows:
<TABLE>
<CAPTION>
TERM CAPITAL
DEBT LEASES
------ -------
<S> <C> <C>
1995............................................................. $ 765 $ 759
1996............................................................. 171 782
1997............................................................. -- 572
1998............................................................. -- 234
1999............................................................. -- 99
Thereafter....................................................... 1,663 --
------ ------
Total.................................................. $2,599 2,446
======
Less amounts representing interest............................... 427
------
Present value of capital lease payments.......................... $ 2,019
======
</TABLE>
(5) TRANSACTIONS WITH PARENT:
GECC provides a note facility to fund working capital and other financing
requirements.
The Company has made payments to (received payment from) GECC and its
affiliates for the years ended December 31,1994 and 1993 as follows:
<TABLE>
<CAPTION>
1994 1993
-------- -------
<S> <C> <C>
Taxes......................................................... $(26,642) $ --
Interest...................................................... 50,103 45,254
Vehicle leases................................................ 844 744
Corporate services............................................ 560 629
</TABLE>
Interest expense is recognized monthly and is included as a component of
the outstanding note payable balance. Current income taxes recoverable are
reflected as a component of the GECC intercompany account. Separate cash
payments are not made for taxes or interest from GECC transactions.
At December 31, 1994, the Company owed $12 to GECC for cumulative preferred
dividends. At December 31, 1994, the Company owed $50 to GECC for the 107,733
shares of Class B common stock repurchased in 1994.
(6) SALE OF BRANCH ASSETS:
In October 1994, an agreement was reached to sell the Company's Rochester
branch operations and assets, except for cash and accounts receivable, for
$5,000 resulting in an approximate loss of $4,020. This loss was recognized in
1994 and included in other income. In February 1995, as a result of a Phase II
environmental study conducted in conjunction with the aforementioned sale, it
was determined that there is contamination resulting from previously removed
underground tanks. If remediation is required by governmental authorities, the
Company would be responsible for all remediation costs associated with this
site. The appropriate governmental authorities have been informed with respect
to the contamination but have not yet imposed remediation requirements on the
Company. Management cannot predict with certainty the total cost of the cleanup
if cleanup is required, however, estimates range from $50-$500. No accrual has
been made as of December 31, 1994 for this required remediation. The Company
will retain title to the associated land and building
F-29
<PAGE> 87
PMG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
until the environmental issues are resolved, although the sale of the other
assets and operations is proceeding.
In connection with the Restructuring Agreement described in note 1, the
Company received a note issued by Alabama Outdoor Advertising, Inc. ("AOA")
relating to the sale of its Alabama branch. The note was assigned a fair value
of $5,000 in connection with the purchase accounting described in note 1. AOA
defaulted under the terms of the note in 1993. The Company foreclosed on the
note, and disposed of the equity of AOA during 1994, resulting in proceeds of
$12,250 to the Company, including a $1,146 note resulting in a gain of $7,002,
subject to certain working capital adjustments. The aforementioned gain was
included in other income in 1994.
(7) INCOME TAXES:
The Company has recorded an income tax benefit of $9,950 and $27,015 in
1994 and 1993, respectively. These amounts have been determined in accordance
with the intercompany income tax sharing arrangement between the Company and
GECC. Taxes receivable from parent, included as a component of the GECC
intercompany amount, represents amounts owing from GECC relating to a portion of
current tax benefits attributable to the Company under the income tax sharing
arrangement. The Company has a net deferred tax asset of $29,622 at December 31,
1994.
The deferred tax asset arises primarily from Federal net operating losses
and minimum tax credits including amounts carried forward from years prior to
GECC exercising its warrant rights in September 1992. This asset is partially
offset by deferred tax liabilities resulting from differences in book and tax
depreciation which have arisen subsequent to September 1992. Management has
concluded, based upon the expected implementation of certain tax planning
strategies, that the net deferred tax asset is fully realizable.
The 1993 tax benefit recognized includes $2,491 due to the enactment of the
Revenue Reconciliation Act of 1993, increasing corporate income tax rates from
34% to 35%, and a state income tax benefit of $14,289 resulting from a refund of
state taxes paid in 1992.
(8) NON-CASH INVESTING AND FINANCING ACTIVITIES:
The Company purchased several businesses in 1994 and 1993 as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Fair value of fixed assets acquired.......................... $ 11,449 $ 18,195
Net working capital acquired................................. 562 1,099
Cash paid for assets......................................... (12,011) (15,810)
-------- --------
Notes assumed................................................ $ -- $ 3,484
======== ========
</TABLE>
Capital lease obligations of $238 and $1,054 in 1994 and 1993,
respectively, were incurred when the Company entered into leases, primarily for
automobiles, with a GECC affiliated company.
(9) RETIREMENT PLANS:
The Company has two defined benefit plans covering substantially all union
employees in its Cleveland, San Francisco, Chicago, Milwaukee and Dallas
branches. The plans also allow for voluntary contributions by participants.
Benefits provided by these plans are based primarily on years of service.
Assets are invested in insurance deposit annuity contracts.
F-30
<PAGE> 88
PMG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
The following table summarizes the defined benefit plans' funded status as
of December 31, 1993, the latest date available:
<TABLE>
<S> <C>
Actuarial present value of the vested accumulated benefit obligation........ $ 883
======
Projected benefit obligation................................................ $1,098
Fair value of plan assets................................................... (947)
------
Projected benefit obligation in excess of plan assets....................... 151
Unrecognized net loss....................................................... (190)
Unrecognized net transition obligation...................................... (65)
------
Prepaid pension cost........................................................ $ (104)
======
</TABLE>
The net periodic pension cost for 1993 was $115.
The weighted average discount rate used in determining the actuarial
present value of the projected benefit obligation and the expected long-term
rate of return on assets was 7.50% in 1993. The actuarial valuations also
include assumptions for salary increases. The Company's funding policy for the
defined benefit plans is to fund the minimum contributions as required by law.
The Company also sponsors a defined contribution (401k) plan that allows
contributions of 1% to 15% of base compensation for eligible employees.
Participation in this plan is available to salaried employees and to certain
groups of hourly employees. Employees covered by collective bargaining units are
not eligible. The Company matches the employer contribution, at its discretion,
in amounts equal to approximately 10% of the employee's contribution up to 8%
subject to certain regulatory wage base limits. The Company also contributes, at
its discretion, an annual contribution based on the Company's year-end results
up to a maximum Social Security integration level. Total costs of the plan to
the Company for 1994 and 1993 were $473 and $292, respectively.
Pursuant to collective bargaining agreements covering certain employees,
the Company made payments to, and charged to expense, one Company sponsored plan
and 34 multi-employer pension and welfare plans in the sum of $1,922 and $1,928
in 1994 and 1993, respectively.
(10) MAJOR CUSTOMERS:
A significant source of the Company's revenues is from the tobacco and
distilled beverage industries which provided, respectively, 14% and 12% of total
gross revenues in 1994 and 20% and 15% in 1993. One tobacco company provided 8%
and 10% of total gross revenues in 1994 and 1993, respectively.
(11) COMMITMENTS AND CONTINGENCIES:
Lease Commitments
The Company's leases for structure sites are generally cancelable on less
than one year's notice and are excluded from the schedule below. Total site
lease expense in 1994 and 1993 was $33,858 and $32,645, respectively.
F-31
<PAGE> 89
PMG HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
Future minimum lease payments under noncancelable operating leases for
facilities, transportation and other equipment as of December 31, 1994 are:
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31,
--------------------------------------------------------------------------
<S> <C>
1995...................................................................... $ 4,344
1996...................................................................... 4,236
1997...................................................................... 3,252
1998...................................................................... 2,202
1999...................................................................... 1,090
Subsequent................................................................ 4,525
-------
Total minimum lease payments.............................................. $19,649
=======
</TABLE>
Total rental expense for noncancelable operating leases in 1994 and 1993
was $5,339 and $2,985, respectively.
The Company leases substantially all of its vehicles from a wholly-owned
subsidiary of GECC. The lease terms are generally five years and require the
annual payment of all insurance and maintenance expenses. The leases are
capitalized and included as a component of furniture, fixtures and equipment. A
summary of the leased vehicles follows:
<TABLE>
<CAPTION>
1994
------
<S> <C>
Capitalized leases.......................................................... $3,238
Less accumulated depreciation............................................... 1,282
------
Net lease value............................................................. $1,956
======
</TABLE>
Letters of Credit
At December 31, 1994, the Company had outstanding irrevocable letters of
credit in the aggregate face amount of $11,663. The majority of these letters of
credit, $10,023 in 1994, support the Company's casualty, liability and workers
compensation self-insurance programs. The remaining letters of credit support
payment and performance obligations. Performance under the letters of credit is
guaranteed by GECC.
Litigation
The Company, together with GECC, are co-defendants in an action brought by
an employee of the Company. The employee has alleged that the Company's actions
in foreclosing upon warrants for common stock and consummating the Merger
Agreement were a violation of the employee's employment contract and a warrant
agreement between the Company and the employee. Management believes the
employee's claims are without merit.
In various areas in which the Company operates, outdoor advertising is the
object of restrictive and, in some cases, prohibitive zoning and other
regulatory provisions, either enacted or proposed. The impact on the Company of
loss of displays due to governmental action has been mitigated by federal and
state laws mandating compensation for such loss and constitutional restraints.
Although the Company cannot predict the outcome of existing litigation or the
enactment of zoning and other regulatory provisions concerning outdoor
advertising, the Company, to date, has incurred no significant losses from the
removal of outdoor advertising structures resulting from litigation or
governmental enactments without just compensation.
The Company also has been named as a defendant in an employment
discrimination suit by a former employee, claiming damages of up to $800.
While the ultimate resolution of the above matters is uncertain, management
believes the ultimate outcome will not have a material adverse effect on the
financial position of the Company.
F-32
<PAGE> 90
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
Eller Investment Company, Inc.:
We have audited the accompanying combined balance sheet of ELLER INVESTMENT
COMPANY, INC. (an Arizona corporation) as of December 31, 1994, and the related
combined statements of operations, stockholders' deficit and cash flows for the
year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of Eller Investment
Company, Inc. as of December 31, 1994, and the results of its operations and
cash flows for the year then ended in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
PHOENIX, ARIZONA,
MARCH 9, 1995.
F-33
<PAGE> 91
ELLER INVESTMENT COMPANY, INC.
COMBINED BALANCE SHEET
DECEMBER 31, 1994
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash........................................................................ $ 490,553
Accounts receivable, net of allowance for doubtful accounts of $72,000...... 2,638,430
Prepaid land leases and other assets........................................ 741,442
-----------
Total current assets................................................ 3,870,425
PREPAID LAND LEASES, net of current portion................................... 179,100
PROPERTY AND EQUIPMENT, net (Note 3).......................................... 34,869,672
DEFERRED LOAN FEES, net of accumulated amortization of $181,691............... 3,334,078
GOODWILL AND OTHER INTANGIBLE ASSETS, net of accumulated amortization of
$1,354,966 (Note 4)......................................................... 3,745,455
-----------
$45,998,730
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable............................................................ $ 510,794
Accrued liabilities......................................................... 1,593,762
Current portion of advertising obligation................................... 500,000
Notes payable to OSI (Note 6)............................................... 1,088,218
Current portion of long-term debt (Note 7).................................. 3,450,000
Current portion of capitalized lease obligations (Note 8)................... 267,638
-----------
Total current liabilities........................................... 7,410,412
ADVERTISING OBLIGATION, net of current portion................................ 551,600
LONG-TERM DEBT, net of current portion (Note 7)............................... 35,550,000
CAPITALIZED LEASE OBLIGATIONS, net of current portion (Note 8)................ 952,740
-----------
Total liabilities................................................... 44,464,752
-----------
COMMITMENTS AND CONTINGENCIES (Note 12)
SERIES A-1 PREFERRED STOCK (Note 9)........................................... 1,700,000
-----------
SERIES B PREFERRED STOCK (Note 9)............................................. 1,500,000
-----------
STOCKHOLDERS' DEFICIT (Note 10):
Class B common stock........................................................ 200
Accumulated deficit......................................................... (2,895,122)
Warrants outstanding........................................................ 2,000,000
Class A common stock, held in treasury...................................... (771,100)
-----------
Total stockholders' deficit......................................... (1,666,022)
-----------
$45,998,730
===========
</TABLE>
The accompanying notes are an integral part of this combined balance sheet.
F-34
<PAGE> 92
ELLER INVESTMENT COMPANY, INC.
COMBINED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------
<S> <C>
ADVERTISING REVENUES........................................................ $ 12,942,911
AGENCY COMMISSIONS AND DISCOUNTS............................................ (1,350,668)
-----------
Net revenues...................................................... 11,592,243
-----------
OPERATING EXPENSES, excluding depreciation and amortization:
Cost of sales and production.............................................. 5,256,136
Selling, general and administrative....................................... 1,366,995
-----------
Total operating expenses other than depreciation and
amortization..................................................... 6,623,131
-----------
OPERATING INCOME BEFORE DEPRECIATION AND AMORTIZATION....................... 4,969,112
-----------
DEPRECIATION AND AMORTIZATION............................................... 1,713,407
-----------
Operating income.................................................. 3,255,705
INTEREST EXPENSE AND FINANCE COST AMORTIZATION.............................. 2,636,960
MANAGEMENT FEES AND OTHER EXPENSE........................................... 204,825
-----------
Income before income taxes and extraordinary item................. 413,920
PROVISION FOR INCOME TAXES.................................................. 80,420
-----------
Income before extraordinary item.................................. 333,500
EXTRAORDINARY ITEM -- Loss on extinguishment of debt........................ (2,172,997)
-----------
Net loss.......................................................... $ (1,839,497)
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-35
<PAGE> 93
ELLER INVESTMENT COMPANY, INC.
COMBINED STATEMENT OF STOCKHOLDERS' DEFICIT
<TABLE>
<CAPTION>
CLASS B CLASS A CLASS A
CLASS COMMON COMMON COMMON
B SHARES STOCK SHARES TOTAL
COMMON ISSUED AND ACCUMULATED WARRANTS HELD IN HELD IN STOCKHOLDERS'
STOCK OUTSTANDING DEFICIT OUTSTANDING TREASURY TREASURY DEFICIT
------ ----------- ----------- ----------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT
DECEMBER 31, 1993....................... $200 20,000 $ (458,750 ) $ -- $(1,100,000) 2,004 $(1,558,550)
Dividends on preferred stock............. -- -- (267,975 ) -- -- -- (267,975)
Retirement of treasury stock............. -- -- (328,900 ) -- 328,900 (599) --
Issuance of Class B common stock warrants
as consideration for deferred loan
fees................................... -- -- -- 2,000,000 -- -- 2,000,000
Net loss................................. -- -- (1,839,497 ) -- -- -- (1,839,497)
---- ------ ----------- ---------- ----------- ------ -----------
BALANCE AT
DECEMBER 31, 1994...................... $200 20,000 $(2,895,122) $2,000,000 $ (771,100) 1,405 $(1,666,022)
==== ====== =========== ========== =========== ====== ===========
</TABLE>
The accompanying notes are an integral part of these combined financial
statements.
F-36
<PAGE> 94
ELLER INVESTMENT COMPANY, INC.
COMBINED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................................................ $ (1,839,497)
Adjustments to reconcile net loss to net cash provided by operating activities --
Depreciation...................................................................... 1,171,507
Amortization of deferred loan fees................................................ 492,639
Amortization of goodwill and other intangible assets.............................. 541,900
Extraordinary item -- loss on extinguishment of debt.............................. 2,172,997
Revenue recorded under Circle K advertising obligation............................ (428,450)
Changes in assets and liabilities, net of effect of acquisition --
Accounts receivable, net.......................................................... (1,459,365)
Prepaid land leases and other assets.............................................. (533,662)
Deferred tax benefit.............................................................. 128,200
Accounts payable and accrued liabilities.......................................... 701,146
-----------
Net cash provided by operating activities.................................... 947,415
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment................................................. (276,363)
Acquisition of property and equipment from OSI...................................... (22,335,588)
-----------
Net cash used in investing activities........................................ (22,611,951)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt.......................................................... (8,347,000)
Payment of fee to CIBC.............................................................. (3,000,000)
Reimbursement from OSI for payments on long-term debt and fee to CIBC............... 6,752,563
Proceeds from long-term debt........................................................ 27,355,000
Payment of deferred loan fees and acquisition costs................................. (1,532,749)
Proceeds from notes payable to OSI.................................................. 1,088,218
Principal payments on capitalized lease obligations................................. (229,622)
Payment of dividends................................................................ (267,975)
Redemption of preferred stock....................................................... (300,000)
-----------
Net cash provided by financing activities.................................... 21,518,435
-----------
NET DECREASE IN CASH.................................................................. (146,101)
-----------
CASH, beginning of year............................................................... 636,654
-----------
CASH, end of year..................................................................... $ 490,553
===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest.............................................................. $ 2,163,215
===========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Capitalized lease obligations incurred.............................................. $ 1,450,000
===========
Class B common stock warrants issued as consideration for deferred loan fees........ $ 2,000,000
===========
Retirement of 599 shares of Class A common stock held in treasury................... $ 328,900
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-37
<PAGE> 95
ELLER INVESTMENT COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
(1) ORGANIZATION AND BASIS OF PRESENTATION:
Organization and Basis of Presentation
Eller Investment Company, Inc. and Eller Holdings, Inc. (collectively, the
"Company") are both majority owned subsidiaries under the control of Loel
Ranches, Inc. The accompanying 1994 financial statements include the combined
accounts of Eller Investment Company, Inc. and Eller Holdings, Inc. Eller
Investment Company, Inc. includes the consolidated accounts of its wholly owned
subsidiaries, Eller Outdoor Advertising Company, Eller Outdoor of El Paso, Inc.
and Eller Outdoor Advertising Company of Atlanta.
In July 1994, Eller Holdings, Inc. ("Eller Holdings") was merged into Eller
Investment Company, Inc. ("Eller Investment"). In conjunction with this merger,
Eller Investment exchanged one share of its Class A and Class B common stock for
every five shares of the same class stock of Eller Holdings. Eller Investment
also exchanged one share of its Series A-1 and Series B preferred stock for
every share of the same class stock of Eller Holdings. The non-class common
stock of Eller Investment was retired. The accounts of Eller Holdings and Eller
Investment have been combined in the accompanying statements of operations,
stockholders' equity and cash flows as if the merger had taken place at December
31, 1993.
The Company is engaged in the business of providing rental space on outdoor
advertising structures and production services for outdoor advertisements in the
metropolitan Phoenix, El Paso and Atlanta areas.
Acquisition
Effective December 31, 1994, Eller Outdoor of Atlanta, which was
incorporated as a wholly owned subsidiary of Eller Investment during 1994,
acquired the outdoor advertising structures and other property and equipment
located in Atlanta, Georgia from Outdoor Systems, Inc. ("OSI"). In accordance
with APB No. 16, Accounting for Business Combinations, this acquisition has been
accounted for as a purchase. The aggregate cash consideration paid for these
assets, including certain legal and other transaction costs, was approximately
$22.3 million. Approximately $21.8 million of the acquisition cost has been
allocated to advertising displays and structures and the remaining $585,000 has
been allocated to other property and equipment that was acquired.
In addition to the assets described in the preceding paragraph, the
accounts receivable and prepaid land leases related to OSI's Atlanta operation
were acquired. Accounts receivable of approximately $722,000 and prepaid land
leases of approximately $365,000 were acquired in return for the Notes Payable
to OSI described in Note 6. The following unaudited pro forma summary presents
the combined results of operations as if the acquisition had occurred at the
beginning of 1994, after giving effect to certain adjustments, including
amortization of deferred loan fees and interest expense on the acquisition debt
and depreciation expense on the acquired assets. These pro forma results have
been prepared for comparative purposes only and do not purport to be indicative
of what would have occurred had the acquisition been made at that date or of
results which may occur in the future.
<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Net revenues......................................................... $ 19,522
=======
Loss before extraordinary item....................................... $ (106)
=======
</TABLE>
During 1994, the Company experienced significant growth by means of the
merger and acquisition discussed above. As a result, the Company has grown from
total net assets of approximately $7.8 million at December 31, 1993 to $46.0
million at December 31, 1994.
F-38
<PAGE> 96
ELLER INVESTMENT COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Prior to the July 1994 merger discussed above, the Company had a financing
arrangement with Canadian Imperial Bank of Commerce ("CIBC"; see Note 7) under
the terms of which the Company and OSI, a competing outdoor advertising company,
were jointly liable for advances made to both parties to fund the acquisition of
certain assets of Gannett Outdoor Co. of Arizona ("Gannett") by each Company.
Additionally, the Company was obligated to reimburse OSI for interest expense on
other debt that OSI incurred to fund the acquisition. To afford the Company the
ability to operate independently of OSI, the financing arrangement with CIBC and
the obligation to OSI were terminated in July 1994, resulting in the loss on
extinguishment of debt of $2.2 million recorded in the accompanying financial
statements. The accumulated deficit of $2.9 million recorded as of December 31,
1994, and the net loss of $1.8 million recorded for the year then ended are
largely the result of this transaction. A new financing agreement was entered
into between CIBC and the Company subsequent to the termination of the initial
agreement.
(2) SIGNIFICANT ACCOUNTING POLICIES:
Revenue Recognition
The Company provides outdoor advertising services under the terms of
contracts covering periods up to 36 months, which are generally billed monthly.
Revenues for outdoor advertising space rental is recognized ratably over the
contract term. Revenues from design, production and certain other services are
recognized as the services are provided. All costs are recognized in the period
in which the related services are provided.
Prepaid Land Leases
Prepaid land leases represents amounts paid for leases of land occupied by
outdoor advertising structures prior to the period for which the amounts are
due. Prepaid land leases are amortized on a straight-line basis over the term of
the related lease period.
Property and Equipment
Property and equipment are recorded at cost. Depreciation is computed on a
straight-line basis over the following useful lives:
<TABLE>
<S> <C>
Advertising displays and structures.................................... 15 years
Machinery and equipment................................................ 3 to 5 years
Vehicles............................................................... 3 years
Furniture and fixtures................................................. 3 years
</TABLE>
Deferred Loan Fees
Deferred loan fees are amortized over the terms of the related loans.
Goodwill
Goodwill represents the excess of consideration paid over the fair market
values of identifiable net assets acquired. Goodwill is amortized on a
straight-line basis over 40 years.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles necessarily 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
F-39
<PAGE> 97
ELLER INVESTMENT COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual amounts may differ from these
estimates.
(3) PROPERTY AND EQUIPMENT:
Property and equipment consists of the following at December 31, 1994:
<TABLE>
<S> <C>
Advertising structures................................................ $39,831,708
Land.................................................................. 728,239
Building.............................................................. 171,196
Vehicles.............................................................. 576,000
Machinery and equipment............................................... 267,904
Furniture and fixtures................................................ 556,764
Construction-in-process............................................... 89,195
-----------
42,221,006
Less: accumulated depreciation........................................ (7,351,334)
-----------
$34,869,672
===========
</TABLE>
(4) GOODWILL AND OTHER INTANGIBLE ASSETS:
Included in goodwill and other intangible assets is $3.4 million of
unamortized goodwill, which represents the excess of consideration paid over the
fair market value of identifiable net assets acquired.
Also included in goodwill and other intangible assets is the unamortized
cost of payments for certain covenants not to compete. The Company paid $399,965
in 1993 to the Series A-1 and Series B preferred stockholders for their
agreement not to compete or invest in any outdoor advertising business in Texas
for two years. In conjunction with the purchase of the Class A common stock in
1993 from The Circle K Corporation ("Circle K"), $400,000 of the purchase price
was allocated to an agreement of Circle K not to compete with the Company in
Texas for two years. These covenants are being amortized on a straight-line
basis over their two year life. The unamortized balance at December 31, 1994, of
$299,987 is included in goodwill and other intangible assets in the accompanying
combined balance sheet.
(5) CIRCLE K ADVERTISING OBLIGATION:
In conjunction with the acquisition of the El Paso operation in 1993, all
shares of the Company's Class A common stock were acquired from Circle K by the
Company and held in treasury. Circle K, which was a major shareholder, also
agreed not to compete with the Company in Texas for two years. As consideration
for the stock and covenant not to compete, the Company agreed to provide $1.5
million of advertising services, at market value, to Circle K over a three year
period.
During 1994, the Company provided approximately $430,000 of advertising
services, at market value, under the agreement, and the balance of advertising
services yet to be provided as of December 31, 1994 was $1.1 million.
The Class A common shares held in treasury are pledged as security to
Circle K for performance under this advertising agreement, and are to be
released and retired quarterly as advertising services are provided. During
1994, 599 shares were released and retired.
F-40
<PAGE> 98
ELLER INVESTMENT COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(6) NOTES PAYABLE TO OSI:
In conjunction with the acquisition described in Note 1, the Company
entered into the following note payable agreements with OSI:
<TABLE>
<S> <C>
Note payable issued in conjunction with acquisition of prepaid
land leases, unsecured, interest at 7%, principal and interest
due August 31, 1995........................................... $ 365,803
Note payable issued in conjunction with acquisition of accounts
receivable, unsecured, interest at 7%, principal and interest
due August 31, 1995. In April 1995, Eller may return any
uncollected receivables to OSI for full credit against the
note payable.................................................. 722,415
--------
$1,088,218
========
</TABLE>
(7) LONG-TERM DEBT:
At December 31, 1993, $13.2 million was outstanding under a credit
agreement with CIBC, the proceeds from which the Company used to purchase the
assets of Gannett in 1992. Under the terms of the agreement, the Company was
obligated to pay all outstanding principal and interest on December 31, 1995. An
additional fee of $3.0 million was also due on that date, which was being
accrued on a straight-line basis over the term of the contract. The Company had
related agreements with OSI whereby OSI was obligated to repay a portion of the
principal and interest and a portion of the additional fee. Additionally, the
Company was obligated to reimburse OSI for interest expense that OSI incurred on
debt related to the acquisition of Gannett.
In July 1994, Eller obtained a new credit agreement with CIBC and the
credit agreement with CIBC described above was terminated. The unaccrued portion
of the additional $3.0 million fee, unamortized deferred loan fees from the
previous credit agreement and the settlement with OSI related to the obligation
described above resulted in the loss on extinguishment of debt of $2.2 million
recorded in the accompanying financial statements.
In conjunction with the acquisition of assets in Atlanta from OSI in
December 1994, the existing credit agreement with CIBC was amended. The amended
credit agreement provides the Company with up to $40.0 million, of which $39.0
million was outstanding at December 31, 1994. The agreement provides for a
floating interest rate based on the Company's leverage ratio (ratio of debt to
operating cash flow, as defined). As draws on the credit agreement are made, the
Company elects the rate of interest to be based on either the banks' base rate
or the LIBOR rate at the time of the draw. The rate of interest varies from 2.50
to 3.25 percent over the banks' base rate or from 3.75 to 4.50 percent over
LIBOR, depending on the leverage ratio for the most recently completed fiscal
quarter. At December 31, 1994, all draws outstanding were at LIBOR + 4.50
percent, with $20.0 million carrying an interest rate of 10.40 percent and $19.0
million carrying an interest rate of 10.60 percent.
The credit agreement has an excess cash flow recapture provision whereby
the $40.0 million commitment is reduced by 50-65 percent of excess cash flow, as
defined, at the end of each fiscal year. The credit agreement also has an annual
commitment fee of 0.5 percent of the unused portion of the commitment.
All obligations under the credit agreement are collateralized by all
tangible and intangible assets of the Company and a pledge of 100 percent of the
stock of the Company, Loel Ranches, Inc. (Loel) and the parent company of Loel.
The majority stockholder has guaranteed up to $4.5 million of the amounts
outstanding under the credit agreement.
F-41
<PAGE> 99
ELLER INVESTMENT COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Under the credit agreement, the Company is required to comply with certain
financial covenants, including a maximum leverage ratio, minimum cash flow to
debt service and fixed charge coverage ratios. Compliance with these covenants
is not required until fiscal 1995. There are also certain limitations on
indebtedness, dividends, management, mergers, capital expenditures and certain
other transactions.
The warrants discussed in Note 10 were issued to CIBC in conjunction with
the funds provided by CIBC during 1994. As discussed in Note 10, the estimated
value of the warrants of $2.0 million are included in the deferred loan fees
balance of $3.5 million in the accompanying financial statements, which are
being amortized over the six-year life of the credit agreement.
Maturities of principal under the credit agreement for the years ended
December 31 are as follows:
<TABLE>
<S> <C>
1995.................................................................. $ 3,450,000
1996.................................................................. 4,900,000
1997.................................................................. 5,810,000
1998.................................................................. 6,900,000
1999.................................................................. 8,800,000
2000.................................................................. 9,140,000
-----------
39,000,000
Less: current portion................................................. 3,450,000
-----------
$35,550,000
===========
</TABLE>
(8) CAPITALIZED LEASE OBLIGATION:
On February 1, 1994, the Company acquired certain advertising structures
through a capital lease agreement. In accordance with Statement of Financial
Accounting Standards No. 13, Accounting for Leases, the acquired advertising
structures have been recorded at the present value of the future minimum lease
payments and are being depreciated over their estimated useful life of 15 years.
The lease agreement requires monthly payments of $28,711 through January 1999,
after which time the Company will own the assets. The Company can exercise its
option to acquire the assets at any time prior to January 1999 through payment
of the remaining lease obligation, and can terminate the agreement after June 1,
1997.
(9) PREFERRED STOCK:
At December 31, 1994, there were 20,000 and 15,000 shares authorized of
$.01 par value Series A-1 and Series B preferred stock, respectively, and 17,000
shares of Series A-1 and 14,997 shares of Series B preferred stock issued and
outstanding. Both classes of preferred stock have a liquidation preference equal
to their redemption value ($100 per share), are entitled to cumulative dividends
of 8 percent on the redemption value, are non-voting, and are non-convertible.
F-42
<PAGE> 100
ELLER INVESTMENT COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Scheduled redemptions of Series A-1 preferred stock for the years ended
December 31 are as follows:
<TABLE>
<S> <C>
1995.................................................................... $ 300,000
1996.................................................................... 400,000
1997.................................................................... 500,000
1998.................................................................... 500,000
-----------
$1,700,000
===========
</TABLE>
The Series B preferred stock is scheduled to be redeemed prior to December
1998. The redemption of both the Series A-1 and Series B preferred stock is
subject to certain restrictions established in the CIBC credit agreement.
(10) STOCKHOLDERS' DEFICIT
The Company's $0.01 par value nonvoting Class A common stock has a
liquidation preference of $500 per share. There were 2,000 shares authorized at
December 31, 1994.
There were 25,000 shares of the Company's $0.01 par value Class B common
stock authorized at December 31, 1994.
Two warrants for the purchase of 2,223 aggregate shares of the Company's
Class B common stock were issued to CIBC in conjunction with the funds provided
by CIBC during 1994. The warrants enable the holder to purchase the stock for
$0.01 per share and expire in July through December of 2004. The warrants
include a put option whereby the holder may require the Company, at any time, to
purchase the warrants for a put price, as defined. The warrants also contain a
provision whereby the holder may require the Company to issue a public offering
of its stock, including the stock represented by the warrants. In the case such
a request is made by the warrant holder, the Company may elect to call the
warrants at 105 percent of the put price. The current put price for both
warrants of $2.0 million has been recorded as deferred loan fees in the
accompanying combined financial statements.
(11) INCOME TAXES:
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), Accounting for Income
Taxes. SFAS 109 requires the use of an asset and liability approach in
accounting for income taxes. Deferred tax assets and liabilities are recorded
based on the differences between the financial statement and tax bases of assets
and liabilities and the tax rates in effect when these differences are expected
to reverse. Should income tax rates legislatively change, the deferred tax
assets and liabilities will be adjusted in the period of change.
The Company has a net deferred tax asset, which arises primarily from net
operating loss carryforwards for federal income tax purposes. The Company has
net operating loss carryforwards of approximately $3.5 million, the majority of
which expire in 2009. SFAS 109 requires the reduction of deferred tax assets by
a valuation allowance if, based on the weight of the available evidence, it is
more likely than not that some or all of the deferred tax assets will not be
realized. The Company has recorded a valuation allowance equal to its net
deferred tax asset. Accordingly, the net losses recorded in the accompanying
statements of operations have not been reduced by any income tax benefit.
F-43
<PAGE> 101
ELLER INVESTMENT COMPANY, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes of $80,420 recorded in the accompanying
financial statements results from the elimination of the net deferred tax asset
recorded on the books of Eller Holdings prior to the merger discussed in Note 1.
(12) COMMITMENTS AND CONTINGENCIES:
The Company has a qualified salary-reduction plan ("Plan") under Section
401(k) of the Internal Revenue Code covering certain employees of the Company
upon their attainment of age 21 and completion of one year of service. The
participants may elect to have up to 12 percent of their compensation
contributed to the Plan. The employee's contribution, up to 3 percent of
compensation, is matched by the Company. During 1994, the Company contributions
to the Plan totaled approximately $16,000.
The Company has entered into management agreements with the parent company
of Loel. For the year ended December 31, 1994, $200,000 in management fee
expense has been recorded. Beginning in 1995, the management agreement calls for
annual management fees of $300,000.
In the normal course of business, the Company is subject to certain
administrative proceedings and litigation. In management's opinion, the outcome
of such matters will not materially affect the financial position of the
Company.
The Company is also subject, from time to time, to audit by various taxing
authorities reviewing the Company's income, property, sales, use and payroll
taxes. Management believes that any findings from such audits will not have a
material impact on its financial statements.
Eller Outdoor of Atlanta, Inc. has entered into a letter of intent
agreement with a key employee. Under the terms of the agreement, the Company has
committed to the payment in 1995 of $350,000 in bonuses, in return for a
three-year employment commitment from the employee.
The Company leases its offices, paint shop facilities and the majority of
the land occupied by its advertising structures under noncancelable operating
lease agreements. Rent expense under operating leases of approximately $2.3
million was recorded for the year ended December 31, 1994. Future minimum lease
payments under these noncancelable operating leases for the years ended December
31 are as follows:
<TABLE>
<S> <C>
1995.................................................................. $ 2,511,987
1996.................................................................. 2,394,771
1997.................................................................. 2,128,228
1998.................................................................. 1,730,444
1999.................................................................. 1,061,425
Thereafter............................................................ 1,981,400
-----------
$11,808,255
===========
</TABLE>
F-44
<PAGE> 102
======================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS
OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE
HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 3
Risk Factors.......................... 8
Special Note Regarding Forward-Looking
Statements.......................... 13
Use of Proceeds....................... 13
Dividend Policy....................... 13
Dilution.............................. 14
Capitalization........................ 15
Selected Consolidated Financial and
Other Data.......................... 16
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 19
Business.............................. 27
Management............................ 37
Principal and Selling Stockholders.... 46
Description of Capital Stock.......... 48
Shares Eligible for Future Sale....... 50
Description of Indebtedness and Other
Commitments......................... 52
Underwriting.......................... 54
Certain Legal Matters................. 55
Experts............................... 55
Available Information................. 55
Index to Financial Statements......... F-1
</TABLE>
------------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
======================================================
======================================================
SHARES
LOGO
ELLER MEDIA CORPORATION
COMMON STOCK
------------------------
PROSPECTUS
------------------------
ALEX. BROWN & SONS
INCORPORATED
BEAR, STEARNS & CO. INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
FURMAN SELZ
, 1997
==========================================================
<PAGE> 103
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth all costs and expenses, other than the
underwriting discounts and commissions, payable by the Company in connection
with the sale of the Common Stock being registered hereby. All the amounts shown
are estimates, except for the Commission Registration Fee and NASD Filing Fee.
<TABLE>
<S> <C>
Commission Registration Fee............................................... $60,606
NASD Filing Fee........................................................... 20,500
Nasdaq National Market Listing Fees....................................... *
Accounting Fees and Expenses.............................................. *
Legal Fees and Expenses (other than Blue Sky)............................. *
Blue Sky Fees and Expenses................................................ *
Printing and Engraving Expenses........................................... *
Transfer Agent Fees and Expenses.......................................... *
Miscellaneous Expenses.................................................... *
-------
Total........................................................... $ *
========
</TABLE>
- ---------------
* To be completed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Corporation Law") gives Delaware corporations broad powers to
indemnify their present and former directors and officers against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred in connection with threatened, pending or
completed actions, suits or proceedings to which they are parties or are
threatened to be made parties by reason of being or having been such directors
or officers, subject to specified conditions and exclusions; gives a director or
officer who successfully defends an action the right to be so indemnified; and
permits a corporation to buy directors' and officers' liability insurance. Such
indemnification is not exclusive of any other rights to which those indemnified
may be entitled under any by-law, agreement, vote of stockholders or otherwise.
As permitted by Section 145 of the Delaware Corporation Law, Article VIII
of the Bylaws of the Company provides for the indemnification by the Company of
its directors, officers, employees and agents against liabilities and expenses
incurred in connection with actions, suits or proceeds brought against them by a
third party or in the right of the corporation, by reason of the fact that they
were or are such directors, officers, employees or agents.
Article VIII of the Company's Certificate of Incorporation provides that to
the fullest extent permitted by the Delaware Corporation Law as the same exists
or may hereafter be amended, a director of the Company shall not be liable to
the Company or its stockholders for monetary damages for breach of fiduciary
duty as a director.
The Company has entered into, or intends to enter into, agreements to
indemnify its directors and executive officers in addition to the
indemnification provided for in the Certificate of Incorporation and Bylaws.
These agreements, among other things, will indemnify the Company's directors and
executive officers for certain expenses (including attorneys' fees), and all
losses, claims, liabilities, judgments, fines and settlement amounts incurred by
such person arising out of or in
II-1
<PAGE> 104
connection with such person's service as a director or officer of the Company to
the fullest extent permitted by applicable law.
Polices of insurance may be obtained and maintained by the Company under
which its directors and officers will be insured, within the limits and subject
to the limitations of the policies, against certain expenses in connection with
the defense of, and certain liabilities which might be imposed as a result of,
actions, suits or proceedings to which they are parties by reason of being or
having been such directors or officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
The following discussion specifies securities sold by the Registrant within
the last three years and not registered under the Securities Act of 1933, the
date of each sale, the title and amount of securities sold, and the nature and
aggregate amount of consideration received by the issuer in connection with each
sale.
Registrant was organized to acquire the businesses of Eller Investment
Company, Inc. ("EIC") and Patrick Media Group, Inc. ("PMG") in August 1995.
In August 1995 Registrant issued 284 shares of common stock for all the
outstanding common stock of EIC (valued at approximately $28.5 million) to EM
Holdings LLC, which had four members, including Scott Eller, Loel Ranches, Inc.
(controlled by Karl Eller and 49% indirectly owned by Scott Eller), and two
other holders whose interest in the aggregate approximated 2% of EM Holdings
LLC.
In August 1995 Registrant issued 1,633 shares of common stock to the
entities affiliated with Hellman & Friedman named in the Prospectus under
"Principal and Selling Stockholders" for $163 million.
In August 1995, in connection with his employment agreement, Registrant
issued to Karl Eller certain options described in the Prospectus under the
caption "Management -- Executive Officers' Stock Options."
In November 1995, in connection with his employment by Registrant,
Registrant issued to Timothy J. Donmoyer certain options described in the
Prospectus under the caption "Management -- Executive Officers' Stock Options."
In November 1995, Registrant issued certain non-qualified stock options to
four directors and in August 1996 issued options to a fifth director, all in
connection with their service as directors and as described in the Prospectus
under "Management -- Executive Officers and Directors."
In April 1996, in connection with his employment by Registrant, Registrant
issued to Paul J. Meyer certain non-qualified stock options.
In June 1996, Registrant issued to four employees phantom stock units, and
in October 1996, modified such units, as described in the Prospectus under the
caption "Management -- Phantom Equity Plan."
In December 1996, Registrant entered an agreement to acquire (and in
January 1997 did acquire) certain display faces and related assets from an
individual in exchange for a $9.5 million secured convertible promissory note,
as described in the Prospectus under the caption "Description of Indebtedness
and Other Commitments -- Convertible Promissory Note."
II-2
<PAGE> 105
In January 1997, Registrant reclassified its outstanding common stock, with
each outstanding share being converted into shares of Common Stock,
par value $.01 per share.
All sales of securities described herein were exempt by virtue of the
exemptions from registration contained in Sections 3(a)(9), 4(2), or Rule 701
under the Securities Act of 1933, as applicable.
ITEM 16. EXHIBITS
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- -------- ---------------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
2.1 Stock Purchase Agreement between Eller Investment Company, Inc. and General
Electric Capital Corporation Relating to the Capital Stock of PMG Holdings, Inc.
and Patrick Media Group, Inc. dated as of July 14, 1995.
2.2 Contribution Agreement among Eller Media Company, Loel, Inc., and EM Holdings LLC
dated as of August 18, 1995
3.1 Form of Restated Certificate of Incorporation of the Company.
3.2 Form of Restated Bylaws of the Company.
4.1 Amended and Restated Credit Agreement dated as of November 19, 1996.
*5.1 Opinion of Latham & Watkins as to the validity of the securities being registered
hereby.
10.1 Employment Agreement between Eller Media Company and Karl Eller dated as of
August 18, 1995.
10.2 Form of 1996 Equity Participation Plan of Eller Media Corporation.
*11.1 Statement re: computation of per share earnings.
21.1 Subsidiaries of Eller Media Corporation.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of KPMG Peat Marwick LLP.
*23.3 Consent of Latham & Watkins (included in Exhibit 5.1).
24.1 Powers of Attorney (included on page II-5).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes to provide to the Underwriters
at the closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnifications for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions referred to in Item 14 hereof, or
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore,
II-3
<PAGE> 106
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For the purpose of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or Rule 497(h) under the Securities Act shall be deemed to be a part of
this Registration Statement as of the time it was declared effective; and
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 107
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Phoenix,
State of Arizona, on December 11, 1996.
ELLER MEDIA CORPORATION
By: /s/ KARL ELLER
--------------------------------------
Karl Eller
Chairman and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints Karl
Eller, Scott S. Eller and Paul J. Meyer and each or any of them, his true and
lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his substitutes or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in their
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------- ------------------
<C> <S> <C>
/s/ KARL ELLER Chairman and December 11, 1996
- ------------------------------------------ Chief Executive Officer
Karl Eller (Principal Executive
Officer)
/s/ TIMOTHY J. DONMOYER Executive Vice President/ December 11, 1996
- ------------------------------------------ Chief Financial Officer
Timothy J. Donmoyer (Principal Financial and
Accounting Officer)
/s/ JOHN L. BUNCE, JR. Director December 11, 1996
- ------------------------------------------
John L. Bunce, Jr.
/s/ JOSEPH M. NIEHAUS Director December 11, 1996
- ------------------------------------------
Joseph M. Niehaus
/s/ BRUCE T. HALLE Director December 11, 1996
- ------------------------------------------
Bruce T. Halle
/s/ F. WARREN HELLMAN Director December 11, 1996
- ------------------------------------------
F. Warren Hellman
</TABLE>
II-5
<PAGE> 108
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------- ------------------
<C> <S> <C>
/s/ ARTHUR H. KERN Director December 11, 1996
- ------------------------------------------
Arthur H. Kern
/s/ PATRICIA SALAS PINEDA Director December 11, 1996
- ------------------------------------------
Patricia Salas Pineda
/s/ RICHARD REISS, JR. Director December 11, 1996
- ------------------------------------------
Richard Reiss, Jr.
Director December , 1996
- ------------------------------------------
H. Irving Grousbeck
</TABLE>
II-6
<PAGE> 109
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBITS DESCRIPTION
- -------- ---------------------------------------------------------------------------------
<C> <S>
*1.1 Form of Underwriting Agreement.
2.1 Stock Purchase Agreement between Eller Investment Company, Inc. and General
Electric Capital Corporation Relating to the Capital Stock of PMG Holdings, Inc.
and Patrick Media Group, Inc. dated as of July 14, 1995.
2.2 Contribution Agreement among Eller Media Company, Loel, Inc., and EM Holdings LLC
dated as of August 18, 1995
3.1 Form of Restated Certificate of Incorporation of the Company.
3.2 Form of Restated Bylaws of the Company.
4.1 Amended and Restated Credit Agreement dated as of November 19, 1996.
*5.1 Opinion of Latham & Watkins as to the validity of the securities being registered
hereby.
10.1 Employment Agreement between Eller Media Company and Karl Eller dated as of
August 18, 1995.
10.2 Form of 1996 Equity Participation Plan of Eller Media Corporation.
*11.1 Statement re: computation of per share earnings.
21.1 Subsidiaries of Eller Media Corporation.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of KPMG Peat Marwick LLP.
*23.3 Consent of Latham & Watkins (included in Exhibit 5.1).
24.1 Powers of Attorney (included on page II-5).
27.1 Financial Data Schedule.
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 2.1
STOCK PURCHASE AGREEMENT
BETWEEN
ELLER INVESTMENT COMPANY, INC.
AND
GENERAL ELECTRIC CAPITAL CORPORATION
RELATING TO THE
CAPITAL STOCK OF
PMG HOLDINGS, INC.
AND
PATRICK MEDIA GROUP, INC.
DATED July 14, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
1. Definitions ............................................... 2
2. Sale of Shares; Purchase Price ............................ 9
3. Representations and Warranties of Seller .................. 10
(a) Organization and Good Standing ............. 10
(b) Capitalization ............................. 11
(c) Subsidiaries ............................... 12
(d) Ownership of Shares and Execution of
Agreement .................................. 13
(e) Financial Statements ....................... 14
(f) No Undisclosed Liabilities ................. 15
(g) No Material Adverse Change;
No Dividends ............................. 16
(h) Taxes ...................................... 16
(i) Patents, Trademarks and Copyrights ......... 18
(j) Real Property; Leases of Real Property ..... 19
(k) Permits; Compliance with Laws .............. 21
(l) Insurance .................................. 21
(m) Material Contracts ......................... 22
(n) Title to Properties;
Absence of Encumbrances .................. 24
(o) Restrictions ............................... 24
(p) Litigation; Consents ....................... 25
(q) Environmental Matters ...................... 26
(r) Collective Bargaining Agreements
and Labor ................................ 27
(s) ERISA ...................................... 28
4. Representations and Warranties of Purchaser ............... 29
(a) Organization and Good Standing ............. 29
(b) Restrictions ............................... 30
(c) Litigation; Consents ....................... 30
(d) Execution and Effect of Agreement .......... 31
(e) Investment Representation .................. 31
(f) Sources of Information ..................... 31
(g) Financing .................................. 32
5. Covenants of Seller........................................ 32
(a) Access to Documents;
Opportunity to Ask Questions .............. 32
(b) Maintenance of Insurance ................... 33
(c) Conduct of Business ........................ 33
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
<S> <C>
(d) Consents; Conditions Precedent ................ 35
(e) Hart-Scott-Rodino Filings ..................... 35
(f) Discharge of Indebtedness ..................... 36
6. Covenants of Purcher........................................ 36
(a) Representations and Warranties ............... 36
(b) Consents; Conditions Precedent ............... 37
(c) Hart-Scott-Rodino Filings .................... 37
(d) Employee and Employee Plans .................. 37
(e) Letters of Credit ............................ 37
7. Tax Matters .............................................. 38
(a) Section 338(h)(10) Election .................. 38
(b) Tax Indemnification .......................... 41
(c) Preparation of Tax Returns;
Payment of Taxes ........................... 42
(d) Cooperation with Respect to Tax Rurns......... 46
(e) Tax Audits ................................... 47
(f) Refund Claims ................................ 49
(g) Tax Sharing Agreements ....................... 50
(h) Transfer Taxes................................ 50
(i) Timing of Tax Indemnity Claim ................ 50
8 Conditio Precedent to Purchaser's Obligation................. 51
9 Condition Precedent to Seller's Obligation................... 53
10 Closing Date; Closing........................................ 55
11 No Brokers................................................... 58
12 Survival of Representations and Warranties.................. 59
13 Indemnification of and by Purchaser
and Limitation of Liability ................................ 59
14 Specific Performance........................................ 66
15 Termination................................................. 66
16 Further Assurances.......................................... 67
17 Confidenential Press Releases............................... 68
18 Notices .................................................... 69
19 Entire Agreement............................................ 70
20 Successors.................................................. 71
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
Page
<S> <C>
21. Section Headings ................................................... 71
22. Applicable Law ..................................................... 71
23. Expenses ........................................................... 72
24. Severability ....................................................... 72
25. Note ............................................................... 72
26. Counterparts ....................................................... 73
</TABLE>
iii
<PAGE> 5
LIST OF SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
Schedules
<S> <C>
2 Additional Purchase Price
3(c) Subsidiaries
3(h) Tax Matters
3(i) Patents, Trademarks and Copyrights
3(j) Real Property and Material Leases
3(l) insurance Policies
3(m) Material Contracts
3(n) Encumbrances
3(o) Restrictions
3(p) Litigation
3(q) Environmental Matters
3(r) Collective Bargaining Agreements and Labor
3(s) ERISA
6(e) Letters of Credit
8(g) Consents
Exhibits
A-1 Form of Opinion of Associate General Counsel of Seller
A-2 Form of Opinion of Counsel to Seller
B Form of Opinion of Counsel to Purchaser
</TABLE>
iv
<PAGE> 6
STOCK PURCHASE AGREEMENT
AGREEMENT made this 14th day of July, 1995, by and between Eller
Investment Company, Inc. an Arizona corporation (hereinafter referred to as
Purchaser"), and General Electric Capital Corporation, a New York corporation
(hereinafter referred to as "Seller").
WI T N E S S E T H:
WHEREAS, Seller is the owner of (i) 100 shares of Common Stock, par
value $.01 per share (the "Company Shares"), of PMG Holdings, Inc. a Delaware
corporation (the "Company"), which shares constitute all of the issued and
outstanding shares of capital stock of the Company, and (ii) 991 shares of
Common Stock, par value $1.00 per share (the "Group Shares;" the 991 Group
Shares owned by Seller together with the Company Shares are collectively
referred to as the "Shares") of Patrick Media Group, Inc., a Delaware
corporation ("Group"), which shares together with the nine (9) Group Shares held
by the Company, constitute all of the issued and outstanding shares of capital
stock of Group; and WHEREAS, the Company, through Group and their respective
subsidiaries are in the business of (a) owning, leasing, constructing, posting,
painting and maintaining outdoor advertising displays and (b) renting and
selling space on such outdoor and other out-of-home advertising
1
<PAGE> 7
displays, consisting principally of painted bulletins and poster panels
of various sizes to the general public for outdoor and other out-of-home
advertising purposes; and
WHEARAS, Seller desires to sell to Purchaser, and Purchaser desires to
purchase from Seller, the Shares, for the purchase price and upon the terms and
conditions hereinafter set forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the parties hereto agree as follows:
1. Definitions. As used in this Agreement, the following terms shall
have the indicated meanings, which meanings shall be applicable, except to the
extent otherwise indicated in a definition of a particular term, both to the
singular and plural forms of such terms. Any agreement referred to below shall
mean such agreement as amended, supplemented and modified from time to time to
the extent permitted by the applicable provisions thereof and by this Agreement.
"Affiliated Group" means any group of corporations with respect to
which a Consolidated Tax Return was, or was required to have been, filed.
"Balance Sheet" shall mean the unaudited Combined Balance Sheet of the
Company, Group and their Subsidiaries as at April 30, 1995.
2
<PAGE> 8
"Balance Sheet Date" shall mean April 30, 1995.
"Best Efforts" shall mean reasonable good faith efforts but shall in no
event require the commencement of litigation against any third party or the
payment of any fees to any third party.
"Business Day" shall mean any weekday on which commercial banks in New
York City are open. Any action, notice or right which is to be exercised or
lapses on or by a given date which is not a Business Day may be taken, given or
exercised, and shall not lapse, until the end of the next Business Day.
"Closing" has the meaning specified in Section 10(a) of this Agreement.
"Closing Date" has the meaning specified in Section 11(a) of this
Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Company" has the meaning specified in the first recital of this
Agreement.
"Company Plan" has the meaning specified in Section 3(s)(i) of this
Agreement.
"Confidentiality Agreement" shall mean that certain letter agreement
dated April 24, 1995 between Seller and Purchaser with respect to, among other
things, the
3
<PAGE> 9
treatment of confidential information regarding the Company and Group.
"Consolidated Tax-Return" means any Tax Return that was, or should have
been, filed on a consolidated, combined or unitary basis for the purpose of any
type of Tax.
"Encumbrances" shall mean any lien, security interest, mortgage,
pledge, hypothecation, easement or conditional sale or other title retention
agreement; provided, however, that Encumbrances shall not include any Permitted
Encumbrance.
"Environmental Laws" shall mean any federal, state, or local law,
ordinance, regulation, order or permit pertaining to the environment, natural
resources or public health or safety as presently in effect.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended.
"Financial-Statements" shall mean (1) the audited Consolidated Balance
Sheets of the Company and its Subsidiaries as at December 31, 1993 and 1994 and
the related audited Consolidated Statements of Earnings and Cash Flows of the
Company and its Subsidiaries for the years then ended, certified by KPMG Peat
Marwick LLP, and (ii) the unaudited Combined Balance Sheet of the Company, Group
and their Subsidiaries as at April 30, 1995 and the related
4
<PAGE> 10
unaudited Combined Statements of Earnings and Cash Flows of the
Company, Group and their Subsidiaries for the four month period then ended.
"Group" has the meaning specified in the first recital of this
Agreement.
"Hart-Scott-Rodino Act" has the meaning specified in Section SW of this
Agreement.
"Hazardous Materials" shall mean hazardous wastes as presently defined
by the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 609 et.
seq., as amended, and regulations promulgated thereunder and hazardous
substances as presently defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601 et. seq., as
amended ("CERCLA" or "Superfund") and regulations promulgated thereunder, and
shall also mean every "hazardous material," "hazardous substance," "hazardous
waste," "toxic substances," or petroleum or petroleum products, as defined or
described in every state, local or other federal Environmental Law which is or
was applicable to the operations of the Company, Group and their Subsidiaries.
"Indebtedness" shall mean all obligations which arise from borrowed money or the
deferred purchase price of property or services (other than accounts payable
arising in the ordinary course of business).
5
<PAGE> 11
"Material Adverse Effect" shall mean a material adverse effect on the
business, operations, assets or financial condition of the Company, Group and
their Subsidiaries taken as a whole.
"Material Lease" or "Material Leases" has the meaning specified in
Section 3(j) of this Agreement.
"Multiemployer Plan" has the meaning specified in Section 3 (s)(i).
"Permitted Encumbrance" shall mean, (a) Encumbrances imposed by any
governmental authority for Taxes, assessments or charges not yet due and payable
or which are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of the
Company or its Subsidiaries in accordance with generally accepted accounting
principles; (b) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Encumbrances arising in the ordinary course of
business which are not overdue for a period of more than 30 days or which are
being contested in good faith and by appropriate proceedings, if adequate
reserves with respect thereto are maintained on the books of the Company, Group
or their Subsidiaries in accordance with generally accepted accounting
principles; (c) pledges or deposits in connection with worker's compensation,
unemployment insurance and other social security legislation; (d)
6
<PAGE> 12
deposits to secure the performance of any or all of the following: bids, trade
contracts (other than for borrowed money), leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business; (e) easements, rights-of-way,
restrictions and other similar encumbrances on real property incurred in the
ordinary course of business and encroachments (whether or not in the ordinary
course of business) which, in the aggregate, are not substantial in amount, and
which do not in any case materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of the business thereon;
and (f) all the exceptions to title reflected in Schedule 3(n).
"Purchase Price" has the meaning specified in Section 2 of this
Agreement.
"Purchaser" has the meaning specified in the first paragraph of this
Agreement.
"Section 338(h)(10) Election" has the meaning specified in Section
7(a)(i) of this Agreement
"Selected Accounting Firm" has the meaning specified in Section
7(a)(iii) of this Agreement.
"Seller" has the meaning specified in the first paragraph of this
Agreement.
7
<PAGE> 13
"Shares" has the meaning specified in the first recital of this
Agreement.
"Subsidiary" shall mean each corporation; partnership or other entity,
fifty percent (50%) or more of the outstanding voting shares of which or other
voting interests or equity interests in the case of a partnership are owned or
controlled directly or indirectly by the Company or Group.
"Tax" or "Taxes" means all taxes, charges, fees, imposts, levies or
other assessments, including, without limitation, all net income, franchise,
profits, gross receipts, capital, sales, use, ad valorem, value added, transfer,
transfer gains, inventory, capital stock, license, withholding, payroll,
employment, social security, unemployment, excise, severance, stamp, occupation,
real or personal property, and estimated taxes, water, rent and sewer service
charges, customs duties, fees, assessments and charges of any kind whatsoever,
together with any interest and any penalties, fines, additions to tax or
additional amounts thereon, imposed by any taxing authority (federal, state,
local or foreign) and shall include any transferee liability in respect of
Taxes.
"Tax Return" means all returns, declarations, reports, estimates,
information returns and statements required to be filed in respect of any Taxes.
8
<PAGE> 14
"Transfer Taxes" has the meaning specified in Section 7(h) of this
Agreement.
"WARN" shall mean the Workers Adjustment and Retraining Notification
Act of 1988 and any similar state or local plant closing law.
"Wazaney Litigation" shall mean that certain lawsuit filed pursuant to
a complaint dated August 18, 1994 in the Supreme Court of the State of New York,
County of New York by Dennis Wazaney, an employee of the Company, against the
Company and Seller.
2. Sale of Shares; Purchase Price. On the terms and subject to the
conditions set forth in this Agreement, Seller hereby agrees to sell, assign and
transfer to Purchaser, and Purchaser hereby agrees to purchase from Seller, on
the Closing Date, the Shares.
In consideration of the sale of the Shares, Purchaser shall pay to
Seller on the Closing Date, by wire transfer in U.S. dollars in immediately
available funds, to the account specified by Seller on or prior to the Closing
Date, a purchase price of $518,500,000 plus an amount equal to all purchase
price and advance payments and capital expenditures (excluding maintenance and
other normal course of business expenditures) up to a maximum of $10,000,000
made during the period from May 1, 1995 through the Closing Date by the Company,
Group or any Subsidiary solely in
9
<PAGE> 15
connection with contracts existing on the date hereof and listed on Schedule 2
hereto or (subject to Purchaser's prior written approval) entered into after the
date hereof relating to acquisitions of businesses or advertising properties or
relating to new bus shelters or airport advertising locations (collectively, the
"Purchase Price"). On the Closing Date, Seller shall deliver to Purchaser a
certificate as to the amount of all such payments.
3. Representations and Warranties of Seller. Seller hereby represents
and warrants to Purchaser as follows (it being understood that the inclusion of
any item on a Schedule hereto shall not be deemed an acknowledgement that such
item is material or would be reasonably likely to result in a Material Adverse
Effect):
(a) Organization and Good Standing. Seller is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New York. Each of the Company and Group is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware, and has
full corporate power and authority to own its properties and carry on its
business as it is now being conducted. Each of the Company and Group is duly
qualified as a foreign corporation and is in good standing under the laws of (i)
each jurisdiction in which it owns real property and (ii) each other
jurisdiction in which
10
<PAGE> 16
the conduct of its business or the ownership of its assets requires such
qualification and where a failure to be so qualified would have a Material
Adverse Effect. The copies of the Company's and Group's Certificate of
Incorporation and By-Laws (together with all amendments thereto) which have been
previously delivered or made available to Purchaser are correct and complete.
(b) Capitalization. The authorized capital stock of the Company
consists of (i) 1,000 shares of Common Stock, par value $.01 per share, of which
100 shares are outstanding as of the date hereof, and (ii) 1,000 shares of
Preferred Stock, par value $1.00 per share, of which no shares are outstanding
as of the date hereof. The authorized capital stock of Group consists of (i)
1,000 shares of Common Stock, par value $1.00 per share, of which 1,000 shares
are outstanding as of the date hereof, and (ii) 2,500 shares of Preferred Stock,
par value $1.00 per share, of which no shares are outstanding as of the date
hereof. All of the outstanding shares of the Company and Group have been validly
issued and are fully paid and non-assessable. No shares of Common Stock or
Preferred Stock are held by either the Company or Group as treasury stock. There
is no existing option, warrant, call, commitment or other security or agreement
of any kind to which the Company or Group is a party requiring, and there are no
11
<PAGE> 17
convertible securities of the Company or Group outstanding which upon conversion
would require, the issuance of any additional shares of capital stock of the
Company or Group or other securities convertible into shares of capital stock or
any debt or equity security of the Company or Group of any kind.
(c) Subsidiaries. Neither the Company nor Group has any Subsidiaries,
except as listed on Schedule 3(c) hereto. The authorized and outstanding capital
stock or equity interests of each Subsidiary is as set forth on Schedule 3(c)
hereto. All of such outstanding shares or equity interests have been validly
issued and are fully paid, non-assessable and, except as set forth on Schedule
3(c), owned by the Company or Group as indicated thereon, free and clear of any
and all Permitted Encumbrances and any and all other Encumbrances, other than
the pledge of such shares to Seller, which will terminate on the Closing Date.
No shares of capital stock are held by any Subsidiary as treasury stock. There
is no existing option, warrant, call, commitment or other security or agreement
of any kind to which any Subsidiary is a party requiring, and there are no
convertible securities of any Subsidiary outstanding which upon conversion would
require, the issuance of any additional shares of capital stock or equity
interests of any Subsidiary or other securities convertible into shares of
12
<PAGE> 18
capital stock or any other debt or equity security of any kind of any
Subsidiary. Each Subsidiary is duly incorporated or organized and validly
existing in good standing under the laws of its respective state of
incorporation or organization. Each Subsidiary has all requisite corporate or
partnership power and authority to own its properties and carry on its business
as presently conducted. Each Subsidiary is duly qualified as a foreign
corporation or partnership and is in good standing under the laws of (i) each
jurisdiction in which it owns real property and (ii) each other jurisdiction in
which the conduct of its business or the ownership of its assets requires such
qualification and where a failure to be so qualified would have a Material
Adverse Effect. There have been delivered or made available to Purchaser
complete and correct copies of the Certificate of Incorporation and By-Laws
(together with all amendments thereto) or other organizational documents of
non-corporate Subsidiaries of each Subsidiary.
(d) Ownership of Shares and Execution of Agreement. Seller is the
record and beneficial owner of the Shares, free and clear of any and all
Permitted Encumbrances and any and all other Encumbrances. Seller has the
corporate power and authority to enter into this Agreement and to sell,
transfer, assign and deliver the Shares as provided in this Agreement, and such
delivery will convey to
13
<PAGE> 19
Purchaser good and marketable title to the Shares, free and clear of any and all
Permitted Encumbrances and any and all Encumbrances. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Seller. This Agreement has been duly executed and delivered by Seller and
constitutes the legal, valid and binding obligation of Seller, enforceable
against it in accordance with its terms. The Group Shares not owned by Seller
are owned of record and beneficially by the Company, free and clear of any and
all Permitted Encumbrances and any and all other Encumbrances, other than the
pledge of such Group Shares to Seller, which will terminate on the Closing Date.
(e) Financial Statements. Seller has delivered to Purchaser copies of
the Financial Statements. Each of the Financial Statements is in accordance with
the books and records of the Company, Group and their Subsidiaries as of the
dates and for the periods indicated, has been prepared in accordance with
generally accepted accounting principles and in conformity with the practices
consistently applied by the Company and Group in the immediately preceding
fiscal periods, and, with respect to the unaudited interim financial statements,
subject to normal year-end audit adjustments and the absence of
14
<PAGE> 20
footnotes, presents fairly in all material respects the financial position,
results of operations and cash flows of the Company, Group and their
Subsidiaries as at the dates and for the periods indicated.
(f) No Undisclosed Liabilities. As at the Balance Sheet Date, neither
the Company, Group nor any Subsidiary had any Indebtedness or liabilities
(whether accrued, absolute, contingent or otherwise, and whether due or to
become due) which is not shown on the Balance Sheet or disclosed herein or in a
schedule hereto or in any document referred to in a schedule or in the Financial
Statements (including the footnotes thereto), which would normally be disclosed
on a balance sheet (including its footnotes) prepared in accordance with
generally accepted accounting principles if such Indebtedness or liabilities had
been known at the time of the balance sheet's preparation, and which undisclosed
Indebtedness or Liabilities are reasonably likely to result in a Material
Adverse Effect. Except as set forth in the Balance Sheet, neither the Company,
Group nor any Subsidiary has outstanding any material Indebtedness or liability
which would normally be disclosed on a balance sheet (including its footnotes)
prepared in accordance with generally accepted accounting principles if such
Indebtedness or liabilities had been known at the time of the balance sheet's
preparation, other than those incurred since
15
<PAGE> 21
the Balance Sheet Date in the ordinary course of business or disclosed herein or
in a schedule hereto or in any document referred to in a schedule or in the
Financial Statements (including the footnotes thereto), which is reasonably
likely to result in a Material Adverse Effect.
(g) No Material Adverse Change: No Dividends. Since the Balance Sheet
Date there has been no material adverse change in the business, operations,
assets or financial condition of the Company, Group and their Subsidiaries taken
as a whole. Since the Balance Sheet Date no dividends or distributions have been
declared or paid on or made with respect to the shares of capital stock or other
equity interests of the Company, Group or the Subsidiaries nor have any such
shares been repurchased or redeemed, other than dividends or distributions paid
to the Company, Group or a Subsidiary.
(h) Taxes. (i) Except as set forth on Schedule 3(h) hereto, (A) all
material Tax Returns required to be filed by or on behalf of the Company, Group
or the Subsidiaries or any Affiliated Group of which the Company, Group or the
Subsidiaries is or was a member have been filed with the appropriate taxing
authorities in all jurisdictions in which such Tax Returns are required to be
filed, and all amounts shown on such Tax Returns (including interest and
penalties) as due from the Company, Group or the
16
<PAGE> 22
Subsidiaries either directly, as part of a Consolidated Tax Return, or
otherwise, have been fully and timely paid or are adequately provided for on the
Balance Sheet; (B) all such Tax Returns, insofar as they relate to the Company,
Group or the Subsidiaries, are true, correct and complete in all material
respects; and (C) no waivers of statutes of limitation have been given or
requested with respect to the Company, Group or the Subsidiaries in connection
with any Tax Returns covering the Company, Group or the Subsidiaries.
