<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 18, 1997
REGISTRATION STATEMENT NO. 333-28489
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
OUTDOOR COMMUNICATIONS, INC.
(FORMERLY KNOWN AS OCI HOLDINGS CORP.)
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
DELAWARE 7312 38-3286430
(PRIMARY STANDARD (I.R.S. EMPLOYER
(STATE OR OTHER INDUSTRIAL IDENTIFICATION NO.)
JURISDICTION OF CLASSIFICATION CODE
INCORPORATION OR NUMBER)
ORGANIZATION)
---------------
512 TAYLOR STREET
CORINTH, MS 38834
(601) 286-3334
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE)
<TABLE>
<CAPTION>
STATE OF
INCORPORATION I.R.S. EMPLOYER
NAME OF ADDITIONAL REGISTRANTS OR ORGANIZATION IDENTIFICATION NO.
------------------------------ --------------- ------------------
<S> <C> <C>
OCI (N) Corp. Delaware 38-2885263
OCI (S) Corp. Mississippi 64-0520092
</TABLE>
---------------
COPIES TO:
DAVID F. DIETZ, P.C. JONATHAN A. SCHAFFZIN, ESQ.
GOODWIN, PROCTER & HOAR LLP CAHILL GORDON & REINDEL
EXCHANGE PLACE 80 PINE STREET
BOSTON, MA 02109 NEW YORK, NY 10005
(617) 570-1000 (212) 701-3000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, 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. [_]
THE REGISTRANT AND THE ADDITIONAL REGISTRANTS (COLLECTIVELY, THE
"REGISTRANTS") HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS 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, AS AMENDED (THE "SECURITIES ACT") OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION,
ACTING PURSUANT TO SECTION 8(A), MAY DETERMINE.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1997
PROSPECTUS
[LOGO]
$100,000,000
OUTDOOR COMMUNICATIONS, INC.
% SENIOR SUBORDINATED NOTES DUE 2007
The % Senior Subordinated Notes due 2007 (the "Notes") are being offered (the
"Offering") by Outdoor Communications, Inc., a Delaware corporation (the
"Company" or "OCI"). Interest on the Notes will be payable semi-annually on
and of each year, commencing on , 1998. The Notes will mature on
, 2007. Except as described below, the Company may not redeem the Notes
prior to , 2002. On or after such date, the Company may redeem the Notes,
in whole or in part, at the redemption prices set forth herein, together with
accrued and unpaid interest, if any, to the date of redemption. In addition, at
any time and from time to time on or prior to , 2000, the Company may
redeem up to 33 1/3% of the original aggregate principal amount of the Notes
with the Net Proceeds (as defined) of one or more Public Equity Offerings (as
defined), at a redemption price equal to % of the aggregate principal amount
plus accrued and unpaid interest, if any, to the redemption date; provided that
at least 66 2/3% of the original aggregate principal amount of the Notes
remains outstanding immediately after each such redemption. Upon the occurrence
of a Change of Control (as defined), the Company will, subject to certain
conditions, be required to make an offer to purchase the Notes at a purchase
price equal to 101% of the principal amount thereof, plus accrued and unpaid
interest, if any, to the date of purchase. There can be no assurance that the
Company will have the financial resources necessary to purchase Notes following
a Change of Control. See "Risk Factors--Change of Control" and "Description of
Notes--Redemption at Option of Holders--Change of Control."
The Notes will be general unsecured obligations of the Company and will be
subordinated in right of payment to all existing and future Senior Indebtedness
(as defined) of the Company and will rank pari passu in right of payment with
all other senior subordinated indebtedness of the Company. The Notes will be
fully and unconditionally guaranteed (the "Guarantees"), on a senior
subordinated basis, as to payment of principal, premium, if any, and interest,
jointly and severally, by the Guarantors (as defined). The Indenture (as
defined) permits the Company to incur additional indebtedness, including Senior
Indebtedness, subject to certain limitations. As of March 31, 1997, after
giving effect to the Offering and the application of the proceeds therefrom,
the Company would have had outstanding $25.5 million of indebtedness ranking
senior in right of payment to the Notes and the Guarantees and the ability to
borrow up to an additional $124.5 million under the New Credit Facility (as
defined). See "Capitalization" and "Description of Notes--Ranking."
While the Notes and the Guarantees are senior subordinated obligations, after
giving effect to the Offering, there will be no indebtedness that is
subordinated in right of payment to the Notes, and the Company and the
Guarantors have no present plans to issue any indebtedness that is subordinated
to the Notes and the Guarantees. As such the Notes will be subordinate to all
of the indebtedness of the Company and the Guarantors expected to be
outstanding immediately following the Offering. See "Risk Factors--
Subordination of Notes and Guarantees."
The Company does not intend to apply for listing of the Notes on any securities
exchange or inclusion of the Notes in any automated quotation system.
This Prospectus has been prepared for use by the Underwriters and may be used
by Chase Securities Inc. ("CSI") in connection with offers and sales in market-
making transactions in the Notes. CSI may act as principal or agent in such
transactions. Such sales will be made at prices relating to prevailing market
prices at the time of sale.
----------------------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 10 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED IN EVALUATING AN INVESTMENT IN THE NOTES.
----------------------------------------
THE NOTES 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 TO UNDERWRITING PROCEEDS TO
PUBLIC(/1/) DISCOUNTS(/2/) COMPANY(/1/)(/3/)
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER NOTE % % %
TOTAL $ $ $
</TABLE>
- --------------------------------------------------------------------------------
(1) Plus accrued and unpaid interest, if any, from the date of issuance.
(2) The Company and the Guarantors have agreed, jointly and severally, to
indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended (the "Securities
Act"). See "Underwriting."
(3)Before deducting expenses payable by the Company estimated at $ .
----------------------------------------
The Notes are being offered by Chase Securities Inc., Donaldson, Lufkin &
Jenrette Securities Corporation and Salomon Brothers Inc (together, the
"Underwriters"), subject to prior sale, when, as and if issued by the Company
and delivered to and accepted by the Underwriters and subject to certain other
conditions. The Underwriters reserve the right to withdraw, cancel or modify
such offer and to reject orders in whole or in part. It is expected that
delivery of the Notes will be made in New York, New York in book-entry form
through the facilities of the Depository Trust Company on or about , 1997.
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
, 1997
<PAGE>
[ARTWORK WILL CONSIST OF A MAP SETTING FORTH THE COMPANY'S LOCATIONS.]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE NOTES, INCLUDING
OVER-ALLOTMENT, STABILIZING TRANSACTIONS AND SYNDICATE SHORT COVERING
TRANSACTIONS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by reference to the more
detailed information and financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. As used in this Prospectus, unless the
context otherwise requires, references to "OCI" or the "Company" mean Outdoor
Communications, Inc. (formerly known as OCI Holdings Corp.) together with all
of its direct and indirect subsidiaries and businesses; "OCI North" refers to
the Company's subsidiary, OCI (N) Corp; "OCI South" refers to the Company's
subsidiary, OCI (S) Corp; and "Predecessors" refers to each of OCI North and
OCI South. Unless otherwise indicated, references to financial or operating
results of the Company occurring in any fiscal year are to the twelve months
ended on June 30 of such indicated fiscal year. Unless otherwise indicated,
references to financial or operating results of OCI South occurring prior to
June 30, 1997 reflect the consolidated results of the Company's Mass
Communications Corp. ("MCC") subsidiary and OCI (S) Corp. prior to the merger
of MCC with and into the Company, which merger was effective as of June 30,
1997. The information in this Prospectus assumes the exchange of the Company's
Series A 10% Subordinated Notes ("Series A Notes") and Series B 10%
Subordinated Notes ("Series B Notes") for shares of Series A Preferred Stock,
$.01 par value per share ("Series A Preferred Stock"). The pro forma financial
information in this Prospectus reflects only the acquisitions of Georgia
Outdoor, Alabama Outdoor, Skoglund and Outdoor West (each, as defined below,
and collectively, the "Significant Acquisitions") and excludes other
individually insignificant operations acquired by the Company since its
formation.
THE COMPANY
OCI is a leading provider of outdoor advertising services, operating
approximately 13,500 advertising displays in 12 midwestern and southeastern
states. The Company focuses on small- to medium-sized markets with populations
ranging from 15,000 to 150,000, and is the largest outdoor advertising company
in most of the markets in which it operates. Management believes that operating
in small- to medium-sized markets provides certain advantages over operating in
large markets, including lower and more stable lease costs, greater new build
opportunities and more attractive acquisition opportunities.
Outdoor advertising offers repetitive impact and relatively low cost-per-
thousand impressions compared to alternative media, including television,
radio, newspapers, magazines and direct mail marketing. The outdoor advertising
industry in the United States has experienced increased advertiser interest and
revenue growth during the 1990s. According to recent 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 $2.0 billion in 1996, or approximately 1.1% of total advertising
expenditures in the United States. While the industry has experienced some
consolidation within the past few years, the OAAA estimates that there are
still approximately 600 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.
The Company's objective is to be a leading provider of outdoor advertising
services in small- to medium-sized markets across the United States. To achieve
this objective, the Company plans both to increase its penetration in its
existing markets and expand into attractive new markets. The Company has
historically implemented, and intends to continue to pursue, the following
operating strategy:
Pursue Strategic Acquisitions. The Company seeks to continue its growth by
pursuing an aggressive acquisition strategy emphasizing both in-market and
new market acquisitions. The Company believes it has attractive in-market
acquisition opportunities which will serve to increase market penetration
and enhance local market operating efficiencies. In most instances, in-
market acquisitions involve the purchase of display faces only and require
no incremental personnel. The Company also intends to pursue new market
acquisitions that are either within its existing regions or in new regions
where attractive growth and consolidation opportunities exist.
3
<PAGE>
Leverage Operational Structure. The Company's operational structure provides
significant operating leverage to support increased penetration of existing
markets and new market expansion. The Company's operations are comprised of
10 divisions, each with its own headquarters to service its display
structures and customers. OCI has centralized management operations in
Traverse City, Michigan and Corinth, Mississippi to provide administrative
oversight of the divisions through centralized purchasing, a detailed
budgeting process, management information systems and strict cost controls.
With this infrastructure in place, the Company can generate revenues from
newly acquired or constructed display faces at attractive incremental
margins.
Focus on Local Advertisers. The Company seeks to continue its local
advertiser focus, which management believes provides the Company with a
diverse and stable advertiser base, fewer sales subject to agency
commissions and greater rate integrity. Local advertising constituted over
84% of the Company's gross revenues for the nine months ended March 31,
1997, which is higher than the industry average of 70% as estimated by the
OAAA. The Company believes that the diversity of its local customer base
insulates it from dependence on any one customer or industry. During the
nine months ended March 31, 1997, no single customer represented more than
2.5% of the Company's gross revenues.
Emphasize Twelve-Month Advertising Contracts. The Company seeks to maximize
occupancy levels and sales force and production efficiency by focusing on
twelve-month advertising contracts. The Company believes that these long-
term contracts enhance occupancy levels at stable advertising rates,
generate higher renewal rates, increase the predictability of revenues and
allow its sales personnel time to devote greater attention to servicing
their accounts.
Capitalize on Experienced Management Team. The Company believes that one of
the keys to continuing its growth is its experienced management team. The
Company's three-person senior management team has over 70 years of combined
experience in the outdoor advertising industry which provides the Company
with the market knowledge and local relationships necessary to identify and
evaluate acquisition candidates. Management's local relationships also
provide OCI with the ability to identify and obtain municipal approval for
new build opportunities.
On April 3, 1996, the Company's current structure emerged with its
acquisitions and consolidation of OCI North and OCI South. OCI South was
founded in 1972 by John C Stanley IV and A.B. Isbell upon their acquisition of
outdoor advertising assets in the region around Memphis, Tennessee. Through
dedication to customer service and product quality and the consummation of
numerous acquisitions, OCI South grew its operations to more than 2,600 display
faces in six states by April 1996. In 1989, OCI North was formed by Messrs.
Stanley and Isbell to complete the acquisition of Dingeman Advertising, Inc.,
an outdoor advertising company based in Traverse City, Michigan. Through
additional acquisitions and new construction, OCI North grew its operations to
more than 2,800 display faces in three states by April 1996. The Company
believes that the success of its management team in developing and expanding
its operations has made OCI a significant competitor in the outdoor advertising
industry. See "Certain Relationships and Related Transactions--The Formation
Transactions." The Company is a Delaware corporation whose executive offices
are located at 512 Taylor Street, Corinth, Mississippi, 38834. The Company's
telephone number is (601) 286-3334.
4
<PAGE>
RECENT ACQUISITIONS
Since its formation, the Company has pursued an aggressive acquisition
strategy, completing 15 acquisitions of outdoor advertising companies
(collectively, the "Acquired Companies") over a 15-month period. None of such
acquisitions involved sellers affiliated with the Company. The Company's
acquisition integration approach is different for new market and in-market
acquisitions. In new market acquisitions, the Company generally eliminates
administrative and accounting positions, maintains a sales and production
capability and institutes the Company's operating philosophy, systems and
controls. In-market acquisitions typically involve the purchase of display
faces only, resulting in the elimination of all personnel and related costs.
The following summarizes the Significant Acquisitions, which are included in
the summary pro forma financial information included herein:
The Outdoor West Acquisition. On March 31, 1997, OCI acquired substantially
all of the assets of Outdoor West, Inc. of Tennessee ("Outdoor West") for a
cash purchase price of $11.8 million. As a result of this acquisition, the
Company acquired approximately 960 display faces in Tennessee and a right
of first refusal to purchase Outdoor West, Inc. of Georgia, an affiliate of
Outdoor West.
The Skoglund Acquisition. On October 31, 1996, OCI completed the
acquisition of substantially all of the assets of Skoglund Communications,
Inc. and Skoglund Communications of St. Cloud, Inc. (together, "Skoglund")
for a cash purchase price of $21.0 million. As a result of the acquisition
of Skoglund, the Company acquired approximately 1,500 display faces in
Minnesota and Wisconsin.
The Alabama Outdoor Acquisition. On April 30, 1996, OCI acquired
approximately 2,900 display faces across North and Central Alabama through
its purchase of substantially all of the assets of AOA Acquisition, L.L.C.
("Alabama Outdoor") for a cash purchase price of $34.2 million.
The Georgia Outdoor Acquisition. On April 3, 1996, OCI completed the
acquisition of substantially all of the assets of Georgia Outdoor
Advertising Company ("Georgia Outdoor") for a cash purchase price of $11.6
million. As a result of this transaction, the Company acquired
approximately 800 display faces in Georgia and South Carolina in the
vicinity of Athens, Georgia.
In addition to the Significant Acquisitions, since September 1996 the Company
has completed 11 individually insignificant in-market acquisitions for an
aggregate purchase price of approximately $17.5 million. The pro forma
financial information in this Prospectus does not fully reflect the effect of
these acquisitions, as the results of these operations are only included from
the date of acquisition. The Company does not currently have any written or
oral agreement to consummate any other material acquisition.
FINANCING PLAN
To provide greater flexibility in pursuing its growth strategy, concurrently
with the Offering the Company intends to enter into a new $150.0 million senior
credit facility (the "New Credit Facility"). In addition, the holders of the
Company's Series A Notes and Series B Notes will exchange such notes for shares
of Series A Preferred Stock effective upon the closing of the Offering. The
Offering, the New Credit Facility and the exchange of Series A Notes and Series
B Notes are referred to in this Prospectus as the "Financing Plan."
5
<PAGE>
THE OFFERING
Issuer .....................
Outdoor Communications, Inc.
Securities Offered .........
$100,000,000 aggregate principal amount of %
Senior Subordinated Notes due 2007.
Maturity ................... , 2007.
Interest Payment Dates ..... and of each year, commencing on ,
1998.
Mandatory Redemption ....... None.
Optional Redemption ........
Except as described below, the Company may not
redeem the Notes prior to , 2002. On or after
such date, the Company may redeem the Notes, in
whole or in part from time to time, at the
redemption prices set forth herein, plus accrued
and unpaid interest, if any, to the date of
redemption. In addition, at any time and from
time to time on or prior to , 2000, the
Company may, at its option, redeem up to 33 1/3%
of the original aggregate principal amount of the
Notes with the Net Proceeds of one or more Public
Equity Offerings by the Company, at a redemption
price equal to % of the principal amount of the
Notes to be redeemed, plus accrued and unpaid
interest, if any, to the date of redemption,
provided that at least 66 2/3% of the original
aggregate principal amount of the Notes remains
outstanding immediately after each such
redemption. See "Description of Notes--Optional
Redemption."
Change of Control ..........
Upon the occurrence of a Change of Control, the
Company will, subject to certain conditions, be
required to make an offer to purchase all of the
Notes at 101% of principal amount thereof, plus
accrued and unpaid interest, if any, to the date
of purchase. There can be no assurance that the
Company will have the financial resources
necessary to purchase Notes following a Change of
Control. See "Risk Factors--Change of Control"
and "Description of Notes--Repurchase at the
Option of Holders--Change of Control."
Guarantees .................
The Company's obligations under the Notes will be
fully and unconditionally guaranteed, jointly and
severally, on a senior subordinated basis by all
of the Company's subsidiaries (collectively, the
"Guarantors"). The Guarantees will be
subordinated to Guarantor Senior Indebtedness (as
defined) to the same extent and in the same
manner as the Notes are subordinated to all
Senior Indebtedness of the Company. See
"Description of Notes--Guarantees."
Ranking .................... The Notes will be general unsecured obligations
of the Company and will be subordinated in right
of payment to all existing and
6
<PAGE>
future Senior Indebtedness of the Company and
will rank pari passu in right of payment with all
other senior subordinated indebtedness of the
Company. The Guarantees will be general,
unsecured obligations of the Guarantors,
subordinated in right of payment to all existing
and future Guarantor Senior Indebtedness. While
the Notes and the Guarantees are senior
subordinated obligations, after giving effect to
the Offering, there will be no indebtedness that
is subordinated in right of payment to the Notes
and the Company and the Guarantors have no
present plans to issue any indebtedness that is
subordinated to the Notes and the Guarantees. As
such the Notes will be subordinate to all of the
indebtedness of the Company and the Guarantors
expected to be outstanding immediately following
the Offering. See "Risk Factors--Subordination of
Notes and Guarantees." As of March 31, 1997,
after giving effect to the Offering and the
application of the proceeds therefrom, the
Company would have had outstanding $25.5 million
of indebtedness ranking senior in right of
payment to the Notes and the Guarantees and the
ability to borrow up to an additional $124.5
million under the New Credit Facility. See
"Description of Notes--Ranking."
Certain Covenants ..........
The indenture governing the Notes (the
"Indenture") will contain covenants relating to,
among other things, the following matters: (i)
incurrence of additional Indebtedness (as
defined) by the Company and its subsidiaries;
(ii) the payment of dividends on, and redemption
of, capital stock of the Company and its
subsidiaries and the redemption of certain
subordinated obligations of the Company and its
subsidiaries; (iii) certain sales of assets; (iv)
mergers, consolidations and transfer of assets;
and (v) transactions with affiliates. See
"Description of Notes--Certain Covenants."
Use of Proceeds ............
The net proceeds of the Offering (after deduction
of underwriting discounts and estimated offering
expenses) are expected to be approximately $96.0
million. The net proceeds from the Offering,
together with borrowings under the New Credit
Facility of approximately $19.7 million, will be
used to repay $115.7 million of indebtedness
outstanding under the existing senior credit
facility. The balance of the net proceeds will be
used for working capital and general corporate
purposes. See "Use of Proceeds."
RISK FACTORS
Prospective investors should carefully consider all of the information set
forth in this Prospectus and, in particular, should evaluate the specific
factors under "Risk Factors" for risks involved with an investment in the Notes
including, without limitation, risks associated with the following factors: the
substantial leverage of the Company, the subordination of the Notes and the
Guarantees, fraudulent conveyance concerns; restrictions imposed by the
Company's indebtedness; potential elimination or reduction of tobacco
advertising; general economic conditions; competition; and reliance on key
executives.
7
<PAGE>
SUMMARY PRO FORMA FINANCIAL INFORMATION
The following sets forth summary pro forma financial information derived from
the information contained under the caption "Unaudited Pro Forma Consolidated
Financial Statements" elsewhere in this Prospectus. Because of the extent to
which the Company has grown through acquisitions since April 1996, management
believes that this summary pro forma financial information, which gives effect
to the Significant Acquisitions for the periods presented, is the most
meaningful information for use in evaluating an investment in the Company.
The summary pro forma statement of operations data for the fiscal year ended
June 30, 1996 and for the nine months and twelve months ended March 31, 1997
give effect to (i) the Formation Transactions (as defined in "Certain
Relationships and Related Transactions"); (ii) the Offering and the application
of the estimated net proceeds therefrom; (iii) the Significant Acquisitions as
if each had occurred at the beginning of the respective periods; and (iv) the
elimination of duplicative administrative and other costs as if each
acquisition had occurred at the beginning of the respective periods. The
summary pro forma balance sheet data as of March 31, 1997 has been prepared as
if the Offering had occurred on March 31, 1997. All pro forma financial
information included herein excludes the pre-acquisition results of operations
of 11 individually insignificant in-market acquisitions completed by the
Company since September 1996. Consequently, the pro forma periods are not
comparable because the pro forma financial information for the nine and twelve
months ended March 31, 1997 includes partial period results of the individually
insignificant acquisitions completed after June 30, 1996.
The summary pro forma financial information does not purport to present the
actual financial position or results of operations of the Company had the
transactions and events assumed therein in fact occurred on the dates
specified, nor are they necessarily indicative of the results of operations
that may be achieved in the future. The summary pro forma financial information
is based on certain assumptions and adjustments described in the notes
contained in "Unaudited Pro Forma Consolidated Financial Statements" and should
be read in conjunction therewith. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the financial statements and
the notes thereto included elsewhere in this Prospectus.
8
<PAGE>
SUMMARY PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
UNAUDITED
<TABLE>
<CAPTION>
PRO FORMA
-------------------------------------------------------
FISCAL YEAR ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, 1996(1) MARCH 31, 1997(1) MARCH 31, 1997(1)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Net revenues (2)........ $44,946 $36,878 $49,407
Direct operating
expenses .............. 15,455 12,575 16,758
Selling, general and
administrative
expenses............... 12,875 9,250 12,770
Depreciation and
amortization........... 10,391 8,620 11,400
------- ------- -------
Operating income...... 6,225 6,433 8,479
Interest expense........ 12,098 9,074 12,098 (3)
Other expenses (income),
net.................... 269 336 10
Income tax expense
(benefit).............. (1,933) (1,144) (480)
------- ------- -------
Net loss.............. $(4,209) $(1,833) $(3,149)
======= ======= =======
OTHER DATA:
EBITDA (4).............. $16,616 $15,053 $19,879
EBITDA margin (5)....... 37.0% 40.8% 40.2%
Ratio of EBITDA to
interest expense....... -- -- 1.6x(3)
Ratio of total debt to
EBITDA................. -- -- 5.9x(3)
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
-----------------------
ACTUAL PRO FORMA
<S> <C> <C>
BALANCE SHEET DATA:
Adjusted working capital(6).......................... $ 12,071 $ 12,071
Total assets......................................... 138,731 138,526
Long-term debt, including current installments....... 136,002 118,077(3)
Stockholders' equity (deficit)....................... (6,180) 14,740
</TABLE>
- -------------------
(1) Excludes the pre-acquisition results of operations for 11 individually
insignificant acquisitions completed since September 1996. Consequently,
the three pro forma periods are not comparable because the pro forma
financial information for the nine and twelve months ended March 31, 1997
includes partial period results of individually insignificant acquisitions
completed after June 30, 1996. If all Acquired Companies were included in
the pro forma operating results for the full twelve months ended March 31,
1997, management estimates the Company's net revenues and EBITDA during
such period would have been approximately $53.5 million and $22.0 million,
respectively. The Company's preliminary results of operations for the
fourth quarter of 1997 are discussed under "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Preliminary
Fourth Quarter Results of Operations." For the fiscal year ended June 30,
1997, the Company estimates that net revenues and EBITDA would have been
approximately $49.4 million and $19.3 million, respectively, on a pro forma
basis for the Significant Acquisitions and approximately $52.3 million and
$20.8 million, respectively, for all acquisitions, as though such
acquisitions had occurred at the beginning of the period.
(2) Net revenues are gross revenues less agency commissions.
(3) The 11 individually insignificant in-market acquisitions are not reflected
in the pro forma statement of operations data for the full twelve months
ended March 31, 1997. Had these acquisitions been fully reflected for such
period, long-term debt and interest expense would have been $125.5 million
and $12.8 million, respectively. Management estimates that EBITDA to
interest expense and total debt to EBITDA on the same pro forma basis would
have been 1.7x and 5.7x, respectively.
(4) "EBITDA" is operating income before depreciation and amortization. EBITDA
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 EBITDA is a
measure commonly reported and widely used by analysts, investors and other
interested parties to evaluate the financial performance of companies in
the outdoor advertising industry and their ability to service indebtedness.
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 outdoor advertising industry.
(5) EBITDA margin is EBITDA stated as a percentage of net revenues.
(6) Adjusted working capital is defined as current assets less current
liabilities excluding current installments of long-term debt and
obligations under non-compete agreement.
9
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the
Notes offered by this Prospectus.
Substantial Leverage; Ability to Service Indebtedness. The Company has
substantial indebtedness. As of March 31, 1997, after giving effect to the
Financing Plan, the Company's total long-term debt was approximately $125.5
million. Also, for the twelve months ended March 31, 1997 the Company's pro
forma operating income was insufficient by $3.6 million to cover interest
expense. The Company's level of indebtedness could have important consequences
to holders of the Notes, including the following: (i) a substantial portion of
the Company's cash flow from operations must be dedicated to the payment of
the principal of and interest on its 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 indebtedness may reduce
the Company's flexibility to respond to changing business and economic
conditions. The Company believes that cash provided by operating activities
will be sufficient to meet payment requirements under the New Credit Facility
and the Notes; however, there can be no assurance that the Company's cash flow
from operations will exceed its fixed charges. A decline in cash flow from
operations could impair the Company's ability to meet its obligations,
including for debt service, and to make scheduled principal repayments. The
Notes will not be entitled to the benefit of any mandatory sinking fund, which
may make more difficult the ability to service the Notes and other
indebtedness of the Company. See "Selected Historical Consolidated Financial
and Other Information," "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Description of New Credit Facility."
Subordination of the Notes and the Guarantees. The Notes and the Guarantees
will be unsecured and subordinated to the prior payment in full of all
existing and future Senior Indebtedness and Guarantor Senior Indebtedness, as
the case may be, including obligations under the New Credit Facility. Subject
to certain limitations, the Indenture will permit the Company and the
Guarantors to incur additional indebtedness, including Senior Indebtedness and
Guarantor Senior Indebtedness. See "Description of Notes--Covenants--
Limitations on Additional Indebtedness." In addition, the indebtedness under
the New Credit Facility will become due prior to the maturity of the Notes. As
a result of the subordination provisions contained in the Indenture, in the
event of a liquidation or insolvency, the assets of the Company and the
Guarantors will be available to pay obligations on the Notes and the
Guarantees only after all senior debt has been paid in full, and there may not
be sufficient assets remaining to pay amounts due on any or all of the Notes
then outstanding. Neither the Company nor any Guarantor may pay principal or
premium, if any, or interest or any other amounts on account of the Notes in
the event of a payment default in respect of Senior Indebtedness, unless such
amount has been paid in full or the default has been cured or waived and such
acceleration has been rescinded. In addition, if any non-payment default
occurs with respect to Senior Indebtedness and certain other conditions are
satisfied, neither the Company nor any Guarantor may make any payments on
account of the Notes for a designated period of time. The New Credit Facility
will also include a prohibition against the Company making an offer to
purchase any Notes pursuant to a Change in Control prior to the repayment in
full of the indebtedness under the New Credit Facility or a waiver by the
requisite lenders thereunder. See "Description of New Credit Facility" and
"Description of Notes--Subordination of Notes and Guarantees."
While the Notes and the Guarantees are senior subordinated obligations,
after giving effect to the Offering, there will be no indebtedness that is
subordinated in right of payment to the Notes, and the Company and the
Guarantors have no present plans to issue any indebtedness that is
subordinated to the Notes and the Guarantees. As such the Notes will be
subordinate to all of the indebtedness of the Company and the Guarantors
expected to be outstanding immediately following the Offering.
Fraudulent Conveyance Concerns. While the Notes will be guaranteed on a
senior subordinated basis by the Guarantors, the Guarantees may be subject to
limitation under federal and state fraudulent conveyance law.