(ii) Except as set forth on Schedule 3(h) hereto, all deficiencies
asserted or assessments made as a result of any examinations by the Internal
Revenue Service or any other taxing authority of the Tax Returns of or covering
the Company, Group or the Subsidiaries have been fully paid, and there are no
unpaid deficiencies asserted or assessments made by any taxing authority against
the Company, Group or the Subsidiaries and there are no audits currently pending
or issues raised in writing since January 1, 1993, by any taxing authority in
connection with Tax Returns of the Company, Group or their Subsidiaries.
(iii) Except as set forth on Schedule 3(h) hereto, neither the Company,
Group nor the Subsidiaries, nor any other person on their behalf has filed a
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply to any disposition of a
17
<PAGE> 23
subsection (f) asset (as such term is defined in Section 341(f)(4) of the Code)
owned by the Company, Group or the Subsidiaries.
(iv) None of Seller, the Company, Group or the Subsidiaries is a
foreign person within the meaning of Section 1445 of the Code.
(v) Except for the Affiliated Group of which they are now members,
since January 1, 1993 neither the Company nor Group has been a member of an
Affiliated Group of companies under Section 1504 of the Code.
(vi) Except as set forth on Schedule 3(h) hereto, no property owned by
the Company, Group or the Subsidiaries (A) is property required to be treated as
being owned by another person pursuant to the provisions of Section 168(f)(8) of
the Internal Revenue Code of 1954, as amended and in effect immediately prior to
the enactment of the Tax Reform Act of 1986, (B) constitutes "tax-exempt use
property" within the meaning of Section 168(h)(1) of the Code or (C) is
tax-exempt bond financed property within the meaning of Section 168(g) of the
Code.
(i) Patents, Trademarks and Copyrights. Schedule 3(i) hereto contains
a complete and correct list of each material patent, trademark, trade name,
service mark and copyright owned or used by the Company, Group or a Subsidiary
and pending applications therefor, and each
18
<PAGE> 24
license or other agreement relating thereto. Except as set forth on Schedule
3(i) hereto, each of the foregoing is owned by the party shown on such Schedule
as owning the same, free and clear of all Encumbrances. To Seller's knowledge,
there have been no claims asserted in writing, which are still pending, that any
of the foregoing is invalid or conflicts with the asserted rights of others,
which would reasonably be likely to result in a Material Adverse Effect. The
Company, Group and each Subsidiary possess all patents, patent licenses, trade
names, trademarks, service marks, brand marks, brand names, copyrights,
know-how, formulas and other proprietary and trade rights necessary for the
conduct of its respective business as now conducted, except for those the
absence of which would not be reasonably likely to result in a Material Adverse
Effect.
(j) Real Property: Leases of Real Property. Except as set forth on
Schedule 3(j) hereto, neither the Company, Group nor their Subsidiaries owns any
real property. Schedule 3(j) hereto contains a complete and correct list in all
material respects of all leases, sub-leases, license agreements or other rights
of possession or occupancy of real property to which the Company, Group or any
Subsidiary is a party (as tenant, occupier or possessor) pursuant to which the
current net annual rent payable by the Company, Group or any Subsidiary
currently exceeds $50,000
19
<PAGE> 25
(each such lease or agreement, a "Material Lease" and collectively the "Material
Leases"). All of the Material Leases are in full force and effect except for the
item on Schedule 3(p) relating to Metro/Westpark Corridor. Complete and correct
copies of each Material Lease have been furnished or made available to
Purchaser. Except as disclosed on Schedule 3(j) hereto, no consent is required
of any landlord or other third party to any Material Lease to consummate the
transactions contemplated hereby, and upon consummation of the transactions
contemplated hereby, each Material Lease will continue to entitle the Company,
Group or their Subsidiaries, as the case may be, to the use and possession of
the real property specified in such Material Leases and for the purposes for
which such real property is now being used by the Company, Group or their
Subsidiaries, respectively. Except as set forth in such Schedule, neither the
Company, Group nor their Subsidiaries is in default beyond any applicable notice
or grace period or has received written notice of default still outstanding on
the date hereof under any such Material Lease, and to Seller's knowledge, on the
date hereof, there exists no uncured default thereunder by any third party,
which in either case would be reasonably likely to result in a Material Adverse
Effect. All material Leases are in full force and effect and are enforceable
against the parties thereto in
20
<PAGE> 26
accordance with their terms subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar laws affecting
creditors, rights and remedies generally, and subject, as to enforceability, to
general principles of equity, including principles of commercial reasonableness,
good faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity) (the "Bankruptcy and Equity Exceptions").
(k) Permits; Compliance with-Laws. The Company, Group and their
Subsidiaries have all necessary permits, licenses and governmental
authorizations required for the ownership or occupancy of their respective
properties and assets and the carrying on of their respective business, except
where the failure to have any such permit, license or governmental authorization
would not be reasonably likely to result in a Material Adverse Effect.
(1) Insurance. Schedule 3(1) hereto contains a complete and correct
list in all material respects of all policies of insurance of any kind or nature
covering the Company, Group or their Subsidiaries, including, without
limitation, policies of life, fire, theft, employee fidelity and other casualty
and liability insurance, and such policies are in full force and effect.
21
<PAGE> 27
Complete and correct copies of each such policy have been furnished or made
available to Purchaser.
(m) Material Contracts. Except as listed in Schedule 3(m) hereto or any
other schedule hereto, and except for loan agreements, pledge agreements and
guarantees with Seller, which will be cancelled at Closing, neither the Company,
Group nor any Subsidiary is a party to any (i) material contract not made in the
ordinary course of business; (ii) contract for the employment of any officer or
employee; (iii) advertising agreement with a remaining term in excess of one
year and a payment obligation in excess of $50,000; (iv) franchise,
distributorship or sales agency agreement; (v) contract for the future purchase
of materials, supplies, services, merchandise or equipment not capable of being
fully performed or not terminable within a period of one year from the date
hereof or in excess of normal operating requirements; (vi) agreement for the
sale or lease of any of its assets other than in the ordinary course of
business; (vii) contract or commitment for capital expenditures in excess of
$100,000; (viii) mortgage, pledge, conditional sales contract, security
agreement, factoring agreement, or other similar agreement with respect to any
of its real or personal property; (ix) lease of machinery or equipment involving
annual payments in excess of $100,000; (x) agreement with a labor union or labor
association; (xi)
22
<PAGE> 28
loan agreement, promissory note issued by it, guarantee, subordination or
similar type of agreement; (xii) stock option, retirement, severance, pension,
bonus, profit sharing, group insurance, medical or other fringe benefit plan or
program providing employee benefits; (xiii) consulting agreement involving
annual payments in excess of $50,000; or (xiv) municipal or other governmental
franchise agreements. Complete and correct copies of each such agreement have
been furnished or made available to Purchaser. Except as set forth in Schedule
3(m) hereto, the Company, Group and their Subsidiaries have performed all of the
obligations required to be performed by them to date and are not in default
under any of the agreements, leases, contracts or other documents to which they
are a party listed on Schedule 3(m), other than for those failures to perform
and defaults which would not be reasonably likely to result in a Material
Adverse Effect. Except as set forth in Schedule 3(m) hereto, to Seller's
knowledge, no party with whom the Company, Group or their Subsidiaries has such
a scheduled agreement is in default thereunder, which default would be
reasonably likely to result in a Material Adverse Effect. All such scheduled
agreements are in full force and effect and are enforceable against the parties
thereto in accordance with their terms subject to the Bankruptcy and Equity
Exceptions, as defined in Section 3(j) hereof.
23
<PAGE> 29
Except as disclosed herein or in Schedule 3(m) hereto, neither the
Company, Group nor their Subsidiaries is a party to any non-compete or similar
agreement which restricts in any material way the current operation of their
businesses taken as a whole.
(n) Title to Properties; Absence of Encumbrances. The Company, Group
and their Subsidiaries have good and marketable title to all of their respective
properties and assets shown as owned on the Balance Sheet (except for assets
disposed of in the ordinary course of business since the Balance Sheet Date or
as set forth in Schedule 3(n) hereto), free and clear of any and all
Encumbrances, except as set forth in Schedule 3(n) hereto or except for
Permitted Encumbrances.
(o) Restrictions. Except as set forth in Schedules 3(j) or 3(o) hereto
and except for leases which do not constitute Material Leases, neither the
execution or delivery of this Agreement nor the consummation of the transactions
contemplated hereby, will conflict with or result in a breach of, or give rise
to a right of termination of, or accelerate the performance required by, any
terms of any agreement to which the Company, Group or their Subsidiaries is a
party, or constitute a default thereunder, or result in the creation of any
Encumbrance upon any of their respective assets, except for such
24
<PAGE> 30
conflicts, breaches, rights of termination or acceleration, defaults
and Encumbrances that in the aggregate would not be reasonably likely to result
in a Material Adverse Effect, nor will it violate any of the provisions of their
respective Certificates of Incorporation or By-Laws or, as to non-corporate
Subsidiaries, organizational documents, or violate any judgment or decree by
which they or Seller is bound.
(p) Litigation; Consents. There is no action, suit, proceeding or
formal governmental inquiry or investigation pending against Seller, the
Company, Group or their Subsidiaries which seeks to restrain or prohibit or
otherwise challenges the consummation, legality or validity of the transactions
contemplated hereby. Except as disclosed in Schedule 3(p) hereto and the Wazaney
Litigation, there is no action, suit, proceeding or formal governmental inquiry
or investigation pending against the Company, Group or the Subsidiaries which is
reasonably likely to result in a Material Adverse Effect. Except as set forth in
Section 5(e) hereof, and except with respect to local governmental permits or
licenses, no consent, approval or authorization of any governmental authority on
the part of Seller, the Company, Group or the Subsidiaries is required in
connection with the execution and delivery of
25
<PAGE> 31
this Agreement or the consummation of any of the transactions contemplated
hereby.
(q) Environmental Matters. Except as disclosed in Schedule 3(g) hereto,
to Seller's knowledge (i) the operations of the Company, Group and their
Subsidiaries are now and since January 1, 1993 have been in compliance with
applicable Environmental Laws, except for such noncompliance which is not
reasonably likely to result in a Material Adverse Effect, (ii) neither the
Company, Group nor their Subsidiaries is subject to any pending or threatened
judicial or administrative proceeding alleging the violation of any
Environmental Law, which such proceeding is reasonably likely to result in a
Material Adverse Effect, (iii) neither the Company, Group nor their Subsidiaries
has received any written notice from any governmental authority that it is a
potentially responsible party at any Superfund site; (iv) neither the Company,
Group nor their Subsidiaries has disposed of or released Hazardous Materials
(nor are underground storage tanks present) on, in or at any real property owned
or leased by the Company, Group or their Subsidiaries in any quantity which is
reasonably likely to result in a Material Adverse Effect and (v) since January
1, 1993 the Company, Group and their Subsidiaries have not disposed of or
released any Hazardous Materials in or at any
26
<PAGE> 32
other real property in any quantity which is reasonably likely to result in a
Material Adverse Effect.
(r) Collective Bargaining Agreements and Labor. (i) Except as set forth
in Schedule 3(r) hereto, none of the Company, Group or the Subsidiaries is a
party to any labor or collective bargaining agreement and there are no labor or
collective bargaining agreements which pertain to employees of the Company,
Group or the Subsidiaries.
(ii) Except as set forth in Schedule 3(r) hereto, there are no pending
strikes, work stoppages, slowdowns, lockouts, arbitrations or other material
labor disputes against the Company, Group or the Subsidiaries which individually
would be reasonably likely to result in a Material Adverse Effect.
(iii) Except as set forth in Schedule 3(r) hereto, there are no pending
complaints, charges or claims against the Company, Group or the Subsidiaries
filed with any public or governmental authority, arbitrator or court based upon
the employment or termination of employment by the Company, Group or the
Subsidiaries of any individual, which individually would be reasonably likely to
result in a Material Adverse Effect.
(iv) Except as set forth in Schedule 3(r) hereto, the Company, Group
and the Subsidiaries are in compliance with all laws, regulations and orders
relating to
27
<PAGE> 33
the employment of labor, including all such laws, regulations and orders
relating to wages, hours, WARN, collective bargaining, discrimination, civil
rights, safety and health, workers' compensation and the collection and payment
of withholding and/or social security taxes and any similar tax, except for such
non-compliance as would not be reasonably likely to result in a Material Adverse
Effect.
(s) ERISA. (i) Schedule 3(s) hereto sets forth all material, written
"employee benefit plans", as defined in Section 3(3) of ERISA, maintained by the
Company, Group or the Subsidiaries or to which the Company, Group or the
Subsidiaries contributed or are obligated to contribute thereunder for current
or former employees of the Company, Group or the Subsidiaries (the "Company
Plans"). Schedule 3(s) hereto separately identifies each Company Plan which is a
multiemployer plan, as defined in Section 3(37) of ERISA ("Multiemployer Plan").
(ii) True, correct and complete copies of the following documents, with
respect to each of the Company Plans (other than the Multiemployer Plans), have
been made available or delivered to Purchaser by Seller, the Company, Group or
the Subsidiaries: (i) any plans and related trust documents, and amendments
thereto; (ii) the most recent Forms 5500; (iii) the last Internal Revenue
Service determination letter, if applicable; (iv) summary
28
<PAGE> 34
plan descriptions; and (v) the last actuarial valuation if the plan is a
"defined benefit plan" as defined in Section 3(35) of ERISA.
(iii) The Company Plans intended to qualify under Section 401 of the
Code and the trusts maintained pursuant thereto are exempt from federal income
taxation under Section 501 of the Code, and nothing has occurred with respect to
the operation of the Company Plans which could cause the loss of such
qualification or exemption or the imposition of any liability, penalty or tax
under ERISA or the Code which is reasonably likely to result in a Material
Adverse Effect.
(iv) The Company Plans have been maintained in accordance with their
terms and with all provisions of the Code and ERISA (including rules and
regulations thereunder) and other applicable federal and state laws and
regulations, except where the failure to so maintain would not be reasonably
likely to result in a Material Adverse Effect.
4. Representations and Warranties of Purchaser. Purchaser hereby represents
and warrants to Seller as follows:
(a) Organization and Good Standing. Purchaser is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arizona,
29
<PAGE> 35
and has full corporate power and authority to own its properties and carry on
its business as it is now being conducted.
(b) Restrictions. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby will not conflict with or
result in a breach of any terms of any agreement to which Purchaser is a party,
except for such conflicts and breaches that in the aggregate would not have a
material adverse effect on the Purchaser's ability to consummate the
transactions contemplated by this Agreement, nor will it violate any of the
provisions of Purchaser's Certificate of Incorporation or By-Laws.
(c) Litigation: Consents. There is no action, suit, proceeding or
formal governmental inquiry or investigation pending against Purchaser which
seeks to restrain or prohibit or otherwise challenges the consummation, legality
or validity of the transactions contemplated hereby, and, except as set forth in
Section 6(c) hereof, no consent, approval or authorization of any governmental
authority on the part of Purchaser is required in connection with the execution
and delivery of this Agreement or the consummation of any of the transactions
contemplated hereby.
30
<PAGE> 36
(d) Execution and Effect Of Agreement. Purchaser has the corporate
power and authority to enter into this Agreement, and the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Purchaser. This Agreement has been duly executed and delivered by Purchaser and
constitutes the legal, valid and binding obligation of Purchaser, enforceable
against it in accordance with its terms.
(e) Investment Representation. Purchaser possesses such knowledge and
experience in financial and business matters that it is capable of evaluating
the merits and risks of its investment hereunder. Purchaser is acquiring the
Shares for its own account, for investment purposes only and not with a view to
the distribution thereof. Purchaser is an "accredited investor" as defined in
Regulation D under the Securities Act of 1933, as amended.
(f) Sources of Information. Purchaser acknowledges that it has
conducted its own investigation of the business and affairs of the Company,
Group and their Subsidiaries, that the Shares have not been registered under the
Securities Act of 1933, as amended, or any state securities or "Blue Sky" laws;
and that it has received all
31
<PAGE> 37
the information that it requested from Seller concerning the Company, Group and
the Subsidiaries.
(g) Financing. Purchaser has, or has access to, sufficient funds and
financing to pay the Purchase Price on the Closing Date.
5. Covenants of Seller. Seller hereby covenants and agrees that:
(a) Access to Documents; Opportunity to Ask Ouestions. From and after
the date hereof and until the Closing Date, Seller shall cause the Company,
Group and the Subsidiaries to make available for inspection by Purchaser or its
representatives, upon reasonable advance notice and during normal business
hours, the Company's, Group's and the Subsidiaries' corporate or comparable
records, books of account, contracts and all other documents reasonably
requested by Purchaser, its managerial employees, counsel and auditors in order
to permit Purchaser and such representatives to make reasonable inspection and
examination of the business and affairs of the Company, Group and the
Subsidiaries. Seller shall further cause the managerial employees, counsel and
regular independent certified public accountants of the Company, Group and the
Subsidiaries to be available upon reasonable advance notice to answer questions
of Purchaser's representatives concerning the business and affairs of the
Company, Group
32
<PAGE> 38
and the Subsidiaries and shall further cause them to make available all relevant
books and records in connection with such inspection and examination.
(b) Maintenance of Insurance. From and after the date hereof and
until the Closing Date, Seller shall cause the Company, Group and the
Subsidiaries to use their Best Efforts to maintain in full force and effect all
of their presently existing insurance coverage, or insurance comparable to such
existing coverage.
(c) Conduct of Business. From and after the date hereof and until the
Closing Date, Seller shall cause the business of the Company, Group and the
Subsidiaries to be conducted in the ordinary course, consistent with the present
conduct of their business. During such period of time, except upon the prior
written consent of Purchaser, Seller shall not permit the Company, Group or the
Subsidiaries to: (a) amend its Certificate of Incorporation or By-Laws or
comparable organizational documents, (b) issue any additional shares of capital
stock or issue, sell or grant any option or right to acquire or otherwise
dispose of or commit to dispose of any of its authorized but unissued capital
stock or other corporate securities, (c) declare or pay any dividends or make
any other distribution in cash or property on its capital stock or other equity
interests, except to the Company, Group or a Subsidiary, (d) repurchase
33
<PAGE> 39
or redeem any shares of its stock or other equity interests, (e) voluntarily
incur any obligation or liability, except obligations and liabilities incurred
in the ordinary course of business, (f) enter into any employment agreement or
become liable for any bonus, profit-sharing or incentive payment to any of its
officers or directors, or otherwise materially change personnel policies,
compensation programs or benefit plans, except pursuant to presently existing
plans, arrangements or agreements disclosed herein or in a schedule hereto or in
the ordinary course of business, (g) mortgage, pledge, or otherwise encumber any
part of its assets, tangible or intangible, except Permitted Encumbrances, (h)
sell, transfer or acquire any properties or assets, tangible or intangible,
other than in the ordinary course of business, and except as set forth in
Schedule 3(n) hereto, (i) make any material changes in its customary method of
operations, including its accounts receivable collection practices (and will not
sell or otherwise transfer accounts receivable), marketing and pricing policies,
and maintenance of business premises, fixtures, furniture and equipment, (j)
modify, amend or cancel any of its existing leases or enter into any contracts,
agreements, leases or understandings, other than in the ordinary course of
business, or enter into any loan agreements, (k) enter into any collective
bargaining
34
<PAGE> 40
agreement, (1) merge or consolidate with any corporation, acquire control or,
except in the ordinary course of business, acquire any capital stock or other
securities of any other corporation or business entity, or take any steps
incident to or in furtherance of any such actions whether by entering into an
agreement providing therefor or otherwise, or (m) take any other action which
would cause any of the representations and warranties made by Seller in this
Agreement not to be true and correct in all material respects on and as of the
Closing Date with the same force and effect as if such representations and
warranties had been made on and as of the Closing Date.
(d) Consents. Conditions Precedent. From and after the date hereof and
until the Closing Date, Seller shall use its Best Efforts to obtain the consents
of those parties indicated on Schedule 8(g) in connection with the transactions
contemplated hereby and to cause the conditions precedent to the consummation of
the transactions contemplated hereby to be satisfied.
(e) Hart-Scott-Rodino Filings. Seller shall, and shall cause the
Company and Group to, make all required filings as promptly as possible with the
Federal Trade Commission and the U.S. Department of Justice-Antitrust Division
pursuant to the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"Hart-Scott-Rodino
35
<PAGE> 41
Act"), and shall cause the Company and Group to, cooperate with Purchaser in
connection with such filings.
(f) Discharge of Indebtedness. During the period between the date
hereof and the Closing Date, Group may incur Indebtedness from Seller and pay
Indebtedness owing to Seller and interest thereon. On the Closing Date and prior
to the Closing, (i) Seller shall contribute to the capital of Group any
Indebtedness of Group then owing to Seller and shall release its liens on the
stock of Group and the Subsidiaries and any guarantees of such Indebtedness;
(ii) any tax sharing payment obligations owed by Seller to, or owed to Seller
by, the Company, Group or any Subsidiary shall be cancelled, and (iii) any
amounts owed to Seller by the Company or Group relating to Seller's prior
ownership of equity of the Company or Group shall be cancelled.
6. Covenants of Purchaser. Purchaser hereby covenants and agrees that:
(a) Representations and Warranties. From and after the date hereof and
until the Closing Date, Purchaser will not take any action which would cause any
of the representations and warranties made by it in this Agreement not to be
true and correct in all material respects on and as of the Closing Date with the
same force and effect as if such representations and warranties had been made on
and as of the Closing Date.
36
<PAGE> 42
(b) Consents; Conditions Precedent. From and after the date hereof and
until the Closing Date, Purchaser shall use its Best Efforts to obtain any
consents required pursuant to Schedules 3(j) and 3(o) hereto in connection with
the transactions contemplated hereby and to cause the conditions precedent to
the consummation of the transactions contemplated hereby to be satisfied.
(c) Hart-Scott-Rodino Filings. Purchaser shall make all required
filings as promptly as possible with the Federal Trade Commission and the U.S.
Department of Justice-Antitrust Division pursuant to the Hart-Scott-Rodino Act,
and it shall cooperate with Seller, the Company and Group in connection with
such filings.
(d) Employee and Employee Plans. As of the Closing Date, any employee
of the Company, Group or the Subsidiaries shall remain an employee of the
Company, Group or the Subsidiaries, as the case may be, for a period of at least
thirty (30) days following the Closing, and Purchaser shall cause the Company,
Group and the Subsidiaries to continue to be bound by any collective bargaining
or other employment or consulting agreement or arrangement to which it is a
party with respect to any such employee.
(e) Letters of Credit. As of the Closing Date, Purchaser shall arrange
for all letters of credit issued for the benefit of the Company, Group or the
37
<PAGE> 43
Subsidiaries and guaranteed by Seller or an affiliate thereof either as
guarantor or account party (a list of which as of the date hereof is set forth
in Schedule 6(e) hereto) and which are outstanding on the Closing Date, to be
returned for cancellation or for such guaranty obligations to be terminated and
released in form and substance acceptable to Seller or, if despite Purchaser's
Best Efforts the foregoing cannot be done, Purchaser shall arrange for Seller to
receive a letter of credit issued for its benefit in form and substance
reasonably acceptable to it as security for any continuing guaranty obligations.
7. Tax Matters.
(a) Section 338(h)(10) Election.
(i) Purchaser will join with Seller in making an election under
Sections 338(g) and 338(h)(10) of the Code and the Treasury Regulations
promulgated under the Code (the "Treasury Regulations") and any corresponding or
similar elections under state, local or foreign Tax law (collectively, a
"Section 338(h)(10) Election") with respect to the purchase and sale of the
Shares hereunder (including with respect to the stock of the Subsidiaries).
Seller and Purchaser shall report, in connection with the determination of
income, franchise or other Taxes measured by net income, the transactions being
undertaken pursuant to this Agreement in a manner consistent with the Section
338(h)(10) Election.
38
<PAGE> 44
(ii) Seller shall be responsible for the preparation and filing of all
forms and documents required in connection with the Section 338(h)(10) Election.
To the extent properly prepared by Seller, and timely delivered to Purchaser,
Purchaser shall execute and return to Seller such documents or forms as are
reasonably requested and are required by any Tax laws to complete properly the
Section 338(h)(10) Election no later than April 2, 1996. For the purpose of
making the Section 338(h)(10) Election, on or prior to the Closing Date, Seller
and Purchaser each shall execute two copies of Internal Revenue Service Form
8023-A.
(iii) Purchaser, no later than March 1, 1996, shall provide Seller with
a valuation statement reflecting, as of the Closing Date, the fair market values
of all of the assets and the liabilities and obligations of the Company, Group
and the Subsidiaries. Purchaser and Seller shall file, and shall cause members
of their respective Affiliated Groups to file, all Tax Returns and statements,
forms and schedules in connection therewith in a manner consistent with such
valuations and shall take no position contrary thereto unless required to do so
by applicable Tax laws and after thirty (30) days, prior notice to the other
party. Seller shall have the right to review and approve (which approval shall
not be unreasonably
39
<PAGE> 45
withheld) any appraisal upon which such valuations are based and any
such forms and schedules relating to such valuations, prior to the filing
thereof. Any disputes regarding the valuation statement or the preparation,
execution or filing of the forms and documents required in connection with
making the Section 338(h)(10) Election shall be resolved in an arbitration to
be conducted by Ernst & Young (New York office) or if such accounting firm is
unable or declines to serve, such other accounting firm mutually selected by
Purchaser and Seller (the "Selected Accounting Firm"), whose fees shall be
borne equally by the parties. Each of the parties to this Agreement shall be
bound by the decision of the Selected Accounting Firm rendered in such
arbitration.
(iv) To the extent permitted by state, local or foreign Tax laws, the
principles and procedures of this Section 7(a) shall also apply with respect to
an agreed valuation and a Section 338(h)(10) Election under state, local or
foreign law. Seller and Purchaser shall make any election similar to a Section
338(h)(10) Election which is optional under any state, local or foreign law, and
shall cooperate and join in any election made by the Company, Group, the
Subsidiaries or members of their Affiliated Group to effect such an election so
as to treat the transactions
40
<PAGE> 46
contemplated herein as a sale of assets for state, local and foreign income Tax
purposes.
(b) Tax indemnification.
(i) Seller shall be liable for, shall pay or cause to be paid and
shall indemnify and hold Purchaser and its Affiliates including after the
Closing the Company, Group and the Subsidiaries and all of their officers,
directors and agents harmless from and against any and all losses, claims,
damages, liabilities, costs, expenses (including reasonable attorneys' fees and
the cost and expenses of enforcing such indemnification against Seller),
interest and penalties, if any, arising out of or based upon or for or in
respect of each of the following: (a) except as otherwise provided in Section
7(h), any and all Taxes with respect to the Company, Group or the Subsidiaries
for any taxable period ending on or before the Closing Date (including any Taxes
arising as a result of the Section 338(h)(310) Election); (b) any and all Taxes
resulting solely from the Company, Group or the Subsidiaries having been
included in any consolidated, combined, or unitary Tax Return that included the
Company, Group or the Subsidiaries for any taxable period (or portion thereof)
ending on or before the Closing Date pursuant to Treasury Regulation Section
1.1502-6(a) or any analogous or similar state, local or foreign law or
regulations (other than any
41
<PAGE> 47
liability arising under such Treasury Regulation or analogous law by reason of
the Company, Group and the Subsidiaries becoming a member of the consolidated,
combined or unitary group of which the Purchaser is a member); and (c) any and
all Taxes allocated to the Seller pursuant to Section 7(c)(iii) hereof and not
previously paid thereunder.
(ii) Purchaser, the Company, Group and the Subsidiaries jointly and
severally shall be liable for, shall pay or cause to be paid and shall indemnify
and hold Seller and each of its Affiliates and all of their officers, directors
and agents harmless from and against any and all losses, claims, damages,
liabilities, costs, expenses (including reasonable attorneys' fees and the cost
and expenses of enforcing such indemnification against Purchaser, the Company,
Group and the Subsidiaries), interest and penalties, if any, arising out of or
based upon or for or in respect of, except as otherwise set forth in Section
7(c)(iii), any and all Taxes with respect to the Company, Group or the
Subsidiaries for any taxable period ending after the Closing Date; and any
Transfer Taxes (excluding Transfer Taxes solely attributable to the Section 338
(h)(10) Election).
(c) Preparation of Tax Returns; Payment of Taxes.
42
<PAGE> 48
(i) Seller (A) shall include, or cause to be included, the Company,
Group and the Subsidiaries in, and shall file, (1) the United States
consolidated federal income Tax Returns of Seller or its Affiliated Group for
the taxable periods of the Company, Group and the Subsidiaries ending on or
prior to the Closing Date and (2) all other consolidated, combined or unitary
Tax Returns of Seller or its Affiliated Group for the taxable periods of the
Company, Group and the Subsidiaries ending on or prior to the Closing Date and
(B) also shall or shall cause the Company, Group and the Subsidiaries to file
all other Tax Returns of or which include the Company, Group or the Subsidiaries
required to be filed (taking into account any extensions) on or prior to the
Closing Date. Following the Closing, Seller shall be responsible for preparing
or causing to be prepared all foreign, state and local Tax Returns required to
be filed by the Company, Group and the Subsidiaries on a separate return basis
after the Closing Date with respect to taxable periods that end on or prior to
the Closing Date. Seller shall prepare and deliver such Tax Returns, along with
the amount of any Taxes shown due thereon, to Purchaser for Purchaser's
reasonable review and approval which approval shall not be unreasonably withheld
and for filing at least 15 days prior to their due date. Purchaser shall
43
<PAGE> 49
file such Tax Returns on a timely basis and provide Seller with adequate proof
of such timely filing.
(ii) For federal income Tax purposes, the taxable year of the Company,
Group and the Subsidiaries shall end as of the close of the Closing Date and,
with respect to all other Taxes, Seller and Purchaser will, unless prohibited by
applicable law, close the taxable period of the Company, Group and the
Subsidiaries as of the close of the Closing Date. Neither Seller nor Purchaser
shall take any position inconsistent with the preceding sentence on any Tax
Return. To the extent permitted by law, the principles of this Subsection also
shall be applied to all state, local and foreign Tax Returns.
(iii) In any case in which a Tax is assessed with respect to a taxable
period which begins before the Closing Date and ends after the Closing Date, the
resulting Tax obligation shall be allocated (i) to Seller for the period up to
and including the Closing Date, and (ii) except to the extent attributable to
the Section 338(h)(10) Election, to Purchaser for the period subsequent to the
Closing Date. Any allocation of income or deductions required to determine any
Taxes attributable to any period beginning before and ending after the Closing
Date shall be made by means of a closing of the books and records of each of the
Company, Group and the Subsidiaries as of the close
44
<PAGE> 50
of the Closing Date, provided that exemptions, allowances, deductions
(including, but not limited to, depreciation and amortization deductions) or any
Taxes (such as property or similar Taxes) that are calculated on an annual basis
shall be allocated between the period ending on the Closing Date and the period
after the Closing Date in proportion to the number of days in each such period.
Any disagreements regarding the allocations shall be promptly resolved in an
arbitration conducted by the Selected Accounting Firm whose decision shall be
binding on the parties.
(iv) Purchaser shall prepare and provide Seller with copies of each Tax
Return (or the relevant portions thereof) reflecting any obligations with
respect to any taxable period of the Company, Group or the Subsidiaries which
begins before and ends after the Closing Date at least 30 days prior to the due
date for filing such return, and Seller shall have the right to review on a
timely basis and approve (which approval shall not be unreasonably withheld)
such Tax Returns. Purchaser and Seller shall attempt in good faith mutually to
resolve any disagreements regarding such Tax Returns prior to the due date for
filing thereof. Purchaser shall file or cause to be filed all such Tax Returns
and subject to receiving the payments from Seller with respect to the portion of
the Taxes allocable to Seller under Section 7(c)(iii) hereof,
45
<PAGE> 51
pay the Taxes shown due thereon. Seller shall remit such Taxes allocable to
Seller under Section 7(c)(iii) hereof to Purchaser at least 5 days prior to the
due date of any such return.
(d) Cooperation with Respect to Tax Returns. Purchaser and Seller agree
to furnish or cause to be furnished to each other, upon written request, and
each at their own expense, as promptly as practicable, such information
(including access to books and records) and assistance relating to the Company,
Group and the Subsidiaries as is reasonably necessary for the filing of any Tax
Return, for the preparation for any audit, and for the prosecution or defense of
any claim, suit or proceeding relating to any adjustment or proposed adjustment
with respect to Taxes, including making employees available on a mutually
convenient basis to provide additional information and explanations of any
material provided hereunder. Seller shall retain in its possession and shall
provide Purchaser reasonable access to (including the right to make copies of)
all Tax Returns and tax records or the relevant portions thereof relating to the
Company, Group and the Subsidiaries that might be relevant to computations or
payments required after the Closing Date with respect to Tax matters relating to
any taxable period ending on or prior the Closing Date until the relevant
statute of limitations has expired.
46
<PAGE> 52
After such time, Seller may dispose of such materials, provided that prior to
such disposition Seller shall give Purchaser a reasonable opportunity to take
possession of such materials. Purchaser or the Company, Group or the
Subsidiaries shall retain in their possession, and shall provide Seller
reasonable access to (including the right to make copies of), such supporting
books and records and any other materials that Seller may specify with respect
to Tax matters relating to any taxable period ending on or prior to the Closing
Date until the relevant statute of limitations has expired. After such time,
Purchaser may dispose of such materials, provided that prior to such disposition
Purchaser shall give Seller a reasonable opportunity to take possession of such
materials.
(e) Tax Audits.
(i) Whenever any taxing authority asserts a claim, makes an
assessment or otherwise disputes or affects the Tax reporting position of the
Company, Group or the Subsidiaries for taxable periods ending on or prior to or
including the Closing Date, Purchaser, promptly upon receipt by Purchaser, the
Company, Group or the Subsidiaries of notice thereof, shall inform Seller
thereof in writing.
(ii) Seller shall have the sole right to represent the interests of the
Company, Group and the Subsidiaries in any Tax audit or administrative or court
47
<PAGE> 53
proceeding relating to (A) taxable periods of the Company, Group and the
Subsidiaries which end on or prior to the Closing Date and (B) the Section
338(h)(10) Election.
(iii) Seller and Purchaser jointly shall represent the interests of the
Company, Group and the Subsidiaries in any Tax audit or administrative or court
proceeding relating to any taxable period of the Company, Group or the
Subsidiaries which includes (but does not begin or end on) the Closing Date. Any
disputes regarding the conduct or resolution of any such audit or proceeding
shall be resolved in an arbitration to be conducted by the Selected Accounting
Firm. Each of the parties shall be bound by the decision of the Selected
Accounting Firm rendered in such arbitration. All costs, fees and expenses paid
to third parties in the course of such audit or proceeding (including the fees
of the Selected Accounting Firm) shall be borne by Seller and Purchaser in the
same ratio as the ratio in which, pursuant to the terms of this Agreement
(including Section 7(c) hereof), Seller and Purchaser would share the
responsibility for payment of the Taxes asserted by the taxing authority in such
claim or assessment if such claim or assessment were sustained in its entirety.
(iv) Purchaser shall have the sole right to represent the interests of
the Company, Group and
48
<PAGE> 54
the Subsidiaries in all other Tax audits or administrative or court proceedings.
(f) Refund Claims. To the extent any determination of Tax liability of
the Company, Group or the Subsidiaries, whether as the result of an audit or
examination, a claim for refund, the filing of an amended return or otherwise,
results in any refund of Taxes paid attributable to (i) any period which ends on
or before the Closing Date, (ii) any sale, exchange or other disposition of
property which occurred on or prior to the Closing Date, or (iii) any period
which includes the Closing Date but does not begin or end on that day, any such
refund shall belong to Seller; provided that in the case of any Tax refund
described in clause (iii) of this Section 7(f), the portion of such Tax refund
which shall belong to Seller shall be that portion that is attributable to the
portion of that period which ends on the Closing Date (determined on the basis
of an interim closing of the books as of the Closing Date), and Purchaser shall
promptly pay any such portion, and the interest actually received thereon, to
Seller upon receipt thereof by Purchaser. Any and all other refunds shall belong
to Purchaser. Any payments made under this Section 7(f) shall be net of any
Taxes payable with respect to such refund, credit or interest thereon (taking
into
49
<PAGE> 55
account any reduction in tax liability actually realized upon the payment
pursuant to this Section 7(f)).
(g) Tax Sharing Agreements. All tax sharing and similar agreements
(other than the provisions of this Agreement) between (i) the Company, Group or
the Subsidiaries on the one hand and (ii) Seller or any other corporation or
corporations on the other hand shall be terminated as to the Company, Group and
the Subsidiaries as of the Closing Date, and neither the Seller, Company, Group
nor the Subsidiaries shall have liability from and after the Closing Date under
any such agreement.
(h) Transfer Taxes. Purchaser shall be liable for and shall pay all
excise, sales, use, transfer (including real property transfer taxes and state
or local transfer gains taxes), stamp, documentary, filing, recordation and
other similar taxes which may be imposed in connection with the transactions
contemplated by this Agreement, together with any interest, additions or
penalties with respect thereto (the "Transfer Taxes"). Each party hereto hereby
agrees to file all necessary documentation (including, but not limited to, all
Tax Returns) with respect to all such amounts in a timely manner.
(i) Timing of Tax Indemnity Claim. Any claim for indemnity hereunder
may be made at any time prior
50
<PAGE> 56
to 60 days after the expiration of the applicable Tax statute of limitations
with respect to the relevant taxable period (including all periods of extension,
whether automatic or permissive).
8. Conditions Precedent to Purchaser's Obligation. The obligation of
Purchaser to consummate the purchase of the Shares on the Closing Date is, at
the option of Purchaser, subject to the satisfaction of the following
conditions:
(a) Each of the representations and warranties of Seller contained in
Section 3 hereof shall be true and correct in all material respects as of the
Closing Date with the same force and effect as though the same had been made on
and as of the Closing Date, except for those given as of a particular date,
which shall be true and correct in all material respects as of such date, and
except for changes therein permitted or contemplated hereby.
(b) Seller shall have performed and complied in all material respects
with the covenants and provisions in this Agreement required herein to be
performed or complied with by Seller between the date hereof and the Closing
Date, and Purchaser shall have received evidence reasonably satisfactory to it
that (i) all of the Indebtedness of Group owing to Seller and guarantees thereof
shall have been discharged and released in the manner
51
<PAGE> 57
described in Section 5(f) hereof, and (ii) Seller's liens on the stock of Group
and the Subsidiaries shall have been released.
(c) No action or proceeding shall have been instituted against
Purchaser, Seller, the Company, Group or the Subsidiaries before any court or
other governmental body, seeking to restrain or prohibit the consummation of the
transactions contemplated hereby, which in the reasonable opinion of Purchaser
makes it inadvisable to consummate such transactions. No governmental action or
proceeding shall have been instituted or threatened against Purchaser, Seller,
the Company, Group or the Subsidiaries seeking to restrain or prohibit the
consummation of the transactions contemplated hereby, which in the reasonable
opinion of Purchaser makes it inadvisable to consummate such transactions.
(d) Purchaser shall have received opinions of an associate general
counsel for Seller and Weil, Gotshal & Manges, counsel for Seller, each dated
the Closing Date and each in form and substance reasonably satisfactory to
Purchaser and its counsel, to the effect set forth in Exhibits A-1 and A-2
hereto, respectively.
(e) Purchaser shall have received a certificate to the effect set forth
in subsections (a) and
52
<PAGE> 58
(b) above, dated the Closing Date, signed by a duly authorized officer of
Seller.
(f) Purchaser shall have received a certificate of a duly authorized
officer of Seller, dated the Closing Date, setting forth resolutions of the
Board of Directors of Seller generally authorizing the signing of agreements and
certifying that such resolutions were duly adopted and have not been rescinded
or amended as of the Closing Date.
(g) The consents of all persons who are parties to the agreements with
Seller, the Company, Group or the Subsidiaries identified on Schedule 8(g) shall
have been obtained, and signed copies thereof shall have been delivered to
Purchaser.
(h) The waiting periods under the Hart-Scott-Rodino Act shall have
expired.
(i) Seller shall have made all deliveries required by Section 10(c)
hereof.
9. Conditions Precedent to Seller's Obligation. The obligation of Seller
to consummate the sale, transfer and assignment to Purchaser of the Shares on
the Closing Date is, at the option of Seller, subject to the satisfaction of the
following conditions:
(a) Each of the representations and warranties of Purchaser contained
in Section 4 hereof shall
53
<PAGE> 59
be true and correct in all material respects as of the Closing Date with the
same force and effect as though the same had been made on and as of the Closing
Date, except for changes therein permitted or contemplated hereby.
(b) Purchaser shall have performed and complied in all material
respects with the covenants and provisions in this Agreement required herein to
be performed or complied with by Purchaser between the date hereof and the
Closing Date.
(c) No action or proceeding, shall have been instituted against
Purchaser, Seller, the Company, Group or the Subsidiaries before any court or
other governmental body, seeking to restrain or prohibit the consummation of the
transactions contemplated hereby, which in the reasonable opinion of Seller
makes it inadvisable to consummate such transactions. No governmental action or
proceeding shall have been instituted or threatened against Purchaser, Seller,
the Company, Group or the Subsidiaries seeking to restrain or prohibit the
consummation of the transactions contemplated hereby, which in the reasonable
opinion of Seller makes it inadvisable to consummate such transactions.
(d) Seller shall have received an opinion of Meyer Hendricks Victor
Ruffner & Bivens, P.L.C., counsel for Purchaser, dated the Closing Date, in form
and substance
54
<PAGE> 60
reasonably satisfactory to Seller and its counsel, to the effect set forth in
Exhibit B hereto.
(e) Seller shall have received a certificate to the effect set forth in
subsections (a) and (b) above, dated the Closing Date, signed by a duly
authorized officer of Purchaser.
(f) Seller shall have received a certificate of a duly authorized
officer of Purchaser, dated the Closing Date, setting forth the resolutions of
the Board of Directors of Purchaser authorizing the execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby, and
certifying that such resolutions were duly adopted and have not been rescinded
or amended as of the Closing Date.
(g) The waiting periods under the Hart-Scott-Rodino Act shall have
expired.
(h) Purchaser shall have arranged for the release of Seller from its
letter of credit guarantees or for the issuance of back-up letters of credit as
contemplated by Section 6(e) hereof.
(i) Purchaser shall have made all deliveries required by Section 10(d)
hereof.
10. Closing Date: Closing.
(a) Except as hereinafter provided, the closing hereunder (herein
called the "Closing") shall take
55
<PAGE> 61
place at the offices of Weil, Gotshal & Manges, 767 Fifth Avenue, New York, N.Y.
10153 at 10:00 A.M. on August 31, 1995 or, if later, the date that is five (5)
Business Days after each of the conditions precedent to the Closing shall have
been satisfied or waived, but not later than September 30, 1995, unless
otherwise mutually agreed to in writing by Purchaser and Seller. The date of the
Closing is referred to in this Agreement as the "Closing Date*.
(b) All proceedings to be taken and all documents to be executed and
delivered by Seller in connection with the consummation of the transactions
contemplated hereby shall be reasonably satisfactory in form and substance to
Purchaser and its counsel. All proceedings to be taken and all documents to be
executed and delivered by Purchaser in connection with the consummation of the
transactions contemplated hereby shall be reasonably satisfactory in form and
substance to Seller and its counsel. All proceedings to be taken and all
documents to be executed and delivered by all parties at the Closing shall be
deemed to have been taken and executed simultaneously and no proceedings shall
be deemed taken nor any documents executed or delivered until all have been
taken, executed and delivered.
(c) At the Closing, Seller shall deliver, or shall cause to be
delivered, to Purchaser the following:
56
<PAGE> 62
(i) Certificates representing the Shares, which certificates shall
be duly endorsed in blank or, in lieu thereof, shall have affixed thereto stock
powers executed in blank, and in proper form for transfer.
(ii) Opinions of counsel for Seller, each dated the Closing Date,
setting forth the matters required pursuant to Section 8(d) hereof.
(iii) The certificate signed by Seller as referred to in Section 8(e)
hereof.
(iv) The certified resolutions of the Board of Directors of Seller
referred to in Section 8(f) hereof.
(v) An incumbency certificate setting forth the names of officers of
Seller who are authorized to execute this Agreement and all documents executed
by Seller pursuant hereto, together with their respective signatures, signed by
a duly authorized officer of Seller.
(d) At the Closing, Purchaser shall deliver to Seller the following:
(i) A wire transfer of funds, in the aggregate amount of the
Purchase Price, as provided in Section 2 hereof.
(ii) An opinion of counsel for Purchaser, dated the Closing Date,
setting forth the matters required pursuant to Section 9(d) hereof.
57
<PAGE> 63
(iii) The certificate signed by a duly authorized officer of Purchaser
referred to in Section 9(e) hereof.
(iv) The certified resolutions of the Board of Directors of Purchaser
referred to in Section 9(f) hereof.
(v) An incumbency certificate setting forth the names of officers of
Purchaser who are authorized to execute this Agreement and all documents
executed by Purchaser pursuant hereto, together with their respective
signatures, signed by a duly authorized officer of Purchaser.
11. No Brokers. Seller represents to Purchaser, and Purchaser
represents to Seller, that they respectively have had no dealings with any
broker or finder in connection with the transactions contemplated by this
Agreement, other than, with respect to Seller, Furman Selz Incorporated. Seller
agrees to indemnify and hold Purchaser harmless from and against any and all
liability to which Purchaser may be subjected by reason of any broker's,
finder's or similar fee with respect to the transactions contemplated by this
Agreement to the extent such fee is attributable to any action undertaken by or
on behalf of Seller. Purchaser agrees to indemnify and hold Seller harmless from
and against any and all liability to which Seller may be
58
<PAGE> 64
subjected by reason of any broker's, finder's or similar fee with respect to the
transactions contemplated by this Agreement to the extent such fee is
attributable to any action undertaken by or on behalf of Purchaser.
12. Survival of Representations and Warranties. The parties hereto agree
that the representations and warranties contained in this Agreement or in any
certificate, document or instrument delivered in connection herewith, shall
survive the execution and delivery of this Agreement, and the Closing hereunder,
regardless of any investigation made by the parties hereto; provided, however,
that, except for claims or actions with respect to Sections 3(b), 3(c) (as to
title only), 3(d) (as to title only) and 3(h) (until the applicable statute of
limitations has expired), any claims or actions with respect thereto shall
terminate unless by March 31, 1997 written notice of such claims is given to
Seller or such actions are commenced.
13. Indemnification of and by Purchaser and Limitation of Liability.
(a) Seller agrees to indemnify and hold Purchaser harmless from and
against:
(i) Any and all liabilities, obligations, damages, deficiencies and
expenses resulting from (A) any misrepresentation or breach of warranty
contained in this Agreement or any certificate delivered
59
<PAGE> 65
pursuant hereto or non-fulfillment of any agreement on the part of Seller under
the terms of this Agreement and (B) the Wazaney Litigation; and
(ii) All actions, suits, proceedings, demands, assessments,
judgments, costs and expenses, including reasonable attorneys' fees, incident to
the foregoing and to all other indemnity obligations created by this Section 13.
(b) (i) Seller agrees to indemnify and hold Purchaser harmless from and
against any and all liabilities, obligations, damages, deficiencies and expenses
arising out of any "employee benefit plan" as defined in Section 3(2) of ERISA
or any "group health plan" as defined in Section 607(l) of ERISA in respect of
which the Company, Group and the Subsidiaries have any liability solely as a
result of being a member of a "controlled group" within the meaning of Section
4001(b)(1) of ERISA prior to the Closing Date which includes Seller.
(ii) Purchaser agrees to indemnify and hold Seller harmless from and
against any and all liabilities, obligations, damages, deficiencies and expenses
arising out of (i) any Company Plan (except for matters arising prior to the
Closing Date which arise as a result of a breach of the representations
contained in Sections 3(r) or 3(s) hereof or caused solely by the actions of
Seller)
60
<PAGE> 66
and (ii) the severance of any employee of the Company, Group or the Subsidiaries
on or after the Closing Date (including without limitation any liabilities under
or with respect to WARN).
(c) Purchaser agrees to indemnify and hold Seller harmless
from and against any and all claims, liabilities, damages, fines, deficiencies
or expenses (including, without limitation, fees, disbursements and expenses of
legal counsel, experts, engineers and consultants and the costs of investigation
and feasibility studies and remedial or corrective action) arising under
Environmental Laws now or hereafter in effect and relating to, resulting from or
based upon anything related to the property presently or formerly owned, leased
or operated by the Company, Group or their Subsidiaries or any of their
predecessors or the facilities or operations thereof, except for items
constituting a breach of the representation contained in Section 3(q) hereof or
caused solely by the actions of Seller (collectively "Environmental Losses").
Except for any indemnity right under this Section 13, Purchaser waives any right
(including, without limitation, any statutory right to recovery or contribution)
it has or may have in the future against Seller in connection with any and all
Environmental Losses.
61
<PAGE> 67
(d) The indemnifications by Seller contained in subsections
(a) and (b) above and Sections 7 and 11 hereof and any and all liabilities and
obligations of and causes of action against Seller, and any recovery in respect
thereof, arising out of or relating to this Agreement and the transactions
contemplated hereby (i) shall be effective only if, and to the extent that, the
aggregate of such losses, liabilities, damages, deficiencies or expenses
(including reasonable attorneys' fees) indemnified against shall exceed
$10,000,000 in which event such indemnification shall be effective with respect
to all such losses, liabilities, damages deficiencies or expenses in excess of
such amount, and shall be limited to an aggregate payment of no more than
$50,000,000. For purposes of determining Seller's indemnification obligations
pursuant to this Section 13, each representation and warranty stated in Section
3 or Section 4 hereof shall be deemed to exclude any materiality standard,
exception or qualification stated therein, including without limitation, any
exceptions therein for matters that would not or are not reasonably likely to
have a Material Adverse Effect. Notwithstanding the foregoing, the provisions of
this Section 13(d) shall not apply to (i) the Seller's indemnification
obligation contained in Section 7(b)(i)(b) hereof (ii) the Seller's
indemnification obligation for the Wazaney Litigation, (iii)
62
<PAGE> 68
Seller's representations and warranties set forth in Sections 3(b), 3(c) (as to
title only) and 3(d) (as to title only) hereof and (iv) the Taxes of the
Company, Group and the Subsidiaries which are based on or measured by net
income.
(e) Except in the case of Taxes which shall be governed by
Section 7 hereof, in the event that any legal proceedings shall be instituted or
that any claim or demand shall be asserted by any person in respect of which
payment may be sought by Purchaser from Seller or by Seller from Purchaser under
the provisions of this Section 13, regardless of the $10,000,000 minimum
referred to in subsection (d) above, Purchaser or Seller, as the case may be,
shall promptly cause written notice of the assertion of any claim of which it
has knowledge which is covered by this indemnity to be forwarded to the
indemnifying party, and the indemnifying party shall have the right, at its
option and at its own expense, to be represented by counsel of its choice and to
defend against, negotiate, settle or otherwise deal with any proceeding, claim
or demand which relates to any loss, liability, damage or deficiency indemnified
against hereunder; provided, however, that no settlement shall be made without
the prior written consent of the indemnified party, which consent shall not be
unreasonably withheld or delayed; and provided further, that the
63
<PAGE> 69
indemnified party may participate in any such proceeding with counsel of its
choice and at its expense. The parties hereto agree to cooperate fully with each
other in connection with the defense, negotiation or settlement of any such
legal proceeding, claim or demand. Purchaser further agrees to retain and cause
the Company and Group to retain any and all records and documents it or they may
have or obtain in connection with the Wazaney Litigation for a period of six
years following the Closing Date and allow Seller, upon reasonable notice on any
Business Day, access to such records and documents, including the right to make
copies thereof. After such time, Purchaser may dispose of such materials,
provided that prior to such disposition Purchaser shall give Seller a reasonable
opportunity to take possession of such materials. In addition, Purchaser agrees
to make reasonable efforts to cause the Company and Group to make its or their
employees available to Seller upon reasonable notice on any Business Day in
connection with Seller's defense of the Wazaney Litigation.
After any final judgment or award shall have been rendered by
a court, arbitration board or administrative agency of competent jurisdiction
and the expiration of the time in which to appeal therefrom, or a settlement
shall have been consummated, or Purchaser and Seller shall have arrived at a
mutually binding agreement with respect to each
64
<PAGE> 70
separate matter indemnified by Seller or Purchaser hereunder, as the case may
be, the indemnified party forward to the indemnifying party notice of any sums
due and owing by it pursuant to this Agreement with respect to such matter, and
the indemnifying party shall be required to pay all of the sums so owing to the
indemnified party within ten (10) days after the date of such notice.
Notwithstanding anything contained herein to the contrary, the
indemnity provided for in Section 13(a) hereof, other than with respect to the
Wazaney Litigation, shall exist with respect to any loss, liability, damage or
deficiency whether or not the actual amount of which shall have been ascertained
prior to the conclusion of the one (1) year period following the Closing Date
referred to in Section 12 hereof, so long as written notice shall have been
given to Seller by Purchaser prior to the conclusion of said applicable period
of the matter as to which indemnification has been asserted.
(f) Any indemnity payments otherwise due and payable under
Sections 7, 11 and 13 shall be (i) decreased to the extent of any reduction of
Tax liability that is realizable by the indemnified party upon payment of an
indemnifiable loss and (ii) increased to the extent of any increase in Tax
liability that is imposed on the indemnified party upon the receipt of an
indemnity payment pursuant to
65
<PAGE> 71
this Agreement, including, in each case, any decrease or increase thereof
pursuant to payments under this Section 13.
(g) Any payments under this Sections 7, 11 and 13 shall be
treated by the parties hereto for federal, state, local and foreign income Tax
purposes either as a non-taxable reimbursement or capital contribution or as a
purchase price adjustment, as the case maybe, except to the extent that another
treatment is required by law.
14. Specific-Performance. The parties hereto acknowledge that
irreparable damage would result if this Agreement is not specifically enforced.
Therefore, the rights and obligations of the parties under the Agreement,
including, without limitation, their respective rights and obligations to sell
and to purchase the Shares, shall be enforceable by a decree of specific
performance issued by any court of competent jurisdiction, and appropriate
injunctive relief may be applied for and granted in connection therewith. Such
remedies shall, however, be cumulative and not exclusive and shall be in
addition to any other remedies which any party may have under this Agreement or
otherwise.
15. Termination. Anything contained in this Agreement to the
contrary notwithstanding, this Agreement may be terminated:
66
<PAGE> 72
(a) At any time on or prior to the Closing Date, by the mutual
consent in writing of Purchaser and Seller; or
(b) By either Purchaser or Seller if the Closing shall not
have occurred on or before September 30, 1995 (or such later date as may be
agreed upon in writing by the parties hereto).
In the event that this Agreement shall be terminated pursuant
to this Section 15, all further obligations of the parties under this Agreement
(other than Sections 11, 17 and 23) shall terminate without further liability of
either party to the other, provided that nothing herein shall relieve any party
from liability for its breach of this Agreement.
16. Further Assurances. The parties hereto each agree to
execute such other documents or agreements and to take such other actions as may
be reasonably necessary or desirable for the implementation of this Agreement
and the consummation of the transactions contemplated hereby, including, but not
limited to, executing such documents or agreements and taking such other actions
as may be reasonably necessary or desirable to obtain the consent or other
approval of all relevant governmental authorities with respect to any
governmental, license, permit, franchises, or
67
<PAGE> 73
other right of the Company, Group or any of their Subsidiaries.
17. Confidentiality: Press Releases. (a) As more specifically
set forth in the Confidentiality Agreement, Purchaser agrees to keep proprietary
information regarding Seller and, prior to the Closing, the Company, Group and
the Subsidiaries confidential and agrees that it will only use such information
in connection with the transactions contemplated by this Agreement and not
disclose any of such information other than (i) to Purchaser's directors,
officers, employees, representatives, and agents who are or may be involved with
the transactions contemplated by this Agreement, (ii) to the extent such
information presently is or hereafter becomes available, on a non-confidential
basis, from a source other than Seller, the Company or Group, and (iii) to the
extent disclosure is required by law, regulation or judicial order by any
governmental authority.
(b) Seller agrees to keep proprietary information regarding
Purchaser confidential and agrees that it will only use such information in
connection with the transactions contemplated by this Agreement and not disclose
any of such information other than (i) to Seller's, the Company's and Group's
directors, officers, employees, representatives, and agents who are involved
with the transactions contemplated by this Agreement, (ii) to the
68
<PAGE> 74
extent such information presently is or hereafter becomes available, on a
non-confidential basis, from a source other than Purchaser, and (iii) to the
extent disclosure is required by law, regulation or judicial order by any
governmental authority.
(c) Prior to any disclosure required by law, regulation or
judicial order Purchaser or Seller, as the case may be, shall advise the other
of such requirement so that it may seek a protective order.
(d) Prior to Closing or thereafter, neither Purchaser nor
Seller shall make any press release or public announcement in connection with
the transactions contemplated hereby without the prior written consent of the
other party or, if required by law, without prior consultation with the other
party.
18. Notices. Any notices or other communications required or
permitted hereunder, shall be sufficiently given if in writing and personally
delivered or sent by registered or certified mail, postage prepaid, return
receipt requested, or sent by facsimile, addressed as follows or to such other
address as the parties shall have given notice of pursuant hereto:
69
<PAGE> 75
In the case of Purchaser:
Eller Investment Company, Inc.
2122 E. Highland Ave. - Suite 425
Phoenix, Arizona 85016
Attention: Karl Eller
Telecopy: 602-954-2650
With a copy to:
Meyer Hendricks Victor Ruffner
& Bivens, P.L.C.
2929 North Central Avenue
Suite 1800
Phoenix, Arizona 85012
Attention: Paul J. Meyer, Esq.
Telecopy: 602-263-5333
H & F Investors III, Inc.
One Maritime Plaza, 12th Fl.
San Francisco, California 94111
Attention: John L. Bunce, Jr.
Telecopy: 415-788-0176
Heller Ehrman
333 Bush Street
San Francisco, California 94104
Attention: Paul Mundies, Esq.
Telecopy: 415-772-6168
In the case of Seller:
General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: Nigel D.T. Andrews
Telecopy: 203-357-3095
With copies to:
General Electric Capital Corporation
260 Long Ridge Road
Stamford, Connecticut 06927
Attention: Victor F. Guaglianone, Esq.
Telecopy: 203-357-6398
70
<PAGE> 76
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Ted S. Waksman, Esq.
Telecopy: 212-310-8007
19. Entire Agreement. This Agreement and the Confidentiality
Agreement represent the entire understanding and agreement between the parties
hereto with respect to the subject matter hereof and can be amended,
supplemented or changed, and any provision hereof can be waived, only by written
instrument making specific reference to this Agreement signed by the party
against whom enforcement of any such amendment, supplement, modification or
waiver is sought.
20. Successors. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement and all rights and obligations
hereunder may not be assigned or transferred without the prior written consent
of the other party hereto, except that Purchaser may collaterally assign all of
its interest under this Agreement to Purchaser's lenders who provide financing
to facilitate Purchaser's acquisition of the Shares pursuant hereto and that
Purchaser may assign its rights and obligations to purchase the Shares pursuant
hereto to an affiliate under the control of Purchaser and/or H&F
71
<PAGE> 77
Investors III, Inc., provided that Purchaser shall not be released from its
obligations hereunder.
21. Section Headings. The section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
22. Applicable Law. This Agreement shall be governed by,
construed and enforced in accordance with the laws of the State of New York,
without regard to the principles thereof relating to conflict of laws.
23. Expenses. Whether or not the transactions contemplated
hereby are consummated, the parties hereto shall pay their own respective
expenses, except that Purchaser shall pay the applicable filing fee in
connection with the filings referred to in Sections 5(e) and 6(c) hereof.
24. Severability. If at any time subsequent to the date
hereof, any provision of this Agreement shall be held by any court of competent
jurisdiction to be illegal, void or unenforceable, such provision shall be of no
force and effect, but the illegality or unenforceability of such provision shall
have no effect upon and shall not impair the enforceability of any other
provision of this Agreement.
25. Note. Purchaser confirms that it has received a demand
note (the "Note") from Hellman & Freidman
72
<PAGE> 78
Capital Partners III, L.P. in the principal amount of $10 million and that
Purchaser hereby pledges to Seller, and grants to Seller a security interest in,
the Note as security for the performance of Purchaser's obligations to
consummate the purchase of the Shares hereunder. In the event Purchaser fails to
perform such obligations hereunder, Seller shall be entitled to exercise in
respect of the Note all rights and remedies of a secured party after default
under the Uniform Commercial Code in effect in the State of New York. Upon the
consummation of the purchase of the Shares hereunder, Purchaser shall be
entitled to the return of the Note.
26. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
taken together shall constitute one and the same instrument.
73
<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ELLER INVESTMENT COMPANY, INC.
By /s/ Karl Eller
------------------------------
Name: Karl Eller
Title: Chairman
GENERAL ELECTRIC CAPITAL CORPORATION
By /s/ Kathryn A. Cassidy
------------------------------
Name: Kathryn A. Cassidy
Title: VP Finance
74
<PAGE> 1
EXHIBIT 2.2
CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT (the "Agreement") dated August 18,
1995, by and among ELLER MEDIA COMPANY, a Delaware corporation (the "Company"),
LOEL, Inc., an Arizona corporation "LOEL") and EM Holdings LLC, an Arizona
limited liability company ("Holdings").
WHEREAS, Karl Eller ("Eller"), indirectly through Red River
Inc., an Arizona corporation ("Red River"), owns 100 percent of the issued and
outstanding shares of LOEL;
WHEREAS, LOEL owns 93.21 percent of the issued and outstanding
shares of Class B Common Stock of Eller Investment Company, an Arizona
Corporation ("EIC"), and the balance of the outstanding Class B Common Stock of
EIC is owned by two minority shareholders (all of such shares of Class B Common
Stock hereinafter collectively the "Shares");
WHEREAS, prior to Closing, as defined in Section 2 hereof,
LOEL and the minority shareholders of EIC will transfer the Shares to Holdings,
which shall be controlled by Eller;
WHEREAS, Eller will cause Holdings to contribute the Shares to
the Company in exchange for the number of shares of Common Stock of the Company
specified in Section 2 hereof (the "New Shares"), which contribution is intended
to constitute a contribution to the capital of the Company pursuant to Section
351 of the Internal Revenue Code;
WHEREAS, pursuant to a purchase agreement of even date
herewith (the "Stock Purchase Agreement") Hellman & Friedman Capital Partners
III, L.P. ("HFCP III") and certain other shareholders shall separately
contribute cash to the Company in exchange for shares of Common Stock of the
Company; and
WHEREAS, the parties desire to enter into this Agreement to
provide for the contribution of the Shares to the Company in exchange for the
New Shares.
NOW, THEREFORE, the parties agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
indicated meanings, which meanings shall be applicable, except to the extent
otherwise indicated in a definition of a particular term, both to the singular
and plural forms of such terms. All terms used in this Agreement that are not
defined in this Section 1 shall have the meanings set forth elsewhere in this
Agreement. Any agreement referred to below shall mean such agreement as amended,
supplemented and modified from time to time to the extent permitted by the
applicable provisions thereof and by this Agreement.
<PAGE> 2
"Acquisition Agreement" means the Stock Purchase Agreement
between EIC and General Electric Credit Corporation dated as or July 14, 1995.
"Balance Sheet" shall mean the unaudited consolidated Balance
Sheet of EIC as at June 30, 1995.
"Balance Sheet Dates" shall mean June 30, 1995.
"Best Efforts" shall mean reasonable good faith efforts but
shall in no event require the commencement of litigation against any third party
or the payment of any fees to any third party.
"Business Day" shall mean any weekday on which commercial
banks in San Francisco, California are open. Any action, notice or right which
is to be exercised or lapses on or by a given date which is not a Business Day
may be taken, given or exercised, and shall not lapse, until the end of the next
Business Day.
"Closing" has the meaning specified in Section 2(c) of this
Agreement.
"Closing Date" has the meaning specified in Section 2(c) of
this Agreement.
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Company" has the meaning specified in the first Paragraph of
this Agreement.
"Company Plan" has the meaning specified in Section 3(s)(i)
of this Agreement
"Consolidated Tax Return" means any Tax Return that was, or
should have been, filed on a consolidated, combined or unitary basis for the
purpose of any type of Tax.
"Credit Agreement" means the Credit Agreement among EH&F, the
Company, Chase Manhattan Bank and the other parties thereto dated as of August
18, 1995.
"EH&F" means EH&F, Inc., a Delaware corporation, a wholly
owned Subsidiary of the Company.
"Encumbrances" shall mean any lien, security interest,
mortgage, pledge, hypothecation, easement or conditional sale or other title
retention agreement.
"Environmental Laws" shall mean any federal, state, or local
law, ordinance, regulation, order or permit pertaining to the environment,
natural resources or public health or safety as presently in effect.
-2-
<PAGE> 3
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
"Financial Statements" shall mean (i) the audited consolidated
balance sheets of EIC and its Subsidiaries as at December 31, 1993 and 1994 and
the related audited consolidated Statements of Earnings and Cash Flows of EIC
and its Subsidiaries for the years then ended, certified by Arthur Andersen, and
(ii) the unaudited Balance Sheet of EIC and its Subsidiaries as at June 30, 1995
and the related unaudited consolidated statements of earnings and cash flows of
EIC and its Subsidiaries for the six month period then ended.
"Hazardous Material" shall mean hazardous wastes as presently
defined by the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section
609 et. seq., as amended, and regulations promulgated thereunder and hazardous
substances as presently defined by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S. C. Section 9601 et. seq., as
amended (CERCLA" or "Superfund") and regulations promulgated thereunder, and
shall also mean every "hazardous material," "hazardous substance," "hazardous
waste," "toxic substances," or petroleum or petroleum products, as defined or
described in every state, local or other federal Environmental Law which is or
was applicable to the operations of the Company and its Subsidiaries.
"Holdings" has the meaning identified in the recitals of this
Agreement.
"Indebtedness" shall mean all obligations which arise from
borrowed money or the deferred purchase price of property or services (other
than accounts payable arising in the ordinary course of business).
"Investors" shall mean each of LOEL, Holdings, and any other
person holding a membership interest in Holdings, jointly and severally.
"Liability" means, with respect to any Person, any direct or
indirect indebtedness, liability, claim, loss, damage, deficiency, obligation or
responsibility, fixed or unfixed, choate or inchoate, liquidated or
unliquidated, secured or unsecured, accrued, absolute, contingent or otherwise.
"LOEL" has the meaning identified in the recitals of this
Agreement.
"Material Adverse Effect" shall mean a material adverse effect
on the business, operations, assets or financial condition of EIC and its
current Subsidiaries taken as a whole.
"Multiemployer Plan" has the meaning specified in Section
3(s)(i).
-3-
<PAGE> 4
"New Shares" has the meaning specified in the Recitals of this
Agreement.
"Per Share Agreed Upon Value" and "Per New Share Agreed Upon
Value" have the meanings specified in Section 2(d).
"Person" means an individual, partnership, joint venture,
association, corporation, trust, estate, limited liability company, limited
liability partnership, or any other legal entity.
"Red River" has the meaning identified in the recitals of this
Agreement.
"Shares" has the meaning specified in the Recitals of this
Agreement.
"Subsidiary" shall mean each corporation, partnership or other
entity, fifty percent (50%) or more of the outstanding voting shares of which
(or other voting interests or equity interests in the case of a partnership) are
owned or controlled directly or indirectly by a Person.
"Tax" or "Taxes" means all taxes, charges, fees, imposts,
levies or other assessments, including, without limitation, all net income,
franchise, profits, gross receipts, capital, sales, use, ad valorem, value
added, transfer, transfer gains, inventory, capital stock, license, withholding,
payroll, employment, social security, unemployment, excise, severance, stamp,
occupation, real or personal property, and estimated taxes, water, rent and
sewer service charges, customs duties, fees, assessments and charges of any kind
whatsoever, together with any interest and any penalties, fines, additions to
tax or additional amounts thereon, imposed by any taxing authority (federal,
state, local or foreign) and shall include any transferee liability in respect
of Taxes.
"Tax Return" means all returns, declarations, reports,
estimates, information returns and statements required to filed in respect of
any Taxes.
"WARN" shall mean the Workers Adjustment and Retraining
Notification Act of 1988 and any similar state or local plant closing law.
2. Contribution of the Shares: Closing.
(a) Contribution of the Shares. On the terms and subject to
the conditions contained in this Agreement, Holdings agrees to contribute and
deliver, or cause to be contributed and delivered to the Company on the Closing
Date, and the Company hereby agrees to accept, the number of Shares set forth on
Exhibit A, in exchange for the number of New Shares set forth on Exhibit B.
-4-
<PAGE> 5
(b) Delivery of Shares. At the Closing, Holdings shall deliver
to the Company the stock certificate or certificates representing the Shares,
duly endorsed in blank or accompanied by duly executed instrument of transfer,
or registered in the name of the Company and the Company shall deliver to
Holdings a stock certificate or certificates representing the New Shares, duly
endorsed in blank or accompanied by duly executed instrument of transfer, or
registered in the name of Holdings.
(c) Closing Date. The closing of the contribution of the
Shares in exchange for the New Shares (the "Closing") shall take place at 9:00
a.m. local time on August 18, 1995 (the "Closing Date") at the offices of
Milbank, Tweed, Hadley & McCloy, or at such other place and time as the Company
and Holdings may agree in writing.
(d) Agreed Upon Value of the Shares. The parties agree that
for purposes of this Agreement the value of the Shares, corresponding to the
value of the New Shares, is $1,422 per Share (the "Per Share Agreed Upon
Value"), and $100,000 per New Share (the "Per New Share Agreed Upon Value").
(e) Contribution. Immediately following receipt of the Shares,
the Company shall contribute the Shares to EH&F.
3. Representations and Warranties of LOEL and Holdings.
LOEL and Holdings, jointly and severally, hereby represent and
warrant to the Company that as of the date of this Agreement and immediately
before Closing:
(a) Organization and Good Standing.
(i) Each of EIC and LOEL is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Arizona, and each of EIC and LOEL has full corporate power and authority to own
its properties and carry on its business as it is now being conducted. Each of
EIC and LOEL is duly qualified as a foreign corporation and in good standing
under the laws of (1) each jurisdiction in which it owns real property and (2)
each other jurisdiction in which the conduct of its business or the ownership of
its assets requires such qualification. The copies of EIC's and LOEL's
Certificates of Incorporation and By-Laws (together with all amendments thereto)
which have been previously delivered or made available to the Company are
correct and complete.
(ii) Holdings is a duly organized and validly existing
limited liability company organized under the laws of Arizona and as such has
full power and authority to own its properties and carry on its business as it
is proposed to be conducted. The management of the business of Holdings is
vested in Eller, who has the sole power to act for Holdings in respect of all
matters relating to this Agreement. Holdings is duly
-5-
<PAGE> 6
qualified to do business as a foreign limited liability company in any
jurisdiction where it owns real property or where the conduct of its business or
the ownership of its assets require such qualification. Copies of Holdings
operating agreement and limited liability company certificate which have been
previously delivered to or made available to the Company are correct and
complete.
(b) Capitalization. The authorized capital stock of
EIC consists of 2,000 shares of Class A Common Stock, of which no shares will be
outstanding immediately following the Closing, 25,000 shares of Class B Common
Stock, of which 20,000 shares are issued and outstanding as of the date hereof
(all of which are included within the "Shares"), and 35,000 shares of preferred
stock (20,000 of which are designated Series A-1 and 15,000 of which are
designated Series B), 17,000 of which Series A and 14,997 of which Series B
shares are issued and outstanding. All outstanding shares of Preferred Stock
will be redeemed at Closing for $3,588,198. All of the outstanding shares of EIC
have been validly issued and are fully paid and non-assessable. Other than
warrants held by the Canadian Imperial Bank of Commerce ("CIBC") and Banque
Paribas to acquire in the aggregate 10% of the shares of Class B Common Stock
(the "Warrants"), which Warrants will be cancelled in consideration of a payment
by EIC of $3.16 million at the Closing, there is no existing option, warrant,
call, commitment or other security or agreement of any kind to which EIC is a
party requiring, and there are no convertible securities of EIC outstanding
which upon conversion would require, the issuance of any additional shares of
capital stock of EIC or other securities convertible into shares of capital
stock or any debt or equity security of EIC of any kind.
(c) Subsidiaries. EIC has no Subsidiaries, except as
listed on Schedule 3(c) hereto. The authorized and outstanding capital stock or
equity interests of each Subsidiary is as set forth on Schedule 3(c) hereto. All
of such outstanding shares or equity interests have been validly issued and are
fully paid, non-assessable and, except as set forth on Schedule 3(c), owned by
EIC as indicated thereon, free and clear of any and all Encumbrances other than
a security interest in favor of CIBC which will be released at Closing. There is
no existing option, warrant, call, commitment or other security or agreement of
any kind to which any Subsidiary is a party requiring, and there are no
convertible securities of any Subsidiary outstanding which upon conversion would
require, the issuance of any additional shares of capital stock or equity
interests of any Subsidiary or other securities convertible into shares of
capital stock or any other debt or equity security of any kind of any
Subsidiary. Each Subsidiary is duly incorporated or organized and validly
existing and in good standing under the laws of its respective state of
incorporation or organization. Each Subsidiary has all requisite corporate power
and authority to own its properties and carry on its business as presently
conducted. There have been delivered or made available to the Company complete
and correct
-6-
<PAGE> 7
copies of the Certificate of Incorporation and By-Laws (together with all
amendments thereto) of each Subsidiary.
(d) Ownership of Shares and Execution of Agreement. Holdings
will be at Closing the record and beneficial owner of the Shares, free and clear
of any and all Encumbrances other than a security interest in favor of CIBC
which will be released at Closing. LOEL has the corporate power and authority,
and Holdings has the limited liability company power and authority, to enter
into this Agreement, and each has the corporate or limited liability company
power and authority to sell, transfer, assign and deliver the Shares as provided
in this Agreement, and such delivery will convey to the Company good and
marketable title to the Shares, free and clear of any and all Encumbrances
(other than the security interest in favor of Chase Manhattan Bank to be granted
pursuant to the Credit Agreement). The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate or limited liability company action on the
part of LOEL and Holdings. This Agreement has been duly executed and delivered
by LOEL and Holdings and constitutes the legal, valid and binding obligation of
LOEL and Holdings, enforceable against each of LOEL and Holdings in accordance
with its terms.
(e) Financial Statements. Eller has delivered to the Company
copies of the Financial Statements. Each of the Financial Statements is in
accordance with the books and records of EIC and its Subsidiaries as of the
dates and for the periods indicated, has been prepared in accordance with
generally accepted accounting principles and in conformity with the practices
consistently applied by EIC in the immediately preceding fiscal periods, and,
with respect to the unaudited interim financial statements, subject to normal
year-end audit adjustments and the absence of footnotes, presents fairly in all
material respects the financial position, results of operations and cash flows
of EIC and its Subsidiaries as at the dates and for the periods indicated.
(f) No Undisclosed Liabilities. As at the Balance Sheet Date,
neither EIC nor its Subsidiaries had any Indebtedness or material Liabilities
which are not shown on the Balance Sheet or disclosed herein or in a schedule
hereto or in the Financial Statements (including the footnotes thereto). Except
as set forth in the Balance Sheet, neither EIC nor any Subsidiary will have
outstanding on the Closing Date any material Indebtedness or Liability other
than those incurred since the Balance Sheet Date in the ordinary course of
business or disclosed herein or in a schedule hereto or in any document referred
to in a schedule or in the Financial Statements (including the footnotes
thereto).
(g) No Material Adverse Change: No Dividends. Since the
Balance Sheet Date. Since the Balance Sheet Data there has been no material
adverse change in the business, operations,
-7-
<PAGE> 8
assets or financial condition of EIC and its Subsidiaries taken as a whole.
Since the Balance Sheet Date no dividends or distributions have been declared or
paid on or made with respect to the shares of capital stock or other equity
interests of EIC or the Subsidiaries, nor have any such shares been repurchased
or redeemed, other than dividends or distributions paid to EIC, redemptions of
Class A Shares pursuant to EIC's advertising agreement with Circle K
Corporation, and the redemption by EIC of the remaining Class A Shares, which
redemption will be effected at the Closing without payment of any consideration
by EIC or its Subsidiaries.
(h) Taxes. (i) Except as set forth on Schedule 3(h) hereto,
(A) all material Tax Returns required to be filed by or on behalf of EIC or its
Subsidiaries have been timely filed (or timely extended) with the appropriate
taxing authorities in all jurisdictions in which such Tax Returns are required
to be filed, and all amounts shown on such Tax Returns (including interest and
penalties) as due from EIC or the Subsidiaries either directly, as part of a
Consolidated Tax Return, or otherwise, have been fully and timely paid or are
adequately provided for on the Balance Sheet; (B) all such Tax Returns are true,
correct and complete in all material respects; and (C) no waivers of statutes of
limitation have been given or requested with respect to EIC or the Subsidiaries
in connection with any Tax Returns covering EIC or the Subsidiaries.
(ii) Except as set forth on Schedule 3(h) hereto, all
deficiencies asserted or assessments made as a result of any examinations by the
Internal Revenue Service or any other taxing authority of the Tax Returns of or
covering EIC or the Subsidiaries have been fully paid, and there are no unpaid
deficiencies asserted-or assessments made by any taxing authority against EIC or
the Subsidiaries.
(iii) Except as set forth on Schedule 3(h) hereto, neither EIC
nor its Subsidiaries, nor any other person on their behalf has filed a consent
pursuant to Section 341(f) of the Code or agreed to have Section 341(f)(2) of
the Code apply to any disposition of a subsection (f) asset (as such term is
defined in Section 341(f)(4) of the Code) owned by EIC or its Subsidiaries.
(iv) None of Red River, LOEL, EIC or its Subsidiaries is a
foreign person within the meaning of Section 1445 of the Code.
(v) Except as set forth on Schedule 3(h) hereto, no property
owned by EIC or its Subsidiaries (A) is property required to be treated as being
owned by another person pursuant to the provisions of Section 168(f)(8) of the
Internal Revenue Code of 1954, as amended and in effect immediately prior to the
enactment of the Tax Reform Act of 1986, (B) constitutes "tax-exempt use
property" within the meaning of Section 168(h)(1)
-8-
<PAGE> 9
of the Code or (C) is tax-exempt bond financed property within the meaning of
Section 168(g) of the Code.
(i) Patents, Trademarks and Copyrights. Schedule 3(i) hereto
contains a complete and correct list of each material patent, trademark, trade
name, service mark and copyright owned or used by EIC or a Subsidiary and
pending applications therefor, and each license or other agreement relating
thereto. Except as set forth on Schedule 3(i) hereto, each of the foregoing is
owned by the party shown on such Schedule as owning the same, free and clear of
all Encumbrances other than a security interest in favor of CIBC which will be
terminated at Closing and the security interest in favor of Chase Manhattan Bank
that will be granted pursuant to the Credit Agreement. No claims have been
asserted in writing, which are still pending, that any of the foregoing is
invalid or conflicts with the asserted rights of others. EIC and each of its
subsidiaries possess all patents, patent licenses, trade names, trademarks,
service marks, brand marks, brand names, copyrights, know-how, formulas and
other proprietary and trade rights necessary for the conduct of their respective
business as now conducted.
(j) Real Property: Leases of Real Property. Except as set
forth on Schedule 3(j) hereto, neither EIC nor its Subsidiaries own any real
property. EIC has delivered to the Company and HFCP III a complete and correct
list in all material respects of all leases, subleases, license agreements or
other rights of possession or occupancy of real property to which EIC or any
Subsidiary is a party (as tenant, occupier or possessor). Except where no
Material Adverse Effect would result, all of the leases are in full force and
effect and enforceable in accordance with their terms subject to bankruptcy and
other laws limiting creditors' rights and subject to equitable principles. No
consent is required of any landlord or other third party to any lease to
consummate the transactions contemplated hereby except for cases where the
failure to obtain such consent would not have a Material Adverse Effect, and
upon consummation of the transactions contemplated hereby, each lease will
continue to entitle EIC or its Subsidiaries, as the case may be, to the use and
possession of the real property specified in such lease and for the purposes for
which such real property is now being used by EIC or its Subsidiaries,
respectively, except where failure to enjoy such use or possession would not
have a Material Adverse Effect. Except as set forth in such Schedule, neither
EIC nor its Subsidiaries is in default beyond any applicable notice or grace
period or has received written notice of default still outstanding on the date
hereof under any such lease, and on the date hereof, there exists no uncured
default thereunder by any third party, which in either case would be reasonably
likely to result in a Material Adverse Effect.
(k) Permits: Compliance with Laws. EIC and its Subsidiaries
have all necessary permits, licenses and governmental authorizations required
for the ownership or occupancy of their respective properties and assets and the
-9-
<PAGE> 10
carrying on of their respective business as presently conducted except where the
failure to have such permits, licenses or authorizations would not have a
Material Adverse Effect.
(l) Insurance. EIC and its Subsidiaries have maintained
insurance policies in type and amount appropriate for a company of their size
engaged in their business, including, without limitation, policies of life,
fire, theft, employee fidelity and other casualty and liability insurance, and
such policies are (and will remain after the Closing) in full force and effect.
The policy limits and deductibles under such policies are appropriate in light
of the business of EIC and its Subsidiaries.
(m) Material Contracts. Except as listed in Schedule 3(m)
hereto or any other Schedule hereto, neither EIC nor any subsidiary is a party
to any (i) material contract not made in the ordinary course of business; (ii)
contract for the employment of any officer or employee (other than oral
agreements for employment at will); (iii) advertising agreement (other than
those entered into in the ordinary course of business; (iv) franchise,
distributorship or sales agency agreement; (v) contract for the future purchase
of materials, supplies, services, merchandise or equipment not capable of being
fully performed or not terminable within a period of one year from the date
hereof or in excess of normal operating requirements; (vi) agreement for the
sale or lease of any of its assets other than in the ordinary course of
business; (vii) contract or commitment for capital expenditures in excess of
$100,000 in the aggregate; (viii) mortgage, pledge, conditional sales contract,
security agreement, factoring agreement, or other similar agreement with respect
to any of its real or personal property; (ix) lease of machinery or equipment
involving annual payments in excess of $25,000; (x) loan agreement, promissory
note issued by it, guarantee, subordination or similar type of agreement; (xi)
stock option, retirement, severance, pension, bonus, profit sharing, group
insurance, medical or other fringe benefit plan or program providing employee
benefits; (xii) consulting agreement; or (xiii) municipal or other governmental
franchise agreements. Complete and correct copies of each such agreement have
been made available to the Company. Except as set forth in Schedule 3(m) hereto,
the Company and its Subsidiaries have performed all of the obligations required
to be performed by them to date and are not in default under any of the
agreements, leases, contracts or other documents to which they are a party
listed on Schedule 3(m) except where the failure to so perform would not have a
Material Adverse Effect. Except as set forth in Schedule 3(m) hereto, no party
with whom EIC or its Subsidiaries has such a scheduled agreement is in default
thereunder except where such default would not have a Material Adverse Effect.
Except as disclosed herein or in Schedule 3(m) hereto, neither EIC nor its
Subsidiaries is a party to any non-compete or similar agreement which restricts
in any material way the current operation of their businesses.
-10-
<PAGE> 11
(n) Title to Properties; Absence of Encumbrances. EIC and its
Subsidiaries have good and marketable title to all of their respective
properties and assets shown as owned on the Balance Sheet (except for assets
disposed of in the ordinary course of business since the Balance Sheet Date or
as set forth in Schedule 3(n) hereto), free and clear of any and all
Encumbrances, except for liens in favor of CIBC that will be terminated at
Closing, and liens granted to Chase pursuant to the Credit Agreement or
permitted under the Credit Agreement. All material property, plant and equipment
shown thereon is in good condition and has been properly maintained, normal wear
and tear excepted.
(o) Restrictions. Except as set forth in Schedules 3(j), 3(m)
or 3(o) hereto, neither the execution or delivery of this Agreement nor the
consummation of the transactions contemplated hereby will conflict with or
result in a breach of, or give rise to a right of termination of, or accelerate
the performance required by, any terms of any lease or material contract to
which EIC or its Subsidiaries is a party, or constitute a default thereunder, or
result in the creation of any Encumbrance upon any of their respective assets,
except where such conflict, default or Encumbrance would not have a Material
Adverse Effect, nor will it violate any of the provisions of their respective
Certificates of Incorporation or By-Laws or, as to non-corporate Subsidiaries,
organizational documents, or violate any judgment or decree by which they are
bound.
(p) Litigation: Consents. There is no action, suit, proceeding
or formal governmental inquiry or investigation pending against EIC or its
Subsidiaries which seeks to restrain or prohibit or otherwise challenges the
consummation, legality or validity of the transactions contemplated hereby.
There is no action, suit, proceeding or formal governmental inquiry or
investigation pending against EIC or the Subsidiaries which is reasonably likely
to result in a liability to EIC or any of its Subsidiaries in an amount that
exceeds applicable insurance coverage by more than $100,000 or which otherwise
would have a Material Adverse Effect. No consent, approval or authorization of
any governmental authority on the part of Eller, LOEL, Holdings, EIC or its
Subsidiaries is required in connection with the execution and delivery of this
Agreement or the consummation of any of the transactions contemplated hereby
except such has have been obtained or made.
(q) Environmental Matters. Except as disclosed in Schedule
3(q) hereto, (i) the operations of EIC and its Subsidiaries are and always have
been in compliance with applicable Environmental Laws, except where the failure
to so comply would not have a Material Adverse Effect, (ii) neither EIC nor its
Subsidiaries is subject to any pending or threatened judicial or administrative
proceeding alleging the violation of any Environmental Law, (iii) neither EIC
nor its Subsidiaries has received any written notice from any governmental
authority that it is a potentially responsible party at any Superfund site; and
-11-
<PAGE> 12
(iv) neither LOEL, Holdings, or EIC is aware of the presence of any Hazardous
Materials on any real property owned or leased by EIC or any Subsidiary that
have not been (or are not being) handled, removed or disposed of in accordance
with applicable Environmental Laws, except where the failure to so handle,
remove or dispose would not have a Material Adverse Effect.
(r) Collective Bargaining Agreements and Labor. (i) Except as
set forth in Schedule 3(r) hereto, none of EIC or the Subsidiaries is a party to
any labor or collective bargaining agreement and there are no labor or
collective bargaining agreements (other than oral agreements for employment at
will) which pertain to employees of EIC or the Subsidiaries.
(ii) Except as set forth in Schedule 3(r) hereto, there are no
pending strikes, work stoppages, slowdowns, lockouts, arbitrations or other
material labor disputes against EIC or the Subsidiaries.
(iii) Except as set forth in Schedule 3(r) hereto, there are
no pending complaints, charges or claims against EIC or the Subsidiaries filed
with any public or governmental authority, arbitrator or court based upon the
employment or termination of employment by EIC or the Subsidiaries of any
individual.
(iv) Except as set forth in Schedule 3(r) hereto, EIC and the
Subsidiaries are in compliance with all laws, regulations and orders relating to
the employment of labor, including all such laws, regulations and orders
relating to wages, hours, WARN, collective bargaining, discrimination, civil
rights, safety and health, workers' compensation and the collection and payment
of withholding and/or social security taxes and any similar tax.
(s) ERISA. (i) Schedule 3(s) hereto sets forth all material,
written "employee benefit plans", as defined in Section 3(3) of ERISA,
maintained by EIC or the Subsidiaries or to which EIC or the Subsidiaries
contributed or are obligated to contribute thereunder for current or former
employees of EIC or the Subsidiaries (the "Company Plans"). Schedule 3(s) hereto
separately identifies each Company Plan which is a multiemployer plan, as
defined in Section 3(37) of ERISA ("Multiemployer Plan").
(ii) True, correct and complete copies of the following
documents, with respect to each of the Company Plans (other than the
Multiemployer Plans), have been made available or delivered to the Company with
respect to EIC or its Subsidiaries: (i) any plans and related trust documents,
and amendments thereto; (ii) the most recent Forms 5500; (iii) the last Internal
Revenue Service determination letter, if applicable; and (iv) summary plan
descriptions.
-12-
<PAGE> 13
(iii) The Company Plans intended to qualify under Section 401
of the Code and the trusts maintained pursuant thereto are exempt from federal
income taxation under Section 501 of the Code, and nothing has occurred with
respect to the operation of the Company Plans which could cause the loss of such
qualification or exemption or the imposition of any Liability, penalty or tax
under ERISA or the Code.
(iv) The Company Plans have been maintained in accordance with
their terms and with all provisions of the Code and ERISA (including rules and
regulations thereunder) and other applicable federal and state laws and
regulations.
(t) Brokers and Finders, Neither Eller, LOEL, Holdings, EIC or
its Subsidiaries nor any person acting on their behalf has engaged any broker,
agent or finder or incurred any liability for any brokerage fees, agents'
commissions or finders' fees in connection with the transactions contemplated
herein and each of EIC and its Subsidiaries, jointly and severally, shall
indemnify the Company with respect to any claim which any person engaged by
Eller, LOEL, Holdings, EIC or its Subsidiaries may make with respect to the
subject matter of this Agreement and the other Agreements referred to herein.
(u) Employee and Director Indebtedness. Except as set forth in
Schedule 3(v), no current or former officer, director or employee of EIC or its
Subsidiaries or any affiliate of EIC or its Subsidiaries or any person related
to any of such persons is indebted to EIC or its Subsidiaries nor is EIC or its
Subsidiaries indebted to any current or former officer, director or employee of
EIC or its Subsidiaries or any affiliate of EIC or its Subsidiaries or any
person related to any of such persons other than for current employee salary and
benefits accrued in the ordinary course of business, but in the ordinary course
of business not yet paid, all of which indebtedness (except for advances of
compensation) shall be discharged or paid prior to the Closing.
(v) No Material Interests. No shareholder, officer, employee
or agent of EIC or its Subsidiaries, nor any affiliate, spouse, ancestor or
descendant thereof, has any direct or indirect material interest in any
creditor, competitor, supplier or lessor of EIC or its Subsidiaries nor is any
such person a party to or bound by any contract or the holder of any interest in
any proprietary right of or used by EIC or its Subsidiaries.
(w) Investment Representations
(a) Investment. Each Investor is an accredited investor within
the meaning of Regulation D promulgated by the Securities and Exchange
Commission, and is acquiring its interest in the New Shares to be acquired by
Holdings for such Investor's own account, and not for the account of any other
person. Each Investor is acquiring its interest in
-13-
<PAGE> 14
the New Shares for investment and not with a view to distribution or resale
thereof except in compliance with applicable laws regulating securities.
(b) Business Experience. Each Investor is capable of
evaluating the merits and risks of Investor's direct or indirect investment in
the Company evidenced by the purchase of the New Shares by Holdings.
(c) Relation of Company. Each Investor is familiar with the
business, affairs, financial condition, and results of operations of the
Company.
(d) Access to Information. Each Investor has had the
opportunity to ask questions of, and to receive answers from, appropriate
executive officers of the Company with respect to the terms and conditions of
the transactions contemplated hereby and with respect to the business, affairs,
financial condition, and results of operations of the Company. Each Investor has
had access to such financial and other information as is necessary in order for
such Investor to make a fully-informed decision as to investment in the Company
by way of purchase of the New Shares by Holdings, and has had the opportunity to
obtain any additional information necessary to verify any of such information to
which such Investor has had access.
(e) Speculative Investment. Each Investor's investment in the
Company represented by the New Shares to be acquired by Holdings is highly
speculative in nature and is subject to a high degree of risk of loss in whole
or in part. The amount of such investment is within such Investor's risk capital
means and is not so great in relation to such Investor's total financial
resources as would jeopardize the financial needs of such Investor or such
Investor's family in the event such investment were lost in whole or in part.
(f) Registration. Each Investor may bear the economic risk of
investment for an indefinite period of time because the sale to Holdings of the
New Shares has not been registered under the Securities Act of 1933 (the "Act")
and the New Shares cannot be transferred by Holdings unless such transfer is
registered under the Act or an exemption from such registration is available.
The Company has made no agreements, covenants or undertakings whatsoever to
register the transfer of any of the Stock under the Act. The Company has made no
representations, warranties, or covenants whatsoever as to whether any exemption
from the Act, including without limitation any exemption for limited sales in
routine brokers' transactions pursuant to Rule 144, will be available; if the
exemption under Rule 144 is available at all, it will not be available until at
least two years after payment of cash for the Stock and not then unless: (i) a
public trading market then exists in the Company's common stock; (ii) adequate
information as to the Company's financial and other affairs and operations is
then available to
-14-
<PAGE> 15
the public; and (iii) all other terms and conditions of Rule 144 have been
satisfied.
(g) Public Trading. None of the Company's securities is
presently publicly traded, and the Company has made no representation, covenant
or agreement as to whether there will be a public market for any of its
securities.
(h) Tax Advice. The Company has made no warranties or
representations to such Investor with respect to the income tax consequences of
the transactions contemplated by this Agreement and such Investor is in no
manner relying on the Company or its representatives for an assessment of such
tax consequences.
4. Representations and Warranties of the Company relating to the
Company and the New Shares.
The Company hereby represents and warrants to LOEL and
Holdings that as of the date of this Agreement and immediately before Closing:
(a) Due Execution and Delivery; Validity and Enforceability.
This Agreement has been duly executed and delivered by the Company and
constitutes the legal, valid, and binding obligation of the Company enforceable
against it in accordance with its terms. No consent, approval, authorization,
regulation, qualification, designation, declaration, filing with any
governmental authority or third party is required in connection with the
consummation of the transactions contemplated by this Agreement except such as
have been obtained or made. Upon receipt of the consideration for the New Shares
as set forth in Exhibit A hereto, such shares will be duly authorized, validly
issued, fully paid and nonassessable.
(b) organization. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of Delaware
and has the corporate power to own and lease its properties and to carry on its
business as now being conducted.
(c) Capitalization of the Company. At Closing the authorized
capital stock of the Company shall consist of 10,000 shares of Common Stock, par
value $0.01 per share, 1916 of which shall be issued and outstanding, and 2,000
shares of Preferred Stock, par value $0.01 per share, none of which will be
issued and outstanding immediately following the Closing. All of the issued and
outstanding shares of Common Stock shall be validly issued, fully paid, and
nonassessable. Except as described in Schedule 4(c), the Company does not have
outstanding any convertible securities, options, warrants, scrip, rights to
subscribe, calls, or commitments of any character relating to any of its capital
stock.
(d) Assets and Liabilities of the Company. The Company is a
newly incorporated entity that does not have any
-15-
<PAGE> 16
assets or Liabilities other than those contemplated by this Agreement, the
Stockholders Agreement, the Stock Purchase Agreement, the Acquisition Agreement
and the Credit Agreement. The Company has engaged in no business other than the
transactions contemplated or referred to by such agreements.
5. Conditions to the Obligations of the Company.
Except as otherwise specifically set forth herein, all
obligations of the Company under this Agreement are subject to the fulfillment
prior to or on the Closing Date of each of the following conditions, any one or
more of which may be waived by the Company:
(a) Delivery of Certificates. Holdings shall have delivered to
the Company the certificate or certificates for the number of Shares set forth
on Exhibit A, duly endorsed to the Company or accompanied by duly executed stock
powers in favor of the Company, together with such evidence as the Company or
its counsel may reasonably require of the authority of any corporate officer
executing such endorsement or stock power.
(b) Representations and Warranties True at Closing. If the
Closing occurs subsequent to the date hereof, the representations and warranties
of LOEL and Holdings contained in this Agreement shall be made again at and as
of the Closing Date with respect to the state of facts then existing and shall
then be true in all material respects on and as of the Closing Date. LOEL and
Holdings shall have delivered to the Company a certificate to such effect with
respect to such representations and warranties.
(c) Covenants Performed. Each of the obligations of LOEL and
Holdings to be performed on or before the Closing Date pursuant to this
Agreement shall have been performed.
(d) Shareholders Agreement. Each of HFCP III, the Company,
Holdings and the other parties thereto shall have executed and delivered the
Shareholders Agreement and an executed copy shall have been delivered to the
Company.
(e) Opinion of Counsel. The Company shall have been furnished
with an opinion of Meyer, Hendricks, Victor, Ruffner & Bivens, counsel for LOEL
and Holdings, dated the Closing Date, substantially in the form set forth in
Exhibit C hereto.
(f) Delivery of Documents: Schedule of Delivery. All schedules
and exhibits to this Agreement shall have been completed and delivered to the
Company and shall be in form and content reasonably satisfactory to the Company.
All actions, proceedings, instruments, resolutions, certificates, and documents
reasonably requested by the Company to be executed and delivered in order to
carry out this Agreement, and all legal matters relating hereto, shall be
reasonably satisfactory to counsel for the Company.
-16-
<PAGE> 17
(g) Other Agreements. Except to the extent any such
agreements include the Closing hereunder as a condition to any parties
obligations thereunder, the conditions to closing under each of the Acquisition
Agreement and the Credit Agreement shall have been satisfied.
6. Conditions to the Obligations of LOEL and Holdings. Except
as otherwise specifically set forth herein, all obligations of Eller, LOEL and
Holdings under this Agreement are subject to the fulfillment and satisfaction
prior to or on the Closing Date of each of the following conditions, any one or
more of which may be waived in writing by Eller, LOEL or Holdings.
(a) Representations and Warranties True at Closing. The
representations and warranties of the Company contained in this Agreement shall
be made again at and as of the Closing Date with respect to the state of facts
then existing and shall then be true in all material respects on and as of the
Closing Date.
(b) Legal Matters. All legal matters incident to this
Agreement and the consummation of the transactions contemplated hereby shall be
reasonably satisfactory to counsel to Holdings
(c) Stockholders Agreement. Each party to the Stockholders
Agreement shall have executed and delivered such agreement.
(d) HFCP III Contribution. The Closing under the Stock
Purchase Agreement shall have occurred.
(e) Employment Agreement. Eller and the Company shall have
entered into an Employment Agreement in form and substance satisfactory to
Eller.
(f) Other Agreements. Except to the extent any such agreements
include the Closing hereunder as a condition to any party's obligations
thereunder, the conditions to closing under each of the Acquisition Agreement
and the Credit Agreement shall have been satisfied.
7. Covenants of LOEL and Holdings.
(a) Access to Properties and Records. Throughout the period
(if any) between the date of this Agreement and the Closing, LOEL and Holdings
shall give or cause to be given to the Company and its representatives full
access, during reasonable business hours to the premises, properties, contracts,
commitments, books, records, and affairs of EIC and shall provide the Company
with such financial, technical, and operating data and other information
pertaining to the business of EIC as the Company may reasonably request.
(b) Conduct of Business Prior to Closing. After the date of
this Agreement and prior to the Closing, except as
-17-
<PAGE> 18
otherwise expressly permitted or required by this Agreement or expressly
consented to by officers of the Company in writing:
(a) The business of EIC shall be conducted in the ordinary
course and in a normal, businesslike fashion; and
(b) Neither EIC, LOEL or Holdings shall take any action, or
suffer any action to be taken against it, that would cause any material adverse
change in any of the items or matters concerning EIC covered by the
representations and warranties of LOEL and Holdings contained in this Agreement.
(c) Notice of Events. Throughout the period between the date
of this Agreement and the Closing Date, LOEL and Holdings shall promptly advise
the Company of any and all material events or developments concerning financial
positions of EIC, results of operations, assets, Liabilities, or businesses or
any of the items or matters concerning EIC covered by the representations and
warranties of LOEL and Holdings contained in this Agreement.
(d) Best Efforts to Close. LOEL and Holdings shall use their
best efforts to fulfill the conditions set forth in this Agreement over which
they have control or influence and to consummate the transactions contemplated
by this Agreement on the Closing Date.
8. Indemnification
(a) LOEL and Holdings, jointly and severally, shall indemnify
the Company and hold the Company harmless from and against any and all losses,
liabilities, claims, damages, and expenses of whatever type or description,
including attorney fees and other costs of investigation and defense ("Losses")
resulting from or arising out of or in connection with (a) the inaccuracy of any
warranty or representation made by LOEL or Holdings pursuant to this Agreement
and (b) the partial or total nonperformance of any covenant of LOEL or Holdings.
It is expressly agreed that a diminution in the value of the business or
properties of EIC by reason of any of the matters described in the foregoing
clauses (a) and (b) shall be deemed a Loss to the Company for purposes of this
indemnification.
(b) The Company shall have the option to either (i) demand
payment of the Loss in cash, (ii) demand the restitution of the number of New
Shares resulting by multiplying the number of the New Shares by a fraction, at
the numerator of which there will be total amount of the Losses, and at the
denominator of which will be the New Per Share Agreed Upon Value multiplied by
the number of New Shares, or (iii) a combination of (i) and (ii).
(c) In the event that any legal proceedings shall be
instituted or any claims or demand shall be asserted by any person (including
the Company) in respect of which payment may be sought by the Company from LOEL
or Holdings (jointly and
-18-
<PAGE> 19
severally, the "Indemnifying Parties") under the provisions of this Section 8,
the Company shall promptly cause written notice of the assertion of any such
claim of which it has knowledge to be forwarded to the Indemnifying Parties and
the Indemnifying Parties shall at their own expense then defend against,
negotiate, settle or otherwise deal with any proceeding, claim or demand which
relates to any loss, liability, damage of deficiency indemnified against
hereunder; provided, however, that no settlement shall be made without the prior
written consent of the Company, which consent shall not be unreasonably withheld
or delayed; and provided further, that if the Indemnifying Parties in fact
defend the Company may nonetheless participate in any such proceeding with
counsel of its choice, provided that such participation shall be at its expense
unless the Company reasonably believes that there is a conflict of interest
between the Company and the Indemnifying Parties that renders separate
representation advisable. The parties hereto agree to cooperate fully with each
other in connection with the defense, negotiation or settlement of any such
legal proceeding, claim or demand.
The indemnity by the Indemnifying Parties contained in this
Section shall be effective only if, and to the extent that, Losses indemnified
against exceed $1,000,000. For purposes of determining Seller's indemnification
obligations hereunder, each representation and warranty set forth in Section 3
hereof shall be deemed to exclude any materiality standard, exception or
qualification stated therein, including without limitation any exceptions
therein for matters that would not or are not reasonably likely to have a
Material Adverse Effect.
9. Legends
All certificates representing the New Shares subject to the
provisions of this Agreement shall have endorsed thereon the following legend:
(a) THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
(b) Any legend required to be placed thereon by the California
Commissioner of Corporations.
(c) Any other legends required by the Shareholders Agreement
or that the Company or its counsel deem appropriate.
10. Miscellaneous.
(a) Several Obligations. Any obligations of Eller, LOEL and
Holdings pursuant to this Agreement shall be joint and several.
-19-
<PAGE> 20
(b) Expenses. The parties each will pay their own costs and
expenses, including legal and accounting expenses, relating to the transactions
contemplated by this Agreement regardless of when incurred. Any legal expenses
incurred by the Company in connection with such transactions shall be borne by
the Company.
(c) Notices. Any notice required or permitted to be given
under this Agreement shall be in writing and shall be given by personal delivery
or by certified mail with return receipt requested. Notices shall be deemed
delivered at the time of personal delivery or five days after such mailing.
Notices shall be addressed as follows:
If to the Company: Eller Media Company
2122 East Highland Avenue,
Suite 425
Phoenix, Arizona 85016
Attn: Chief Financial Officer
with copy to: Paul J. Mundie, Esq.
Timothy G. Hoxie, Esq.
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94104
If to LOEL
or Holdings: 2122 East Highland Avenue,
Suite 425
Phoenix, Arizona 85016
Attn: Karl Eller
with copy to: Paul Meyer, Esq.
Meyer, Hendricks, Victor,
Ruffner & Bivens, P.L.C.
2929 North Central Avenue
Suite 1800
Phoenix, Arizona 85012-2762
or to such other address (or with copies to such other person) as any party may
specify in a notice delivered to each other party as provided in this Section.
(d) Survival of Terms. All representations, warranties, and
covenants contained in this Agreement or in any certificate or other instrument
delivered by or on behalf of the parties pursuant hereto shall be continuous and
shall survive the Closing.
(e) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to the conflicts of laws principles thereof.
-20-
<PAGE> 21
(f) Dispute Resolution. Any dispute among the parties arising
out of or in connection with this Agreement shall be referred to and finally
resolved by arbitration in Los Angeles, California in accordance with the
Commercial Arbitration Rules of the American Arbitration Association then in
force which rules are deemed to be incorporated by reference into this Section .
A party may commence such arbitration at any time at least ten (10) calendar
days after giving notice to each of the others describing the dispute generally
and stating an intention to commence such arbitration if the matter is not
resolved within such 10-day period. The arbitrator shall be appointed by the
American Arbitration Association. An arbitral award may include monetary
damages, specific performance or other equitable relief, as the arbitrator may
determine. The running of any time periods specified herein shall be tolled
during the pendency of any arbitration, unless otherwise ordered by the
arbitrator. The parties agree that judgment may be entered upon award of the
arbitrator which shall be final and binding and may be enforced in any court of
competent jurisdiction. All costs and expenses (including, without limitation,
reasonable attorneys' fees) incurred in connection with any such arbitration
proceeding shall be borne by the party against which the decision is rendered,
or, if no decision is rendered or if the decision is a compromise, equally by
such parties.
(g) Captions. The captions in this Agreement and the attached
exhibit and schedules are for convenience only and shall not be construed so as
to change the meaning of the provisions of this Agreement or the disclosure
requirements of such exhibits or schedules.
(h) Severability. If any provision of this Agreement is held
to be unenforceable for any reason, it shall be adjusted rather than voided, if
possible, in order to achieve the intent of the parties to the extent possible.
In any event, the remainder of this Agreement shall be deemed valid and
enforceable and enforced to the fullest extent possible in a manner consistent
with the intent of the parties as evidenced by this Agreement as executed.
(i) Waiver. The waiver by any party of any term or condition
of this Agreement shall not be construed as a waiver of a subsequent breach or
failure of the same or any other term of this Agreement.
(j) Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns. Eller and LOEL may assign this Agreement to Holdings,
which will assume all rights and obligations under this Agreement. Eller and
LOEL shall not be relieved of any of their obligations pursuant to this
Agreement but shall remain jointly and severally liable vis-a-vis the Company.
-21-
<PAGE> 22
(k) Counterparts. This Agreement may be executed in one or
more separate counterparts all of which together shall constitute one and the
same instrument.
(l) Entire Agreement and Modification. This Agreement and the
attached exhibit and schedules together with the other agreements referred to
herein constitute and contain the entire agreement of the parties with respect
to the subject matter hereof and supersede any and all prior negotiations,
correspondence, understandings, and agreements among the parties. This Agreement
may only be amended by a written instrument signed by each of the parties
hereto.
(m) Further Assurances. Each of the parties hereto agrees that
subsequent to the Closing, at the request of any other party will execute and
deliver, or cause to be executed and delivered, to the other parties such
further instruments of transfer and conveyance and take such other action as may
be necessary to carry out the transfer of the Shares to the Company and the New
Shares to Holdings and the consummation of the transactions contemplated by this
Agreement.
-22-
<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
ELLER MEDIA COMPANY
By /s/ Joseph M. Niehaus
----------------------------------
Its Treasurer and Secretary
----------------------------------
LOEL, INC.
By /s/ Karl Eller
----------------------------------
Its President
----------------------------------
EM Holdings LLC
By /s/ Karl Eller
----------------------------------
Its Chairman
----------------------------------
-23-
<PAGE> 1
EXHIBIT 3.1
RESTATED CERTIFICATE OF INCORPORATION
OF
ELLER MEDIA CORPORATION
Eller Media Corporation, a corporation organized and existing under the
laws of the State of Delaware, hereby certifies as follows:
(a) The name of the corporation is Eller Media Corporation. The
original Certificate of Incorporation of the corporation was filed with the
Secretary of State of the State of Delaware on August 11, 1995, and the name
under which the corporation was originally incorporated is "Eller Media
Company."
(b) Pursuant to and in accordance with the provisions of Sections 228,
242 and 245 of the General Corporation Law of the State of Delaware, this
Restated Certificate of Incorporation restates, integrates and amends the
provisions of the Certificate of Incorporation of this corporation, and (i) the
written consent of the holders of a majority of the outstanding shares of common
stock of the corporation to such amendment and restatement has been given, and
(ii) written notice has been given to all stockholders of the corporation who
have not so consented in writing, in each case in accordance with the provisions
of Section 228 of the General Corporation Law of the State of Delaware.
(c) The text of the Certificate of Incorporation of the corporation as
heretofore amended is hereby restated and amended to read in its entirety as
follows:
ARTICLE I
The name of the corporation (which is hereinafter referred to as the
"Corporation") is:
ELLER MEDIA CORPORATION
ARTICLE II
The address of the registered office of the Corporation in the State of
Delaware is 1013 Centre Road, Wilmington, Delaware 19805-1297, County of New
Castle. The name of the registered agent at that address is Corporation Service
Company.
ARTICLE III
The purpose of the Corporation shall be to engage in any lawful act or
activity for which corporations may be organized and incorporated under the
General Corporation Law of the State of Delaware (the "GCL").
-1-
<PAGE> 2
ARTICLE IV
The total number of shares of capital stock which the Corporation shall
have authority to issue is ____________ million (______), consisting of
_________ million (_______) shares of Preferred Stock, par value $.01 per share
(hereinafter referred to as "Preferred Stock"), and ____________ million
(________) shares of Common Stock, par value $.01 per share (hereinafter
referred to as "Common Stock").
A. Shares of Preferred Stock may be issued from time to time in one or
more series as may from time to time be determined by the Board of Directors,
each of said series to be distinctly designated. The designations, voting
powers, preferences and relative, participating, optional and other special
rights, and the qualifications, limitations or restrictions thereof, if any, of
each such series may differ from those of any and all other series of Preferred
Stock at any time outstanding, and the Board of Directors is hereby expressly
granted authority to fix or alter, by resolution or resolutions, and to file a
certificate pursuant to the applicable law of the State of Delaware (hereinafter
referred to as a "Preferred Stock Designation"), the designation, number, voting
powers, preferences and relative, participating, optional and other special
rights, and the qualifications, limitations and restrictions thereof, of each
such series, including but without limiting the generality of the foregoing, the
following:
1. The distinctive designation of, and the number of shares of
Preferred Stock that shall constitute, such series, which number (except where
otherwise provided by the Board of Directors in the resolution establishing such
series) may be increased or decreased (but not below the number of shares of
such series then outstanding) from time to time by like action of the Board of
Directors;
2. The rights in respect of dividends, if any, of such series
of Preferred Stock, the extent of the preference or relation, if any, of such
dividends to the dividends payable on any other class or classes or on any other
series of the same or other class or classes of capital stock of the Corporation
and whether such dividends shall be cumulative or noncumulative;
3. The right, if any, of the holders of such series of
Preferred Stock to convert the same into, or exchange the same for, shares of
any other class or classes or of any other series of the same or any other class
or classes of capital stock of the Corporation, and the terms and conditions of
such conversion or exchange;
4. Whether or not shares of such series of Preferred Stock
shall be subject to redemption, and the redemption price or prices and the time
or times at which, and the terms and conditions on which, shares of such series
of Preferred Stock may be redeemed;
5. The rights, if any, of the holders of such series of
Preferred Stock upon the voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation or in the event of any merger or consolidation of
or sale of assets by the Corporation;
6. There terms of any sinking fund or redemption or repurchase
or purchase account, if any, to be provided for shares of such series of
Preferred Stock;
-2-
<PAGE> 3
7. The voting powers, if any, of the holders of any series of
Preferred Stock generally or with respect to any particular matter, which may be
less than, equal to or greater than one vote per share, and which may, without
limiting the generality of the foregoing, include the right, voting as a series
by itself or together with the holders of any other series of Preferred Stock or
all series of Preferred Stock as a class, to elect one or more directors of the
Corporation generally or under such specific circumstances and on such
conditions, as shall be provided in the resolution or resolutions of the Board
of Directors adopted pursuant hereto, including, without limitation, in the
event there shall have been a default in the payment of dividends on or
redemption of any one or more series of Preferred Stock; and
8. Such other powers, preferences and relative, participating,
optional and other special rights, and the qualifications, limitations and
restrictions thereof, as the Board of Directors shall determine.
B. The Common Stock shall be subject to the express terms of the
Preferred Stock and any series thereof. Except as may otherwise be provided in
this Restated Certificate of Incorporation, in a Preferred Stock Designation or
by applicable law (i) the holders of shares of Common Stock shall be entitled to
one vote for each such share upon all questions presented to the stockholders,
(ii) the holders of shares of Common Stock shall have the exclusive right to
vote for the election of directors, and (iii) holders of Preferred Stock shall
not be entitled to vote at or receive notice of any meeting of stockholders.
Upon the effectiveness of this Restated Certificate of Incorporation as
filed with the Secretary of State of the State of Delaware, each share of Common
Stock of the Corporation outstanding immediately prior to the effectiveness
hereof shall automatically be reclassified into ________ shares of Common Stock.
[Insert treatment of fractional shares]
ARTICLE V
A. Meetings of the stockholders of the Corporation may be held within
or without the State of Delaware, as the By-laws of the Corporation may provide.
Except as otherwise provided for or fixed pursuant to the provisions of Article
IV of this Restated Certificate of Incorporation relating to the rights of the
holders of any series of Preferred Stock, special meetings of stockholders of
the Corporation may be called only by the Chairman of the Board, the President
or the Board of Directors pursuant to a resolution adopted by a majority of the
then-authorized number of directors of the Corporation.
B. In addition to the powers conferred on the Board of Directors by
this Restated Certificate of Incorporation and by the GCL, and without limiting
the generality thereof, the Board of Directors is specifically authorized from
time to time, by resolution of the Board of Directors without additional
authorization by the stockholders of the Corporation, to adopt, amend or repeal
the By-laws of the Corporation, in such form and with such terms as the Board of
Directors may determine, including, without limiting the generality of the
foregoing, By-laws relating to (i) regulation of the procedure for submission by
stockholders of nominations of persons to be elected to the Board of Directors,
(ii) regulation of the attendance at annual or
-3-
<PAGE> 4
special meetings of the stockholders of persons other than holders of record or
their proxies, and (iii) regulation of the business that may properly be brought
by a stockholder of the Corporation before an annual or special meeting of
stockholders of the Corporation.
ARTICLE VI
Except as otherwise provided for or fixed pursuant to the provisions of
Article IV of this Restated Certificate of Incorporation relating to the rights
of holders of any series of Preferred Stock, no action that is required or
permitted to be taken by the stockholders of the Corporation at any annual or
special meeting of stockholders may be effected by written consent of
stockholders in lieu of a meeting of stockholders, unless the action to be
effected by written consent of stockholders and the taking of such action by
such written consent have expressly been approved in advance by the Board of
Directors.
ARTICLE VII
A. Except as otherwise provided for or fixed pursuant to the provisions
of Article IV of this Restated Certificate of Incorporation relating to the
rights of the holders of any series of Preferred Stock to elect additional
directors, the total number of directors constituting the entire Board of
Directors shall be fixed from time to time by or pursuant to a resolution passed
by the Board of Directors. Unless and except to the extent that the By-laws of
the Corporation shall so require, the election of directors of the Corporation
need not be by written ballot.
B. The directors, other than those who may be elected by the holders of
any series of Preferred Stock or any other series or class of stock as set forth
in or pursuant to this Restated Certificate of Incorporation, shall be divided
into three classes, as nearly equal in number as possible. One class of
directors shall be initially elected for a term expiring at the annual meeting
of stockholders to be held in 1997, another class shall be initially elected for
a term expiring at the annual meeting of stockholders to be held in 1998, and
another class shall be initially elected for a term expiring at the annual
meeting of stockholders to be held in 1999. Members of each such class shall
hold office until their successors are duly elected and qualified. At each
succeeding annual meeting of the stockholders of the Corporation, the successors
of the class of directors whose term expires at that meeting shall be elected by
a plurality vote of all votes cast at such meeting to hold office for a term
expiring at the annual meeting of stockholders held in the third year following
the year of their election.
C. Subject to the rights of the holders of any series of Preferred
Stock, or any other series or class of stock as set forth in or pursuant to this
Restated Certificate of Incorporation, to elect additional directors under
specified circumstances, and unless the Board of Directors otherwise determines,
vacancies resulting from death, resignation, retirement, disqualification,
removal from office or other cause, and newly-created directorships resulting
from any increase in the authorized number of directors, may be filled only by
the affirmative vote of a majority of the remaining directors then in office,
though less than a quorum of the Board of Directors, and directors so elected
shall hold office for a term expiring at the annual meeting of stockholders at
which the term of office of the class to which they have been elected expires
and until such director's successor shall have been duly elected and qualified.
Subject to the provisions of this
-4-
<PAGE> 5
Restated Certificate of Incorporation, no decrease in the number of authorized
directors constituting the whole Board of Directors shall shorten the term of
any incumbent director.
D. During any period when the holders of any series of Preferred Stock
have the right to elect additional directors as provided for or fixed pursuant
to the provisions of Article IV of this Restated Certificate of Incorporation,
then upon commencement and for the duration of the period during which such
right continues (i) the then otherwise total authorized number of directors of
the Corporation shall automatically be increased by such specified number of
directors, and the holders of such series of Preferred Stock shall be entitled
to elect the additional directors so provided for or fixed pursuant to said
provisions, and (ii) each such additional director shall serve until such
director's successor shall have been duly elected and qualified, or until such
director's right to hold such office terminates pursuant to said provisions,
whichever occurs earlier, subject to his death, disqualification, resignation,
retirement or removal. Except as otherwise provided by the Board of Directors in
the resolution or resolutions establishing such series, whenever the holders of
any series of Preferred Stock having such right to elect additional directors
are divested of such right pursuant to the provisions of such stock, the terms
of office of all such additional directors elected by the holders of such stock,
or elected to fill any vacancies resulting from death, resignation,
disqualification, retirement or removal of such additional directors, shall
forthwith terminate and the total and authorized number of directors of the
Corporation shall be reduced accordingly. Notwithstanding the foregoing,
whenever, pursuant to the provisions of Article IV of this Restated Certificate
of Incorporation, the holders of any one or more series of Preferred Stock shall
have the right, voting separately as a series or together with holders of other
such series, to elect directors at an annual or special meeting of stockholders,
the election, term of office, filling of vacancies and other features of such
directorships shall be governed by the terms of this Restated Certificate of
Incorporation and any Certificate of Designations applicable thereto, and such
directors so elected shall not be divided into classes pursuant to this Article
VII unless expressly provided by such terms.
5
<PAGE> 6
ARTICLE VIII
No director shall be personally liable to the Corporation or any of its
stockholders for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of loyalty to the
Corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii)
pursuant to Section 174 of the GCL or (iv) for any transaction from which the
director derived an improper personal benefit. Any repeal or modification of
this Article IX by the stockholders of the Corporation shall not adversely
affect any right or protection of a director of the Corporation existing at the
time of such repeal or modification with respect to acts or omissions occurring
prior to such repeal or modification.
ARTICLE IX
A. Except as may be expressly provided in this Restated Certificate of
Incorporation, the Corporation reserves the right at any time and from time to
time to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation or in a Preferred Stock Designation, and any other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted, in the manner now or hereafter prescribed herein or by
applicable law, and all rights, preferences and privileges of whatsoever nature
conferred upon stockholders, directors or any other persons whomsoever by and
pursuant to this Restated Certificate of Incorporation in its present form or as
hereafter amended are granted subject to the right reserved in this Article.
Whenever any vote of the holders of capital stock of the Corporation is
required to amend the provisions of this Restated Certificate of Incorporation,
and in addition to any other vote of holders of capital stock that is required
by law, the affirmative vote of the holders of at least two-thirds (or such
greater proportion as may be required by law) of the combined voting power of
the then-outstanding shares of capital stock of Corporation entitled to vote
generally in the election of directors (the "Voting Stock"), with respect to
such repeal, alteration or amendment, voting together as a single class, at a
duly constituted meeting of stockholders called expressly for such purpose
shall be required to repeal, alter or amend any provision of, or adopt any
provisions inconsistent with, any provision of Article V, Article VI, Article
VII, Article VIII or this Article IX of this Restated Certificate of
Incorporation.
B. In addition to any affirmative vote required by law, any amendment,
alteration or repeal of any provision of the By-laws of the Corporation may be
adopted either (i) by the Board of Directors by the affirmative vote of at
least a majority of the then-authorized number of directors or (ii) by the
stockholders by the affirmative vote of the holders of at least 66 2/3% of the
Voting Stock, voting together as a single class.
IN WITNESS WHEREOF, the undersigned has executed this Restated
Certificate of Incorporation on behalf of Eller Media Corporation this ___ day
of ________________, 1997.
By:___________________________
Name:_________________________
Title:________________________
-6-
<PAGE> 1
EXHIBIT 3.2
ELLER MEDIA CORPORATION
a Delaware corporation
BY-LAWS
ARTICLE I
OFFICES
Section 1. The principal office of the Corporation in the
State of Delaware shall be in the City of Wilmington, County of New Castle,
State of Delaware.
Section 1.2. The Corporation may also have offices at such
other places both within and without the State of Delaware as the board of
directors (the "Board of Directors") may from time to time determine or the
business of the Corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 2.1. Annual Meetings. An annual meeting of
stockholders shall be held for the election of directors at such date, time and
place, either within or without the State of Delaware, as may be designated by
resolution of the Board of Directors from time to time. Any other proper
business may be transacted at the annual meeting.
Section 2.2. Special Meetings. Special meetings of
stockholders for any purpose or purposes may be called at any time pursuant to
and in accordance with the provisions of the Restated Certificate of
Incorporation, but such special meetings may not be called by any other person
or persons. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice.
Section 2.3. Notice of Meetings. Whenever stockholders are
required or permitted to take any action at a meeting, a written notice of the
meeting shall be given that shall state the place, date and hour of the meeting
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called. Unless otherwise provided by law, the Restated Certificate of
Incorporation or these By-laws, the written notice of any meeting shall be given
not less than ten (10) nor more than sixty (60) days before the date of the
meeting to each stockholder entitled to vote at such meeting. If mailed, such
notice shall be deemed to be given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.
Section 2.4. Adjournments. Any meeting of stockholders, annual
or special, may adjourn from time to time to reconvene at the same or some other
place, and notice need not be given of any such adjourned meeting if the time
and place thereof are
<PAGE> 2
announced at the meeting at which the adjournment is taken. At the adjourned
meeting the Corporation may transact any business which might have been
transacted at the original meeting. If the adjournment is for more than thirty
(30) days, or if after the adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 2.5. Quorum. Except as otherwise provided by law, the
Restated Certificate of Incorporation or these By-laws, at each meeting of
stockholders the presence in person or by proxy of the holders of a majority in
voting power of the outstanding shares of stock entitled to vote at the meeting
shall be necessary and sufficient to constitute a quorum. In the absence of a
quorum, the stockholders so present may, by a majority in voting power thereof,
adjourn the meeting from time to time in the manner provided in Section 2.4 of
these By-laws until a quorum shall attend. Shares of its own stock belonging to
the Corporation or to another corporation, if a majority of the shares entitled
to vote in the election of directors of such other corporation is held, directly
or indirectly, by the Corporation, shall neither be entitled to vote nor be
counted for quorum purposes; provided, however, that the foregoing shall not
limit the right of the Corporation or any subsidiary of the Corporation to vote
stock, including but not limited to its own stock, held by it in a fiduciary
capacity.
Section 2.6. Organization. Meetings of stockholders shall be
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
his absence by a Vice President, or in the absence of the foregoing persons by a
chairman designated by the Board of Directors, or in the absence of such
designation by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 2.7. Voting; Proxies. Except as otherwise provided by
or pursuant to the provisions of the Restated Certificate of Incorporation, each
stockholder entitled to vote at any meeting of stockholders shall be entitled to
one vote for each share of stock held by such stockholder which has voting power
upon the matter in question. Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for such
stockholder by proxy, but no such proxy shall be voted or acted upon after three
years from its date, unless the proxy provides for a longer period. A proxy
shall be irrevocable if it states that it is irrevocable and if, and only as
long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A stockholder may revoke any proxy which is not irrevocable
by attending the meeting and voting in person or by filing an instrument in
writing revoking the proxy or by delivering a proxy in accordance with
applicable law bearing a later date to the Secretary of the Corporation. Voting
at meetings of stockholders need not be by written ballot. At all meetings of
stockholders for the election of directors a plurality of the votes cast shall
be sufficient to elect. All other elections and questions shall, unless
otherwise provided by the Restated Certificate of Incorporation, these By-laws,
the rules or regulations of any stock exchange applicable to
-2-
<PAGE> 3
the Corporation, or as otherwise provided by law or pursuant to any regulation
applicable to the Corporation, be decided by the affirmative vote of the holders
of a majority in voting power of the shares of stock of the Corporation which
are entitled to vote thereon.
Section 2.8. Fixing Date for Determination of Stockholders of
Record. In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or to express consent to corporate action in writing without a meeting, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors, and which record date: (1) in the case of determination
of stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty nor
less than ten days before the date of such meeting; (2) in the case of
determination of stockholders entitled to express consent to corporate action in
writing without a meeting, shall not be more than ten days from the date upon
which the resolution fixing the record date is adopted by the Board of
Directors; and (3) in the case of any other action, shall not be more than sixty
days prior to such other action. If no record date is fixed: (1) the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business on
the day next preceding the day on which the meeting is held; (2) the record date
for determining stockholders entitled to express consent to corporate action in
writing without a meeting, when no prior action of the Board of Directors is
required by law, shall be the first date on which a signed written consent
setting forth the action taken or proposed to be taken is delivered to the
corporation in accordance with applicable law, or, if prior action by the Board
of Directors is required by law, shall be at the close of business on the day on
which the Board of Directors adopts the resolution taking such prior action; and
(3) the record date for determining stockholders for any other purpose shall be
at the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record entitled
to notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of Directors may
fix a new record date for the adjourned meeting.
Section 2.9. List of Stockholders Entitled to Vote. The
Secretary shall prepare and make, at least ten days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the meeting, during ordinary business hours, for a period of at least
ten (10) days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof and may be inspected by any
-3-
<PAGE> 4
stockholder who is present. Except as otherwise provided by law, the stock
ledger shall be the only evidence as to who are the stockholders entitled to
examine the stock ledger, the list of stockholders or the books of the
Corporation, or to vote in person or by proxy at any meeting of stockholders.
Section 2.10. Inspectors of Election. The Corporation shall in
advance of any meeting of stockholders, appoint one or more inspectors of
election, who may be employees of the Corporation, to act at the meeting or any
adjournment thereof and to make a written report thereof. The Corporation may
designate one or more persons as alternate inspectors to replace any inspector
who fails to act. In the event that no inspector so appointed or designated is
able to act at a meeting of stockholders, the person presiding at the meeting
shall appoint one or more inspectors to act at the meeting. Each inspector,
before entering upon the discharge of his or her duties, shall take and sign an
oath to execute faithfully the duties of inspector with strict impartiality and
according to the best of his or her ability. The inspector or inspectors so
appointed or designated shall (i) ascertain the number of shares of capital
stock of the Corporation outstanding and the voting power of each such share,
(ii) determine the shares of capital stock of the Corporation represented at the
meeting and the validity of proxies and ballots, (iii) count all votes and
ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the inspectors, and
(v) certify their determination of the number of shares of capital stock of the
Corporation represented at the meeting and such inspectors' count of all votes
and ballots. Such certification and report shall specify such other information
as may be required by law. In determining the validity and counting of proxies
and ballots cast at any meeting of stockholders of the Corporation, the
inspectors may consider such information as is permitted by applicable law. No
person who is a candidate for an office at an election may serve as an inspector
at such election.
Section 2.11. Conduct of Meetings. The date and time of the
opening and the closing of the polls for each matter upon which the stockholders
will vote at a meeting shall be announced at the meeting by the person presiding
over the meeting. The Board of Directors may adopt by resolution such rules and
regulations for the conduct of the meeting of stockholders as it shall deem
appropriate. Except to the extent inconsistent with such rules and regulations
as adopted by the Board of Directors, the chairman of any meeting of
stockholders shall have the right and authority to prescribe such rules,
regulations and procedures and to do all such acts as, in the judgment of such
chairman, are appropriate for the proper conduct of the meeting. Such rules,
regulations or procedures, whether adopted by the Board of Directors or
prescribed by the chairman of the meeting, may include, without limitation, the
following: (i) the establishment of an agenda or order of business for the
meeting; (ii) rules and procedures for maintaining order at the meeting and the
safety of those present; (iii) limitations on attendance at or participation in
the meeting to stockholders of record of the corporation, their duly authorized
and constituted proxies or such other persons as the chairman of the meeting
shall determine; (iv) restrictions on entry to the meeting after the time fixed
for the commencement thereof; and (v) limitations on the time allotted to
questions or comments by participants. Unless and to the extent determined by
the Board of Directors or the chairman of the meeting, meetings of
-4-
<PAGE> 5
stockholders shall not be required to be held in accordance with the rules of
parliamentary procedure.
-5-
<PAGE> 6
Section 2.12. Notice of Stockholder Business and Nominations.
(A) Annual Meetings of Stockholders. (1) Nominations of
persons for election to the Board of Directors and the proposal of business to
be considered by the stockholders may be made at an annual meeting of
stockholders (a) pursuant to the Corporation's notice of meeting, (b) by or at
the direction of the Board of Directors or (c) by any stockholder of the
Corporation who was a stockholder of record at the time of giving of notice
provided for in this By-law, who is entitled to vote at the meeting and complies
with the notice procedures set forth in this By-law.
(2) For nominations or other business to be properly
brought before an annual meeting by a stockholder pursuant to clause (c) of
paragraph (A)(1) of this By-law, the stockholder must have given timely notice
thereof in writing to the Secretary of the Corporation and such other business
must otherwise be a proper matter for stockholder action. To be timely, a
stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the Corporation not later than the close of business on the
60th day nor earlier than the close of business on the 90th day prior to the
first anniversary of the preceding year's annual meeting; provided, however,
that in the event that the date of the annual meeting is more than thirty (30)
days before or more than sixty (60) days after such anniversary date, notice by
the stockholder to be timely must be so delivered not earlier than the close of
business on the 90th day prior to such annual meeting and not later than the
close of business on the later of the 60th day prior to such annual meeting or
the 10th day following the day on which public announcement of the date of such
meeting is first made by the Corporation. In no event shall the public
announcement of an adjournment of an annual meeting commence a new time period
for the given of a stockholder's notice as described above. Such stockholder's
notice shall set forth (a) as to each person whom the stockholder proposes to
nominate for election or re-election as a director all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors in an election contest, or is otherwise required, in each
case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and Rule 14a-11 thereunder (including such person's
written consent to being named in the proxy statement as a nominee and to
serving as a director if elected); (b) as to any other business that the
stockholder proposes to bring before the meeting, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
stockholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (c) as to the stockholder giving the notice and the beneficial owner,
if any, on whose behalf the nomination or proposal is made (i) the name and
address of such stockholder, as they appear on the Corporation's books, and of
such beneficial owner and (ii) the class and number of shares of the Corporation
which are owned beneficially and of record by such stockholder and such
beneficial owner.
(3) Notwithstanding anything in the second sentence
of paragraph (A)(2) of this By-law to the contrary, in the event that the number
of directors to be elected to the Board of Directors of the Corporation is
increased and there is no public
-6-
<PAGE> 7
announcement by the Corporation naming all of the nominees for director or
specifying the size of the increased Board of Directors at least 70 days prior
to the first anniversary of the preceding year's annual meeting, a stockholder's
notice required by this By-law shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the Secretary at the principal executive offices of the
Corporation not later than the close of business on the 10th day following the
day on which such public announcement is first made by the Corporation.
(B) Special Meetings of Stockholders. Only such business shall
be conducted at a special meeting of stockholders as shall have been brought
before the meeting pursuant to the Corporation's notice of meeting. Nominations
of persons for election to the Board of Directors may be made at a special
meeting of stockholders at which directors are to be elected pursuant to the
Corporation's notice of meeting (a) by or at the direction of the Board of
Directors or (b) provided that the Board of Directors has determined that
directors shall be elected at such meeting, by any stockholder of the
Corporation who is a stockholder or record at the time of giving of notice
provided for in this By-law, who shall be entitled to vote at the meeting and
who complies with the notice procedures set forth in this By-law. In the event
the Corporation calls a special meeting of stockholders for the purpose of
electing one or more directors to the Board of Directors, any such stockholder
may nominate a person or persons (as the case may be) for election to such
position(s) as specified in the Corporation's notice of meeting, if the
stockholder's notice required by paragraph (A)(2) of this By-law shall be
delivered to the Secretary at the principal executive offices of the Corporation
not earlier than the close of business on the 90th day prior to such special
meeting and not later than the close of business on the later of the 60th day
prior to such special meeting, or the 10th day following the day on which public
announcement if first made of the date of the special meeting and of the
nominees proposed by the Board of Directors to be elected at such meeting. In no
event shall the public announcement of an adjournment of a special meeting
commence a new time period for the giving of a stockholder's notice as described
above.