10
<PAGE>
To the extent that a court were to find that (i) a guarantee was incurred by a
Guarantor with intent to hinder, delay, or defraud any present or future
creditor, or the Guarantor contemplated insolvency with a design to prefer one
or more creditors to the exclusion in whole or in part of others; or (ii) such
Guarantor did not receive fair consideration or reasonable equivalent value
for issuing its guarantee and such Guarantor (w) was insolvent; (x) was
rendered insolvent by reason of the issuance of such guarantee; (y) was
engaged or about to engage in a business or transaction for which the
remaining assets of such Guarantor constituted unreasonably small capital to
carry on its business; or (z) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they matured, a court
could avoid or subordinate such guarantee in favor of the Guarantor's other
creditors. Among other things, a legal challenge of a Guarantee on fraudulent
conveyance grounds may focus on the benefits, if any, realized by each
Guarantor as a result of the issuance by the Company of the Notes. To the
extent any Guarantee is avoided or subordinated as a fraudulent conveyance,
limited as described above, or held unenforceable for any other reason,
holders of the Notes would to such extent, cease to have a claim in respect of
such Guarantee and, to such extent, would be creditors solely of the Company
and any Guarantor whose Guarantee was not avoided, subordinated, limited, or
held unenforceable. Because the Company is a holding Company, if the
Guarantees are deemed not to be enforceable, the Company's ability to repay
the Notes would be dependent on cash flows from its subsidiaries. In such
event, the claims of the holders of the Notes against the issuer of an
avoided, subordinated, limited or unenforceable Guarantee would be subject to
the prior payment of all liabilities of such Guarantor. There can be no
assurance that, after providing for all prior claims, there would be
sufficient assets to satisfy the claims of the holders of the Notes. Based
upon the financial and other information currently available to it, management
believes that the Notes and the Guarantees are being incurred for proper
purposes and in good faith and that the Company and each of the Guarantors is
solvent and will, after issuing the Notes or its Guarantee, as the case may
be, have sufficient capital for carrying on its business and be able to pay
its debts as they mature.
Restrictions Imposed by the Company's Indebtedness. The Company's debt
instruments contain restrictions on the Company's ability to incur additional
indebtedness, create liens, pay dividends, sell assets and make acquisitions.
Furthermore, the New Credit Facility contains certain maintenance tests that
require the Company to maintain a specified minimum operating cash flow and
interest expense coverage ratio and maintain a leverage ratio below a
specified maximum. There can be no assurance that the Company and its
subsidiaries will be able to comply with the provisions of their respective
debt instruments, including compliance by the Company with the financial
ratios and tests contained in the New Credit Facility. These restrictions and
the Company's failure to so comply could have a material adverse effect on the
holders of the Notes. 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 applicable debt
instruments, and the holders of such indebtedness could declare all amounts
outstanding under the applicable instruments to be due and payable
immediately. There can be no assurance that the assets or cash flow of the
Company or the Company's subsidiaries, as the case may be, would be sufficient
to repay in full borrowings under their outstanding debt instruments whether
upon maturity or earlier or if such indebtedness were to be accelerated upon
an event of default or certain repurchase events or that the Company would be
able to refinance or restructure its payments on such indebtedness, or
repurchase the Notes. If such indebtedness were not so repaid, refinanced or
restructured, the lenders could proceed to realize on their collateral,
following which there may not be sufficient proceeds for the Company and the
Guarantors to meet their obligations under the Indenture. In addition, any
event of default or declaration of acceleration under one debt instrument
could also result in an event of default under one or more of the Company's
other debt instruments. See "--Substantial Leverage; Ability to Service
Indebtedness," "--Subordination of the Notes and the Guarantees" and
"Description of New Credit Facility." Other indebtedness of the Company that
may be incurred in the future may contain financial or other covenants more
restrictive than those applicable to the Notes or the New Credit Facility. See
"Description of New Credit Facility" and "Description of Notes."
Risks of Acquisitions and Growth Strategy. The Company's growth has been
facilitated by strategic acquisitions that have substantially increased the
Company's inventory of advertising display faces. One facet of
11
<PAGE>
the Company's operating strategy is to make acquisitions in new and existing
markets. While the Company believes that the outdoor advertising industry is
highly fragmented and that significant acquisition opportunities are available
there can be no assurance that suitable acquisition candidates can be found.
The Company is likely to face competition from other outdoor advertising and
media companies for acquisition opportunities. In addition, the prices sought
by sellers of outdoor advertising display faces and companies have been rising
and if they continue to rise, the Company may find fewer acceptable acquisition
opportunities or be unsuccessful in its acquisitions. As part of its on-going
evaluation of strategic acquisition opportunities, the Company may from time to
time engage in discussions concerning possible acquisitions for which the
Company may require additional debt or equity financing. There can be no
assurance that the Company will have sufficient capital resources to complete
acquisitions or that acquisitions can be completed on terms acceptable to the
Company. While management has gained considerable experience in assimilating
such acquisitions into the structure of the Company, future acquisitions may
require substantial attention from the Company's management to integrate
acquired company operations. There can be no assurance the Company will be able
to integrate such operations successfully. Furthermore, diversion of management
attention from the Company's existing business could have an adverse impact on
the revenues and operating results of the Company.
Potential Elimination or Reduction of Tobacco Advertising. Approximately 9.1%
of the Company's gross revenues for the nine months ended March 31, 1997 were
derived from tobacco advertising. In August 1996, the U.S. Food and Drug
Administration (the "FDA") issued final regulations governing certain marketing
practices in the tobacco industry. Among other things, the regulations prohibit
tobacco product billboard advertisements within 1,000 feet of schools and
playgrounds and require that tobacco product advertisements on billboards be in
black and white and contain only text. Enforcement of such regulations has been
stayed indefinitely by a federal court in North Carolina. In June 1997, a
majority of the major tobacco companies in the United States and certain state
attorneys general reached agreement on a proposed settlement of litigation
between such parties. The terms of such proposed settlement include a ban on
all outdoor advertising of tobacco products commencing nine months after
finalization of the settlement. The settlement is subject to numerous
conditions, including the enactment of legislation by the federal government.
At this time, it is unclear whether a definitive settlement will be reached or
what the terms of any such settlement would be. A reduction in billboard
advertising by the tobacco industry as a result of either the FDA regulations
or the proposed settlement could 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 lowering of rates
throughout the industry or limit the ability of industry participants to
increase rates for some period of time. If the tobacco litigation settlement
were finalized in its current form and the Company were unable to replace
revenues from tobacco advertising with revenues from other advertising sources,
the settlement could have a material adverse effect on the Company by reducing
its EBITDA, which could in turn reduce the Company's ability to meet its
financial obligations under the New Credit Facility and the Notes. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," "Business--Customers" and "Business--Government Regulation."
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. Such regulations limit the
ability of the Company to expand its operations in the affected markets. The
inability to expand its operations in such areas or replace lost structures
could have a negative impact on the Company's growth opportunities and
potential results of operations. In addition, some cities have adopted
amortization ordinances under which, after the expiration of a specified period
of time, billboards must be removed at the owner's expense and without the
payment of compensation. Ordinances requiring the removal of a billboard
without compensation, whether through amortization or otherwise, are being
challenged in various state and federal courts with conflicting results.
Amortization ordinances and governmental restrictions on construction or
replacement of structures have not
12
<PAGE>
materially affected operations in the Company's markets. No assurance can be
given as to the effect on the Company of additional laws and regulations that
may be adopted in the future that could have a material adverse effect on the
Company. See "--Potential Elimination or Reduction of Tobacco Advertising,"
"Business--Customers" and "Business--Government Regulation."
Potential Losses from Natural Disasters. A significant portion of the
Company's structures are located in the southeast and midwest regions of the
United States. These areas are susceptible to flooding, tornadoes and
hurricanes during certain periods of the year. The Company has determined that
it is not economically feasible at this time to obtain insurance against losses
from hurricanes or other weather-related casualties. OCI has not incurred
material losses in the past due to weather-related incidents; however, there
can be no assurance that the Company will not suffer such losses in the future
or that, in pursuing its acquisition strategy, the Company will not acquire
companies or properties that are particularly susceptible to weather-related
incidents.
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 particular markets where the Company conducts
business 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 outdoor advertising companies, as well as from other media such as radio,
television, print and direct mail marketing. The Company also competes with a
wide variety of other out-of-home advertising media, the range and diversity of
which have increased substantially over the past several years, including
highway logo signs, 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."
History of Operating Losses. The Company has historically had net losses
which have resulted in significant part from substantial depreciation and
amortization expenses relating to assets purchased in the Company's
acquisitions, interest expense associated with related indebtedness and
deferred financing costs charged to extraordinary losses. Moreover, additional
acquisitions will result in increased depreciation, amortization and interest
expenses. There can be no assurance that the Company will generate net income
in the future. See "Selected Historical Consolidated Financial and Other
Information."
Reliance on Key Executives. The Company's success depends to a significant
extent upon the continued services of its executive officers and other key
management and sales personnel, in particular its Chairman and Chief Executive
Officer, John C Stanley IV, and its President and Chief Operating Officer, A.B.
Isbell. Although the Company believes it has incentive and compensation
programs designed to retain key employees, the Company has no employment
contracts with its employees, and very few of its employees are bound by non-
competition agreements. The unavailability of the continuing services of its
executive officers and other key management and sales personnel could have a
material adverse effect on the Company's business. The Company maintains key
man insurance on Messrs. Stanley and Isbell. See "Management."
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. To date, compliance with such laws
and regulations has not had a material adverse effect on the historical
business of the Company. See "Business--Environmental."
Control of the Company by Stockholders. The capital stock of the Company is
privately held. The officers and directors of the Company, or entities
affiliated with such persons, hold all of the issued and outstanding capital
stock of the Company. All of the Company's stockholders are party to a
Shareholders Agreement pursuant
13
<PAGE>
to which the parties to the agreement agree to vote their shares in favor of
persons nominated to the Board of Directors by the Company's management, Media
Communications Partners Limited Partnership and Chase Venture Capital
Associates, L.P. As a result, such stockholders can effectively control the
affairs and policies of the Company. There can be no assurance that the
interests of the Company's controlling stockholders and those of the holders
of the Notes will not conflict. While the Indenture imposes limitations on the
ability of the Company to enter into transactions with its affiliates and
holders of more than ten percent of its Common Stock (as defined), there may
be circumstances in which actions taken by the Company in the interests of
such stockholders will diverge from the interests of holders of the Notes. See
"Description of Notes--Limitation on Transactions with Affiliates."
Repurchase of Notes upon a Change of Control. Upon a Change of Control, the
Company will, subject to certain conditions, be obligated to offer to purchase
the Notes at a purchase price equal to 101% of the outstanding principal
amount, plus accrued and unpaid interest, thereof. The Change of Control
purchase feature may make more difficult a sale or takeover of the Company. In
addition, a "change of control" under the New Credit Facility will constitute
an event of default thereunder. In the event that the Company defaults in its
obligation to repay the indebtedness under the New Credit Facility, the
subordination provisions of the Indenture will preclude payments in respect of
the Notes until the event of default is cured or waived under the New Credit
Facility. There can be no assurance that the Company will have the necessary
financial resources to meet its obligations in respect of its indebtedness,
including the Notes, following a Change of Control.
Absence of Public Market. There is currently no established trading market
for the Notes and the Company does not intend to list the Notes on any
securities exchange or to arrange for their inclusion in any automated
quotation system. The Company has been advised by the Underwriters that the
Underwriters presently intend to make a market in the Notes, although the
Underwriters are under no obligation to make such market and any such market
making may be discontinued at any time at the sole discretion of the
Underwriters. Accordingly, no assurance can be given as to the prices or the
liquidity of the trading market for the Notes or that an active public market
for the Notes will develop. If an active public market does not develop, the
market prices and liquidity of the Notes may be adversely affected.
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the Offering are estimated to be
approximately $96.0 million. The Company intends to use the net proceeds of
the Offering, together with borrowings under the New Credit Facility, to
refinance indebtedness outstanding under the Company's amended and restated
$140.0 million credit facility dated October 30, 1996 (the "Existing Credit
Facility"). The holders of the Company's Series A Notes and Series B Notes
will exchange such notes for Series A Preferred Stock upon consummation of the
Offering.
The estimated sources and uses of funds in connection with the Financing
Plan are set forth below as of an assumed closing date of August 10, 1997:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
<S> <C>
Sources of Funds:
% Senior Subordinated Notes due 2007............... $100,000
New Credit Facility ................................ 19,650
--------
Total Sources..................................... $119,650
========
Uses of Funds:
Repay Existing Credit Facility (1).................. $115,650(2)
Fees and expenses................................... 4,000
--------
Total Uses........................................ $119,650
========
</TABLE>
- ---------------------
(1) The Existing Credit Facility was used by the Company to (a) acquire OCI
North and OCI South; (b) purchase the Acquired Companies; and (c) fund
working capital and transaction costs. The Existing Credit Facility
consists of (a) a $40.0 million A tranche term loan and a $40.0 million B
tranche term loan (collectively, the "Term Loans"); and (b) a $60.0
million revolving credit facility (the "Revolving Credit Facility").
(2) This amount includes approximately $6.7 million of borrowings to fund
acqusitions consummated after March 31, 1997 and approximately $1.3
million in borrowings incurred after March 31, 1997 for working capital
purposes.
15
<PAGE>
CAPITALIZATION
The following table sets forth (i) the historical capitalization of the
Company as of March 31, 1997; (ii) as adjusted to give effect to those
acquisitions of the Acquired Companies completed after March 31, 1997; (iii)
as further adjusted to give effect to the Offering, the application of the net
proceeds therefrom and, upon the closing of the Offering, the exchange of
Series A Notes and Series B Notes for Series A Preferred Stock. See "Use of
Proceeds." This table should be read in conjunction with the "Unaudited Pro
Forma Consolidated Financial Statements," "Selected Historical Consolidated
Financial and Other Information," "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources" and the financial statements of the Company, including notes
thereto, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
---------------------------------------
AS ADJUSTED AS ADJUSTED
ACTUAL FOR ACQUISITIONS FOR OFFERING
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Long-term debt, including current
installments:
Existing Credit Facility............. $107,700 114,350(1) $ --
New Credit Facility(2)............... -- -- 19,650
% Senior Subordinated Notes due
2007................................ -- -- 100,000
Series A Notes and Series B Notes,
including accrued interest(3)....... 23,743 24,097(4) --
Notes payable--stockholders(5)....... 5,877 5,877 5,877
-------- -------- --------
Total long-term debt, including
current installments.............. 137,320 144,324 125,527
Stockholders' equity (deficit):
Series A Preferred Stock, $.01 par
value. Authorized 5,000,000 shares;
issued and outstanding 240,966.66
shares.............................. -- -- 24,097
Class A Common Stock, $.01 par value.
Authorized 20,000 shares; issued and
outstanding 8,410.72 shares......... -- -- --
Class B Common Stock, $.01 par value.
Authorized 20,000 shares; issued and
outstanding 3,289.20 shares......... -- -- --
Additional paid-in capital .......... 3,812 3,812 3,812
Retained deficit .................... (9,126) (9,126) (9,126)
-------- -------- --------
Total stockholders' equity
(deficit)......................... (5,314) (5,314) 18,783
-------- -------- --------
Total capitalization................... $132,006 $139,010 $144,310
======== ======== ========
</TABLE>
- ---------------------
(1) Reflects borrowing of $6.65 million incurred after March 31, 1997 to
reflect acquisitions consummated by the Company after such date.
(2) The Company will enter into the New Credit Facility, which will become
effective upon consummation of the Offering and will provide for
borrowings of up to $150.0 million. See "Description of New Credit
Facility."
(3) The Series A Notes and Series B Notes are held by the principal
stockholders and executive officers of the Company. See "Certain
Relationships and Related Transactions." The holders of the Company's
Series A Notes and Series B Notes will exchange such notes for Series A
Preferred Stock upon consummation of the Offering.
(4) Reflects accrued but unpaid interest through June 30, 1997 on the amount
of Series A and Series B Notes that will be exchanged for Series A
Preferred Stock.
(5) The Notes payable--stockholders are held by John C Stanley IV, the
Company's Chairman and Chief Executive Officer, a Director and one of its
principal stockholders, and A.B. Isbell, the Company's President, a
Director, and one of its principal stockholders. These notes are due in
April 1998 and are secured by a letter of credit under the Existing Credit
Facility. The notes will be secured by a letter of credit under the New
Credit Facility, which will reduce the amount available to the Company
under such facility.
16
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following sets forth the unaudited pro forma consolidated financial
statements of the Company. The unaudited pro forma consolidated statements of
operations for the twelve months ended March 31, 1997, the nine months ended
March 31, 1997, the fiscal year ended June 30, 1996 and the nine months ended
March 31, 1996 give effect to the following transactions, as if such
transactions had occurred at the beginning of each period: (i) the Formation
Transactions (as defined in "Certain Relationships and Related Transactions");
(ii) the Significant Acquisitions; (iii) the elimination of duplicative
administrative and other costs; and (iv) the Offering and the application of
the net proceeds therefrom. The unaudited pro forma consolidated balance sheet
as of March 31, 1997 has been prepared as if the Offering had occurred on
March 31, 1997.
The unaudited pro forma consolidated statement of operations data for OCI
for the twelve months ended March 31, 1997, the nine months ended March 31,
1997, the fiscal year ended June 30, 1996 and the nine months ended March 31,
1996 set forth in the unaudited pro forma consolidated statement of operations
data under the column "Historical OCI" reflect the historical results of
operations of OCI and its consolidated subsidiaries, including the Acquired
Companies since the dates of such acquisitions. The unaudited pro forma
consolidated statement of operations data under the column "Significant
Acquisitions" reflect the historical statements of operations data of the
Significant Acquisitions as if such acquisitions had occurred on July 1, 1995
and present their respective results from the beginning of the respective
periods presented through the respective dates of their acquisition by the
Company.
The unaudited pro forma consolidated financial statements are based, in
part, on the historical financial statements of OCI, its Predecessors and the
Significant Acquisitions and should be read in conjunction with their
respective financial statements and notes thereto appearing elsewhere in this
Prospectus. The pro forma data are not necessarily indicative of the results
of operations or financial condition of OCI had these acquisitions occurred at
the beginning of each period presented, nor are they indicative of the results
of future operations. In addition, reference is made to the Company's
preliminary results of operations for the fourth quarter of 1997, which are
discussed under "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Preliminary Fourth Quarter Results of Operations."
Estimated information concerning the pro forma net revenues and EBITDA for the
fiscal year ended June 30, 1997 are also presented there and reflect a decline
as compared with the twelve month period ended March 31, 1997.
The unaudited pro forma consolidated financial statements reflect purchase
price allocations for the acquisitions of Georgia Outdoor, Alabama Outdoor and
Skoglund using fair market values of the assets and liabilities of such
companies, based on completed appraisals as of the dates of each of the
acquisitions. The unaudited pro forma consolidated financial statements also
reflect purchase price allocations for the acquisition of Outdoor West, using
estimated fair values of the assets and liabilities of such companies as of
the assumed merger dates based on appraisals and other studies, which are not
yet complete. Accordingly, the final allocations will likely be different than
the amounts included in the accompanying pro forma consolidated financial
statements. Although the final allocations may differ, the pro forma
consolidated financial statements reflect management's best estimate based on
currently available information as if the aforementioned transactions had
occurred on the assumed merger dates. Management does not believe that any
differences between estimated and final allocations will be material.
17
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
HISTORICAL SIGNIFICANT ACQUISITION SUBTOTAL FOR THE PRO FORMA
OCI ACQUISITIONS ADJUSTMENTS OCI OFFERING OCI
<S> <C> <C> <C> <C> <C> <C>
Net revenues............ $40,490 $ 8,892 $ 25 (1) $49,407 $ -- $49,407
Direct operating
expenses............... 13,691 3,183 (116)(2) 16,758 -- 16,758
Selling, general and
administrative
expenses............... 10,942 2,911 (1,083)(3) 12,770 -- 12,770
Depreciation and
amortization........... 9,212 544 1,404 (4) 11,160 240 (5) 11,400
------- ------- ------- ------- ------- -------
Operating income
(loss)................. 6,645 2,254 (180) 8,719 (240) 8,479
Other (income) expense:
Interest expense...... 9,445 474 -- 9,919 2,179 (6) 12,098
Loss (gain) on
disposal of assets,
net.................. -- (8,062) 8,072 (7) 10 -- 10
Other non-operating
expenses............. (309) 309 -- -- -- --
------- ------- ------- ------- ------- -------
Total other (income)
expense, net....... 9,136 (7,279) 8,072 9,929 2,179 12,108
------- ------- ------- ------- ------- -------
Income (loss) before
income taxes........... (2,491) 9,533 (8,252) (1,210) (2,419) (3,629)
Income tax expense
(benefit).............. (354) 4,143 (3,301)(8) 488 (968)(9) (480)
------- ------- ------- ------- ------- -------
Net income (loss)....... $(2,137) $ 5,390 $(4,951) $(1,698) $(1,451)(10) $(3,149)
======= ======= ======= ======= ======= =======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Operations
18
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
HISTORICAL SIGNIFICANT ACQUISITION SUBTOTAL FOR THE PRO FORMA
OCI ACQUISITIONS ADJUSTMENTS OCI OFFERING OCI
<S> <C> <C> <C> <C> <C> <C>
Net revenues............ $31,741 $ 5,137 $ -- (1) $36,878 $ -- $36,878
Direct operating
expenses............... 10,817 1,843 (85)(2) 12,575 -- 12,575
Selling, general and
administrative
expenses............... 8,016 1,751 (517)(3) 9,250 -- 9,250
Depreciation and
amortization........... 7,257 281 863 (4) 8,401 219 (5) 8,620
------- ------- ------- ------- ------- -------
Operating income
(loss)................. 5,651 1,262 (261) 6,652 (219) 6,433
Other (income) expense:
Interest expense...... 7,597 242 -- 7,839 1,235 (6) 9,074
Loss (gain) on
disposal of assets,
net.................. -- (8,072) 8,072 (7) -- -- --
Other non-operating
expenses............. (53) 389 -- 336 -- 336
------- ------- ------- ------- ------- -------
Total other (income)
expense, net....... 7,544 (7,441) 8,072 8,175 1,235 9,410
------- ------- ------- ------- ------- -------
Income (loss) before
income taxes........... (1,893) 8,703 (8,333) (1,523) (1,454) (2,977)
Income tax expense
(benefit).............. (440) 3,211 (3,333)(8) (562) (582)(9) (1,144)
------- ------- ------- ------- ------- -------
Net income (loss)....... $(1,453) $ 5,492 $(5,000) $ (961) $ (872)(10) $(1,833)
======= ======= ======= ======= ======= =======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Operations
19
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
HISTORICAL SIGNIFICANT ACQUISITION SUBTOTAL FOR THE PRO FORMA
OCI ACQUISITIONS ADJUSTMENTS OCI OFFERING OCI
<S> <C> <C> <C> <C> <C> <C>
Net revenues............ $22,617 $22,240 $ 89 (1) $44,946 $ -- $44,946
Direct operating
expenses............... 7,543 7,922 (10)(2) 15,455 -- 15,455
Selling, general and
administrative
expenses............... 6,877 6,889 (891)(3) 12,875 -- 12,875
Depreciation and
amortization........... 4,261 2,381 3,469 (4) 10,111 280 (5) 10,391
------- ------- ------- ------- ------- -------
Operating income
(loss)................. 3,936 5,048 (2,479) 6,505 (280) 6,225
Other (income) expense:
Interest expense...... 4,308 1,830 -- 6,138 5,960 (6) 12,098
Loss (gain) on
disposal of assets,
net.................. (1) (93) -- (7) (94) -- (94)
Other non-operating
expenses............. (173) 536 -- 363 -- 363
------- ------- ------- ------- ------- -------
Total other (income)
expense, net....... 4,134 2,273 -- 6,407 5,960 12,367
------- ------- ------- ------- ------- -------
Income (loss) before
income taxes........... (198) 2,775 (2,479) 98 (6,240) (6,142)
Income tax expense
(benefit).............. 583 972 (992)(8) 563 (2,496)(9) (1,933)
------- ------- ------- ------- ------- -------
Net income (loss)....... $ (781) $ 1,803 $(1,487) $ (465) $(3,744)(10) $(4,209)
======= ======= ======= ======= ======= =======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Operations
20
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
HISTORICAL SIGNIFICANT ACQUISITION SUBTOTAL FOR THE PRO FORMA
OCI ACQUISITIONS ADJUSTMENTS OCI OFFERING OCI
<S> <C> <C> <C> <C> <C> <C>
Net revenues............ $14,059 $18,460 $ 114 (1) $32,633 $ -- $32,633
Direct operating
expenses............... 4,810 6,582 (13)(2) 11,379 -- 11,379
Selling, general and
administrative
expenses............... 4,696 5,516 (336)(3) 9,876 -- 9,876
Depreciation and
amortization........... 2,321 2,100 2,221 (4) 6,642 210 (5) 6,852
------- ------- ------- ------- ------ -------
Operating income
(loss)................. 2,232 4,262 (1,758) 4,736 (210) 4,526
Other (income) expense:
Interest expense...... 2,481 806 -- 3,287 5,787 (6) 9,074
Loss (gain) on
disposal of assets,
net.................. -- (2,616) -- (7) (2,616) -- (2,616)
Other non-operating
(income) expenses,
net.................. (480) 4,116 -- 3,636 -- 3,636
------- ------- ------- ------- ------ -------
Total other (income)
expense, net....... 2001 2,306 -- 4,307 5,787 10,094
------- ------- ------- ------- ------ -------
Income (loss) before
income taxes........... 231 1,956 (1,758) 429 (5,997) (5,568)
Income tax expense
(benefit).............. 499 40 (703)(8) (164) (2,399)(9) (2,563)
------- ------- ------- ------- ------ -------
Net income (loss)....... $ (268) $ 1,916 $(1,055) $ 593 (3,598)(10) $(3,005)
======= ======= ======= ======= ====== =======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Statements of
Operations
21
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
The following notes describe the adjustments to present the pro forma
statements of operations of OCI for the twelve months ended March 31, 1997, for
the nine months ended March 31, 1997, for the fiscal year ended June 30, 1996
and the nine months ended March 31, 1996 as if the Significant Acquisitions and
the Offering had occurred on July 1, 1995.
<TABLE>
<CAPTION>
TWELVE MONTHS NINE MONTHS FISCAL YEAR NINE MONTHS
ENDED ENDED ENDED ENDED
MARCH 31, 1997 MARCH 31, 1997 JUNE 30, 1996 MARCH 31, 1996
<C> <S> <C> <C> <C> <C>
(1) Entry records pro forma
changes in revenues for
company acquired by
Skoglund prior to OCI's
acquisition of
Skoglund................ $ 25 $ -- $ 89 $ 114
======= ===== ======= =======
(2) Entry records a net
decrease in operating
expenses due to
elimination of employee
costs upon completion of
acquisitions,
capitalization of
certain costs expensed
by certain acquired
companies and
recognition of costs
incurred by a company
acquired by Skoglund
prior to OCI's
acquisition of Skoglund:
Payroll and payroll
related costs........... $ (83) $ (62) $ -- $ --
Other operating costs... (33) (23) (10) (13)
------- ----- ------- -------
Total operating costs... $ (116) $ (85) $ (10) (13)
======= ===== ======= =======
(3) Entry records a net
decrease in general and
administrative expenses
due to elimination of
employee costs upon
completion of
acquisitions, addition
of employees to operate
acquired divisions,
elimination of legal
costs related to the
acquisition transactions
incurred by certain
acquired companies, and
elimination of
duplicative
administrative and other
costs:
Payroll and payroll
related costs........... $ (565) $(263) $ (364) $ (22)
Legal costs............. (232) (104) (184) (56)
Other general and
administrative costs.... (286) (150) (343) (258)
------- ----- ------- -------
Total general and
administrative
costs................ $(1,083) $(517) $ (891) $ (336)
======= ===== ======= =======
(4) Entry records the
increase in depreciation
and amortization expense
arising from purchase
accounting adjustments
relating to the
Significant Acquisitions
to property and
equipment, customer
lists and goodwill over
periods of 3-25, 8 and
25 years, respectively.
Property and equipment -
historical.............. $ (515) $(256) $(3,260) $(2,776)
Property and equipment -
pro forma............... 846 489 3,211 2,408
Customer lists - pro
forma................... 765 461 2,531 1,898
Goodwill - historical... (29) (25) (123) (192)
Goodwill - pro forma.... 337 194 1,110 883
------- ----- ------- -------
1,404 863 3,469 2,221
(5) Entry records the net
effect on amortization
of deferred financing
costs related to
extinguishment of
existing debt and
issuance of the Notes... $ 240 $ 219 $ 280 $ 210
======= ===== ======= =======
</TABLE>
(Continued)
22
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(CONTINUED)
<TABLE>
<CAPTION>
TWELVE MONTHS NINE MONTHS FISCAL YEAR NINE MONTHS
ENDED ENDED ENDED ENDED
MARCH 31, 1997 MARCH 31, 1997 JUNE 30, 1996 MARCH 31, 1996
<C> <S> <C> <C> <C> <C>
(6) Entry eliminates
historical interest
expense on the existing
debt and records
interest expense on the
Notes at a rate of
10.50% (a difference of
0.125% in the rate of
interest would have
changed net income
(loss) by $75 for the
twelve months ended
March 31, 1997 and the
fiscal year ended June
30, 1996 and $56 for the
nine months ended March
31, 1997 and 1996)...... $ 2,179 $ 1,235 $ 5,960 $ 5,787
======= ======= ======= ========
(7) Entry eliminates the
gain on sale of assets
to OCI.................. $ 8,072 $ 8,072 $ -- $ --
======= ======= ======= ========
(8) Entry records the income
tax effect of pro forma
adjustments using a
blended rate of 40%..... $(3,301) $(3,333) $ (992) $ (703)
======= ======= ======= ========
(9) Entry records the income
tax effect of pro forma
adjustments using a
blended rate of 40%..... $ (968) $ (582) $(2,496) $ (2,399)
======= ======= ======= ========
(10) The accompanying pro
forma results of
operations do not give
effect to the
extraordinary loss on
the extinguishment of
debt of $2,823, $2,823,
$365 and $663 for the
twelve months ended
March 31, 1997, nine
months ended March 31,
1997, fiscal year ended
June 30, 1996, and nine
months ended March 31,
1996 respectively;
however, such amounts
have been reflected as
adjustments to pro forma
retained earnings
(deficit).