(C) General. (1) Only such persons who are nominated in
accordance with the procedures set forth in this By-law shall be eligible to
serve as directors and only such business shall be conducted at a meeting of
stockholders as shall have been brought before the meeting in accordance with
the procedures set forth in this By-law. Except as otherwise provided by law,
the Restated Certificate of Incorporation or these By-laws, the Chairman of the
meeting shall have the power and duty to determine whether a nomination or any
business proposed to be brought before the meeting was made or proposed, as the
case may be, in accordance with the procedures set forth in this By-law and, if
any proposed nomination or business is not in compliance with this By-law, to
declare that such defective proposal or nomination shall be disregarded.
(2) For purposes of this By-law, "public
announcement" shall mean disclosure in a press release reported by the Dow Jones
News Service, Associated Press or comparable national news service or in a
document publicly filed by the
-7-
<PAGE> 8
Corporation with the Securities and Exchange Commission pursuant to Section 13,
14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this
By-law, a stockholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this By-law. Nothing in this By-Law shall be deemed to
affect any rights (i) of stockholders to request inclusion of proposals in the
Corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(ii) of the holders of any series of Preferred Stock to elect directors under
specified circumstances.
ARTICLE III
BOARD OF DIRECTORS
Section 3.1. Number; Qualifications. The Board of Directors
shall consist of one or more members, the number thereof to be determined from
time to time by resolution of the Board of Directors. Directors need not be
stockholders.
Section 3.2. Election; Resignation; Vacancies. At each annual
meeting of stockholders, the stockholders shall elect directors each of whom
shall hold office for a term of three (3) years or until a successor is elected
and qualified, in accordance with the Restated Certificate of Incorporation. Any
director may resign at any time upon written notice to the Corporation. Any
newly created directorship or any vacancy occurring in the Board of Directors
for any cause may be filled in accordance with the Restated Certificate of
Incorporation.
Section 3.3. Regular Meetings. Regular meetings of the Board
of Directors may be held at such places within or without the State of Delaware
and at such times as the Board of Directors may from time to time determine. The
first meeting of each newly elected Board of Directors shall be held at the same
place as, and immediately after, the annual meeting of stockholders. No notice
of the meeting shall be necessary to the newly elected directors in order
legally to constitute the meeting, provided a quorum shall be present. If the
meeting is not held at such time and place, or in the event a unanimous written
consent of stockholders is filed in lieu of the annual meeting of stockholders,
the meeting may be held at such time and place as is specified in a notice given
as provided below for special meetings of the Board of Directors, or as
specified in a written waiver signed by all of the directors.
Section 3.4. Special Meetings. Special meetings of the Board
of Directors may be held at any time or place within or without the State of
Delaware whenever called by the Chairman of the Board or the President or by the
Secretary upon the written request of two (2) directors. Written notice of
special meetings of the Board shall be given to each director at least
twenty-four hours before the time of the meeting. Attendance at a meeting by a
director shall constitute a conclusive waiver of any objections made by any
person
-8-
<PAGE> 9
with respect to the notice given to such director unless such attendance is
solely for the purpose of objection.
Section 3.5. Telephonic Meetings Permitted. Members of the
Board of Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
By-law shall constitute presence in person at such meeting.
Section 3.6. Quorum; Vote Required for Action. At all meetings
of the Board of Directors a majority of the whole Board of Directors shall
constitute a quorum for the transaction of business. Except in cases in which
the Restated Certificate of Incorporation, these By-laws or applicable law
otherwise provides, the vote of a majority of the directors present at a meeting
at which a quorum is present shall be the act of the Board of Directors. If a
quorum if not present at any meeting of the Board of Directors, the directors
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum is present. At such adjourned
meeting at which a quorum is present or represented any business may be
transacted that might have been transacted at the meeting as originally
notified.
Section 3.7. Organization. Meetings of the Board of Directors
shall be presided over by the Chairman of the Board, if any, or in his absence
by the Vice Chairman of the Board, if any, or in his absence by the President,
or in their absence by a chairman chosen at the meeting. The Secretary shall act
as secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
Section 3.8. Action by Written Consent of Directors. Unless
otherwise restricted by the Restated Certificate of Incorporation or these
By-laws, any action required or permitted to be taken at any meeting of the
Board of Directors, or of any committee thereof, may be taken without a meeting
if all members of the Board of Directors or such committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of proceedings of the Board of Directors or such committee.
Section 3.9. Powers. The business of the Corporation shall be
managed by its Board, which may exercise all such powers of the Corporation and
do all such lawful acts and things as are not by statute or by the Restated
Certificate of Incorporation or by these By-laws directed or required to be
exercised or done by the stockholders.
Section 3.10. Compensation of Directors. The directors may be
paid their expenses, if any, of attending meetings of the Board and may be paid
a fixed sum for attendance at each meeting of the Board or stated salaries as
directors. No such payment shall preclude any director from serving the
Corporation in any other capacity and
-9-
<PAGE> 10
receiving compensation therefor. Members of special or standing committees may
similarly be allowed compensation for attending committee meetings.
-10-
<PAGE> 11
ARTICLE IV
COMMITTEES
Section 4.1. Committees. The Board of Directors may designate
one or more committees, each committee to consist of one or more of the
directors of the Corporation. The Board of Directors may designate one or more
directors as alternate members of any committee, who may replace any absent or
disqualified member at any meeting of the committee. In the absence or
disqualification of a member of the committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board of
Directors to act at the meeting in place of any such absent or disqualified
member. Any such committee, to the extent permitted by law and to the extent
provided in the resolution of the Board of Directors, shall have and may
exercise all the powers and authority of the Board of Directors in the
management of the business and affairs of the corporation, and may authorize the
seal of the corporation to be affixed to all papers which may require it. The
committee shall keep regular minutes of their proceedings and report the same to
the Board when required.
Section 4.2. Committee Rules. Unless the Board of Directors
otherwise provides, each committee designated by the Board of Directors may
make, alter and repeal rules for the conduct of its business. In the absence of
such rules each committee shall conduct its business in the same manner as the
Board of Directors conducts its business pursuant to Article III of these
By-laws.
ARTICLE V
NOTICES
Section 5.1. Manner of Notice. Except as otherwise provided
herein, notices to directors and stockholders shall be in writing and delivered
personally or mailed to the directors or stockholders at their addresses
appearing on the books of the Corporation. Notice to directors may be given by
telegram, telegraph, telecopier, telephone or other means of electronic
transmission.
Section 5.2. Waiver of Notice. Any notice required to be given
under the provisions of applicable law or of the Restated Certificate of
Incorporation or of these By-laws may be waived in writing, either before or
after the event requiring such notice if the waiver is signed by the person or
persons entitled to said notice.
ARTICLE VI
OFFICERS
-11-
<PAGE> 12
Section 6.1. Officers; Election; Qualifications; Resignation;
Removal; Vacancies. The Board of Directors shall elect a President and
Secretary, and it may, if it so determines, choose a Chairman of the Board and a
Vice Chairman of the Board from among its members. The Board of Directors may
also choose one or more Vice Presidents, one or more Assistant Secretaries, a
Treasurer and one or more Assistant Treasurers. Each such officer shall hold
office until the first meeting of the Board of Directors after the annual
meeting of stockholders next succeeding his election, and until his successor is
elected and qualified or until his earlier resignation or removal. Any officer
may resign at any time upon written notice to the corporation. The Board of
Directors may remove any officer with or without cause at any time, but such
removal shall be without prejudice to the contractual rights of such officer, if
any, with the Corporation. Any number of offices may be held by the same person.
Section 6.2. Powers and Duties of Officers. The officers of
the Corporation shall have such powers and duties in the management of the
Corporation as may be prescribed in a resolution by the Board of Directors and,
to the extent not so provided, as generally pertain to their respective offices,
subject to the control of the Board of Directors. The Board of Directors may
require any officer, agent or employee to give security for the faithful
performance of his duties.
Section 6.3. Executive Officers. The Board of Directors at its
first meeting after each annual meeting of stockholders (or pursuant to a
unanimous consent in lieu thereof) shall choose a Chairman of the Board from
among the directors, and shall choose a President, one or more Vice Presidents,
a Secretary and a Treasurer, none of whom need be a member of the Board.
Section 6.4. Other Officers. The Board of Directors may
appoint such other officers and agents as it shall deem necessary who shall hold
their officers for such terms and shall exercise such powers and perform such
duties as are determined from time to time by the Board of Directors.
Section 6.5. Compensation. The compensation of all officers
and agents of the Corporation shall be fixed by the Board of Directors.
Section 6.6. Term of Office. The officers of the Corporation
shall hold office until their successors are chosen and qualify. Any officer
elected or appointed by the Board of Directors may be removed, with or without
cause, at any time by the affirmative vote of a majority of the Board. Any
vacancy occurring in any office of the Corporation by death, resignation,
removal or otherwise shall be filled by the Board of Directors.
Section 6.7. Chairman of the Board. The Chairman of the Board
shall be the chief executive officer of the Corporation, shall preside at all
meetings of the stockholders and the Board of Directors, shall be ex officio a
member of all standing committees and shall have general and active management
of the business of the Corporation, as that authority is delegated to him by the
Board.
-12-
<PAGE> 13
Section 6.8. Powers of the Chairman. The Chairman of the Board
may execute bonds, mortgages and other contracts requiring a seal, under the
seal of the Corporation, except where required or permitted by law to be
otherwise signed and executed and except where the signing and execution thereof
shall be delegated by the Board of Directors to some other officer or agent of
the Corporation. Unless the Board of Directors specifies otherwise, the Chairman
of the Board shall have authority to vote (or grant a proxy with respect to) any
securities held or owned by the Corporation.
Section 6.9. President. The President shall be the chief
operating officer of the Corporation and shall supervise the day-to-day
operation of the business of the Corporation, as that authority is delegated to
him by the Board of Directors. He may execute all bonds, mortgages and other
contracts in the ordinary course of the business of the Corporation, except
where required or permitted by law to be otherwise signed and executed. Unless
the Board specifies otherwise, the President shall, in the absence or disability
of the Chairman of the Board, perform the duties and exercise the powers of the
Chairman of the Board.
Section 6.10. Vice Presidents. The Vice Presidents in the
order of their seniority, unless otherwise determined by the Board or the
Chairman of the Board, shall, in the absence or disability of the President
perform the duties and exercise the powers of the President. They shall perform
such other duties and have such other powers as the Board may from time to time
prescribe.
Section 6.11. Secretary. The Secretary shall attend all
meetings of the Board and all meetings of the stockholders and record all the
proceedings of such meetings in a book or books to be kept for that purpose and
shall perform like duties for the standing committees when required. The
Secretary shall give, or cause to be given, required notices of all meetings of
the stockholders and the Board, and shall perform such other duties as may be
prescribed by the Board or Chairman of the Board, under whose supervision he
shall be. The Secretary shall keep in safe custody the seal of the Corporation,
if any, and, if there is a seal of the Corporation, when authorized by the
Board, shall affix the same to any instrument requiring it and, when so affixed,
it may be attested by the Secretary's signature or by the signature of the
Treasurer or an Assistant Secretary. The Secretary shall perform such other
duties and have such other powers as the Board may from time to time prescribe.
Section 6.12. Assistant Secretaries. The Assistant Secretaries
in the order of their seniority, unless otherwise determined by the Board,
shall, in the absence or disability of the Secretary, perform the duties and
exercise the powers of the Secretary. They shall perform such other duties and
have such other powers as the Board may from time to time prescribe.
Section 6.13. Treasurer. The Treasurer shall have the custody
of the corporate funds and securities, shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation, and shall
deposit all monies and
-13-
<PAGE> 14
other valuable effects in the name and to the credit of the Corporation in such
depositories as may be designated by the Board. The Treasurer shall perform such
other duties and have such other powers as the Board may from time to time
prescribe.
Section 6.14. Powers of Treasurer. The Treasurer shall
disburse the funds of the Corporation as may be ordered by the Board, taking
proper vouchers for such disbursements, and shall render to the Chairman of the
Board and the Board, at its regular meetings, or when the Board so requires, an
account of all transactions of the Treasurer and of the financial condition of
the Corporation.
Section 6.15. Bond. If required by the Board, the Treasurer
shall give the Corporation a bond (which shall be renewed every six years) in
such sum and with such surety or sureties as shall be satisfactory to the Board
for the faithful performance of the duties of the office of Treasurer and for
the restoration to the Corporation, in case of the Treasurer's death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under the
Treasurer's control belonging to the Corporation.
Section 6.16. Assistant Treasurer. The Assistant Treasurers in
the order of their seniority, unless otherwise determined by the Board, shall,
in the absence or disability of the Treasurer, perform the duties and exercise
the powers of the Treasurer. They shall perform such other duties and have such
other powers as the Board may from time to time prescribe.
ARTICLE VII
STOCK
Section 7.1. Certificates. Every holder of stock shall be
entitled to have a certificate signed by or in the name of the corporation by
the Chairman or Vice Chairman of the Board of Directors, if any, or the
President or a Vice President, and by the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary, of the Corporation certifying the
number of shares owned by such stockholder in the Corporation. Any of or all the
signatures on the certificate may be a facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been placed
upon a certificate shall have ceased to be such officer, transfer agent, or
registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if he were such officer, transfer agent, or registrar at
the date of issue.
Section 7.2. Lost, Stolen or Destroyed Stock Certificates;
Issuance of New Certificates. The Corporation may issue a new certificate of
stock in the place of any certificate theretofore issued by it, alleged to have
been lost, stolen or destroyed, and the Corporation may require the owner of the
lost, stolen or destroyed certificate, or his legal representative, to give the
corporation a bond sufficient to indemnify it against any claim
-14-
<PAGE> 15
that may be made against it on account of the alleged loss, theft or destruction
of any such certificate or the issuance of such new certificate.
ARTICLE VIII
INDEMNIFICATION
Section 8.1. Right to Indemnification. The Corporation shall
indemnify and hold harmless, to the fullest extent permitted by applicable law
as it presently exists or may hereafter be amended, any person (an "Indemnitee")
who was or is made or is threatened to be made a party or is otherwise involved
in any action, suit or proceeding, whether civil, criminal, administrative or
investigative (a "proceeding"), by reason of the fact that he, or a person for
whom he is the legal representative, is or was a director or officer of the
corporation or, while a director or officer of the Corporation, is or was
serving at the written request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
(including attorneys' fees) reasonably incurred by such Indemnitee.
Notwithstanding the preceding sentence, except as otherwise provided in Section
8.3, the Corporation shall be required to indemnify an Indemnitee in connection
with a proceeding (or part thereof) commenced by such Indemnitee only if the
commencement of such proceeding (or part thereof) by the Indemnitee was
authorized by the Board of Directors.
Section 8.2. Prepayment of Expenses. The Corporation shall pay
the expenses (including attorneys' fees) incurred by an Indemnitee in defending
any proceeding in advance of its final disposition, provided, however, that, to
the extent required by law, such payment of expenses in advance of the final
disposition of the proceeding shall be made only upon receipt of an undertaking
by the Indemnitee to repay all amounts advanced if it should be ultimately
determined that the Indemnitee is not entitled to be indemnified under this
Article VIII or otherwise.
Section 8.3. Claims. If a claim for indemnification or payment
of expenses under this Article VIII is not paid in full within sixty (60) days
after a written claim therefor by the Indemnitee has been received by the
Corporation, the Indemnitee may file suit to recover the unpaid amount of such
claim and, if successful in whole or in part, shall be entitled to be paid the
expense of prosecuting such claim. In any such action the Corporation shall have
the burden of proving that the Indemnitee is not entitled to the requested
indemnification or payment of expenses under applicable law.
Section 8.4. Nonexclusivity of Rights. The rights conferred on
any Indemnitee by this Article VIII shall not be exclusive of any other rights
which such Indemnitee may have or hereafter acquire under any statute, provision
of the Restated Certificate of Incorporation, these By-laws, agreement, vote of
stockholders or disinterested directors or otherwise.
-15-
<PAGE> 16
Section 8.5. Other Sources. The Corporation's obligation, if
any, to indemnify or to advance expenses to any Indemnitee who was or is serving
at its request as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust, enterprise or nonprofit entity shall be
reduced by any amount such Indemnitee may collect as indemnification or
advancement of expenses from such other corporation, partnership, joint venture,
trust, enterprise or non-profit enterprise.
Section 8.6. Amendment or Repeal. Any repeal or modification
of the foregoing provisions of this Article VIII shall not adversely affect any
right or protection hereunder of any Indemnitee in respect of any act or
omission occurring prior to the time of such repeal or modification.
Section 8.7. Other Indemnification and Prepayment of Expenses.
This Article VIII shall not limit the right of the Corporation, to the extent
and in the manner permitted by law, to indemnify and to advance expenses to
persons other than Indemnitees when and as authorized by appropriate corporate
action.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Fiscal Year. The fiscal year of the Corporation
shall be determined by resolution of the Board of Directors.
Section 9.2. Seal. The corporate seal shall have the name of
the Corporation inscribed thereon and shall be in such form as may be approved
from time to time by the Board of Directors.
Section 9.3. Waiver of Notice of Meetings of Stockholders,
Directors and Committees. Any written waiver of notice, signed by the person
entitled to notice, whether before or after the time stated therein, shall be
deemed equivalent to notice. Attendance of a person at a meeting shall
constitute a waiver of notice of such meeting, except when the person attends a
meeting for the express purpose of objecting, at the beginning of the meeting,
to the transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at nor the purpose of any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
Section 9.4. Interested Directors; Quorum. No contract or
transaction between the Corporation and one or more of its directors or
officers, or between the corporation and any other corporation, partnership,
association, or other organization in which one or more of its directors or
officers are directors or officers, or have a financial interest, shall be void
or voidable solely for this reason, or solely because the director or officer is
present at or participates in the meeting of the Board of Directors or committee
thereof which authorizes the contract or transaction, or solely because his or
their votes are
-16-
<PAGE> 17
counted for such purpose, if: (1) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (2) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (3) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
Section 9.5. Form of Records. Any records maintained by the
Corporation in the regular course of its business, including its stock ledger,
books of account, and minute books, may be kept on, or be in the form of, punch
cards, magnetic tape, photographs, microphotographs, or any other information
storage device, provided that the records so kept can be converted into clearly
legible form within a reasonable time.
Section 9.6. Amendment. These By-laws may be altered or
repealed, and new made, as provided in the Restated Certificate of
Incorporation.
-17-
<PAGE> 1
EXHIBIT 4.1
[CONFORMED COPY]
************************************************************
ELLER MEDIA COMPANY,
as Borrower
and
ELLER MEDIA CORPORATION,
as Parent Guarantor
and
SUBSIDIARY GUARANTORS
referred to herein
-----------------------------
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of November 19, 1996
------------------------------
THE CHASE MANHATTAN BANK,
as Administrative Agent
************************************************************
<PAGE> 2
TABLE OF CONTENTS
This Table of Contents is not part of the Agreement to which it is
attached but is inserted for convenience of reference only.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Definitions and Accounting Matters.............................. 2
1.01 Certain Defined Terms.......................................... 2
1.02 Accounting Terms and Determinations............................ 26
1.03 Classes and Types of Loans..................................... 27
Section 2. Commitments, Loans, Notes and Prepayments....................... 27
2.01 Loans.......................................................... 27
2.02 Borrowings..................................................... 30
2.03 Letters of Credit.............................................. 30
2.04 Changes of Commitments......................................... 36
2.05 Commitment Fee................................................. 38
2.06 Lending Offices................................................ 38
2.07 Several Obligations; Remedies Independent...................... 38
2.08 Notes.......................................................... 38
2.09 Optional Prepayments and Conversions or
Continuations of Loans........................................ 40
2.10 Mandatory Prepayments.......................................... 41
Section 3. Payments of Principal and Interest.............................. 43
3.01 Repayment of Loans............................................. 43
3.02 Interest....................................................... 45
Section 4. Payments; Pro Rata Treatment; Computations; Etc................. 46
4.01 Payments....................................................... 46
4.02 Pro Rata Treatment............................................. 47
4.03 Computations................................................... 47
4.04 Minimum Amounts................................................ 48
4.05 Certain Notices................................................ 48
4.06 Non-Receipt of Funds by the Administrative Agent............... 49
4.07 Sharing of Payments, Etc....................................... 51
Section 5. Yield Protection, Etc........................................... 52
5.01 Additional Costs............................................... 52
5.02 Limitation on Types of Loans................................... 54
5.03 Illegality..................................................... 55
5.04 Treatment of Affected Loans.................................... 55
5.05 Compensation................................................... 56
5.06 Additional Costs in Respect of Letters of Credit............... 57
5.07 U.S. Taxes..................................................... 58
5.08 Replacement of Lenders......................................... 60
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 6. Guarantee....................................................... 61
6.01 The Guarantee.................................................. 61
6.02 Obligations Unconditional...................................... 61
6.03 Reinstatement.................................................. 62
6.04 Subrogation.................................................... 63
6.05 Remedies....................................................... 63
6.07 Continuing Guarantee........................................... 63
6.08 Rights of Contribution......................................... 63
6.09 General Limitation on Guarantee Obligations.................... 64
Section 7. Conditions Precedent............................................ 65
7.01 Initial Extension of Credit ................................... 65
7.02 Initial and Subsequent Extensions of Credit.................... 67
Section 8. Representations and Warranties.................................. 68
8.01 Corporate Existence............................................ 68
8.02 Financial Condition............................................ 68
8.03 Litigation..................................................... 69
8.04 No Breach...................................................... 69
8.05 Action......................................................... 70
8.06 Approvals...................................................... 70
8.07 Use of Credit.................................................. 70
8.08 ERISA.......................................................... 71
8.09 Taxes.......................................................... 71
8.10 Investment Company Act......................................... 71
8.11 Public Utility Holding Company Act............................. 71
8.12 Material Agreements and Liens.................................. 71
8.13 Environmental Matters.......................................... 72
8.14 Capitalization................................................. 73
8.15 Subsidiaries, Etc.............................................. 74
8.16 True and Complete Disclosure................................... 75
Section 9. Covenants of the Company and the Parent
Guarantor..................................................... 76
9.01 Financial Statements Etc....................................... 76
9.02 Litigation..................................................... 80
9.03 Existence, Etc................................................. 80
9.04 Insurance...................................................... 81
9.05 Prohibition of Fundamental Changes............................. 81
9.06 Limitation on Liens............................................ 82
9.07 Indebtedness................................................... 84
9.08 Investments.................................................... 84
9.09 Dividend Payments.............................................. 85
9.10 Certain Financial Covenants.................................... 85
9.11 Capital Expenditures........................................... 86
9.12 Interest Rate Protection Agreements............................ 86
9.13 Lines of Business.............................................. 86
9.14 Transactions with Affiliates................................... 86
9.15 Use of Proceeds................................................ 87
9.16 Certain Obligations Respecting Subsidiaries.................... 87
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
9.17 Ownership of the Company....................................... 88
9.18 Special Purpose Company........................................ 88
Section 10. Events of Default.............................................. 88
Section 11. The Administrative Agent....................................... 93
11.01 Appointment, Powers and Immunities............................ 93
11.02 Reliance by Administrative Agent.............................. 94
11.03 Defaults...................................................... 94
11.04 Rights as a Lender............................................ 95
11.05 Indemnification............................................... 95
11.06 Non-Reliance on Administrative Agent and Other
Lenders...................................................... 96
11.07 Failure to Act................................................ 96
11.08 Resignation or Removal of Administrative Agent................ 96
11.09 Consents under Other Loan Documents........................... 97
Section 12. Miscellaneous.................................................. 97
12.01 Waiver........................................................ 97
12.02 Notices....................................................... 98
12.03 Expenses, Etc................................................. 99
12.04 Amendments, Etc...............................................100
12.05 Successors and Assigns........................................101
12.06 Assignments and Participations................................101
12.07 Survival......................................................105
12.08 Captions......................................................105
12.09 Counterparts..................................................105
12.10 Governing Law; Submission to Jurisdiction.....................105
12.11 Waiver of Jury Trial..........................................106
12.12 Treatment of Certain Information;
Confidentiality..............................................106
12.13 Credit Lyonnais...............................................107
</TABLE>
(iii)
<PAGE> 5
ANNEXES
ANNEX 1 - Loan Amounts
ANNEX 2 - Existing Letters of Credit
SCHEDULES
SCHEDULE I - Material Agreements and Liens
SCHEDULE II - Equity Rights
SCHEDULE III - Subsidiaries
SCHEDULE IV - Environmental Notices
EXHIBITS
EXHIBIT A-1 - Form of Revolving Credit Note
EXHIBIT A-2 - Form of Tranche A Term Loan Note
EXHIBIT A-3 - Form of Tranche B Term Loan Note
EXHIBIT B - Form of Security Agreement
EXHIBIT C - Form of Opinion of Counsel to the Obligors
EXHIBIT D - Form of Opinion of Special New York Counsel to Chase
EXHIBIT E - Form of Confidentiality Agreement
EXHIBIT F - Form of Assignment and Acceptance
(iv)
<PAGE> 6
AMENDED AND RESTATED CREDIT AGREEMENT dated as of November 19, 1996,
between:
ELLER MEDIA COMPANY (formerly named EH&F, Inc.), a corporation duly
organized and validly existing under the laws of the State of Delaware
(the "Company");
ELLER MEDIA CORPORATION (formerly named EMC Group, Inc. and, prior
to being named EMC Group, Inc., named Eller Media Company), a corporation
duly organized and validly existing under the laws of the State of
Delaware (the "Parent Guarantor");
each of the Subsidiaries of the Company identified under the caption
"SUBSIDIARY GUARANTORS" on the signature pages hereto and each Subsidiary
of the Company that becomes a "Subsidiary Guarantor" on or after the date
hereof pursuant to Section 9.16(a) hereof (individually, a "Subsidiary
Guarantor" and, collectively, the "Subsidiary Guarantors" and, together
with the Parent Guarantor, the "Guarantors"; and the Guarantors
collectively with the Company, the "Obligors");
each of the lenders that is a signatory hereto identified under the
caption "LENDERS" on the signature pages hereto and each lender that
becomes a "Lender" after the date hereof pursuant to Section 12.06(b)
hereof (individually, a "Lender" and, collectively, the "Lenders"); and
THE CHASE MANHATTAN BANK (successor by merger to The Chase Manhattan
Bank (National Association)), as administrative agent for the Lenders (in
such capacity, together with its successors in such capacity, the
"Administrative Agent").
The Company, the Parent Guarantor, the Subsidiary Guarantors, all or
some of the Lenders (in such capacity, the "Existing Lenders") and the
Administrative Agent are parties to a Credit Agreement dated as of August 18,
1995 (as heretofore amended and in effect on the date of this Amended and
Restated Credit Agreement, the "Existing Credit Agreement") providing for loans
to be made to, and letters of credit to be issued for account of, the Company in
the aggregate principal and/or face amount not exceeding $440,000,000 at any one
time outstanding. The parties hereto desire to amend and restate the Existing
Credit Agreement as hereinafter set forth to increase the credit available to
the Company thereunder to an amount not exceeding $550,000,000.
Credit Agreement
<PAGE> 7
- 2 -
Accordingly, the parties hereto agree that, effective as of the date
(the "Effective Date") the Administrative Agent gives notice to the Company and
the Lenders that the conditions precedent specified in Section 7 hereof have
been met to its satisfaction or waived as provided in Section 12.04 hereof, the
Existing Credit Agreement shall be amended and restated to read in its entirety
as follows:
Section 1. Definitions and Accounting Matters.
1.01 Certain Defined Terms. As used herein, the following terms
shall have the following meanings (all terms defined in this Section 1.01 or in
other provisions of this Agreement in the singular to have the same meanings
when used in the plural and vice versa):
"Acquisition-Related Expenditures" shall mean, for any period,
expenditures by the Parent Guarantor or any of its Consolidated Subsidiaries to
acquire (but not construct) billboards or other outdoor advertising signs or
structures, by purchase of capital stock (by merger, consolidation or otherwise)
or purchase of assets, but excluding any such transaction resulting in a
Subsidiary of the Parent Guarantor that is not a Wholly Owned Subsidiary of the
Guarantor.
"Administrative Agent" shall have the meaning assigned to such term
in the caption hereof.
"Administrative Questionnaire" shall mean an
administrative questionnaire in a form supplied by the
Administrative Agent.
"Affiliate" shall mean any Person that directly or indirectly
controls, or is under common control with, or is controlled by, the Parent
Guarantor and, if such Person is an individual, any member of the immediate
family (including parents, spouse, children and siblings) of such individual and
any trust whose principal beneficiary is such individual or one or more members
of such immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), provided that, in any
event, any Person that owns directly or indirectly securities having 5% or more
of the voting power for the election of
Credit Agreement
<PAGE> 8
- 3 -
directors or other governing body of a corporation or 5% or more of the
partnership or other ownership interests of any other Person (other than as a
limited partner of such other Person) will be deemed to control such corporation
or other Person. Notwithstanding the foregoing, (a) no individual shall be an
Affiliate solely by reason of his or her being a director, officer or employee
of the Parent Guarantor or any of its Subsidiaries and (b) none of the Wholly
Owned Subsidiaries of the Parent Guarantor shall be Affiliates.
"Applicable Lending Office" shall mean, for each Lender and for each
Type of Loan, the lending office of such Lender (or of an affiliate of such
Lender) designated for such Type of Loan in the Administrative Questionnaire of
such Lender or such other lending office of such Lender (or of an affiliate of
such Lender) as such Lender may from time to time specify to the Administrative
Agent and the Company as the office by which its Loans of such Type are to be
made and maintained.
"Applicable Margin" shall mean: (a) with respect to Base Rate Loans,
0.875% per annum (in the case of Revolving Credit Loans and Tranche A Term
Loans) and 1.50% per annum (in the case of Tranche B Term Loans); (b) with
respect to Eurodollar Loans, 2.125% per annum (in the case of Revolving Credit
Loans and Tranche A Term Loans) and 2.75% per annum (in the case of Tranche B
Term Loans); and (c) with respect to commitment fees, 0.500%; provided that (i)
for the period commencing on the Effective Date and ending on the Quarterly Date
falling on or nearest to March 31, 1997, the Applicable Margins for Base Rate
Loans shall be 0.625% per annum (in the case of Base Rate Loans that are
Revolving Credit Loans or Tranche A Term Loans) or 1.500% per annum (in the case
of Base Rate Loans that are Tranche B Term Loans), the Applicable Margins for
Eurodollar Loans shall be 1.875% per annum (in the case of Eurodollar Loans that
are Revolving Credit Loans or Tranche A Term Loans) or 2.750% per annum (in the
case of Eurodollar Rate Loans that are Tranche B Term Loans), and the Applicable
Margin for commitment fees shall be 0.375% per annum and (ii) if the Total
Leverage Ratio as at the last day of any fiscal quarter of the Company
(commencing with the fiscal quarter ending December 31, 1996) shall fall within
any of the ranges set forth below then, subject to the delivery to the
Administrative Agent of a certificate of a senior financial officer of the
Company demonstrating such fact prior to the end of the next succeeding fiscal
quarter, the "Applicable Margin" for each Loan and for commitment fees shall be
reduced to the rate for the respective Type and Class of Loan and for commitment
fees set forth below opposite such range during the period commencing on the
Quarterly Date on or
Credit Agreement
<PAGE> 9
- 4 -
immediately following the date of receipt of such certificate to but not
including the next succeeding Quarterly Date thereafter:
================================================================================
<TABLE>
<CAPTION>
Revolving Revolving
Total Leverage Credit and Credit and
Ratio Tranche A Tranche A Tranche B Tranche B Commitment
(Base Rate) (Eurodollar) (Base Rate) (Eurodollar) Fees
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Greater than 0.875% 2.125% 1.500% 2.750% 0.500%
or equal to
5.0 to 1
- -----------------------------------------------------------------------------------------
Greater than 0.625% 1.875% 1.500% 2.750% 0.375%
or equal to
4.5 to 1 and
less than
5.0 to 1
- -----------------------------------------------------------------------------------------
Greater than 0.375% 1.625% 1.250% 2.500% 0.375%
or equal to
4.0 to 1 and
less than
4.5 to 1
- -----------------------------------------------------------------------------------------
Less than 4.0 0.125% 1.375% 1.250% 2.500% 0.300%
to 1
</TABLE>
================================================================================
"Asset Swaps" shall mean exchanges by the Company and its
Subsidiaries with Persons that are not Affiliates of tangible advertising
Properties (and their related locations) having equivalent value; provided that
the aggregate fair market value of all such Properties (and related locations)
transferred by the Company and its Subsidiaries as part of such exchanges may
not exceed $15,000,000 in any fiscal year of the Company.
"Assignment and Acceptance" shall mean an Assignment and Acceptance
substantially in the form of Exhibit F hereto, duly completed and executed.
"Bankruptcy Code" shall mean the Federal Bankruptcy Code of 1978, as
amended from time to time.
"Base Rate" shall mean, for any day, a rate per annum equal to the
higher of (a) the Federal Funds Rate for such day plus 1/2 of 1% and (b) the
Prime Rate for such day. Each change in any interest rate provided for herein
based upon the Base Rate resulting from a change in the Base Rate shall take
effect at the time of such change in the Base Rate.
"Base Rate Loans" shall mean Loans that bear interest at rates based
upon the Base Rate.
"Basle Accord" shall mean the proposals for risk-based capital
framework described by the Basle Committee on Banking Regulations and
Supervisory Practices in its paper entitled
Credit Agreement
<PAGE> 10
- 5 -
"International Convergence of Capital Measurement and Capital Standards" dated
July 1988, as amended, modified and supplemented and in effect from time to time
or any replacement thereof.
"Business Day" shall mean any day (a) on which commercial banks are
not authorized or required to close in New York City and (b) if such day relates
to a borrowing of, a payment or prepayment of principal of or interest on, a
Conversion of or into, or an Interest Period for, a Eurodollar Loan or a notice
by the Company with respect to any such borrowing, payment, prepayment,
Conversion or Interest Period, that is also a day on which dealings in Dollar
deposits are carried out in the London interbank market.
"Capital Expenditures" shall mean, for any period, expenditures
(including, without limitation, the aggregate amount of Capital Lease
Obligations incurred during such period) made by the Parent Guarantor or any of
its Consolidated Subsidiaries to acquire or construct fixed assets, plant and
equipment (including renewals, improvements and replacements, but excluding
repairs) during such period computed in accordance with GAAP; provided that the
term "Capital Expenditures" shall exclude (a) the value of goods and services
provided by the Company and its Subsidiaries in exchange for any such fixed
assets, plant and equipment to the extent that such value does not exceed
$1,000,000 in any fiscal year of the Parent Guarantor, (b) Acquisition-Related
Expenditures and (c) Capital Lease Obligations incurred in any fiscal year of
the Parent Guarantor to lease motor vehicles to be used in the ordinary course
of business to the extent that the amount so incurred does not exceed $4,000,000
in such fiscal year.
"Capital Lease Obligations" shall mean, for any Person, all
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) Property to the extent such
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP, and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.
"Cash Flow" shall mean, for any period, for the Parent Guarantor and
its Consolidated Subsidiaries (determined on a consolidated basis without
duplication in accordance with GAAP), operating income for such fiscal quarter
(calculated before taxes, Interest Expense, depreciation, amortization and any
other non-cash charges accrued for such period and (except to the extent
received or paid in cash by the Parent Guarantor or
Credit Agreement
<PAGE> 11
- 6 -
any of its Consolidated Subsidiaries) income or loss attributable to equity in
Affiliates for such fiscal quarter) excluding any extraordinary and unusual
gains or losses during such period and excluding the proceeds of any Casualty
Events and Dispositions, provided that, in the event that during such period the
Company or any of its Consolidated Subsidiaries shall acquire or dispose of any
assets or business, "Cash Flow" shall be determined for such period on a pro
forma basis (using reasonable assumptions) as if such acquisition or disposition
had occurred on the first day of such period.
"Casualty Event" shall mean, with respect to any Property of any
Person, any loss of or damage to, or any condemnation or other taking of, such
Property for which such Person or any of its Subsidiaries receives insurance
proceeds, or proceeds of a condemnation award or other compensation.
"Chase" shall mean The Chase Manhattan Bank (as
successor by merger to The Chase Manhattan Bank (National
Association)).
"Class" shall have the meaning assigned to such term in
Section 1.03 hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Collateral Account" shall have the meaning assigned to such term in
Section 4.01 of the Security Agreement.
"Commitments" shall mean the Revolving Credit
Commitments, the Tranche A Term Loan Commitments and the
Tranche B Term Loan Commitments.
"Company" shall have the meaning assigned to such term
in the caption hereof.
"Consolidated Subsidiary" shall mean, for any Person, each
Subsidiary of such Person (whether now existing or hereafter created or
acquired) the financial statements of which shall be (or should have been)
consolidated with the financial statements of such Person in accordance with
GAAP.
"Continue", "Continuation" and "Continued" shall refer to the
continuation pursuant to Section 2.09 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.
Credit Agreement
<PAGE> 12
- 7 -
"Convert", "Conversion" and "Converted" shall refer to a conversion
pursuant to Section 2.09 hereof of one Type of Loans into another Type of Loans,
which may be accompanied by the transfer by a Lender (at its sole discretion) of
a Loan from one Applicable Lending Office to another.
"date hereof" and "date of this Agreement" and similar references
shall mean November 19, 1996.
"Default" shall mean an Event of Default or an event that with
notice or lapse of time or both would become an Event of Default.
"Disposition" shall mean any sale, assignment, transfer or other
disposition of any Property (whether now owned or hereafter acquired) by the
Parent Guarantor or any of its Subsidiaries to any other Person excluding any
Asset Swap and any sale, assignment, transfer or other disposition of any
Property sold or disposed of in the ordinary course of business and on ordinary
business terms.
"Dividend Payment" shall mean dividends (in cash, Property or
obligations) on, or other payments or distributions on account of, or the
setting apart of money for a sinking or other analogous fund for, or the
purchase, redemption, retirement or other acquisition of, any shares of any
class of stock of the Parent Guarantor or of any warrants, options or other
rights to acquire the same (or to make any payments to any Person, such as
"phantom stock" payments, where the amount thereof is calculated with reference
to the fair market or equity value of the Parent Guarantor or any of its
Subsidiaries), but excluding dividends payable solely in shares of common stock
of the Parent Guarantor.
"Dollars" and "$" shall mean lawful money of the United
States of America.
"Effective Date" shall have the meaning assigned to such term in the
recitals hereto.
"Environmental Claim" shall mean, with respect to any Person, any
written notice, claim, demand or other communication (collectively, a "claim")
by any other Person alleging or asserting such Person's liability for
investigatory costs, cleanup costs, governmental response costs, damages to
natural resources or other Property, personal injuries, fines or penalties
arising out of, based on or resulting from (i) the presence, or Release into the
environment, of any Hazardous Material at any location, whether or not owned by
such Person, or
Credit Agreement
<PAGE> 13
- 8 -
(ii) circumstances forming the basis of any violation, or alleged violation, of
any Environmental Law. The term "Environmental Claim" shall include, without
limitation, any claim by any governmental authority for enforcement, cleanup,
removal, response, remedial or other actions or damages pursuant to any
applicable Environmental Law, and any claim by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or injunctive relief
resulting from the presence of Hazardous Materials or arising from alleged
injury or threat of injury to health, safety or the environment.
"Environmental Laws" shall mean any and all present and future
Federal, state, local and foreign laws, rules or regulations, and any orders or
decrees, in each case as now or hereafter in effect, relating to the regulation
or protection of human health, safety or the environment or to emissions,
discharges, releases or threatened releases of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes into the indoor or outdoor
environment, including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or toxic or
hazardous substances or wastes.
"Equity Issuance" shall mean (a) any issuance or sale by the Parent
Guarantor or any of its Subsidiaries after the Effective Date of (i) any of its
capital stock, (ii) any warrants or options exercisable in respect of its
capital stock (other than any warrants or options issued to directors, officers
or employees of the Parent Guarantor or any of its Subsidiaries pursuant to (x)
the options provided for in the Employment Agreement made and entered into as of
August 18, 1995 by and between the Parent Guarantor and Karl Eller and (y)
employee benefit plans established in the ordinary course of business and any
capital stock of the Parent Guarantor issued upon the exercise of such warrants
or options) or (iii) any other security or instrument representing an equity
interest (or the right to obtain any equity interest) in the Parent Guarantor or
any of its Subsidiaries or (b) the receipt by the Parent Guarantor or any of its
Subsidiaries after the Effective Date of any capital contribution (whether or
not evidenced by any equity security issued by the recipient of such
contribution); provided that Equity Issuance shall not include (x) any such
issuance or sale by any Subsidiary of the Parent Guarantor to the Parent
Guarantor or any Wholly Owned Subsidiary of the Parent Guarantor, (y) any
capital contribution by the Parent Guarantor or any Wholly Owned Subsidiary of
the Parent Guarantor to any Subsidiary of the
Credit Agreement
<PAGE> 14
- 9 -
Parent Guarantor or (z) any such issuance or sale by the Parent Guarantor to
Karl Eller (or a corporation, partnership or limited liability company directly
or indirectly controlled by and substantially all of the capital stock or other
equity interests of which is directly or indirectly owned by Karl Eller), to any
H&F Affiliated Party or to any Other Purchaser.
"Equity Rights" shall mean, with respect to any Person, any
subscriptions, options, warrants, commitments, preemptive rights or agreements
of any kind (including, without limitation, any stockholders' or voting trust
agreements) for the issuance, sale, registration or voting of, or securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, such Person.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time.
"ERISA Affiliate" shall mean any corporation or trade or business
that is a member of any group of organizations (i) described in Section 414(b)
or (c) of the Code of which the Parent Guarantor or any of its Subsidiaries is a
member and (ii) solely for purposes of potential liability under Section
302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created
under Section 302(f) of ERISA and Section 412(n) of the Code, described in
Section 414(m) or (o) of the Code of which Parent Guarantor or any of its
Subsidiaries is a member.
"Eurodollar Base Rate" shall mean, with respect to any Eurodollar
Loan for any Interest Period therefor, the arithmetic mean (rounded upwards, if
necessary, to the nearest 1/16 of 1%), as determined by the Administrative
Agent, of the rates per annum quoted by the respective Reference Lenders at
approximately 11:00 a.m. London time (or as soon thereafter as practicable) on
the date two Business Days prior to the first day of such Interest Period for
the offering by the respective Reference Lenders to leading banks in the London
interbank market of Dollar deposits having a term comparable to such Interest
Period and in an amount comparable to the principal amount of the Eurodollar
Loan to be made by the respective Reference Lenders for such Interest Period. If
any Reference Lender is not participating in any Eurodollar Loans during any
Interest Period therefor, the Eurodollar Base Rate for such Loans for such
Interest Period shall be determined by reference to the amount of such Loans
that such Reference Lender would have made or had outstanding had it been
participating in such Loan during such Interest Period.
Credit Agreement
<PAGE> 15
- 10 -
"Eurodollar Loans" shall mean Loans that bear interest at rates
based on rates referred to in the definition of "Eurodollar Base Rate" in this
Section 1.01.
"Eurodollar Rate" shall mean, for any Eurodollar Loan for any
Interest Period therefor, a rate per annum (rounded upwards, if necessary, to
the nearest 1/100 of 1%) determined by the Administrative Agent to be equal to
the Eurodollar Base Rate for such Loan for such Interest Period divided by 1
minus the Reserve Requirement (if any) for such Loan for such Interest Period.
"Events of Default" shall have the meaning assigned to such term in
Section 10 hereof.
"Excess Cash Flow" shall mean, for any fiscal year, the sum for such
fiscal year of (a) Cash Flow for such fiscal year (determined without taking
into account the proviso at the end of the definition of "Cash Flow" in this
Section 1.01) minus (b) Fixed Charges for such fiscal year (determined without
taking into account the proviso at the end of the definition of "Fixed Charges"
in this Section 1.01) and minus (c) Acquisition-Related Expenditures for such
fiscal year.
"Existing Credit Agreement" shall have the meaning assigned to such
term in the recitals hereto.
"Existing Lenders" shall have the meaning assigned to such term in
the recitals hereto.
"Existing Letters of Credit" shall mean letters of credit issued
under the Existing Credit and outstanding on the Effective Date, all of which
are listed on Annex 2 hereto.
"Existing Revolving Credit Loans" shall mean the "Revolving Credit
Loans" outstanding on the Effective Date under (as defined in) the Existing
Credit Agreement.
"Existing Tranche A Term Loans" shall mean the "Tranche A Term
Loans" outstanding on the Effective Date under (as defined in) the Existing
Credit Agreement.
"Existing Tranche B Term Loans" shall mean the "Tranche B Term
Loans" outstanding on the Effective Date under (as defined in) the Existing
Credit Agreement.
"Federal Funds Rate" shall mean, for any day, the rate
per annum (rounded upwards, if necessary, to the nearest 1/100 of
Credit Agreement
<PAGE> 16
- 11 -
1%) equal to the weighted average of the rates on overnight Federal funds
transactions with members of the Federal Reserve System arranged by Federal
funds brokers on such day, as published by the Federal Reserve Bank of New York
on the Business Day next succeeding such day, provided that (a) if the day for
which such rate is to be determined is not a Business Day, the Federal Funds
Rate for such day shall be such rate on such transactions on the next preceding
Business Day as so published on the next succeeding Business Day and (b) if such
rate is not so published for any Business Day, the Federal Funds Rate for such
Business Day shall be the average rate charged to Chase on such Business Day on
such transactions as determined by the Administrative Agent.
"Fixed Charges" shall mean, for any period, the sum for the Parent
Guarantor and its Consolidated Subsidiaries (determined on a consolidated basis
without duplication in accordance with GAAP) of the following: (a) Capital
Expenditures made during such period (except for any such Capital Expenditures
to the extent financed with the proceeds of Indebtedness or Capital Lease
Obligations incurred as permitted by Section 9.07(d) hereof during such period)
plus (b) all regularly scheduled payments of principal of Indebtedness
(including, without limitation, the principal component of any payments in
respect of Capital Lease Obligations) made during such period plus (c) all
Interest Expense for such period plus (d) the aggregate amount of Federal, state
and local income taxes paid or payable in respect of such period plus (if
positive) or minus (if negative) (e) any change in Working Capital during such
fiscal period, provided that, in the event that during such period the Company
or any of its Consolidated Subsidiaries shall acquire or dispose of any assets
or business, "Fixed Charges" shall be determined for such period on a pro forma
basis (using reasonable assumptions) as if such acquisition or disposition had
occurred on the first day of such period.
"Fixed Charges Coverage Ratio" shall mean, as at any date, the ratio
for the period of four consecutive fiscal quarters of the Parent Guarantor
ending on or most recently ended prior to such date of (a) Cash Flow to (b)
Fixed Charges.
"GAAP" shall mean generally accepted accounting principles applied
on a basis consistent with those that, in accordance with the last sentence of
Section 1.02(a) hereof, are to be used in making the calculations for purposes
of determining compliance with this Agreement.
Credit Agreement
<PAGE> 17
- 12 -
"Guarantee" shall mean a guarantee, an endorsement, a contingent
agreement to purchase or to furnish funds for the payment or maintenance of, or
otherwise to be or become contingently liable under or with respect to, the
Indebtedness, other obligations, net worth, working capital or earnings of any
Person, or a guarantee of the payment of dividends or other distributions upon
the stock or equity interests of any Person, or an agreement to purchase, sell
or lease (as lessee or lessor) Property, products, materials, supplies or
services primarily for the purpose of enabling a debtor to make payment of such
debtor's obligations or an agreement to assure a creditor against loss, and
including, without limitation, causing a bank or other financial institution to
issue a letter of credit or other similar instrument for the benefit of another
Person, but excluding endorsements for collection or deposit in the ordinary
course of business. The terms "Guarantee" and "Guaranteed" used as a verb shall
have a correlative meaning.
"H&F Affiliated Parties" shall mean partnerships in which the
ultimate managing general partner is controlled by general partners of Hellman &
Friedman, a California general partnership, and shall in any event include
Hellman and Friedman Capital Partners III, L.P., H&F International Partners III,
L.P., and H&F Orchard Partners III, L.P.
"Hazardous Material" shall mean, collectively, (a) any petroleum or
petroleum products, flammable materials, explosives, radioactive materials,
asbestos, urea formaldehyde foam insulation, and transformers or other equipment
that contain polychlorinated biphenyls ("PCB's"), (b) any chemicals or other
materials or substances that are now or hereafter become defined as or included
in the definition of "hazardous substances", "hazardous wastes", "hazardous
materials", "extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", "contaminants", "pollutants" or words of
similar import under any Environmental Law and (c) any other chemical or other
material or substance, exposure to which is now or hereafter prohibited, limited
or regulated under any Environmental Law.
"Indebtedness" shall mean, for any Person: (a) obligations created,
issued or incurred by such Person for borrowed money (whether by loan, the
issuance and sale of debt securities or the sale of Property to another Person
subject to an understanding or agreement, contingent or otherwise, to repurchase
such Property from such Person); (b) obligations of such Person to pay the
deferred purchase or acquisition price of Property or services, other than trade
accounts payable (other
Credit Agreement
<PAGE> 18
- 13 -
than for borrowed money) arising, and accrued expenses incurred, in the ordinary
course of business so long as such trade accounts payable are payable within 90
days of the date the respective goods are delivered or the respective services
are rendered; (c) Indebtedness of others secured by a Lien on the Property of
such Person, whether or not the respective indebtedness so secured has been
assumed by such Person; (d) obligations of such Person in respect of letters of
credit or similar instruments issued or accepted by banks and other financial
institutions for account of such Person, other than (except for purposes of
Section 10(b) hereof) obligations in respect of the undrawn face amount of
letters of credit that are the functional equivalents of surety or performance
bonds or that support self-insurance programs to the extent that the aggregate
amount of all such obligations does not exceed $15,000,000; (e) Capital Lease
Obligations of such Person; and (f) Indebtedness of others Guaranteed by such
Person. Notwithstanding the foregoing, the term "Indebtedness" shall not include
the following obligations of the Company and its Subsidiaries, provided that the
aggregate amount of such obligations does not exceed $2,000,000: (i) obligations
heretofore incurred to The Circle K Corporation payable-in-kind in respect of
the purchase of The Circle K Corporation's interest in Eller Outdoor of El Paso,
Inc. and (ii) obligations heretofore incurred in respect of post-closing
adjustments relating to the purchase of the assets of Eller Outdoor Company of
Atlanta.
"Interest Coverage Ratio" shall mean, as at any date, the ratio for
the period of four consecutive fiscal quarters of the Parent Guarantor ending on
or most recently ended prior to such date of (a) Cash Flow to (b) Interest
Expense for such period payable in cash.
"Interest Expense" shall mean, for any period, the sum, for the
Parent Guarantor and its Consolidated Subsidiaries (determined on a consolidated
basis without duplication in accordance with GAAP), of the following: (a) all
interest in respect of Indebtedness (including without limitation, the interest
component of any payments in respect of Capital Lease Obligations) accrued or
capitalized during such period (whether or not actually paid during such period)
plus (b) the net amount payable (or minus the net amount receivable) under
Interest Rate Protection Agreements during such period (whether or not actually
paid or received during such period), provided that, in the event that during
such period the Company or any of its Consolidated Subsidiaries shall acquire or
dispose of any assets or business, "Interest Expense" shall be determined for
such period on a pro
Credit Agreement
<PAGE> 19
- 14 -
forma basis (using reasonable assumptions) as if such acquisition or disposition
had occurred on the first day of such period.
"Interest Period" shall mean, with respect to any Eurodollar Loan,
each period commencing on the date such Eurodollar Loan is made or Converted
from a Base Rate Loan or (in the event of a Continuation) the last day of the
next preceding Interest Period for such Loan and (subject to the provisions of
Section 2.01(d) hereof) ending on the numerically corresponding day in the
first, second, third or sixth calendar month thereafter, as the Company may
select as provided in Section 4.05 hereof, except that each Interest Period that
commences on the last Business Day of a calendar month (or on any day for which
there is no numerically corresponding day in the appropriate subsequent calendar
month) shall end on the last Business Day of the appropriate subsequent calendar
month.
Notwithstanding the foregoing: (i) no Interest Period for any
Revolving Credit Loan may commence before and end after any Revolving Credit
Commitment Reduction Date unless, after giving effect thereto, the aggregate
principal amount of Revolving Credit Loans having Interest Periods that end
after such Revolving Credit Commitment Reduction Date shall be equal to or less
than the aggregate principal amount of Revolving Credit Loans scheduled to be
outstanding after giving effect to the payments of principal required to be made
on such Revolving Credit Commitment Reduction Date; (ii) no Interest Period for
any Tranche A Term Loan may commence before and end after any Tranche A
Principal Payment Date unless, after giving effect thereto, the aggregate
principal amount of the Tranche A Term Loans having Interest Periods that end
after such Tranche A Principal Payment Date shall be equal to or less than the
aggregate principal amount of the Tranche A Term Loans scheduled to be
outstanding after giving effect to the payments of principal required to be made
on such Tranche A Principal Payment Date; (iii) no Interest Period for any
Tranche B Term Loan may commence before and end after any Tranche B Principal
Payment Date unless, after giving effect thereto, the aggregate principal amount
of the Tranche B Term Loans having Interest Periods that end after such Tranche
B Principal Payment Date shall be equal to or less than the aggregate principal
amount of the Tranche B Term Loans scheduled to be outstanding after giving
effect to the payments of principal required to be made on such Tranche B
Principal Payment Date; (iv) each Interest Period that would otherwise end on a
day that is not a Business Day shall end on the next succeeding Business Day
(or, if such next succeeding Business Day falls in the next succeeding calendar
month, on the next preceding Business Day); and (v) notwithstanding clauses (i),
(ii) and
Credit Agreement
<PAGE> 20
- 15 -
(iii) above, no Interest Period shall have a duration of less than one month
and, if the Interest Period for any Eurodollar Loan would otherwise be a shorter
period, such Loan shall not be available hereunder for such period.
"Interest Rate Protection Agreement" shall mean, for any Person, an
interest rate swap, cap or collar agreement or similar arrangement between such
Person and one or more financial institutions providing for the transfer or
mitigation of interest risks either generally or under specific contingencies.
"Investment" shall mean, for any Person: (a) the acquisition
(whether for cash, Property, services or securities or otherwise) of capital
stock, bonds, notes, debentures, partnership or other ownership interests or
other securities of any other Person or any agreement to make any such
acquisition (including, without limitation, any "short sale" or any sale of any
securities at a time when such securities are not owned by the Person entering
into such sale); (b) the making of any deposit with, or advance, loan or other
extension of credit to, any other Person (including the purchase of Property
from another Person subject to an understanding or agreement, contingent or
otherwise, to resell such Property to such Person), but excluding any such
advance, loan or extension of credit having a term not exceeding 90 days arising
in connection with the sale of inventory or supplies by such Person in the
ordinary course of business; (c) the entering into of any Guarantee of, or other
contingent obligation with respect to, Indebtedness or other liability of any
other Person and (without duplication) any amount committed to be advanced, lent
or extended to such Person; or (d) the entering into of any Interest Rate
Protection Agreement.
"Issuing Lender" shall mean Chase, as the issuer of Letters of
Credit under Section 2.03 hereof, together with its successors and assigns in
such capacity.
"Lender" shall have the meaning assigned to such term
in the caption hereof.
"Letters of Credit" shall have the meaning assigned to such term in
the first sentence of Section 2.03 hereof and shall include the Existing Letters
of Credit.
"Letter of Credit Documents" shall mean, with respect to any Letter
of Credit, collectively, any application therefor and any other agreements,
instruments, guarantees or other documents (whether general in application or
applicable only to
Credit Agreement
<PAGE> 21
- 16 -
such Letter of Credit) governing or providing for (a) the rights and obligations
of the parties concerned or at risk with respect to such Letter of Credit or (b)
any collateral security for any of such obligations, each as the same may be
modified and supplemented and in effect from time to time.
"Letter of Credit Interest" shall mean, for each Revolving Credit
Lender, such Lender's participation interest (or, in the case of the Issuing
Lender, the Issuing Lender's retained interest) in the Issuing Lender's
liability under Letters of Credit and such Lender's rights and interests in
Reimbursement Obligations and fees, interest and other amounts payable in
connection with Letters of Credit and Reimbursement Obligations.
"Letter of Credit Liability" shall mean, without duplication, at any
time and in respect of any Letter of Credit, the sum of (a) the undrawn face
amount of such Letter of Credit plus (b) the aggregate unpaid principal amount
of all Reimbursement Obligations of the Company at such time due and payable in
respect of all drawings made under such Letter of Credit. For purposes of this
Agreement, a Revolving Credit Lender (other than the Issuing Lender) shall be
deemed to hold a Letter of Credit Liability in an amount equal to its
participation interest in the related Letter of Credit under Section 2.03
hereof, and the Issuing Lender shall be deemed to hold a Letter of Credit
Liability in an amount equal to its retained interest in the related Letter of
Credit after giving effect to the acquisition by the Revolving Credit Lenders
other than the Issuing Lender of their participation interests under said
Section 2.03.
"Lien" shall mean, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
Property. For purposes of this Agreement and the other Loan Documents, a Person
shall be deemed to own subject to a Lien any Property that it has acquired or
holds subject to the interest of a vendor or lessor under any conditional sale
agreement, capital lease or other title retention agreement (other than an
operating lease) relating to such Property.
"Loan Documents" shall mean this Agreement, the Notes,
the Letter of Credit Documents and the Security Documents.
"Loans" shall mean the Revolving Credit Loans and the
Term Loans.
Credit Agreement
<PAGE> 22
- 17 -
"Majority Lenders" shall mean, subject to the last paragraph of
Section 12.04 hereof, Lenders having at least 66 2/3% of the sum of (a) the
aggregate outstanding principal amount of the Term Loans, plus (b) the sum of
(i) the aggregate unused amount, if any, of the Revolving Credit Commitments at
such time plus (ii) the aggregate outstanding principal amount of the Revolving
Credit Loans at such time plus (c) the aggregate amount of all Letter of Credit
Liabilities at such time.
"Majority Revolving Credit Lenders" shall mean Revolving Credit
Lenders having at least 66 2/3% of the aggregate amount of the Revolving Credit
Commitments or, if the Revolving Credit Commitments shall have terminated,
Lenders holding at least 66 2/3% of the sum of (a) the aggregate unpaid
principal amount of the Revolving Credit Loans plus (b) the aggregate amount of
all Letter of Credit Liabilities.
"Majority Tranche A Lenders" shall mean Tranche A Lenders holding at
least 66 2/3% of the aggregate outstanding principal amount of the Tranche A
Term Loans.
"Majority Tranche B Lenders" shall mean Tranche B Lenders holding at
least 66 2/3% of the aggregate outstanding principal amount of the Tranche B
Term Loans.
"Margin Stock" shall mean "margin stock" within the meaning of
Regulations G, U and X.
"Material Adverse Effect" shall mean a material adverse effect on
(a) the Property, business, operations, financial condition, prospects,
liabilities or capitalization of the Parent Guarantor and its Subsidiaries taken
as a whole, (b) the ability of any Obligor to perform its obligations under any
of the Loan Documents to which it is a party, (c) the validity or enforceability
of any of the Loan Documents, (d) the rights and remedies of the Lenders and the
Administrative Agent under any of the Loan Documents or (e) the timely payment
of the principal of or interest on the Loans or the Reimbursement Obligations or
other amounts payable in connection therewith.
"Multiemployer Plan" shall mean a multiemployer plan defined as such
in Section 3(37) of ERISA to which contributions have been made by the Parent
Guarantor, the Company or any ERISA Affiliate and that is covered by Title IV of
ERISA.
Credit Agreement
<PAGE> 23
- 18 -
"Net Available Proceeds" shall mean:
(i) in the case of any Disposition, the amount of
Net Cash Payments received in connection with such
Disposition;
(ii) in the case of any Casualty Event, the aggregate amount of
proceeds of insurance, condemnation awards and other compensation received
by the Parent Guarantor and its Subsidiaries in respect of such Casualty
Event net of (A) reasonable expenses incurred by the Parent Guarantor and
its Subsidiaries in connection therewith and (B) contractually required
repayments of Indebtedness to the extent secured by a Lien on such
Property and any income and transfer taxes payable by the Parent Guarantor
or any of its Subsidiaries in respect of such Casualty Event; and
(iii) in the case of any Equity Issuance, the aggregate amount of
all cash received by the Parent Guarantor and its Subsidiaries in respect
of such Equity Issuance net of reasonable expenses incurred by the Parent
Guarantor and its Subsidiaries in connection therewith.
"Net Cash Payments" shall mean, with respect to any Disposition, the
aggregate amount of all cash payments received by the Parent Guarantor and its
Subsidiaries directly or indirectly in connection with such Disposition;
provided that (a) Net Cash Payments shall be net of (i) the amount of any legal,
title and recording tax expenses, commissions and other fees and expenses paid
by the Parent Guarantor and its Subsidiaries in connection with such Disposition
and (ii) any Federal, state and local income or other taxes estimated to be
payable by the Parent Guarantor and its Subsidiaries as a result of such
Disposition (but only to the extent that such estimated taxes are in fact paid
to the relevant Federal, state or local governmental authority when due) and (b)
Net Cash Payments shall be net of any repayments by the Parent Guarantor or any
of its Subsidiaries of Indebtedness to the extent that (i) such Indebtedness is
secured by a Lien on the Property that is the subject of such Disposition and
(ii) the transferee of (or holder of a Lien on) such Property requires that such
Indebtedness be repaid as a condition to the purchase of such Property.
"New Lenders" shall mean each of the Lenders (other than the
Existing Lenders) identified on the signature pages hereof under the caption
"LENDERS".
Credit Agreement
<PAGE> 24
- 19 -
"Notes" shall mean the Revolving Credit Notes, the Tranche A Term
Loan Notes and the Tranche B Term Loan Notes.
"Obligor" shall have the meaning assigned to such term
in the caption hereof.
"Other Purchasers" shall have the meaning assigned to such term in
the EMC Stock Purchase Agreement made and entered into as of August 18, 1995 by
and among the Parent Guarantor, Hellman and Friedman Capital Partners III, L.P.,
H&F Orchard Partners III, L.P., and H&F International Partners III, L.P., and
the Other Purchasers.
"Parent Guarantor" shall have the meaning assigned to such term in
the caption hereof.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any
entity succeeding to any or all of its functions under ERISA.
"Permitted Investments" shall mean: (a) direct obligations of the
United States of America, or of any agency thereof, or obligations guaranteed as
to principal and interest by the United States of America, or of any agency
thereof, in either case maturing not more than 180 days from the date of
acquisition thereof; (b) certificates of deposit issued by any bank or trust
company organized under the laws of the United States of America or any state
thereof and having capital, surplus and undivided profits of at least
$500,000,000, maturing not more than 180 days from the date of acquisition
thereof; (c) commercial paper rated A-1 or better or P-1 by Standard & Poor's
Ratings Services, a Division of The McGraw-Hill Companies, Inc., or Moody's
Investors Services, Inc., respectively, maturing not more than 180 days from the
date of acquisition thereof; and (d) interests in any money market mutual fund
registered under the Investment Company Act of 1940, as amended, the portfolio
of which is limited to obligations described in the foregoing clauses (a), (b)
and (c) that satisfy the proviso set forth below, and so long as such fund has
total assets of at least $1,000,000,000 and is rated at least Am or A by
Standard & Poor's Ratings Services or Moody's Investors Services, Inc.,
respectively; provided that in each case referred to in the preceding clauses
(a), (b) and (c), the respective investments (x) provide for the payment of
principal and interest (and not principal alone or interest alone) and (y) are
not subject to any contingency regarding the payment of principal or interest.
Credit Agreement
<PAGE> 25
- 20 -
"Person" shall mean any individual, corporation, company, voluntary
association, partnership, limited liability company, joint venture, trust,
unincorporated organization or government (or any agency, instrumentality or
political subdivision thereof).
"Plan" shall mean an employee benefit or other plan established or
maintained by the Parent Guarantor, the Company or any ERISA Affiliate and that
is covered by Title IV of ERISA, other than a Multiemployer Plan.
"Post-Default Rate" shall mean: (a) in respect of any principal of
any Loan that is not paid when due (whether at stated maturity, by acceleration,
by optional or mandatory prepayment or otherwise), a rate per annum during the
period from and including the due date to but excluding the date on which such
amount is paid in full equal to the higher of (i) 3% plus the Base Rate as in
effect from time to time plus the Applicable Margin for Base Rate Loans and (ii)
3% plus the interest rate for such Loan as provided in Section 3.02(a) or
3.02(b) hereof (as the case may be) and (b) in respect of any other amount under
this Agreement, any Note or any other Loan Document that is not paid when due
(whether at stated maturity, by acceleration, by optional or mandatory
prepayment or otherwise), a rate per annum during the period from and including
the due date to but excluding the date on which such amount is paid in full
equal to 3% plus the Base Rate as in effect from time to time plus the
Applicable Margin for Base Rate Loans which are Revolving Credit Loans.
"Prime Rate" shall mean the rate of interest from time to time
announced by Chase at its principal office as its prime commercial lending rate.
"Property" shall mean any right or interest in or to property of any
kind whatsoever, whether real, personal or mixed and whether tangible or
intangible.
"Quarterly Dates" shall mean the last Business Day of March, June,
September and December in each year, the first of which shall be the first such
day after the Effective Date.
"Reference Lenders" shall mean Chase, CIBC Inc. and
Credit Lyonnais (or their respective Applicable Lending Offices).
"Registered Holder" shall have the meaning assigned to such term in
Section 5.07(a)(ii) hereof.
Credit Agreement
<PAGE> 26
- 21 -
"Registered Loan" shall have the meaning assigned to such term in
Section 2.08(f) hereof.
"Registered Note" shall have the meaning assigned to such term in
Section 2.08(f) hereof.
"Regulations A, D, G, U and X" shall mean, respectively, Regulations
A, D, G, U and X of the Board of Governors of the Federal Reserve System (or any
successor), as the same may be modified and supplemented and in effect from time
to time.
"Regulatory Change" shall mean, with respect to any Lender, any
change after the date hereof in Federal, state or foreign law or regulations
(including, without limitation, Regulation D) or the adoption or making after
such date of any interpretation, directive or request applying to a class of
banks including such Lender of or under any Federal, state or foreign law or
regulations (whether or not having the force of law and whether or not failure
to comply therewith would be unlawful) by any court or governmental or monetary
authority charged with the interpretation or administration thereof.
"Reimbursement Obligations" shall mean, at any time, the obligations
of the Company then outstanding, or that may thereafter arise in respect of all
Letters of Credit then outstanding, to reimburse amounts paid by the Issuing
Lender in respect of any drawings under a Letter of Credit.
"Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal, leaching or migration into
the indoor or outdoor environment, including, without limitation, the movement
of Hazardous Materials through ambient air, soil, surface water, ground water,
wetlands, land or subsurface strata.
"Relevant Parties" shall have the meaning assigned to such term in
Section 10(b) hereof.
"Reserve Requirement" shall mean, for any Interest Period for any
Eurodollar Loan, the average maximum rate at which reserves (including, without
limitation, any marginal, supplemental or emergency reserves) are required to be
maintained during such Interest Period under Regulation D by member banks of the
Federal Reserve System in New York City with deposits exceeding one billion
Dollars against "Eurocurrency liabilities" (as such term is used in Regulation
D). Without limiting the effect of the foregoing, the Reserve Requirement shall
include
Credit Agreement
<PAGE> 27
- 22 -
any other reserves required to be maintained by such member banks by reason of
any Regulatory Change with respect to (i) any category of liabilities that
includes deposits by reference to which the Eurodollar Base Rate is to be
determined as provided in the definition of "Eurodollar Base Rate" in this
Section 1.01 or (ii) any category of extensions of credit or other assets that
includes Eurodollar Loans.
"Retiring Lenders" shall mean the "Lenders" under (and as defined
in) the Existing Credit Agreement immediately prior to the effectiveness of the
amendment and restatement thereof provided for hereby that indicated on the
signature pages hereof under the caption "LENDERS".
"Revolving Credit Commitment" shall mean, as to each Revolving
Credit Lender, the obligation of such Lender to make Revolving Credit Loans
(and/or to take an assignment of certain Loans on the Effective Date pursuant to
Section 2.01(a) hereof), and to issue or participate in Letters of Credit
pursuant to Section 2.03 hereof, in an aggregate principal or face amount at any
one time outstanding up to but not exceeding the amount set opposite the name of
such Lender on Annex 1 hereto under the caption "Revolving Credit Commitment"
or, in the case of a Person that becomes a Revolving Credit Lender pursuant to
an assignment permitted under Section 12.06(b) hereof, as specified in the
respective Assignment and Acceptance or other instrument of assignment pursuant
to which such assignment is effected (as the same may be reduced from time to
time pursuant to Section 2.04 or 2.10 hereof).
"Revolving Credit Commitment Percentage" shall mean, with respect to
any Revolving Credit Lender, the ratio of (a) the amount of the Revolving Credit
Commitment of such Lender to (b) the aggregate amount of the Revolving Credit
Commitments of all of the Lenders.
"Revolving Credit Commitment Reduction Dates" shall mean the
Quarterly Dates commencing with the Quarterly Date falling on or nearest to
September 30, 2000, through and including the Quarterly Date falling on or
nearest to September 30, 2003.
"Revolving Credit Commitment Termination Date" shall mean the
Quarterly Date falling on or nearest to September 30, 2003.
"Revolving Credit Lenders" shall mean (a) on the date
hereof, the Lenders having Revolving Credit Commitments on
Credit Agreement
<PAGE> 28
- 23 -
Annex 1 hereto and (b) thereafter, the Lenders from time to time holding
Revolving Credit Loans, Revolving Credit Commitments and/or Letter of Credit
Interests after giving effect to any assignments thereof permitted by Section
12.06(b) hereof.
"Revolving Credit Loans" shall have the meaning assigned to such
term in Section 2.01(a) hereof.
"Revolving Credit Notes" shall mean the promissory notes provided
for by Section 2.08(a) hereof and all promissory notes delivered in substitution
or exchange therefor, in each case as the same shall be modified and
supplemented and in effect from time to time. The term "Revolving Credit Notes"
shall include any Registered Notes evidencing Revolving Credit Loans executed
and delivered pursuant to Section 2.08(f) hereof.
"Security Agreement" shall mean an Amended and Restated Security
Agreement substantially in the form of Exhibit B hereto between the Company, the
Guarantors and the Administrative Agent, as the same shall be modified and
supplemented and in effect from time to time.
"Security Documents" shall mean the Security Agreement and all
Uniform Commercial Code financing statements required by the Security Agreement
to be filed with respect to the security interests in personal Property and
fixtures created pursuant to the Security Agreement.
"Subsidiary" shall mean, with respect to any Person, any
corporation, partnership or other entity of which at least a majority of the
securities or other ownership interests having by the terms thereof ordinary
voting power to elect a majority of the board of directors or other persons
performing similar functions of such corporation, partnership or other entity
(irrespective of whether or not at the time securities or other ownership
interests of any other class or classes of such corporation, partnership or
other entity shall have or might have voting power by reason of the happening of
any contingency) is at the time directly or indirectly owned or controlled by
such Person or one or more Subsidiaries of such Person or by such Person and one
or more Subsidiaries of such Person.
"Subsidiary Guarantor" shall have the meaning assigned to such term
in the caption hereof.
"Term Loans" shall mean the Tranche A Term Loans and
the Tranche B Term Loans.
Credit Agreement
<PAGE> 29
- 24 -
"Total Debt" shall mean, as at any date, all Indebtedness of the
Parent Guarantor and its Consolidated Subsidiaries (determined on a consolidated
basis without duplication in accordance with GAAP) on such date.
"Total Leverage Ratio" shall mean, as at any date, the ratio of (a)
Total Debt on such date to (b) Cash Flow for the period of four fiscal quarters
of the Parent Guarantor ending on or most recently ended prior to such date.
"Tranche A Lenders" shall mean the Lenders from time to time holding
Tranche A Term Loans after giving effect to any assignments thereof permitted by
Section 12.06(b) hereof.
"Tranche A Principal Payment Dates" shall mean the 25 Quarterly
Dates falling on or nearest to the dates specified in the table set forth in
Section 3.01(b) hereof.
"Tranche A Term Loan Commitment" shall mean, as to each Tranche A
Lender, the obligation of such Tranche A Lender to make a Tranche A Term Loan
(and/or to take an assignment of certain Loans on the Effective Date pursuant to
Section 2.01(b) hereof) in an aggregate principal amount up to but not exceeding
the amount set opposite the name of such Lender on Annex 1 hereto under the
caption "Tranche A Term Loan Commitment" or, in the case of a Person that
becomes a Tranche A Lender pursuant to an assignment permitted under Section
12.06(b) hereof, as specified in the respective instrument of assignment
pursuant to which such assignment is effected (as the same may be reduced from
time to time pursuant to Section 2.04 or 2.10 hereof).
"Tranche A Term Loan Notes" shall mean the promissory notes provided
for by Section 2.08(b) hereof and all promissory notes delivered in substitution
or exchange therefor, in each case as the same shall be modified and
supplemented and in effect from time to time. The term "Tranche A Term Loan
Notes" shall include any Registered Notes evidencing Tranche A Term Loans
executed and delivered pursuant to Section 2.08(f) hereof.
"Tranche A Term Loans" shall mean the loans provided for by Section
2.01(b) hereof.
"Tranche B Lenders" shall mean the Lenders from time to time holding
Tranche B Term Loans after giving effect to any assignments thereof permitted by
Section 12.06(b) hereof.
Credit Agreement
<PAGE> 30
- 25 -
"Tranche B Principal Payment Dates" shall mean the nine Quarterly
Dates falling on or nearest to the dates specified in the table set forth in
Section 3.01(c) hereof.
"Tranche B Term Loan Commitment" shall mean, as to each Tranche B
Lender, the obligation of such Tranche B Lender to make a Tranche B Term Loan
(and/or to take an assignment of certain Loans on the Effective Date pursuant to
Section 2.01(c) hereof) in an aggregate principal amount up to but not exceeding
the amount set opposite the name of such Lender on Annex 1 hereto under the
caption "Tranche B Term Loan Commitment" or, in the case of a Person that
becomes a Tranche B Lender pursuant to an assignment permitted under Section
12.06(b) hereof, as specified in the respective instrument of assignment
pursuant to which such assignment is effected (as the same may be reduced from
time to time pursuant to Section 2.04 or 2.10 hereof).
"Tranche B Term Loan Notes" shall mean the promissory notes provided
for by Section 2.08(c) hereof and all promissory notes delivered in substitution
or exchange therefor, in each case as the same shall be modified and
supplemented and in effect from time to time. The term "Tranche B Term Loan
Notes" shall include any Registered Notes evidencing Tranche B Term Loans
executed and delivered pursuant to Section 2.08(f) hereof.
"Tranche B Term Loans" shall mean the loans provided for by Section
2.01(c) hereof.
"Type" shall have the meaning assigned to such term in
Section 1.03 hereof.
"U.S. Person" shall mean a citizen or resident of the United States
of America, a corporation, partnership or other entity created or organized in
or under any laws of the United States of America or any State thereof, or any
estate or trust that is subject to Federal income taxation regardless of the
source of its income.
"U.S. Taxes" shall mean any present or future tax,
assessment or other charge or levy imposed by or on behalf of the
United States of America or any taxing authority thereof.
"Wholly Owned Subsidiary" shall mean, with respect to any Person,
any corporation, partnership or other entity of which all of the equity
securities or other ownership interests (other than, in the case of a
corporation, directors' qualifying shares) are directly or indirectly owned or
controlled by such Person or
Credit Agreement
<PAGE> 31
- 26 -
one or more Wholly Owned Subsidiaries of such Person or by such Person and one
or more Wholly Owned Subsidiaries of such Person.
"Working Capital" shall mean, at any time, the excess, if any, of
the current assets (net of cash and Permitted Investments) of the Parent
Guarantor and its Consolidated Subsidiaries over the current liabilities of the
Parent Guarantor and its Consolidated Subsidiaries excluding the current portion
of Indebtedness hereunder.
1.02 Accounting Terms and Determinations.
(a) Except as otherwise expressly provided herein, all accounting
terms used herein shall be interpreted, and all financial statements and
certificates and reports as to financial matters required to be delivered to the
Lenders hereunder shall (unless otherwise disclosed to the Lenders in writing at
the time of delivery thereof in the manner described in subsection (b) below) be
prepared, in accordance with generally accepted accounting principles applied on
a basis consistent with those used in the preparation of the latest financial
statements furnished to the Lenders hereunder (which, prior to the delivery of
the first financial statements under Section 9.01 hereof, shall mean the
financial statements as at December 31, 1995 referred to in Section 8.02(a)(i)
hereof). All calculations made for the purposes of determining compliance with
this Agreement shall (except as otherwise expressly provided herein) be made by
application of generally accepted accounting principles applied on a basis
consistent with those used in the preparation of the latest annual or quarterly
financial statements furnished to the Lenders pursuant to Section 9.01 hereof
(or, prior to the delivery of the first financial statements under Section 9.01
hereof, used in the preparation of the audited financial statements as at
December 31, 1995 referred to in Section 8.02(a) hereof) unless (i) the Company
shall have objected to determining such compliance on such basis at the time of
delivery of such financial statements or (ii) the Majority Lenders shall so
object in writing within 30 days after delivery of such financial statements, in
either of which events such calculations shall be made on a basis consistent
with those used in the preparation of the latest financial statements as to
which such objection shall not have been made (which, if objection is made in
respect of the first financial statements delivered under Section 9.01 hereof,
shall mean the audited financial statements referred to in Section 8.02(a)(i)
hereof).
(b) The Company shall deliver to the Lenders at the
same time as the delivery of any annual or quarterly financial
Credit Agreement
<PAGE> 32
- 27 -
statement under Section 9.01 hereof (i) a description in reasonable detail of
any material variation between the application of accounting principles employed
in the preparation of such statement and the application of accounting
principles employed in the preparation of the next preceding annual or quarterly
financial statements as to which no objection has been made in accordance with
the last sentence of subsection (a) above and (ii) reasonable estimates of the
difference between such statements arising as a consequence thereof.
(c) To enable the ready and consistent determination of compliance
with the covenants set forth in Section 9 hereof, the Company will not change
the last day of its fiscal year from December 31, or the last days of the first
three fiscal quarters in each of its fiscal years from March 31, June 30 and
September 30 of each year, respectively.
1.03 Classes and Types of Loans. Loans hereunder are distinguished
by "Class" and by "Type". The "Class" of a Loan refers to whether such Loan is a
Revolving Credit Loan, a Tranche A Term Loan or a Tranche B Term Loan, each of
which constitutes a Class. The "Type" of a Loan refers to whether such Loan is a
Base Rate Loan or a Eurodollar Loan, each of which constitutes a Type. Loans may
be identified by both Class and Type.
Section 2. Commitments, Loans, Notes and Prepayments.
2.01 Loans.
(a) Revolving Credit Loans. On the Effective Date:
(i) the Existing Revolving Credit Loans held by each Existing Lender
shall automatically, and without any action on the part of any Person, be
designated as Revolving Credit Loans of such Lender hereunder;
(ii) Existing Tranche A Term Loans held by each Existing Lender not
designated as Tranche A Term Loans on the Effective Date pursuant to
Section 2.01(b) hereof shall automatically, and without any action on the
part of any Person, be designated as Revolving Credit Loans of such Lender
hereunder;
(iii) each of the New Lenders that is a Revolving Credit Lender (and
each Existing Lender, if any, whose relative proportion of Revolving
Credit Loans hereunder is increasing over the proportion of Existing
Revolving Credit
Credit Agreement
<PAGE> 33
- 28 -
Loans held by it on the Effective Date) shall, by assignments from the
Existing Lenders (which shall be deemed to occur automatically on the
Effective Date), acquire a portion of the Revolving Credit Loans of the
Existing Lenders; and
(iv) each Revolving Credit Lender shall make revolving
credit loans to the Company in Dollars,
in each case in such amounts (and the Lenders shall, through the Administrative
Agent, make such additional adjustments among themselves as shall be necessary)
so that after giving effect to such assignments, adjustments and revolving
credit loans, the Lenders shall hold the Revolving Credit Loans ratably in
accordance with their respective Revolving Credit Commitments.
In addition, each Revolving Credit Lender severally agrees, on the
terms and conditions of this Agreement, to make loans to the Company in Dollars
during the period from and including the Effective Date to but not including the
Revolving Credit Commitment Termination Date in an aggregate principal amount at
any one time outstanding up to but not exceeding the amount of the Revolving
Credit Commitment of such Lender as in effect from time to time (such loans,
including without limitation the loans referred to in the immediately preceding
paragraph, being referred to herein as "Revolving Credit Loans"), provided that
in no event shall the aggregate principal amount of all Revolving Credit Loans,
together with the aggregate amount of all Letter of Credit Liabilities, exceed
the aggregate amount of the Revolving Credit Commitments as in effect from time
to time. Subject to the terms and conditions of this Agreement, during such
period the Company may borrow, repay and reborrow the amount of the Revolving
Credit Commitments by means of Base Rate Loans and Eurodollar Loans and may
Convert Revolving Credit Loans of one Type into Revolving Credit Loans of
another Type (as provided in Section 2.09 hereof) or Continue Revolving Credit
Loans of one Type as Revolving Credit Loans of the same Type (as provided in
Section 2.09 hereof).
(b) Tranche A Term Loans. On the Effective Date:
(i) Existing Tranche A Term Loans held by the Existing Lenders in an
aggregate amount (as to all Existing Tranche A Lenders) equal to
$200,000,000 shall automatically, and without any action on the part of
any Person, be designated as Tranche A Term Loans of such Lenders
hereunder;
Credit Agreement
<PAGE> 34
- 29 -
(ii) each of the New Lenders that is a Tranche A Lender (and each
Existing Lender, if any, whose relative proportion of Tranche A Term Loans
hereunder is increasing over the proportion of Existing Tranche A Term
Loans held by it on the Effective Date) shall, by assignments from the
Existing Lenders (which shall be deemed to occur automatically on the
Effective Date), acquire a portion of the Tranche A Term Loans of the
Existing Lenders; and
(iii) each Tranche A Term Loan Lender shall make term
loans to the Company in Dollars,
in each case in such amounts (and the Lenders shall, through the Administrative
Agent, make such additional adjustments among themselves as shall be necessary)
so that after giving effect to such assignments and adjustments, each Lender
shall hold Tranche A Term Loans in an aggregate amount equal to its Tranche A
Term Loan Commitment. The Company may Convert Tranche A Term Loans of one Type
into Tranche A Term Loans of another Type (as provided in Section 2.09 hereof)
or Continue Tranche A Term Loans of one Type as Tranche A Term Loans of the same
Type (as provided in Section 2.09 hereof). Tranche A Term Loans that are prepaid
may not be reborrowed.
(c) Tranche B Term Loans. On the Effective Date:
(i) the Existing Tranche B Term Loans held by each Existing Lender
shall automatically, and without any action on the part of any Person, be
designated as Tranche B Term Loans of such Lender hereunder;
(ii) each of the New Lenders that is a Tranche B Lender (and each
Existing Lender, if any, whose relative proportion of Tranche B Term Loans
hereunder is increasing over the proportion of Existing Tranche B Term
Loans held by it on the Effective Date) shall, by assignments from the
Existing Lenders (which shall be deemed to occur automatically on the
Effective Date), acquire a portion of the Tranche B Term Loans of the
Existing Lenders; and
(iii) each Tranche B Lender shall make term loans to
the Company in Dollars,
in each case in such amounts (and the Lenders shall, through the Administrative
Agent, make such additional adjustments among themselves as shall be necessary)
so that after giving effect to such assignments, adjustments and term loans,
each Lender shall hold Tranche B Term Loans in an aggregate amount equal to its
Credit Agreement
<PAGE> 35
- 30 -
Tranche B Term Loan Commitment. The Company may Convert Tranche B Term Loans of
one Type into Tranche B Term Loans of another Type (as provided in Section 2.09
hereof) or Continue Tranche B Term Loans of one Type as Tranche B Term Loans of
the same Type (as provided in Section 2.09 hereof). Tranche B Term Loans that
are prepaid may not be reborrowed.
(d) Interest Periods; Limit on Eurodollar Loans. On the Effective
Date all "Interest Periods" under and as defined in the Existing Credit
Agreement shall automatically be terminated. No more than six separate Interest
Periods in respect of Eurodollar Loans of a Class from each Lender may be
outstanding at any one time.
(e) Continuation of Indebtedness, Etc. Except as expressly provided
herein, the indebtedness outstanding under the Existing Credit Agreement on the
Effective Date shall not be deemed to be repaid or prepaid by the amendment and
restatement of the Existing Credit Agreement provided for hereby or the other
transactions stated to occur on the Effective Date, but such indebtedness shall
continue to be outstanding hereunder on the terms and conditions hereof. Upon
the satisfaction or waiver of the conditions precedent set forth in Section 7
hereof, the commitments (if any) of the Retiring Lenders to lend under the
Existing Credit Agreement shall be canceled and terminated and the Retiring
Lenders shall cease to be parties to the Existing Credit Agreement.
2.02 Borrowings. The Company shall give the Administrative Agent
notice of each borrowing hereunder as provided in Section 4.05 hereof. Not later
than 1:00 p.m. New York time on the date specified for each borrowing hereunder,
each Lender shall make available the amount of the Loan or Loans to be made by
it on such date to the Administrative Agent, at an account specified by the
Administrative Agent that is maintained by the Administrative Agent with Chase,
in immediately available funds, for account of the Company. The amount so
received by the Administrative Agent shall, subject to the terms and conditions
of this Agreement, be made available to the Company by depositing the same, in
immediately available funds, in an account of the Company designated by the
Company and maintained with Chase at Chase's principal office.
2.03 Letters of Credit. Subject to the terms and conditions of this
Agreement, the Revolving Credit Commitments may be utilized, upon the request of
the Company, in addition to the Revolving Credit Loans provided for by Section
2.01(a) hereof, by the issuance by the Issuing Lender of letters of
Credit Agreement
<PAGE> 36
- 31 -
credit (collectively, "Letters of Credit") for account of the Company or any of
its Subsidiaries (as specified by the Company), provided that in no event shall
(i) the aggregate amount of all Letter of Credit Liabilities, together with the
aggregate principal amount of the Revolving Credit Loans, exceed the aggregate
amount of the Revolving Credit Commitments as in effect from time to time, (ii)
the outstanding aggregate amount of all Letter of Credit Liabilities exceed
$15,000,000 and (iii) the expiration date of any Letter of Credit extend beyond
the earlier of the Revolving Credit Commitment Termination Date and the date
twelve months following the issuance of such Letter of Credit. The following
additional provisions shall apply to Letters of Credit:
(a) The Company shall give the Administrative Agent at least three
Business Days' irrevocable prior notice (effective upon receipt)
specifying the Business Day (which shall be no later than 30 days
preceding the Revolving Credit Commitment Termination Date) each Letter of
Credit is to be issued and the account party or parties therefor and
describing in reasonable detail the proposed terms of such Letter of
Credit (including the beneficiary thereof) and the nature of the
transactions or obligations proposed to be supported thereby (including
whether such Letter of Credit is to be a commercial letter of credit or a
standby letter of credit). Upon receipt of any such notice, the
Administrative Agent shall advise the Issuing Lender of the contents
thereof.
(b) On each day during the period commencing with (i) in the case of
each of the Existing Letters of Credit, the Effective Date, and (ii) in
the case of each Letter of Credit other than the Existing Letters of
Credit, the date of issuance by the Issuing Lender of any such Letter of
Credit and, in each of the cases referred to in the foregoing clauses (i)
and (ii), until such Letter of Credit shall have expired or been
terminated, the Revolving Credit Commitment of each Revolving Credit
Lender shall be deemed to be utilized for all purposes of this Agreement
in an amount equal to such Lender's Revolving Credit Commitment Percentage
of the then undrawn face amount of such Letter of Credit. Each Revolving
Credit Lender (other than the Issuing Lender) agrees that, (x) on the
Effective Date, in the case of each of the Existing Letters of Credit, and
(y) upon the issuance hereunder of any Letter of Credit other than the
Existing Letters of Credit, it shall automatically acquire a participation
in the Issuing Lender's liability under such Letter of Credit in an amount
Credit Agreement
<PAGE> 37
- 32 -
equal to such Lender's Revolving Credit Commitment Percentage of such
liability, and each Revolving Credit Lender (other than the Issuing
Lender) thereby shall absolutely, unconditionally and irrevocably assume,
as primary obligor and not as surety, and shall be unconditionally
obligated to the Issuing Lender to pay and discharge when due, its
Revolving Credit Commitment Percentage of the Issuing Lender's liability
under such Letter of Credit.
(c) Upon receipt from the beneficiary of any Letter of Credit of any
demand for payment under such Letter of Credit, the Issuing Lender shall
promptly notify the Company (through the Administrative Agent) of the
amount to be paid by the Issuing Lender as a result of such demand and the
date on which payment is to be made by the Issuing Lender to such
beneficiary in respect of such demand. Notwithstanding the identity of the
account party of any Letter of Credit, the Company hereby unconditionally
agrees to pay and reimburse the Administrative Agent for account of the
Issuing Lender for the amount of each demand for payment under such Letter
of Credit that is in substantial compliance with the provisions of such
Letter of Credit at or prior to the date on which payment is to be made by
the Issuing Lender to the beneficiary thereunder, without presentment,
demand, protest or other formalities of any kind.
(d) Forthwith upon its receipt of a notice referred to in paragraph
(c) of this Section 2.03, the Company shall advise the Administrative
Agent whether or not the Company intends to borrow hereunder to finance
its obligation to reimburse the Issuing Lender for the amount of the
related demand for payment and, if it does, submit a notice of such
borrowing as provided in Section 4.05 hereof.
(e) Each Revolving Credit Lender (other than the Issuing Lender)
shall pay to the Administrative Agent for account of the Issuing Lender at
Chase's principal office in Dollars and in immediately available funds,
the amount of such Lender's Revolving Credit Commitment Percentage of any
payment under a Letter of Credit upon notice by the Issuing Lender
(through the Administrative Agent) to such Revolving Credit Lender
requesting such payment and specifying such amount. Each such Revolving
Credit Lender's obligation to make such payment to the Administrative
Agent for account of the Issuing Lender under this paragraph (e), and the
Issuing Lender's right to receive the same, shall be absolute and
Credit Agreement
<PAGE> 38
- 33 -
unconditional and shall not be affected by any circumstance whatsoever,
including, without limitation, the failure of any other Revolving Credit
Lender to make its payment under this paragraph (e), the financial
condition of the Company (or any other account party), the existence of
any Default or the termination of the Revolving Credit Commitments. Each
such payment to the Issuing Lender shall be made without any offset,
abatement, withholding or reduction whatsoever. If any Revolving Credit
Lender shall default in its obligation to make any such payment to the
Administrative Agent for account of the Issuing Lender, for so long as
such default shall continue the Administrative Agent may at the request of
the Issuing Lender withhold from any payments received by the
Administrative Agent under this Agreement or any Note for account of such
Revolving Credit Lender the amount so in default and, to the extent so
withheld, pay the same to the Issuing Lender in satisfaction of such
defaulted obligation.
(f) Upon the making of each payment by a Revolving Credit Lender to
the Issuing Lender pursuant to paragraph (e) above in respect of any
Letter of Credit, such Lender shall, automatically and without any further
action on the part of the Administrative Agent, the Issuing Lender or such
Lender, acquire (i) a participation in an amount equal to such payment in
the Reimbursement Obligation owing to the Issuing Lender by the Company
hereunder and under the Letter of Credit Documents relating to such Letter
of Credit and (ii) a participation in a percentage equal to such Lender's
Revolving Credit Commitment Percentage in any interest or other amounts
payable by the Company hereunder and under such Letter of Credit Documents
in respect of such Reimbursement Obligation (other than the commissions,
charges, costs and expenses payable to the Issuing Lender pursuant to
paragraph (g) of this Section 2.03). Upon receipt by the Issuing Lender
from or for account of the Company of any payment in respect of any
Reimbursement Obligation or any such interest or other amount (including
by way of setoff or application of proceeds of any collateral security)
the Issuing Lender shall promptly pay to the Administrative Agent for
account of each Revolving Credit Lender entitled thereto, such Revolving
Credit Lender's Revolving Credit Commitment Percentage of such payment,
each such payment by the Issuing Lender to be made in the same money and
funds in which received by the Issuing Lender. In the event any payment
received by the Issuing Lender and so paid to the Revolving Credit Lenders
hereunder is rescinded or must otherwise be returned by the Issuing
Credit Agreement
<PAGE> 39
- 34 -
Lender, each Revolving Credit Lender shall, upon the request of the
Issuing Lender (through the Administrative Agent), repay to the Issuing
Lender (through the Administrative Agent) the amount of such payment paid
to such Lender, with interest at the rate specified in paragraph (j) of
this Section 2.03.
(g) The Company shall pay to the Administrative Agent for account of
each Revolving Credit Lender (ratably in accordance with their respective
Revolving Credit Commitment Percentages) a letter of credit fee on the
daily average undrawn face amount of such Letter of Credit at a rate per
annum equal to the Applicable Margin for Revolving Credit Loans that are
Eurodollar Loans for the period from and including (i) the Effective Date,
in the case of each of the Existing Letters of Credit, and (ii) the date
of issuance of such Letter of Credit, in the case of each Letter of Credit
other than the Existing Letters of Credit, (x) in the case of a Letter of
Credit that expires in accordance with its terms, to and including such
expiration date and (y) in the case of a Letter of Credit that is drawn in
full or is otherwise terminated other than on the stated expiration date
of such Letter of Credit, to but excluding the date such Letter of Credit
is drawn in full or is terminated (such fee to be non-refundable, to be
paid in arrears on each Quarterly Date and on the Revolving Credit
Commitment Termination Date and to be calculated for any day after giving
effect to any payments made under such Letter of Credit on such day). In
addition, the Company shall pay to the Administrative Agent for account of
the Issuing Lender a fronting fee in respect of each Letter of Credit in
an amount equal to 1/4 of 1% per annum of the daily average undrawn face
amount of such Letter of Credit for the period from and including (i) the
Effective Date, in the case of each of the Existing Letters of Credit, and
(ii) the date of issuance of such Letter of Credit, in the case of each
Letter of Credit other than the Existing Letters of Credit, (x) in the
case of a Letter of Credit that expires in accordance with its terms, to
and including such expiration date and (y) in the case of a Letter of
Credit that is drawn in full or is otherwise terminated other than on the
stated expiration date of such Letter of Credit, to but excluding the date
such Letter of Credit is drawn in full or is terminated (such fee to be
non-refundable, to be paid in arrears on each Quarterly Date and on the
Revolving Credit Commitment Termination Date and to be calculated for any
day after giving effect to any payments made under such Letter of Credit
on such day) plus all commissions, charges, costs
Credit Agreement
<PAGE> 40
- 35 -
and expenses in the amounts customarily charged by the Issuing Lender from
time to time in like circumstances with respect to the issuance of each
Letter of Credit and drawings and other transactions relating thereto.
(h) Promptly following the end of each calendar month, the Issuing
Lender shall deliver (through the Administrative Agent) to each Revolving
Credit Lender and the Company a notice describing the aggregate amount of
all Letters of Credit outstanding at the end of such month. Upon the
request of any Revolving Credit Lender from time to time, the Issuing
Lender shall deliver any other information reasonably requested by such
Lender with respect to each Letter of Credit then outstanding.
(i) The issuance by the Issuing Lender of each Letter of Credit
shall, in addition to the conditions precedent set forth in Section 7
hereof, be subject to the conditions precedent that (i) such Letter of
Credit shall be in such form, contain such terms and support such
transactions as shall be satisfactory to the Issuing Lender consistent
with its then current practices and procedures with respect to letters of
credit of the same type and (ii) the Company shall have executed and
delivered such applications, agreements and other instruments relating to
such Letter of Credit as the Issuing Lender shall have reasonably
requested consistent with its then current practices and procedures with
respect to letters of credit of the same type, provided that in the event
of any conflict between any such application, agreement or other
instrument and the provisions of this Agreement or any Security Document,
the provisions of this Agreement and the Security Documents shall control.
(j) To the extent that any Lender shall fail to pay any amount
required to be paid pursuant to paragraph (e) or (f) of this Section 2.03
on the due date therefor, such Lender shall pay interest to the Issuing
Lender (through the Administrative Agent) on such amount from and
including such due date to but excluding the date such payment is made at
a rate per annum equal to the Federal Funds Rate, provided that if such
Lender shall fail to make such payment to the Issuing Lender within three
Business Days of such due date, then, retroactively to the due date, such
Lender shall be obligated to pay interest on such amount at the
Post-Default Rate.
Credit Agreement
<PAGE> 41
- 36 -
(k) The issuance by the Issuing Lender of any modification or
supplement to any Letter of Credit hereunder shall be subject to the same
conditions applicable under this Section 2.03 to the issuance of new
Letters of Credit, and no such modification or supplement shall be issued
hereunder unless either (i) the respective Letter of Credit affected
thereby would have complied with such conditions had it originally been
issued hereunder in such modified or supplemented form or (ii) each
Revolving Credit Lender shall have consented thereto.
The Company hereby indemnifies and holds harmless each Revolving Credit Lender
and the Administrative Agent from and against any and all claims and damages,
losses, liabilities, costs or expenses that such Lender or the Administrative
Agent may incur (or that may be claimed against such Lender or the
Administrative Agent by any Person whatsoever) by reason of or in connection
with the execution and delivery or transfer of or payment or refusal to pay by
the Issuing Lender under any Letter of Credit; provided that the Company shall
not be required to indemnify any Lender or the Administrative Agent for any
claims, damages, losses, liabilities, costs or expenses to the extent, but only
to the extent, caused by (x) the willful misconduct or gross negligence of the
Issuing Lender in determining whether a request presented under any Letter of
Credit complied with the terms of such Letter of Credit or (y) in the case of
the Issuing Lender, such Lender's failure to pay under any Letter of Credit
after the presentation to it of a request strictly complying with the terms and
conditions of such Letter of Credit unless it is prohibited from doing so by an
injunction or other order of any court. Nothing in this Section 2.03 is intended
to limit the other obligations of the Company, any Lender or the Administrative
Agent under this Agreement.
2.04 Changes of Commitments.
(a) The aggregate amount of the Revolving Credit Commitments shall
be automatically reduced to zero on the Revolving Credit Commitment Termination
Date. In addition, the aggregate amount of the Revolving Credit Commitments
shall be automatically reduced on each Revolving Credit Commitment Reduction
Date by an amount (subject to reduction pursuant to paragraph (c) below) equal
to the amount set forth below opposite such Commitment Reduction Date:
Credit Agreement
<PAGE> 42
- 37 -
<TABLE>
<CAPTION>
Commitment Reduction Date
Falling on or Nearest To: Amount
------------------------- ------
<S> <C>
September 30, 2000 $20,000,000
December 31, 2000 $20,000,000
March 31, 2001 $10,000,000
June 30, 2001 $10,000,000
September 30, 2001 $10,000,000
December 31, 2001 $10,000,000
March 31, 2002 $10,000,000
June 30, 2002 $10,000,000
September 30, 2002 $10,000,000
December 31, 2002 $10,000,000
March 31, 2003 $26,666,667
June 30, 2003 $26,666,667
September 30, 2003 $26,666,666
</TABLE>
(b) The Company shall have the right at any time or from time to
time (i) so long as no Revolving Credit Loans or Letter of Credit Liabilities
are outstanding, to terminate the Revolving Credit Commitments and (ii) to
reduce the aggregate unused amount of the Revolving Credit Commitments (for
which purpose use of the Revolving Credit Commitments shall be deemed to include
the aggregate amount of Letter of Credit Liabilities); provided that (x) the
Company shall give notice of each such termination or reduction as provided in
Section 4.05 hereof and (y) each partial reduction shall be in an aggregate
amount at least equal to $5,000,000 (or a larger multiple of $1,000,000).
(c) Each reduction in the aggregate amount of the Revolving Credit
Commitments pursuant to paragraph (b) above (each, a "Voluntary Reduction") on
any date shall result in an automatic and simultaneous reduction (but not below
zero) in the amount of the reductions required by paragraph (a) above of the
Revolving Credit Commitments on the Revolving Credit Commitment Reduction Dates
falling after such date (each, a "Required Reduction") in an aggregate amount
equal to the amount of such Voluntary Reduction, the amount of each Voluntary
Reduction to be applied pro rata to such Required Reductions in accordance with
their respective amounts.
(d) The Tranche A Term Loan Commitments and the Tranche B Term Loan
Commitments shall automatically be terminated and reduced to zero at the close
of business (New York time) on the Effective Date.
Credit Agreement
<PAGE> 43
- 38 -
(e) The Commitments once terminated or reduced may not
be reinstated.
2.05 Commitment Fee. The Company shall pay to the Administrative
Agent for account of each Lender a commitment fee on the daily average unused
amount of such Lender's Revolving Credit Commitment (for which purpose the
aggregate amount of any Letter of Credit Liabilities shall be deemed to be a pro
rata (based on the Revolving Credit Commitments) use of each Lender's Revolving
Credit Commitment), for the period from and including the Effective Date to but
not including the earlier of the date such Revolving Credit Commitment is
terminated and the Revolving Credit Commitment Termination Date, on each
Quarterly Date and on the earlier of the date the relevant Commitments are
terminated and the Revolving Credit Commitment Termination Date, at the rate per
annum equal to the Applicable Margin for commitment fees. Notwithstanding
anything to the contrary contained herein or in the Existing Credit Agreement,
the accrued commitment fee payable under Section 2.05 of the Existing Credit
Agreement shall be payable on the Effective Date.
2.06 Lending Offices. The Loans of each Type made by each Lender
shall be made and maintained at such Lender's Applicable Lending Office for
Loans of such Type.
2.07 Several Obligations; Remedies Independent. The failure of any
Lender to make any Loan to be made by it on the date specified therefor shall
not relieve any other Lender of its obligation to make its Loan on such date,
but neither any Lender nor the Administrative Agent shall be responsible for the
failure of any other Lender to make a Loan to be made by such other Lender, and
(except as otherwise provided in Section 4.06 hereof) no Lender shall have any
obligation to the Administrative Agent or any other Lender for the failure by
such Lender to make any Loan required to be made by such Lender. The amounts
payable by the Company at any time hereunder and under the Notes to each Lender
shall be a separate and independent debt and each Lender shall be entitled to
protect and enforce its rights arising out of this Agreement and the Notes, and
it shall not be necessary for any other Lender or the Administrative Agent to
consent to, or be joined as an additional party in, any proceedings for such
purposes.
2.08 Notes.
(a) The Revolving Credit Loans (other than Registered Loans) made by
each Lender shall be evidenced by a single promissory note of the Company
substantially in the form of
Credit Agreement
<PAGE> 44
- 39 -
Exhibit A-1 hereto, dated the Effective Date, payable to such Lender in a
principal amount equal to the amount of its Revolving Credit Commitment as in
effect on the Effective Date and otherwise duly completed.
(b) The Tranche A Term Loan (other than Registered Loans) made by
each Lender shall be evidenced by a single promissory note of the Company
substantially in the form of Exhibit A-2 hereto, dated the Effective Date,
payable to such Lender in a principal amount equal to the principal amount of
its Tranche A Term Loan outstanding on the Effective Date and otherwise duly
completed.
(c) The Tranche B Term Loan (other than Registered Loans) made by
each Lender shall be evidenced by a single promissory note of the Company
substantially in the form of Exhibit A-3 hereto, dated the Effective Date,
payable to such Lender in a principal amount equal to the amount of its Tranche
B Term Loan outstanding on the Effective Date and otherwise duly completed.
(d) The date, amount, Type, interest rate and duration of Interest
Period (if applicable) of each Loan of each Class made by each Lender to the
Company, and each payment made on account of the principal thereof, shall be
recorded by such Lender on its books and, prior to any transfer of any Note
evidencing the Loans of such Class held by it, endorsed by such Lender on the
schedule attached to such Note or any continuation thereof; provided that the
failure of such Lender to make any such recordation or endorsement shall not
affect the obligations of the Company to make a payment when due of any amount
owing hereunder or under such Note in respect of such Loans.
(e) No Lender shall be entitled to have its Notes substituted or
exchanged for any reason, or subdivided for promissory notes of lesser
denominations, except (i) as contemplated by Section 7.01(e) hereof, (ii) in
connection with a permitted assignment of all or any portion of such Lender's
Loans and Notes pursuant to Section 12.06(b) hereof and (iii) as provided in
clause (f) below (and, if requested by any Lender, the Company agrees to so
exchange any Note).
(f) Notwithstanding the foregoing, any Lender that is not a U.S.
Person and is not a "bank" within the meaning of Section 881(c)(3)(A) of the
Code may request the Company (through the Administrative Agent), and the Company
agrees thereupon, to record on the Register referred to in Section 12.06(g)
hereof any Loans of any Class held by such Lender under this Agreement.
Credit Agreement
<PAGE> 45
- 40 -
Loans recorded on the Register ("Registered Loans") may not be evidenced by
promissory notes other than Registered Notes as defined below and, upon the
registration of any Loan, any promissory note (other than a Registered Note)
evidencing the same shall be null and void and shall be returned to the Company.
The Company agrees, at the request of any Lender that is the holder of
Registered Loans, to execute and deliver to such Lender a promissory note in
registered form to evidence such Registered Loans (i.e. containing the optional
registered note language as indicated in Exhibits A-1, A-2 or A-3 hereto, as the
case may be) and registered as provided in Section 12.06(g) hereof (herein, a
"Registered Note"), dated the Effective Date, payable to such Lender and
otherwise duly completed. A Loan once recorded on the Register may not be
removed from the Register so long as it remains outstanding and a Registered
Note may not be exchanged for a promissory note that is not a Registered Note.
2.09 Optional Prepayments and Conversions or Continuations of Loans.
Subject to Section 4.04 hereof, the Company shall have the right to prepay
Loans, or to Convert Loans of one Type into Loans of another Type or Continue
Loans of one Type as Loans of the same Type, at any time or from time to time,
provided that: (a) the Company shall give the Administrative Agent notice of
each such prepayment, Conversion or Continuation as provided in Section 4.05
hereof (and, upon the date specified in any such notice of prepayment, the
amount to be prepaid shall become due and payable hereunder); (b) Eurodollar
Loans may be prepaid or Converted only on the last day of an Interest Period for
such Loans; (c) prepayments of the Term Loans shall be applied ratably to the
Tranche A Term Loans and the Tranche B Term Loans and, in the case of each such
Class, to the installments of the Term Loans pro rata in accordance with the
respective amounts of such installments; and (d) any Conversion or Continuation
of Eurodollar Loans shall be subject to the provisions of Section 2.01(d)
hereof. Notwithstanding the foregoing, and without limiting the rights and
remedies of the Lenders under Section 10 hereof, in the event that any Event of
Default shall have occurred and be continuing, the Administrative Agent may (and
at the request of the Majority Lenders shall) suspend the right of the Company
to Convert any Loan into a Eurodollar Loan, or to Continue any Loan as a
Eurodollar Loan, in which event all Loans shall be Converted (on the last day(s)
of the respective Interest Periods therefor) or Continued, as the case may be,
as Base Rate Loans.
Credit Agreement
<PAGE> 46
- 41 -
2.10 Mandatory Prepayments.
(a) Casualty Events. Upon the first anniversary of the receipt by
the Parent Guarantor or any of its Subsidiaries of the proceeds of insurance,
condemnation award or other compensation in respect of any Casualty Event
affecting any Property of the Parent Guarantor or any of its Subsidiaries (or
upon such earlier date as the Parent Guarantor or such Subsidiary, as the case
may be, shall have determined not to repair or replace the Property affected by
such Casualty Event), the Company shall prepay the Term Loans in an aggregate
amount, if any, equal to 100% of the Net Available Proceeds of such Casualty
Event not theretofore applied to the repair or replacement of such Property,
such prepayment and reduction to be effected in each case in the manner and to
the extent specified in paragraph (e) of this Section 2.10. Nothing in this
paragraph (a) shall be deemed to limit any obligation of the Parent Guarantor or
any of its Subsidiaries pursuant to any of the Security Documents to remit to a
collateral or similar account (including, without limitation, the Collateral
Account) maintained by the Administrative Agent pursuant to any of the Security
Documents the proceeds of insurance, condemnation award or other compensation
received in respect of any Casualty Event.
(b) Equity Issuance. Upon the first Equity Issuance to occur after
the date hereof, the Company shall prepay Revolving Credit Loans in an aggregate
amount equal to 100% of the Net Available Proceeds thereof. Upon any Equity
Issuance (other than the first Equity Issuance to occur after the date hereof),
the Company shall prepay the Term Loans in an aggregate amount equal to 100% of
the Net Available Proceeds of such Equity Issuance, such prepayment and
reduction to be effected in each case in the manner and to the extent specified
in paragraph (e) of this Section 2.10.
(c) Excess Cash Flow. Not later than the 30 days after the receipt
by the Administrative Agent of the annual audited consolidated and consolidating
financial statements of the Parent Guarantor and its Subsidiaries in accordance
with Section 9.01(b) hereof (or, if such consolidated and consolidating
financial statements are not received by the last day on which they are required
to be delivered, not later than 30 days after the last day on which such
financial statements are required by said Section 9.01(b) to be so delivered) in
respect of each fiscal year of the Company ending on or after December 31, 1998,
the Company shall prepay the Term Loans in an aggregate amount equal to the
excess of (A) 50% of Excess Cash Flow for such fiscal year over (B) the
aggregate amount of prepayments of
Credit Agreement
<PAGE> 47
- 42 -
Term Loans made during such fiscal year pursuant to Section 2.09 hereof, such
prepayment and reduction to be effected in each case in the manner and to the
extent specified in paragraph (e) of this Section 2.10.
(d) Sale of Assets. Without limiting the obligation of the Parent
Guarantor to obtain the consent of the Majority Lenders pursuant to Section 9.05
hereof to any Disposition not otherwise permitted hereunder, in the event that
the Net Available Proceeds of any Disposition (herein, the "Current
Disposition"), and of all prior Dispositions as to which a prepayment has not
yet been made under this Section 2.10(d), but excluding the amount of any
Reinvestable Proceeds (as defined below), shall exceed $1,000,000 then, no later
than five Business Days prior to the occurrence of the Current Disposition, the
Company will deliver to the Lenders a statement, certified by a senior financial
officer of the Company, in form and detail satisfactory to the Administrative
Agent, of the amount of the Net Available Proceeds of the Current Disposition
and of all such prior Dispositions and will prepay the Term Loans in an
aggregate amount equal to 100% of the Net Available Proceeds of the Current
Disposition and such prior Dispositions, but excluding the amount of any
Reinvestable Proceeds, such prepayment and reduction to be effected in each case
in the manner and to the extent specified in paragraph (e) of this Section 2.10.
In the event that the Company determines that it will use a portion of the Net
Available Proceeds of any Disposition (the "Reinvestable Proceeds" of such
Disposition) to repair or replace any of its Properties, it may so use such
portion within 120 days of such Disposition; provided that (i) if it fails so to
use such portion, such portion shall cease to be Reinvestable Proceeds on such
120th day and shall be deemed to be Net Available Proceeds of a Disposition that
has occurred on such day and (ii) the Company may not use more than $15,000,000
of Net Available Proceeds as Reinvestable Proceeds in any of its fiscal years.
(e) Application. Prepayments and reductions of Commitments described
in the above paragraphs of this Section 2.10 (other than the first sentence of
Section 2.10(b) hereof) (each, a "Reduction") shall be effected as follows: (i)
the Tranche A Amount (as defined below) of such Reduction shall be applied to
the prepayment of installments of the Tranche A Term Loans then outstanding pro
rata in accordance with the respective amounts of such installments and (ii) the
Tranche B Amount (as defined below) of such Reduction shall be applied to the
prepayment of the installments of the Tranche B Term Loans then outstanding pro
rata in accordance with the respective amounts of such installments. For the
purposes of this
Credit Agreement
<PAGE> 48
- 43 -
Section 2.10(e), with respect to any Reduction, (A) "Tranche A Amount" shall
mean the amount of such Reduction minus the Tranche B Amount and (B) "Tranche B
Amount" shall mean the product of the amount of such Reduction multiplied by a
fraction the numerator of which is the aggregate principal amount of the Tranche
B Term Loans then outstanding and the denominator of which is the aggregate
principal amount of the Term Loans then outstanding; provided that, if the
Majority Tranche B Lenders so agree on or before the date of such Reduction, the
Tranche B Amount for such Reduction shall be zero.
Section 3. Payments of Principal and Interest.
3.01 Repayment of Loans.
(a) The Company hereby promises to pay to the Administrative Agent
for account of each Lender the entire outstanding principal amount of such
Lender's Revolving Credit Loans, and each Revolving Credit Loan shall mature, on
the Revolving Credit Commitment Termination Date. In addition, if following any
Revolving Credit Commitment Reduction Date the aggregate principal amount of the
Revolving Credit Loans, together with the aggregate amount of all Letter of
Credit Liabilities, shall exceed the Revolving Credit Commitments, the Company
shall, first, pay Revolving Credit Loans and, second, provide cover for Letter
of Credit Liabilities, in an aggregate amount equal to such excess. In the event
that the Company shall be required pursuant to this Section 3.01(a) to provide
cover for Letter of Credit Liabilities, the Company shall effect the same by
paying to the Administrative Agent immediately available funds in an amount
equal to the required amount, which funds shall be retained by the
Administrative Agent in the Collateral Account (as provided therein as
collateral security in the first instance for the Letter of Credit Liabilities)
until such time as the Letters of Credit shall have been terminated and all of
the Letter of Credit Liabilities paid in full.
(b) The Company hereby promises to pay to the Administrative Agent
for account of each Lender the principal of such Lender's Tranche A Term Loan in
twenty-five installments payable on the Tranche A Principal Payment Dates as
follows:
Credit Agreement
<PAGE> 49
- 44 -
<TABLE>
<CAPTION>
Principal Payment Date
Falling on or Nearest to: Amount of Installment:
------------------------ ----------------------
<S> <C>
September 30, 1997 $ 5,000,000
December 31, 1997 $ 5,000,000
March 31, 1998 $ 5,000,000
June 30, 1998 $ 5,000,000
September 30, 1998 $ 5,000,000
December 31, 1998 $ 5,000,000
March 31, 1999 $ 7,750,000
June 30, 1999 $ 7,750,000
September 30, 1999 $ 7,750,000
December 31, 1999 $ 7,750,000
March 31, 2000 $ 7,750,000
June 30, 2000 $ 7,750,000
September 30, 2000 $ 7,750,000
December 31, 2000 $ 7,750,000
March 31, 2001 $ 9,000,000
June 30, 2001 $ 9,000,000
September 30, 2001 $ 9,000,000
December 31, 2001 $ 9,000,000
March 31, 2002 $ 9,000,000
June 30, 2002 $ 9,000,000
September 30, 2002 $ 9,000,000
December 31, 2002 $ 9,000,000
March 31, 2003 $12,000,000
June 30, 2003 $12,000,000
September 30, 2003 $12,000,000
</TABLE>
(c) The Company hereby promises to pay to the Administrative Agent
for account of each Lender the principal of such Lender's Tranche B Term Loan in
nine installments payable on the Tranche B Principal Payment Dates as follows:
Credit Agreement
<PAGE> 50
- 45 -
<TABLE>
<CAPTION>
Principal Payment Date
Falling on or Nearest to: Amount of Installment:
------------------------ ---------------------
<S> <C>
December 31, 1997 $ 2,000,000
December 31, 1998 $ 2,000,000
December 31, 1999 $ 2,000,000
December 31, 2000 $ 2,000,000
December 31, 2001 $ 2,000,000
December 31, 2002 $ 2,000,000
December 31, 2003 $25,000,000
June 30, 2004 $56,500,000
December 31, 2004 $56,500,000
</TABLE>
3.02 Interest. The Company hereby promises to pay to the
Administrative Agent for account of each Lender interest on the unpaid principal
amount of each Loan made by such Lender for the period from and including the
date of such Loan to but excluding the date such Loan shall be paid in full, at
the following rates per annum:
(a) during such periods as such Loan is a Base Rate Loan, the Base
Rate (as in effect from time to time) plus the Applicable Margin and
(b) during such periods as such Loan is a Eurodollar Loan, for each
Interest Period relating thereto, the Eurodollar Rate for such Loan for
such Interest Period plus the Applicable Margin.
Notwithstanding the foregoing, the Company hereby promises to pay to the
Administrative Agent for account of each Lender interest at the applicable
Post-Default Rate on any principal of any Loan made by such Lender, on any
Reimbursement Obligation held by such Lender and on any other amount payable by
the Company hereunder or under the Notes held by such Lender to or for account
of such Lender, that shall not be paid in full when due (whether at stated
maturity, by acceleration, by mandatory prepayment or otherwise), for the period
from and including the due date thereof to but excluding the date the same is
paid in full. Accrued interest on each Loan shall be payable (i) in the case of
a Base Rate Loan, quarterly on the Quarterly Dates, (ii) in the case of a
Eurodollar Loan, on the last day of each Interest Period therefor and, if such
Interest Period is longer than three months, at three-month intervals following
the first day of such Interest Period, and (iii) in the case of any Loan, upon
the payment or prepayment thereof or the Conversion of such Loan to a Loan of
another Type (but only on the principal amount so paid, prepaid or Converted),
except that interest payable at the
Credit Agreement
<PAGE> 51
- 46 -
Post-Default Rate shall be payable from time to time on demand. Promptly after
the determination of any interest rate provided for herein or any change
therein, the Administrative Agent shall give notice thereof to the Lenders to
which such interest is payable and to the Company.
Notwithstanding anything to the contrary contained herein or in the
Existing Credit Agreement, accrued interest payable under Section 3.02 of the
Existing Credit Agreement with respect to any of the "Loans" outstanding
thereunder shall be paid on the Effective Date.
Section 4. Payments; Pro Rata Treatment; Computations;
Etc.
4.01 Payments.
(a) Except to the extent otherwise provided herein, all payments of
principal, interest, Reimbursement Obligations and other amounts to be made by
the Company under this Agreement and the Notes, and, except to the extent
otherwise provided therein, all payments to be made by the Obligors under any
other Loan Document, shall be made in Dollars, in immediately available funds,
without deduction, set-off or counterclaim, to the Administrative Agent at an
account specified by the Administrative Agent that is maintained by the
Administrative Agent with Chase, not later than 1:00 p.m. New York time on the
date on which such payment shall become due (each such payment made after such
time on such due date to be deemed to have been made on the next succeeding
Business Day).
(b) Any Lender for whose account any such payment is to be made may
(but shall not be obligated to) debit the amount of any such payment that is not
made by such time as required hereunder to any ordinary deposit account of the
Company with such Lender (with notice to the Company and the Administrative
Agent), provided that such Lender's failure to give such notice shall not affect
the validity thereof.
(c) The Company shall, at the time of making each payment under this
Agreement or any Note for account of any Lender, specify to the Administrative
Agent (which shall so notify the intended recipient(s) thereof) the Loans,
Reimbursement Obligations or other amounts payable by the Company hereunder to
which such payment is to be applied (and in the event that the Company fails to
so specify, or if an Event of Default has occurred and is continuing, the
Administrative Agent
Credit Agreement
<PAGE> 52
- 47 -
may distribute such payment to the Lenders for application in such manner as it
or the Majority Lenders, subject to Section 4.02 hereof, may determine to be
appropriate).
(d) Except to the extent otherwise provided in the last sentence of
Section 2.03(e) hereof, each payment received by the Administrative Agent under
this Agreement or any Note for account of any Lender shall be paid by the
Administrative Agent promptly to such Lender, in immediately available funds,
for account of such Lender's Applicable Lending Office for the Loan or other
obligation in respect of which such payment is made.
(e) If the due date of any payment under this Agreement or any Note
would otherwise fall on a day that is not a Business Day, such date shall be
extended to the next succeeding Business Day, and interest shall be payable for
any principal so extended for the period of such extension.
4.02 Pro Rata Treatment. Except to the extent otherwise provided
herein: (a) each borrowing of Revolving Credit Loans shall be made from the
Revolving Credit Lenders, each payment of commitment fee under Section 2.05
hereof in respect of Revolving Credit Commitments shall be made for account of
the Revolving Credit Lenders, and each termination or reduction of the amount of
the Revolving Credit Commitments shall be applied to the respective Revolving
Credit Commitments of the Revolving Credit Lenders, pro rata according to the
amounts of their respective Revolving Credit Commitments; (b) except as
otherwise provided in Section 5.04 hereof, Eurodollar Loans of any Class having
the same Interest Period shall be allocated pro rata among the relevant Lenders
according to the amounts of their respective Commitments of such Class (in the
case of the making of Loans) or their respective Loans of such Class (in the
case of Conversions and Continuations of Loans); (c) each payment or prepayment
of principal of Revolving Credit Loans and Term Loans by the Company shall be
made for account of the relevant Lenders pro rata in accordance with the
respective unpaid principal amounts of the Loans of such Class held by them; and
(d) each payment of interest on Revolving Credit Loans and Term Loans by the
Company shall be made for account of the relevant Lenders pro rata in accordance
with the amounts of interest on such Loans then due and payable to the
respective Lenders.
4.03 Computations. Interest on Eurodollar Loans and commitment fee
and letter of credit fees shall be computed on the basis of a year of 360 days
and actual days elapsed (including the first day but, except as otherwise
provided in Section 2.03(g) hereof, excluding the last day) occurring in the
Credit Agreement
<PAGE> 53
- 48 -
period for which payable and interest on Base Rate Loans and Reimbursement
Obligations shall be computed on the basis of a year of 365 or 366 days, as the
case may be, and actual days elapsed (including the first day but excluding the
last day) occurring in the period for which payable. Notwithstanding the
foregoing, for each day that the Base Rate is calculated by reference to the
Federal Funds Rate, interest on Base Rate Loans and Reimbursement Obligations
shall be computed on the basis of a year of 360 days and actual days elapsed.
4.04 Minimum Amounts. Except for mandatory prepayments made pursuant
to Section 2.10 hereof and Conversions or prepayments made pursuant to Section
5.04 hereof, (a) in the case of Base Rate Loans, each borrowing, Conversion and
partial prepayment of principal shall be in an aggregate amount at least equal
to $500,000 or a larger multiple of $100,000 and (b) in the case of Eurodollar
Loans, each borrowing shall be in an aggregate amount at least equal to
$1,000,000 or a larger multiple of $1,000,000 and each Conversion or partial
prepayment shall be in an aggregate amount at least equal to $1,000,000 or a
larger multiple of $1,000,000 (borrowings, Conversions or prepayments of or into
Loans of different Types or, in the case of Eurodollar Loans, having different
Interest Periods at the same time hereunder to be deemed separate borrowings,
Conversions and prepayments for purposes of the foregoing, one for each Type or
Interest Period), and, if any Eurodollar Loans would otherwise be in a lesser
principal amount for any period, such Loans shall be Base Rate Loans during such
period.
4.05 Certain Notices. Notices by the Company to the Administrative
Agent of terminations or reductions of the Revolving Credit Commitments, of
borrowings, Conversions, Continuations and optional prepayments of Loans and of
Classes of Loans, of Types of Loans and of the duration of Interest Periods
shall be irrevocable and shall be effective only if received by the
Administrative Agent not later than 11:00 a.m. New York time on the number of
Business Days prior to the date of the relevant termination, reduction,
borrowing, Conversion, Continuation or prepayment or the first day of such
Interest Period specified below:
Credit Agreement
<PAGE> 54
- 49 -
<TABLE>
<CAPTION>
Number of
Business
Notice Days Prior
------ ----------
<S> <C>
Termination or reduction
of Revolving Credit Commitments 3
Borrowing or prepayment of,
or Conversions into,
Base Rate Loans 1
Borrowing or prepayment of,
Conversions into, Continuations
as, or duration of Interest
Period for, Eurodollar Loans 3
</TABLE>
Each such notice of termination or reduction shall specify the amount of the
Revolving Credit Commitments to be terminated or reduced. Each such notice of
borrowing, Conversion, Continuation or optional prepayment shall specify the
Class of Loans to be borrowed, Converted, Continued or prepaid and the amount
(subject to Section 4.04 hereof) and Type of each Loan to be borrowed,
Converted, Continued or prepaid and the date of borrowing, Conversion,
Continuation or optional prepayment (which shall be a Business Day). Each such
notice of the duration of an Interest Period shall specify the Loans to which
such Interest Period is to relate. The Administrative Agent shall promptly
notify the Lenders of the contents of each such notice. In the event that the
Company fails to select the Type of Loan, or the duration of any Interest Period
for any Eurodollar Loan, within the time period and otherwise as provided in
this Section 4.05, such Loan (if outstanding as a Eurodollar Loan) will be
automatically Converted into a Base Rate Loan on the last day of the then
current Interest Period for such Loan or (if outstanding as a Base Rate Loan)
will remain as, or (if not then outstanding) will be made as, a Base Rate Loan.
4.06 Non-Receipt of Funds by the Administrative Agent. Unless the
Administrative Agent shall have been notified by a Lender or the Company (the
"Payor") prior to the date on which the Payor is to make payment to the
Administrative Agent of (in the case of a Lender) the proceeds of a Loan to be
made by such Lender hereunder or (in the case of the Company) a payment to the
Administrative Agent for account of one or more of the Lenders hereunder (such
payment being herein called the "Required Payment"), which notice shall be
effective upon receipt, that the Payor does not intend to make the Required
Payment to the Administrative Agent, the Administrative Agent may assume that
Credit Agreement
<PAGE> 55
- 50 -
the Required Payment has been made and may, in reliance upon such assumption
(but shall not be required to), make the amount thereof available to the
intended recipient(s) on such date; and, if the Payor has not in fact made the
Required Payment to the Administrative Agent, the recipient(s) of such payment
shall, on demand, repay to the Administrative Agent the amount so made available
together with interest thereon in respect of each day during the period
commencing on the date (the "Advance Date") such amount was so made available by
the Administrative Agent until the date the Administrative Agent recovers such
amount at a rate per annum equal to the Federal Funds Rate for such day and, if
such recipient(s) shall fail promptly to make such payment, the Administrative
Agent shall be entitled to recover such amount, on demand, from the Payor,
together with interest as aforesaid, provided that if neither the recipient(s)
nor the Payor shall return the Required Payment to the Administrative Agent
within three Business Days of the Advance Date, then, retroactively to the
Advance Date, the Payor and the recipient(s) shall each be obligated to pay
interest on the Required Payment as follows:
(i) if the Required Payment shall represent a payment to be made
by the Company to the Lenders, the Company and the recipient(s) shall each
be obligated retroactively to the Advance Date to pay interest in respect
of the Required Payment at the Post-Default Rate (without duplication of
the obligation of the Company under Section 3.02 hereof to pay interest on
the Required Payment at the Post-Default Rate), it being understood that
the return by the recipient(s) of the Required Payment to the
Administrative Agent shall not limit such obligation of the Company under
said Section 3.02 to pay interest at the Post-Default Rate in respect of
the Required Payment and
(ii) if the Required Payment shall represent proceeds of a Loan
to be made by the Lenders to the Company, the Payor and the Company shall
each be obligated retroactively to the Advance Date to pay interest in
respect of the Required Payment pursuant to whichever of the rates
specified in Section 3.02 hereof is applicable to the Type of such Loan,
it being understood that the return by the Company of the Required Payment
to the Administrative Agent shall not limit any claim the Company may have
against the Payor in respect of such Required Payment.
Credit Agreement
<PAGE> 56
- 51 -
4.07 Sharing of Payments, Etc.
(a) Each Obligor agrees that, in addition to (and without limitation
of) any right of set-off, banker's lien or counterclaim a Lender may otherwise
have, each Lender shall be entitled, at its option (to the fullest extent
permitted by law), to set off and apply any deposit (general or special, time or
demand, provisional or final), or other indebtedness, held by it for the credit
or account of such Obligor at any of its offices, in Dollars or in any other
currency, against any principal of or interest on any of such Lender's Loans,
Reimbursement Obligations or any other amount payable to such Lender hereunder,
that is not paid when due (regardless of whether such deposit or other
indebtedness are then due to such Obligor), in which case it shall promptly
notify such Obligor and the Administrative Agent thereof, provided that such
Lender's failure to give such notice shall not affect the validity thereof.
(b) If any Lender shall obtain from any Obligor payment of any
principal of or interest on any Loan of any Class or Letter of Credit Liability
owing to it or payment of any other amount under this Agreement or any other
Loan Document through the exercise of any right of set-off, banker's lien or
counterclaim or similar right or otherwise (other than from the Administrative
Agent as provided herein), and, as a result of such payment, such Lender shall
have received a greater percentage of the principal of or interest on the Loans
of such Class or Letter of Credit Liabilities or such other amounts then due
hereunder or thereunder by such Obligor to such Lender than the percentage
received by any other Lender, it shall promptly purchase from such other Lenders
participations in (or, if and to the extent specified by such Lender, direct
interests in) the Loans of such Class or Letter of Credit Liabilities or such
other amounts, respectively, owing to such other Lenders (or in interest due
thereon, as the case may be) in such amounts, and make such other adjustments
from time to time as shall be equitable, to the end that all the Lenders shall
share the benefit of such excess payment (net of any expenses that may be
incurred by such Lender in obtaining or preserving such excess payment) pro rata
in accordance with the unpaid principal of and/or interest on the Loans of such
Class or Letter of Credit Liabilities or such other amounts, respectively, owing
to each of the Lenders. To such end all the Lenders shall make appropriate
adjustments among themselves (by the resale of participations sold or otherwise)
if such payment is rescinded or must otherwise be restored.
Credit Agreement
<PAGE> 57
- 52 -
(c) Each Obligor agrees that any Lender so purchasing such a
participation (or direct interest) may exercise all rights of set-off, banker's
lien, counterclaim or similar rights with respect to such participation as fully
as if such Lender were a direct holder of Loans or other amounts (as the case
may be) owing to such Lender in the amount of such participation.
(d) Nothing contained herein shall require any Lender to exercise
any such right or shall affect the right of any Lender to exercise, and retain
the benefits of exercising, any such right with respect to any other
indebtedness or obligation of any Obligor. If, under any applicable bankruptcy,
insolvency or other similar law, any Lender receives a secured claim in lieu of
a set-off to which this Section 4.07 applies, such Lender shall, to the extent
practicable, exercise its rights in respect of such secured claim in a manner
consistent with the rights of the Lenders entitled under this Section 4.07 to
share in the benefits of any recovery on such secured claim.
Section 5. Yield Protection, Etc.
5.01 Additional Costs.
(a) The Company shall pay directly to each Lender from time to time
such amounts as such Lender may determine to be necessary to compensate such
Lender for any costs that such Lender determines are attributable to its making
or maintaining of any Eurodollar Loans or its obligation to make any Eurodollar
Loans hereunder, or any reduction in any amount receivable by such Lender
hereunder in respect of any of such Loans or such obligation (such increases in
costs and reductions in amounts receivable being herein called "Additional
Costs"), resulting from any Regulatory Change that:
(i) shall subject any Lender (or its Applicable Lending Office
for any of such Loans) to any tax, duty or other charge in respect of such
Loans or its Notes or changes the basis of taxation of any amounts payable
to such Lender under this Agreement or its Notes in respect of any of such
Loans (excluding changes in the rate of tax on the overall net income of
such Lender or of such Applicable Lending Office by the jurisdiction in
which such Lender has its principal office or such Applicable Lending
Office); or
(ii) imposes or modifies any reserve, special deposit or similar
requirements (other than the Reserve Requirement utilized in the
determination of the Eurodollar
Credit Agreement
<PAGE> 58
- 53 -
Rate for such Loan) relating to any extensions of credit or other assets
of, or any deposits with or other liabilities of, such Lender (including,
without limitation, any of such Loans or any deposits referred to in the
definition of "Eurodollar Base Rate" in Section 1.01 hereof), or any
commitment of such Lender (including, without limitation, the Commitments
of such Lender hereunder); or
(iii) imposes any other condition affecting this Agreement or its
Notes (or any of such extensions of credit or liabilities) or its
Commitments.