</TABLE>
23
<PAGE>
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS PRO
HISTORICAL FOR THE FORMA
OCI OFFERING OCI
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents................. $ 4,566 $ $ 4,566
Accounts receivable, net.................. 6,318 -- 6,318
Other current assets...................... 3,978 -- 3,978
Property and equipment, net............... 63,185 -- 63,185
Intangible assets, net.................... 55,864 (205)(1) 55,659
Other assets.............................. 4,820 -- 4,820
-------- --------- --------
Total assets............................ $138,731 $ (205) $138,526
======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities, excluding current
installments of long-term debt........... $ 2,791 $ -- $ 2,791
Deferred federal income tax............... 4,754 (1,882)(1) 2,872
Other long-term liabilities............... 1,364 (1,318)(2) 46
Long-term debt, including current
installments:
Existing Credit Facility................. 107,700 (107,700)(1) --
New credit facility...................... -- 12,200 (1) 12,200
% Senior Subordinated Notes............. -- 100,000 (1) 100,000
Series A and Series B Notes.............. 22,425 (22,425)(2) --
Notes payable--stockholders.............. 5,877 -- 5,877
-------- --------- --------
Total long-term debt.................... 136,002 (17,925) 118,077
-------- --------- --------
Total liabilities....................... 144,911 (21,125) 123,786
Series A Preferred Stock.................. -- 23,743 (2) 23,743
Stockholders' equity (deficit)............ (6,180) (2,823)(1) (9,003)
-------- --------- --------
Total stockholders' equity (deficit).... (6,180) 20,920 14,740
-------- --------- --------
Total liabilities and stockholders'
equity (deficit)....................... $138,731 $ (205) $138,526
======== ========= ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Consolidated Balance Sheet
24
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
The following notes describe the adjustments to present the pro forma balance
sheet of OCI as of March 31, 1997, as if the Financing Plan had occurred on
March 31, 1997.
(1) Entry records the effects of the proceeds from the issuance of the Notes,
capitalized debt issuance costs, repayment of existing debt and related
long-term accrued interest, and loss on early extinguishment of debt:
<TABLE>
<S> <C>
Intangible assets, net........................................... $ (205)
Deferred Federal income tax...................................... (1,882)
Existing Credit Facility......................................... 107,700
New Credit Facility.............................................. 12,200
% Senior Subordinated Notes..................................... 100,000
Stockholders' equity (deficit)................................... (2,823)
</TABLE>
(2) Entry records the effects of the conversion of Series A and Series B Notes
to Series A Preferred Stock.
<TABLE>
<S> <C>
Series A and Series B Notes..................................... $(22,425)
Other long-term liabilities..................................... (1,318)
Series A Preferred Stock........................................ 23,743
</TABLE>
25
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER INFORMATION
The selected data presented on the following page under the captions
"Statement of Operations Data," "Balance Sheet Data" and "Other Data,"
excluding "Number of display faces--period end" for, and as of the end of, the
period April 4, 1996 to June 30, 1996, are derived from the consolidated
financial statements of OCI, which financial statements have been audited by
KPMG Peat Marwick LLP, independent certified public accountants. The
consolidated financial statements as of June 30, 1996, and for the period
April 4, 1996 to June 30, 1996, and the report thereon, are included elsewhere
in this Prospectus.
On April 3, 1996, the Company's current structure emerged with its
acquisition and consolidation of OCI North and OCI South. See "Certain
Relationships and Related Transactions-The Formation Transactions."
The selected data presented on the following page under the captions
"Statement of Operations Data," "Balance Sheet Data" and "Other Data,"
excluding "Number of display faces--period end" for, and as of the end of, the
period August 1, 1995 to April 3, 1996 and each of the years in the four-year
period ended July 31, 1995, are derived from the consolidated financial
statements of OCI North, which financial statements have been audited by KPMG
Peat Marwick LLP, independent certified public accountants. The consolidated
financial statements as of April 3, 1996 and July 31, 1995, and for the period
August 1, 1995 to April 3, 1996 and each of the years in the two-year period
ended July 31, 1995, and the report thereon, are included elsewhere in this
Prospectus.
The selected data presented on the following page under the captions
"Statement of Operations Data," "Balance Sheet Data" and "Other Data,"
excluding "Number of display faces--period end" for, and as of the end of, the
period September 1, 1995 to April 3, 1996, are derived from the consolidated
financial statements of OCI South, which financial statements have been
audited by KPMG Peat Marwick LLP, independent certified public accountants.
The selected data presented on the following page under the captions
"Statement of Operations Data" and "Balance Sheet Data," "Other Data,"
excluding "Number of display faces--period end" for, and as the end of, each
of the years in the four-year period ended August 31, 1995, are derived from
the consolidated financial statements of OCI South, which financial statements
have been audited by Moore & Gray, independent certified public accountants.
The consolidated financial statements as of April 3, 1996 and August 31, 1995,
and for the period September 1, 1995 to April 3, 1996 and each of the years in
the two-year period ended August 31, 1995, and the reports thereon, are
included elsewhere in this Prospectus.
The selected data presented on the following page as of and for the nine
months ended March 31, 1997 are derived from the consolidated financial
statements of OCI. The consolidated financial statements include all
adjustments, consisting of normal recurring adjustments, which management
considers necessary for a fair presentation of the financial position and the
results of operations for this period. The results of operations for any such
period are not necessarily indicative of the results of operations for a full
year.
The selected pro forma data presented on the following page under the
captions "Statement of Operations Data," "Balance Sheet Data," and "Other
Data" for the nine months ended March 31, 1996, fiscal year ended June 30,
1996 and the twelve months ended March 31, 1997 are derived from the
consolidated pro forma financial statements of the Company included elsewhere
in this Prospectus.
The selected historical consolidated financial and other information set
forth on the following page should be read in conjunction with the
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," the historical consolidated financial statements of the Company,
its Predecessors and the Significant Acquisitions, including the notes
thereto, the pro forma consolidated financial statements of the Company and
the notes thereto, and other financial information included elsewhere in this
Prospectus.
26
<PAGE>
SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PREDECESSORS (1)
----------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED AUGUST 1, SEPTEMBER 1,
----------------------------------------------------------------------------------- 1995 TO 1995 TO
JULY 31, AUGUST 31, JULY 31, AUGUST 31, JULY 31, AUGUST 31, JULY 31, AUGUST 31, APRIL 3, APRIL 3,
1992 1992 1993 1993 1994 1994 1995 1995 1996 1996
OCI NORTH OCI SOUTH OCI NORTH OCI SOUTH OCI NORTH OCI SOUTH OCI NORTH OCI SOUTH OCI NORTH OCI SOUTH
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net revenues
(4)............. $ 9,199 $ 6,891 $ 9,155 $ 7,105 $ 9,500 $7,127 $10,369 $8,153 $ 6,683 $4,957
Operating
expenses:
Direct
operating...... 3,614 2,778 3,603 2,754 3,619 1,616 3,650 1,880 2,510 1,565
Selling, general
and
administrative.. 2,590 2,011 2,942 2,059 2,746 2,913 2,739 2,908 2,160 1,641
Depreciation and
amortization... 2,154 1,252 2,540 1,200 2,276 930 2,111 1,064 1,430 647
------- ------- ------- ------- ------- ------ ------- ------ ------- ------
Total operating
expenses....... 8,358 6,041 9,085 6,013 8,641 5,459 8,500 5,852 6,100 3,853
Operating
income.......... 841 850 70 1,092 859 1,668 1,869 2,301 583 1,104
Interest
expense......... 2,120 1,040 2,030 845 2,042 853 2,127 1,173 1,461 645
Other expense
(income), net... 291 -- 327 -- 656 (65) (21) (180) 17 (11)
Income tax
expense
(benefit)....... -- 14 (723) 170 (473) 340 (133) 524 156 201
------- ------- ------- ------- ------- ------ ------- ------ ------- ------
Net income
(loss)......... $(1,570) $ (204) $(1,564) $ 77 $(1,366) $ 540 $ (104) $ 784 $(1,051) $ 269
======= ======= ======= ======= ======= ====== ======= ====== ======= ======
OTHER DATA:
Cash flows from:
Operating
activities..... 1,315 1,469 1,150 1,846 2,384 279 2,882 2,123 948 716
Investing
activities..... (325) (419) (607) (511) 1,017 (556) (345) (1,279) (585) (739)
Financing
activities..... (800) (643) (200) (858) (3,748) (139) (2,300) (1,100) (500) --
EBITDA (6)....... $ 2,995 $ 2,102 $ 2,610 $ 2,292 $ 3,135 $2,598 $ 3,980 $3,365 $ 2,013 $1,751
EBITDA margin
(7)............. 32.6% 30.5% 28.5% 32.3% 33.0% 36.5% 38.4% 41.3% 30.1% 35.3%
Capital
expenditures.... $ 614 $ 426 $ 622 $ 546 $ 610 $ 642 $ 522 $1,313 $ 588 $ 746
Ratio
(deficiency) of
earnings to
fixed charges... $(1,570) $ (190) $(2,287) 1.2x $(1,839) 1.8x $ (237) 1.9x $ (895) 1.6x
Number of display
faces--
period end...... 3,469 2,660 3,350 2,598 2,851 2,542 2,859 2,609 2,858 2,644
<CAPTION>
AS OF
----------------------------------------------------------------------------------------------------------
JULY 31, AUGUST 31, JULY 31, AUGUST 31, JULY 31, AUGUST 31, JULY 31, AUGUST 31, APRIL 3, APRIL 3,
1992 1992 1993 1993 1994 1994 1995 1995 1996 1996
OCI NORTH OCI SOUTH OCI NORTH OCI SOUTH OCI NORTH OCI SOUTH OCI NORTH OCI SOUTH OCI NORTH OCI SOUTH
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
DATA:
Working capital.. $ 696 $(1,946) $ 1,015 $(2,093) $ 625 $ 494 $(4,001) $ 42 $ 81 $ (988)
Adjusted working
capital (8)..... 896 590 1,389 889 930 1,494 1,299 1,092 1,326 1,134
Total assets..... 18,180 8,005 19,948 9,069 15,992 8,701 14,715 8,590 14,496 8,854
Long-term
obligations
(9)............. 19,148 11,148 18,948 10,290 15,200 11,750 12,900 10,750 12,400 10,750
Stockholders'
equity
(deficit)....... (4,023) (4,302) (4,758) (2,622) (6,112) (3,681) (6,217) (2,997) (7,041) (2,728)
<CAPTION>
OCI
--------------------------------------------------
PRO
PRO FORMA FORMA PRO FORMA
NINE NINE FISCAL TWELVE
APRIL 4, MONTHS MONTHS YEAR MONTHS
1996 TO ENDED ENDED ENDED ENDED
JUNE 30, MARCH 31, MARCH 31, JUNE 30, MARCH 31,
1996 1997 1996 1996 1997
<S> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Net revenues
(4)............. $ 8,549 $ 31,741 $32,633 $44,946 $49,407
Operating
expenses:
Direct
operating...... 2,754 10,817 11,379 15,455 16,758
Selling, general
and
administrative.. 2,308 8,016 9,876 12,875 12,770
Depreciation and
amortization... 1,930 7,257 6,852 10,391 11,400
--------- ---------- --------- --------- ---------
Total operating
expenses....... 6,992 26,090 28,107 38,721 40,928
Operating
income.......... 1,556 5,651 4,526 6,225 8,479
Interest
expense......... 1,826 7,597 9,074 12,098 12,098
Other expense
(income), net... (3) (53) 1,020 269 10
Income tax
expense
(benefit)....... (11) (440) (2,563) (1,933) (480)
--------- ---------- --------- --------- ---------
Net income
(loss)......... $ (262) $ (1,453) $(3,005) $(4,209) $(3,149)
========= ========== ========= ========= =========
OTHER DATA:
Cash flows from:
Operating
activities..... (4,170) 4,674 -- -- --
Investing
activities..... 47,599 (45,239) -- -- --
Financing
activities..... 52,770 43,872 -- -- --
EBITDA (6)....... $ 3,486 $ 12,908 $11,378 $16,616 $19,879
EBITDA margin
(7)............. 40.8% 40.7% 34.8% 37.0% 40.2%
Capital
expenditures.... $ 589 $ 1,612 -- -- --
Ratio
(deficiency) of
earnings to
fixed charges... 1.0x $ (740) $(5,568) $(6,142) $(3,629)
Number of display
faces--
period end...... 9,346 13,774 -- -- --
<CAPTION>
AS OF AS OF
JUNE 30, MARCH 31,
1996 1997
<S> <C> <C> <C> <C> <C>
BALANCE SHEET
DATA:
Working capital.. $ 151 $ 7,571
Adjusted working
capital (8)..... 5,001 12,071
Total assets..... 94,829 138,731
Long-term
obligations
(9)............. 90,683 136,048
Stockholders'
equity
(deficit)....... (4,901) (6,180)
</TABLE>
See Notes to Selected Historical Consolidated Financial and Other Information.
27
<PAGE>
NOTES TO SELECTED HISTORICAL CONSOLIDATED FINANCIAL AND OTHER INFORMATION
(1) The historical information set forth under the caption "Predecessors"
represents the separate financial information of OCI North and OCI South.
(2) The historical statement of operations data for OCI for the period April 4,
1996 through June 30, 1996 has been added to the historical statement of
operations data of OCI North and OCI South for the period August 1, 1995
through April 3, 1996 and September 1, 1995 through April 3, 1996,
respectively, to arrive at the unadjusted combined information for the
period ended June 30, 1996.
(3) The historical statement of operations data of OCI North and OCI South for
the period August 1, 1995 through April 3, 1996 and September 1, 1995
through April 3, 1996, respectively, have been combined to arrive at the
unadjusted combined information for the period ended March 31, 1996.
(4) Net revenues are gross revenues less agency commissions.
(5) Net income (loss) per share for OCI North and OCI South have not been
presented because the companies are closely held and owned by private
investor groups and accordingly, an earnings per share calculation is not
required or meaningful.
(6) "EBITDA" is operating income before depreciation and amortization. EBITDA
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 EBITDA is a
measure commonly reported and widely used by analysts, investors and other
interested parties to evaluate the financial performance of companies in
the outdoor advertising industry and their ability to service indebtedness.
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 outdoor advertising industry.
(7) EBITDA margin is EBITDA stated as a percentage of net revenues.
(8) Adjusted working capital is defined as current assets less current
liabilities excluding current installments of long-term debt and obligation
under non-compete agreement.
(9) Long-term obligations are long-term debt and obligation under non-compete
agreement.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Historical Consolidated Financial and Other Information" and the financial
statements of OCI, its Predecessors and the Significant Acquisitions,
including notes thereto, appearing elsewhere in this Prospectus. The following
discussion contains certain forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed in "Risk Factors," "Business"
and elsewhere in this Prospectus, including, without limitation, risks and
uncertainties relating to leverage, the need for additional funds,
consummation and integration of future acquisitions, the ability of the
Company to achieve certain cost savings, the management of growth and the
popularity of outdoor advertising as an advertising medium.
BACKGROUND
The Company was formed in April 1996 to acquire the Predecessors. OCI South
was formed in 1972 to acquire outdoor advertising assets in the region around
Memphis, Tennessee. OCI North was formed in 1989 for the purpose of acquiring
Dingeman Advertising, Inc., an outdoor advertising company based in Traverse
City, Michigan. The Company is a holding company with no independent
operations or assets other than investments in its operating subsidiaries. The
Company is dependent on the receipt of dividends from its operating
subsidiaries to meet its liquidity needs. After giving effect to the Financing
Plan, there will be no material limitations on the ability of the operating
subsidiaries to make distributions or otherwise make available funds to the
Company.
Since its formation, the Company has completed 15 acquisitions of the assets
of outdoor advertising companies, all of which were accounted for under the
purchase method of accounting. The Company's acquisitions can be classified
into two categories: in-market acquisitions and new market acquisitions. The
Company's acquisition integration approach is different for in-market and new
market acquisitions. In-market acquisitions typically involve the purchase of
display faces only, resulting in the elimination of all personnel and related
costs. The functions relating to sales, production, leasing and administration
are assumed by existing operations. In new markets, the Company generally
eliminates administrative and accounting positions, maintains a sales and
production capability, and institutes the Company's operating philosophy,
systems and controls.
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF
DATE OF DISPLAYS ACQUISITION
NAME OF ACQUIRED COMPANY ACQUISITION DISPLAY LOCATIONS ACQUIRED TYPE
<S> <C> <C> <C> <C>
Summey Outdoor ......... June 1997 North Carolina/ South Carolina 900 In-market
Ellis Outdoor........... April 1997 Alabama 80 In-market
Quality Outdoor......... April 1997 Kentucky 180 In-market
Outdoor West............ March 1997 Tennessee 960 New market
Raven Outdoor........... February 1997 Michigan 12 In-market
Scout Outdoor........... February 1997 Tennessee 100 In-market
Amor Sign Studios....... February 1997 Michigan 120 In-market
Pabian Outdoor.......... December 1996 Georgia 40 In-market
D&S Outdoor............. December 1996 Georgia 16 In-market
Crowder Outdoor......... November 1996 Georgia 110 In-market
Skoglund................ October 1996 Minnesota/Wisconsin 1,500 New market
Hawthorne of
Birmingham............. October 1996 Alabama 23 In-market
Hawthorne of Georgia.... September 1996 Georgia 110 In-market
Alabama Outdoor......... April 1996 Alabama 2,900 New market
Georgia Outdoor......... April 1996 South Carolina/Georgia 800 New market
-----
Total.................. 7,851
=====
</TABLE>
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<PAGE>
The Company has completed 11 in-market acquisitions since September 1996 for
an aggregate purchase price of $17.5 million. The pro forma financial
information contained herein does not include the results of operations for
these businesses prior to their respective dates of acquisition as these
acquisitions were individually insignificant. Although these in-market
acquisitions did not have audited financial statements, management has
calculated the pro forma impact of these acquisitions throughout this
Prospectus for the fiscal year ended June 30, 1997 and the twelve months ended
March 31, 1997 in order to provide a potential investor with the most
meaningful information possible. Pro forma EBITDA of the Company's in-market
acquisitions has been derived from actual revenues and a careful analysis of
actual lease expenses, as well as production, sales, maintenance, illumination
and other expenses typically incurred by the Compay in operating similar
assets.
PRELIMINARY FOURTH QUARTER 1997 RESULTS OF OPERATIONS
The Company expects to report net revenues and EBITDA for the quarter ended
June 30, 1997 of approximately $12.6 million and $4.4 million, respectively.
As adjusted to reflect acquisitions completed during the fourth quarter as
though such acquisitions occurred on April 1, 1997, net revenues and EBITDA
would have been $12.9 million and $4.5 million, respectively. These figures
reflect a decline in net revenues and EBITDA from the quarter ended June 30,
1996 on a pro forma basis as adjusted for the acquisitions of all Acquired
Companies as though such acquisitions had occurred at the beginning of the
period. Such pro forma revenues and EBITDA would have been $13.4 million and
$5.3 million, respectively.
The decline was principally due to a decline in occupancy resulting from two
factors. The fourth quarter of the 1996 period included $298,000 of non-
recurring net revenues derived from advertising placed in the Company's
Atlanta area markets attributable to the 1996 Summer Olympics. In addition,
four large national advertisers that had placed advertising in the same period
in prior years did not place contracts. These contracts represented an
aggregate of $649,000 in net revenues. A significant portion of such net
revenues represents seasonal advertising. In an effort to strengthen its
salesforce generally, the Company is in the process of adding 12 new
salespersons, an increase of approximately 20%. The Company expects that this
will help it replace lost national revenues with local revenues as well as
take advantage of future opportunities. EBITDA also declined due to $125,000
of additional expense associated with failed acquisition transactions in the
1997 period.
For the fiscal year ended June 30, 1997, the Company estimates net revenues
and EBITDA would have been approximately $52.3 million and $20.8 million,
respectively, as adjusted to reflect the results of all Acquired Companies as
though the acquisitions occurred at the beginning of the period. These compare
with $53.5 million and $22.0 million of net revenues and EBITDA, respectively,
for the twelve month period ended March 31, 1997 determined on the same basis.
The foregoing information is preliminary and subject to the normal review
process by the Company's auditors in connection with the preparation of the
audited 1997 results.
OVERVIEW OF REVENUES AND EXPENSES
Revenues are a function of the number of display faces 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 twelve-month contracts to maximize both the occupancy of its
display inventory and its sales force efficiency. The Company believes that it
has opportunities to improve the occupancy levels and rate structure of its
display faces for a number of reasons, including benefits derived from
implementation of its incentive compensation-based sales strategy in newly
acquired operations and general economic conditions in its markets. The
Company utilizes substantial creative resources and aggressive sales and
marketing techniques to generate demand for outdoor advertising, including
targeting customers currently using other forms of media. The Company relies
on sales of advertising space for its revenues, and its operating results are
therefore affected by general economic conditions, as well as trends in the
advertising industry.
Net revenues are gross revenues less commissions paid to advertising
agencies that contract for the use of advertising displays on behalf of
advertisers. Agency commissions on revenues that have been contracted through
advertising agencies are approximately 15% of gross revenues. Agency
commissions amounted to approximately 8.5% of gross revenues for the nine
months ended March 31, 1997. The Company enters into agreements with
advertising agencies on a customer-by-customer basis and does not have long-
term arrangements with any advertising agencies. Because of the Company's
reliance on local advertisers, many of which do not employ
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<PAGE>
agencies, the Company depends less on placement of advertising through
agencies than most other major outdoor advertising companies; therefore, its
aggregate agency commission payments are relatively lower. The Company does
not consider agency commissions as "operating expenses" and measures its
operating performance based upon percentages of net revenues rather than gross
revenues.
Direct operating expenses consist of the following categories: maintenance,
production, lease and illumination. The maintenance category includes minor
repairs and miscellaneous maintenance of display structures as well as labor
for installation of display faces. The production category includes labor
related to paint and poster production and purchases of supplies. The lease
category consists mainly of rental payments to owners of the land underlying
the display structures. The illumination category consists of electricity
costs to light the display faces. The majority of these direct expenses are
variable costs that tend to fluctuate with revenues.
Selling, general and administrative expenses occur at both the division and
corporate levels. At the division level, these costs consist of administrative
overhead. At the corporate level, these costs represent staff and facility
expenses for the Company's executive offices, insurance and the Company's
accounting function. Selling expenses consist mainly of salaries and
commissions for the Company's sales force, travel and entertainment relating
to sales, sales administration and other related costs. The Company's bonus
expense is primarily accounted for at the division level, which division-level
bonuses are payable to division general managers and are based on the
applicable division's operating results.
THE COMPANY
THE COMPANY'S PRO FORMA TWELVE MONTHS ENDED MARCH 31, 1997 COMPARED TO PRO
FORMA FISCAL YEAR ENDED JUNE 30, 1996.
The following discussion reflects a comparison of the Company's pro forma
results of operations for the twelve months ended March 31, 1997 as if the
Significant Acquisitions had occurred at the beginning of such period and the
Company's pro forma results of operations for the fiscal year ended June 30,
1996 as if the Significant Acquisitions had occurred at the beginning of such
period.
The Company's pro forma net revenues increased $4.5 million, or 9.9%, to
$49.4 million for the twelve months ended March 31, 1997 compared to $45.0
million in pro forma net revenues for the fiscal year ended June 30, 1996.
This increase was primarily due to increased rate and occupancy levels and
revenues from in-market acquisitions completed during the twelve-month period
ended March 31, 1997.
The Company's pro forma direct operating expenses increased $1.3 million, or
8.4%, to $16.8 million for the twelve months ended March 31, 1997 compared to
$15.5 million in pro forma direct operating expenses for the fiscal year ended
June 30, 1996. This increase reflects normal inflationary cost increases and
expenses associated with in-market acquisitions.
The Company's pro forma selling, general and administrative expenses
decreased $0.1 million, or 0.8%, to $12.8 million for the twelve months ended
March 31, 1997 compared to $12.9 million in pro forma selling, general and
administrative expenses for the fiscal year ended June 30, 1996.
The Company's pro forma depreciation and amortization expense increased $1.0
million, or 9.7%, to $11.4 million for the twelve months ended March 31, 1997
compared to $10.4 million in pro forma depreciation and amortization expense
for the fiscal year ended June 30, 1996. This increase was due to higher
levels of depreciation relating to in-market acquisitions.
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<PAGE>
As a result, the Company's pro forma operating income increased $2.3
million, or 36.2%, to $8.5 million for the twelve months ended March 31, 1997
compared to $6.2 million in pro forma operating income for the fiscal year
ended June 30, 1996. This increase was the result of higher net revenues
combined with stable selling, general and administrative expenses. The
Company's pro forma operating expenses, excluding depreciation and
amortization, as a percentage of net revenues for the twelve months ended
March 31, 1997 decreased to 59.8% compared to pro forma operating expenses,
excluding depreciation and amortization, as a percentage of net revenues of
63.0% for the fiscal year ended June 30, 1996. The Company's pro forma
operating income as a percentage of net revenues for the twelve months ended
March 31, 1997 increased to 17.2% compared to pro forma operating income as a
percentage of net revenues of 13.9% for the fiscal year ended June 30, 1996.
The Company's pro forma interest expense was $12.1 million for the twelve
months ended March 31, 1997 and did not change from pro forma interest expense
for the fiscal year ended June 30, 1996.
As a result of the foregoing factors, the Company's pro forma net loss for
the twelve months ended March 31, 1997 was $3.2 million as compared to a pro
forma net loss of $4.2 million for the fiscal year ended June 30, 1996.
THE COMPANY'S NINE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE PRO FORMA
NINE MONTHS ENDED MARCH 31, 1996.
The following discussion reflects a comparison of the Company's actual
results of operations for the nine months ended March 31, 1997 and the
Company's pro forma results of operations for the nine months ended March 31,
1996. Although the pro forma operating results for the nine months ended March
31, 1996 include the results of operations of the Significant Acquisitions as
if such acquisitions had occurred at the beginning of such period, the
Company's operating results for the nine months ended March 31, 1997 only
reflect the results of operations of such Significant Acquisitions from the
date of acquisition.
The Company's net revenues decreased $0.9 million, or 2.7%, to $31.7 million
for the nine months ended March 31, 1997 compared to $32.6 million in pro
forma net revenues for the nine months ended March 31, 1996. This decrease was
primarily due to the inclusion of nine months of pro forma operating results
of the Significant Acquisitions in the pro forma information for the nine
months ended March 31, 1996.
The Company's direct operating expenses decreased $0.6 million, or 4.9%, to
$10.8 million for the nine months ended March 31, 1997 compared to $11.4
million in pro forma direct operating expenses for the nine months ended March
31, 1996. This decrease reflects the inclusion of nine months of pro forma
operating results of the Significant Acquisitions in the pro forma information
for the nine months ended March 31, 1996.
The Company's selling, general and administrative expenses decreased $1.9
million, or 18.8%, to $8.0 million for the nine months ended March 31, 1997
compared to $9.9 million in pro forma selling, general and administrative
expenses for the nine months ended March 31, 1996. This decrease was primarily
due to the inclusion of nine months of pro forma operating results of the
Significant Acquisitions in the pro forma information for the nine months
ended March 31, 1996.
The Company's depreciation and amortization expense increased $0.4 million,
or 5.9%, to $7.3 million for the nine months ended March 31, 1997 compared to
$6.9 million in pro forma depreciation and amortization expense for the nine
months ended March 31, 1996.
As a result, the Company's operating income increased $1.1 million, or
24.9%, to $5.7 million for the nine months ended March 31, 1997 compared to
$4.5 million in pro forma operating income for the nine months ended March 31,
1996. This increase is due to the inclusion of nine months of pro forma
operating results of the Significant Acquisitions in the pro forma information
for the nine months ended March 31, 1996. The Company's
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<PAGE>
operating expenses, excluding depreciation and amortization, as a percentage
of net revenues for the nine months ended March 31, 1997 decreased to 59.3%
compared to pro forma operating expenses, excluding depreciation and
amortization, as a percentage of net revenues of 65.1% for the nine months
ended March 31, 1996. The Company's operating income as a percentage of net
revenues for the nine months ended March 31, 1997 increased to 17.8% compared
to pro forma operating income as a percentage of net revenues 13.9% for the
nine months ended March 31, 1996.
The Company's interest expense decreased $1.5 million, or 16.3%, to $7.6
million for the nine months ended March 31, 1997 compared to $9.1 million in
pro forma interest expense for the nine months ended March 31, 1996. This
decrease was caused by the inclusion of nine months of pro forma operating
results of the Significant Acquisitions in the pro forma information for the
nine months ended March 31, 1996.
As a result of the foregoing factors, the Company's net loss for the nine
months ended March 31, 1997 was $1.5 million as compared to a pro forma net
loss of $3.0 million for the nine months ended March 31, 1996.
OCI NORTH
OCI NORTH'S FISCAL YEAR 1995 COMPARED TO OCI NORTH'S FISCAL YEAR 1994
OCI North's net revenues increased $0.9 million, or 9.2%, to $10.4 million
for the fiscal year 1995 compared to $9.5 million in net revenues for the same
period in 1994. This increase was primarily the result of increased rate and
occupancy levels for OCI North's displays.
OCI North's direct operating expenses were $3.7 million for the fiscal year
1995 and did not materially change from direct operating expenses for the same
period in 1994.
OCI North's selling, general and administrative expenses were $2.7 million
for the fiscal year 1995 and did not materially change from selling, general
and administrative expenses for the same period in 1994.
OCI North's depreciation and amortization expenses decreased $0.2 million,
or 7.2%, to $2.1 million for the fiscal year 1995 compared to $2.3 million in
depreciation and amortization expense for the same period in 1994.
OCI North's operating income increased $1.0 million, or 117.6%, to $1.9
million for the fiscal year 1995 compared to $0.9 million in operating income
for the same period in 1994. Such increase was primarily the result of
increased revenues due to higher rate and occupancy levels without associated
increases in operating expenses. OCI North's operating expenses, excluding
depreciation and amortization, as a percentage of net revenues for the fiscal
year 1995 decreased to 61.6% compared to operating expenses, excluding
depreciation and amortization, as a percentage of net revenues of 67.0% for
the same period in 1994. OCI North's operating income as a percentage of net
revenues for the fiscal year 1995 increased to 18.0% compared to operating
income as a percentage of net revenues of 9.0% for the same period in 1994.
OCI North's interest expense increased $0.1 million, or 4.2%, to $2.1
million for the fiscal year 1995 compared to $2.0 million in interest expense
for the same period in 1994.
As a result of the foregoing factors, OCI North's net loss for the fiscal
year 1995 was $0.1 million compared to a net loss of $1.4 million for the same
period in 1994.
OCI SOUTH
OCI SOUTH'S FISCAL YEAR 1995 COMPARED TO OCI SOUTH'S FISCAL YEAR 1994
OCI South's net revenues increased $1.0 million, or 14.4%, to $8.2 million
for the fiscal year 1995 compared to $7.1 million in net revenues for the same
period in 1994. This increase was primarily due to higher rate and occupancy
levels for the Company's displays generally and revenues associated with a
large national advertising campaign.
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<PAGE>
OCI South's direct operating expenses increased $0.3 million, or 16.3%, to
$1.9 million for the fiscal year 1995 compared to $1.6 million in direct
operating expenses for the same period in 1994.
OCI South's selling, general and administrative expenses were $2.9 million
for the fiscal year 1995 and did not materially change from selling, general
and administrative expenses for the same period in 1994.
OCI South's depreciation and amortization expense increased $0.1 million, or
14.4%, to $1.1 million for the fiscal year 1995 compared to $0.9 million in
depreciation and amortization expense for the same period in 1994.
OCI South's operating income increased $0.6 million, or 37.9%, to $2.3
million for the fiscal year 1995 compared to $1.7 million in operating income
for the same period in 1994. This increase is the result of OCI South's having
higher net revenues but stable selling, general and administrative expenses.
OCI South's operating expenses, excluding depreciation and amortization, as a
percentage of net revenues for the fiscal year 1995 decreased to 58.7%
compared to operating expenses, excluding depreciation and amortization, as a
percentage of net revenues of 63.6% for the same period in 1994. OCI South's
operating income as a percentage of net revenues for the fiscal year 1995
increased to 28.2% compared to operating income as a percentage of net
revenues of 23.4% for the same period in 1994.
OCI South's interest expense increased $0.3 million, or 37.5%, to $1.2
million for the fiscal year 1995 compared to $0.9 million in interest expense
for the same period in 1994. The increase in interest expense was due to the
refinancing of OCI South's long-term debt during fiscal year 1995.
As a result of the foregoing factors, OCI South's net income for the fiscal
year 1995 was $0.8 million compared to a net income of $0.5 million for the
same period in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company financed the consolidation of OCI North and OCI South and the
acquisitions of Georgia Outdoor and Alabama Outdoor through the combination of
a $90.0 million credit facility with Canadian Imperial Bank of Commerce
("CIBC"), as collateral agent, and The Chase Manhattan Bank ("Chase"), as
agent for a syndicate of lenders (the "Old Credit Facility"), and an equity
and subordinated debt investment of approximately $34 million from certain
individual investors, funds managed by Media/Communications Partners and Chase
Venture Capital Associates, L.P. See "Certain Relationships and Related
Transactions." Since that time, the Company has satisfied its working capital
requirements with cash from operations and to a lesser extent borrowings under
its credit facilities. Its acquisitions have been financed primarily with
borrowings under its credit facilities.
In October 1996, the Old Credit Facility was amended and restated as the
Existing Credit Facility with CIBC, as collateral agent, The First National
Bank of Chicago and First Union Bank of North Carolina, as co-agents, and
Chase, as agent, for a syndicate of lenders, in order to increase the
available credit to $140.0 million. The Company financed its acquisitions of
Skoglund, Outdoor West and several smaller outdoor advertising operations
through borrowings under the Existing Credit Facility. The Company intends to
use the proceeds of the Offering, together with borrowings under the New
Credit Facility, to repay all amounts owing under the Existing Credit
Facility. As of June 30, 1997, aggregate principal and accrued interest due
and payable under the Existing Credit Facility was $114.4 million at a
weighted average interest rate of 8.8%. As of the same date, availability
under the Existing Credit Facility was approximately $19.8 million which
reflects the amount outstanding as of June 30, 1997 and approximately $5.9
million of Notes payable-stockholders which are secured by a letter of credit
under the Existing Credit Facility.
Concurrently with the Offering, the Company intends to enter into the New
Credit Facility. The Company is entering into the New Credit Facility for the
purpose of financing acquisitions and capital expenditures relating to the
development and improvement of advertising structures. The Company believes
that its cash from operations, together with available borrowings under the
New Credit Facility, will be sufficient to satisfy its cash
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requirements, including anticipated capital expenditures, for the foreseeable
future. However, in the event that cash from operations, together with
available funds under the New Credit Facility, are insufficient to satisfy cash
requirements, the Company may require additional indebtedness to finance its
operations including, without limitation, additional acquisitions. There can be
no assurance that such additional debt will be available or that the Company
will be able to incur such additional debt. See "Description of New Credit
Facility" and "Description of Notes--Certain Covenants--Limitation on
Additional Indebtedness."
The Company has low maintenance capital expenditure requirements. Such
capital expenditures are required to maintain and upgrade the Company's
existing display faces. Management estimates that maintenance capital
expenditures will total approximately $1.5 million in fiscal 1998. In addition
to maintenance capital expenditures, the Company incurs discretionary capital
expenditures for the construction of new display faces. Management estimates
that discretionary capital expenditures will total an additional $2.5 million
in fiscal 1998.
Net cash provided by operating activities was $4.7 million for the nine
months ended March 31, 1997. Net cash used in investing activities was $45.2
million for the nine months ended March 31, 1997, resulting primarily from
acquisitions and capital expenditures. Net cash provided by financing
activities was $43.9 million for the nine months ended March 31, 1997,
resulting primarily from net borrowings under the Existing Credit Facility.
INFLATION
In the last three years, inflation has not had a significant impact on the
Company or its Predecessors.
NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of, on
April 4, 1996. This statement requires that long-lived assets and certain
identifiable intangibles be reviewed for impairment whenever events of changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less
costs to sell. Adoption of this statement did not have a material impact on the
Company's financial position, results of operations or liquidity.
TAXES
As of June 30, 1996, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $943,000. As a result of the
Formation Transactions in April 1996, future utilization of such net operating
loss carryforwards is limited to approximately $580,000 annually. The Company
expects that the net operating loss carryforwards will be exhausted during
fiscal 1998 and the Company's effective tax rate will rise in fiscal 1999 and
thereafter.
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BUSINESS
THE COMPANY
OCI is a leading provider of outdoor advertising services, operating
approximately 13,500 advertising displays in 12 midwestern and southeastern
states. The Midwest and Southeast are attractive markets for outdoor
advertising with stable, growing economies and a significant number of
advertisers in diverse industries such as retail sales, health care,
agriculture and manufacturing. The Company focuses on small- to medium-sized
markets with populations ranging from 15,000 to 150,000 and is the largest
outdoor advertising company in most of the markets in which it operates.
Management believes that operating in small- to medium-sized markets provides
certain advantages over operating in large markets, including lower and more
stable lease costs, greater new build opportunities and more attractive
acquisition opportunities.
On April 3, 1996, the Company's current structure emerged with its
acquisitions and consolidation of OCI North and OCI South. OCI South was
founded in 1972 by John C Stanley IV and A.B. Isbell upon their acquisition of
outdoor advertising assets in the region around Memphis, Tennessee. Through
dedication to customer service and product quality and the consummation of
numerous acquisitions, OCI South grew its operations to more than 2,600
display faces in six states by April 1996. In 1989, OCI North was formed by
Messrs. Stanley and Isbell to complete the acquisition of Dingeman
Advertising, Inc., an outdoor advertising company based in Traverse City,
Michigan. Through additional acquisitions and new construction, OCI North grew
its operations to more than 2,800 display faces in three states by April 1996.
See "Certain Relationships and Related Transactions--The Formation
Transactions." The Company believes that the success of its management team in
developing and expanding its operations has made OCI a significant competitor
in the outdoor advertising industry.
INDUSTRY OVERVIEW
Outdoor advertising offers repetitive impact and relatively low cost-per-
thousand impressions compared to alternative media, including television,
radio, newspapers, magazines and direct mail marketing. The outdoor
advertising industry in the United States has experienced increased advertiser
interest and revenue growth during the 1990's. According to recent 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 $2.0 billion in 1996, or
approximately 1.1% of the total advertising expenditures in the United States.
Although the outdoor advertising industry has gained increased prominence in
recent years, the industry itself dates back to the late nineteenth century
when companies began renting spaces on wooden boards or fences for advertising
"bills" which were pasted or posted to the rented spaces. The industry grew
dramatically from the 1920s to the 1960s, with the significant increase in
automobile travel and highway and freeway construction and improvement. As
roadside advertising became more popular with advertisers, the displays used
by the industry evolved from posters to more permanent billboards in standard
sizes located in highly visible, high-traffic locations.
In more recent times, the outdoor advertising industry has experienced
significant changes due to a number of factors. First, the outdoor advertising
industry has increased its visibility with and attractiveness to a diversified
set of local advertisers as well as national retail and consumer product-
oriented companies to offset the decline in the use of tobacco advertising in
recent years. Second, the industry has benefitted significantly from
improvements in production technology, including the use of computer printing,
vinyl advertising copy and improved lighting techniques, which have
facilitated a more dynamic, colorful and creative use of the medium. 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. Third, 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 study most recently published by the
Office of Highway
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Information Management of the Federal Highway Administration indicated that,
during the period from 1983 to 1990, licensed drivers in the United States
increased by 11%, vehicles owned increased by 15%, the number of vehicle trips
increased by 25% and vehicle miles increased by 40%. The Company believes that
these trends demonstrate that consumer exposure to existing billboard
structures also increased during this period.
Advertisers purchase outdoor advertising for a number of reasons. Outdoor
advertising offers repetitive impact and a relatively low cost per-thousand
impressions, a commonly used media measurement, as compared to television,
radio, newspapers, magazines and direct mail marketing. This cost-
effectiveness makes outdoor advertising 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 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 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 600 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 objective is to be a leading provider of outdoor advertising
services in small- to medium-sized markets across the United States. To
achieve this objective, the Company plans to both increase its penetration in
its existing markets and expand into attractive new markets. The Company has
historically implemented, and intends to continue to pursue, the following
operating strategy:
Pursue Strategic Acquisitions. The Company seeks to continue its growth by
pursuing an aggressive acquisition strategy emphasizing both in-market and
new market acquisitions. The Company believes it has attractive in-market
acquisition opportunities which will serve to increase market penetration
and enhance local market operating efficiencies. In most instances, in-
market acquisitions involved the purchase of display faces only and require
no incremental personnel. The Company also intends to pursue new market
acquisitions that are either within its existing regions or in new regions
where attractive growth and consolidation opportunities exist.
Leverage Operational Structure. The Company's operational structure
provides significant operating leverage to support increased penetration of
existing markets and new market expansion. The Company's operations are
comprised of 10 divisions, each with its own division headquarters to
service its display structures and customers. OCI has centralized
management operations in Traverse City, Michigan and Corinth, Mississippi
to provide administrative oversight of the divisions through centralized
purchasing, a detailed budgeting process, management information systems
and strict cost controls. With this infrastructure in place, the Company
can generate revenues from newly acquired or constructed display faces at a
very attractive incremental margin.
Focus on Local Advertisers. The Company seeks to continue its local
advertiser focus, which management believes provides the Company with a
diverse and stable advertiser base, fewer sales subject to agency
commissions and greater rate integrity. Local advertising constituted over
84% of the Company's gross revenues for the nine months ended March 31,
1997, which is higher than the industry average of 70% as estimated by the
OAAA. The Company believes that the diversity of its local customer base
insulates it
37
<PAGE>
from dependence on any one customer or industry. During the nine months
ended March 31, 1997, no single customer represented more than 2.5% of the
Company's gross revenues.
Emphasize Twelve-Month Advertising Contracts. The Company seeks to maximize
occupancy levels and sales force and production efficiency by focusing on
twelve-month advertising contracts. The Company believes that these long-
term contracts enhance occupancy levels at stable advertising rates,
generate higher renewal rates, increase the predictability of revenues and
allow its sales personnel time to provide greater attention to servicing
their accounts.
Capitalize on Experienced Management Team. The Company believes that one of
the keys to continuing its growth is its experienced management team. The
Company's three-person senior management team has over 70 years of combined
experience in the outdoor advertising industry which provides the Company
with the market knowledge and relationships necessary to identify and
evaluate acquisition candidates. Management's local relationships also
provide OCI with the ability to identify and obtain municipal approval for
new build opportunities.
RECENT ACQUISITIONS
The Company has historically relied on an acquisition-based growth strategy
that has provided its management with considerable experience in analyzing and
negotiating potential acquisitions. In addition, the Company's management has
consistently demonstrated its ability to assimilate its acquisitions into the
existing structure of the Company. The Company has acquired the assets of 15
outdoor advertising companies over a 15-month period, totaling in excess of
7,800 display faces. None of such acquisitions involved sellers affiliated
with the Company. The Company believes that these completed acquisitions have
significantly strengthened its market presence in the Midwest and Southeast
and have allowed the Company to capitalize on the operating efficiencies and
cross-market sales opportunities associated with operating in contiguous
markets. The following summarizes the Significant Acquisitions, which are
included in the pro forma financial information in this Prospectus:
The Outdoor West Acquisition. On March 31, 1997, OCI acquired substantially
all of the assets of Outdoor West for a cash purchase price of $11.8 million.
As a result of this acquisition, the Company acquired approximately 960
display faces in Tennessee and a right of first refusal to purchase Outdoor
West, Inc. of Georgia, an affiliate of Outdoor West. The acquisition of
Outdoor West has strengthened the Company's presence in eastern and central
Tennessee.
The Skoglund Acquisition. On October 31, 1996, OCI completed the acquisition
of substantially all of the assets of Skoglund for a cash purchase price of
$21.0 million. As a result of the acquisition of Skoglund, the Company
acquired approximately 1,500 display faces in Minnesota and Wisconsin. These
new market areas strengthen OCI's presence in the Midwest.
The Alabama Outdoor Acquisition. On April 30, 1996, OCI acquired
approximately 2,900 display faces across North and Central Alabama through its
purchase of substantially all of the assets of Alabama Outdoor for a cash
purchase price of $34.2 million. By purchasing display faces in the regions
around and between Birmingham and Gadsden, Alabama, the Company has been able
to strengthen its presence in a growing market.
The Georgia Outdoor Acquisition. On April 3, 1996, OCI completed the
acquisition of substantially all of the assets of Georgia Outdoor for a cash
purchase price of $11.6 million. As a result of this transaction, the Company
acquired approximately 800 display faces in Georgia and South Carolina in the
vicinity of Athens, Georgia. This complemented the Company's existing
operations in the region around Rome, Georgia.
In addition to the Significant Acquisitions, since September 1996 the
Company has consummated 11 in-market acquisitions, acquiring 1,691 display
faces in Alabama, Georgia, Kentucky, North Carolina, South Carolina, Michigan
and Tennessee for aggregate cash payments totaling approximately $17.5
million.
38
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
NUMBER OF
DATE OF DISPLAYS ACQUISITION
NAME OF ACQUIRED COMPANY ACQUISITION DISPLAY LOCATIONS ACQUIRED TYPE
<S> <C> <C> <C> <C>
Summey Outdoor.......... June 1997 North Carolina/South Carolina 900 In-market
Ellis Outdoor........... April 1997 Alabama 80 In-market
Quality Outdoor......... April 1997 Kentucky 180 In-market
Outdoor West............ March 1997 Tennessee 960 New market
Raven Outdoor........... February 1997 Michigan 12 In-market
Scout Outdoor........... February 1997 Tennessee 100 In-market
Amor Sign Studios....... February 1997 Michigan 120 In-market
Pabian Outdoor.......... December 1996 Georgia 40 In-market
D&S Outdoor............. December 1996 Georgia 16 In-market
Crowder Outdoor......... November 1996 Georgia 110 In-market
Skoglund................ October 1996 Minnesota/Wisconsin 1,500 New market
Hawthorne of
Birmingham............. October 1996 Alabama 23 In-market
Hawthorne of Georgia.... September 1996 Georgia 110 In-market
Alabama Outdoor......... April 1996 Alabama 2,900 New market
Georgia Outdoor......... April 1996 South Carolina/Georgia 800 New market
------
Total.................. 7,851
======
</TABLE>
The Company's acquisition integration approach is different for in-market
and new market acquisitions. In-market acquisitions typically involve the
purchase of display faces only, resulting in the elimination of all personnel
and related costs. The functions relating to sales, production, leasing and
administration are assumed by existing operations. In new markets, the Company
generally eliminates administrative and accounting positions, maintains a
sales and production capability, and institutes the Company's operating
philosophy, systems and controls. In addition, the Company immediately
implements its sales strategy which involves converting the compensation
program of the sales force from salary plus incentive to straight commission
and redirects the sales effort toward twelve-month advertising contracts. The
Company does not currently have any written or oral agreement to consummate
any material new acquisition.
39
<PAGE>
MARKETS
The Company operates primarily in small- to medium-sized markets in the
midwest and southeast regions of the country. Each market has local
industries, businesses and special events that are frequent users of outdoor
advertising. The Company has 10 administrative and sales divisions
headquartered in the locations listed in the table below.
The following sets forth certain information (on a pro forma basis as set
forth in the Unaudited Pro Forma Consolidated Financial Statements of OCI) for
each of the Company's markets as of and for the twelve months ended March 31,
1997, excluding the pre-acquisition operating results from the 11 individually
insignificant acquisitions by the Company since September 1996.
<TABLE>
<CAPTION>
NUMBER OF DISPLAYS
----------------------------------------------
PRO FORMA NET REVENUES
12 MONTHS ENDED
MARCH 31, 1997 PERCENTAGE OF JUNIOR 30-SHEET 8-SHEET
MARKET (IN THOUSANDS) NET REVENUES BULLETINS BULLETINS POSTERS POSTERS TOTAL
<S> <C> <C> <C> <C> <C> <C> <C>
Birmingham, AL.......... $10,533 21.3% 420 101 1,120 308 1,949
Duluth, MN.............. 6,150 12.4 318 390 864 12 1,584
Athens, GA.............. 6,037 12.2 301 415 822 98 1,636
Traverse City, MI....... 4,830 9.7 161 520 746 -- 1,427
Saginaw, MI............. 4,466 9.0 155 217 630 8 1,010
Corinth, MS............. 3,946 8.0 191 111 719 1 1,022
Johnson City, TN........ 3,878 7.8 160 136 651 -- 947
Paducah, KY............. 3,305 6.7 70 281 617 2 970
Huntsville, AL.......... 3,241 6.6 223 126 591 -- 940
Tuscaloosa, AL.......... 3,022 6.1 276 138 384 -- 798
------- ----- ----- ----- ----- --- ------
Total................. $49,408 100.0% 2,275 2,435 7,144 429 12,283(2)
======= ===== ===== ===== ===== === ======
</TABLE>
- ---------------------
(1) Separate information on the number of junior bulletins included among
bulletins is unavailable.
(2) Excludes approximately 1,180 displays acquired after March 31, 1997.
The following is an overview of the economies and significant features of
the Company's 10 markets:
Birmingham, Alabama. The Company's Birmingham market includes the region in
and around Birmingham, Alabama, the largest city and the leading trade center
in the State of Alabama. This market area is one of the Southeast's major
centers of finance, health care, manufacturing, research and engineering,
transportation and education. Unlike the other markets in which OCI operates,
Birmingham is one of the sixty largest metropolitan areas in the country.
Duluth, Minnesota. The Company's Duluth market includes the areas in and
around Duluth, Minnesota; St. Cloud, Minnesota; and Eau Claire, Wisconsin.
Important components of the Duluth area's economy include tourism, shipping,
medical services, manufacturing, mining and education. St. Cloud is located
approximately 65 miles from Minneapolis/St. Paul and is one of the state's
leading agricultural areas. It is also the home of a variety of medical and
light manufacturing companies. Eau Claire is located between Chicago and
Milwaukee and is one of Wisconsin's most rapidly growing cities. Its
industrial base includes computer manufacturing, insurance, environmental
cleaning products and meat and dairy products.
Athens, Georgia. The Company's Athens market encompasses 31 counties
throughout northwest Georgia, a region with a healthy economy well positioned
for growth. Much of this growth will emanate from the expansion of nearby
Atlanta. In addition to the large number of commuters to greater Atlanta who
live in this market area, there are a significant number of tourists who
frequent the region including visitors to the University of Georgia.
40
<PAGE>
Traverse City, Michigan. The Company's Traverse City market includes the
areas of Traverse City, Muskegon and Michigan's Upper Peninsula, some of that
state's most popular tourist destinations. The greater Traverse City area
attracts more than 2 million visitors annually to its numerous recreational
offerings and events. The area's 20 championship golf courses as well as
plentiful fishing and camping opportunities draw thousands of tourists during
the summer, while premier ski resorts and hundreds of groomed snowmobile
trails are popular in the winter. The tourism and retail sectors of the
Traverse City Division's economy are balanced by stable manufacturing and
natural resource-related sectors.
Saginaw, Michigan. The Company's Saginaw market encompasses the "Tri-Cities"
of Saginaw, Midland and Bay City, Michigan as well as the region in and around
Port Huron, Michigan. The region's solid retail sectors are complemented by a
robust tourism industry. For example, in Mount Pleasant, Michigan, the Soaring
Eagle Casino attracts many people from across the state and nearby Canada.
Other significant industry sectors in this region include automotive
manufacturing, chemical production, agriculture processing and electric power
and gas production.
Corinth, Mississippi. The Company's Corinth market covers north and central
Mississippi, northwest Alabama and west Tennessee. While this region's economy
has traditionally been rooted in the timber, pulp and paper and railroad
industries, other industries such as furniture and electronics manufacturing
have emerged in recent years. In addition, the growing presence of casino
gambling is boosting the region's economy dramatically. This market's Alabama
region features a strong mix of industries, including apparel mills, metal
casting houses and food processing plants. In addition, the lakes in this
region have made tourism an increasingly important attraction for potential
consumers in the region.
Johnson City, Tennessee. The Company's Johnson City market is centered on
the "Tri-Cities" area of Tennessee: Johnson City, Kingsport and Bristol. Local
industries include electronics, pharmaceuticals, mining, machinery, apparel,
textiles and aluminum products. The region also features many recreational
areas with boating, skiing, white water rafting and fishing which make it a
tourist destination.
Paducah, Kentucky. The Company's Paducah market encompasses parts of
Kentucky, Missouri and Illinois. The local economies within this division are
driven by a diverse collection of industries including retail, health care and
transportation. This market also includes the area in and around Decatur,
Illinois, which is centrally located among Chicago, St. Louis and
Indianapolis.
Huntsville, Alabama. The Company's Huntsville market is centered in a region
where defense and aerospace technology, research and manufacturing play an
important role in the local economy. In addition, the area's economic base
includes numerous electronics and other industrial firms. The Company's
Huntsville market also includes the Murfreesboro, Tennessee region.
Murfreesboro's proximity to Nashville generates substantial commuter and
tourist traffic in this market. This region is also the location of companies
involved in heavy manufacturing, health care and education.
Tuscaloosa, Alabama. The Company's Tuscaloosa market covers the region in
and around Tuscaloosa, Alabama, home of the main campus of the University of
Alabama which serves as the focal point for much of the activity in and around
this market area. Tuscaloosa is located fifty miles southwest of Birmingham,
and large cities such as Atlanta, Memphis and Nashville are within a two-
hundred mile radius of the city.
LOCAL MARKET OPERATIONS
In addition to the sales operations in each of its divisions, the Company
maintains a complete outdoor advertising operation, including a general
manager, a production, construction and maintenance facility, a creative
department equipped with advanced technology, a real estate unit 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
demand and provides greater incentives to employees. The decentralized sales
operations are balanced by administrative
41
<PAGE>
oversight through OCI's centralized accounting and financial controls based in
the Company's primary administrative offices in Corinth, Mississippi and
Traverse City, Michigan. These controls allow OCI to closely monitor the
operating and financial performance of its operations in each market. Mr.
Isbell is the President of the Company and its Chief Operating Officer, and
four regional Vice Presidents report directly to him. The 10 division general
managers in turn report directly to one of the four regional Vice Presidents.
Such division general managers are responsible for the day-to-day operations
of their respective markets and are compensated according to the financial
performance of such markets. In general, these local managers oversee market
development, production and local sales.
Although site leases (for land underlying an advertising structure) are
administered from the Company's primary administrative offices in Mississippi
and Michigan, each local division office is solely responsible for locating
and ultimately procuring leases for appropriate sites in its market. Site
lease contracts vary in term but typically run from five to twenty years with
various termination and renewal provisions. Each division office maintains a
leasing department, which maintains records containing information on local
property ownership, lease contract terms, zoning ordinances and permit
requirements. The Company believes that by relying on personnel in its local
offices to study market conditions and procure new site leases it is better
able to respond to increases in customer demand.
The Company has also established fully staffed and equipped creative
departments in each of its divisions. Using technologically advanced computer
hardware and software, the creative departments are able to develop original
design copy for local advertisers and exchange work and concepts with each
other or directly with clients or their agencies. This capability has
encouraged some advertising agencies to rely on the Company for the creation
of their clients' outdoor campaigns. The Company believes that its creative
departments' implementation of continuing technological advances provides a
significant competitive advantage in its sales and service area.
SALES AND SERVICE
The Company has long focused on providing a low cost, high-quality
advertising vehicle to local businesses. During the nine months ended March
31, 1997, local advertising revenues accounted for 84% of gross revenues. The
Company believes that outdoor advertising will typically be the most efficient
means for local advertisers to reach consumers. Management believes that its
local advertiser focus provides the Company with a diverse and stable
advertiser base, fewer agency commission sales and greater rate integrity. The
Company also believes that the diversity of its customer base insulates the
Company from dependence on any one customer or industry. For the nine months
ended March 31, 1997, no single customer represented more than 2.5% of the
Company's gross revenues.
The Company believes that the development of partner-like relationships with
local business owners is a key component to successful operation in smaller
markets. Management therefore encourages its sales personnel to become
acquainted with these local business persons to learn about the needs of its
small business customers and spend time discussing the benefits of outdoor
advertising with them. Few of the local advertisers in small markets have
relationships with advertising agencies; therefore, the Company obtains many
of its contracts with such advertisers through direct sales. As a result, a
lower percentage of the Company's revenues are subject to advertising agency
commissions than those of major market outdoor advertising companies.
Elimination of the payment of agency commissions on some local sales,
typically 15% of gross revenues, increases the profitability of contracts with
local businesses or, under some circumstances, enhances the Company's ability
to offer incentive programs to its customers.
The Company emphasizes the use of advertising contracts with a term of
twelve months. The Company believes that such contracts provide the Company
with considerable stability with respect to both occupancy and advertising
rates. Long-term contracts also increase the predictability of revenues and
allow sales personnel time to devote greater attention to servicing their
accounts. The Company believes that once its customers enter into twelve-month
contracts they tend to view their outdoor advertising expenses as a routine
cost of doing business.
42
<PAGE>
As a result, such customers are more likely to renew their contracts. The
Company has experienced renewal rates of approximately 75% of advertising
contracts, with average annual rate increases at or above the annual rate of
inflation.
To encourage customers to sign twelve-month poster contracts, the Company
has consistently used two promotions: an incentive program and a rotation
program. Under the incentive program, customers who enter into a twelve-month
poster contract are eligible for a rebate of a percentage of the amount paid
to the Company under such contract which may be applied to a twelve-month
renewal of such contract. Under the rotation program, customers of the Company
who have entered into twelve-month contracts can change the location of their
poster advertising display from one of the Company's structures to another
Company-owned structure every 30 to 60 days. This affords such customers with
more varied exposure and access to some of the Company's most attractive
locations which might otherwise be unavailable.
In each of its 10 divisions, the Company maintains teams of sales
representatives with defined territories who report to a general manager in
each of its markets. The Company's sales teams are experienced, with
individual sales persons averaging six years of service with the Company or
operations acquired by the Company. Each sales representative is compensated
exclusively on a commission basis, and the local general manager's
compensation is tied to the performance of his or her sales team. The Company
believes that this incentive structure, together with the experience of its
personnel, is a significant factor in its ability to maintain a solid base of
local advertisers in the communities where it operates. In addition, the
Company's national sales manager works with advertising agencies across the
country to solicit national advertising with the Company.