If any Lender requests compensation from the Company under this Section 5.01(a),
the Company may, by notice to such Lender (with a copy to the Administrative
Agent), suspend the obligation of such Lender thereafter to make or Continue
Eurodollar Loans, or to Convert Base Rate Loans into Eurodollar Loans, until the
Regulatory Change giving rise to such request ceases to be in effect (in which
case the provisions of Section 5.04 hereof shall be applicable), provided that
such suspension shall not affect the right of such Lender to receive the
compensation so requested.
(b) Without limiting the effect of the foregoing provisions of this
Section 5.01 (but without duplication), the Company shall pay directly to each
Lender from time to time on request such amounts as such Lender may determine to
be necessary to compensate such Lender (or, without duplication, the bank
holding company of which such Lender is a subsidiary) for any costs that it
determines are attributable to the maintenance by such Lender (or any Applicable
Lending Office or such bank holding company), pursuant to any law or regulation
or any interpretation, directive or request (whether or not having the force of
law and whether or not failure to comply therewith would be unlawful) of any
court or governmental or monetary authority (i) following any Regulatory Change
or (ii) implementing any risk-based capital guideline or other requirement
(whether or not having the force of law and whether or not the failure to comply
therewith would be unlawful) hereafter issued by any government or governmental
or supervisory authority implementing at the national level the Basle Accord, of
capital in respect of its Commitments or Loans (such compensation to include,
without limitation, an amount equal to any reduction of the rate of return on
assets or equity of such Lender (or any Applicable Lending Office or such bank
holding company) to a level below that which such Lender (or any Applicable
Lending Office or such bank holding company) could have achieved but for such
law, regulation, interpretation, directive or request).
Credit Agreement
<PAGE> 59
- 54 -
(c) Each Lender shall notify the Company of any event occurring
after the date hereof entitling such Lender to compensation under paragraph (a)
or (b) of this Section 5.01 as promptly as practicable, but in any event within
45 days, after such Lender obtains actual knowledge thereof; provided that (i)
if any Lender fails to give such notice within 45 days after it obtains actual
knowledge of such an event, such Lender shall, with respect to compensation
payable pursuant to this Section 5.01 in respect of any costs resulting from
such event, only be entitled to payment under this Section 5.01 for costs
incurred from and after the date 45 days prior to the date that such Lender does
give such notice and (ii) each Lender will designate a different Applicable
Lending Office for the Loans of such Lender affected by such event if such
designation will avoid the need for, or reduce the amount of, such compensation
and will not, in the sole opinion of such Lender, be disadvantageous to such
Lender, except that such Lender shall have no obligation to designate an
Applicable Lending Office located in the United States of America. Each Lender
will furnish to the Company a certificate setting forth the basis and amount of
each request by such Lender for compensation under paragraph (a) or (b) of this
Section 5.01. Determinations and allocations by any Lender for purposes of this
Section 5.01 of the effect of any Regulatory Change pursuant to paragraph (a) of
this Section 5.01, or of the effect of capital maintained pursuant to paragraph
(b) of this Section 5.01, on its costs or rate of return of maintaining Loans or
its obligation to make Loans, or on amounts receivable by it in respect of
Loans, and of the amounts required to compensate such Lender under this Section
5.01, shall be conclusive, provided that such determinations and allocations are
made on a reasonable basis.
5.02 Limitation on Types of Loans. Anything herein to the contrary
notwithstanding, if, on or prior to the determination of any Eurodollar Base
Rate for any Interest Period:
(a) the Administrative Agent determines, which determination shall
be conclusive, that quotations of interest rates for the relevant deposits
referred to in the definition of "Eurodollar Base Rate" in Section 1.01
hereof are not being provided in the relevant amounts or for the relevant
maturities for purposes of determining rates of interest for Eurodollar
Loans as provided herein; or
(b) if the related Loans are Revolving Credit Loans, the Majority
Revolving Credit Lenders or, if the related Loans are Tranche A Term
Loans, the Majority Tranche A
Credit Agreement
<PAGE> 60
- 55 -
Lenders or, if the related Loans are Tranche B Term Loans, the Majority
Tranche B Lenders determine, which determination shall be conclusive, and
notify the Administrative Agent that the relevant rates of interest
referred to in the definition of "Eurodollar Base Rate" in Section 1.01
hereof upon the basis of which the rate of interest for Eurodollar Loans
for such Interest Period is to be determined are not likely adequately to
cover the cost to such Lenders of making or maintaining Eurodollar Loans
for such Interest Period;
then the Administrative Agent shall give the Company and each Lender prompt
notice thereof and, so long as such condition remains in effect, the Lenders
shall be under no obligation to make additional Eurodollar Loans, to Continue
Eurodollar Loans or to Convert Base Rate Loans into Eurodollar Loans, and the
Company shall, on the last day(s) of the then current Interest Period(s) for the
outstanding Eurodollar Loans, either prepay such Loans or Convert such Loans
into Base Rate Loans in accordance with Section 2.09 hereof.
5.03 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Lender or its
Applicable Lending Office to honor its obligation to make or maintain Eurodollar
Loans hereunder (and, in the sole opinion of such Lender, the designation of a
different Applicable Lending Office would either not avoid such unlawfulness or
would be disadvantageous to such Lender), then such Lender shall promptly notify
the Company thereof (with a copy to the Administrative Agent) and such Lender's
obligation to make or Continue, or to Convert Loans of any other Type into,
Eurodollar Loans shall be suspended until such time as such Lender may again
make and maintain Eurodollar Loans (in which case the provisions of Section 5.04
hereof shall be applicable).
5.04 Treatment of Affected Loans. If the obligation of any Lender to
make Eurodollar Loans or to Continue, or to Convert Base Rate Loans into,
Eurodollar Loans shall be suspended pursuant to Section 5.01 or 5.03 hereof,
such Lender's Eurodollar Loans shall be automatically Converted into Base Rate
Loans on the last day(s) of the then current Interest Period(s) for Eurodollar
Loans (or, in the case of a Conversion resulting from a circumstance described
in Section 5.03 hereof, on such earlier date as such Lender may specify to the
Company with a copy to the Administrative Agent) and, unless and until such
Lender gives notice as provided below that the circumstances specified in
Credit Agreement
<PAGE> 61
- 56 -
Section 5.01 or 5.03 hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have been so
Converted, all payments and prepayments of principal that would otherwise
be applied to such Lender's Eurodollar Loans shall be applied instead to
its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such
Lender as Eurodollar Loans shall be made or Continued instead as Base Rate
Loans, and all Base Rate Loans of such Lender that would otherwise be
Converted into Eurodollar Loans shall remain as Base Rate Loans.
If such Lender gives notice to the Company with a copy to the Administrative
Agent that the circumstances specified in Section 5.01 or 5.03 hereof that gave
rise to the Conversion of such Lender's Eurodollar Loans pursuant to this
Section 5.04 no longer exist (which such Lender agrees to do promptly upon such
circumstances ceasing to exist) at a time when Eurodollar Loans of the same
Class made by other Lenders are outstanding, such Lender's Base Rate Loans of
such Class shall be automatically Converted, on the first day(s) of the next
succeeding Interest Period(s) for such outstanding Eurodollar Loans, to the
extent necessary so that, after giving effect thereto, all Base Rate and
Eurodollar Loans of such Class are allocated among the Lenders ratably (as to
principal amounts, Types and Interest Periods).
5.05 Compensation. The Company shall pay to the Administrative Agent
for account of each Lender, upon the request of such Lender through the
Administrative Agent, such amount or amounts as shall be sufficient (in the
reasonable opinion of such Lender) to compensate it for any loss, cost or
expense that such Lender determines is attributable to:
(a) any payment, mandatory or optional prepayment or Conversion of a
Eurodollar Loan made by such Lender for any reason (including, without
limitation, the acceleration of the Loans pursuant to Section 10 hereof)
on a date other than the last day of the Interest Period for such Loan; or
(b) any failure by the Company for any reason (including, without
limitation, the failure of any of the conditions precedent specified in
Section 7 hereof to be satisfied) to borrow a Eurodollar Loan from such
Lender on the date for such borrowing specified in the relevant notice of
borrowing given pursuant to Section 2.02 hereof.
Credit Agreement
<PAGE> 62
- 57 -
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
that otherwise would have accrued on the principal amount so paid, prepaid,
Converted or not borrowed for the period from the date of such payment,
prepayment, Conversion or failure to borrow to the last day of the then current
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan that would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Loan provided
for herein over (ii) the amount of interest that otherwise would have accrued on
such principal amount at a rate per annum equal to the interest component of the
amount such Lender would have bid in the London interbank market for Dollar
deposits of leading banks in amounts comparable to such principal amount and
with maturities comparable to such period (as reasonably determined by such
Lender).
Without limiting the generality of the foregoing, on the Effective
Date, the Company shall pay to the Administrative Agent for account of the
Existing Lenders under the Existing Credit Agreement any amounts that would be
payable under Section 5.05 of the Existing Credit Agreement assuming any
"Eurodollar Loans" outstanding thereunder had been paid in full on the Effective
Date.
5.06 Additional Costs in Respect of Letters of Credit. Without
limiting the obligations of the Company under Section 5.01 hereof (but without
duplication), if as a result of any Regulatory Change or any risk-based capital
guideline or other requirement hereafter issued by any government or
governmental or supervisory authority implementing at the national level the
Basle Accord there shall be imposed, modified or deemed applicable any tax,
reserve, special deposit, capital adequacy or similar requirement against or
with respect to or measured by reference to Letters of Credit issued or to be
issued hereunder and the result shall be to increase the cost to any Lender or
Lenders of issuing (or purchasing participations in) or maintaining its
obligation hereunder to issue (or purchase participations in) any Letter of
Credit hereunder or reduce any amount receivable by any Lender hereunder in
respect of any Letter of Credit (which increases in cost, or reductions in
amount receivable, shall be the result of such Lender's or Lenders' reasonable
allocation of the aggregate of such increases or reductions resulting from such
event), then, not later than five Business Days following demand by such Lender
or Lenders (through the Administrative Agent), the Company shall pay to the
Administrative Agent for account of such Lender or Lenders, from
Credit Agreement
<PAGE> 63
- 58 -
time to time as specified by such Lender or Lenders (through the Administrative
Agent), such additional amounts as shall be sufficient to compensate such Lender
or Lenders (through the Administrative Agent) for such increased costs or
reductions in amount. A statement as to such increased costs or reductions in
amount incurred by any such Lender or Lenders, submitted by such Lender or
Lenders to the Company shall be conclusive in the absence of manifest error as
to the amount thereof.
5.07 U.S. Taxes.
(a) The Company agrees to pay to each Lender that is not a U.S.
Person such additional amounts as are necessary in order that the net payment of
any amount due to such non-U.S. Person hereunder after deduction for or
withholding in respect of any U.S. Taxes imposed with respect to such payment
(or in lieu thereof, payment of such U.S. Taxes by such non-U.S. Person), will
not be less than the amount stated herein to be then due and payable, provided
that the foregoing obligation to pay such additional amounts shall not apply:
(i) to any payment to any Lender hereunder (other than in
respect of any Registered Loan) unless such Lender is, on the date hereof
(or on the date it becomes a Lender hereunder as provided in Section
12.06(b) hereof) and on the date of any change in the Applicable Lending
Office of such Lender, either entitled to submit a Form 1001 (relating to
such Lender and entitling it to a complete exemption from withholding on
all interest to be received by it hereunder in respect of the Loans) or
Form 4224 (relating to all interest to be received by such Lender
hereunder in respect of the Loans),
(ii) to any payment to any Lender hereunder in respect of a
Registered Loan (a "Registered Holder"), unless such Registered Holder
(or, if such Registered Holder is not the beneficial owner of such
Registered Loan, the beneficial owner thereof) is, on the date hereof (or
on the date such Registered Holder becomes a Lender as provided in Section
12.06(b) hereof) and on the date of any change in the Applicable Lending
Office of such Lender, entitled to submit a Form W-8, together with an
annual certificate stating that (x) such Registered Holder (or beneficial
owner, as the case may be) is not a "bank" within the meaning of Section
881(c)(3)(A) of the Code, and (y) such Registered Holder (or beneficial
owner, as the case may be) shall promptly notify the Company if at any
time, such Registered Holder (or beneficial owner, as the case may be)
Credit Agreement
<PAGE> 64
- 59 -
determines that it is no longer in a position to provide such certificate
to the Company (or any other form of certification adopted by the relevant
taxing authorities of the United States of America for such purposes), or
(iii) to any U.S. Taxes imposed solely by reason of the failure by
such non-U.S. Person (or, if such non-U.S. Person is not the beneficial
owner of the relevant Loan, such beneficial owner) to comply with
applicable certification, information, documentation or other reporting
requirements concerning the nationality, residence, identity or
connections with the United States of America of such non-U.S. Person (or
beneficial owner, as the case may be) if such compliance is required by
statute or regulation of the United States of America as a precondition to
relief or exemption from such U.S. Taxes.
For the purposes of this Section 5.07(a), (A) "Form 1001" shall mean Form 1001
(Ownership, Exemption, or Reduced Rate Certificate) of the Department of the
Treasury of the United States of America, (B) "Form 4224" shall mean Form 4224
(Exemption from Withholding of Tax on Income Effectively Connected with the
Conduct of a Trade or Business in the United States) of the Department of the
Treasury of the United States of America (or in relation to either such Form
such successor and related forms as may from time to time be adopted by the
relevant taxing authorities of the United States of America to document a claim
to which such Form relates) and (C) "Form W-8" shall mean Form W-8 (Certificate
of Foreign Status of the Department of Treasury of the United States of
America). Each of the Forms referred to in the foregoing clauses (A), (B) and
(C) shall include such successor and related forms as may from time to time be
adopted by the relevant taxing authorities of the United States of America to
document a claim to which such Form relates.
(b) Within 30 days after paying any amount to the Administrative
Agent or any Lender from which it is required by law to make any deduction or
withholding, and within 30 days after it is required by law to remit such
deduction or withholding to any relevant taxing or other authority, the Company
shall deliver to the Administrative Agent for delivery to such non-U.S. Person
evidence satisfactory to such Person of such deduction, withholding or payment
(as the case may be).
(c) Each such non-U.S. Person that is entitled to submit a Form
1001, Form 4224 or Form W-8, together with a certificate stating that (x) such
Registered Holder (or beneficial owner, as the case may be) is not a "bank"
within the
Credit Agreement
<PAGE> 65
- 60 -
meaning of Section 881(c)(3)(A) of the Code and (y) such Registered Holder (or
beneficial owner, as the case may be) shall promptly notify the Company if at
any time, such Registered Holder (or beneficial owner, as the case may be)
determines that it is no longer in a position to provide such certificate to the
Company (or any other form of certification adopted by the relevant taxing
authorities of the United States of America for such purposes), shall submit the
same to the Administrative Agent and to the Company on the Effective Date (or on
the date it becomes a Lender hereunder as provided in Section 12.06(b) hereof)
and annually thereafter.
5.08 Replacement of Lenders. If any Lender requests compensation
pursuant to Section 5.01, 5.06 or 5.07 hereof, or any Lender's obligation to
make or Continue, or to Convert Loans of any Type into, the other Type of Loan
shall be suspended pursuant to Section 5.01 or 5.03 hereof (any such Lender
requesting such compensation, or whose obligations are so suspended, being
herein called a "Requesting Lender"), the Company, upon three Business Days
notice, may require that such Requesting Lender transfer all of its right, title
and interest under this Agreement and such Requesting Lender's Notes to any bank
or other financial institution (a "Proposed Lender") identified by the Company
that is satisfactory to the Agent and the Issuing Lender (i) if such Proposed
Lender agrees to assume all of the obligations of such Requesting Lender
hereunder, and to purchase all of such Requesting Lender's Loans hereunder for
consideration equal to the aggregate outstanding principal amount of such
Requesting Lender's Loans, together with interest thereon to the date of such
purchase, and satisfactory arrangements are made for payment to such Requesting
Lender of all other amounts payable hereunder to such Requesting Lender on or
prior to the date of such transfer (including any fees accrued hereunder and any
amounts that would be payable under Section 5.05 hereof as if all of such
Requesting Lender's Loans were being prepaid in full on such date) and (ii) if
such Requesting Lender has requested compensation pursuant to Section 5.01, 5.06
or 5.07 hereof, such Proposed Lender's aggregate requested compensation, if any,
pursuant to said Section 5.01, 5.06 or 5.07 with respect to such Requesting
Lender's Loans is lower than that of the Requesting Lender. Subject to the
provisions of Section 12.06(b) hereof, such Proposed Lender shall be a "Lender"
for all purposes hereunder. Without prejudice to the survival of any other
agreement of the Company hereunder the agreements of the Company contained in
Sections 5.01, 5.06, 5.07 and 12.03 hereof (without duplication of any payments
made to such Requesting Lender by the Company or the Proposed Lender) shall
survive for the benefit of
Credit Agreement
<PAGE> 66
- 61 -
such Requesting Lender under this Section 5.08 with respect to the time prior to
such replacement.
Section 6. Guarantee.
6.01 The Guarantee. The Guarantors hereby jointly and severally
guarantee to each Lender and the Administrative Agent and their respective
successors and assigns the prompt payment in full when due (whether at stated
maturity, acceleration or otherwise) of the principal of and interest on the
Loans made by the Lenders to, and the Notes held by each Lender of, the Company
and all other amounts from time to time owing to the Lenders or the
Administrative Agent by the Company under this Agreement and under the Notes and
by any Obligor under any of the other Loan Documents, and all obligations of the
Company or any of its Subsidiaries to any Lender or any affiliate of any Lender
in respect of any Interest Rate Protection Agreements, in each case strictly in
accordance with the terms thereof (such obligations being herein collectively
called the "Guaranteed Obligations"). The Guarantors hereby further jointly and
severally agree that if the Company shall fail to pay in full when due (whether
at stated maturity, by acceleration or otherwise) any of the Guaranteed
Obligations, the Guarantors will promptly pay the same, without any demand or
notice whatsoever, and that in the case of any extension of time of payment or
renewal of any of the Guaranteed Obligations, the same will be promptly paid in
full when due (whether at extended maturity, by acceleration or otherwise) in
accordance with the terms of such extension or renewal.
6.02 Obligations Unconditional. The obligations of the Guarantors
under Section 6.01 hereof are absolute and unconditional, joint and several,
irrespective of the value, genuineness, validity, regularity or enforceability
of the obligations of the Company under this Agreement, the Notes or any other
agreement or instrument referred to herein or therein, or any substitution,
release or exchange of any other guarantee of or security for any of the
Guaranteed Obligations, and, to the fullest extent permitted by applicable law,
irrespective of any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
it being the intent of this Section 6.02 that the obligations of the Guarantors
hereunder shall be absolute and unconditional, joint and several, under any and
all circumstances. Without limiting the generality of the foregoing, it is
agreed that the occurrence of any one or more of the following shall not alter
or
Credit Agreement
<PAGE> 67
- 62 -
impair the liability of the Guarantors hereunder which shall remain absolute and
unconditional as described above:
(i) at any time or from time to time, without notice to the
Guarantors, the time for any performance of or compliance with any of the
Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;
(ii) any of the acts mentioned in any of the provisions of this
Agreement or the Notes or any other agreement or instrument referred to
herein or therein shall be done or omitted;
(iii) the maturity of any of the Guaranteed Obligations shall be
accelerated, or any of the Guaranteed Obligations shall be modified,
supplemented or amended in any respect, or any right under this Agreement
or the Notes or any other agreement or instrument referred to herein or
therein shall be waived or any other guarantee of any of the Guaranteed
Obligations or any security therefor shall be released or exchanged in
whole or in part or otherwise dealt with; or
(iv) any lien or security interest granted to, or in favor of,
the Administrative Agent or any Lender or Lenders as security for any of
the Guaranteed Obligations shall fail to be perfected.
The Guarantors hereby expressly waive diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that the Administrative
Agent or any Lender exhaust any right, power or remedy or proceed against the
Company under this Agreement or the Notes or any other agreement or instrument
referred to herein or therein, or against any other Person under any other
guarantee of, or security for, any of the Guaranteed Obligations.
6.03 Reinstatement. The obligations of the Guarantors under this
Section 6 shall be automatically reinstated if and to the extent that for any
reason any payment by or on behalf of the Company in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in bankruptcy
or reorganization or otherwise and the Guarantors jointly and severally agree
that they will indemnify the Administrative Agent and each Lender on demand for
all reasonable costs and expenses (including, without limitation, fees of
counsel) incurred by the Administrative Agent or such Lender in connection with
such
Credit Agreement
<PAGE> 68
- 63 -
rescission or restoration, including any such costs and expenses incurred in
defending against any claim alleging that such payment constituted a preference,
fraudulent transfer or similar payment under any bankruptcy, insolvency or
similar law.
6.04 Subrogation. The Guarantors hereby jointly and severally agree
that until the payment and satisfaction in full of all Guaranteed Obligations
and the expiration and termination of the Commitments of the Lenders under this
Agreement they shall not exercise any right or remedy arising by reason of any
performance by them of their guarantee in Section 6.01 hereof, whether by
subrogation or otherwise, against the Company or any other guarantor of any of
the Guaranteed Obligations or any security for any of the Guaranteed
Obligations.
6.05 Remedies. The Guarantors jointly and severally agree that, as
between the Guarantors and the Lenders, the obligations of the Company under
this Agreement and the Notes may be declared to be forthwith due and payable as
provided in Section 10 hereof (and shall be deemed to have become automatically
due and payable in the circumstances provided in said Section 10) for purposes
of Section 6.01 hereof notwithstanding any stay, injunction or other prohibition
preventing such declaration (or such obligations from becoming automatically due
and payable) as against the Company and that, in the event of such declaration
(or such obligations being deemed to have become automatically due and payable),
such obligations (whether or not due and payable by the Company) shall forthwith
become due and payable by the Guarantors for purposes of said Section 6.01.
6.06 Instrument for the Payment of Money. Each Guarantor hereby
acknowledges that the guarantee in this Section 6 constitutes an instrument for
the payment of money, and consents and agrees that any Lender or the
Administrative Agent, at its sole option, in the event of a dispute by such
Guarantor in the payment of any moneys due hereunder, shall have the right to
bring motion-action under New York CPLR Section 3213.
6.07 Continuing Guarantee. The guarantee in this Section 6 is a
continuing guarantee, and shall apply to all Guaranteed Obligations whenever
arising.
6.08 Rights of Contribution. The Subsidiary Guarantors hereby agree,
as between themselves, that if any Subsidiary Guarantor shall become an Excess
Funding Guarantor (as defined below) by reason of the payment by such Subsidiary
Guarantor of any Guaranteed Obligations, each other Subsidiary
Credit Agreement
<PAGE> 69
- 64 -
Guarantor shall, on demand of such Excess Funding Guarantor (but subject to the
next sentence), pay to such Excess Funding Guarantor an amount equal to such
Subsidiary Guarantor's Pro Rata Share (as defined below and determined, for this
purpose, without reference to the Properties, debts and liabilities of such
Excess Funding Guarantor) of the Excess Payment (as defined below) in respect of
such Guaranteed Obligations. The payment obligation of a Subsidiary Guarantor to
any Excess Funding Guarantor under this Section 6.08 shall be subordinate and
subject in right of payment to the prior payment in full of the obligations of
such Subsidiary Guarantor under the other provisions of this Section 6 and such
Excess Funding Guarantor shall not exercise any right or remedy with respect to
such excess until payment and satisfaction in full of all of such obligations.
For purposes of this Section 6.08, (i) "Excess Funding Guarantor"
shall mean, in respect of any Guaranteed Obligations, a Subsidiary Guarantor
that has paid an amount in excess of its Pro Rata Share of such Guaranteed
Obligations, (ii) "Excess Payment" shall mean, in respect of any Guaranteed
Obligations, the amount paid by an Excess Funding Guarantor in excess of its Pro
Rata Share of such Guaranteed Obligations and (iii) "Pro Rata Share" shall mean,
for any Subsidiary Guarantor, the ratio (expressed as a percentage) of (x) the
amount by which the aggregate present fair saleable value of all Properties of
such Subsidiary Guarantor (excluding any shares of stock of any other Subsidiary
Guarantor) exceeds the amount of all the debts and liabilities of such
Subsidiary Guarantor (including contingent, subordinated, unmatured and
unliquidated liabilities, but excluding the obligations of such Subsidiary
Guarantor hereunder and any obligations of any other Subsidiary Guarantor that
have been Guaranteed by such Subsidiary Guarantor) to (y) the amount by which
the aggregate fair saleable value of all Properties of all of the Subsidiary
Guarantors exceeds the amount of all the debts and liabilities (including
contingent, subordinated, unmatured and unliquidated liabilities, but excluding
the obligations of the Company and the Subsidiary Guarantors hereunder and under
the other Loan Documents) of all of the Subsidiary Guarantors, determined (A)
with respect to any Subsidiary Guarantor that is a party hereto on the Effective
Date, as of the Effective Date, and (B) with respect to any other Subsidiary
Guarantor, as of the date such Subsidiary Guarantor becomes a Subsidiary
Guarantor hereunder.
6.09 General Limitation on Guarantee Obligations. In any action or
proceeding involving any state corporate law, or any state or Federal
bankruptcy, insolvency, reorganization or other law affecting the rights of
creditors generally, if the
Credit Agreement
<PAGE> 70
- 65 -
obligations of any Subsidiary Guarantor under Section 6.01 hereof would
otherwise, taking into account the provisions of Section 6.08 hereof, be held or
determined to be void, invalid or unenforceable, or subordinated to the claims
of any other creditors, on account of the amount of its liability under said
Section 6.01, then, notwithstanding any other provision hereof to the contrary,
the amount of such liability shall, without any further action by such
Subsidiary Guarantor, any Lender, the Administrative Agent or any other Person,
be automatically limited and reduced to the highest amount that is valid and
enforceable and not subordinated to the claims of other creditors as determined
in such action or proceeding.
Section 7. Conditions Precedent.
7.01 Initial Extension of Credit. The effectiveness of the
amendment and restatement of the Existing Credit Agreement contemplated hereby
is subject to the conditions precedent that (i) this Amended and Restated Credit
Agreement be duly executed and delivered by the Company, the Parent Guarantor,
the Subsidiary Guarantors, each of the Lenders (including, without limitation
all Persons that are "Lenders" under and as defined in the Existing Credit
Agreement as in effect immediately prior to the effectiveness of the amendment
and restatement contemplated hereby) and the Administrative Agent; (ii) such
conditions precedent shall be satisfied on or before November 29, 1996; and
(iii) the Administrative Agent shall have received the following (with, in the
case of clauses (a), (b), (c) and (d) below, sufficient copies for each Lender),
each of which shall be satisfactory to the Administrative Agent (and to the
extent specified below, to each Lender) in form and substance:
(a) Corporate Documents. Certified copies of the charter and by-laws
(or equivalent documents) of each Obligor and of all corporate or
partnership authority for each Obligor (including, without limitation,
board of director resolutions and evidence of the incumbency, including
specimen signatures, of officers) with respect to the execution, delivery
and performance of such of the Loan Documents to which such Obligor is
intended to be a party and each other document to be delivered by such
Obligor from time to time in connection herewith and the extensions of
credit hereunder (and the Administrative Agent and each Lender may
conclusively rely on such certificate until it receives notice in writing
from such Obligor to the contrary).
Credit Agreement
<PAGE> 71
- 66 -
(b) Officer's Certificate. A certificate of a senior officer of
the Company, dated the Effective Date, to the effect set forth in the
first sentence of Section 7.02 hereof.
(c) Opinion of Counsel to the Obligors. An opinion, dated the
Effective Date, of Paul Meyer, Esq., general counsel of the Company,
substantially in the form of Exhibit C hereto and covering such other
matters as the Administrative Agent or any Lender may reasonably request
(and each Obligor hereby instructs such counsel to deliver such opinion to
the Lenders and the Administrative Agent).
(d) Opinion of Special New York Counsel to Chase. An opinion, dated
the Effective Date, of Milbank, Tweed, Hadley & McCloy, special New York
counsel to Chase, substantially in the form of Exhibit D hereto (and Chase
hereby instructs such counsel to deliver such opinion to the Lenders).
(e) Notes. The Notes, duly completed and executed for each Lender
(except that, in the case of a Registered Holder, Notes shall be required
only to the extent that such Registered Holder shall have requested the
execution and delivery of a Note pursuant to Section 2.08(f) hereof).
(f) Security Agreement. The Security Agreement, duly executed and
delivered by the Company, the Guarantors and the Administrative Agent and
the certificates identified in Annex 1 thereto, in each case accompanied
by undated stock powers executed in blank. In addition, the Company and
the Guarantors shall have taken such other action (including, without
limitation, delivering to the Administrative Agent, for filing,
appropriately completed and duly executed copies of Uniform Commercial
Code financing statements) as the Administrative Agent shall have
requested in order to perfect the security interests created pursuant to
the Security Agreement.
(g) Repayment of Certain Indebtedness. Evidence that the principal
of and interest on, and all other amounts owing in respect of, the
Indebtedness owing to the Retiring Lenders under the Existing Credit
Agreement as of the Effective Date shall have been (or shall be
simultaneously) paid in full.
(h) Other Documents. Such other documents as the Administrative
Agent or any Lender or special New York counsel to Chase may reasonably
request.
Credit Agreement
<PAGE> 72
- 67 -
The effectiveness of the amendment and restatement of the Existing Credit
Agreement contemplated hereby is also subject to the payment by the Company of
(x) all interest, commitment fees and letter of credit fees payable under the
Existing Credit Agreement accrued to but not including the Effective Date and
remaining unpaid on the Effective Date and (y) such other fees as the Company
shall have agreed to pay or deliver to any Lender or the Administrative Agent in
connection herewith, including, without limitation, the reasonable fees and
expenses of Milbank, Tweed, Hadley & McCloy, special New York counsel to Chase,
in connection with the negotiation, preparation, execution and delivery of this
Agreement and the Notes and the other Loan Documents and the extensions of
credit hereunder (to the extent that statements for such fees and expenses have
been delivered to the Company).
7.02 Initial and Subsequent Extensions of Credit. The obligation of
the Lenders to make any Loan or to issue any Letter of Credit hereunder upon the
occasion of each borrowing or issuance of a Letter of Credit hereunder
(including the initial such extension of credit) is subject to the further
conditions precedent that, both immediately prior to the making of such Loan or
the issuance of such Letter of Credit and also after giving effect thereto and
to the intended use thereof:
(a) no Default shall have occurred and be continuing; and
(b) the representations and warranties made by the Company and the
Parent Guarantor in Section 8 hereof, and by each Obligor in each of the
other Loan Documents to which it is a party, shall be true and complete on
and as of the date of the making of such Loan or other extension of credit
with the same force and effect as if made on and as of such date (or, if
any such representation or warranty is expressly stated to have been made
as of a specific date, as of such specific date).
Each notice of borrowing or request for the issuance of a Letter of Credit by
the Company hereunder shall constitute a certification by the Company to the
effect set forth in the preceding sentence (both as of the date of such notice
or request and, unless the Company otherwise notifies the Administrative Agent
prior to the date of such borrowing or issuance, as of the date of such
borrowing or issuance).
Credit Agreement
<PAGE> 73
- 68 -
Section 8. Representations and Warranties. Each of the Company and
the Parent Guarantor represents and warrants to the Administrative Agent and the
Lenders that:
8.01 Corporate Existence. Each of the Parent Guarantor and its
Subsidiaries: (a) is a corporation, partnership or other entity duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization; (b) has all requisite corporate or other power, and has all
material governmental licenses, authorizations, consents and approvals necessary
to own its assets and carry on its business as now being or as proposed to be
conducted; and (c) is qualified to do business and is in good standing in all
jurisdictions in which the nature of the business conducted by it, makes such
qualification necessary and where failure so to qualify could (either
individually or in the aggregate) have a Material Adverse Effect.
8.02 Financial Condition. (a) The Parent Guarantor and the Company
have heretofore furnished to each of the Lenders the following:
(i) a consolidated balance sheet of the Parent Guarantor and its
Consolidated Subsidiaries as at December 31, 1995 and the related
consolidated statements of income, retained earnings and cash flows of the
Parent Guarantor and its Consolidated Subsidiaries for the fiscal year
ended on said date, with the opinions thereon (in the case of said
consolidated balance sheet and statements) of KPMG Peat Marwick LLP, and
the unaudited consolidated balance sheet of the Parent Guarantor and its
Consolidated Subsidiaries as at June 30, 1996 and the related consolidated
statements of income, retained earnings and cash flows of the Parent
Guarantor and its Consolidated Subsidiaries for the six-month period ended
on such date; and
(ii) projections of consolidated statements of income, retained
earnings and cash flows of the Parent Guarantor and its Subsidiaries
through December 31, 2004.
(b) All such financial statements referred to in the preceding
paragraph (a)(i) are complete and correct and fairly present the financial
condition of the respective entities as at the respective dates, and the
respective financial results of operations, as the case may be, for the
respective periods on said respective dates, all in accordance with generally
accepted
Credit Agreement
<PAGE> 74
- 69 -
accounting principles and practices applied on a consistent basis (subject, in
the case of unaudited financial statements, to the absence of footnote
disclosures and to normal year-end audit adjustments), and such projections
referred to in the preceding paragraph (a)(ii) are the Parent Guarantor's best
estimate of the matters covered thereby based upon the assumptions stated
therein, which assumptions are reasonable. None of the Parent Guarantor, the
Company nor any of their respective Subsidiaries has on the date hereof any
material contingent liabilities, liabilities for taxes, unusual forward or
long-term commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in said
financial statements as at said dates. Since December 31, 1995 there has been no
material adverse change in the consolidated financial condition, operations,
business or prospects taken as a whole of the Parent Guarantor and its
Consolidated Subsidiaries from that set forth in said financial statements as at
said date.
8.03 Litigation. There, are no legal or arbitral proceedings, or any
proceedings by or before any governmental or regulatory authority or agency, now
pending or (to the knowledge of the Parent Guarantor or the Company) threatened
against the Parent Guarantor or any of its Subsidiaries that, if adversely
determined could (either individually or in the aggregate) have a Material
Adverse Effect or where there is a reasonable likelihood of determinations that
will result (either individually or in the aggregate) in liabilities to the
Parent Guarantor and its Subsidiaries in an aggregate amount (excluding, except
where the Parent Guarantor and its Subsidiaries have self-insured, liabilities
for which creditworthy insurance companies have acknowledged coverage) exceeding
$3,000,000.
8.04 No Breach. None of the execution and delivery of this Agreement
and the Notes and the other Loan Documents, the consummation of the transactions
herein and therein contemplated or compliance with the terms and provisions
hereof and thereof will conflict with or result in a breach of, or require any
consent under, the charter or by-laws of any Obligor, or any applicable law or
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, or any agreement or instrument to which the
Parent Guarantor or any of its Subsidiaries is a party or by which any of them
or any of their Property is bound or to which any of them is subject, or
constitute a default under any such agreement or instrument, or (except for the
Liens created pursuant to the Security Documents) result in the creation or
imposition of any Lien upon any
Credit Agreement
<PAGE> 75
- 70 -
Property of the Parent Guarantor or any of its Subsidiaries pursuant to the
terms of any such agreement or instrument.
8.05 Action. Each Obligor has all necessary corporate or partnership
power, authority and legal right to execute, deliver and perform its obligations
under each of the Loan Documents to which it is a party; the execution, delivery
and performance by each Obligor of each of the Loan Documents to which it is a
party have been duly authorized by all necessary corporate or partnership action
on its part (including, without limitation, any required shareholder approvals);
and this Agreement has been duly and validly executed and delivered by each
Obligor and constitutes, and each of the Notes and the other Loan Documents to
which it is a party when executed and delivered by such Obligor (in the case of
the Notes, for value) will constitute, its legal, valid and binding obligation,
enforceable against each Obligor in accordance with its terms, except as such
enforceability may be limited by (a) bankruptcy, insolvency, reorganization,
moratorium or similar laws of general applicability affecting the enforcement of
creditors' rights and (b) the application of general principles of equity
(regardless of whether such enforceability is considered in a proceeding in
equity or at law).
8.06 Approvals. No authorizations, approvals or consents of, and no
filings or registrations with, any governmental or regulatory authority or
agency, or any securities exchange, are necessary for the execution, delivery or
performance by any Obligor of this Agreement or any of the other Loan Documents
to which it is a party or for the legality, validity or enforceability hereof or
thereof, except for filings and recordings in respect of the Liens created
pursuant to the Security Documents. No authorizations, approvals or consents of
any Person (other than any governmental or regulatory authority or agency, and
other than any securities exchange) are necessary for the execution, delivery or
performance by any Obligor of this Agreement or any of the other Loan Documents
to which it is a party or for the legality, validity or enforceability hereof or
thereof, except for authorizations, approvals or consents the failure of which
to be obtained could not have a Material Adverse Effect.
8.07 Use of Credit. Neither the Parent Guarantor nor any of its
Subsidiaries is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose, whether immediate, incidental
or ultimate, of buying or carrying Margin Stock, and no part of the proceeds of
the Loans hereunder will be used to buy or carry any Margin Stock.
Credit Agreement
<PAGE> 76
- 71 -
8.08 ERISA. Each Plan, and, to the knowledge of the Parent Guarantor
and the Company, each Multiemployer Plan, is in compliance in all material
respects with, and has been administered in all material respects in compliance
with, the applicable provisions of ERISA, the Code and any other Federal or
State law, and no event or condition has occurred and is continuing as to which
the Company would be under an obligation to furnish a report to the Lenders
under Section 9.01(e) hereof.
8.09 Taxes. The Parent Guarantor and its Subsidiaries will be
members of an affiliated group of corporations filing consolidated returns for
Federal income tax purposes, of which the Parent Guarantor is the "common
parent" (within the meaning of Section 1504 of the Code) of such group. The
Parent Guarantor and its Subsidiaries have filed all Federal income tax returns
and all other material tax returns that are required to be filed by them and
have paid all taxes due pursuant to such returns or pursuant to any assessment
received by the Parent Guarantor or any of its Subsidiaries. The charges,
accruals and reserves on the books of the Parent Guarantor and its Subsidiaries
in respect of taxes and other governmental charges are, in the opinion of the
Parent Guarantor, adequate. Neither the Parent Guarantor, any of its
Subsidiaries has given or been requested to give a waiver of the statute of
limitations relating to the payment of any Federal, state, local and foreign
taxes or other impositions.
8.10 Investment Company Act. Neither the Parent Guarantor nor any
of its Subsidiaries is an "investment company", or a company "controlled" by an
"investment company", within the meaning of the Investment Company Act of 1940,
as amended.
8.11 Public Utility Holding Company Act. Neither the Parent
Guarantor nor any of its Subsidiaries is a "holding company", or an "affiliate"
of a "holding company" or a "subsidiary company" of a "holding company", within
the meaning of the Public Utility Holding Company Act of 1935, as amended.
8.12 Material Agreements and Liens.
(a) Part A of Schedule I hereto is a complete and correct list of
each credit agreement, loan agreement, indenture, note purchase agreement,
guarantee, letter of credit or other arrangement providing for or otherwise
relating to any Indebtedness or any extension of credit (or commitment for any
extension of credit) to, or guarantee by, the Parent Guarantor or any of its
Subsidiaries, that will be outstanding on the Effective Date, the aggregate
principal or face amount of which equals or exceeds (or may equal or exceed),
$2,500,000 and the
Credit Agreement
<PAGE> 77
- 72 -
aggregate principal or face amount outstanding or that may become outstanding
under each such arrangement is correctly described in Part A of said Schedule I.
(b) Part B of Schedule I hereto is a complete and correct list of
each Lien securing Indebtedness of any Person that will be outstanding on the
Effective Date, the aggregate principal or face amount of which equals or
exceeds (or may equal or exceed) $2,500,000 and covering any Property of the
Parent Guarantor or any of its Subsidiaries, and the aggregate Indebtedness
secured (or that may be secured) by each such Lien and the Property covered by
each such Lien is correctly described in Part B of said Schedule I.
8.13 Environmental Matters. (a) Each of the Parent Guarantor and its
Subsidiaries, has obtained all environmental, health and safety permits,
licenses and other authorizations required under all Environmental Laws to carry
on their respective businesses as now being or as proposed to be conducted,
except to the extent failure to have any such permit, license or authorization
would not (either individually or in the aggregate) have a Material Adverse
Effect.
(b) Each of such permits, licenses and authorizations is in full
force and effect and each of the Parent Guarantor and its Subsidiaries is in
compliance with the terms and conditions thereof, and is also in compliance with
all other limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in any applicable
Environmental Law or in any regulation, code, plan, order, decree, judgment,
injunction, notice or demand letter issued, entered, promulgated or approved
thereunder, except to the extent failure to comply therewith would not (either
individually or in the aggregate) have a Material Adverse Effect.
(c) Except as set forth in Schedule IV hereto, no notice,
notification, demand, request for information, citation, summons or order has
been issued, no complaint has been filed, no penalty has been assessed and no
investigation or review is pending or threatened by any governmental or other
entity with respect to any alleged failure by any of the Parent Guarantor or any
of its Subsidiaries to have any environmental, health or safety permit, license
or other authorization required under any Environmental Law in connection with
the conduct of the business of any of the Parent Guarantor or any of its
Subsidiaries or with respect to any generation, treatment, storage, recycling,
transportation, discharge or disposal, or any Release of any
Credit Agreement
<PAGE> 78
- 73 -
Hazardous Materials generated by any of the Parent Guarantor or any of its
Subsidiaries.
(d) There have been no environmental investigations, studies,
audits, tests, reviews or other analyses conducted by or that are in the
possession of any of the Parent Guarantor or any of its Subsidiaries in relation
to any site or facility now or previously owned, operated or leased by any of
the Parent Guarantor or any of its Subsidiaries that have not been made
available to the Banks.
(e) There is not a reasonable likelihood of any Environmental
Liabilities (as defined below) that would require payments or expenditures by
the Parent Guarantor and its Subsidiaries either individually or in the
aggregate, in excess of $5,000,000. For purposes of this paragraph (e),
"Environmental Liability" shall mean any liability for investigatory costs,
cleanup costs, governmental response costs, damages to natural resources or
other Property, personal injuries, fines or penalties arising out of, based on
or resulting from (i) the presence, or Release into the environment, of any
Hazardous Material at any location, whether or not owned by such Person, or (ii)
circumstances forming the basis of any violation, or alleged violation, of any
Environmental Law. The term "Environmental Liability" shall include, without
limitation, any liability for enforcement, cleanup, removal, response, remedial
or other actions or damages pursuant to any applicable Environmental Law, and
any claim by any third party seeking damages, contribution, indemnification,
cost recovery, compensation or injunctive relief resulting from the presence of
Hazardous Materials or arising from alleged injury or threat of injury to
health, safety or the environment.
8.14 Capitalization.
(a) The authorized capital stock of the Parent Guarantor will
consist, on the Effective Date, of an aggregate of 12,000 shares consisting of
(i) 10,000 shares of common stock, par value $.01 per share, of which, after
giving effect to the transactions contemplated on the Effective Date, 1,917
shares will be duly and validly issued and outstanding, each of which shares
will be fully paid and nonassessable and (ii) 2,000 shares of preferred stock,
none of which will be duly and validly issued and outstanding on the Effective
Date. As of the Effective Date 284.4 shares of such issued and outstanding
shares of common stock will be owned beneficially and of record by EM Holdings
LLC, 1,429.2 by Hellman & Friedman Capital Partners, III, L.P., 105.2 by H&F
Orchard Partners III, L.P., 31.7 by H&F
Credit Agreement
<PAGE> 79
- 74 -
International Partners III, L.P., 50.0 by Irving Grousbeck, 10.0 by American
Media Management, Inc., 2.5 by Richard Reiss, Jr., 0.5 by Glenn Krevlin, 1.5 by
K. Tucker Andersen, 1.0 by Bruce Halls and 1.0 by Timothy J. Donmeyer. As of the
Effective Date, except as set forth in Schedule II hereto, (x) there will be no
outstanding Equity Rights with respect to the Parent Guarantor and (y) there
will be no outstanding obligations of the Parent Guarantor or the Company or any
of their respective Subsidiaries to repurchase, redeem, or otherwise acquire any
shares of capital stock of the Parent Guarantor nor will there be any
outstanding obligations of the Parent Guarantor or any of its Subsidiaries to
make payments to any Person, such as "phantom stock" payments, where the amount
thereof is calculated with reference to the fair market value or equity value of
the Parent Guarantor or any of its Subsidiaries.
(b) The authorized capital stock of the Company will consist, on the
Effective Date, of an aggregate of 12,000 shares consisting of (i) 10,000 shares
of common stock, par value $.01 per share, of which, 1,000 shares will be duly
and validly issued and outstanding, each of which shares will be fully paid and
nonassessable and (ii) 2,000 shares of preferred stock, none of which will be
duly and validly issued and outstanding on the Effective Date. As of the
Effective Date all of such issued and outstanding shares of common stock will be
owned beneficially and of record by the Parent Guarantor. As of the Effective
Date, except as set forth in Schedule II hereto, (x) there will be no
outstanding Equity Rights with respect to the Company and (y) there will be no
outstanding obligations of the Company or any of its Subsidiaries to repurchase,
redeem, or otherwise acquire any shares of capital stock of the Company nor will
there be any outstanding obligations of the Company or any of its Subsidiaries
to make payments to any Person, such as "phantom stock" payments, where the
amount thereof is calculated with reference to the fair market value or equity
value of the Company or any of its Subsidiaries.
8.15 Subsidiaries, Etc.
(a) Set forth in Schedule III hereto is a complete and correct list
of all of the Subsidiaries of the Parent Guarantor as of the date hereof, and as
of the Effective Date, together with, for each such Subsidiary, (i) the
jurisdiction of organization of such Subsidiary, (ii) each Person holding
ownership interests in such Subsidiary and (iii) the nature of the ownership
interests held by each such Person and the percentage of ownership of such
Subsidiary represented by such ownership interests. Except as disclosed in
Schedule III hereto,
Credit Agreement
<PAGE> 80
- 75 -
(x) each of the Parent Guarantor and its Subsidiaries owns, or will own on the
Effective Date free and clear of Liens (other than Liens created pursuant to the
Security Documents), and has the unencumbered right to vote, all outstanding
ownership interests in each Person shown to be held by it in Schedule III
hereto, (y) all of the issued and outstanding capital stock of each such Person
organized as a corporation is validly issued, fully paid and nonassessable and
(z) there are no outstanding Equity Rights with respect to such Person.
(b) The financial statements referred to in Section 8.02(a)(i) and
(ii) hereof contain a complete and correct list of all Investments (other than
Investments disclosed in Schedule III hereto) held by the Parent Guarantor or
any of its Subsidiaries in any Person on the date hereof, or that will be so
held on the Effective Date.
(c) None of the Subsidiaries of the Parent Guarantor is, on the date
hereof, subject to any indenture, agreement, instrument or other arrangement of
the type described in Section 9.16(c) hereof.
8.16 True and Complete Disclosure. The information, reports,
financial statements, exhibits and schedules furnished in writing by or on
behalf of the Obligors to the Administrative Agent or any Lender in connection
with the negotiation, preparation or delivery of this Agreement and the other
Loan Documents or included herein or therein or delivered pursuant hereto or
thereto, when taken as a whole do not contain any untrue statement of material
fact or omit to state any material fact necessary to make the statements herein
or therein, in light of the circumstances under which they were made, not
misleading. All written information furnished after the date hereof by the
Parent Guarantor and its Subsidiaries to the Administrative Agent and the
Lenders in connection with this Agreement and the other Loan Documents and the
transactions contemplated hereby and thereby will be true, complete and accurate
in every material respect, or (in the case of projections) based on reasonable
estimates, on the date as of which such information is stated or certified.
There is no fact known to the Company or the Parent Guarantor that could have a
Material Adverse Effect that has not been disclosed herein, in the other Loan
Documents or in a report, financial statement, exhibit, schedule, disclosure
letter or other writing furnished to the Lenders for use in connection with the
transactions contemplated hereby or thereby.
Credit Agreement
<PAGE> 81
- 76 -
Section 9. Covenants of the Company and the Parent Guarantor. Each
of the Company and the Parent Guarantor covenants and agrees with the Lenders
and the Administrative Agent that, so long as any Commitment, Loan or Letter of
Credit Liability is outstanding and until payment in full of all amounts payable
by the Company hereunder:
9.01 Financial Statements Etc. The Company (for itself and on behalf
of the Parent Guarantor) shall deliver to each of the Lenders:
(a) as soon as available and in any event within 45 days after the
end of the first, second and third quarterly fiscal periods of each fiscal
year of the Company and the Parent Guarantor, consolidated and
consolidating statements of income, retained earnings and cash flows of
the Company and its Consolidated Subsidiaries (and, separately stated, of
the Parent Guarantor and its Consolidated Subsidiaries) for the respective
period and for the period from the beginning of the respective fiscal year
to the end of the respective period, and the related consolidated and
consolidating balance sheets of the Company and its Consolidated
Subsidiaries (and, separately stated, of the Parent Guarantor and its
Consolidated Subsidiaries) as at the end of such period, setting forth in
each case in comparative form the corresponding consolidated and
consolidating figures for the corresponding periods in the preceding
fiscal year (except that, in the case of balance sheets, such comparison
shall be to the last day of the prior fiscal year), accompanied by a
certificate of a senior financial officer of the Company (and of the
Parent Guarantor, as the case may be), which certificate shall state that
said consolidated financial statements fairly present the consolidated
financial condition and results of operations of the Company and its
Consolidated Subsidiaries (and of the Parent Guarantor and its
Consolidated Subsidiaries), and said consolidating financial statements
fairly present the respective individual unconsolidated financial
condition and results of operations of the Company and of each of its
Consolidated Subsidiaries (and of the Parent Guarantor and each of its
Consolidated Subsidiaries), in each case in accordance with generally
accepted accounting principles, consistently applied, as at the end of,
and for, such period (subject to normal year-end audit adjustments);
(b) as soon as available and in any event within 90 days after the
end of each fiscal year of the Company and
Credit Agreement
<PAGE> 82
- 77 -
the Parent Guarantor, consolidated and consolidating statements of income,
retained earnings and cash flows of the Company and its Consolidated
Subsidiaries (and, separately stated, of the Parent Guarantor and its
Consolidated Subsidiaries) for such fiscal year and the related
consolidated and consolidating balance sheets of the Company and its
Consolidated Subsidiaries (and, separately stated, of the Parent Guarantor
and its Consolidated Subsidiaries) as at the end of such fiscal year,
setting forth in each case in comparative form the corresponding
consolidated and consolidating figures for the preceding fiscal year, and
accompanied (i) in the case of said consolidated statements and balance
sheet of the Company (and of the Parent Guarantor, as the case may be), by
an opinion thereon of independent certified public accountants of
recognized national standing, which opinion shall state that said
consolidated financial statements fairly present the consolidated
financial condition and results of operations of the Company and its
Consolidated Subsidiaries (and of the Parent Guarantor and its
Consolidated Subsidiaries) as at the end of, and for, such fiscal year in
accordance with generally accepted accounting principles, and a statement
of such accountants setting forth calculations demonstrating whether the
Company (or the Parent Guarantor, as the case may be) was in compliance
with Sections 9.06(j), 9.07(d), 9.10 and 9.11 hereof, insofar as such
Sections relate to accounting matters, and (ii) in the case of said
consolidating statements and balance sheets, by a certificate of a senior
financial officer of the Company (and of the Parent Guarantor, as the case
may be), which certificate shall state that said consolidating financial
statements fairly present the respective individual unconsolidated
financial condition and results of operations of the Company and of each
of its Consolidated Subsidiaries (and of the Parent Guarantor and of each
of its Consolidated Subsidiaries), in each case in accordance with
generally accepted accounting principles, consistently applied, as at the
end of, and for, such fiscal year;
(c) promptly upon their becoming available, copies of all
registration statements and regular periodic reports, if any, that the
Company or the Parent Guarantor shall have filed with the Securities and
Exchange Commission (or any governmental agency substituted therefor) or
any national securities exchange;
(d) promptly upon the mailing thereof to the shareholders of the
Company or the Parent Guarantor
Credit Agreement
<PAGE> 83
- 78 -
generally, copies of all financial statements, reports and proxy
statements so mailed;
(e) as soon as possible, and in any event within 30 days after the
Company or the Parent Guarantor knows or has reason to believe that any of
the events or conditions specified below with respect to any Plan or
Multiemployer Plan has occurred or exists, a statement signed by a senior
financial officer of the Company or the Parent Guarantor (as the case may
be) setting forth details respecting such event or condition and the
action, if any, that the Company or the Parent Guarantor (as the case may
be) or its ERISA Affiliate proposes to take with respect thereto (and a
copy of any report or notice required to be filed with or given to the
PBGC by the Company or the Parent Guarantor (as the case may be) or an
ERISA Affiliate with respect to such event or condition):
(i) any reportable event, as defined in Section 4043(c) of
ERISA and the regulations issued thereunder, with respect to a Plan,
as to which the PBGC has not by regulation waived the requirement of
Section 4043(a) of ERISA that it be notified within 30 days of the
occurrence of such event (provided that a failure to meet the
minimum funding standard of Section 412 of the Code or Section 302
of ERISA, including, without limitation, the failure to make on or
before its due date a required installment under Section 412(m) of
the Code or Section 302(e) of ERISA, shall be a reportable event
regardless of the issuance of any waivers in accordance with Section
412(d) of the Code); and any request for a waiver under Section
412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of a
notice of intent to terminate any Plan or any action taken by the
Company or an ERISA Affiliate to terminate any Plan;
(iii) the institution by the PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Plan, or the receipt by the Company or
any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by the PBGC with respect to such Multiemployer
Plan;
Credit Agreement
<PAGE> 84
- 79 -
(iv) the complete or partial withdrawal from a
Multiemployer Plan by the Company or any ERISA Affiliate that
results in liability under Section 4201 or 4204 of ERISA (including
the obligation to satisfy secondary liability as a result of a
purchaser default) or the receipt by the Company or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate or has terminated under
Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of any
Multiemployer Plan against the Company or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed
within 30 days; and
(vi) the adoption of an amendment to any Plan that,
pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA,
would result in the loss of tax-exempt status of the trust of which
such Plan is a part if the Company or an ERISA Affiliate fails to
timely provide security to the Plan in accordance with the
provisions of said Sections ;
(g) promptly after the Company or the Parent Guarantor knows or has
reason to believe that any Default has occurred, a notice of such Default
describing the same in reasonable detail and, together with such notice or
as soon thereafter as possible, a description of the action that the
Company or the Parent Guarantor, as the case may be, has taken or proposes
to take with respect thereto; and
(h) from time to time such other information regarding the financial
condition, operations, business or prospects of the Parent Guarantor or
any of its Subsidiaries (including, without limitation, any Plan or
Multiemployer Plan and any reports or other information required to be
filed under ERISA) as any Lender or the Administrative Agent may
reasonably request.
The Company and the Parent Guarantor will furnish to each Lender, at the time it
furnishes each set of financial statements pursuant to paragraph (a) or (b)
above, a certificate of a senior financial officer of the Company (and the
Parent Guarantor, as the case may be) (i) to the effect that, to the best
knowledge of such financial officer, no Default has occurred and is continuing
(or, if any Default has occurred and is continuing, describing the same in
reasonable detail and describing the action that the
Credit Agreement
<PAGE> 85
- 80 -
Company (or the Parent Guarantor, as the case may be) has taken or proposes to
take with respect thereto) and (ii) setting forth in reasonable detail the
computations necessary to determine whether the Company (or the Parent
Guarantor, as the case may be) is in compliance with Sections 9.06(j), 9.07(d),
9.09, 9.10 and 9.11 hereof as of the end of the respective quarterly fiscal
period or fiscal year.
9.02 Litigation. The Company (for itself and on behalf of the Parent
Guarantor) will promptly give to each Lender notice of all legal or arbitral
proceedings, and of all proceedings by or before any governmental or regulatory
authority or agency, and any material development in respect of such legal or
other proceedings, affecting the Parent Guarantor or any of its Subsidiaries,
except proceedings that, if adversely determined, would not (either individually
or in the aggregate) have a Material Adverse Effect. Without limiting the
generality of the foregoing, the Company will give to each Lender notice of the
assertion of any Environmental Claim by any Person against, or with respect to
the activities of, the Parent Guarantor or any of its Subsidiaries and notice of
any alleged violation of or non-compliance with any Environmental Laws or any
permits, licenses or authorizations, other than any Environmental Claim or
alleged violation that, if adversely determined, would not (either individually
or in the aggregate) have a Material Adverse Effect.
9.03 Existence, Etc. The Parent Guarantor will, and will cause
each of its Subsidiaries to:
(a) preserve and maintain its legal existence and all of its
material rights, privileges, licenses and franchises (provided that
nothing in this Section 9.03 shall prohibit any transaction expressly
permitted under Section 9.05 hereof);
(b) comply with the requirements of all applicable laws, rules,
regulations and orders of governmental or regulatory authorities if
failure to comply with such requirements could (either individually or in
the aggregate) have a Material Adverse Effect;
(c) pay and discharge all taxes, assessments and governmental
charges or levies imposed on it or on its income or profits or on any of
its Property prior to the date on which penalties attach thereto, except
for any such tax, assessment, charge or levy the payment of which is being
contested in good faith and by proper proceedings and
Credit Agreement
<PAGE> 86
- 81 -
(unless the amount thereof is not material) against which adequate
reserves are being maintained;
(d) maintain all of its Properties used or materially useful in its
business in good working order and condition, ordinary wear and tear
excepted;
(e) keep adequate records and books of account, in which complete
entries will be made in accordance with generally accepted accounting
principles consistently applied; and
(f) permit representatives of any Lender or the Administrative
Agent, during normal business hours, to examine, copy and make extracts
from its books and records, to inspect any of its Properties, and to
discuss its business and affairs with its officers, all to the extent
reasonably requested by such Lender or the Administrative Agent (as the
case may be).
9.04 Insurance. The Parent Guarantor will, and will cause each of
its Subsidiaries to, maintain insurance with financially sound and reputable
insurance companies, and with respect to Property and risks of a character
usually maintained by corporations or other entities engaged in the same or
similar business similarly situated, against loss, damage and liability of the
kinds and in the amounts customarily maintained by such corporations or
entities.
9.05 Prohibition of Fundamental Changes. The Parent Guarantor will
not, nor will it permit any of its Subsidiaries to, enter into any transaction
of merger or consolidation or amalgamation, or liquidate, wind up or dissolve
itself (or suffer any liquidation or dissolution).
The Parent Guarantor will not, nor will it permit any of its
Subsidiaries to, acquire any business or Property from, or capital stock of, or
be a party to any acquisition of, any Person except for purchases of inventory
and other Property to be sold or used in the ordinary course of business,
Investments permitted under Section 9.08 hereof, Capital Expenditures permitted
under Section 9.11 hereof and Acquisition-Related Expenditures.
The Parent Guarantor will not, nor will it permit any of its
Subsidiaries to, convey, sell, lease, transfer or otherwise dispose of, in one
transaction or a series of transactions, any part of its business or Property,
whether now owned or hereafter acquired (including, without limitation,
Credit Agreement
<PAGE> 87
- 82 -
receivables and leasehold interests, but excluding (i) Properties exchanged in
Asset Swaps, (ii) obsolete or worn-out Property, tools or equipment no longer
used or useful in its business so long as the amount thereof sold in any single
fiscal year by the Parent Guarantor and its Subsidiaries shall not have a fair
market value in excess of $2,000,000 and (iii) any inventory or other Property
sold or disposed of in the ordinary course of business and on ordinary business
terms). Notwithstanding the foregoing provisions of this Section 9.05:
(a) any Subsidiary of the Company may be merged or consolidated with
or into: (i) the Company if the Company shall be the continuing or
surviving corporation or (ii) any such other Subsidiary; provided that (x)
if any such transaction shall be between a Subsidiary and a Wholly Owned
Subsidiary, the Wholly Owned Subsidiary shall be the continuing or
surviving corporation and (y) if any such transaction shall be between a
Subsidiary Guarantor and a Subsidiary not a Subsidiary Guarantor, and such
Subsidiary Guarantor is not the continuing or surviving corporation, then
the continuing or surviving corporation shall have assumed all of the
obligations of such Subsidiary Guarantor hereunder and under the other
Loan Documents; and
(b) any Subsidiary of the Company may sell, lease, transfer or
otherwise dispose of any or all of its Property (upon voluntary
liquidation or otherwise) to the Company or a Wholly Owned Subsidiary of
the Company; provided that (x) any such sale by a Wholly Owned Subsidiary
shall be to a Wholly Owned Subsidiary and (y) if any such sale is by a
Subsidiary Guarantor to a Subsidiary of the Company not a Subsidiary
Guarantor, then such Subsidiary shall have assumed all of the obligations
of such Subsidiary Guarantor hereunder and under the other Loan Documents.
9.06 Limitation on Liens. The Parent Guarantor will not, nor will it
permit any of its Subsidiaries to, create, incur, assume or suffer to exist any
Lien upon any of its Property, whether now owned or hereafter acquired, except:
(a) Liens created pursuant to the Security Documents;
(b) Liens in existence on the date hereof and listed in Part B of
Schedule I hereto;
(c) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings if,
Credit Agreement
<PAGE> 88
- 83 -
unless the amount thereof is not material with respect to it or its
financial condition, adequate reserves with respect thereto are maintained
on the books of the Parent Guarantor or the affected Subsidiaries, as the
case may be, in accordance with GAAP;
(d) carriers', warehousemen's, mechanics', materialmen's,
repairmen's, banker's or other like Liens, and rights of set-off, arising
in the ordinary course of business that are not overdue for a period of
more than 30 days or that are being contested in good faith and by
appropriate proceedings and Liens securing judgments but only to the
extent for an amount and for a period not resulting in an Event of Default
under Section 10(h) hereof;
(e) pledges or deposits under worker's compensation, unemployment
insurance and other social security legislation;
(f) deposits to secure the performance of bids, trade contracts
(other than for Indebtedness), leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature
incurred in the ordinary course of business;
(g) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and encumbrances
consisting of zoning restrictions, easements, licenses, restrictions on
the use of Property or minor imperfections in title thereto that, in the
aggregate, are not material in amount, and that do not in any case
materially detract from the value of the Property subject thereto or
interfere with the ordinary conduct of the business of the Parent
Guarantor or any of its Subsidiaries;
(h) Liens on Property of any Person that becomes a Subsidiary of the
Company after the date hereof, provided that such Liens are in existence
at the time such Person becomes a Subsidiary of the Company and were not
created in anticipation thereof;
(i) Liens upon real and/or tangible personal Property acquired after
the date hereof (by purchase, construction or otherwise) by the Company or
any of its Subsidiaries, each of which Liens either (A) existed on such
Property before the time of its acquisition and was not created in
anticipation thereof or (B) was created solely for the purpose of securing
Indebtedness representing, or incurred
Credit Agreement
<PAGE> 89
- 84 -
to finance, refinance or refund, the cost (including the cost of
construction) of such Property; provided that (i) no such Lien shall
extend to or cover any Property of the Company or such Subsidiary other
than the Property so acquired and improvements thereon and (ii) the
principal amount of Indebtedness secured by any such Lien shall at no time
exceed 80% of the fair market value (as determined in good faith by a
senior financial officer of the Company) of such Property at the time it
was acquired (by purchase, construction or otherwise); and
(j) additional Liens upon real and/or personal Property created
after the date hereof, provided that the aggregate Indebtedness secured
thereby and incurred on and after the date hereof shall not exceed
$1,000,000 in the aggregate at any one time outstanding.
9.07 Indebtedness. The Parent Guarantor will not, nor will it permit
any of its Subsidiaries to, create, incur or suffer to exist any Indebtedness
except:
(a) Indebtedness to the Lenders hereunder;
(b) Indebtedness outstanding on the date hereof and listed in Part
A of Schedule I hereto;
(c) Indebtedness of Subsidiaries of the Company to the Company or
to other Subsidiaries of the Company; and
(d) additional Indebtedness of the Company and its Subsidiaries
(including, without limitation, Capital Lease Obligations and other
Indebtedness secured by Liens permitted under Sections 9.06(h), 9.06(i)
and 9.06(j) hereof) up to but not exceeding $25,000,000 at any one time
outstanding.
9.08 Investments. The Parent Guarantor will not, nor will it permit
any of its Subsidiaries to, make or permit to remain outstanding any Investments
except:
(a) Investments outstanding on the date hereof and identified in
the financial statements referred to in Section 8.02(a)(i) hereof;
(b) operating deposit accounts with banks;
(c) Permitted Investments;
Credit Agreement
<PAGE> 90
- 85 -
(d) Investments by the Parent Guarantor in the Company;
(e) Investments by the Company and its Subsidiaries in the Company
and its Subsidiaries; and
(f) Interest Rate Protection Agreements entered into as bona fide
hedges and neither for speculative purposes nor to reverse the effects of
any Interest Rate Protection Agreements entered into as required by
Section 9.12 hereof.
9.09 Dividend Payments. The Parent Guarantor will not, nor will it
permit any of its Subsidiaries to, declare or make any Dividend Payment at any
time; provided that nothing in this Section 9.09 shall be deemed to prohibit the
payment of dividends by any Subsidiary of the Parent Guarantor to the Parent
Guarantor or to any other Subsidiary of the Parent Guarantor.
9.10 Certain Financial Covenants.
(a) Total Leverage Ratio. The Parent Guarantor will not permit the
Total Leverage Ratio to exceed the following respective ratios at any time
during the following respective periods:
<TABLE>
<CAPTION>
Period Ratio
------ -----
<S> <C>
From the Effective Date
through December 30, 1997 5.50 to 1
From December 31, 1997
through June 29, 1998 5.25 to 1
From June 30, 1998
through December 30, 1998 5.00 to 1
From December 31, 1998
through December 30, 1999 4.75 to 1
From December 31, 1999
through December 30, 2000 4.25 to 1
From December 31, 2000
and at all times thereafter 3.75 to 1
</TABLE>
(b) Interest Coverage Ratio. The Parent Guarantor will not permit
the Interest Coverage Ratio to be less than 2.0 to 1 at any time.