CUSTOMERS
Approximately 84% of the Company's gross revenues in the first nine months
of fiscal 1997 were generated from local advertisers. The Company believes
that focusing on local advertising offers several advantages over national
advertising. In local sales, the Company often deals directly with the
customer without an agency acting as an intermediary. The Company expends
considerable sales efforts on educating local customers regarding the benefits
of outdoor media and helping potential customers develop an outdoor
advertising strategy. Hence, the Company has an opportunity to develop a long-
term working relationship with local advertisers and influence their
purchasing decisions. The direct relationship also gives the Company an
advantage in obtaining renewals, as is evidenced by its advertising contract
renewal rate of 75%. In addition, the Company's experience has been that local
advertisers are more likely to enter into twelve-month contracts. See "--Sales
and Service". Local advertisers tend to have smaller advertising budgets and
are more dependent on the Company's production and creative personnel to
design and produce advertising copy. While price and availability are
important competitive factors, service and customer relationships are also
critical components of local sales. The Company's reliance on local
advertisers is particularly beneficial from a diversification standpoint. No
one customer accounted for more than 2.5% of the Company's gross revenues
during the nine months ended March 31, 1997.
The close proximity of the Company's displays to several large metropolitan
areas allows it to attract national advertisers. One strategy employed by the
Company to attract national advertisers has been the establishment of "rings"
around several major metropolitan areas including Atlanta, Detroit, Memphis,
Minneapolis and Nashville. Rather than locate signs within such metropolitan
areas, the Company operates display faces in smaller communities surrounding
these markets. National advertisers who want access to commuters who work in
metropolitan areas but live outside them are therefore attracted to OCI. The
Company competes for national advertisers primarily as compared to the outdoor
advertising industry as a whole on the basis of price, location of displays,
availability and service.
Tobacco revenues have historically accounted for a significantly lower
portion of the Company's outdoor advertising revenues than the outdoor
advertising industry as a whole. For the nine months ended March 31, 1997,
tobacco advertisers accounted for less than 10% of the Company's gross
revenues, well below the estimated 13.6% for the outdoor advertising industry
as a whole in 1996, as reported by Competitive Media Reporting and Publishers
Information Bureau Inc. Thus, the reduction by the leading tobacco companies
in their
43
<PAGE>
expenditures for outdoor advertising due to a declining population of smokers,
societal pressures, consolidation in the tobacco industry and price
competition from generic brands has had a less dramatic effect on the
Company's inventories than on the outdoor advertising industry as a whole. See
"--Government Regulation."
The following table illustrates the diversity of the Company's advertising
base for the nine months ended March 31, 1997:
GROSS REVENUES BY ADVERTISER CATEGORY
<TABLE>
<CAPTION>
PERCENTAGE OF
GROSS REVENUES
<S> <C>
Retail/Consumer Products...................................... 12.8%
Hospitality................................................... 12.4
Automotive and Related........................................ 11.8
Tobacco....................................................... 9.1
Media/Communications.......................................... 7.8
Restaurants................................................... 7.4
Gaming and other Recreation................................... 5.9
Financial Services/Insurance.................................. 5.5
Health Care................................................... 4.8
Beverages (alcoholic and non-alcoholic)....................... 4.3
Real Estate................................................... 2.3
Other......................................................... 15.9
-----
Total....................................................... 100.0%
=====
</TABLE>
INVENTORY
The Company operates four standard types of outdoor advertising display
faces:
Bulletins generally are 36 feet long by 10 1/2 feet high or 48 feet long by
14 feet high and consist of panels on which advertising copy is displayed.
The advertising copy is either hand painted onto the panels at the
facilities of the Company in accordance with design specifications supplied
by the advertiser and attached to the outdoor advertising structure, or is
hand-painted or printed with the computer-generated graphics on a single
sheet of vinyl that is wrapped around the structure. On occasion, to
attract more attention, some of the panels may extend beyond the linear
edges of the display face and may include three-dimensional embellishments.
Because of their greater impact and higher cost, bulletins are usually
located on major highways.
Junior Bulletins are smaller bulletins, measuring 25 feet long by 12 feet
high or smaller, with panels on which advertising copy is displayed. As
with standard bulletins, the advertising copy is either hand painted onto
the panels at the facilities of the Company in accordance with design
specifications supplied by the advertiser and attached to the outdoor
advertising structure, or is hand-painted or printed with the computer-
generated graphics on a single sheet of vinyl that is wrapped around the
structure. Junior bulletins may also feature panels extending beyond the
linear edges of the display face or other three-dimensional embellishments.
Junior bulletins are generally located on secondary roads and highways.
30-Sheet Posters generally are 25 feet long by 12 feet high 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 primarily located on major traffic
arteries.
Junior (8-Sheet) Posters usually are 12 feet long by 6 feet high. Displays
are prepared and mounted in the same manner as 30-sheet posters. Most
junior posters, because of their smaller size, are primarily located on
city streets.
44
<PAGE>
Billboards generally are mounted on structures owned by the Company and
located on sites that are either owned or leased by it or on which it has
acquired a permanent easement. Billboard structures are durable, have long
useful lives and do not require substantial maintenance. When disassembled,
they typically can be moved and relocated at new sites. The Company's outdoor
advertising structures are made of steel and other durable materials built to
withstand variable climates, including the rigors of the midwestern climate.
The Company expects its structures to last 15 years or more without
significant refurbishment.
PRODUCTION
The Company has internal production facilities and staff in each of its 10
divisions 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 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 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.
COMPETITION
The Company is the leading outdoor advertising provider in most of its
markets. In each of its markets, the Company faces competition from other
media, including broadcast and cable television, radio, print media and direct
mail marketers. In addition, the Company also competes with a wide variety of
"out-of-home" media, including highway logo signs, 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 low cost-per-
thousand-impressions and its ability to reach repetitively 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 600 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 3M Media, which has agreed to be acquired by Outdoor
Systems, Inc., Whiteco, Inc., and Lamar Advertising Company, each of which has
a larger national network and greater total resources than the Company. The
Company believes that its emphasis on local advertisers and its position as a
major provider of advertising services in each of its markets enable it to
compete effectively with the other outdoor media operators, as well as other
media, both within those markets and in the midwest region. The Company also
competes with other outdoor advertising companies for sites on which to build
new structures. See "Risk Factors--Competition."
45
<PAGE>
GOVERNMENT REGULATION
The outdoor advertising industry is subject to governmental regulation at
the federal, state and local levels. Federal law, principally the Highway
Beautification Act, encouraged 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 prohibitions 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
government authorities require legally erected and maintained billboards to be
removed from federally-aided highways.
The states and local jurisdictions have, in some cases, passed additional
and more restrictive regulations on the construction, repair, upgrading,
height, size and location of, and, in some instances, content of advertising
copy being displayed on outdoor advertising structures adjacent to federally-
aided highways and other thoroughfares. Such regulations, often in the form of
municipal building, sign or zoning ordinances, specify minimum standards for
the height, size and location of billboards. In some cases, the construction
of new billboards or relocation of existing billboards is prohibited. Some
jurisdictions also have restricted the ability to enlarge or upgrade existing
billboards, such as converting from wood to steel or from non-illuminated to
illuminated structures. From time to time governmental authorities order the
removal of billboards by the exercise of eminent domain. Thus far, the Company
has been able to obtain satisfactory compensation for any of its structures
removed at the direction of governmental authorities, although there is no
assurance that it will be able to continue to do so in the future.
In recent years, there have been movements to restrict billboard advertising
of certain products, including tobacco and alcohol. It is uncertain whether
additional legislation of this type will be enacted on the national level or
in any of the Company's markets. The Company derives significant revenues from
advertisers in the gaming industry. The Company is not aware of any concerted
efforts to enact legislation limiting the advertisement of casino gaming, but
there can be no assurance that there will not be such efforts in the future.
In August 1996, the FDA issued final regulations governing certain marketing
practices in the tobacco industry. Among other things, the regulations
prohibit tobacco product billboard advertisements within 1,000 feet of schools
and playgrounds and require that tobacco product advertisements on billboards
be in black and white and contain only text. Enforcement of such regulations
has been stayed indefinitely by a federal court in North Carolina. In June
1997, a majority of the major tobacco companies in the United States and
certain state attorneys general reached agreement on a proposed settlement of
litigation between such parties. The terms of such proposed settlement include
a ban on all outdoor advertising of tobacco products commencing nine months
after finalization of the settlement. The settlement is subject to numerous
conditions, including the enactment of legislation by the federal government.
At this time, it is unclear whether a definitive settlement will be reached or
what the terms of any such settlement would be. A reduction in billboard
advertising by the tobacco industry could 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. If the tobacco litigation settlement were
finalized in its current form and the Company were unable to replace revenues
from tobacco advertising with revenues from other advertising sources, the
settlement could have a material adverse effect on the Company's results of
operations. However, the Company believes that it would be able to replace a
substantial portion of revenues from tobacco advertising that would be
eliminated due to such a settlement with revenues from other sources. See "--
Customers" and "Risk Factors--Potential Elimination or Reduction of Tobacco
Advertising."
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
46
<PAGE>
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.
The outdoor advertising industry is heavily regulated and, at various times
and in various markets, the Company can expect 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 has not adversely impacted the Company's business, no
assurance can be given that existing or future laws or regulations will not
materially adversely affect the Company at some time in the future.
OUTDOOR ADVERTISING PROPERTIES
Outdoor Advertising Sites. The Company owns or has permanent easements on
approximately 158 parcels of real property that serve as the sites for its
outdoor displays. The Company's remaining approximately 5,273 advertising
display sites are leased or licensed. The Company's site leases are for
varying terms ranging from month-to-month or year-to-year to terms of 10 years
or longer, and many provide for renewal options. With the exception of
approximately 150 leases between the Company and John H. Dingeman in Michigan,
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 manage its lease portfolio and
negotiate suitable lease renewals and extensions. Through the use of double-
side structures and the erection of multiple structures on individual sites,
the Company averages approximately three display faces for every occupied site
it owns or leases.
Office and Production Facilities. The Company's principal executive and
administrative offices are located in Corinth, Mississippi and Traverse City,
Michigan. In Corinth, Mississippi, OCI leases approximately 5,000 square feet
of office space to house its administrative operations. In its Traverse City,
Michigan office, the Company leases approximately 4,500 square feet of office
space. The Company owns office and production facilities in Rome, Georgia,
Duluth, Minnesota and Corinth, Mississippi. The Company is exploring the
benefits of selling such real estate. In addition to these properties, the
Company owns or leases other office space and production and maintenance
facilities in each of its 10 divisions. The Company considers its facilities
to be well maintained and adequate for its current and reasonably anticipated
future needs.
EMPLOYEES
At March 31, 1997, the Company employed approximately 316 people, of whom
approximately 67 were primarily engaged in sales and marketing, 162 were
engaged in painting, bill posting and construction and maintenance of displays
and the balance were employed in financial, administrative and similar
capacities. The Duluth Division has 13 employees who belong to a union. The
Company considers its relations with the union and with its employees to be
good, and it has experienced no work stoppages that have materially affected
the Company's operations.
LEGAL PROCEEDINGS
From time to time, the Company may be involved in various legal proceedings
that are incidental to the conduct of its business. The Company is not
involved in any pending or, to its knowledge, threatened legal proceedings
which the Company believes could reasonably be expected to have a material
adverse effect on the Company's financial condition or results of operations.
In July 1997, the Company and a prospective seller agreed to terminate a
contract to purchase the assets of an outdoor advertising company for which
the Company had tendered a deposit in the form of a letter of credit in the
amount of $1.0 million. The Company and the seller have each made claims to
the deposit, and, while the Company believes that it is entitled to have the
deposit returned, there can be no assurance that the Company will be
successful in recovering the deposit.
47
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
John C Stanley IV.......... 49 Chairman of the Board of Directors,
Chief Executive Officer and Director
A.B. Isbell................ 61 President, Chief Operating Officer and Director
Richard W. Ebersole........ 44 Treasurer and Chief Financial Officer
Douglas W. Ferris, Jr.*.... 53 Director
Stephen F. Gormley*+....... 47 Director
John G. Hayes*+............ 34 Director
Brian J. Richmand+......... 43 Director
John G. Andrews............ 43 Regional Vice President
G. Robert Joiner........... 52 Regional Vice President
Gerald P. Scott............ 46 Regional Vice President
Mark K. Sherwood........... 37 Regional Vice President
David F. Dietz............. 47 Secretary
</TABLE>
- ---------------------
* Member of Audit Committee
+ Member of Compensation Committee
John C Stanley IV has served as Chairman of the Board of Directors and Chief
Executive Officer of the Company and its direct and indirect subsidiaries
since April 1996. From 1972 through 1994, Mr. Stanley was Vice President and
Secretary of OCI South. Since 1994, Mr. Stanley has served as Chairman of OCI
South.
A.B. Isbell has served as a Director and President and Chief Operating
Officer of the Company and its direct and indirect subsidiaries since April
1996. Mr. Isbell has also served as President of OCI South since 1972.
Richard W. Ebersole has served as a Director and Treasurer and Chief
Financial Officer of the Company and its direct and indirect subsidiaries
since April 1996. Mr. Ebersole was President of OCI North from 1991 until the
consummation of the Formation Transactions in April 1996.
Douglas W. Ferris, Jr. has been a Director of the Company since May 1997.
Mr. Ferris has been Chairman of the Board of National Commerce Bank Services,
Inc., a financial institution based in Memphis, Tennessee, since 1987.
National Commerce Bank Services, Inc. is an affiliate of National Commerce
Bank Corporation.
Stephen F. Gormley has served as a Director of the Company and its direct
and indirect subsidiaries since April 1996. Mr. Gormley has been a partner of
Media/Communications Partners, a venture capital firm, since 1985.
John G. Hayes has served as a Director of the Company and its direct and
indirect subsidiaries since April 1996. Mr. Hayes has been associated with
Media/Communications Partners since 1989 and has served as a partner since
1993.
Brian J. Richmand has served as a Director of the Company and its direct and
indirect subsidiaries since April 1996. Mr. Richmand has been a general
partner of Chase Capital Partners, the general partner of Chase Venture
Capital Associates, L.P., a venture capital firm, since August 1993. From
January 1986 to August 1993, Mr. Richmand was a partner at the law firm of
Kirkland & Ellis. Mr. Richmand is also a director of Riverwood Holding, Inc.
48
<PAGE>
John G. Andrews has been a Regional Vice President of the Company since
April 1996. Mr. Andrews was President of Alabama Outdoor from March 1994 until
Alabama Outdoor was acquired by OCI in April 1996. From March 1993 through
November 1993, Mr. Andrews served as a Vice President and Regional Manager of
Gateway Outdoor Advertising's Carolina Division, an outdoor advertising
company.
G. Robert Joiner has been a Regional Vice President of the Company since
April 1996, having previously served as a division General Manager since March
1996. Prior to joining OCI, Mr. Joiner was employed by Waste Management, Inc.,
a waste disposal company, serving as such company's State President of its
Mississippi operations from February 1993 to March 1996 and as general manager
of its Winston-Salem, North Carolina division from January 1991 to February
1993.
Gerald P. Scott has been a Regional Vice President of the Company since
March 1996, having previously served as a division General Manager since 1992.
Mark K. Sherwood has been a Regional Vice President of the Company since
September 1996, having previously served as a division manager of the Company
since September 1992. Prior to joining OCI, Mr. Sherwood was employed as a
sales manager at Coca Cola Bottling Co. of Michigan, a soft drink bottler.
David F. Dietz has served as the Secretary of the Company since April 1996.
Mr. Dietz has been a partner in the law firm of Goodwin, Procter & Hoar LLP
since 1984.
The number of directors of the Company is currently fixed at seven.
Directors are elected annually. In connection with the Formation Transactions,
the stockholders of the Company entered into a Shareholders Agreement dated as
of April 3, 1996 (the "Shareholders Agreement") which provides that the
parties thereto, who consist of all of the holders of the Company's Common
Stock, shall vote their shares of Common Stock regarding the nomination or
election of directors of the Company such that the Board of Directors will
consist of three designated representatives of management stockholders, three
designated representatives of Media Communications Partners, and one
designated representative of Chase Venture Capital Associates. See "Certain
Relationships and Related Transactions--Shareholders Agreement." See "Certain
Relationships and Related Transactions--Formation Transactions".
The Board of Directors has established an audit committee (the "Audit
Committee") and a Compensation Committee (the "Compensation Committee"). The
Audit Committee recommends the firm to be appointed as independent auditors of
the Company's financial statements and to perform services related to the
audit, reviews the scope and results of the audit with the independent
auditors, reviews with management and the independent auditors the Company's
annual operating results, considers the adequacy of the internal accounting
procedures, considers the effect of such procedures on the auditors'
independence and establishes policies for business values, ethics and employee
relations. Messrs. Ferris, Gormley and Hayes constitute the members of the
Audit Committee. The Compensation Committee, which consists of Messrs.
Gormley, Hayes and Richmand, reviews and recommends the compensation
arrangements for all directors and officers and approves such arrangements for
other senior level employees.
DIRECTOR COMPENSATION
Directors who are employees of the Company serve without compensation (other
than reimbursement of expenses) in connection with rendering services as a
Director. Non-employee directors receive $1,500 per board or committee
meeting, plus reimbursement of expenses.
EXECUTIVE COMPENSATION
Prior to the establishment of the Compensation Committee, the compensation
of executive officers of the Company was determined by the Board of Directors
of the Company. The Compensation Committee is currently responsible for
reviewing and recommending the compensation of senior executives of the
Company. The following table sets forth certain information concerning
compensation received by the Chief Executive Officer
49
<PAGE>
and the other four most highly-compensated executive officers of the Company
for services rendered to the Company in all capacities (including service as
an officer or director) in fiscal 1996. No stock options or similar awards had
been granted as of the end of fiscal 1996.
Summary Compensation. The following table shows compensation paid to the
executive officers of the Company listed below for services rendered to the
Company and its predecessors in all capacities during the fiscal year ended
June 30, 1996 (collectively, the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------- ALL OTHER
NAME AND PRINCIPAL POSITION SALARY(1) BONUS COMPENSATION
<S> <C> <C> <C>
John C Stanley IV $ 137,500 $ -- $75,386(2)
Chairman and Chief
Executive Officer
A.B. Isbell 116,666 -- 75,386(2)
President and Chief
Operating Officer
Richard W. Ebersole 108,425 108,742(3) 79,106(2)(4)
Treasurer and Chief
Financial Officer
</TABLE>
- ---------------------
(1) The current annual salaries of Messrs. Stanley, Isbell and Ebersole are
$225,000, $175,000 and $125,000, respectively.
(2) Pursuant to an agreement dated August 9, 1994 among OCI North and Messrs.
Stanley, Isbell and Ebersole in connection with the acquisition of OCI
North by the Company on April 3, 1996 OCI North issued one share of its
common stock to each of Messrs. Stanley, Isbell and Ebersole as
compensation. The market value of such share of common stock was
calculated to be $75,386.
(3) Consists of a cash bonus paid to Mr. Ebersole by OCI North upon the
acquisition of OCI North by the Company.
(4) Includes $3,720 contributed by OCI North to Mr. Ebersole's account under a
401(k) plan maintained by OCI North.
No other executive officers of the Company earned in excess of $100,000
during the fiscal year ended June 30, 1996.
401(K) PLAN
The Company has adopted a 401(k) Employee Savings Plan (the "401(k) Plan").
All full-time employees of the Company are eligible to participate in the
401(k) Plan once they have accumulated 12 months of qualified service with the
Company. The Company currently matches employee contributions to the 401(k)
Plan at a rate of 50% of each employee's contribution up to a total of 3% of
the employee's total compensation.
KEY MAN INSURANCE
The Company has $5.1 million in key man life insurance on the life of Mr.
Stanley, consisting of two 10-year level premium term policies and a $100,000
whole life policy. The Company has $3.15 million in key man life insurance on
the life of Mr. A.B. Isbell, consisting of two 10-year level premium term
policies and a $150,000 whole life policy.
50
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company formed its Compensation Committee in June 1997. Previously,
compensation decisions were made by the entire Board of Directors. Messrs.
Gormley, Hayes and Richmand comprise the Company's Compensation Committee. No
director of the Company serves on the compensation committee of the board of
directors of any other Company.
51
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Class A Common Stock, par value $.01 per
share ("Class A Common Stock") and Class B Common Stock, par value $.01 per
share ("Class B Common Stock" and, together with the Class A Common Stock, the
"Common Stock") as of May 31, 1997 and the Company's Series A Preferred Stock
as if the Series A Notes and Series B Notes had been exchanged for shares of
Series A Preferred Stock on such date (i) by each person who is known by the
Company to own beneficially five percent or more of the outstanding shares of
Common Stock, (ii) by each of the Company's directors, (iii) by each of the
Named Executives, and (iv) by all current directors and executive officers of
the Company as a group.
<TABLE>
<CAPTION>
CLASS A VOTING CLASS B NON-VOTING SERIES A
COMMON STOCK COMMON STOCK PREFERRED STOCK
----------------------- ----------------------- -------------------------
NUMBER NUMBER
OF PERCENT OF OF PERCENT OF NUMBER PERCENT OF
NAME AND ADDRESS SHARES CLASS(1) SHARES CLASS(2) OF SHARES CLASS(3)
<S> <C> <C> <C> <C> <C> <C>
Entities affiliated with
Media/Communications
Partners(4)............ 3,362.16 40.09% 2,101.34 56.96% 109,311.33 45.36%
75 State Street
Boston, MA 02109
Media/Communications
Partners II Limited
Partnership(4)....... 3,227.67 38.49 2,017.29 54.68 104,938.87 43.55
Media/Communications
Investors Limited
Partnership(4)....... 134.49 1.60 84.05 2.28 4,372.46 1.81
Chase Venture Capital
Associates, L.P.(5)..... 2,048.57(6) 24.43 1,587.94 43.04 72,757.62(7) 30.19
c/o Chase Capital
Partners
380 Madison Avenue
12th Floor
New York, NY 10017
John C Stanley IV....... 1,400.54 16.70 -- -- 27,776.02 11.11
512 Taylor Street
Corinth, MS 38834
A.B. Isbell............. 1,050.00 12.52 -- -- 20,823.86 11.53
512 Taylor Street
Corinth, MS 38834
Richard W. Ebersole..... 35.00 * -- -- 694. 13 *
Douglas W. Ferris....... 87.50 1.04 -- -- 1,735.32 *
Stephen F. Gormley(8)... 3,362.16 40.09 2,101.34 56.96 109,311.33 45.36
John G. Hayes(9)........ 3,362.16 40.09 2,101.34 56.96 109,311.33 45.36
Brian J. Richmand(10)... 2,048.57 24.43 1,587.94 43.04 72,757.62 30.19
All directors and
executive officers as a
group
(12 persons)........... 8,158.77(10) 97.29 3,689.28(12) 100.00 236,465.71(13) 98.13
</TABLE>
- ---------------------
*Represents less than 1% of the outstanding shares
(1) Total outstanding Class A Common Stock consists of 8,385.72 shares.
(2) Total outstanding Class B Stock consists of 3,689.28 shares.
(3) Total outstanding Series A Preferred Stock consists of 240,966.66 shares.
52
<PAGE>
(4) Messrs. Gormley and Hayes are general partners of M/CP II Limited
Partnership, the general partner of Media/Communications Partners II
Limited Partnership ("M/C II") and Media/Communications Investors Limited
Partnership ("M/C Investors"). The consent of general partners holding a
majority of the voting percentages of M/CP II Limited Partnership is
required to vote on behalf of M/C II and M/C Investors.
(5) Mr. Richmand, as general partner of Chase Capital Partners, the general
partner of Chase Venture Capital Associates, L.P. ("CVCA"), has the power
to vote such shares.
(6) Includes (i) 1,204.16 shares held by Mr. Stanley, (ii) 98.19 shares held
by the JCS Trust of which Mr. Stanley serves as trustee and (iii) 98.19
shares held by the LWS Trust of which Mr. Stanley serves as trustee.
(7) Includes (i) 23,881.28 shares held by Mr. Stanley, (ii) 1,947.37 shares
held by the JCS Trust and (iii) 1,947.37 shares held by the LWS Trust.
(8) Consists of shares held by M/C II and the M/C Investors. As a general
partner of Media/Communications Partners, Mr. Gormley may be deemed to be
the beneficial owner of such shares. Mr. Gormley disclaims beneficial
ownership of such shares.
(9) Consists of shares held by M/C II and the M/C Investors. As a general
partner of Media/Communications Partners, Mr. Hayes may be deemed to be
the beneficial owner of such shares. Mr. Hayes disclaims beneficial
ownership of such shares.
(10) Consists of shares held by CVCA. As a general partner of CVCA, Mr.
Richmand may be deemed to be the beneficial owner of such shares. Mr.
Richmand disclaims beneficial ownership of such shares.
(11) Includes (i) 3,362.16 shares of Class A Common Stock held by entities
affiliated with Media/Communications Partners, (ii) 2,048.57 shares of
Class A Common Stock held by CVCA and (iii) 98.19 shares of Class A
Common Stock held by each of the JCS Trust and the LWS Trust of which Mr.
Stanley serves as trustee.
(12) Consists of (i) 2,101.34 shares of Class B Common Stock held by entities
affiliated with Media/Communications Partners and (ii) 1,587.94 shares of
Class B Common Stock held by CVCA.
(13) Includes (i) 109,311.33 shares of Series A Preferred Stock held by
entities affiliated with Media/Communications Partners, (ii) 72,757.62
shares of Series A Preferred Stock held by CVCA and (iii) 1,947.37 shares
of Series A Preferred Stock held by each of the JCS Trust and the LWS
Trust of which Mr. Stanley serves as trustee.
53
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
THE FORMATION TRANSACTIONS
On April 3, 1996, the Company's current structure emerged through an equity
financing and the simultaneous acquisition and consolidation of OCI North and
OCI South (collectively, the "Formation Transactions"). The terms of the
transactions discussed below were on terms as favorable as could have been
received from disinterested third parties.
Acquisition of OCI North. Pursuant to an Asset Purchase Agreement dated as
of April 3, 1996 (the "OCI North Purchase Agreement"), the Company acquired
from all of the shareholders of OCI North, including Media/Communications
Partners Limited Partnership, Chestnut Street Partners, Inc., Milk Street
Partners, Inc. and TA Investors (collectively, the "Original MCP Investors"),
John C Stanley IV, A.B. Isbell and Richard W. Ebersole, all of the outstanding
capital stock of OCI North for an aggregate purchase price of $9.5 million.
Under the terms of the OCI North Purchase Agreement, the shares of OCI North
common stock and preferred stock held by Messrs. Stanley, Isbell and Ebersole
were initially purchased for cash by M/C II and M/C Investors (together, the
"MCP Investors"). The MCP Investors subsequently assigned all shares of OCI
North common stock and preferred stock to OCI in exchange for shares of Common
Stock of the Company. For each share of OCI North common stock, valued at
$75,347 per share, the MCP Investors received 72.07 shares of the Company's
Common Stock and a $3,310 cash payment, and for each share of OCI North
preferred stock, valued at $2,178 per share, the MCP Investors received 2.18
shares of the Company's Common Stock. As a result, M/C II purchased 1,832.45
shares of Common Stock, and M/C Investors purchased 76.36 shares of Common
Stock. At the time of the Formation Transactions, OCI North also paid 100% of
the principal and accrued interest on subordinated notes issued in August 1989
to each of the Original MCP Investors. Messrs. Gormley and Hayes are partners
of entities affiliated with each of the MCP Investors and the Original MCP
Investors.
Acquisition of OCI South. On April 3, 1996, under the terms of a Stock and
Warrant Purchase Agreement, the Company, in conjunction with New South
Holdings Corp., a wholly-owned subsidiary of the Company ("New South
Holdings"), acquired all of the outstanding capital stock of OCI South for an
aggregate purchase price of $15.0 million, including, shares held by Mr.
Stanley, A.B. Isbell, Norman Isbell, Priscilla S. Denton, the JCS Trust and
the LWS Trust, in exchange for (i) the issuance by the Company of $5.9 million
aggregate principal amount of notes payable to Messrs. Stanley and A.B. Isbell
(the "South Notes"), which notes bear interest at a rate based on the
Company's interest rate under its Senior Credit Facility and are due and
payable on April 3, 1998, and (ii) the issuance of shares of Common Stock and
Series A 10% Subordinated Notes due December 31, 2003 of OCI to Messrs.
Stanley, A.B. Isbell, Norman Isbell, the JCS Trust and the LWS Trust. Norman
Isbell is the son of A.B. Isbell. Ms. Denton is the sister of Mr. Stanley. Mr.
Stanley is the trustee of the JCS Trust and the LWS Trust. For each share of
OCI South common stock, valued at $1,057 per share, the former stockholders of
OCI South received 1.03 shares of the Company's Common Stock and a $30 cash
payment. As a result Mr. Stanley purchased 1,204.16 shares of Common Stock;
Mr. A.B. Isbell purchased 1,050.00 shares of Common Stock; Mr. Norman Isbell
purchased 51.95 shares of Common Stock; Ms. Denton purchased 87.50 shares of
Common Stock; the JCS Trust purchased 98.19 shares of Common Stock; and the
LWS Trust purchased 98.19 shares of Common Stock. As of June 30, 1997,
interest payments in the following amounts have been paid to Mr. Stanley, Mr.
A.B. Isbell, Mr. Norman Isbell, the JCS Trust and the LWS Trust, respectively,
under the terms of the Series A Notes: $102,306, $89,208, $4,414, $8,342 and
$8,342. As of June 30, 1997 interest payments in the following amounts have
been paid to Mr. Stanley and Mr. A.B. Isbell, respectively, under the terms of
the South Notes: $197,212 and $215,423. The South Notes will remain
outstanding and payable by New South Holdings after this Offering.
Equity Financing of OCI. On April 3, 1996, under the terms of a Securities
Purchase Agreement (the "OCI Agreement"), M/C II purchased for $7.4 million in
cash 1,395.22 shares of Common Stock and $6.0 million aggregate principal
amount of Series B Notes, M/C Investors purchased for $0.3 million in cash
58.13 shares of Common Stock and $0.2 million principal amount of Series B
Notes and CVCA purchased for $6.4
54
<PAGE>
million cash 2,237.85 shares of Common Stock and $4.2 million principal amount
of Series B Notes. Mr. Richmand is a partner of the general partner of CVCA.
In addition, Mr. Ebersole purchased for $100,000 cash shares of Common Stock
and $65,000 principal amount of Series A Notes. On April 30, 1996, pursuant to
the terms of the OCI Agreement and in connection with the acquisition of
Alabama Outdoor, M/C II purchased for $5.8 million cash 2,017.29 shares of
Common Stock and $3.7 million aggregate principal amount of Series B Notes,
M/C Investors purchased for $0.2 million cash 84.05 shares of Common Stock and
$0.2 million principal amount of Series B Notes and CVCA purchased for $4.0
million cash 1,398.66 shares of Common Stock and $2.6 million principal amount
of Series B Notes. On September 10, 1996, Gerald P. Scott and G. Robert
Joiner, under the same terms as the April 3, 1996 transactions, purchased for
$150,000 cash 52.50 shares of Common Stock and $97,500 principal amount of
Series A Notes of the Company. On January 27, 1997, John Andrews and Mark
Sherwood, under the same terms as the April 3, 1996 transactions, purchased
for $100,000 cash 35.00 shares of Common Stock and $65,000 principal amount of
Series A Notes.
SHAREHOLDERS AGREEMENT
All of the Company's stockholders have entered into the Shareholders
Agreement pursuant to which they have agreed to cause the Board of Directors
to consist at all times of seven directors, with the executive officers and
other individual stockholders of the Company (the "Management Investors")
having the ability to nominate three directors, the M/C Investors having the
ability to nominate three directors and CVCA having the ability to nominate
one director. Each party agrees to vote for the other parties' nominees. Under
the Shareholders Agreement, if a party desires to sell any shares of Common
Stock (other than transfers to permitted affiliates of such stockholders or
through underwriters in a public offering), then such party must offer to sell
such shares first to the Company and, if the Company refuses to purchase such
shares, then to the other parties to the Shareholders Agreement. In addition,
such potential selling party to the Shareholders Agreement must offer each of
the other parties to the Shareholders Agreement "go-along" rights to sell a
proportional amount of its shares of Common Stock or other security of the
Company to the same purchaser in the same transaction. Furthermore, under the
terms of the Shareholders Agreement, the approval of a majority of the
shareholders of the Company and, through April 3, 1999, a majority of the
Management Investors is required to approve a sale of the Company. At any time
from and after April 3, 2003, each of the Management Investors, the M/C
Investors and CVCA shall have the right to cause the Company to take such
actions as may be reasonably necessary or appropriate to consummate a sale of
the Company.
REGISTRATION RIGHTS AGREEMENT
In connection with the initial capitalization of the Company, OCI entered
into a Registration Rights Agreement with the holders (the "Holders") of
12,075 shares of its Common Stock ("Registrable Shares") which provides that,
subject to certain limitations relating to whether the Company has filed other
registration statements or if the filing of a registration statement on behalf
of a Holder would have a material adverse effect on the Company, upon a
written request by the Holders of at least fifty-one percent (51%) of the
Registrable Shares at any time after the earlier of six months after the first
public offering of securities of the Company or April 3, 1999, the Company
shall use its best efforts to effect the registration of all or a portion of
the shares of Common Stock of such requesting Holders. If the Company becomes
eligible to use a shelf registration statement, the Holders of at least ten
percent (10%) of the Registrable Shares shall have the right to request, and
the Company shall use its best efforts to have declared effective, not more
than two (2) shelf registration statements per year for a public offering of
Registrable Securities having an aggregate proposed offering price of not less
than $250,000.
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DESCRIPTION OF NEW CREDIT FACILITY
The Company and all of its subsidiaries have entered into the New Credit
Facility, which will become effective upon consummation of the Offering. A
copy of the form of the New Credit Facility has been filed as an exhibit to
the Registration Statement of which this Prospectus is a part and the
following summary of the material terms of the New Credit Facility is
qualified in its entirety be reference thereto. The material terms and
conditions of the New Credit Facility are as set forth below.
Borrowers. The subsidiaries of the Company, OCI (N) Corp. and OCI (S) Corp.,
will be co-borrowers (the "Borrowers") under the New Credit Facility.
Structure. The New Credit Facility is a $150 million facility, of which $110
million is immediately available and $40 million will become available upon
the agreement of the Company and the Company's creditors. The New Credit
Facility may be utilized to fund the Company's working capital requirements,
including issuance of stand-by and trade letters of credit, to fund
acquisitions (subject to compliance with certain covenants) and for other
general corporate purposes.
Security; Guaranty. The New Credit Facility will be unsecured. The
Borrowers' obligations under the New Credit Facility will be guaranteed by the
Company.
Interest; Maturity. Borrowings under the New Credit Facility will bear
interest, payable quarterly, at a rate per annum equal (at the Company's
option) to: (i) the Agent's LIBOR rate plus an applicable margin or (ii) an
alternate base rate plus an applicable margin. Initially, the applicable
margin is expected to be % per annum for LIBOR rate loans and % per annum
for alternate base rate loans. The applicable margins may reduce depending
upon the Company's leverage ratio. The New Credit Facility amortizes quarterly
commencing in June 1998 and will mature on the seventh and one half year
anniversary of the closing of the Transactions.
Fees. The Company will be required to pay the lenders under the New Credit
Facility, on a quarterly basis, a commitment fee equal to % per annum (which
may be reduced based on the Company's leverage ratio) on the undrawn portion
of the New Credit Facility.
Covenants. The New Credit Facility contains the following material covenants
which restrict the Company and its subsidiaries from, among other things: (i)
changes in business; (ii) with certain exceptions, consolidation, mergers,
sales or purchases of assets; (iii) with certain exceptions, incurring,
creating, assuming or suffering to exist any liens or encumbrances upon
property of the Company or assigning any right to receive income; (iv) with
certain exceptions, creating, incurring, assuming or suffering to exist any
indebtedness; (v) making investments or loans in any other person or entity or
acquiring or establishing any subsidiaries except for investments and
subsidiaries permitted under the New Credit Facility; (vi) selling, assigning
or otherwise encumbering or disposing of the capital stock or other securities
of any subsidiary; (vii) making any optional or voluntary prepayments on
indebtedness; (viii) with certain exceptions, redeeming, retiring or
purchasing capital stock of the Company or declaring or paying dividends on
the capital stock of the Company; and (ix) except as to certain transactions
that comply with the terms of the New Credit Facility, entering into
transactions with affiliates. In addition, the New Credit Facility also
requires the Company to maintain (a) a leverage ratio, defined as Total Debt
to Operating Cash Flow, below a specified maximum of 6.75 to 1.00, (b) an
interest coverage ratio, defined as pro forma Operating Cash Flow for the
period of 12 months most recently ended to total accrued cash interest expense
for such period, of at least 1.50 to l.00 and (c) a fixed charge coverage
ratio, defined as pro forma Operating Cash Flow for the period of 12 months
most recently ended to total projected payments of principal and interest on
debt to be made in the succeeding four fiscal quarters plus (I) capital
expenditures and (II) income and franchise tax payments and stock dividends
during such period of at least 1.05 to 1.00
Events of Default. The New Credit Facility will contain customary events of
default, including non-payment of principal, interest or fees, material
inaccuracy of representations and warranties, violation of covenants, cross-
default and cross-acceleration to certain other indebtedness, certain events
of bankruptcy and
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insolvency, certain events under the Employee Retirement Income Security Act
of 1974, as amended, material judgments, actual or asserted invalidity of any
guarantee or security interest and a change of control in certain
circumstances as set forth therein.
Change of Control. A "change of control" of the Company constitutes an event
of default permitting the lenders to accelerate indebtedness under and
terminate the New Credit Facility.
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DESCRIPTION OF NOTES
GENERAL
The Notes will be issued pursuant to an Indenture, dated as of , 1997
(the "Indenture"), among the Company, the Guarantors and First Union National
Bank of North Carolina, as trustee (the "Trustee"). The terms of the Notes
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act of 1939, as amended (the "Trust Indenture
Act"), as in effect on the date of the Indenture. The Notes are subject to all
such terms, and holders of the Notes are referred to the Indenture and the
Trust Indenture Act for a statement of them. The following is a summary of the
material terms and provisions of the Notes. This summary does not purport to
be a complete description of the Notes and is subject to the detailed
provisions of, and qualified in its entirety by reference to, the Notes and
the Indenture (including the definitions contained therein). A copy of the
form of Indenture has been filed as an exhibit to the Registration Statement
of which this Prospectus is a part. The definitions of certain capitalized
terms are set forth under "--Certain Definitions" and throughout this
description. Capitalized terms that are used but not otherwise defined herein
have the meanings assigned to them in the Indenture and such definitions are
incorporated herein by reference. For purposes of this section, references to
the "Company" include only the Company and not its subsidiaries.
The Notes will be general unsecured obligations of the Company and will be
subordinated in right of payment to Senior Indebtedness of the Company and
will rank pari passu in right of payment with all other senior subordinated
Indebtedness of the Company. The Notes will be fully and unconditionally
guaranteed, on a senior subordinated basis, as to payment of principal,
premium, if any, and interest, jointly and severally, by the Guarantors.
PRINCIPAL, MATURITY AND INTEREST
The Notes will be limited in aggregate principal amount to $100,000,000 and
will mature on , 2007. The Notes will bear interest at a rate of % per
annum from the date of original issuance until maturity. Interest will be
payable semi-annually in arrears on and , commencing , 1998, to
holders of record of the Notes at the close of business on the immediately
preceding and , respectively.
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after , 2002 at the following redemption prices
(expressed as a percentage of principal amount), together, in each case, with
accrued and unpaid interest, if any, to the redemption date, if redeemed
during the twelve-month period beginning on , of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
<S> <C>
2002............................................. %
2003............................................. %
2004............................................. %
2005 and thereafter.............................. 100.000%
</TABLE>
Notwithstanding the foregoing, the Company may redeem in the aggregate up to
one-third of the original principal amount of Notes at any time and from time
to time prior to , 2000 at a redemption price equal to % of the aggregate
principal amount so redeemed, plus accrued interest to the redemption date out
of the Net Proceeds of one or more Public Equity Offerings; provided that at
least two-thirds of the principal amount of Notes originally issued remain
outstanding immediately after the occurrence of any such redemption and that
any such redemption occurs within 60 days following the closing of any such
Public Equity Offering.
In the event of a redemption of fewer than all of the Notes, the Trustee
shall select by lot or in such other manner as it shall deem fair and
equitable the Notes to be redeemed; provided, however, that if a partial
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redemption is made with the proceeds of a Public Equity Offering, selection of
the Notes for redemption shall be made by the Trustee only on a pro rata
basis, unless such method is otherwise prohibited. The Notes will be
redeemable in whole or in part upon not less than 30 nor more than 60 days'
prior written notice, mailed by first class mail to a holder's last address as
it shall appear on the register maintained by the Registrar of the Notes.
Notice of a redemption in connection with a Public Equity Offering shall be
mentioned within 60 days of their particular Public Equity Offering. On and
after any redemption date, interest will cease to accrue on the Notes or
portions thereof called for redemption unless the Company shall fail to redeem
any such Note.
MANDATORY REDEMPTION
The Notes will not be subject to the benefit of any mandatory sinking fund.
Upon the occurrence of certain Asset Sales or a Change of Control, holders of
the Notes will have the right to require the Company to purchase some or all
of their Notes, as more fully described under "--Repurchase at the Option of
Holders--Change of Control" and "--Asset Sales."
GUARANTEES
The Company's obligations under the Notes will be fully and unconditionally
and jointly and severally guaranteed (the "Guarantees") on a senior
subordinated basis by the Guarantors. All payments pursuant to the Guarantees
by the Guarantors will be subordinated in right of payment to the prior
payment in full of all Guarantor Senior Indebtedness of the Guarantor, to the
same extent and in the same manner that all payments pursuant to the Notes are
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness of the Company. See "--Subordination of Notes and Guarantees."
The obligations of each Guarantor are limited to the maximum amount as will,
after giving effect to all other contingent and fixed liabilities of such
Guarantor (including, without limitation, any guarantees of Senior
Indebtedness) and after giving effect to any collections from or payments made
by or on behalf of any other Guarantor in respect of the obligations of such
other Guarantor under its Guarantee or pursuant to its contribution
obligations under the Indenture, result in the obligations of such Guarantor
under the Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law. Each Guarantor that makes a payment or
distribution under a Guarantee shall be entitled to a contribution from each
other Guarantor in a pro rata amount based on the net assets of each
Guarantor.
Subject to the provisions of "--Merger, Consolidation or Sale of Assets," a
Guarantor will be released from all of its obligations under its Guarantee if
all or substantially all of its assets are sold or all of its Capital Stock is
sold (whether by way of merger, consolidation or otherwise), in each case in a
transaction in compliance with the covenant described under "Repurchase at the
Option of Holders--Asset Sales" and the other provisions of the Indenture.
SUBORDINATION OF NOTES AND GUARANTEES
The indebtedness represented by the Notes and the Guarantees will, to the
extent and in the manner provided for in the Indenture, be subordinated in
right of payment to the prior payment and satisfaction in full in cash of all
existing and future Senior Indebtedness of the Company and Guarantor Senior
Indebtedness, as the case may be, including obligations under the New Credit
Facility. While the Notes and the Guarantees are senior subordinated
obligations, after giving effect to the Offering, there will be no
indebtedness that is subordinated in right of payment to the Notes, and the
Company and the Guarantors have no present plans to issue any indebtedness
that is subordinated to the Notes and the Guarantees. As such the Notes will
be subordinate to all of the indebtedness of the Company and the Guarantors
expected to be outstanding immediately following the Offering. As of March 31,
1997, after giving pro forma effect to the application of the net proceeds of
the Offering, the Company's total long-term debt would have been approximately
$25.5 million and the Company and the Guarantors would have had the ability to
borrow an additional $124.5 million.
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In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, arrangement, reorganization or other similar case
or proceeding in connection therewith, relative to the Company or to its
creditors, as such, or to its assets, whether voluntary or involuntary, or any
liquidation, dissolution or other winding-up of the Company, whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy, or any
general assignment for the benefit of creditors or other marshalling of assets
or liabilities of the Company (except in connection with the merger or
consolidation of the Company or its liquidation or dissolution following the
transfer of substantially all of its assets, upon the terms and conditions
permitted under the circumstances described under "--Merger, Consolidation or
Sale of Assets"), the holders of Senior Indebtedness of the Company will be
entitled to receive payment and satisfaction in full in cash of all
obligations due on or in respect of all Senior Indebtedness of the Company
before the holders of the Notes are entitled to receive or retain any payment
or distribution of any kind (other than a payment or distribution in the form
of Permitted Junior Securities) on account of the Notes. In the event that,
notwithstanding the foregoing, the Trustee or any holder of Notes receives any
payment or distribution of assets of the Company of any kind, whether in cash,
property or securities, including, without limitation, by way of set-off or
otherwise, in respect of the Notes before all Obligations in respect of Senior
Indebtedness of the Company are paid and satisfied in full in cash, then such
payment or distribution (other than a payment or distribution in the form of
Permitted Junior Securities) will be held by the recipient in trust for the
benefit of holders of Senior Indebtedness and will be immediately paid over or
delivered to the holders of Senior Indebtedness or their representative or
representatives to the extent necessary to make payment in full of all
Obligations with respect to Senior Indebtedness remaining unpaid, after giving
effect to any concurrent payment or distribution, or provision therefor, to or
for the holders of Senior Indebtedness (except that holders of Notes may
receive payments made from the trust (the "Defeasance Trust") described under
"--Defeasance and Covenant Defeasance" if the deposit into such trust was
permitted to be made under the terms of the Indenture). By reason of such
subordination, in the event of liquidation or insolvency, creditors of the
Company who are holders of Senior Indebtedness may recover more, ratably, than
other creditors of the Company, and creditors of the Company who are not
holders of Senior Indebtedness or of the Notes may recover more, ratably, than
the holders of the Notes.
No payment or distribution (other than payments made out of the Defeasance
Trust) of any assets or securities of the Company or any of its Subsidiaries
of any kind or character may be made by or on behalf of the Company,
including, without limitation, by way of set-off or otherwise, for or on
account of the Notes, or for or on account of the purchase, redemption or
other acquisition of the Notes, and neither the Trustee nor any holder or
owner of any Notes shall take or receive from the Company, directly or
indirectly in any manner, payment in respect of all or any portion of Notes
following the delivery by the representative of the holders of Designated
Senior Indebtedness (the "Representative") to the Trustee of written notice of
the occurrence of a Payment Default, and in any such event, such prohibition
shall continue until such Payment Default is cured, waived in writing or
ceases to exist. At such time as the prohibition set forth in the preceding
sentence shall no longer be in effect, subject to the provisions of the
following paragraph, the Company shall resume making any and all required
payments in respect of the Notes, including any missed payments.
Upon the occurrence of a Non-Payment Event of Default in respect of
Designated Senior Indebtedness, no payment or distribution (other than
payments made out of the Defeasance Trust) of any assets of the Company of any
kind or character may be made by the Company, including, without limitation,
by way of set-off or otherwise, for or on account of the Notes, or for or on
account of the purchase, redemption or other acquisition of Notes, and neither
the Trustee nor any holder or owner of any Notes shall take or receive from
the Company, directly or indirectly in any manner, payment in respect of all
or any portion of the Notes, for a period (a "Payment Blockage Period")
commencing on the date of receipt by the Trustee of written notice from the
Representative of such Non-Payment Event of Default unless and until (subject
to any blockage of payments that may then be in effect under the preceding
paragraph) the earliest of (x) more than 179 days shall have elapsed since
receipt of such written notice by the Trustee, (y) such Non-Payment Event of
Default shall have been cured or waived in writing or shall have ceased to
exist or such Designated Senior Indebtedness shall have been paid in full or
(z) such Payment Blockage Period shall have been terminated by written notice
to the Company or the Trustee from such Representative, after which, in the
case of clause (x), (y) or (z), the Company
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shall resume making any and all required payments in respect of the Notes,
including any missed payments. In no event will a Payment Blockage Period
extend beyond 179 days from the date of the receipt by the Trustee of the
notice initiating such Payment Blockage Period. Only one Payment Blockage
Period with respect to the Notes may be commenced within any 365-day period.
No Non-Payment Event of Default with respect to Designated Senior Indebtedness
that existed or was continuing on the date of the commencement of any Payment
Blockage Period with respect to the Designated Senior Indebtedness initiating
such Payment Blockage Period will be, or can be, made the basis for the
commencement of a second Payment Blockage Period, unless such default has been
cured or waived for a period of not less than 90 consecutive days. In no event
shall a Payment Blockage Period extend beyond 179 days from the date of the
receipt of the notice referred to above and there must be a 186-consecutive-
day period in any 365-consecutive-day period during which no Payment Blockage
Period is in effect. In the event that, notwithstanding the foregoing, the
Company makes any payment or distribution to the Trustee or any holder of any
Note prohibited by the subordination provision of the Indenture, then such
payment or distribution will be required to be paid over and delivered to the
holders (or their representative) of Designated Senior Indebtedness.
Each Guarantee will, to the extent set forth in the Indenture, be
subordinated in right of payment to the prior payment in full of all
Obligations in respect of Guarantor Senior Indebtedness of the applicable
Guarantor, including obligations of such Guarantor with respect to its
guarantee of the Company's obligations under the New Credit Facility, and will
be subject to the rights of holders of Designated Senior Indebtedness of such
Guarantor to initiate blockage periods, with respect to the Guarantees at the
same times as a Payment Blockage Period is in effect with respect to the
Notes.
If the Company or any Guarantor fails to make any payment on the Notes or
any Guarantee, as the case may be, when due or within any applicable grace
period, whether or not on account of payment blockage provisions, such failure
would constitute an Event of Default under the Indenture and would enable the
holders of the Notes to accelerate the maturity thereof. See "--Events of
Default."
A holder of Notes by his acceptance of Notes agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on his behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee as his
attorney-in-fact for such purpose.
REPURCHASE AT THE OPTION OF HOLDERS
Change of Control
The Indenture will provide that upon the occurrence of a Change of Control,
each holder of Notes will have the right to require the Company to purchase
all or any part of such holder's Notes pursuant to an offer described below
(the "Change of Control Offer") at a purchase price equal to 101% of the
principal amount thereof plus any accrued and unpaid interest, if any, thereon
to the date of purchase (the "Change of Control Payment").
Within 30 days of the occurrence of a Change of Control, the Company shall
send by first-class mail, postage prepaid, to the Trustee and to each holder
of the Notes, at the address appearing in the register maintained by the
Registrar of the Notes, a notice stating: (1) that the Change of Control Offer
is being made pursuant to this covenant and that all Notes tendered will be
accepted for payment; (2) the purchase price and the purchase date, which
shall be a business day no earlier than 30 business days nor later than 60
business days from the date such notice is mailed (the "Change of Control
Payment Date"); (3) that any Note not tendered will continue to accrue
interest; (4) that, unless the Company defaults in the payment of the Change
of Control Payment, any Notes accepted for payment pursuant to the Change of
Control Offer shall cease to accrue interest after the Change of Control
Payment Date; (5) that holders accepting the offer to have their Notes
purchased pursuant to a Change of Control Offer will be required to surrender
the Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the business day preceding the Change of Control
Payment Date; (6) that holders will be entitled to withdraw their acceptance
if the Paying Agent receives, not later than the close of business on the
third Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the holder,
the principal amount of the
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Notes delivered for purchase, and a statement that such holder is withdrawing
his election to have such Notes purchased; (7) that holders whose Notes are
being purchased only in part will be issued new Notes equal in principal
amount to the unpurchased portion of the Notes surrendered, provided that each
Note purchased and each such new Note issued shall be in an original principal
amount in denominations of $1,000 and integral multiples thereof; (8) any
other procedures that a holder must follow to accept a Change of Control Offer
or effect withdrawal of such acceptance; and (9) the name and address of the
Paying Agent.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent money
sufficient to pay the purchase price of all Notes or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Company. The Paying Agent shall promptly mail to each
holder of Notes so accepted payment in an amount equal to the purchase price
for such Notes, and the Company shall execute and issue, and the Trustee shall
promptly authenticate and mail to such holder, a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered; provided that each
such new Note shall be issued in an original principal amount in denominations
of $1,000 and integral multiples thereof. The Company will send to the Trustee
and the holders of Notes on or as soon as practicable after the Change of
Control Payment Date a notice setting forth the results of the Change of
Control Offer.
The Company will not be required to make a Change of Control Offer if a
third party makes the Change of Control Offer in the manner, at the time and
otherwise in compliance with the requirements set forth in the Indenture
applicable to a Change of Control Offer made by the Company and purchases all
Notes or portions thereof validly tendered and not withdrawn under such Change
of Control Offer.
The New Credit Facility will prohibit the Company from repurchasing any
Notes pursuant to a Change of Control Offer prior to the repayment in full of
the Senior Indebtedness and Guarantor Senior Indebtedness under the New Credit
Facility. Moreover, the occurrence of certain change of control events
identified in the New Credit Facility will constitute a default under the New
Credit Facility. Any future credit facilities or other agreements relating to
Senior Indebtedness to which the Company becomes a party may contain similar
restrictions and provisions. If a Change of Control were to occur, the Company
may not have sufficient available funds to pay the Change of Control Payment
for all Notes that might be delivered by holders of the Notes seeking to
accept the Change of Control Offer after first satisfying its obligations
under the New Credit Facility or other agreements relating to Senior
Indebtedness, if accelerated. The failure of the Company to make or consummate
the Change of Control Offer or pay the Change of Control Payment when due will
give the Trustee and the holders of the Notes the rights described under "--
Events of Default."
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under
applicable law. Accordingly, the ability of a holder of the Notes to require
the Company to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
Asset Sales
The Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, consummate an Asset Sale unless (i) the Company or
such Subsidiary, as the case may be, receives consideration at the time of
such sale or other disposition at least equal to the fair market value thereof
(as determined in good faith by the Company's board of directors, and
evidenced by a board resolution); (ii) not less than 75% of the consideration
received by the Company or such Subsidiary, as the case may be, is in the form
of cash or Cash Equivalents; provided that the Company or such Subsidiary will
not be required to comply with this clause (ii) with respect to a Permitted
Asset Swap; and (iii) the Asset Sale Proceeds received by the Company or such
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Subsidiary are applied (a) first, to the extent the Company elects, or is
required, to prepay, repay or purchase debt under any then existing Senior
Indebtedness of the Company or any Guarantor Senior Indebtedness of any
Guarantor that is a Subsidiary of the Company within 180 days following the
receipt of the Asset Sale Proceeds from any Asset Sale; provided that any such
repayment shall result in a permanent reduction of the commitments thereunder
in an amount equal to the principal amount so repaid; (b) second, to the
extent of the balance of Asset Sale Proceeds after application as described
above, to the extent the Company elects, to an investment in assets (including
Capital Stock or other securities purchased in connection with the acquisition
of Capital Stock or property of another Person) used or useful in businesses
similar or ancillary to the business of the Company and its Subsidiaries as
conducted at the time of such Asset Sale, provided that such investment occurs
and such Asset Sale Proceeds are so applied within 270 days following the
receipt of such Asset Sale Proceeds (the "Reinvestment Date"); and (c) third,
(1) to the repayment of an amount of Other Pari Passu Debt not exceeding the
Other Pari Passu Debt Pro Rata Share (provided that any such repayment shall
result in a permanent reduction of any commitment in respect thereof in an
amount equal to the principal amount so repaid) and (2) if on the Reinvestment
Date with respect to any Asset Sale the Excess Proceeds exceed $10.0 million,
the Company shall apply an amount equal to such Excess Proceeds to an offer to
repurchase the Notes, at a purchase price in cash equal to 100% of the
principal amount thereof plus accrued and unpaid interest, if any, to the date
of repurchase (an "Excess Proceeds Offer"). If an Excess Proceeds Offer is not
fully subscribed, the Company may retain the portion of the Excess Proceeds
not required to repurchase Notes.
If the Company is required to make an Excess Proceeds Offer, the Company
shall mail, within 30 days following the Reinvestment Date, a notice to the
holders stating, among other things: (1) that such holders have the right to
require the Company to apply the Excess Proceeds to repurchase such Notes at a
purchase price in cash equal to 100% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase; (2) the purchase
date, which shall be no earlier than 30 days and not later than 60 days from
the date such notice is mailed; (3) the instructions, determined by the
Company, that each Holder must follow in order to have such Notes repurchased;
and (4) the calculations used in determining the amount of Excess Proceeds to
be applied to the repurchase of such Notes.
The New Credit Facility may prohibit the Company from purchasing any Notes
from Asset Sale Proceeds. Any future credit agreements or other agreements
relating to Senior Indebtedness to which the Company becomes a party may
contain similar restrictions. In the event an Excess Proceeds Offer occurs at
a time when the Company is prohibited from purchasing the Notes, the Company
could seek the consent of its lenders to the purchase or could attempt to
refinance the Senior Indebtedness, that contains such prohibition. If the
Company does not obtain such a consent or repay such Senior Indebtedness, the
Company may remain prohibited from purchasing the Notes. In such case, the
Company's failure to purchase tendered Notes would constitute an Event of
Default.
CERTAIN COVENANTS
Limitation on Additional Indebtedness
The Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, incur (as defined) any
Indebtedness (including Acquired Indebtedness), except for Permitted
Indebtedness; provided that (i) the Company will be permitted to incur
Indebtedness (including Acquired Indebtedness) and (ii) a Subsidiary of the
Company will be permitted to incur Acquired Indebtedness, if, in either case,
after giving pro forma effect to the incurrence of such Indebtedness and the
receipt and application of the proceeds thereof, the Company's Leverage Ratio
is less than (x) 6.50 to 1.00 if such Indebtedness is incurred on or prior to
, 2000, (y) 6.25 to 1.00 if such Indebtedness is incurred after , 2000
and on or prior to , 2002 and (z) 6.00 to 1.00 if such Indebtedness is
incurred thereafter. Notwithstanding the foregoing, a Guarantor will be
permitted to guarantee any Indebtedness of the Company incurred pursuant to
clause (i) of the proviso of the immediately preceding sentence.