Credit Agreement
<PAGE> 91
- 86 -
(c) Fixed Charges Coverage Ratio. The Parent Guarantor will not
permit the Fixed Charges Coverage Ratio to be less than 1.05 to 1 at any time.
9.11 Capital Expenditures. The Parent Guarantor will not permit the
aggregate amount of Capital Expenditures (excluding Capital Expenditures made
with the Net Available Proceeds of any Disposition or Casualty Event) by the
Parent Guarantor and its Consolidated Subsidiaries in any fiscal year to exceed
(a) for its fiscal year ending December 31, 1996, $15,000,000, (b) for each of
its fiscal years ending December 31, 1997, and December 31, 1998, $20,000,000
plus the amount (not exceeding $15,000,000 for its fiscal year ending December
31, 1997 or $20,000,000 for its fiscal year ending December 31, 1998) of Capital
Expenditures permitted by this Section 9.11 to have been made, but not made, by
the Parent Guarantor and its Consolidated Subsidiaries in its prior fiscal year,
and (c) for any fiscal year thereafter, the sum of $15,000,000 plus the amount
(not exceeding $20,000,000 for its fiscal year ending December 31, 1999 or
$15,000,000 for any of its fiscal years thereafter) of Capital Expenditures
permitted by this Section 9.11 to have been made, but not made, by the Company
and its Consolidated Subsidiaries in the immediately preceding year.
9.12 Interest Rate Protection Agreements. The Company will within 60
days of the Effective Date enter into, and thereafter maintain in full force and
effect, one or more Interest Rate Protection Agreements with one or more of the
Lenders (and/or with a bank or other financial institution having capital,
surplus and undivided profits of at least $500,000,000), that effectively
enables the Company (in a manner satisfactory to the Majority Lenders) to
protect itself against three-month London interbank offered rates exceeding
8-1/2% per annum as to a notional principal amount at least equal to 50% of
Total Debt for a period of at least two and 1/2 years measured from the
Effective Date.
9.13 Lines of Business. The Parent Guarantor will not, nor will it
permit any of its Subsidiaries to, engage to any substantial extent in any line
or lines of business activity other than the business of outdoor, transit and
similar types of advertising.
9.14 Transactions with Affiliates. Except as expressly permitted by
this Agreement, the Parent Guarantor will not, nor will it permit any of its
Subsidiaries to, directly or indirectly: (a) make any Investment in an
Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any
Credit Agreement
<PAGE> 92
- 87 -
Property to an Affiliate; (c) merge into or consolidate with or purchase or
acquire Property from an Affiliate; or (d) enter into any other transaction
directly or indirectly with or for the benefit of an Affiliate (including,
without limitation, Guarantees and assumptions of obligations of an Affiliate);
provided that (x) any Affiliate who is an individual may serve as a director,
officer or employee of the Parent Guarantor or any of its Subsidiaries and
receive reasonable compensation for his or her services in such capacity and (y)
the Company and its Subsidiaries may enter into transactions (other than
extensions of credit by the Company or any of its Subsidiaries to an Affiliate)
providing for the leasing of Property, the rendering or receipt of services or
the purchase or sale of inventory and other Property in the ordinary course of
business if the monetary or business consideration arising therefrom would be
substantially as advantageous to the Company and its Subsidiaries as the
monetary or business consideration that would obtain in a comparable transaction
with a Person not an Affiliate.
9.15 Use of Proceeds. The Company will use the proceeds of the Loans
hereunder solely to refinance certain existing indebtedness of the Company and
the Subsidiary Guarantors, to finance expenses associated with the foregoing, to
finance acquisitions permitted hereunder and to finance the operations of the
Company and the Subsidiary Guarantors and for other general business purposes,
in each case in compliance with all applicable legal and regulatory
requirements); provided that neither the Administrative Agent nor any Lender
shall have any responsibility as to the use of any of such proceeds.
9.16 Certain Obligations Respecting Subsidiaries.
(a) Subsidiary Guarantors. In the event that the Parent Guarantor or
any of its Subsidiaries shall form or acquire any new Subsidiary, the Parent
Guarantor will cause such new Subsidiary to become a "Subsidiary Guarantor"
(and, thereby, an "Obligor") hereunder and to pledge and grant a security
interest in its Property pursuant to the Security Agreement to the
Administrative Agent for the benefit of the Lenders, pursuant to a written
instrument in form and substance satisfactory to the Administrative Agent and to
deliver such proof of corporate or partnership action, incumbency of officers,
opinions of counsel and other documents as is consistent with those delivered by
each "Obligor" pursuant to Section 7.01 hereof upon the Effective Date or as the
Administrative Agent shall have otherwise requested.
(b) Ownership of Subsidiaries. The Parent Guarantor will, and will
cause each of its Subsidiaries to, take such
Credit Agreement
<PAGE> 93
- 88 -
action from time to time as shall be necessary to ensure that the Parent
Guarantor and each of its Subsidiaries at all times owns (subject only to the
Lien of the Security Agreement) at least the same percentage of the issued and
outstanding shares of each class of stock (or the same percentage of ownership
interests) of each of its Subsidiaries as is owned on the date hereof. In the
event that any additional shares of stock shall be issued by any Subsidiary, the
respective Obligor agrees forthwith to deliver to the Administrative Agent
pursuant to the Security Agreement the certificates evidencing such shares of
stock, accompanied by undated stock powers executed in blank and to take such
other action as the Administrative Agent shall request to perfect the security
interest created therein pursuant to the Security Agreement.
(c) Certain Restrictions. The Parent Guarantor will not permit any
of its Subsidiaries to enter into, after the date hereof, any indenture,
agreement, instrument or other arrangement that, directly or indirectly,
prohibits or restrains, or has the effect of prohibiting or restraining, or
imposes materially adverse conditions upon, the incurrence or payment of
Indebtedness, the granting of Liens, the declaration or payment of dividends,
the making of loans, advances or Investments or the sale, assignment, transfer
or other disposition of Property.
9.17 Ownership of the Company. The Parent Guarantor will at all
times cause the Company to be a Wholly Owned Subsidiary of the Parent Guarantor.
9.18 Special Purpose Company. Notwithstanding anything herein to the
contrary, the Parent Guarantor shall not (a) engage in any business other than
ownership of the Company, (b) own any material assets other than Investments
permitted to be made by it as provided in Section 9.08 hereof or (c) create,
incur, assume or have outstanding any Indebtedness or other obligations or
liabilities except for obligations under the Loan Documents.
Section 10. Events of Default. If one or more of the following
events (herein called "Events of Default") shall occur and be continuing:
(a) The Company shall default in the payment when due (whether at
stated maturity or upon mandatory or optional prepayment) of any principal
of or interest on any Loan or any Reimbursement Obligation, any fee or any
other amount payable by it hereunder or under any other Loan Document; or
Credit Agreement
<PAGE> 94
- 89 -
(b) The Company, the Parent Guarantor or any of their respective
Subsidiaries (the Parent Guarantor, the Company and such Subsidiaries
herein collectively called the "Relevant Parties") shall default in the
payment when due of any principal of or interest on any of its other
Indebtedness aggregating $1,000,000 or more; or any event specified in any
note, agreement, indenture or other document evidencing or relating to any
such Indebtedness shall occur if the effect of such event is to cause, or
(with the giving of any notice or the lapse of time or both) to permit the
holder or holders of such Indebtedness (or a trustee or agent on behalf of
such holder or holders) to cause, such Indebtedness to become due, or to
be prepaid in full (whether by redemption, purchase, offer to purchase or
otherwise), prior to its stated maturity; or any Relevant Party shall
default in the payment when due of any amount aggregating $2,000,000 or
more under any Interest Rate Protection Agreement; or any event specified
in any Interest Rate Protection Agreement shall occur if the effect of
such event is to cause, or (with the giving of any notice or the lapse of
time or both) to permit, termination or liquidation payment or payments
aggregating $1,000,000 or more to become due; or
(c) Any representation, warranty or certification made or deemed
made herein or in any other Loan Document (or in any modification or
supplement hereto or thereto) by any Relevant Party, or any certificate
furnished to any Lender or the Administrative Agent pursuant to the
provisions hereof or thereof, shall prove to have been false or misleading
as of the time made or furnished in any material respect; or
(d) The Company or the Parent Guarantor (as applicable) shall
default in the performance of any of its obligations under any of Sections
9.01(g), 9.05, 9.06, 9.07, 9.08, 9.09, 9.10, 9.11, 9.14, 9.16 or 9.17
hereof or any Obligor shall default in the performance of any of its
obligations under Section 4.02 or 5.02 of the Security Agreement; or any
Obligor shall default in the performance of any of its other obligations
in this Agreement or any other Loan Document and such default shall
continue unremedied for a period of thirty or more days after notice
thereof to the Company by the Administrative Agent or any Lender (through
the Administrative Agent); or
Credit Agreement
<PAGE> 95
- 90 -
(e) Any Relevant Party shall admit in writing its inability to, or
be generally unable to, pay its debts as such debts become due; or
(f) Any Relevant Party shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
trustee, examiner or liquidator of itself or of all or a substantial part
of its Property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Bankruptcy Code, (iv)
file a petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, liquidation, dissolution,
arrangement or winding-up, or composition or readjustment of debts, (v)
fail to controvert in a timely and appropriate manner, or acquiesce in
writing to, any petition filed against it in an involuntary case under the
Bankruptcy Code or (vi) take any corporate or partnership action for the
purpose of effecting any of the foregoing; or
(g) A proceeding or case shall be commenced, without the application
or consent of the affected Relevant Party, in any court of competent
jurisdiction, seeking (i) its reorganization, liquidation, dissolution,
arrangement or winding-up, or the composition or readjustment of its
debts, (ii) the appointment of a receiver, custodian, trustee, examiner,
liquidator or the like of such Relevant Party or of all or any substantial
part of its Property or (iii) similar relief in respect of such Relevant
Party under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, and such proceeding or
case shall continue undismissed, or an order, judgment or decree approving
or ordering any of the foregoing shall be entered and continue unstayed
and in effect, for a period of 60 or more days; or an order for relief
against any Relevant Party shall be entered in an involuntary case under
the Bankruptcy Code; or
(h) A final judgment or judgments for the payment of money of
$2,000,000 or more in the aggregate (exclusive of judgment amounts fully
covered by insurance where the insurer has admitted liability in respect
of such judgment) or of $2,000,000 or more in the aggregate (regardless of
insurance coverage) shall be rendered by one or more courts,
administrative tribunals or other bodies having jurisdiction against any
Relevant Party and the same shall not be discharged (or provision shall
not be made for such discharge), or a stay of execution thereof shall not
be
Credit Agreement
<PAGE> 96
- 91 -
procured, within 30 days from the date of entry thereof and such Relevant
Party shall not, within said period of 30 days, or such longer period
during which execution of the same shall have been stayed, appeal
therefrom and cause the execution thereof to be stayed during such appeal;
or
(i) An event or condition specified in Section 9.01(e) hereof shall
occur or exist with respect to any Plan or Multiemployer Plan and, as a
result of such event or condition, together with all other such events or
conditions, the Company or any ERISA Affiliate shall incur or in the
opinion of the Majority Lenders shall be reasonably likely to incur a
liability to a Plan, a Multiemployer Plan or the PBGC (or any combination
of the foregoing) that, in the determination of the Majority Lenders,
would (either individually or in the aggregate) have a Material Adverse
Effect; or
(j) A reasonable basis shall exist for the assertion against any
Relevant Party, or any predecessor in interest of any Relevant Party or
any of its Affiliates, of (or there shall have been asserted against any
Relevant Party) an Environmental Claim that, in the judgment of the
Majority Lenders is reasonably likely to be determined adversely to any
Relevant Party or any of its Affiliates, and the amount thereof (either
individually or in the aggregate) is reasonably likely to have a Material
Adverse Effect (insofar as such amount is payable by any Relevant Party
but after deducting any portion thereof that is reasonably expected to be
paid by other creditworthy Persons jointly and severally liable therefor);
or
(k) H&F Affiliated Parties shall cease to own or control, directly
or indirectly, a plurality of the capital stock of the Parent Guarantor;
or Persons nominated to the Board of Directors of the Parent Guarantor by
(i) H&F Affiliated Parties or (ii) by a Board of Directors the majority of
which is comprised of Persons originally nominated by H&F Affiliated
Parties (including, without limitation, all Persons who are members of the
Board of Directors of the Parent Guarantor as of the date hereof) or (iii)
by a Board of Directors the members of which were so nominated, shall
cease to constitute a majority of said Board of Directors; or the Parent
Guarantor shall cease to own or control directly all of the capital stock
of the Company; or
Credit Agreement
<PAGE> 97
- 92 -
(l) The Liens created by the Security Documents on the capital stock
of the Company and its Subsidiaries shall at any time not constitute a
valid and perfected Lien in favor of the Administrative Agent, free and
clear of all other Liens, or, except for expiration in accordance with its
terms, any of the Security Documents shall for whatever reason be
terminated or cease to be in full force and effect, or the enforceability
thereof shall be contested by any Obligor;
THEREUPON: (1) in the case of an Event of Default other than one referred to in
clause (f) or (g) of this Section 10 with respect to any Obligor, the
Administrative Agent may (and upon the request of the Majority Lenders shall),
by notice to the Company, terminate the Commitments and/or declare the principal
amount then outstanding of, and the accrued interest on, the Loans, the
Reimbursement Obligations and all other amounts payable by the Obligors
hereunder and under the Notes (including, without limitation, any amounts
payable under Section 5.05 or 5.06 hereof) to be forthwith due and payable,
whereupon such amounts shall be immediately due and payable without presentment,
demand, protest or other formalities of any kind, all of which are hereby
expressly waived by each Obligor; and (2) in the case of the occurrence of an
Event of Default referred to in clause (f) or (g) of this Section 10 with
respect to any Obligor, the Commitments shall automatically be terminated and
the principal amount then outstanding of, and the accrued interest on, the
Loans, the Reimbursement Obligations and all other amounts payable by the
Obligors hereunder and under the Notes (including, without limitation, any
amounts payable under Section 5.05 or 5.06 hereof) shall automatically become
immediately due and payable without presentment, demand, protest or other
formalities of any kind, all of which are hereby expressly waived by each
Obligor.
In addition, upon the occurrence and during the continuance of any
Event of Default (if the Administrative Agent has declared the principal amount
then outstanding of, and accrued interest on, the Revolving Credit Loans and all
other amounts payable by the Company hereunder and under the Notes to be due and
payable), the Company agrees that it shall, if requested by the Administrative
Agent or the Majority Revolving Credit Lenders through the Administrative Agent
(and, in the case of any Event of Default referred to in clause (f) or (g) of
this Section 10 with respect to the Company or the Parent Guarantor, forthwith,
without any demand or the taking of any other action by the Administrative Agent
or such Lenders) provide cover for the Letter of Credit Liabilities by paying to
the Administrative
Credit Agreement
<PAGE> 98
- 93 -
Agent immediately available funds in an amount equal to the then aggregate
undrawn face amount of all Letters of Credit, which funds shall be held by the
Administrative Agent in the Collateral Account as collateral security in the
first instance for the Letter of Credit Liabilities and be subject to withdrawal
only as therein provided.
Section 11. The Administrative Agent.
11.01 Appointment, Powers and Immunities. Each Lender hereby
appoints and authorizes the Administrative Agent to act as its agent hereunder
and under the other Loan Documents with such powers as are specifically
delegated to the Administrative Agent by the terms of this Agreement and of the
other Loan Documents, together with such other powers as are reasonably
incidental thereto. The Administrative Agent (which term as used in this
sentence and in Section 11.05 and the first sentence of Section 11.06 hereof
shall include reference to its affiliates and its own and its affiliates'
officers, directors, employees and agents):
(a) shall have no duties or responsibilities except those expressly
set forth in this Agreement and in the other Loan Documents, and shall not
by reason of this Agreement or any other Loan Document be a trustee for
any Lender;
(b) shall not be responsible to the Lenders for any recitals,
statements, representations or warranties contained in this Agreement or
in any other Loan Document, or in any certificate or other document
referred to or provided for in, or received by any of them under, this
Agreement or any other Loan Document, or for the value, validity,
effectiveness, genuineness, enforceability or sufficiency of this
Agreement, any Note or any other Loan Document or any other document
referred to or provided for herein or therein or for any failure by the
Company or any other Person to perform any of its obligations hereunder or
thereunder;
(c) shall not, except to the extent expressly instructed by the
Majority Lenders with respect to collateral security under the Security
Documents, be required to initiate or conduct any litigation or collection
proceedings hereunder or under any other Loan Document; and
(d) shall not be responsible for any action taken or omitted to be
taken by it hereunder or under any other Loan
Credit Agreement
<PAGE> 99
- 94 -
Document or under any other document or instrument referred to or provided
for herein or therein or in connection herewith or therewith, except for
its own gross negligence or willful misconduct.
The Administrative Agent may employ agents and attorneys-in-fact and shall not
be responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith. The Administrative Agent may
deem and treat the payee (or Registered Holder, as the case may be) of a Note as
the holder thereof for all purposes hereof unless and until a notice of the
assignment or transfer thereof shall have been filed with the Administrative
Agent.
11.02 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely upon any certification, notice or other communication
(including, without limitation, any thereof by telephone, telecopy, telegram or
cable) reasonably believed by it to be genuine and correct and to have been
signed or sent by or on behalf of the proper Person or Persons, and upon advice
and statements of legal counsel, independent accountants and other experts
selected by the Administrative Agent. As to any matters not expressly provided
for by this Agreement or any other Loan Document, the Administrative Agent shall
in all cases be fully protected in acting, or in refraining from acting,
hereunder or thereunder in accordance with instructions given by the Majority
Lenders or, if provided herein, in accordance with the instructions given by the
Majority Revolving Credit Lenders, the Majority Term Lenders or all of the
Lenders as is required in such circumstance, and such instructions of such
Lenders and any action taken or failure to act pursuant thereto shall be binding
on all of the Lenders.
11.03 Defaults. The Administrative Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default unless the Administrative
Agent has received notice from a Lender or the Company specifying such Default
and stating that such notice is a "Notice of Default". In the event that the
Administrative Agent receives such a notice of the occurrence of a Default, the
Administrative Agent shall give prompt notice thereof to the Lenders. The
Administrative Agent shall (subject to Section 11.07 hereof) take such action
with respect to such Default as shall be directed by the Majority Lenders or, if
provided herein, the Majority Revolving Credit Lenders or the Majority Term
Lenders, provided that, unless and until the Administrative Agent shall have
received such directions, the Administrative Agent may (but shall not be
obligated to) take such action, or refrain from taking such action, with respect
to
Credit Agreement
<PAGE> 100
- 95 -
such Default as it shall deem advisable in the best interest of the Lenders
except to the extent that this Agreement expressly requires that such action be
taken, or not be taken, only with the consent or upon the authorization of the
Majority Lenders, the Majority Revolving Credit Lenders, the Majority Term
Lenders or all of the Lenders.
11.04 Rights as a Lender. With respect to its Commitments, if any,
and the Loans made by it, Chase (and any successor acting as Administrative
Agent) in its capacity as a Lender hereunder shall have the same rights and
powers hereunder as any other Lender and may exercise the same as though it were
not acting as the Administrative Agent, and the term "Lender" or "Lenders"
shall, unless the context otherwise indicates, include the Administrative Agent
in its individual capacity. Chase (and any successor acting as Administrative
Agent) and its affiliates may (without having to account therefor to any Lender)
accept deposits from, lend money to, make investments in and generally engage in
any kind of banking, trust or other business with the Obligors (and any of their
Subsidiaries or Affiliates) as if it were not acting as the Administrative
Agent, and Chase (and any such successor) and its affiliates may accept fees and
other consideration from the Obligors for services in connection with this
Agreement or otherwise without having to account for the same to the Lenders.
11.05 Indemnification. The Lenders agree to indemnify the
Administrative Agent (to the extent not reimbursed under Section 12.03 hereof,
but without limiting the obligations of the Company under said Section 12.03)
ratably in accordance with the aggregate principal amount of the Loans and
Reimbursement Obligations held by the Lenders, for any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind and nature whatsoever that may be imposed
on, incurred by or asserted against the Administrative Agent (including by any
Lender) arising out of or by reason of any investigation in or in any way
relating to or arising out of this Agreement or any other Loan Document or any
other documents contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby (including, without limitation, the
costs and expenses that the Company is obligated to pay under Section 12.03
hereof, but excluding, unless a Default has occurred and is continuing, normal
administrative costs and expenses incident to the performance of its agency
duties hereunder) or the enforcement of any of the terms hereof or thereof or of
any such other documents, provided that no Lender shall be liable for any of the
Credit Agreement
<PAGE> 101
- 96 -
foregoing to the extent they arise from the gross negligence or willful
misconduct of the party to be indemnified.
11.06 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender agrees that it has, independently and without reliance on the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own credit analysis of the
Parent Guarantor and its Subsidiaries and decision to enter into this Agreement
and that it will, independently and without reliance upon the Administrative
Agent or any other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own analysis and
decisions in taking or not taking action under this Agreement or under any other
Loan Document. The Administrative Agent shall not be required to keep itself
informed as to the performance or observance by any Obligor of this Agreement or
any of the other Loan Documents or any other document referred to or provided
for herein or therein or to inspect the Properties or books of the Parent
Guarantor or any of its Subsidiaries. Except for notices, reports and other
documents and information expressly required to be furnished to the Lenders by
the Administrative Agent hereunder or under the Security Documents, the
Administrative Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition or business of the Parent Guarantor or any of its Subsidiaries (or any
of their affiliates) that may come into the possession of the Administrative
Agent or any of its affiliates.
11.07 Failure to Act. Except for action expressly required of the
Administrative Agent hereunder and under the other Loan Documents, the
Administrative Agent shall in all cases be fully justified in failing or
refusing to act hereunder and thereunder unless it shall receive further
assurances to its satisfaction from the Lenders of their indemnification
obligations under Section 11.05 hereof against any and all liability and expense
that may be incurred by it by reason of taking or continuing to take any such
action.
11.08 Resignation or Removal of Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice thereof
to the Lenders and the Company and the Parent Guarantor, and the Administrative
Agent may be removed at any time with or without cause by the Majority Lenders.
Upon any such resignation or removal, the Majority Lenders shall have the right
to appoint a successor Administrative Agent. If no successor Administrative
Agent shall
Credit Agreement
<PAGE> 102
- 97 -
have been so appointed by the Majority Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent's giving of
notice of resignation or the Majority Lenders' removal of the retiring
Administrative Agent, then the retiring Administrative Agent may, on behalf of
the Lenders, appoint a successor Administrative Agent, that shall be a bank that
has an office in New York, New York with a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Administrative
Agent hereunder by a successor Administrative Agent, such successor
Administrative Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Administrative Agent, and
the retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After any retiring Administrative Agent's resignation or
removal hereunder as Administrative Agent, the provisions of this Section 11
shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as the Administrative Agent.
11.09 Consents under Other Loan Documents. Except as otherwise
provided in Section 12.04 hereof with respect to this Agreement, the
Administrative Agent may, with the prior consent of the Majority Lenders (but
not otherwise), consent to any modification, supplement or waiver under any of
the Loan Documents, provided that, without the prior consent of each Lender, the
Administrative Agent shall not (except as provided herein or in the Security
Documents) release any collateral or otherwise terminate any Lien under any
Security Document providing for collateral security, agree to additional
obligations being secured by such collateral security (unless the Lien for such
additional obligations shall be junior to the Lien in favor of the other
obligations secured by such Security Document, in which event the Administrative
Agent may consent to such junior Lien provided that it obtains the consent of
the Majority Lenders thereto), alter the relative priorities of the obligations
entitled to the benefits of the Liens created under the Security Documents,
except that no such consent shall be required, and the Administrative Agent is
hereby authorized, to release any Lien covering Property that is the subject of
either a disposition of Property permitted hereunder or a disposition to which
the Majority Lenders have consented.
Section 12. Miscellaneous.
12.01 Waiver. No failure on the part of the Administrative Agent or
any Lender to exercise and no delay in
Credit Agreement
<PAGE> 103
- 98 -
exercising, and no course of dealing with respect to, any right, power or
privilege under this Agreement or any Note shall operate as a waiver thereof,
nor shall any single or partial exercise of any right, power or privilege under
this Agreement or any Note preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The remedies provided herein
are cumulative and not exclusive of any remedies provided by law.
Each Obligor irrevocably waives, to the fullest extent permitted by
applicable law, any claim that any action or proceeding commenced by the
Administrative Agent or any Lender relating in any way to this Agreement should
be dismissed or stayed by reason, or pending the resolution, of any action or
proceeding commenced by any Obligor relating in any way to this Agreement
whether or not commenced earlier. To the fullest extent permitted by applicable
law, the Obligors shall take all measures necessary for any such action or
proceeding commenced by the Administrative Agent or any Lender to proceed to
judgment prior to the entry of judgment in any such action or proceeding
commenced by any Obligor.
12.02 Notices. All notices, requests and other communications
provided for herein and under the Security Documents (including, without
limitation, any modifications of, or waivers, requests or consents under, this
Agreement) shall be given or made in writing (including, without limitation, by
telecopy) delivered to the intended recipient shall be given or made in writing
(including, without limitation, by telecopy) delivered to the intended
recipient:
(a) in the case of each of the Obligors, at the
"Address for Notices" specified below the name of the
Company on the signature pages hereof;
(b) in the case of the Administrative Agent, at the
"Address for Notices" specified below the name of the
Administrative Agent on the signature pages hereof; and
(c) in the case of any Lender, at its address (or
telecopy number) set forth in its Administrative
Questionnaire;
or, as to any party, at such other address as shall be designated by such party
in a notice to each other party. Except as otherwise provided in this Agreement,
all such communications shall be deemed to have been duly given when transmitted
by telecopier or personally delivered or, in the case of a mailed
Credit Agreement
<PAGE> 104
- 99 -
notice, upon receipt, in each case given or addressed as aforesaid.
12.03 Expenses, Etc. The Company agrees to pay or reimburse each of
the Lenders and the Administrative Agent for: (a) all reasonable out-of-pocket
costs and expenses of the Administrative Agent (including, without limitation,
the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy, special New
York counsel to Chase) in connection with (i) the negotiation, preparation,
execution and delivery of this Agreement and the other Loan Documents and the
extension of credit hereunder, (ii) the negotiation or preparation of any
modification, supplement or waiver of any of the terms of this Agreement or any
of the other Loan Documents (whether or not consummated) and (iii) the
termination of the Commitments, the payment or prepayment of the Loans, or the
release of any collateral under any of the Security Documents; (b) all
reasonable out-of-pocket costs and expenses of the Lenders and the
Administrative Agent (including, without limitation, the reasonable fees and
expenses of legal counsel) in connection with (i) any Default and any
enforcement or collection proceedings resulting therefrom, including, without
limitation, all manner of participation in or other involvement with (x)
bankruptcy, insolvency, receivership, foreclosure, winding up or liquidation
proceedings, (y) judicial or regulatory proceedings and (z) workout,
restructuring or other negotiations or proceedings (whether or not the workout,
restructuring or transaction contemplated thereby is consummated) and (ii) the
enforcement of this Section 12.03; and (c) all transfer, stamp, documentary or
other similar taxes, assessments or charges levied by any governmental or
revenue authority in respect of this Agreement or any of the other Loan
Documents or any other document referred to herein or therein and all costs,
expenses, taxes, assessments and other charges incurred in connection with any
filing, registration, recording or perfection of any security interest
contemplated by any Security Document or any other document referred to therein.
The Company hereby agrees to indemnify the Administrative Agent and
each Lender and their respective directors, officers, employees, attorneys and
agents from, and hold each of them harmless against, any and all losses,
liabilities, claims, damages or expenses incurred by any of them (including,
without limitation, any and all losses, liabilities, claims, damages or expenses
incurred by the Administrative Agent to any Lender, whether or not the
Administrative Agent or any Lender is a party thereto) arising out of or by
reason of any investigation or litigation or other proceedings (including any
Credit Agreement
<PAGE> 105
- 100 -
threatened investigation or litigation or other proceedings) relating to the
extensions of credit hereunder or any actual or proposed use by the Company or
any of its Subsidiaries of the proceeds of any of the extensions of credit
hereunder, including, without limitation, the reasonable fees and disbursements
of counsel incurred in connection with any such investigation or litigation or
other proceedings (but excluding any such losses, liabilities, claims, damages
or expenses incurred by reason of the gross negligence or willful misconduct of
the Person to be indemnified). Without limiting the generality of the foregoing,
the Company will indemnify the Administrative Agent and each Lender from, and
hold the Administrative Agent and each Lender harmless against, any losses,
liabilities, claims, damages or expenses described in the preceding sentence
(excluding, as provided in the preceding sentence, any loss, liability, claim,
damage or expense incurred by reason of the gross negligence or willful
misconduct of the Person to be indemnified) arising under any Environmental Law
as a result of the past, present or future operations of the Company or any of
its Subsidiaries (or any predecessor in interest to the Company or any of its
Subsidiaries), or the past, present or future condition of any site or facility
owned, operated or leased at any time by the Company or any of its Subsidiaries
(or any such predecessor in interest), or any Release or threatened Release of
any Hazardous Materials at or from any such site or facility, excluding any such
Release or threatened Release that shall occur during any period when the
Administrative Agent or any Lender shall be in possession of any such site or
facility following the exercise by the Administrative Agent or any Lender of any
of its rights and remedies hereunder or under any of the Security Documents, but
including any such Release or threatened Release occurring during such period
that is a continuation of conditions previously in existence, or of practices
employed by the Company and its Subsidiaries, at such site or facility.
12.04 Amendments, Etc. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be modified or supplemented
only by an instrument in writing signed by the Company and the Majority Lenders,
or by the Company and the Administrative Agent acting with the consent of the
Majority Lenders, and any provision of this Agreement may be waived by the
Majority Lenders or by the Administrative Agent acting with the consent of the
Majority Lenders; provided that: (a) no modification, supplement or waiver
shall, unless by an instrument signed by all of the Lenders or by the
Administrative Agent acting with the consent of all of the Lenders: (i)
increase, or extend the term of any of the Commitments, or extend the time or
waive any requirement for the reduction or
Credit Agreement
<PAGE> 106
- 101 -
termination of any of the Commitments, (ii) extend the date fixed for the
payment of principal of or interest on any Loan, the Reimbursement Obligations
or any fee hereunder, (iii) reduce the amount of any such payment of principal,
(iv) reduce the rate at which interest is payable thereon or any fee is payable
hereunder, (v) alter the rights or obligations of the Company to prepay Loans,
(vi) alter the manner in which payments or prepayments of principal, interest or
other amounts hereunder shall be applied as between the Lenders or Types or
Classes of Loans, (vii) alter the terms of this Section 12.04, (viii) modify the
definition of the term "Majority Lenders", "Majority Revolving Credit Lenders",
"Majority Tranche A Term Lenders" or "Majority Tranche B Term Lenders" or modify
in any other manner the number or percentage of the Lenders required to make any
determinations or waive any rights hereunder or to modify any provision hereof,
(ix) release any Guarantor from any of its guarantee obligations under Section 6
hereof, or (x) waive any of the conditions precedent set forth in Section 7.01
hereof; (b) any modification or supplement of Section 11 hereof, or of any of
the rights or duties of the Administrative Agent hereunder, shall require the
consent of the Administrative Agent; and (c) any modification or supplement of
Section 6 hereof shall require the consent of each Guarantor.
Anything in this Agreement to the contrary notwithstanding, no
waiver or modification of any provision of this Agreement that has the effect
(either immediately or at some later time) of enabling the Company to satisfy a
condition precedent to the making of a Revolving Credit Loan shall be effective
against the Revolving Credit Lenders for the purposes of the Revolving Credit
Commitments unless the Majority Revolving Credit Lenders shall have concurred
with such waiver or modification.
12.05 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
12.06 Assignments and Participations.
(a) No Obligor may assign any of its rights or obligations hereunder
or under the Notes without the prior consent of all of the Lenders and the
Administrative Agent.
(b) Each Lender may assign any of its Loans, its Notes, its
Commitments, and, if such Lender is a Revolving Credit Lender, its Letter of
Credit Interest (with the consent of the Company, the Administrative Agent and,
in the case of the
Credit Agreement
<PAGE> 107
- 102 -
Revolving Credit Commitment or a Letter of Credit Interest, the Issuing Lender,
which consents by the Company and the Administrative Agent shall not be
unreasonably withheld); provided that
(i) no such consent by the Company or the Administrative Agent
shall be required in the case of any assignment to another Lender or to an
affiliate of the assigning Lender;
(ii) except to the extent the Company and the Administrative
Agent shall otherwise consent, any such partial assignment (other than to
another Lender) shall be in an amount at least equal to $5,000,000;
(iii) each such assignment by a Lender of its Revolving Credit
Loans, Revolving Credit Note, Revolving Credit Commitment or Letter of
Credit Interest shall be made in such manner so that the same portion of
its Revolving Credit Loans, Revolving Credit Note, Revolving Credit
Commitment and Letter of Credit Interest is assigned to the respective
assignee;
(iv) each such assignment by a Lender of its Tranche A Term Loan
Commitment or its Tranche B Term Loan Commitment shall be made in such
manner so that the same portion of its Commitment, Loans and Note of each
Class of Commitment being so assigned is assigned to the respective
assignee; and
(v) in order to evidence each such assignment, the assignor and
assignee shall execute and deliver an Assignment and Acceptance.
Upon execution and delivery by the assignor and the assignee of such Assignment
and Acceptance (and the delivery thereof to the Administrative Agent (with a
copy to the Company) for recordation of the assignment provided therein), and
upon consent thereto by the Company, the Administrative Agent and the Issuing
Lender to the extent required above, the assignee shall have, to the extent of
such assignment (unless otherwise consented to by the Company, the
Administrative Agent and the Issuing Lender), the obligations, rights and
benefits of a Lender hereunder holding the Commitment(s), Loans and, if
applicable, Letter of Credit Interest (or portions thereof) assigned to it and
specified in such Assignment and Acceptance (in addition to the Commitment(s),
Loans and Letter of Credit Interest, if any, theretofore held by such assignee)
and the assigning Lender shall, to the extent of
Credit Agreement
<PAGE> 108
- 103 -
such assignment, be released from the Commitment(s) (or portion(s) thereof) so
assigned. Upon each such assignment (excluding, in any event, the assignments to
be effected on the Effective Date under Section 2.01 hereof) the assigning
Lender shall pay the Administrative Agent an assignment fee of $3,000.
(c) A Lender may sell or agree to sell to one or more other Persons
(each a "Participant") a participation in all or any part of any Loans or Letter
of Credit Interest held by it, or in its Revolving Credit Commitments, provided
that such Participant shall not have any rights or obligations under this
Agreement or any Note or any other Loan Document (the Participant's rights
against such Lender in respect of such participation to be those set forth in
the agreements executed by such Lender in favor of the Participant). All amounts
payable by the Company to any Lender under Section 5 hereof in respect of Loans,
Letter of Credit Interest held by it, and its Commitments, shall be determined
as if such Lender had not sold or agreed to sell any participations in such
Loans, Letter of Credit Interest and Commitments, and as if such Lender were
funding each of such Loan, Letter of Credit Interest and Commitments in the same
way that it is funding the portion of such Loan, Letter of Credit Interest and
Commitments in which no participations have been sold. In no event shall a
Lender that sells a participation agree with the Participant to take or refrain
from taking any action hereunder or under any other Loan Document except that
such Lender may agree with the Participant that it will not, without the consent
of the Participant, agree to (i) increase or extend the term of such Lender's
Commitment(s) or extend the amount or date of any scheduled reduction of such
Commitment(s) pursuant to Section 2.04 hereof, (ii) extend the date fixed for
the payment of principal of or interest on the related Loan or Loans,
Reimbursement Obligations or any portion of any fee hereunder payable to the
Participant, (iii) reduce the amount of any such payment of principal, (iv)
reduce the rate at which interest is payable thereon, or any fee hereunder
payable to the Participant, to a level below the rate at which the Participant
is entitled to receive such interest or fee or (v) consent to any modification,
supplement or waiver hereof or of any of the other Loan Documents to the extent
that the same, under Section 11.09 or 12.04 hereof, requires the consent of each
Lender.
(d) In addition to the assignments and participations permitted
under the foregoing provisions of this Section 12.06, any Lender may (without
notice to the Company, the Administrative Agent or any other Lender and without
payment of any fee) (i) assign and pledge all or any portion of its Loans and
its Notes to any Federal Reserve Bank as collateral security pursuant to
Credit Agreement
<PAGE> 109
- 104 -
Regulation A and any Operating Circular issued by such Federal Reserve Bank and
(ii) assign all or any portion of its rights under this Agreement and its Loans
and its Notes to an affiliate. No such assignment shall release the assigning
Lender from its obligations hereunder.
(e) A Lender may furnish any information concerning the Company or
any of its Subsidiaries in the possession of such Lender from time to time to
assignees and participants (including prospective assignees and participants),
subject, however, to the provisions of Section 12.12(b) hereof.
(f) Anything in this Section 12.06 to the contrary notwithstanding,
no Lender may assign or participate any interest in any Loan or Reimbursement
Obligation held by it hereunder to the Company or any of its Affiliates or
Subsidiaries without the prior consent of each Lender.
(g) At the request of any Lender that is not a U.S. Person and is
not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, the Company
shall maintain, or cause to be maintained, a register (the "Register") that, at
the request of the Company, shall be kept by the Administrative Agent on behalf
of the Company at no charge to the Company at the address to which notices to
the Administrative Agent are to be sent hereunder, on which it enters the name
of such Lender as the registered owner of each Registered Loan held by such
Lender. A Registered Loan (and the Registered Note, if any, evidencing the same)
may be assigned or otherwise transferred in whole or in part by registration of
such assignment or transfer on the Register (and each Registered Note shall
expressly so provide). Any assignment or transfer of all or part of such Loan
(and the Registered Note, if any, evidencing the same) may be effected by
registration of such assignment or transfer on the Register, together with the
surrender of the Registered Note, if any, evidencing the same duly endorsed by
(or accompanied by a written instrument of assignment or transfer duly executed
by) the holder of such Registered Note, whereupon, at the request of the
designated assignee(s) or transferee(s), one or more new Registered Notes in the
same aggregate principal amount shall be issued to the designated assignee(s) or
transferee(s). Prior to the registration of assignment or transfer of any
Registered Loan (and the Registered Note, if any, evidencing the same), the
Company shall treat the Person in whose name such Loan (and the Registered Note,
if any, evidencing the same) is registered as the owner thereof for the purpose
of receiving all payments thereon and for all other purposes, notwithstanding
notice to the contrary.
Credit Agreement
<PAGE> 110
- 105 -
(h) The Register shall be available for inspection by the Company
and any Lender that is a Registered Holder at any reasonable time upon
reasonable prior notice.
12.07 Survival. The obligations of the Company under Sections 5.01,
5.05, 5.06, 5.07 and 12.03 hereof, the obligations of each Guarantor under
Section 6.03 hereof, and the obligations of the Lenders under Section 11.05
hereof, shall survive the repayment of the Loans and Reimbursement Obligations
and the termination of the Commitments and, in the case of any Lender that may
assign any interest in its Commitments, Loans or Letter of Credit Interest
hereunder, shall survive the making of such assignment, notwithstanding that
such assigning Lender may cease to be a "Lender" hereunder. In addition, each
representation and warranty made, or deemed to be made by a notice of any
extension of credit (whether by means of a Loan or a Letter of Credit), herein
or pursuant hereto shall survive the making of such representation and warranty,
and no Lender shall be deemed to have waived, by reason of making any extension
of credit hereunder (whether by means of a Loan or a Letter of Credit), any
Default that may arise by reason of such representation or warranty proving to
have been false or misleading, notwithstanding that such Lender or the
Administrative Agent may have had notice or knowledge or reason to believe that
such representation or warranty was false or misleading at the time such
extension of credit was made.
12.08 Captions. The table of contents and captions and section
headings appearing herein are included solely for convenience of reference and
are not intended to affect the interpretation of any provision of this
Agreement.
12.09 Counterparts. This Agreement may be executed in any number of
counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart.
12.10 Governing Law; Submission to Jurisdiction. This Agreement and
the Notes shall be governed by, and construed in accordance with, the law of the
State of New York. Each Obligor hereby submits to the nonexclusive jurisdiction
of the United States District Court for the Southern District of New York and of
the Supreme Court of the State of New York sitting in New York County (including
its Appellate Division), and of any other appellate court in the State of New
York, for the purposes of all legal proceedings arising out of or relating to
this Agreement or the transactions contemplated hereby. Each Obligor hereby
Credit Agreement
<PAGE> 111
- 106 -
irrevocably waives, to the fullest extent permitted by applicable law, any
objection that it may now or hereafter have to the laying of the venue of any
such proceeding brought in such a court and any claim that any such proceeding
brought in such a court has been brought in an inconvenient forum.
12.11 Waiver of Jury Trial. EACH OF THE OBLIGORS, THE ADMINISTRATIVE
AGENT AND THE LENDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE NOTES OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
12.12 Treatment of Certain Information; Confidentiality. (a) Each of
the Company and the Parent Guarantor acknowledges that from time to time
financial advisory, investment banking and other services may be offered or
provided to the Company, the Parent Guarantor or one or more of their
Subsidiaries (in connection with this Agreement or otherwise) by any Lender or
by one or more subsidiaries or affiliates of such Lender and each of the Company
and the Parent Guarantor hereby authorizes each Lender to share any information
delivered to such Lender by the Company, the Parent Guarantor and their
Subsidiaries pursuant to this Agreement, or in connection with the decision of
such Lender to enter into this Agreement, to any such subsidiary or affiliate,
it being understood that any such subsidiary or affiliate receiving such
information shall be bound by the provisions of paragraph (b) below as if it
were a Lender hereunder. Such authorization shall survive the repayment of the
Loans and Reimbursement Obligations and the termination of the Commitments.
(b) Each Lender and the Administrative Agent agrees (on behalf of
itself and each of its affiliates, directors, officers, employees and
representatives) to use reasonable precautions to keep confidential, in
accordance with their customary procedures for handling confidential information
of the same nature and in accordance with safe and sound banking practices, any
non-public information supplied to it by the Parent Guarantor or the Company
pursuant to this Agreement that is identified by such Person as being
confidential at the time the same is delivered to the Lenders or the
Administrative Agent, provided that nothing herein shall limit the disclosure of
any such information (i) after such information shall have become public (other
than through a violation of this Section 12.12), (ii) to the extent required by
statute, rule, regulation or judicial process, (iii) to counsel for any of the
Lenders or the Administrative Agent, (iv) to bank examiners (or any other
Credit Agreement
<PAGE> 112
- 107 -
regulatory authority having jurisdiction over any Lender or the Administrative
Agent), or to auditors or accountants, (v) to the Administrative Agent or any
other Lender (or to Chase Securities Inc.), (vi) in connection with any
litigation to which any one or more of the Lenders or the Administrative Agent
is a party, or in connection with the enforcement of rights or remedies
hereunder or under any other Loan Document, (vii) to a subsidiary or affiliate
of such Lender as provided in paragraph (a) above or (viii) to any assignee or
participant (or prospective assignee or participant) so long as such assignee or
participant (or prospective assignee or participant) first executes and delivers
to the respective Lender a Confidentiality Agreement substantially in the form
of Exhibit E hereto (or executes and delivers to such Lender an acknowledgement
to the effect that it is bound by the provisions of this Section 12.12(b), which
acknowledgement may be included as part of the respective assignment or
participation agreement pursuant to which such assignee or participant acquires
an interest in the Loans or Letter of Credit Interest hereunder); provided,
further, that (x) unless specifically prohibited by applicable law or court
order, each Lender and the Agent shall, prior to disclosure thereof, notify the
Company of any request for disclosure of any such non-public information (A) by
any governmental agency or representative thereof (other than any such request
in connection with an examination of the financial condition of such Lender by
such governmental agency) or (B) pursuant to legal process and (y) in no event
shall any Lender or the Administrative Agent be obligated or required to return
any materials furnished by the Parent Guarantor or the Company. The obligations
of each Lender under this Section 12.12 shall supersede and replace the
obligations of such Lender under the confidentiality letter in respect of this
financing signed and delivered by such Lender to the Company prior to the date
hereof; in addition, the obligations of any assignee that has executed a
Confidentiality Agreement in the form of Exhibit E hereto shall be superseded by
this Section 12.12 upon the date upon which such assignee becomes a Lender
hereunder pursuant to Section 12.06(b) hereof.
12.13 Credit Lyonnais. (a) It is understood that, insofar as
obligations to make Loans are concerned, Credit Lyonnais Los Angeles Branch
shall only be obligated to make and maintain Base Rate Loans and that Credit
Lyonnais Cayman Islands Branch shall only be obligated to make and maintain
Eurodollar Loans and that such Branches shall make separate arrangements between
themselves for the transfer of Loans upon the Conversion of any Base Rate Loan
into a Eurodollar Loan or vice versa. Credit Lyonnais Los Angeles Branch shall
be obligated with respect to any Letter of Credit Liabilities. The relevant
Credit Agreement
<PAGE> 113
- 108 -
Commitments of such Branches shall be expressed as a single Revolving Credit
Commitment, a single Tranche A Term Loan Commitment and a single Tranche B Term
Loan Commitment, as the case may be. Such Branches shall together be deemed to
be one "Lender" hereunder and each of such Branches shall be bound to perform
all of the obligations of a Lender hereunder with Commitments in the amount
equal to the aggregate Commitments of such Branches. Without limiting the
generality of the foregoing, (i) such Branches shall be jointly and severally
obligated in respect of any amounts payable to the Administrative Agent under
Section 11.05 hereof (and in cases where the liability of such Branches under
said Section 11.05 is to be determined with reference to the amount of the
Commitments held by them, the aggregate liability of both such Branches shall
not exceed the ratio of the amount which their Commitments bear to the amount of
all of the Commitments) and (ii) no amendment, modification or waiver hereunder
(or consent under Section 11.09 hereof), that requires the concurrence of Credit
Lyonnais, shall bind either such Branch unless executed by both such Branches.
(b) Notwithstanding the provisions of Section 2.07 hereof, the
Revolving Credit Loans, the Tranche A Term Loans and the Tranche B Term Loans
made by Credit Lyonnais Los Angeles Branch shall be evidenced respectively by a
Revolving Credit Note, a Tranche A Term Loan Note and a Tranche B Term Loan
Note, payable to the order of such Branch (and evidencing the Base Rate Loans
made by such Branch hereunder), and the Revolving Credit Loans, the Tranche A
Term Loans and the Tranche B Term Loans made by Credit Lyonnais Cayman Island
Branch hereunder shall be evidenced by a Revolving Credit Note, a Tranche A Term
Loan Note and a Tranche B Term Loan Note, payable to the order of such Branch
(and evidencing the Eurodollar Loans made by such Branch hereunder). Each such
Revolving Credit Note shall be in a principal amount equal to the full amount of
the Revolving Credit Commitment of such Branches, each such Tranche A Term Loan
Note shall be in a principal amount equal to the full amount of the Tranche A
Term Loan Commitment of such Branches and each such Tranche B Term Loan Note
shall be in a principal amount equal to the full amount of the Tranche B Term
Loan Commitment of such Branches, provided that such Notes together may not be
enforced (and each such Note shall expressly so state) with respect to an
aggregate principal amount in excess of such Commitments. For all purposes of
this Agreement, such Revolving Credit Notes shall be treated as one, single
"Revolving Credit Note" hereunder, such Tranche A Term Loan Notes shall be
treated as one, single "Tranche A Term Loan Note" and such Tranche B Term Loan
Notes shall be treated as one single "Tranche B Term Loan Note". Without
limiting the generality of the foregoing, neither Credit
Credit Agreement
<PAGE> 114
- 109 -
Lyonnais Los Angeles nor Credit Lyonnais Cayman Island Branch may assign its
Notes to any assignee in the manner contemplated by Section 12.06(b) hereof
without the other Branch simultaneously transferring its Notes to the same
assignee and, upon such assignment, such assignee shall be required to surrender
such Notes to the Company hereunder and receive in exchange therefor a single
Revolving Credit Note, a single Tranche A Term Loan Note and a single Tranche B
Term Loan Note to evidence the Loans evidenced by such Notes, provided that in
the case of a partial assignment, each of Credit Lyonnais Los Angeles Branch and
Credit Lyonnais Cayman Island Branch shall simultaneously assign to the assignee
the same proportion of its Notes, and such Branches shall request that the
Company deliver to each of the assignee, Credit Lyonnais Los Angeles Branch and
Credit Lyonnais Cayman Island Branch, new executed promissory notes in exchange
for the promissory notes then held by them signed by the Company, in the forms
of Exhibits A-1, A-2 and A-3 to the Credit Agreement, payable to the order of
the assignee, Credit Lyonnais Los Angeles Branch and Credit Lyonnais Cayman
Island Branch, respectively, in principal amounts equal to (i) in the case of
the assignee, the aggregate principal amounts of the Commitments or Loans
assigned to the assignee by Credit Lyonnais Los Angeles Branch and Credit
Lyonnais Cayman Island Branch and (ii) in the case of Credit Lyonnais Los
Angeles Branch and Credit Lyonnais Cayman Island Branch, the aggregate principal
amounts of such Branches' remaining Commitments or Loans after giving effect to
such partial assignment.
Credit Agreement
<PAGE> 115
- 110 -
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered as of the day and year first above written.
ELLER MEDIA COMPANY
By /s/ Timothy J. Donmoyer
----------------------------------
Title: Chief Financial Officer
Address for Notices:
2850 East Camelback Road
Suite 300
Phoenix, Arizona 85016
Attention: Mr. Karl Eller
Telecopier No.: (602) 957-8602
Telephone No.: (602) 957-8116
ELLER MEDIA CORPORATION
By /s/ Timothy J. Donmoyer
----------------------------------
Title: Chief Financial Officer
Address for Notices:
2850 East Camelback Road
Suite 300
Phoenix, Arizona 85016
Attention: Mr. Karl Eller
Telecopier No.: (602) 957-8602
Telephone No.: (602) 957-8116
Credit Agreement
<PAGE> 116
- 111 -
SUBSIDIARY GUARANTORS
ELLER INVESTMENT COMPANY, INC.
ELLER OUTDOOR ADVERTISING COMPANY
ELLER OUTDOOR ADVERTISING COMPANY
OF ATLANTA
ELLER OUTDOOR OF EL PASO, INC.
ELTEX INVESTMENT CORPORATION
AMERICAN SHELTER COMPANY, INC.
BLUE WALLSCAPES, INC.
CHICAGO SHELTERS ADVERTISING, INC.
PATRICK MEDIA GROUP, INC.
PMG HOLDINGS, INC.
PMG TARGET MEDIA HOLDINGS, INC.
SHELTER ADVERTISING OF AMERICA, INC.
SHELTER ADVERTISING OF HIALEAH, INC.
TRENDEL, INC.
TRENDEL ENTERPRISES INTERNATIONAL, INC.
TRENDEL INTERNATIONAL DEVELOPMENT CORP.
For each of the above Subsidiary
Guarantors
By /s/ Timothy J. Donmoyer
----------------------------------
Title: Chief Financial Officer
ELLER TARGET MEDIA GROUP, L.P. (formerly
known as PMG Target Media Group, L.P.)
By its general partner,
PMG TARGET MEDIA HOLDINGS, INC.
By /s/ Timothy J. Donmoyer
-------------------------------
Title: Chief Financial Officer
Credit Agreement
<PAGE> 117
- 112 -
LENDERS
THE CHASE MANHATTAN BANK
By /s/ Stephen P. Mumblow
--------------------------------
Title: Managing Director
CIBC INC.
By /s/ Deborah Streck
-------------------------------
Title: Account Manager
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By /s/ F. Glenn Harvey
-------------------------------
Title: Authorized Signatory
CREDIT LYONNAIS LOS ANGELES
BRANCH
By /s/ F. Glenn Harvey
-------------------------------
Title: Vice President
VAN KAMPEN AMERICAN CAPITAL
PRIME RATE INCOME TRUST
By /s/ Kathleen A. Zarn
-------------------------------
Title: Vice President
Credit Agreement
<PAGE> 118
- 113 -
MERRILL LYNCH SENIOR FLOATING
RATE FUND, INC.
By /s/ Gilles Marchand
-------------------------------
Title: CFA, Authorized Signatory
ABN AMRO BANK N.V.
LOS ANGELES INTERNATIONAL BRANCH
By: ABN AMRO NORTH AMERICA INC., AS
AGENT
By /s/ Ellen M. Coleman
-------------------------------
Title: Vice President/Director
By /s/ John A. Miller
-------------------------------
Title: Group Vice President/Director
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By /s/ Jane A. Mejeski
-------------------------------
Title: Vice President
By /s/ Brian Haughney
-------------------------------
Title: Assistant Treasurer
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By /s/ Bruce W. Loftin
-------------------------------
Title: Senior Vice President
Credit Agreement
<PAGE> 119
- 114 -
FLEET BANK, N.A.
By /s/ Eric S. Meyer
----------------------------
Title: Vice President
THE BANK OF NOVA SCOTIA
By /s/ Vincent J. Fitzgerald, Jr.
----------------------------
Title: Authorized Signatory
BANQUE NATIONALE DE PARIS
By /s/ David Low
----------------------------
Title: Vice President & Manager
By /s/ Jeffrey S. Kajisa
----------------------------
Title: Assistant Vice President
BANQUE PARIBAS
By /s/ Thomas Brandt
----------------------------
Title: Vice President
By /s/ Harry Collyns
----------------------------
Title: Vice President
CORESTATES BANK, N.A.
By /s/ Douglas E. Blackman
----------------------------
Title: Vice President
Credit Agreement
<PAGE> 120
- 115 -
THE FIRST NATIONAL BANK OF
BOSTON
By /s/ Mark S. Denomme
----------------------------
Title: Director
LONG TERM CREDIT BANK OF JAPAN, LTD.
By /s/ Paul B. Clifford
----------------------------
Title: Deputy General Manager
THE NIPPON CREDIT BANK, LTD.,
LOS ANGELES AGENCY
By /s/ Bernardo E. Correa-Henschke
----------------------------
Title: Vice President & Senior
Manager
UNION BANK OF CALIFORNIA, N.A.
By /s/ John C. Lee
----------------------------
Title: Banking Officer
INDOSUEZ CAPITAL FUNDING II,
LIMITED
By: Indosuez Capital as
Portfolio Advisor
By ____________________
Title:
Credit Agreement
<PAGE> 121
- 116 -
BANK OF TOKYO-MITSUBISHI TRUST COMPANY
By /s/ John P. Judge
----------------------------
Title: Vice President
CREDIT SUISSE NEW YORK
By /s/ Todd C. Morgan
----------------------------
Title: Member of Senior Management
By /s/ Jeffrey C. Howe
----------------------------
Title: Member of Senior Management
CREDITANSTALT CORPORATE FINANCE, INC.
By /s/ Greg Roux
----------------------------
Title: Vice President
By /s/ Jack R. Bertges
----------------------------
Title: Vice President
THE FUJI BANK, LTD., LOS ANGELES AGENCY
By /s/ Nobuhiro Umemura
----------------------------
Title: Joint General Manager
MERITA BANK LTD.-NEW YORK BRANCH
By /s/ Frank Maffei
----------------------------
Title: Vice President
By /s/ John F. Kehnle
----------------------------
Title: Vice President
Credit Agreement
<PAGE> 122
- 117 -
NATIONAL CITY BANK
By /s/ Robert C. Rowe
----------------------------
Title: Vice President
ORIX USA CORPORATION
By /s/ David Woolsey
----------------------------
Title: Deputy President & COO
PILGRIM AMERICA PRIME RATE TRUST
By /s/ Michael J. Bacevich
----------------------------
Title: Vice President
PROTECTIVE LIFE INSURANCE COMPANY
By /s/ Mark K. Okada
----------------------------
Title: CFA, Executive Vice President
CRESTAR BANK
By /s/ Edwin D. Brooks, Jr.
----------------------------
Title: Executive Vice President
SOUTHERN PACIFIC THRIFT & LOAN
By /s/ Chris Kelleher
----------------------------
Title: Vice President
Credit Agreement
<PAGE> 123
-118-
PRIME INCOME TRUST
By
----------------------------
Title:
ADMINISTRATIVE AGENT
THE CHASE MANHATTAN BANK
as Administrative Agent
By /s/ Stephen P. Mumblow
----------------------------
Title: Managing Director
Address for Notices to
Chase as Administrative Agent:
The Chase Manhattan Bank
Agent Bank Services Group
1 Chase Manhattan Plaza
8th Floor
New York, New York 10081
Attention: Gloria Javier
Telecopier No.: (212) 552-5700
Telephone No.: (212) 552-7440
Credit Agreement
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into as of August 18, 1995 by and between ELLER MEDIA COMPANY, a
Delaware corporation (the "Company") and Karl Eller ("Executive").
WHEREAS, the Company has been formed to acquire and operate
certain outdoor advertising businesses, including the business of Patrick Media
Group and PMG Holdings (the closing of the acquisition of which by a Subsidiary
of the Company is hereinafter referred to as the "Closing"); and
WHEREAS, the Company wishes to employ Executive and Executive
is prepared to serve in those capacities required by the Company.
NOW, THEREFORE, the parties agree as follows:
1. Position and Authority. The Company employs the Executive,
and the Executive accepts such employment and agrees to serve the Company as the
Chairman of the Board of Directors and Chief Executive Officer of the Company
and its respective Subsidiaries, for the compensation and benefits detailed in
Sections 3 and 4 hereof and the Options provided in Section 5. It is understood
that the Executive will report directly to the Board of Directors. The Executive
shall have (in all cases subject to the overall authority and control of the
board) such authority as is typical for executives having similar positions in
similar companies. A "Subsidiary" shall be any company in which the Company
beneficially owns more than 50% of the voting power of such company's
outstanding voting securities.
2. Duties. Executive shall devote substantially all of his
business time (subject to reasonable vacation consistent with Company policy as
set by the Board of Directors) to the affairs of the Company during the
employment term, except as may be consented to by the Board of Directors.
Executive shall perform such duties and responsibilities as the Board of
Directors of the Company may from time to time reasonably determine.
3. Base Compensation. Executive will be compensated at a base
salary rate of $400,000 per year during the employment term. Base compensation
will be paid monthly in two approximately equal installments each month. All
compensation and benefits will be subject to reduction by all federal, state,
local and other withholdings and similar taxes and payments required by
applicable law. At each anniversary of this Agreement the Executive's Base
Salary shall be increased by the percentage (if any) that the Consumer Price
Index (U.S. (All Items) increased during the most recent calendar year. In
addition to Executive's base compensation, Executive may receive bonus
compensation at the sole discretion of the Board of Directors.
<PAGE> 2
4. Benefits. During Executive's employment by the Company,
Executive will receive the same (or substantially similar) employee benefits to
those provided by the Company or its Subsidiaries to other members of senior
management from time to time.
5. Option to Purchase Shares in the Company.
(a) Subject to the terms of this Agreement, Executive is
hereby granted the option (the "Option") to purchase shares of common stock of
the Company (the "Shares"), as follows:
(1) Executive may purchase 111.513 Shares at a price
per Share equal to $100,000 (the "Base Option");
(2) If the Internal Rate of Return (as defined below)
on the Shares purchased by Hellman & Friedman Capital Partners III, L.P., H&F
International Partners III, L.P. and H&F Orchard Partners III, L.P.
(collectively "HFCP III") at Closing exceeds 25% per annum, for the period from
the Closing through December 31, 2000, or such earlier date as a majority of the
voting power of the Company is acquired by a Person other than HFCP III or an
Affiliate thereof, or all or substantially all of the Company's assets are sold
to, or the Company merges or consolidates with, another Person if the Person
surviving such transaction is not controlled by the stockholders of the Company
(each a "Sale of the Company"), Executive shall have the option to purchase an
additional 43.838 Shares at a price per Share equal to $100,000 (the "25%
Option"); and
(3) If the Internal Rate of Return (as defined below)
on the Shares purchased by HFCP III at Closing, for the period from the Closing
through December 31, 2000 or such earlier date as a Sale of the Company shall
occur, exceeds 30% per annum, Executive shall have the option to purchase an
additional 45.776 Shares at a price per Share equal to $100,000 (the "30%
Option").
For the purposes of Paragraphs (2) and (3) of this Section 5,
"Internal Rate of Return" shall be defined as the annual compounded rate of
return on the initial capital investment by HFCP III in the Company's shares of
$100,000 per share. If the Company and the Shareholder cannot agree as to the
Internal Rate of Return by February 15, 2001 (or, in the case of a Sale of the
Company, by a date 15 days prior to the Closing of such Sale), the Internal Rate
of Return shall be determined by an independent appraiser selected by the
Company reasonably acceptable to both HFCP III and Executive.
(b) The Base Option shall be exercisable as to 20% of the
total number of Shares covered thereby from the Closing and as to the remaining
80% in four equal parts on December 31, 1995, 1996, 1997 and 1998, respectively.
If the respective Internal Rate of Return targets are met, the 25% Options and
the 30% Options shall become exercisable on the earlier of April 1, 2001 or a
Sale of the Company. All options shall expire to the extent not exercised before
April 1, 2002. In the case of a Sale of the Company, all presently exercisable
options may be exercised by Executive immediately prior
2
<PAGE> 3
to the closing of such Sale. All options not so exercised (including any
unvested portion of the Base Option), shall expire upon any Sale of the Company.
(c) The number of Shares that may be acquired upon exercise
of the Options granted in this section (and the exercise price therefor) shall
be proportionately adjusted in the event of stock splits and reverse stock
splits affecting the Company's common stock and for dividends payable in shares
of common stock. If the common stock is reclassified or exchanged for other
securities of the Company in connection with a recapitalization, Executive shall
have the option to acquire such number and type of securities as the number of
shares of common stock subject to the options granted hereunder would have been
converted into.
(d) The Executive may not Transfer (as defined in the
Stockholders Agreement) any Options. All Shares acquired upon exercise of
Options shall be held by the Executive pursuant to the Stockholders Agreement.
Transfer of the Shares purchased through the exercise of the Options shall be
subject to the provisions of the Stockholders Agreement.
6. Term. This Employment Agreement shall have a term of four (4)
years, provided that Sections 5, 8, 9 and 10 shall survive such expiration in
accordance with their terms.
7. Termination.
(a) This Employment Agreement may be terminated by the
Company at any time for Cause upon written notice to Executive, which notice
shall specify the reason for termination. As used herein, "Cause" shall mean (A)
willful misconduct or gross negligence by executive in respect of his
obligations under this Agreement, (B) commission of a crime involving moral
turpitude, (C) disloyal or dishonest conduct of the Executive that materially
harms the Company or its business or materially undermines the confidence of the
Board in the Executive, or (D) willful breach of this Agreement.
(b) Executive may terminate the Employment Agreement for
Good Reason by giving thirty (30) days prior written notice to the Company. Good
Reason shall exist only if (i) Executive is removed or is not re-appointed as
the Company's Chief Executive Officer, except in connection with termination of
this Employment Agreement by the Company for cause or due to death or
disability, (ii) Executive is assigned duties or authority is withdrawn from
Executive inconsistent with Executive's authority pursuant to Section 1, without
Executive's express written consent, or (iii) breach by the Company of any
material obligation of the Company under this Agreement.
(c) Should the Executive terminate this Agreement for Good
Reason, or should the Company terminate this Agreement without Cause, then the
Executive shall be entitled to receive, for a period equal to the remainder of
the Term, all compensation and benefits provided for in Sections 3 and 4 hereof;
provided that if such benefits cannot be legally provided, or the provision
thereof would disqualify and plan for favorable tax
3
<PAGE> 4
treatment under the International Revenue Code, a financially equivalent
substitute shall be provided.
(d) If the Company terminates this Agreement with Cause or
if the Executive terminates this Agreement without Good Reason, then the
Executive shall, from the date of such termination, no longer be entitled to any
compensation under Section 3 or 4.
(e) If this Agreement is terminated by either party for any
reason prior to the expiration of its term, then (i) all Base Options not then
presently exercisable shall be terminated and (ii) a portion of each of the 25%
Option and 30% Option equal to the portion of the Base Option not then
exercisable shall be terminated. All Options presently exercisable at the time
of any termination of this Agreement shall continue to be exercisable for the
period provided in Section 5, subject to any right of repurchase provided in
Section 9 of the Stockholders Agreement of even date herewith.
(f) Termination of this Agreement shall not discharge any
liability existing at the date of termination. Further, notwithstanding any
termination, the provisions of Sections 5, 9 and 10 shall survive in accordance
with their terms.
8. Effective Date. This Agreement shall take effect immediately
upon the Closing.
9. Non-Competition.
(a) For a period beginning on the date hereof and ending
one year after the termination of this Agreement, Executive shall not, directly
or indirectly, by himself, or as a shareholder, employee, director, officer,
partner, contractor, consultant or agent of another, enter into any business or
activity in any metropolitan area in which the Company does business in
competition with the Company, its subsidiaries, affiliates or related entities
involved in outdoor advertising.
(b) The Executive agrees that the restrictions imposed by
this Section 9 are reasonable in both geographic scope and duration. The
Executive understands that the provisions of Section 9 may affect or limit his
ability to earn a livelihood in a business similar to the businesses engaged in
by the Company. The Executive acknowledges that this non-competition agreement
is a material part of the consideration for both this Agreement and the
Contribution Agreement pursuant to which the Executive has purchased his shares.
10. Solicitation of Other Employees. Executive shall not, until
one year subsequent to the expiration or termination of this Agreement, solicit
or seek to influence any employee or consultant, designer or contractor under
contract with the Company, its subsidiaries, affiliates or related entities to
enter into any employment agreement, independent contractor arrangement, or any
other contractual arrangement whereby such individual would perform services for
compensation, either directly or indirectly, for any
4
<PAGE> 5
person, firm, corporation or other entity or business that provides products or
services in competition with the Company, its subsidiaries, affiliates or
related entities.
11. Key Man Life Insurance. For a period of three years from the
date hereof, Executive will arrange (unless otherwise notified by the Company)
for the Company to purchase key man insurance on his life in the amount of $5
million. The premiums for such policy will be payable by the Company, and the
sole beneficiary of such policy shall be the Company.
12. Arbitration. Any claim arising out of or relating to this
Employment Agreement (including disputes regarding the presence or absence of
"Cause" or "Good Reason" in the event of a termination), or otherwise arising
out of or relating to the Executive's employment by the Company, will be subject
to arbitration in Los Angeles, California, in accordance with the Federal
Arbitration Act and the rules of the American Arbitration Association relating
to commercial disputes.