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Limitation on Restricted Payments
The Indenture will provide that the Company will not make, and will not
permit any of its Subsidiaries to make, directly or indirectly, any Restricted
Payment, unless:
(a) no Default shall have occurred and be continuing at the time of or
immediately after giving effect to such Restricted Payment;
(b) immediately after giving pro forma effect to such Restricted Payment,
the Company could incur $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the covenant set forth under "Limitation on
Additional Indebtedness;" and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum of (1) the difference between (x) the Cumulative
EBITDA and (y) 1.4 times the Cumulative Consolidated Interest Expense, plus
(2) the aggregate net cash proceeds received by the Company either (x) as
capital contributions in the form of common equity to the Company after the
Issue Date or (y) from the issuance or sale of Capital Stock (excluding
proceeds from Disqualified Capital Stock and excluding the proceeds to the
Company from the Common Stock Offering, but including Capital Stock issued
upon the conversion of convertible Indebtedness, in exchange for
outstanding Indebtedness or from the exercise of options, warrants or
rights to purchase Capital Stock (other than Disqualified Capital Stock))
of the Company to any person (other than to a Subsidiary of the Company)
after the Issue Date, plus (3) in the case of the disposition or repayment
of any Investment constituting a Restricted Payment made after the Issue
Date, an amount equal to the lesser of the return of capital with respect
to such Investment and the initial amount of such Investment, in either
case, less the cost of the disposition of such Investment. For purposes of
the preceding subclause (2)(y), upon the issuance of Capital Stock either
from the conversion of convertible Indebtedness or exchange for outstanding
Indebtedness or upon the exercise of options, warrants or rights, the
amount counted as net cash proceeds received will be the cash amount
received by the Company at the original issuance of the Indebtedness that
is so converted or exchanged or from the issuance of options, warrants or
rights, as the case may be, plus the incremental amount of cash received by
the Company, if any, upon the conversion, exchange or exercise thereof. For
purposes of determining under this clause (c) the amount expended for
Restricted Payments, cash distributed shall be valued at the face amount
thereof and property other than cash shall be valued at its Fair Market
Value.
The provisions of this covenant shall not prohibit (i) the payment of any
distribution within 60 days after the date of declaration thereof, if at such
date of declaration such payment would comply with the provisions of the
Indenture, (ii) the retirement of any shares of Capital Stock of the Company
or Subordinated Indebtedness by conversion into, or by or in exchange for,
shares of Capital Stock (other than Disqualified Capital Stock), or out of,
the net cash proceeds of the substantially concurrent sale (other than to a
Subsidiary of the Company) of other shares of Capital Stock of the Company
(other than Disqualified Capital Stock), (iii) the redemption or retirement of
Subordinated Indebtedness (other than Disqualified Capital Stock) of the
Company (including any related guarantees) in exchange for, by conversion
into, or out of the net cash proceeds of, a substantially concurrent sale or
incurrence of Subordinated Indebtedness (other than any Indebtedness owed to a
Subsidiary of the Company) of the Company (including any related guarantees)
that is contractually subordinated in right of payment to the Notes to at
least the same extent as the Subordinated Indebtedness being redeemed or
retired, (iv) the purchase, redemption or other acquisition for value of
shares of Capital Stock of the Company (other than Disqualified Capital Stock)
or options on such shares held by officers or employees or former officers or
employees (or their estates or beneficiaries under their estates) upon the
death, disability, retirement or termination of employment of such current or
former officers or employees pursuant to the terms of an employee benefit plan
or any other agreement pursuant to which such shares of Capital Stock or
options were issued or pursuant to a severance, buy-sell or right of first
refusal agreement with such current or former officer or employee; provided
that the aggregate cash consideration paid, or distributions made, pursuant to
this clause (iv) do not in any one fiscal year exceed $1,000,000, (v)
Investments constituting Restricted Payments made as a result of the receipt
of non-cash consideration from any Asset Sale made pursuant to and in
compliance with the covenant described under "--Repurchase at the Option of
Holders--Asset Sales" or (vi) other Investments
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constituting Restricted Payments made after the Issue Date in an aggregate
amount not in excess of $10,000,000; provided, however, that in the case of
clauses (iii), (iv), (v) and (vi), no Default shall have occurred or be
continuing at the time of such payment or as a result thereof. In determining
the amount of Restricted Payments made subsequent to the Issue Date for
purposes of clause (c) of the first paragraph above, amounts expended pursuant
to clauses (i), (ii), (iv), (v) and (vi) shall be included in such
calculation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "Limitation on Restricted Payments" were computed,
which calculations may be based upon the Company's latest available financial
statements, and that no Default exists and is continuing and no Default will
occur immediately after giving effect to any Restricted Payments.
Limitation on Other Senior Subordinated Debt
The Indenture will provide that the Company will not, and will not permit
any of the Guarantors to, directly or indirectly, incur, contingently or
otherwise, any Indebtedness that is both (i) subordinate in right of payment
to any Indebtedness of the Company or any Guarantor, as the case may be, and
(ii) senior in right of payment to the Notes or any of the Guarantees, as the
case may be. In addition, the Company will not permit any of the Guarantors
to, directly or indirectly, incur, contingently or otherwise, any guarantee on
a senior basis any Indebtedness of the Company that is subordinate in right of
payment to any other Indebtedness of the Company.
Limitations on Liens
The Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, create, incur, assume or suffer to exist any Lien
of any kind, upon any of its property or assets, whether now owned or acquired
after the Issue Date, or any proceeds therefrom, that secure either (i)
Subordinated Indebtedness unless the Notes and the Guarantees, as applicable,
are secured by a Lien on such property, assets or proceeds that is senior in
priority to the Liens securing such Subordinated Indebtedness or (ii)
Indebtedness that is pari passu with the Notes unless the Notes and the
Guarantees, as applicable, are equally and ratably secured with the Liens
securing such Indebtedness.
Limitation on Transactions with Affiliates
The Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, enter into or suffer to
exist any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services) with any Affiliate or holder of 10% or more of the Common Stock of
the Company or any Affiliate (each of the foregoing, an "Affiliate
Transaction") or extend, renew, waive or otherwise modify the terms of any
Affiliate Transaction entered into prior to the Issue Date unless (i) such
Affiliate Transaction is between or among the Company and/or Wholly-Owned
Subsidiaries or (ii) the terms of such Affiliate Transaction are fair and
reasonable to the Company or such Subsidiary, as the case may be, and the
terms of such Affiliate Transaction are at least as favorable as the terms
that could be obtained by the Company or such Subsidiary, as the case may be,
in a comparable transaction made on an arm's-length basis between unaffiliated
parties. In any Affiliate Transaction involving an amount or having a value in
excess of $1.0 million that is not permitted under clause (i) above, the
Company must obtain a resolution of the board of directors approved by a
majority of the members of the board of directors (and a majority of the
independent directors) of the Company certifying that such Affiliate
Transaction complies with clause (ii) above. In transactions with a value in
excess of $5.0 million that are not permitted under clause (i) above, the
Company must obtain a written opinion as to the fairness of such a transaction
to the Company or its Subsidiary from an independent investment banking firm
of nationally recognized standing.
The foregoing provisions will not apply to (i) any dividend that is not
prohibited by the provisions described under "Limitations on Restricted
Payments" contained herein, (ii) any transaction, approved by the board of
directors of the Company, with an officer or director of the Company or of any
Subsidiary of the Company in
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his or her capacity as officer or director entered into in the ordinary course
of business, including compensation and employee benefit arrangements with any
officer or director of the Company or of any of its Subsidiaries that are
customary for public companies in the outdoor advertising industry or (iii)
transactions with The Chase Manhattan Bank or any of its Affiliates in the
ordinary course of providing banking, financial advisory, securities or other
financial services.
Limitation on Guarantees of Certain Indebtedness
The Indenture will provide that the Company will not permit any of its
Subsidiaries (other than the Guarantors) to (a) guarantee any Indebtedness of
the Company (other than Indebtedness incurred under clause (vii) of Permitted
Indebtedness) or (b) pledge any intercompany notes representing obligations of
any of its Subsidiaries (other than the Guarantors) to secure the payment of
any Indebtedness of the Company (other than Indebtedness incurred under clause
(vii) of Permitted Indebtedness), in each case unless such Subsidiary, the
Company, the other Guarantors and the Trustee execute and deliver a
supplemental indenture evidencing such Subsidiary's Guarantee under the
Indenture. Thereafter, such Subsidiary shall be a Guarantor for all purposes
of the Indenture.
Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries
The Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create or otherwise cause
or suffer to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any of its Subsidiaries to (a) pay
dividends or make any other distributions to the Company or any of its
Subsidiaries on its Capital Stock, (b) pay any Indebtedness owed to the
Company or any of its Subsidiaries, (c) make loans or advances to the Company
or any Subsidiary, (d) transfer any of its properties or assets to the Company
or any Subsidiary, (e) grant liens or security interests on the assets of the
Company or any of its Subsidiaries in favor of the holders of the Notes or (f)
guarantee the Notes or any renewals or refinancings thereof, except for (i)
such encumbrances or restrictions arising by reason of Acquired Indebtedness
of any of the Company's Subsidiaries existing at the time such Person became a
Subsidiary of the Company; provided that such encumbrances or restrictions
were not created in anticipation of such Person becoming a Subsidiary and are
not applicable to the Company or any of its other Subsidiaries, (ii) such
encumbrances or restrictions arising under Refinancing Indebtedness; provided
that the terms and conditions of any such restrictions are no less favorable
to the holders of Notes than those under the Indebtedness being refinanced,
(iii) customary provisions restricting the assignment of any contract or
interest of the Company or any of its Subsidiaries, (iv) restrictions under
the New Credit Facility no more restrictive than those in effect on the Issue
Date and (v) restrictions contained in the Indenture or any other indenture
governing debt securities that is no more restrictive than those contained in
the Indenture.
Limitation on Issuance and Sales of Preferred Stock by Subsidiaries
The Indenture will provide that the Company (i) will not permit any of its
Subsidiaries to issue any Preferred Stock (other than to the Company or a
Wholly-Owned Subsidiary) and (ii) will not permit any person (other than the
Company or a Wholly-Owned Subsidiary) to own any Preferred Stock of any
Subsidiary.
Line of Business
The Indenture will provide that the Company will not, and will not permit
any of its Subsidiaries to, engage in any business other than the business of
outdoor advertising or a substantially similar or related business.
COMMISSION REPORTS
Notwithstanding that the Company may not be subject to the reporting
requirements of Section 13 or 15(d) of the Exchange Act, to the extent
permitted by the Exchange Act, the Company will file with the Commission and
provide, within 15 days after such filing, the Trustee and holders of Notes
and prospective holders of Notes
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(upon request) with the annual reports and the information, documents and
other reports which are specified in Sections 13 and 15(d) of the Exchange
Act. In the event that the Company is not permitted to file such reports,
documents and information with the Commission, the Company will provide
substantially similar information to the Trustee, the holders of Notes and the
prospective holders of Notes upon request) as if the Company were subject to
the reporting requirements of Section 13 or 15(d) of the Exchange Act. The
Company also will comply with the other provisions of Section 314(a) of the
Trust Indenture Act.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Indenture will provide that the Company will not, in any transaction or
series of related transactions, merge or consolidate with or into, or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially
all of its properties and assets to, any Person or Persons, and that the
Company will not permit any of its Subsidiaries to enter into any such
transaction or series of related transactions if such transaction or series of
related transactions, in the aggregate, would result in a sale, assignment,
conveyance, transfer, lease or other disposition of all or substantially all
of the properties and assets of the Company or of the Company and its
Subsidiaries, taken as whole, to any other Person or Persons, unless (i)
either (a)(1) if the transaction or transactions is a merger or consolidation
involving the Company, the Company shall be the surviving Person of such
merger or consolidation or (2) if the transaction or transactions is a merger
or consolidation involving a Subsidiary of the Company, such Subsidiary shall
be the surviving Person of such merger or consolidation and such surviving
Person shall be a Subsidiary of the Company, or (b)(1) the Person formed by
such consolidation or into which the Company or such Subsidiary is merged or
to which the properties and assets of the Company or such Subsidiary, as the
case may be, are transferred (any such surviving Person or transferee Person
being the "Surviving Entity") shall be a corporation organized and existing
under the laws of the United States of America, any State thereof or the
District of Columbia and (2)(A) in the case of a transaction involving the
Company, the Surviving Entity shall expressly assume by a supplemental
indenture executed and delivered to the Trustee, in form satisfactory to the
Trustee, all of the obligations of the Company under the Notes and the
Indenture, and in each case, the Indenture shall remain in full force and
effect, or (B) in the case of a transaction involving a Subsidiary that is a
Guarantor, the Surviving Entity shall expressly assume by a supplemental
indenture executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of such Subsidiary under its Guarantee and
related supplemental indenture, and in each case, such Guarantee and
supplemental indenture shall remain in full force and effect; and (ii)
immediately after giving effect to such transaction or series of related
transactions on a pro forma basis (including, without limitation, any
Indebtedness incurred or anticipated to be incurred in connection with or in
respect of such transaction or series of transactions), no Default shall have
occurred and be continuing and the Company, or the Surviving Entity, as the
case may be, after giving effect to such transaction or series of transactions
on a pro forma basis, could incur $1.00 of additional Indebtedness under the
first paragraph of "--Limitation on Additional Indebtedness."
In connection with any consolidation, merger, transfer, lease or other
disposition contemplated hereby, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to
the Trustee, an officers' certificate and an opinion of counsel, each stating
that such consolidation, merger, transfer, lease or other disposition and the
supplemental indenture in respect thereof comply with the requirements under
the Indenture. In addition, each Guarantor, unless it is the other party to
the transaction or unless its Guarantee will be released and discharged in
accordance with its terms as a result of the transaction, will be required to
confirm, by supplemental indenture, that its Guarantee will continue to apply
to the obligations of the Company or the Surviving Entity under the Indenture.
Upon any consolidation or merger or any transfer of all or substantially all
of the assets of the Company in accordance with the foregoing, in which the
Company or any Subsidiary of the Company, as the case may be, is not the
continuing corporation, the successor corporation formed by such a
consolidation or into which the Company or such Subsidiary is merged or to
which such transfer is made, will succeed to, and be substituted for, and may
exercise every right and power of, the Company or such Subsidiary, as the case
may be, under the Indenture with the same effect as if such successor
corporation had been named as the Company or such
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Subsidiary therein; and thereafter, except in the case of (i) a lease or (ii)
any sale, assignment, conveyance, transfer, lease or other disposition to a
Subsidiary of the Company, the Company or such Guarantor, as the case may be,
shall be discharged from all obligations and covenants under the Indenture and
the Notes; provided that, solely for purposes of computing Cumulative EBITDA
for purposes of the covenant "Limitation on Restricted Payments," the
Cumulative EBITDA of any persons other than the Company and its Subsidiaries
shall only be included for periods subsequent to the effective time of such
merger, consolidation, combination or transfer of assets.
The Indenture will provide that for all purposes of the Indenture and the
Notes (including the provision of this covenant and the covenants described
under "--Limitation on Additional Indebtedness," "--Limitation on Restricted
Payments" and "--Limitation on Liens"), Subsidiaries of any Surviving Entity
will, upon such transaction or series of related transactions, become
Subsidiaries of the Company and all Indebtedness, and all Liens on property or
assets, of the Company and its Subsidiaries in existence immediately prior to
such transaction or series of related transactions will be deemed to have been
incurred upon such transaction or series of related transactions.
EVENTS OF DEFAULT
The following are "Events of Default" under the Indenture:
(i) default in the payment of the principal of or premium, if any, when
due and payable, on any of the Notes; or
(ii) default in the payment of an installment of interest on any of the
Notes, when due and payable, for 30 days; or
(iii) the Company or any Guarantor fails to comply with any of its
obligations described under "--Merger, Consolidation or Sale of Assets" or
"Repurchase at the Option of Holders--Change of Control" or "--Asset
Sales"; or
(iv) the Company or any Guarantor fails to perform or observe any other
term, covenant or agreement contained in the Notes, the Guarantees or the
Indenture (other than a default specified in (i), (ii) or (iii) above) for
a period of 30 days after written notice of such failure requiring the
Company to remedy the same shall have been given (a) to the Company by the
Trustee or (b) to the Company and the Trustee by the holders of 25% in
aggregate principal amount of the Notes then outstanding; or
(v) default or defaults under any agreement, indenture or instrument
under which the Company or any Subsidiary of the Company then has
outstanding Indebtedness in excess of $10,000,000 in the aggregate and
either (a) such Indebtedness is already due and payable in full or (b) such
default or defaults results in the acceleration of the maturity of such
Indebtedness; or
(vi) any Guarantee ceases to be in full force and effect or is declared
null and void or any Guarantor denies that it has any further liability
under any Guarantee, or gives notice to such effect (other than by reason
of the termination of the Indenture or the release of any such Guarantee in
accordance with "--Certain Covenants--Guarantees of Certain Indebtedness");
or
(vii) one or more judgments, orders or decrees of any court or regulatory
or administrative agency for the payment of money in excess of $10,000,000
either individually or in the aggregate, shall have been entered against
the Company or any of its Subsidiaries or any of their respective
properties and shall not have been discharged and either (a) any creditor
shall have commenced an enforcement proceeding upon such judgment, order or
decree or (b) there shall have been a period of 60 consecutive days during
which a stay of enforcement of such judgment, order or decree, by reason of
a pending appeal or otherwise, will not be in effect; or
(viii) certain events of bankruptcy, insolvency or reorganization with
respect to the Company or any Subsidiary of the Company shall have
occurred.
The Indenture will provide that if an Event of Default (other than as
specified in clause (viii) with respect to the Company) shall have occurred
and be continuing, then the Trustee or the holders of not less than 25% in
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aggregate principal amount of the Notes then outstanding may declare to be
immediately due and payable the entire principal amount of all the Notes then
outstanding plus accrued interest to the date of acceleration; provided,
however, that so long as the New Credit Facility shall be in effect, if an
Event of Default shall have occurred and be continuing (other than an Event of
Default specified in clause (viii) above with respect to the Company), any
such acceleration shall not be effective until the earlier of (x) five
business days following delivery of a notice of acceleration specifying the
respective Event of Default and stating that it is a "notice of acceleration"
to the agent bank under the New Credit Facility (but only if such Event of
Default is then continuing) and (y) the acceleration of any indebtedness under
the New Credit Facility. In case an Event of Default specified in clause
(viii) above with respect to the Company occurs and is continuing, the
principal, premium and interest with respect to all of the Notes shall be due
and payable immediately without any declaration or other act on the part of
the Trustee or the holders of the Notes.
After a declaration of acceleration, but before a judgment or decree for
payment of the money due has been obtained by the Trustee, the holders of a
majority in aggregate principal amount of the outstanding Notes, by written
notice to the Company and the Trustee, may rescind such declaration if (i) the
Company has paid or deposited with the Trustee a sum sufficient to pay (a) all
sums paid or advanced by the Trustee under the Indenture and the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, (b) all overdue interest on all Notes, (c) the principal of and
premium, if any, on any Notes which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne by the
Notes, and (c) to the extent that payment of such interest is lawful, interest
upon overdue interest at the rate borne by the Notes; and (ii) all Defaults,
other than the non-payment of principal of, premium, if any, and interest on
the Notes that has become due solely by such declaration of acceleration, have
been cured or waived.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to waive any existing default or compliance with any
provision of the Indenture or the Notes and to direct the time, method and
place of conducting any proceeding for any remedy available to the Trustee,
subject to certain limitations specified in the Indenture.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder
shall have previously given to the Trustee written notice of a continuing
Event of Default and unless also the holders of at least 25% in aggregate
principal amount of the outstanding Notes shall have made written request and
offered reasonable indemnity to the Trustee to institute such proceeding as a
trustee, and unless the Trustee shall not have received from the holders of a
majority in aggregate principal amount of the outstanding Notes a direction
inconsistent with such request and shall have failed to institute such
proceeding within 60 days. However, such limitations do not apply to a suit
instituted on such Note on or after the respective due dates expressed in such
Note.
DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, terminate its obligations
with respect to the outstanding Notes ("defeasance"). Such defeasance means
that the Company shall be deemed to have paid and discharged the entire
Indebtedness presented by the then outstanding Notes, except for (i) the
rights of holders of outstanding Notes to receive payment in respect of the
principal of, premium, if any, and interest on such Notes when such payments
are due (but without being subject to the subordination provisions of the
Indenture), (ii) the Company's obligations to issue temporary Notes, register
the transfer or exchange of any Notes, replace mutilated, destroyed, lost or
stolen Notes and maintain an office or agency for receipt of payments in
respect of the Notes, (iii) the rights, powers, trusts, duties and immunities
of the Trustee and (iv) the defeasance provisions of the Indenture. In
addition, the Company may, at its option and at any time, elect to terminate
its obligations with respect to certain covenants that are set forth in the
Indenture, some of which are described under "--Certain Covenants" above, and
any subsequent failure to comply with such obligations shall not constitute a
Default or an Event of Default with respect to the Notes ("covenant
defeasance").
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In order to exercise either defeasance or covenant defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust for the benefit of
the holders of the Notes, cash in United States dollars, U.S. Government
Obligations (as defined in the Indenture), or a combination thereof, in such
amounts as will be sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay the principal of, premium, if any,
and interest on the outstanding Notes to redemption or maturity, (ii) the
Company shall have delivered to the Trustee an opinion of counsel to the
effect that the holders of the outstanding Notes will not recognize income,
gain or loss for federal income tax purposes as a result of such defeasance or
covenant defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case
if such defeasance or covenant defeasance had not occurred (in the case of
defeasance, such opinion must refer to and be based upon a ruling of the
Internal Revenue Service or a change in applicable federal income tax laws),
(iii) no Default shall have occurred and be continuing on the date of such
deposit or at any time during the 90-day period following such date, (iv) such
defeasance or covenant defeasance shall not cause the Trustee to have a
conflicting interest under the Indenture or the Trust Indenture Act with
respect to any securities of the Company, (v) such defeasance or covenant
defeasance shall not result in a breach or violation of, or constitute a
default under, any other material agreement or instrument to which the Company
is a party or by which the Company is bound and (vi) the Company shall have
delivered to the Trustee an officers' certificate and an opinion of counsel
that, taken together, state that all conditions precedent under the Indenture
to either defeasance or covenant defeasance, as the case may be, have been
complied with and that no violations under agreements governing any other
outstanding Indebtedness would result therefrom.
SATISFACTION AND DISCHARGE
The Indenture shall upon request of the Company cease to be of further
effect (except as to certain provisions governing registration of transfer and
exchange of the Notes and payments thereon) when (A) either (1) all Notes
theretofore authenticated and delivered (other than (i) Notes that have been
destroyed, lost or stolen and that have been replaced or paid and (ii) Notes
for whose payment (x) cash in United States dollars or (y) U.S. Government
Obligations maturing as to principal, premium, if any, and interest in such
amounts of money and at such times as are sufficient without consideration of
any reinvestment of such interest, to pay principal of and interest on the
outstanding Notes not later than one day before the due date of any payment,
have theretofore been deposited in trust with the Trustee or any Paying Agent)
have been delivered to the Trustee for the cancellation, or (2) all such Notes
not theretofore delivered to the Trustee for cancellation (i) have become due
and payable, or (ii) will become due and payable at their stated maturity
within one year, or (iii) are to be called for redemption within one year
under arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the Company, and
the Company in the case of (2)(i), (2)(ii) or (2)(iii) above, has irrevocably
deposited or caused to be deposited with the Trustee funds in an amount
sufficient to pay and discharge the entire indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation, for principal and
interest to the date of such deposit (in the case of Notes which have become
due and payable) or the stated maturity or Redemption Date, as the case may
be, together with instructions from the Company irrevocably directing the
Trustee to apply such funds to the payment thereof at maturity or redemption,
as the case may be; (B) the Company has paid or caused to be paid all other
sums then due and payable hereunder by the Company; and (C) the Company has
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel
that, taken together, state that all conditions precedent herein relating to
the satisfaction and discharge of this Indenture have been complied with.
TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange Notes in accordance with the
Indenture. The Registrar under such Indenture may require a holder, among
other things, to furnish appropriate endorsements and transfer documents, and
to pay any taxes and fees required by law or permitted by the Indentures. The
Registrar is not required to transfer or exchange any Note selected for
redemption. Also, the Registrar is not required to transfer or exchange any
Note for a period of 15 days before selection of the Notes to be redeemed. The
registered holder of a Note may be treated as the owner of it for all
purposes.
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AMENDMENT, SUPPLEMENT AND WAIVER
From time to time, the Company, the Guarantors and the Trustee may, without
the consent of holders of the Notes, amend the Indenture or the Notes or
supplement the Indenture for certain specified purposes, including providing
for uncertificated Notes in addition to certificated Notes, and curing any
ambiguity, defect or inconsistency, or making any other change that does not
materially and adversely affect the rights of any holder. The Indenture
contains provisions permitting the Company, the Guarantors and the Trustee,
with the consent of holders of at least a majority in principal amount of the
outstanding Notes, to modify, supplement or waive any provision of the
Indenture or the Notes, except that no such modification, supplement or waiver
shall, without the consent of each holder affected thereby, (i) reduce the
amount of Notes whose holders must consent to an amendment, supplement or
waiver to the Indenture or the Notes, (ii) reduce the rate of or change the
time for payment of interest on any Note, (iii) reduce the principal of or
premium on or change the stated maturity of any Note, (iv) make any Note
payable in money other than that stated in the Note or change the place of
payment from New York, New York, (v) change the amount or time of any payment
required by the Notes or reduce the premium payable upon any redemption of
Notes, or change the time before which no such redemption may be made, (vi)
waive a default on the payment of the principal of, interest on, or redemption
payment with respect to any Note, (vii) following the occurrence of a Change
of Control or an Asset Sale, amend, alter, change or modify the obligation of
the Company to make and consummate a Change of Control Offer or make and
consummate an Excess Proceeds Offer or waive any Default in the performance of
any such offers to the extent relating to such Change of Control or Asset Sale
or modify any of the provisions or definitions with respect to any such offers
or (viii) take any other action otherwise prohibited by the Indenture to be
taken without the consent of each holder affected thereby.
CONCERNING THE TRUSTEE
The Trustee under the Indenture will be the Registrar and Paying Agent with
regard to the Notes. The Indenture will provide that, except during the
continuance of an Event of Default, the Trustee will perform only such duties
as are specifically set forth in the Indenture. During the existence of an
Event of Default, the Trustee will exercise such rights and powers vested in
it under the Indenture and use the same degree of care and skill in its
exercise as a prudent person would exercise under the circumstances in the
conduct of such person's own affairs.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms as well as any other capitalized terms used herein for which no
definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person existing at the time
such Person become a Subsidiary or assumed in connection with an Asset
Acquisition by such Person and not incurred in connection with, or in
anticipation of, such Person becoming a Subsidiary or such Asset Acquisition.
"Advertising Displays" mean all posters, signs, billboards and other outdoor
advertising displays and related sites therefor owned or leased (as lessee) by
the Company and its Subsidiaries.
"Affiliate" of any specified Person means any other Person that directly or
indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such specified Person. For the purposes of
this definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise. For purposes of this definition, none of The Chase Manhattan Bank
or any of its Affiliates shall be deemed an Affiliate of the Company.
"Asset Acquisition" means (i) an Investment by the Company or any of its
Subsidiaries in any other Person pursuant to which such Person shall become a
Subsidiary of the Company or shall be consolidated or merged
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with the Company or any Subsidiary of the Company or (ii) the acquisition by
the Company or any Subsidiary of the Company of assets of any Person
comprising a division or line of business of such Person or which is otherwise
outside of the ordinary course of business or (iii) the acquisition by the
Company or any Subsidiary of the Company of Advertising Displays of any Person
with a Fair Market Value in excess of $100,000.
"Asset Sale" means any direct or indirect sale, conveyance, transfer or lease
(that has the effect of a disposition and is not for security purposes) or
other disposition (that is not for security purposes) to any person other than
the Company or a Subsidiary of the Company, in one transaction or a series of
related transactions, of (i) any Capital Stock of any Subsidiary of the
Company, (ii) any assets of the Company or any Subsidiary of the Company which
constitute substantially all of an operating unit or line of business of the
Company and its Subsidiaries or (iii) any other property or asset of the
Company or any Subsidiary of the Company outside of the ordinary course of
business or (iv) Advertising Displays of the Company or any Subsidiary of the
Company with a Fair Market Value in excess of $100,000. For the purposes of
this definition, the term "Asset Sale" shall not include (i) any disposition
of property or assets of the Company that is governed under "--Consolidation,
Merger or Sale of Assets" above, (ii) sales of property and equipment that
have become worn out, obsolete or damaged or otherwise unsuitable for use in
connection with the business of the Company or any Subsidiary of the Company,
as the case may be, (iii) dispositions of property pursuant to any
condemnation or other taking by any governmental authority; provided that any
net cash proceeds of such taking are applied in accordance with clause (iii)
of the covenant "Asset Sales"and (iv) for purposes of the covenant "Repurchase
at Option of Holders--Asset Sales," any sale, conveyance, transfer, lease or
other disposition of any property or asset, whether in one transaction or a
series of related transactions occurring within one year, either (x) involving
assets with a Fair Market Value not in excess of $500,000 or (y) which
constitutes an incurrence of a Capitalized Lease Obligation.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Company or any of its Subsidiaries from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such
Asset Sale, (b) payment of all brokerage commissions, underwriting and other
fees and expenses related to such Asset Sale, (c) provision for minority
interest holders in any Subsidiary of the Company as a result of such Asset
Sale and (d) deduction of appropriate amounts to be provided by the Company or
such Subsidiary as a reserve, in accordance with GAAP, against any liabilities
associated with the assets sold or disposed of in such Asset Sale and retained
by the Company or such Subsidiary after such Asset Sale, including, without
limitation, pension and other post employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the assets sold or disposed of in such Asset Sale,
and (ii) promissory notes and other noncash consideration received by the
Company or any Subsidiary from such Asset Sale or other disposition upon the
liquidation or conversion of such notes or noncash consideration into cash.
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sale that has not been applied
in accordance with clauses (iii)(a) or (iii)(b), and that has not yet been the
basis for application in accordance with clause (iii)(c) of the first
paragraph of "Repurchase at the Option of Holders--Asset Sales."