13. Severability. If any provision of this agreement is determined
to be invalid or unenforceable, it shall be adjusted rather than voided, to
achieve the intent of the parties to the extent possible, and the remainder of
the agreement shall be enforced to the maximum extent possible.
14. Entire Agreement. This letter agreement constitutes the entire
agreement between Executive and the Company with respect to the terms and
conditions of the employment of Executive by the Company, and supersedes all
prior or concurrent arrangements, discussions, agreements or understandings with
respect to your employment.
15. Governing Law. This Agreement shall be governed by the laws of
Arizona.
16. Notice. Any notice, or other written communication to be given
pursuant to this Agreement for whatever reason shall be deemed duly given and
received (a) if delivered personally, from the date of delivery, or (b) by
certified mail, postage pre-paid, return receipt requested, three (3) days after
the date of mailing, addressed to the above parties as follows:
If to the Company:
ELLER MEDIA COMPANY
2122 East Highland Avenue, Suite 425
Phoenix, Arizona 85016
Attn: Chief Financial Officer
5
<PAGE> 6
with a copy to:
Heller, Ehrman, White & McAuliffe
333 Bush Street
San Francisco, California 94101
Attn: Paul J. Mundie, Esq.
Timothy G. Hoxie, Esq.
If to Executive:
Karl Eller
2122 East Highland Avenue, Suite 425
Phoenix, Arizona 85016
17. Certain Definitions. Capitalized terms not otherwise defined
herein shall have the meaning ascribed to such terms in the Stockholders
Agreement of even date herewith.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement the date and year first above written.
ELLER MEDIA COMPANY
By: /s/ Joseph M. Niehaus
-----------------------------------
Name: Joseph M. Niehaus
Title: Treasurer and Secretary
/s/ Karl Eller
-----------------------------------
Karl Eller
6
<PAGE> 1
EXHIBIT 10.2
THE 1996 EQUITY PARTICIPATION PLAN
OF
ELLER MEDIA CORPORATION
Eller Media Corporation, a Delaware corporation, has adopted
The 1996 Equity Participation Plan of Eller Media Corporation (the "Plan"),
effective October ___, 1996, for the benefit of its eligible employees,
consultants and directors.
The purposes of this Plan are as follows:
(1) To provide an additional incentive for directors, key
Employees and consultants to further the growth, development and financial
success of the Company by personally benefiting through the ownership of Company
stock and/or rights which recognize such growth, development and financial
success.
(2) To enable the Company to obtain and retain the services of
directors, key Employees and consultants considered essential to the long range
success of the Company by offering them an opportunity to own stock in the
Company and/or rights which will reflect the growth, development and financial
success of the Company.
ARTICLE I
DEFINITIONS
1.1 General. Wherever the following terms are used in this
Plan they shall have the meanings specified below, unless the context clearly
indicates otherwise.
1.2 Award Limit. "Award Limit" shall mean
_______________________ shares of Common Stock.
1.3 Board. "Board" shall mean the Board of Directors of the
Company.
1.4 Change in Control. "Change in Control" shall mean a change
in ownership or control of the Company effected through either of the following
transactions:
(a) any person or related group of persons (other than the
Company or a person that directly or indirectly controls, is controlled
by, or is under common control with, the Company) directly or
indirectly acquires beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Company's
outstanding securities pursuant to a tender or exchange offer made
directly to the Company's stockholders which the Board does not
recommend such stockholders to accept; or
<PAGE> 2
(b) there is a change in the composition of the Board over a
period of thirty-six (36) consecutive months (or less) such that a
majority of the Board members (rounded up to the nearest whole number)
ceases, by reason of one or more proxy contests for the election of
Board members, to be comprised of individuals who either (i) have been
Board members continuously since the beginning of such period or (ii)
have been elected or nominated for election as Board members during
such period by at least a majority of the Board members described in
clause (i) who were still in office at the time such election or
nomination was approved by the Board.
1.5 Code. "Code" shall mean the Internal Revenue Code of 1986,
as amended.
1.6 Committee. "Committee" shall mean the Compensation
Committee of the Board, or another committee of the Board, appointed as provided
in Section 9.1.
1.7 Common Stock. "Common Stock" shall mean the common stock
of the Company, par value $_____ per share, and any equity security of the
Company issued or authorized to be issued in the future, but excluding any
preferred stock and any warrants, options or other rights to purchase Common
Stock. Debt securities of the Company convertible into Common Stock shall be
deemed equity securities of the Company.
1.8 Company. "Company" shall mean Eller Media Corporation, a
Delaware corporation.
1.9 Corporate Transaction. "Corporate Transaction" shall mean
any of the following stockholder-approved transactions to which the Company is a
party:
(a) a merger or consolidation in which the Company is not the
surviving entity, except for a transaction the principal purpose of
which is to change the State in which the Company is incorporated, form
a holding company or effect a similar reorganization as to form
whereupon this Plan and all Options are assumed by the successor
entity;
(b) the sale, transfer, exchange or other disposition of all
or substantially all of the assets of the Company, in complete
liquidation or dissolution of the Company in a transaction not covered
by the exceptions to clause (a), above; or
(c) any reverse merger in which the Company is the surviving
entity but in which securities possessing more than fifty percent (50%)
of the total combined voting power of the Company's outstanding
securities are transferred or issued to a person or persons different
from those who held such securities immediately prior to such merger.
1.10 Deferred Stock. "Deferred Stock" shall mean Common Stock
awarded under Article VII of this Plan.
1.11 Director. "Director" shall mean a member of the Board.
2
<PAGE> 3
1.12 Dividend Equivalent. "Dividend Equivalent" shall mean a
right to receive the equivalent value (in cash or Common Stock) of dividends
paid on Common Stock, awarded under Article VII of this Plan.
1.13 Employee. "Employee" shall mean any officer or other
employee (as defined in accordance with Section 3401(c) of the Code) of the
Company, or of any corporation which is a Subsidiary.
1.14 Exchange Act. "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1.15 Fair Market Value. "Fair Market Value" of a share of
Common Stock as of a given date shall be (i) the closing price of a share of
Common Stock on the principal exchange on which shares of Common Stock are then
trading, if any (or as reported on any composite index which includes such
principal exchange), on the trading day previous to such date, or if shares were
not traded on the trading day previous to such date, then on the next preceding
date on which a trade occurred, or (ii) if Common Stock is not traded on an
exchange but is quoted on NASDAQ or a successor quotation system, the mean
between the closing representative bid and asked prices for the Common Stock on
the trading day previous to such date as reported by NASDAQ or such successor
quotation system; or (iii) if Common Stock is not publicly traded on an exchange
and not quoted on NASDAQ or a successor quotation system, the Fair Market Value
of a share of Common Stock as established by the Committee (or the Board, in the
case of Options granted to Independent Directors) acting in good faith.
1.16 Grantee. "Grantee" shall mean an Employee or consultant
granted a Performance Award, Dividend Equivalent, Stock Payment or Stock
Appreciation Right, or an award of Deferred Stock, under this Plan.
1.17 Incentive Stock Option. "Incentive Stock Option" shall
mean an option which conforms to the applicable provisions of Section 422 of the
Code and which is designated as an Incentive Stock Option by the Committee.
1.18 Independent Director. "Independent Director" shall mean a
member of the Board who is not an Employee of the Company.
1.19 Non-Qualified Stock Option. "Non-Qualified Stock Option"
shall mean an Option which is not designated as an Incentive Stock Option by the
Committee (or the Board, in the case of Options granted to Independent
Directors).
1.20 Option. "Option" shall mean a stock option granted under
Article III of this Plan. An Option granted under this Plan shall, as determined
by the Committee, be either a Non-Qualified Stock Option or an Incentive Stock
Option; provided, however, that Options granted to Independent Directors and
consultants shall be Non-Qualified Stock Options.
1.21 Optionee. "Optionee" shall mean an Employee, consultant
or Independent Director granted an Option under this Plan.
3
<PAGE> 4
1.22 Performance Award. "Performance Award" shall mean a cash
bonus, stock bonus or other performance or incentive award that is paid in cash,
Common Stock or a combination of both, awarded under Article VII of this Plan.
1.23 Plan. "Plan" shall mean The 1996 Equity Participation
Plan of Eller Media Corporation.
1.24 QDRO. "QDRO" shall mean a qualified domestic relations
order as defined by the Code or Title I of the Employee Retirement Income
Security Act of 1974, as amended, or the rules thereunder.
1.25 Restricted Stock. "Restricted Stock" shall mean Common
Stock awarded under Article VI of this Plan.
1.26 Restricted Stockholder. "Restricted Stockholder" shall
mean an Employee or consultant granted an award of Restricted Stock under
Article VI of this Plan.
1.27 Rule 16b-3. "Rule 16b-3" shall mean that certain Rule
16b-3 under the Exchange Act, as such Rule may be amended from time to time.
1.28 Stock Appreciation Right. "Stock Appreciation Right"
shall mean a stock appreciation right granted under Article VIII of this Plan.
1.29 Stock Payment. "Stock Payment" shall mean (i) a payment
in the form of shares of Common Stock, or (ii) an option or other right to
purchase shares of Common Stock, as part of a deferred compensation arrangement,
made in lieu of all or any portion of the compensation, including without
limitation, salary, bonuses and commissions, that would otherwise become payable
to a key Employee or consultant in cash, awarded under Article VII of this Plan.
1.30 Subsidiary. "Subsidiary" shall mean any corporation in an
unbroken chain of corporations beginning with the Company if each of the
corporations other than the last corporation in the unbroken chain then owns
stock possessing 50 percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such chain.
1.31 Termination of Consultancy. "Termination of Consultancy"
shall mean the time when the engagement of an Optionee, Grantee or Restricted
Stockholder as a consultant to the Company or a Subsidiary is terminated for any
reason, with or without cause, including, but not by way of limitation, by
resignation, discharge, death or retirement; but excluding terminations where
there is a simultaneous commencement of employment with the Company or any
Subsidiary. The Committee, in its absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Consultancy,
including, but not by way of limitation, the question of whether a Termination
of Consultancy resulted from a discharge for good cause, and all questions of
whether particular leaves of absence constitute Terminations of Consultancy.
Notwithstanding any other provision of this Plan, the Company or any Subsidiary
has an absolute and unrestricted right to terminate a consultant's service at
any
4
<PAGE> 5
time for any reason whatsoever, with or without cause, except to the extent
expressly provided otherwise in writing.
1.32 Termination of Directorship. "Termination of
Directorship" shall mean the time when an Optionee who is an Independent
Director ceases to be a Director for any reason, including, but not by way of
limitation, a termination by resignation, failure to be elected, death or
retirement. The Board, in its sole and absolute discretion, shall determine the
effect of all matters and questions relating to Termination of Directorship with
respect to Independent Directors.
1.33 Termination of Employment. "Termination of Employment"
shall mean the time when the employee-employer relationship between an Optionee,
Grantee or Restricted Stockholder and the Company or any Subsidiary is
terminated for any reason, with or without cause, including, but not by way of
limitation, a termination by resignation, discharge, death, disability or
retirement; but excluding (i) terminations where there is a simultaneous
reemployment or continuing employment of an Optionee, Grantee or Restricted
Stockholder by the Company or any Subsidiary, (ii) at the discretion of the
Committee, terminations which result in a temporary severance of the
employee-employer relationship, and (iii) at the discretion of the Committee,
terminations which are followed by the simultaneous establishment of a
consulting relationship by the Company or a Subsidiary with the former employee.
The Committee, in its absolute discretion, shall determine the effect of all
matters and questions relating to Termination of Employment, including, but not
by way of limitation, the question of whether a Termination of Employment
resulted from a discharge for good cause, and all questions of whether
particular leaves of absence constitute Terminations of Employment; provided,
however, that, with respect to Incentive Stock Options, a leave of absence,
change in status from an employee to an independent contractor or other change
in the employee-employer relationship shall constitute a Termination of
Employment if, and to the extent that, such leave of absence, change in status
or other change interrupts employment for the purposes of Section 422(a)(2) of
the Code and the then applicable regulations and revenue rulings under said
Section . Notwithstanding any other provision of this Plan, the Company or any
Subsidiary has an absolute and unrestricted right to terminate an Employee's
employment at any time for any reason whatsoever, with or without cause, except
to the extent expressly provided otherwise in writing.
ARTICLE II
SHARES SUBJECT TO PLAN
2.1 Shares Subject to Plan.
(a) The shares of stock subject to Options, awards of
Restricted Stock, Performance Awards, Dividend Equivalents, awards of Deferred
Stock, Stock Payments or Stock Appreciation Rights shall be Common Stock,
initially shares of the Company's Common Stock, par value $_____ per share. The
aggregate number of such shares which may be issued upon exercise of such
options or rights or upon any such awards under the Plan shall not exceed
_______________ (___________). The shares of Common Stock issuable upon exercise
of such
5
<PAGE> 6
options or rights or upon any such awards may be either previously authorized
but unissued shares or treasury shares.
(b) The maximum number of shares which may be subject to
Options or Stock Appreciation Rights granted under the Plan to any individual in
any calendar year shall not exceed the Award Limit. To the extent required by
Section 162(m) of the Code, shares subject to Options which are canceled
continue to be counted against the Award Limit and if, after grant of an Option,
the price of shares subject to such Option is reduced, the transaction is
treated as a cancellation of the Option and a grant of a new Option and both the
Option deemed to be canceled and the Option deemed to be granted are counted
against the Award Limit. Furthermore, to the extent required by Section 162(m)
of the Code, if, after grant of a Stock Appreciation Right, the base amount on
which stock appreciation is calculated is reduced to reflect a reduction in the
Fair Market Value of the Company's Common Stock, the transaction is treated as a
cancellation of the Stock Appreciation Right and a grant of a new Stock
Appreciation Right and both the Stock Appreciation Right deemed to be canceled
and the Stock Appreciation Right deemed to be granted are counted against the
Award Limit.
2.2 Add-back of Options and Other Rights. If any Option, or
other right to acquire shares of Common Stock under any other award under this
Plan, expires or is canceled without having been fully exercised, or is
exercised in whole or in part for cash as permitted by this Plan, the number of
shares subject to such Option or other right but as to which such Option or
other right was not exercised prior to its expiration, cancellation or exercise
may again be optioned, granted or awarded hereunder, subject to the limitations
of Section 2.1. Furthermore, any shares subject to Options or other awards which
are adjusted pursuant to Section 10.3 and become exercisable with respect to
shares of stock of another corporation shall be considered cancelled and may
again be optioned, granted or awarded hereunder, subject to the limitations of
Section 2.1. Shares of Common Stock which are delivered by the Optionee or
Grantee or withheld by the Company upon the exercise of any Option or other
award under this Plan, in payment of the exercise price thereof, may again be
optioned, granted or awarded hereunder, subject to the limitations of Section
2.1. If any share of Restricted Stock is forfeited by the Grantee or repurchased
by the Company pursuant to Section 6.6 hereof, such share may again be optioned,
granted or awarded hereunder, subject to the limitations of Section 2.1.
Notwithstanding the provisions of this Section 2.2, no shares of Common Stock
may again be optioned, granted or awarded if such action would cause an
Incentive Stock Option to fail to qualify as an incentive stock option under
Section 422 of the Code.
ARTICLE III
GRANTING OF OPTIONS
3.1 Eligibility. Any Employee or consultant selected by the
Committee pursuant to Section 3.4(a)(i) shall be eligible to be granted an
Option. Each Independent Director of the Company shall be eligible to be granted
Options at the times and in the manner set forth in Section 3.4(d).
6
<PAGE> 7
3.2 Disqualification for Stock Ownership. No person may be
granted an Incentive Stock Option under this Plan if such person, at the time
the Incentive Stock Option is granted, owns stock possessing more than ten
percent (10%) of the total combined voting power of all classes of stock of the
Company or any then existing Subsidiary or parent corporation (within the
meaning of Section 422 of the Code) unless such Incentive Stock Option conforms
to the applicable provisions of Section 422 of the Code.
3.3 Qualification of Incentive Stock Options. No Incentive
Stock Option shall be granted to any person who is not an Employee.
3.4 Granting of Options
(a) The Committee shall from time to time, in its absolute
discretion, and subject to applicable limitations of this Plan:
(i) Determine which Employees are key Employees
and select from among the key Employees or consultants (including
Employees or consultants who have previously received Options or other
awards under this Plan) such of them as in its opinion should be
granted Options;
(ii) Subject to the Award Limit, determine the
number of shares to be subject to such Options granted to the selected
key Employees or consultants;
(iii) Subject to Section 3.3, determine whether
such Options are to be Incentive Stock Options or Non-Qualified Stock
Options and whether such Options are to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code; and
(iv) Determine the terms and conditions of such
Options, consistent with this Plan; provided, however, that the terms
and conditions of Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall
include, but not be limited to, such terms and conditions as may be
necessary to meet the applicable provisions of Section 162(m) of the
Code.
(b) Upon the selection of a key Employee or consultant to be
granted an Option, the Committee shall instruct the Secretary of the Company to
issue the Option and may impose such conditions on the grant of the Option as it
deems appropriate. Without limiting the generality of the preceding sentence,
the Committee may, in its discretion and on such terms as it deems appropriate,
require as a condition on the grant of an Option to an Employee or consultant
that the Employee or consultant surrender for cancellation some or all of the
unexercised Options, awards of Restricted Stock or Deferred Stock, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments or
other rights which have been previously granted to him under this Plan or
otherwise. An Option, the grant of which is conditioned upon such surrender, may
have an option price lower (or higher) than the exercise price of such
surrendered Option or other award, may cover the same (or a lesser or greater)
number of shares as such surrendered Option or other award, may contain such
other terms as
7
<PAGE> 8
the Committee deems appropriate, and shall be exercisable in accordance with its
terms, without regard to the number of shares, price, exercise period or any
other term or condition of such surrendered Option or other award.
(c) Any Incentive Stock Option granted under this Plan may be
modified by the Committee to disqualify such option from treatment as an
"incentive stock option" under Section 422 of the Code.
(d) The Board shall from time to time, in its absolute
discretion, and subject to applicable limitations of this Plan:
(i) Determine whether, in its opinion, the
Independent Directors (or any of them) should be granted Non-Qualified Stock
Options;
(ii) Subject to the Award Limit, determine the
number of shares to be subject to such Non-Qualified Stock Options granted to
selected Independent Directors; and
(iii) Determine the terms and conditions of such
Non-Qualified Stock Options, consistent with this Plan.
ARTICLE IV
TERMS OF OPTIONS
4.1 Option Agreement. Each Option shall be evidenced by a
written Stock Option Agreement, which shall be executed by the Optionee and an
authorized officer of the Company and which shall contain such terms and
conditions as the Committee (or the Board, in the case of Options granted to
Independent Directors) shall determine, consistent with this Plan. Stock Option
Agreements evidencing Options intended to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code shall contain such
terms and conditions as may be necessary to meet the applicable provisions of
Section 162(m) of the Code. Stock Option Agreements evidencing Incentive Stock
Options shall contain such terms and conditions as may be necessary to meet the
applicable provisions of Section 422 of the Code.
4.2 Option Price. The price per share of the shares subject to
each Option shall be set by the Committee (or the Board, in the case of Options
granted to Independent Directors); provided, however, that such price shall be
no less than the par value of a share of Common Stock, unless otherwise
permitted by applicable state law, and (i) in the case of Incentive Stock
Options and Options intended to qualify as performance-based compensation as
described in Section 162(m)(4)(C) of the Code, such price shall not be less than
100% of the Fair Market Value of a share of Common Stock on the date the Option
is granted; (ii) in the case of Incentive Stock Options granted to an individual
then owning (within the meaning of Section 424(d) of the Code) more than 10% of
the total combined voting power of all classes of stock of the Company or any
Subsidiary or parent corporation thereof (within the meaning of Section 422 of
the Code) such price shall not be less than 110% of the Fair Market Value of
8
<PAGE> 9
a share of Common Stock on the date the Option is granted; and (iii) in the case
of Options granted to Independent Directors, such price shall equal 100% of the
Fair Market Value of a share of Common Stock on the date the Option is granted;
provided, however, that the price of each share subject to each Option granted
to Independent Directors on the date of the initial public offering of Common
Stock shall equal the initial public offering price (net of underwriting
discounts and commissions) per share of Common Stock.
4.3 Option Term. The term of an Option shall be set by the
Committee (or the Board, in the case of Options granted to Independent
Directors) in its discretion; provided, however, that, (i) in the case of
Options granted to Independent Directors, the term shall be ten (10) years from
the date the Option is granted, without variation or acceleration hereunder, but
subject to Section 5.6, and (ii) in the case of Incentive Stock Options, the
term shall not be more than ten (10) years from the date the Incentive Stock
Option is granted, or five (5) years from such date if the Incentive Stock
Option is granted to an individual then owning (within the meaning of Section
424(d) of the Code) more than 10% of the total combined voting power of all
classes of stock of the Company or any Subsidiary or parent corporation thereof
(within the meaning of Section 422 of the Code). Except as limited by
requirements of Section 422 of the Code and regulations and rulings thereunder
applicable to Incentive Stock Options, the Committee may extend the term of any
outstanding Option in connection with any Termination of Employment or
Termination of Consultancy of the Optionee, or amend any other term or condition
of such Option relating to such a termination.
4.4 Option Vesting
(a) The period during which the right to exercise an Option in
whole or in part vests in the Optionee shall be set by the Committee (or the
Board, in the case of Options granted to Independent Directors) and the
Committee (or the Board, in the case of Options granted to Independent
Directors) may determine that an Option may not be exercised in whole or in part
for a specified period after it is granted; provided, however, that Options
granted to Independent Directors shall become exercisable in cumulative annual
installments of 25% on each of the first, second, third and fourth anniversaries
of the date of Option grant, without variation or acceleration hereunder except
as provided in Section 10.3(b). At any time after grant of an Option, the
Committee (or the Board, in the case of Options granted to Independent
Directors) may, in its sole and absolute discretion and subject to whatever
terms and conditions it selects, accelerate the period during which an Option
(except an Option granted to an Independent Director) vests.
(b) No portion of an Option which is unexercisable at
Termination of Employment, Termination of Directorship or Termination of
Consultancy, as applicable, shall thereafter become exercisable, except as may
be otherwise provided by the Committee (or the Board, in the case of Options
granted to Independent Directors) in the case of Options granted to Employees or
consultants either in the Stock Option Agreement or by action of the Committee
(or the Board, in the case of Options granted to Independent Directors)
following the grant of the Option.
9
<PAGE> 10
(c) To the extent that the aggregate Fair Market Value of
stock with respect to which "incentive stock options" (within the meaning of
Section 422 of the Code, but without regard to Section 422(d) of the Code) are
exercisable for the first time by an Optionee during any calendar year (under
the Plan and all other incentive stock option plans of the Company and any
Subsidiary) exceeds $100,000, such Options shall be treated as Non-Qualified
Options to the extent required by Section 422 of the Code. The rule set forth in
the preceding sentence shall be applied by taking Options into account in the
order in which they were granted. For purposes of this Section 4.4(c), the Fair
Market Value of stock shall be determined as of the time the Option with respect
to such stock is granted.
4.5 Consideration. In consideration of the granting of an
Option, the Optionee shall agree, in the written Stock Option Agreement, to
remain in the employ of (or to consult for or to serve as an Independent
Director of, as applicable) the Company or any Subsidiary for a period of at
least one year (or such shorter period as may be fixed in the Stock Option
Agreement or by action of the Committee (or the Board, in the case of Options
granted to Independent Directors) following grant of the Option) after the
Option is granted (or, in the case of an Independent Director, until the next
annual meeting of stockholders of the Company). Nothing in this Plan or in any
Stock Option Agreement hereunder shall confer upon any Optionee any right to
continue in the employ of, or as a consultant for, the Company or any
Subsidiary, or as a director of the Company, or shall interfere with or restrict
in any way the rights of the Company and any Subsidiary, which are hereby
expressly reserved, to discharge any Optionee at any time for any reason
whatsoever, with or without good cause.
ARTICLE V
EXERCISE OF OPTIONS
5.1 Partial Exercise. An exercisable Option may be exercised
in whole or in part. However, an Option shall not be exercisable with respect to
fractional shares and the Committee (or the Board, in the case of Options
granted to Independent Directors) may require that, by the terms of the Option,
a partial exercise be with respect to a minimum number of shares.
5.2 Manner of Exercise. All or a portion of an exercisable
Option shall be deemed exercised upon delivery of all of the following to the
Secretary of the Company or his office:
(a) A written notice complying with the applicable rules
established by the Committee (or the Board, in the case of Options granted to
Independent Directors) stating that the Option, or a portion thereof, is
exercised. The notice shall be signed by the Optionee or other person then
entitled to exercise the Option or such portion;
(b) Such representations and documents as the Committee (or
the Board, in the case of Options granted to Independent Directors), in its
absolute discretion, deems necessary or advisable to effect compliance with all
applicable provisions of the Securities Act of 1933, as amended, and any other
federal or state securities laws or regulations. The Committee or
10
<PAGE> 11
Board may, in its absolute discretion, also take whatever additional actions it
deems appropriate to effect such compliance including, without limitation,
placing legends on share certificates and issuing stop-transfer notices to
agents and registrars;
(c) In the event that the Option shall be exercised pursuant
to Section 10.1 by any person or persons other than the Optionee, appropriate
proof of the right of such person or persons to exercise the Option; and
(d) Full cash payment to the Secretary of the Company for the
shares with respect to which the Option, or portion thereof, is exercised.
However, the Committee (or the Board, in the case of Options granted to
Independent Directors), may in its discretion (i) allow a delay in payment up to
thirty (30) days from the date the Option, or portion thereof, is exercised;
(ii) allow payment, in whole or in part, through the delivery of shares of
Common Stock owned by the Optionee, duly endorsed for transfer to the Company
with a Fair Market Value on the date of delivery equal to the aggregate exercise
price of the Option or exercised portion thereof; (iii) allow payment, in whole
or in part, through the surrender of shares of Common Stock then issuable upon
exercise of the Option having a Fair Market Value on the date of Option exercise
equal to the aggregate exercise price of the Option or exercised portion
thereof; (iv) allow payment, in whole or in part, through the delivery of
property of any kind which constitutes good and valuable consideration; (v)
allow payment, in whole or in part, through the delivery of a full recourse
promissory note bearing interest (at no less than such rate as shall then
preclude the imputation of interest under the Code) and payable upon such terms
as may be prescribed by the Committee or the Board; (vi) allow payment, in whole
or in part, through the delivery of a notice that the Optionee has placed a
market sell order with a broker with respect to shares of Common Stock then
issuable upon exercise of the Option, and that the broker has been directed to
pay a sufficient portion of the net proceeds of the sale to the Company in
satisfaction of the Option exercise price; or (vii) allow payment through any
combination of the consideration provided in the foregoing subparagraphs (ii),
(iii), (iv), (v) and (vi). In the case of a promissory note, the Committee (or
the Board, in the case of Options granted to Independent Directors) may also
prescribe the form of such note and the security to be given for such note. The
Option may not be exercised, however, by delivery of a promissory note or by a
loan from the Company when or where such loan or other extension of credit is
prohibited by law.
5.3 Conditions to Issuance of Stock Certificates. The Company
shall not be required to issue or deliver any certificate or certificates for
shares of stock purchased upon the exercise of any Option or portion thereof
prior to fulfillment of all of the following conditions:
(a) The admission of such shares to listing on all stock
exchanges on which such class of stock is then listed;
(b) The completion of any registration or other qualification
of such shares under any state or federal law, or under the rulings or
regulations of the Securities and Exchange Commission or any other governmental
regulatory body which the Committee or Board shall, in its absolute discretion,
deem necessary or advisable;
11
<PAGE> 12
(c) The obtaining of any approval or other clearance from any
state or federal governmental agency which the Committee (or Board, in the case
of Options granted to Independent Directors) shall, in its absolute discretion,
determine to be necessary or advisable;
(d) The lapse of such reasonable period of time following the
exercise of the Option as the Committee (or Board, in the case of Options
granted to Independent Directors) may establish from time to time for reasons of
administrative convenience; and
(e) The receipt by the Company of full payment for such
shares, including payment of any applicable withholding tax.
5.4 Rights as Stockholders. The holders of Options shall not
be, nor have any of the rights or privileges of, stockholders of the Company in
respect of any shares purchasable upon the exercise of any part of an Option
unless and until certificates representing such shares have been issued by the
Company to such holders.
5.5 Ownership and Transfer Restrictions. The Committee (or
Board, in the case of Options granted to Independent Directors), in its absolute
discretion, may impose such restrictions on the ownership and transferability of
the shares purchasable upon the exercise of an Option as it deems appropriate.
Any such restriction shall be set forth in the respective Stock Option Agreement
and may be referred to on the certificates evidencing such shares. The Committee
may require the Employee to give the Company prompt notice of any disposition of
shares of Common Stock acquired by exercise of an Incentive Stock Option within
(i) two years from the date of granting such Option to such Employee or (ii) one
year after the transfer of such shares to such Employee. The Committee may
direct that the certificates evidencing shares acquired by exercise of an Option
refer to such requirement to give prompt notice of disposition.
ARTICLE VI
AWARD OF RESTRICTED STOCK
6.1 Award of Restricted Stock
(a) The Committee may from time to time, in its absolute
discretion:
(i) Select from among the key Employees or
consultants (including Employees or consultants who have previously
received other awards under this Plan) such of them as in its opinion
should be awarded Restricted Stock; and
(ii) Determine the purchase price, if any, and
other terms and conditions applicable to such Restricted Stock,
consistent with this Plan.
(b) The Committee shall establish the purchase price, if any,
and form of payment for Restricted Stock; provided, however, that such purchase
price shall be no less than the par value of the Common Stock to be purchased,
unless otherwise permitted by applicable
12
<PAGE> 13
state law. In all cases, legal consideration shall be required for each issuance
of Restricted Stock.
(c) Upon the selection of a key Employee or consultant to be
awarded Restricted Stock, the Committee shall instruct the Secretary of the
Company to issue such Restricted Stock and may impose such conditions on the
issuance of such Restricted Stock as it deems appropriate.
6.2 Restricted Stock Agreement. Restricted Stock shall be
issued only pursuant to a written Restricted Stock Agreement, which shall be
executed by the selected key Employee or consultant and an authorized officer of
the Company and which shall contain such terms and conditions as the Committee
shall determine, consistent with this Plan.
6.3 Consideration. As consideration for the issuance of
Restricted Stock, in addition to payment of any purchase price, the Restricted
Stockholder shall agree, in the written Restricted Stock Agreement, to remain in
the employ of, or to consult for, the Company or any Subsidiary for a period of
at least one year after the Restricted Stock is issued (or such shorter period
as may be fixed in the Restricted Stock Agreement or by action of the Committee
following grant of the Restricted Stock). Nothing in this Plan or in any
Restricted Stock Agreement hereunder shall confer on any Restricted Stockholder
any right to continue in the employ of, or as a consultant for, the Company or
any Subsidiary or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved, to discharge
any Restricted Stockholder at any time for any reason whatsoever, with or
without good cause.
6.4 Rights as Stockholders. Upon delivery of the shares of
Restricted Stock to the escrow holder pursuant to Section 6.7, the Restricted
Stockholder shall have, unless otherwise provided by the Committee, all the
rights of a stockholder with respect to said shares, subject to the restrictions
in his Restricted Stock Agreement, including the right to receive all dividends
and other distributions paid or made with respect to the shares; provided,
however, that in the discretion of the Committee, any extraordinary
distributions with respect to the Common Stock shall be subject to the
restrictions set forth in Section 6.5.
6.5 Restriction. All shares of Restricted Stock issued under
this Plan (including any shares received by holders thereof with respect to
shares of Restricted Stock as a result of stock dividends, stock splits or any
other form of recapitalization) shall, in the terms of each individual
Restricted Stock Agreement, be subject to such restrictions as the Committee
shall provide, which restrictions may include, without limitation, restrictions
concerning voting rights and transferability and restrictions based on duration
of employment with the Company, Company performance and individual performance;
provided, however, that by action taken after the Restricted Stock is issued,
the Committee may, on such terms and conditions as it may determine to be
appropriate, remove any or all of the restrictions imposed by the terms of the
Restricted Stock Agreement. Restricted Stock may not be sold or encumbered until
all restrictions are terminated or expire. Unless provided otherwise by the
Committee, if no consideration was paid by the Restricted Stockholder upon
issuance, a Restricted Stockholder's
13
<PAGE> 14
rights in unvested Restricted Stock shall lapse upon Termination of Employment
or, if applicable, upon Termination of Consultancy with the Company.
6.6 Repurchase of Restricted Stock. The Committee shall
provide in the terms of each individual Restricted Stock Agreement that the
Company shall have the right to repurchase from the Restricted Stockholder the
Restricted Stock then subject to restrictions under the Restricted Stock
Agreement immediately upon a Termination of Employment or, if applicable, upon a
Termination of Consultancy between the Restricted Stockholder and the Company,
at a cash price per share equal to the price paid by the Restricted Stockholder
for such Restricted Stock; provided, however, that provision may be made that no
such right of repurchase shall exist in the event of a Termination of Employment
or Termination of Consultancy without cause, or following a change in control of
the Company or because of the Restricted Stockholder's retirement, death or
disability, or otherwise.
6.7 Escrow. The Secretary of the Company or such other escrow
holder as the Committee may appoint shall retain physical custody of each
certificate representing Restricted Stock until all of the restrictions imposed
under the Restricted Stock Agreement with respect to the shares evidenced by
such certificate expire or shall have been removed.
6.8 Legend. In order to enforce the restrictions imposed upon
shares of Restricted Stock hereunder, the Committee shall cause a legend or
legends to be placed on certificates representing all shares of Restricted Stock
that are still subject to restrictions under Restricted Stock Agreements, which
legend or legends shall make appropriate reference to the conditions imposed
thereby.
ARTICLE VII
PERFORMANCE AWARDS, DIVIDEND EQUIVALENTS,
DEFERRED STOCK, STOCK PAYMENTS
7.1 Performance Awards. Any key Employee or consultant
selected by the Committee may be granted one or more Performance Awards. The
value of such Performance Awards may be linked to the market value, book value,
net profits or other measure of the value of Common Stock or other specific
performance criteria determined appropriate by the Committee, in each case on a
specified date or dates or over any period or periods determined by the
Committee, or may be based upon the appreciation in the market value, book
value, net profits or other measure of the value of a specified number of shares
of Common Stock over a fixed period or periods determined by the Committee. In
making such determinations, the Committee shall consider (among such other
factors as it deems relevant in light of the specific type of award) the
contributions, responsibilities and other compensation of the particular key
Employee or consultant.
7.2 Dividend Equivalents. Any key Employee or consultant
selected by the Committee may be granted Dividend Equivalents based on the
dividends declared on Common Stock, to be credited as of dividend payment dates,
during the period between the date an Option, Stock Appreciation Right, Deferred
Stock or Performance Award is granted, and the
14
<PAGE> 15
date such Option, Stock Appreciation Right, Deferred Stock or Performance Award
is exercised, vests or expires, as determined by the Committee. Such Dividend
Equivalents shall be converted to cash or additional shares of Common Stock by
such formula and at such time and subject to such limitations as may be
determined by the Committee. With respect to Dividend Equivalents granted with
respect to Options intended to be qualified performance-based compensation for
purposes of Section 162(m) of the Code, such Dividend Equivalents shall be
payable regardless of whether such Option is exercised.
7.3 Stock Payments. Any key Employee or consultant selected by
the Committee may receive Stock Payments in the manner determined from time to
time by the Committee. The number of shares shall be determined by the Committee
and may be based upon the Fair Market Value, book value, net profits or other
measure of the value of Common Stock or other specific performance criteria
determined appropriate by the Committee, determined on the date such Stock
Payment is made or on any date thereafter.
7.4 Deferred Stock. Any key Employee or consultant selected by
the Committee may be granted an award of Deferred Stock in the manner determined
from time to time by the Committee. The number of shares of Deferred Stock shall
be determined by the Committee and may be linked to the market value, book
value, net profits or other measure of the value of Common Stock or other
specific performance criteria determined to be appropriate by the Committee, in
each case on a specified date or dates or over any period or periods determined
by the Committee. Common Stock underlying a Deferred Stock award will not be
issued until the Deferred Stock award has vested, pursuant to a vesting schedule
or performance criteria set by the Committee. Unless otherwise provided by the
Committee, a Grantee of Deferred Stock shall have no rights as a Company
stockholder with respect to such Deferred Stock until such time as the award has
vested and the Common Stock underlying the award has been issued.
7.5 Performance Award Agreement, Dividend Equivalent
Agreement, Deferred Stock Agreement, Stock Payment Agreement. Each Performance
Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment shall
be evidenced by a written agreement, which shall be executed by the Grantee and
an authorized Officer of the Company and which shall contain such terms and
conditions as the Committee shall determine, consistent with this Plan.
7.6 Term. The term of a Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment shall be set by the
Committee in its discretion.
7.7 Exercise Upon Termination of Employment. A Performance
Award, Dividend Equivalent, award of Deferred Stock and/or Stock Payment is
exercisable or payable only while the Grantee is an Employee or consultant;
provided that the Committee may determine that the Performance Award, Dividend
Equivalent, award of Deferred Stock and/or Stock Payment may be exercised or
paid subsequent to Termination of Employment or Termination of Consultancy
without cause, or following a change in control of the Company, or because of
the Grantee's retirement, death or disability, or otherwise.
15
<PAGE> 16
7.8 Payment on Exercise. Payment of the amount determined
under Section 7.1 or 7.2 above shall be in cash, in Common Stock or a
combination of both, as determined by the Committee. To the extent any payment
under this Article VII is effected in Common Stock, it shall be made subject to
satisfaction of all provisions of Section 5.3.
7.9 Consideration. In consideration of the granting of a
Performance Award, Dividend Equivalent, award of Deferred Stock and/or Stock
Payment, the Grantee shall agree, in a written agreement, to remain in the
employ of, or to consult for, the Company or any Subsidiary for a period of at
least one year after such Performance Award, Dividend Equivalent, award of
Deferred Stock and/or Stock Payment is granted (or such shorter period as may be
fixed in such agreement or by action of the Committee following such grant).
Nothing in this Plan or in any agreement hereunder shall confer on any Grantee
any right to continue in the employ of, or as a consultant for, the Company or
any Subsidiary or shall interfere with or restrict in any way the rights of the
Company and any Subsidiary, which are hereby expressly reserved, to discharge
any Grantee at any time for any reason whatsoever, with or without good cause.
ARTICLE VIII
STOCK APPRECIATION RIGHTS
8.1 Grant of Stock Appreciation Rights. A Stock Appreciation
Right may be granted to any key Employee or consultant selected by the
Committee. A Stock Appreciation Right may be granted (i) in connection and
simultaneously with the grant of an Option, (ii) with respect to a previously
granted Option, or (iii) independent of an Option. A Stock Appreciation Right
shall be subject to such terms and conditions not inconsistent with this Plan as
the Committee shall impose and shall be evidenced by a written Stock
Appreciation Right Agreement, which shall be executed by the Grantee and an
authorized officer of the Company. The Committee, in its discretion, may
determine whether a Stock Appreciation Right is to qualify as performance-based
compensation as described in Section 162(m)(4)(C) of the Code and Stock
Appreciation Right Agreements evidencing Stock Appreciation Rights intended to
so qualify shall contain such terms and conditions as may be necessary to meet
the applicable provisions of Section 162(m) of the Code. Without limiting the
generality of the foregoing, the Committee may, in its discretion and on such
terms as it deems appropriate, require as a condition of the grant of a Stock
Appreciation Right to an Employee or consultant that the Employee or consultant
surrender for cancellation some or all of the unexercised Options, awards of
Restricted Stock or Deferred Stock, Performance Awards, Stock Appreciation
Rights, Dividend Equivalents or Stock Payments, or other rights which have been
previously granted to him under this Plan or otherwise. A Stock Appreciation
Right, the grant of which is conditioned upon such surrender, may have an
exercise price lower (or higher) than the exercise price of the surrendered
Option or other award, may cover the same (or a lesser or greater) number of
shares as such surrendered Option or other award, may contain such other terms
as the Committee deems appropriate, and shall be exercisable in accordance with
its terms, without regard to the number of shares, price, exercise period or any
other term or condition of such surrendered Option or other award.
16
<PAGE> 17
8.2 Coupled Stock Appreciation Rights
(a) A Coupled Stock Appreciation Right ("CSAR") shall be
related to a particular Option and shall be exercisable only when and to the
extent the related Option is exercisable.
(b) A CSAR may be granted to the Grantee for no more than the
number of shares subject to the simultaneously or previously granted Option to
which it is coupled.
(c) A CSAR shall entitle the Grantee (or other person entitled
to exercise the Option pursuant to this Plan) to surrender to the Company
unexercised a portion of the Option to which the CSAR relates (to the extent
then exercisable pursuant to its terms) and to receive from the Company in
exchange therefor an amount determined by multiplying the difference obtained by
subtracting the Option exercise price from the Fair Market Value of a share of
Common Stock on the date of exercise of the CSAR by the number of shares of
Common Stock with respect to which the CSAR shall have been exercised, subject
to any limitations the Committee may impose.
8.3 Independent Stock Appreciation Rights
(a) An Independent Stock Appreciation Right ("ISAR") shall be
unrelated to any Option and shall have a term set by the Committee. An ISAR
shall be exercisable in such installments as the Committee may determine. An
ISAR shall cover such number of shares of Common Stock as the Committee may
determine. The exercise price per share of Common Stock subject to each ISAR
shall be set by the Committee. An ISAR is exercisable only while the Grantee is
an Employee or consultant; provided that the Committee may determine that the
ISAR may be exercised subsequent to Termination of Employment or Termination of
Consultancy without cause, or following a change in control of the Company, or
because of the Grantee's retirement, death or disability, or otherwise.
(b) An ISAR shall entitle the Grantee (or other person
entitled to exercise the ISAR pursuant to this Plan) to exercise all or a
specified portion of the ISAR (to the extent then exercisable pursuant to its
terms) and to receive from the Company an amount determined by multiplying the
difference obtained by subtracting the exercise price per share of the ISAR from
the Fair Market Value of a share of Common Stock on the date of exercise of the
ISAR by the number of shares of Common Stock with respect to which the ISAR
shall have been exercised, subject to any limitations the Committee may impose.
8.4 Payment and Limitations on Exercise
(a) Payment of the amount determined under Section 8.2(c) and
8.3(b) above shall be in cash, in Common Stock (based on its Fair Market Value
as of the date the Stock Appreciation Right is exercised) or a combination of
both, as determined by the Committee. To the extent such payment is effected in
Common Stock it shall be made subject to satisfaction of all provisions of
Section 5.3 above pertaining to Options.
17
<PAGE> 18
(b) Grantees of Stock Appreciation Rights may be required to
comply with any timing or other restrictions with respect to the settlement or
exercise of a Stock Appreciation Right, including a window-period limitation, as
may be imposed in the discretion of the Board or Committee.
8.5 Consideration. In consideration of the granting of a Stock
Appreciation Right, the Grantee shall agree, in the written Stock Appreciation
Right Agreement, to remain in the employ of, or to consult for, the Company or
any Subsidiary for a period of at least one year after the Stock Appreciation
Right is granted (or such shorter period as may be fixed in the Stock
Appreciation Right Agreement or by action of the Committee following grant of
the Restricted Stock). Nothing in this Plan or in any Stock Appreciation Right
Agreement hereunder shall confer on any Grantee any right to continue in the
employ of, or as a consultant for, the Company or any Subsidiary or shall
interfere with or restrict in any way the rights of the Company and any
Subsidiary, which are hereby expressly reserved, to discharge any Grantee at any
time for any reason whatsoever, with or without good cause.
ARTICLE IX
ADMINISTRATION
9.1 Compensation Committee. Prior to the Company's initial
registration of Common Stock under Section 12 of the Exchange Act, the
Compensation Committee shall consist of the entire Board. Following such
registration, the Compensation Committee (or another committee of the Board
assuming the functions of the Committee under this Plan) shall consist solely of
two or more Independent Directors appointed by and holding office at the
pleasure of the Board, each of whom is both a "non-employee director" as defined
by Rule 16b-3 and, with respect to the grant of Options or SARs which are
intended to qualify as "performance-based compensation" under Section 162(m) of
the Code, an "outside director" for purposes of Section 162(m) of the Code.
Appointment of Committee members shall be effective upon acceptance of
appointment. Committee members may resign at any time by delivering written
notice to the Board. Vacancies in the Committee may be filled by the Board.
9.2 Duties and Powers of Committee. It shall be the duty of
the Committee to conduct the general administration of this Plan in accordance
with its provisions. The Committee shall have the power to interpret this Plan
and the agreements pursuant to which Options, awards of Restricted Stock or
Deferred Stock, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments are granted or awarded, and to adopt such rules
for the administration, interpretation, and application of this Plan as are
consistent therewith and to interpret, amend or revoke any such rules.
Notwithstanding the foregoing, the full Board, acting by a majority of its
members in office, shall conduct the general administration of the Plan with
respect to Options granted to Independent Directors. Any such grant or award
under this Plan need not be the same with respect to each Optionee, Grantee or
Restricted Stockholder. Any such interpretations and rules with respect to
Incentive Stock Options shall be consistent with the provisions of Section 422
of the Code. In its absolute discretion, the Board may at any time and from time
to time exercise any and all rights and duties of the Committee under this Plan
except with respect to matters which under Rule 16b-3
18
<PAGE> 19
or Section 162(m) of the Code, or any regulations or rules issued thereunder,
are required to be determined in the sole discretion of the Committee.
9.3 Majority Rule; Unanimous Written Consent. The Committee
shall act by a majority of its members in attendance at a meeting at which a
quorum is present or by a memorandum or other written instrument signed by all
members of the Committee.
9.4 Compensation; Professional Assistance; Good Faith Actions.
Members of the Committee shall receive such compensation for their services as
members as may be determined by the Board. All expenses and liabilities which
members of the Committee incur in connection with the administration of this
Plan shall be borne by the Company. The Committee may, with the approval of the
Board, employ attorneys, consultants, accountants, appraisers, brokers, or other
persons. The Committee, the Company and the Company's officers and Directors
shall be entitled to rely upon the advice, opinions or valuations of any such
persons. All actions taken and all interpretations and determinations made by
the Committee or the Board in good faith shall be final and binding upon all
Optionees, Grantees, Restricted Stockholders, the Company and all other
interested persons. No members of the Committee or Board shall be personally
liable for any action, determination or interpretation made in good faith with
respect to this Plan, Options, awards of Restricted Stock or Deferred Stock,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments, and all members of the Committee and the Board shall be fully
protected by the Company in respect of any such action, determination or
interpretation.
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Not Transferable. Options, Restricted Stock awards,
Deferred Stock awards, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents or Stock Payments under this Plan may not be sold, pledged,
assigned, or transferred in any manner other than by will or the laws of descent
and distribution or pursuant to a QDRO, unless and until such rights or awards
have been exercised, or the shares underlying such rights or awards have been
issued, and all restrictions applicable to such shares have lapsed. No Option,
Restricted Stock award, Deferred Stock award, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment or interest or right
therein shall be liable for the debts, contracts or engagements of the Optionee,
Grantee or Restricted Stockholder or his successors in interest or shall be
subject to disposition by transfer, alienation, anticipation, pledge,
encumbrance, assignment or any other means whether such disposition be voluntary
or involuntary or by operation of law by judgment, levy, attachment, garnishment
or any other legal or equitable proceedings (including bankruptcy), and any
attempted disposition thereof shall be null and void and of no effect, except to
the extent that such disposition is permitted by the preceding sentence.
During the lifetime of the Optionee or Grantee, only he may
exercise an Option or other right or award (or any portion thereof) granted to
him under the Plan, unless it has been disposed of pursuant to a QDRO. After the
death of the Optionee or Grantee, any exercisable
19
<PAGE> 20
portion of an Option or other right or award may, prior to the time when such
portion becomes unexercisable under the Plan or the applicable Stock Option
Agreement or other agreement, be exercised by his personal representative or by
any person empowered to do so under the deceased Optionee's or Grantee's will or
under the then applicable laws of descent and distribution.
10.2 Amendment, Suspension or Termination of this Plan. Except
as otherwise provided in this Section 10.2, this Plan may be wholly or partially
amended or otherwise modified, suspended or terminated at any time or from time
to time by the Board or the Committee. However, without approval of the
Company's stockholders given within twelve months before or after the action by
the Board or the Committee, no action of the Board or the Committee may, except
as provided in Section 10.3, increase the limits imposed in Section 2.1 on the
maximum number of shares which may be issued under this Plan or modify the Award
Limit, and no action of the Board or the Committee may be taken that would
otherwise require stockholder approval as a matter of applicable law, regulation
or rule. No amendment, suspension or termination of this Plan shall, without the
consent of the holder of Options, Restricted Stock awards, Deferred Stock
awards, Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments, alter or impair any rights or obligations under any Options,
Restricted Stock awards, Deferred Stock awards, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments theretofore granted
or awarded, unless the award itself otherwise expressly so provides. No Options,
Restricted Stock, Deferred Stock, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents or Stock Payments may be granted or awarded during any
period of suspension or after termination of this Plan, and in no event may any
Incentive Stock Option be granted under this Plan after the first to occur of
the following events:
(a) The expiration of ten years from the date the Plan is
adopted by the Board; or
(b) The expiration of ten years from the date the Plan is
approved by the Company's stockholders under Section 10.4.
10.3 Changes in Common Stock or Assets of the Company,
Acquisition or Liquidation of the Company and Other Corporate Events.
(a) Subject to Section 10.3(d), in the event that the
Committee (or the Board, in the case of Options granted to Independent
Directors)determines that any dividend or other distribution (whether in the
form of cash, Common Stock, other securities, or other property),
recapitalization, reclassification, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, liquidation, dissolution, or sale, transfer, exchange or other
disposition of all or substantially all of the assets of the Company (including,
but not limited to, a Corporate Transaction), or exchange of Common Stock or
other securities of the Company, issuance of warrants or other rights to
purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event, in the Committee's sole discretion (or in the
case of Options granted to Independent Directors, the Board's sole discretion),
affects the Common Stock such that an adjustment is determined by the
20
<PAGE> 21
Committee to be appropriate in order to prevent dilution or enlargement of the
benefits or potential benefits intended to be made available under the Plan or
with respect to an Option, Restricted Stock award, Performance Award, Stock
Appreciation Right, Dividend Equivalent, Deferred Stock award or Stock Payment,
then the Committee (or the Board, in the case of Options granted to Independent
Directors) shall, in such manner as it may deem equitable, adjust any or all of
(i) the number and kind of shares of Common Stock
(or other securities or property) with respect to which Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or
Stock Payments may be granted under the Plan, or which may be granted
as Restricted Stock or Deferred Stock (including, but not limited to,
adjustments of the limitations in Section 2.1 on the maximum number and
kind of shares which may be issued and adjustments of the Award Limit),
(ii) the number and kind of shares of Common Stock
(or other securities or property) subject to outstanding Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents, or
Stock Payments, and in the number and kind of shares of outstanding
Restricted Stock or Deferred Stock, and
(iii) the grant or exercise price with respect to
any Option, Performance Award, Stock Appreciation Right, Dividend
Equivalent or Stock Payment.
(b) Subject to Section 10.3(d), in the event of any Corporate
Transaction or other transaction or event described in Section 10.3(a) or any
unusual or nonrecurring transactions or events affecting the Company, any
affiliate of the Company, or the financial statements of the Company or any
affiliate, or of changes in applicable laws, regulations, or accounting
principles, the Committee (or the Board, in the case of Options granted to
Independent Directors) in its discretion is hereby authorized to take any one or
more of the following actions whenever the Committee (or the Board, in the case
of Options granted to Independent Directors) determines that such action is
appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under the Plan or with respect
to any option, right or other award under this Plan, to facilitate such
transactions or events or to give effect to such changes in laws, regulations or
principles:
(i) In its sole and absolute discretion, and on
such terms and conditions as it deems appropriate, the Committee (or
the Board, in the case of Options granted to Independent Directors) may
provide, either by the terms of the agreement or by action taken prior
to the occurrence of such transaction or event and either automatically
or upon the optionee's request, for either the purchase of any such
Option, Performance Award, Stock Appreciation Right, Dividend
Equivalent, or Stock Payment, or any Restricted Stock or Deferred Stock
for an amount of cash equal to the amount that could have been attained
upon the exercise of such option, right or award or realization of the
optionee's rights had such option, right or award been currently
exercisable or payable or fully vested or the replacement of such
option, right or award with other rights or property selected by the
Committee (or the Board, in the case of Options granted to Independent
Directors) in its sole discretion;
21
<PAGE> 22
(ii) In its sole and absolute discretion, the
Committee (or the Board, in the case of Options granted to Independent
Directors) may provide, either by the terms of such Option, Performance
Award, Stock Appreciation Right, Dividend Equivalent, or Stock Payment,
or Restricted Stock or Deferred Stock or by action taken prior to the
occurrence of such transaction or event that it cannot be exercised
after such event;
(iii) In its sole and absolute discretion, and on
such terms and conditions as it deems appropriate, the Committee (or
the Board, in the case of Options granted to Independent Directors) may
provide, either by the terms of such Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent, or Stock Payment, or
Restricted Stock or Deferred Stock or by action taken prior to the
occurrence of such transaction or event, that for a specified period of
time prior to such transaction or event, such option, right or award
shall be exercisable as to all shares covered thereby, notwithstanding
anything to the contrary in (i) Section 4.4 or (ii) the provisions of
such Option, Performance Award, Stock Appreciation Right, Dividend
Equivalent, or Stock Payment, or Restricted Stock or Deferred Stock;
(iv) In its sole and absolute discretion, and on
such terms and conditions as it deems appropriate, the Committee (or
the Board, in the case of Options granted to Independent Directors) may
provide, either by the terms of such Option, Performance Award, Stock
Appreciation Right, Dividend Equivalent, or Stock Payment, or
Restricted Stock or Deferred Stock or by action taken prior to the
occurrence of such transaction or event, that upon such event, such
option, right or award be assumed by the successor or survivor
corporation, or a parent or subsidiary thereof, or shall be substituted
for by similar options, rights or awards covering the stock of the
successor or survivor corporation, or a parent or subsidiary thereof,
with appropriate adjustments as to the number and kind of shares and
prices; and
(v) In its sole and absolute discretion, and on
such terms and conditions as it deems appropriate, the Committee (or
the Board, in the case of Options granted to Independent Directors) may
make adjustments in the number and type of shares of Common Stock (or
other securities or property) subject to outstanding Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents, or
Stock Payments, and in the number and kind of outstanding Restricted
Stock or Deferred Stock and/or in the terms and conditions of
(including the grant or exercise price), and the criteria included in,
outstanding options, rights and awards and options, rights and awards
which may be granted in the future.
(vi) In its sole and absolute discretion, and on
such terms and conditions as it deems appropriate, the Committee may
provide either by the terms of a Restricted Stock award or Deferred
Stock award or by action taken prior to the occurrence of such event
that, for a specified period of time prior to such event, the
restrictions imposed under a Restricted Stock Agreement or a Deferred
Stock Agreement upon some or all shares of Restricted Stock or Deferred
Stock may be terminated, and, in the case of Restricted Stock, some or
all shares of such Restricted Stock may cease to be subject to
repurchase under Section 6.6 or forfeiture under Section 6.5 after such
event.
22
<PAGE> 23
(vii) In the event of a Change in Control, each
outstanding Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent, Stock Payment, Restricted Stock, or Deferred Stock
award shall, immediately prior to the effective date of the Change in
Control, automatically become fully exercisable for all of the shares
of Common Stock at the time subject to such rights or fully vested, as
applicable, and may be exercised for any or all of those shares as
fully-vested shares of Common Stock.
(c) Subject to Section 10.3(d) and 10.8, the Committee (or the
Board, in the case of Options granted to Independent Directors) may, in its
discretion, include such further provisions and limitations in any Option,
Performance Award, Stock Appreciation Right, Dividend Equivalent, or Stock
Payment, or Restricted Stock or Deferred Stock agreement or certificate, as it
may deem equitable and in the best interests of the Company.
(d) With respect to Incentive Stock Options and Options and
Stock Appreciation Rights intended to qualify as performance-based compensation
under Section 162(m) of the Code, no adjustment or action described in this
Section 10.3 or in any other provision of the Plan shall be authorized to the
extent that such adjustment or action would cause the Plan to violate Section
422(b)(1) of the Code or would cause such option or stock appreciation right to
fail to so qualify under Section 162(m) of the Code, as the case may be, or any
successor provisions thereto. Furthermore, no such adjustment or action shall be
authorized to the extent such adjustment or action would result in short-swing
profits liability under Section 16 or violate the exemptive conditions of Rule
16b-3 unless the Committee (or the Board, in the case of Options granted to
Independent Directors) determines that the option or other award is not to
comply with such exemptive conditions. The number of shares of Common Stock
subject to any option, right or award shall always be rounded to the next whole
number.
10.4 Approval of Plan by Stockholders. This Plan will be
submitted for the approval of the Company's stockholders within twelve months
after the date of the Board's initial adoption of this Plan. Options,
Performance Awards, Stock Appreciation Rights, Dividend Equivalents or Stock
Payments may be granted and Restricted Stock or Deferred Stock may be awarded
prior to such stockholder approval, provided that such Options, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments shall
not be exercisable and such Restricted Stock or Deferred Stock shall not vest
prior to the time when this Plan is approved by the stockholders, and provided
further that if such approval has not been obtained at the end of said
twelve-month period, all Options, Performance Awards, Stock Appreciation Rights,
Dividend Equivalents or Stock Payments previously granted and all Restricted
Stock or Deferred Stock previously awarded under this Plan shall thereupon be
canceled and become null and void.
10.5 Tax Withholding. The Company shall be entitled to require
payment in cash or deduction from other compensation payable to each Optionee,
Grantee or Restricted Stockholder of any sums required by federal, state or
local tax law to be withheld with respect to the issuance, vesting or exercise
of any Option, Restricted Stock, Deferred Stock, Performance Award, Stock
Appreciation Right, Dividend Equivalent or Stock Payment. The Committee (or the
Board, in the case of Options granted to Independent Directors) may in its
23
<PAGE> 24
discretion and in satisfaction of the foregoing requirement allow such Optionee,
Grantee or Restricted Stockholder to elect to have the Company withhold shares
of Common Stock otherwise issuable under such Option or other award (or allow
the return of shares of Common Stock) having a Fair Market Value equal to the
sums required to be withheld.
10.6 Loans. The Committee may, in its discretion, extend one
or more loans to key Employees in connection with the exercise or receipt of an
Option, Performance Award, Stock Appreciation Right, Dividend Equivalent or
Stock Payment granted under this Plan, or the issuance of Restricted Stock or
Deferred Stock awarded under this Plan. The terms and conditions of any such
loan shall be set by the Committee.
10.7 Forfeiture Provisions. Pursuant to its general authority
to determine the terms and conditions applicable to awards under the Plan, the
Committee (or the Board, in the case of Options granted to Independent
Directors) shall have the right (to the extent consistent with the applicable
exemptive conditions of Rule 16b-3) to provide, in the terms of Options or other
awards made under the Plan, or to require the recipient to agree by separate
written instrument, that (i) any proceeds, gains or other economic benefit
actually or constructively received by the recipient upon any receipt or
exercise of the award, or upon the receipt or resale of any Common Stock
underlying such award, must be paid to the Company, and (ii) the award shall
terminate and any unexercised portion of such award (whether or not vested)
shall be forfeited, if (a) a Termination of Employment, Termination of
Consultancy or Termination of Directorship occurs prior to a specified date, or
within a specified time period following receipt or exercise of the award, or
(b) the recipient at any time, or during a specified time period, engages in any
activity in competition with the Company, or which is inimical, contrary or
harmful to the interests of the Company, as further defined by the Committee (or
the Board, as applicable).
10.8 Limitations Applicable to Section 16 Persons and
Performance-Based Compensation. Notwithstanding any other provision of this
Plan, this Plan, and any Option, Performance Award, Stock Appreciation Right,
Dividend Equivalent or Stock Payment granted, or Restricted Stock or Deferred
Stock awarded, to any individual who is then subject to Section 16 of the
Exchange Act, shall be subject to any additional limitations set forth in any
applicable exemptive rule under Section 16 of the Exchange Act (including any
amendment to Rule 16b-3 of the Exchange Act) that are requirements for the
application of such exemptive rule. To the extent permitted by applicable law,
the Plan, Options, Performance Awards, Stock Appreciation Rights, Dividend
Equivalents, Stock Payments, Restricted Stock and Deferred Stock granted or
awarded hereunder shall be deemed amended to the extent necessary to conform to
such applicable exemptive rule. Furthermore, notwithstanding any other provision
of this Plan, any Option or Stock Appreciation Right intended to qualify as
performance-based compensation as described in Section 162(m)(4)(C) of the Code
shall be subject to any additional limitations set forth in Section 162(m) of
the Code (including any amendment to Section 162(m) of the Code) or any
regulations or rulings issued thereunder that are requirements for qualification
as performance-based compensation as described in Section 162(m)(4)(C) of the
Code, and this Plan shall be deemed amended to the extent necessary to conform
to such requirements.
24
<PAGE> 25
10.9 Effect of Plan Upon Options and Compensation Plans. The
adoption of this Plan shall not affect any other compensation or incentive plans
in effect for the Company or any Subsidiary. Nothing in this Plan shall be
construed to limit the right of the Company (i) to establish any other forms of
incentives or compensation for Employees, Directors or Consultants of the
Company or any Subsidiary or (ii) to grant or assume options or other rights
otherwise than under this Plan in connection with any proper corporate purpose
including but not by way of limitation, the grant or assumption of options in
connection with the acquisition by purchase, lease, merger, consolidation or
otherwise, of the business, stock or assets of any corporation, partnership,
limited liability company, firm or association.
10.10 Compliance with Laws. This Plan, the granting and
vesting of Options, Restricted Stock awards, Deferred Stock awards, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments under
this Plan and the issuance and delivery of shares of Common Stock and the
payment of money under this Plan or under Options, Performance Awards, Stock
Appreciation Rights, Dividend Equivalents or Stock Payments granted or
Restricted Stock or Deferred Stock awarded hereunder are subject to compliance
with all applicable federal and state laws, rules and regulations (including but
not limited to state and federal securities law and federal margin requirements)
and to such approvals by any listing, regulatory or governmental authority as
may, in the opinion of counsel for the Company, be necessary or advisable in
connection therewith. Any securities delivered under this Plan shall be subject
to such restrictions, and the person acquiring such securities shall, if
requested by the Company, provide such assurances and representations to the
Company as the Company may deem necessary or desirable to assure compliance with
all applicable legal requirements. To the extent permitted by applicable law,
the Plan, Options, Restricted Stock awards, Deferred Stock awards, Performance
Awards, Stock Appreciation Rights, Dividend Equivalents or Stock Payments
granted or awarded hereunder shall be deemed amended to the extent necessary to
conform to such laws, rules and regulations.
10.11 Titles. Titles are provided herein for convenience only
and are not to serve as a basis for interpretation or construction of this Plan.
10.12 Governing Law. This Plan and any agreements hereunder
shall be administered, interpreted and enforced under the internal laws of the
State of [Delaware] without regard to conflicts of laws thereof.
* * *
I hereby certify that the foregoing Plan was duly adopted by
the Board of Directors of __________________ on ____________, 199__.
Executed on this ____ day of _______________, 199___.
________________________
Secretary
25
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF ELLER MEDIA CORPORATION
Eller Media Company (Delaware)
Eller Investment Company, Inc. (Arizona)
Eller Outdoor of El Paso, Inc. (Texas)
Eller Outdoor Advertising Company (Arizona)
Eller Outdoor Advertising Company of Atlanta (Arizona)
PMG Holdings, Inc. (Delaware)
Patrick Media Group, Inc. (Delaware)
PMG Target Media Holdings, Inc. (Delaware)
Eller Target Media Group, L.P. (California)
American Shelter Company, Inc. (Illinois)
Shelter Advertising of America, Inc. (Delaware)
Shelter Advertising of Hialeah, Inc. (Florida)
Trendel International Development Corp. (Florida)
Trendel, Inc. (Florida)
Trendel Enterprises International, Inc. (Florida)
Chicago Shelters Advertising, Inc. (Illinois)
Blue Wallscapes, Inc. (California)
Eltex Investment Corp. (Delaware)
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
ARTHUR ANDERSEN LLP
Phoenix, Arizona
December 11, 1996
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
PMG Holdings, Inc.
We consent to the inclusion in the Registration Statement on Form S-1 of
Eller Media Corporation of our report dated April 27, 1995 relating to the
consolidated balance sheet of PMG Holdings, Inc. and subsidiaries as of December
31, 1994 and the related consolidated statements of operations, changes in
stockholders' deficit and cash flows for each of the years in the two-year
period then ended.
We also consent to the reference to our firm under the heading "Experts" in
the Registration Statement.
KPMG Peat Marwick LLP
Stamford, Connecticut
December 11, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINACIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF ELLER MEDIA CORPORATION, A COMPANY FORMED
IN AUGUST 1995 TO ACQUIRE TWO COMPANIES, ELLER INVESTMENT COMPANY AND PMG
HOLDINGS, INC AND SUBSIDIARIES, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,948
<SECURITIES> 0
<RECEIVABLES> 38,955
<ALLOWANCES> 2,399
<INVENTORY> 0
<CURRENT-ASSETS> 51,402
<PP&E> 504,512
<DEPRECIATION> 39,203
<TOTAL-ASSETS> 668,034
<CURRENT-LIABILITIES> 61,319
<BONDS> 0
0
0
<COMMON> 1
<OTHER-SE> 196,016
<TOTAL-LIABILITY-AND-EQUITY> 668,034
<SALES> 0
<TOTAL-REVENUES> 203,995
<CGS> 68,135
<TOTAL-COSTS> 107,254
<OTHER-EXPENSES> 29,372
<LOSS-PROVISION> 711
<INTEREST-EXPENSE> 26,877
<INCOME-PRETAX> 9,191
<INCOME-TAX> 2,400
<INCOME-CONTINUING> 41,391
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,791
<EPS-PRIMARY> 3,093
<EPS-DILUTED> 3,093
</TABLE>