"Board Resolution" means a copy of a resolution certified by a Secretary or
an Assistant Secretary of the Company to have been duly adopted by the board
of directors of the Company to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated) of capital stock, partnership interests
or any other participation, right or other interest in the nature of an equity
interest in such Person or any option, warrant or other security convertible
into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and for purposes of this
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definition, the amount of such Indebtedness shall be the capitalized amount of
such obligations determined in accordance with GAAP.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof having maturities of not more than six
months from the date of acquisition, (iii) certificates of deposit and
eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any lender party to the New
Credit Facility or with any domestic commercial bank having capital and
surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clauses (ii) and (iii)
above entered into with any financial institution meeting the qualifications
specified in clause (iii) above, (v) commercial paper having a rating of at
least P1 from Moody's or a rating of at least A1 from S&P and (vi) money
market mutual or similar funds having assets in excess of $100 million.
"Change of Control" means the occurrence of any of the following events
(whether or not approved by the Board of Directors of the Company): (i) any
Person (as such term is used in Sections 13(d) and 14(d) of the Exchange Act,
including any group acting for the purpose of acquiring, holding or disposing
of securities within the meaning of Rule 13d-5(b)(1) under the Exchange Act),
other than one or more Permitted Holders, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 and 13d-5 under the Exchange Act, except that a
Person shall be deemed to have "beneficial ownership" of all shares that any
such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time, upon the happening of an event
or otherwise), directly or indirectly, of more than 35% of the total voting
power of the then outstanding Voting Stock of the Company; (ii) the Company
consolidates with, or merges with or into, another Person (other than the
Company or a Wholly Owned Subsidiary) or the Company or any of its
Subsidiaries sells, assigns, conveys, transfers, leases or otherwise disposes
of all or substantially all of the assets of the Company and its Subsidiaries
(determined on a consolidated basis) to any Person (other than the Company or
any Wholly Owned Subsidiary), other than any such transaction where
immediately after such transaction the Person or Persons that "beneficially
owned" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except
that a Person shall be deemed to have "beneficial ownership" of all securities
that such Person has the right to acquire, whether such right is exercisable
immediately or only after the passage of time) immediately prior to such
transaction, directly or indirectly, a majority of the total voting power of
the then outstanding Voting Stock of the Company, as the case may be,
"beneficially own" (as so determined), directly or indirectly, a majority of
the total voting power of the then outstanding Voting Stock of the surviving
or transferee Person; (iii) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by
such Board of Directors or whose nomination for election by the shareholders
of the Company was approved by a vote of a majority of the directors of the
Company then still in office who were either directors at the beginning of
such period or whose election or nomination for election was previously so
approved) cease for any reason to constitute a majority of the Board of
Directors of the Company then in office; or (iv) the Company is liquidated or
dissolved or adopts a plan of liquidation or dissolution other than in a
transaction which complies with the provisions described under "--
Consolidation, Merger, Sale of Assets, etc."
"Common Stock" of any Person means all Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will
control the management and policies of such Person.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, the aggregate amount of interest that, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on an
income statement for such Person and its Subsidiaries on a consolidated basis
(including, but not limited to, imputed interest included in Capitalized Lease
Obligations, all commissions, discounts and other
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fees and charges owed with respect to letters of credit and bankers'
acceptance financing, the net costs associated with hedging obligations,
amortization of other financing fees and expenses, the interest portion of any
deferred payment obligation, amortization of discount or premium, if any, and
all other non-cash interest expense (other than interest amortized to cost of
sales)) plus, without duplication, all net capitalized interest for such
period and all interest incurred or paid under any guarantee of Indebtedness
(including a guarantee of principal, interest or any combination thereof) of
any Person, plus the amount of all dividends or distributions paid on
Disqualified Capital Stock (other than dividends paid or payable in shares of
Capital Stock of the Company).
"Consolidated Net Income" means, with respect to any Person, for any period,
the aggregate of the Net Income of such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; provided,
however, that (i) the Net Income (but not loss) of any Person that is
accounted for by the equity method of accounting shall be included only to the
extent of the amount of dividends or distributions paid in cash to the
referent Person or a Subsidiary thereof, (ii) the Net Income of any Subsidiary
of such Person shall be excluded to the extent that the declaration or payment
of dividends or similar distributions by that Subsidiary of that Net Income to
such Person or one of its other Subsidiaries is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule
or governmental regulation applicable to that Subsidiary or its stockholders,
(iii) the Net Income of any Person acquired in a pooling of interests
transaction for any period prior to the date of such acquisition shall be
excluded, (iv) extraordinary gains and losses shall be excluded from
Consolidated Net Income for purposes of the covenant "Limitation on Additional
Indebtedness," and (v) the cumulative effect of a change in accounting
principles shall be excluded.
"Cumulative Consolidated Interest Expense" means, as of any date of
determination, Consolidated Interest Expense of the Company from the Issue
Date to the end of the Company's most recently ended full fiscal quarter prior
to such date, taken as a single accounting period.
"Cumulative EBITDA" means, as of any date of determination, EBITDA of the
Company from the Issue Date to the end of the Company's most recently ended
full fiscal quarter prior to such date, taken as a single accounting period.
"Default" means any event that is, or after notice of passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) all Senior Indebtedness under or
in respect of the New Credit Facility and (ii) any other Senior Indebtedness
that, at the time of the Incurrence of such Indebtedness, is specifically
designated in the instrument evidencing such Senior Indebtedness as
"Designated Senior Indebtedness" by the Company.
"Disqualified Capital Stock" means any Capital Stock of the Company or any
of its Subsidiaries that, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable at the option of the
holder), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is
redeemable at the option of the holder thereof, in whole or in part, on or
prior to the final maturity date of the Notes, for cash and/or securities
constituting Indebtedness, provided, however, that (i) such Capital Stock
shall only constitute Disqualified Capital Stock to the extent it so matures
or is redeemable or exchangeable at the option of the holder thereof on or
prior to the final maturity date of the Notes and (ii) Preferred Stock that is
issued with the benefit of provisions requiring a change of control offer to
be made for such Preferred Stock in the event of a change of control of the
Company, which provisions have substantially the same effect as the provisions
of the Indenture described under "--Repurchase at Option of Holders--Change of
Control," shall not be deemed to be Disqualified Capital Stock solely by
virtue of such provisions.
"EBITDA" means, for any Person, for any period, an amount equal to (a) the
sum of, without duplication, Consolidated Net Income for such period, plus, to
the extent reducing such Consolidated Net Income, (i) the
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provision for taxes for such period based on income or profits to the extent
such income or profits were included in computing Consolidated Net Income and
any provision for taxes utilized in computing net loss under clause (i)
hereof, plus (ii) Consolidated Interest Expense for such period, plus (iii)
depreciation for such period on a such consolidated basis, plus (iv)
amortization of intangibles for such period on a consolidated basis, plus (v)
any other non-cash items reducing Consolidated Net Income for such period,
minus (b) all non-cash items increasing Consolidated Net Income for such
period, all for such Person and its Subsidiaries determined in accordance with
GAAP, except that with respect to the Company each of the foregoing items
shall be determined on a consolidated basis with respect to the Company and
the Subsidiaries only; and provided, however, that, for purposes of
calculating EBITDA during any fiscal quarter, cash income from a particular
Investment of such Person (other than a consolidated Subsidiary of the
Company) shall be included only (x) if cash income has been received by such
Person with respect to such Investment during each of the previous four fiscal
quarters, or (y) if the cash income derived from such Investment is
attributable to Cash Equivalents.
"Excess Proceeds" means, with respect to any Asset Sale, the then Available
Asset Sale Proceeds less any such Available Asset Sale Proceeds that are
required to be applied and are applied in accordance with clause (iii)(c)(1)
of the first paragraph of "Repurchase at the Option of Holders--Asset Sales."
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fair Market Value" means, with respect to any asset or property, the price
that could be negotiated in an arm's-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of whom is under
pressure or compulsion to complete the transaction. Unless otherwise specified
in the Indenture, Fair Market Value shall be determined by the Board acting in
good faith and shall be evidenced by a Board Resolution delivered to the
Trustee.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States on the Issue Date.
"guarantee" means, as applied to any obligation, (i) a guarantee (other than
by endorsement of negotiable instruments for collection in the ordinary course
of business), direct or indirect, in any manner, of any part of all of such
obligation and (ii) an agreement, direct or indirect, contingent or otherwise,
the practical effect which is to assure in any way the payment or performance
(or payment of damages in the event of non-performance) of all or any part of
such obligation, including, without limiting the foregoing, the payment of
amounts drawn down by letters of credit.
"Guarantor Senior Indebtedness" means, with respect to the Indebtedness of
any Guarantor, any such Indebtedness represented by a guarantee by such
Guarantor of any Senior Indebtedness.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, guarantee or otherwise become liable in respect of such Indebtedness
or other obligation or the recording, as required pursuant to GAAP or
otherwise, of any such Indebtedness or other obligation on the balance sheet
of such person (and "incurrence," "incurred," and "incurring" shall have
meanings correlative to the foregoing); provided that a change in GAAP that by
itself results in an obligation of such Person that exists at such time
becoming Indebtedness shall not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, that is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other accrued liabilities arising in the
ordinary course of business) if and to the extent any of the foregoing
indebtedness would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, and shall also include, to the extent not
otherwise included (i) any Capitalized Lease Obligations,
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(ii) obligations secured by a lien to which the property or assets owned or
held by such Person is subject, whether or not the obligation or obligations
secured thereby shall have been assumed, (iii) guarantees of items of other
Persons which would be included within this definition for such other Persons
(whether or not such items would appear upon the balance sheet of the
guarantor), (iv) all obligations for the reimbursement of any obligor on any
letter of credit, banker's acceptance or similar credit transaction, (v)
Disqualified Capital Stock of such Person or any of its Subsidiaries and (vi)
obligations of any such Person under any Interest Rate Agreement applicable to
any of the foregoing (if and to the extent such Interest Rate Agreement
obligations would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP). The amount of Indebtedness of any Person at
any date shall be the outstanding balance at such date of all unconditional
obligations as described above and, with respect to contingent obligations,
the maximum liability upon the occurrence of the contingency giving rise to
the obligation, provided that (i) that the amount outstanding at any time of
any Indebtedness issued with original issue discount, including the Notes, is
the principal amount of such Indebtedness less the remaining unamortized
portion of the original issue discount of such Indebtedness at such time as
determined in conformity with GAAP, (ii) that Indebtedness shall not include
any liability for federal, state, local or other taxes and (iii) the principal
amount of any Indebtedness shall be reduced by the aggregate amount of Cash
Equivalents of the Company and its Subsidiaries that are pledged to secure,
and are required to be applied, solely to the repayment of the principal of
such Indebtedness. Notwithstanding any other provision of the foregoing
definition, any trade payable arising from the purchase of goods or materials
or for services obtained in the ordinary course of business shall not be
deemed to be "Indebtedness" of the Company or any of its Subsidiaries for
purposes of this definition.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or
other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance, loan or other
extension of credit (including by means of a guarantee) or capital
contribution to (by means of transfers of property to others, payments for
property or services for the account or use of others or otherwise), the
acquisition, by purchase or otherwise of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities or other evidence
of beneficial interest of any Person. Investments shall exclude extensions of
trade credit on commercially reasonable terms in accordance with normal trade
practices. In addition to the foregoing, any foreign exchange contract,
currency swap, Interest Rate Agreement or similar agreement shall constitute
an Investment.
"Issue Date" means the date the Notes are first issued by the Company and
authenticated by the Trustee under the Indenture.
"Leverage Ratio" means the ratio of (i) the sum of the aggregate outstanding
amount of Indebtedness of the Company and its Subsidiaries as of the date of
calculation on a consolidated basis in accordance with GAAP to (ii) the
Company's EBITDA for the four full fiscal quarters (the "Four Quarter Period")
ending on or prior to the date of determination for which financial statements
are available. For purposes of this definition, the Company's "EBITDA" shall
be calculated on a pro forma basis after giving effect to any Asset Sales or
Asset Acquisitions (including, without limitation, any Asset Acquisition
giving rise to the need to make such calculation as a result of the Company or
one of its Subsidiaries (including any Person who becomes a Subsidiary of the
Company as a result of such Asset Acquisition) incurring, assuming or
otherwise becoming liable for Indebtedness) at any time on or subsequent to
the first day of the Four Quarter Period and on or prior to the date of
determination, as if such Asset Sale or Asset Acquisition (including any
EBITDA associated with such Asset Acquisition and including any pro forma
expense and cost reductions determined in accordance with Article 11 of
Regulation S-X) occurred on the first day of the Four Quarter Period.
"Lien" means with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority, or other security agreement or preferential arrangement
of any kind or nature whatsoever on
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or with respect to such property or assets (including without limitation, any
Capitalized Lease Obligation, conditional sales, or other title retention
agreement having substantially the same economic effect as any of the
foregoing).
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"New Credit Facility" means that certain Credit Agreement, dated as of ,
1997 by and among the Company, the Guarantors Chase Manhattan Bank, as agent
and as a lender, and certain banks, financial institutions and other entities,
as lenders, including any related notes, letters of credit issued thereunder,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, and in each case as amended, restated, modified,
renewed, refunded, increased, replaced or refinanced, in whole or in part,
from time to time, whether or not with the same lenders or agents.
"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate
the maturity of any Designated Senior Indebtedness.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chairman, Chief Executive Officer, the President or any Vice
President and the Chief Financial Officer or any Treasurer of such Person that
shall comply with applicable provisions of the Indenture.
"Other Pari Passu Debt" means Indebtedness of the Company or any Subsidiary
Guarantor that neither constitutes Senior Indebtedness or Guarantor Senior
Indebtedness, as applicable, or Subordinated Indebtedness.
"Other Pari Passu Debt Pro Rata Share" means the amount of the applicable
Available Asset Sale Proceeds obtained by multiplying the amount of such
Available Asset Sale Proceeds by a fraction, (i) the numerator of which is the
aggregate accreted value and/or principal amount, as the case may be, of all
Other Pari Passu Debt outstanding at the time of the applicable Asset Sale
with respect to which the Company is required to use Available Asset Sale
Proceeds to repay or make an offer to purchase or repay and (ii) the
denominator of which is the sum of (a) the aggregate principal amount of all
Notes outstanding at the time of the applicable Asset Sale and (b) the
aggregate principal amount or the aggregate accreted value, as the case may
be, of all Other Pari Passu Debt outstanding at the time of the applicable
Asset Sale Offer with respect to which the Company is required to use the
applicable Available Asset Sale Proceeds to offer to repay or make an offer to
purchase or repay.
"Payment Default" means any default, whether or not any requirement for the
giving of notice, the lapse of time or both, or any other condition to such
default becoming an event of default has occurred, in the payment of principal
of (or premium, if any) or interest on or any other amount payable in
connection with Designated Senior Indebtedness.
"Permitted Asset Swap" means the exchange of any interest of the Company or
any of its Subsidiaries in any Advertising Display or Displays for a similar
interest in an Advertising Display or Displays of a Person other than the
Company or such Subsidiary; provided that (i) the aggregate Fair Market Value
of the Advertising Display or Displays being transferred by the Company or
such Subsidiary is not greater than the aggregate Fair Market Value of the
Advertising Display or Displays received by the Company or such Subsidiary in
such exchange or (ii) if the aggregate Fair Market Value of the Advertising
Display or Displays being transferred by the Company or such Subsidiary is
greater than the aggregate Fair Market Value of the Advertising Display or
Displays received by the Company or such Subsidiary in such exchange, so long
as the Company or such Subsidiary receives cash or other property with a Fair
Market Value equal to the difference between the Fair Market Value of the
Advertising Display or Displays being transferred by the Company or such
Subsidiary and
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the Fair Market Value of the Advertising Display or Displays received by the
Company or such Subsidiary in such exchange, the transaction shall be
bifurcated and treated as a "Permitted Asset Swap" to the extent of the Fair
Market Value of the Advertising Display or Displays received by the Company or
such Subsidiary in such exchange, and as an "Asset Sale," subject to the
provisions of the covenant "Repurchase at the Option of Holders--Asset Sales,"
to the extent of the difference between the Fair Market Value of the
Advertising Display or Displays being transferred by the Company or such
Subsidiary and the Fair Market Value of the Advertising Display or Displays
received by the Company or such Subsidiary in such exchange.
"Permitted Indebtedness" means each of the following:
(i) Indebtedness of the Company, as borrower, or any Guarantor, as
guarantor, under the New Credit Facility in an amount not to exceed
$200,000,000, less the aggregate amount of all principal repayments
thereunder (to the extent, in the case of payments of revolving credit
Indebtedness, that the corresponding commitments have been permanently
reduced) or scheduled payments actually made thereunder;
(ii) Indebtedness under the Notes and the Guarantees;
(iii) (i) Indebtedness of any Subsidiary of the Company owed to and held
by the Company or a Subsidiary of the Company and (ii) Indebtedness of the
Company owed to and held by any Subsidiary of the Company; provided that an
incurrence of Indebtedness shall be deemed to have occurred upon (x) any
sale or other disposition (excluding assignments as security to financial
institutions) of any Indebtedness of the Company or a Subsidiary of the
Company referred to in this clause (iii) to a person (other than the
Company or a Subsidiary of the Company) or (y) any sole or other
disposition of Capital Stock of a Subsidiary of the Company, which holds
Indebtedness of the Company or another Subsidiary of the Company such that
such Subsidiary, in any such case, ceases to be a Subsidiary of the
Company;
(iv) Interest Rate Agreements of the Company and/or any Subsidiary of the
Company relating to (i) Indebtedness of the Company and/or such Subsidiary,
as the case may be (which Indebtedness (x) bears interest at fluctuating
interest rates and (y) is otherwise permitted to be incurred under the
"Limitation on Additional Indebtedness" covenant), and/or (ii) Indebtedness
(which Indebtedness would bear interest at fluctuating interest rates) for
which a lender has provided a commitment (subject to customary conditions)
in an amount reasonably anticipated to be incurred by the Company and/or a
Subsidiary of the Company in the following 12 months after such Interest
Rate Agreement has been incurred, but only to the extent, in the case of
either subclause (i) or (ii), that the notional principal amount of such
Interest Rate Agreements does not exceed the principal amount of the
Indebtedness (and/or Indebtedness subject to commitments) to which such
Interest Rate Agreements relate;
(v) Purchase Money Indebtedness and Capitalized Lease Obligations of the
Company and/or any Subsidiary of the Company incurred to acquire property
in the ordinary course of business, which Purchase Money Indebtedness and
Capitalized Lease Obligations do not in the aggregate exceed 5% of the
Company's consolidated total assets;
(vi) Indebtedness ("Refinancing Indebtedness") of the Company and/or any
Subsidiary of the Company to the extent it represents a replacement,
renewal, refinancing or extension (a "Refinancing") of outstanding
Indebtedness of the Company and/or of any Subsidiary of the Company
incurred or outstanding pursuant to clause (ii) or (vii) of this definition
or the proviso to the covenant "Limitation on Additional Indebtedness",
provided that (1) Indebtedness of the Company may not be Refinanced to such
extent under this clause (vi) with Indebtedness of any Subsidiary of the
Company and (2) any such Refinancing shall only be permitted under this
clause (vi) to the extent that (x) it does not result in a lower Average
Life to Stated Maturity (as defined) of such Indebtedness as compared with
the Indebtedness being Refinanced and (y) it does not exceed the sum of the
principal amount (or, if such Indebtedness provides for a lesser amount to
be due and payable upon a declaration of acceleration thereof, an amount no
greater than such lesser amount) of the Indebtedness being Refinanced plus
the amount of accrued interest thereon and the amount of any reasonably
determined prepayment premium necessary to accomplish such Refinancing and
such reasonable fees and expenses incurred in connection therewith; and
78
<PAGE>
(vii) in addition to the items referred to above, Indebtedness of the
Company and/or any Subsidiary of the Company having an aggregate principal
amount not to exceed $25,000,000 at any time outstanding.
"Permitted Investments" means (i) Investments in any of the Notes; (ii)
Investments in Cash Equivalents; (iii) Investments by the Company or any of
its Subsidiaries in a Subsidiary of the Company or another person, if as a
result of such Investment (a) such other person becomes a Subsidiary of the
Company or (b) such other person is merged or consolidated with or into, or
transfers or conveys all or substantially all of its assets to, the Company or
a Subsidiary of the Company; (iv) Investments received in connection with the
bankruptcy or reorganization of suppliers and customers and in settlement of
delinquent obligations of, and other disputes with, customers and suppliers,
in each case arising in the ordinary course of business; (v) Investments in
Interest Rate Agreements permitted by the covenant "--Limitation on Additional
Indebtedness"; and (vi) loans or advances to officers or employees of the
Company and its Subsidiaries in the ordinary course of business for bona fide
business purposes of the Company and its Subsidiaries (including travel and
moving expenses) not in excess of $1,000,000 in the aggregate at any one time
outstanding.
"Permitted Junior Securities" means unsecured equity securities or unsecured
subordinated securities of an issuer as reorganized or readjusted or
securities of the Company or any other Company, trust, corporation or
partnership provided for by a plan of reorganization or readjustment, that, in
the case of any such subordinated securities as junior or the payment of which
is otherwise subordinated, at least to the extent provided in the Indenture
with respect to the Notes, to the payment and satisfaction in full in cash of
all Senior Indebtedness of the Company at the time outstanding, and to the
payment of all securities issued in exchange therefor, to the holders of the
Senior Indebtedness at the time outstanding and that has no shorter a maturity
than the Notes.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however designated,
that entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Public Equity Offering" means a public offering by the Company of shares of
its common stock on a primary basis pursuant to a registration statement filed
and declared effective pursuant to the Securities Act for gross proceeds of
not less than $20,000,000 in cash.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the
cost of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Capital Stock
of the Company or any of its Subsidiaries or any payment made to the direct or
indirect holders (in their capacities as such) of Capital Stock of the Company
or any of its Subsidiaries (other than (x) dividends or distributions payable
solely in Capital Stock (other than Disqualified Stock) or in options,
warrants or other rights to purchase Capital Stock (other than Disqualified
Stock), and (y) in the case of Subsidiaries of the Company, dividends or
distributions payable to the Company or to a Wholly-Owned Subsidiary or
dividends or distributions made on a pro rata basis to all holders of Capital
Stock of a Restricted Subsidiary), (ii) the purchase, redemption or other
acquisition or retirement for value of any Capital Stock of the Company or any
of its Subsidiaries (other than Capital Stock owned by the Company or a
Subsidiary of the Company), (iii) the making of any principal payment on, or
the purchase, defeasance, repurchase, redemption or other acquisition or
retirement for value, prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, of any Subordinated Indebtedness other than
Subordinated Indebtedness acquired in anticipation of satisfying a scheduled
sinking fund obligation, principal installment or final maturity, in each case
due within one year of the date of acquisition) and (iv) the making of any
Investment in any Person other than a Permitted Investment.
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"Senior Indebtedness" means the principal of and premium, if any, and
interest (including, without limitation, interest accruing or that would have
accrued but for the filing of a bankruptcy, reorganization or other insolvency
proceeding whether or not such interest constitutes an allowable claim in such
proceeding) on, and any and all other fees, charges, expense reimbursement
obligations and other amounts due pursuant to the terms of all agreements,
documents and instruments providing for, creating, securing or evidencing or
otherwise entered into in connection with (a) all obligations of the Company
owed to lenders under the New Credit Facility, (b) all obligations of the
Company with respect to any Interest Rate Agreement, (c) all obligations of
the Company to reimburse any bank or other person in respect of amounts paid
under letters of credit, acceptances or other similar instruments, (d) all
other Indebtedness of the Company that does not provide that it is to rank
pari passu with or subordinate to the Notes and (e) all deferrals, renewals,
extensions and refundings of, and amendments, modifications and supplements
to, any of the Senior Indebtedness described above. Notwithstanding anything
to the contrary in the foregoing, Senior Indebtedness will not include (i)
Indebtedness of the Company to any of its Subsidiaries, (ii) Indebtedness
represented by the Notes, (iii) any Indebtedness designated as subordinated or
junior in right of payment to any other Indebtedness of the Company or (iv)
any trade payable arising from the purchase of goods or materials or for
services obtained in the ordinary course of business any obligation that is by
operation of law or judicial decision subordinate to any general unsecured
obligations of the Company or (vi) Indebtedness of the Company to the extent
that such Indebtedness is owed to and held by any Federal, State, local or
other governmental authority.
"Significant Subsidiary" means any Subsidiary of the Company that would be a
"significant subsidiary" as defined in Article I, Rule 1.02 of Regulation S-X,
promulgated pursuant to the Securities Act as such act may be amended from
time to time.
"Subordinated Indebtedness" means with respect to the Company, Indebtedness
of the Company that is expressly subordinated in right of payment to the Notes
or, with respect to any Guarantor, Indebtedness of such Guarantor that is
expressly subordinated in right of payment to the Guarantee of such Guarantor.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which
more than 50% of the total voting power of the Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the
direction of the management and policies of such entity by contract or
otherwise or if in accordance with GAAP such entity is consolidated with the
first-named Person for financial statement purposes.
"Voting Stock" means, with respect to any Person, securities of any class or
classes of Capital Stock in such Person entitling the holders thereof to vote
under ordinary circumstances in the election of members of the board of
directors or other governing body of such Person.
"Wholly-Owned Subsidiary" means any Subsidiary of the Company, all of the
outstanding voting securities (other than directors' qualifying shares) of
which are owned, directly or indirectly, by the Company.
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DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 20,000 shares of Class A
Common Stock, $.01 par value per share, 20,000 shares of Class B Common Stock,
$.01 par value per share, and will consist of 5,000,000 shares of Series A
Preferred Stock, $.01 par value per share. The following summary of the
Company's capital stock is qualified in its entirety by reference to the
Company's Amended and Restated Certificate of Incorporation, as amended (the
"Certificate of Incorporation"), and By-Laws (the "By-Laws"), each of which
has been filed as an exhibit to the registration statement of which this
Prospectus is a part. For ownership of the outstanding shares of the Company's
capital stock, see "Principal Stockholders."
COMMON STOCK
Except for voting rights, the rights of the holders of the Class A Common
Stock and the Class B Common Stock are substantially identical. The holders of
the Class A Common Stock are entitled to one vote per share on all matters on
which the holders of Common Stock are entitled to vote. Except as otherwise
required by law, holders of Class B Common Stock shall not be entitled to vote
on any matter on which the stockholders of the Corporation shall be entitled
to vote, and shares of Class B Common Stock shall not be included in
determining the number of shares voting or entitled to vote on any such
matters; provided that the holders of Class B Common Stock shall have the
right to vote as a separate class on any merger or consolidation of the
Corporation with or into another entity or entities, or any recapitalization
or reorganization, in which shares of Class B Common Stock would receive or be
exchanged for consideration different on a per share basis from consideration
received with respect to or in exchange for the shares of Class A Common Stock
or would otherwise be treated differently from shares of Class A Common Stock
in connection with such transaction, except that shares of Class B Common
Stock may, without such a separate class vote, receive or be exchanged for
non-voting securities which are otherwise identical on a per share basis in
amount and form to the voting securities received with respect to or exchanged
for the Class A Common Stock so long as (i) such non-voting securities are
convertible into such voting securities on the same terms as the Class B
Common Stock is convertible into Class A Common Stock and (ii) all other
consideration is equal on a per share basis. Notwithstanding the foregoing,
holders of shares of the Class B Common Stock shall be entitled to vote as a
separate class on any amendment to the Certificate of Incorporation relating
to such voting rights and on any amendment, repeal or modification of any
provision of this Certificate of Incorporation that adversely affects the
powers, preferences or special rights of holders of the Class B Common Stock.
Each share of Class B Common Stock is convertible at the option of its holder
into one share of Class A Common Stock at any time.
All of the outstanding shares of Common Stock are fully paid and
nonassessable. In the event of the liquidation or dissolution of the Company,
following any required distribution to the holders of outstanding shares of
Preferred Stock, the holders of Common Stock are entitled to share pro rata in
any balance 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 Company's existing and future debt instruments. Subject to the
preferential rights of the holders of any class of preferred stock, holders of
shares of Common Stock are entitled to receive such dividends as may be
declared by the Company's Board of Directors out of funds legally available
for such purpose. No dividend may be declared or paid in cash or property on
any share of either class of Common Stock unless simultaneously the same
dividend is declared or paid on each share of the other class of Common Stock,
provided that, in the event of stock dividends, holders of a specific class of
Common Stock shall be entitled to receive only additional shares of such
class. Holders of Common Stock have no preemptive rights.
Subject to compliance with applicable provisions of the Certificate of
Incorporation, shares of Class A Common Stock held by a stockholder that is,
or is an Affiliate of any entity that is, subject to the provisions of Section
23A or Section 23B of the Federal Reserve Act, as amended (or any successor to
either such Section), that holds shares of Common Stock of the Corporation and
that has provided written notice to the Corporation of its status as a
"Regulated Stockholder" shall be entitled to convert, at any time and from
time to time, any or all of the shares of Class A Common Stock held by such
stockholder into the same number of shares of Class B
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Common Stock; provided, however, that no shares of Class A Common Stock may be
converted into Class B Common Stock by a Regulated Holder if, immediately
after such conversion, any other Person (as defined in the Certificate of
Incorporation), together with all Affiliates (as defined in the Certificate of
Incorporation) of such Person, would hold fifty percent (50%) or more of the
outstanding Class A Common Stock.
Subject to compliance with applicable provisions of the Certificate of
Incorporation, holders of Class B Common Stock shall be entitled at any time
and from time to time in such holder's sole discretion and at such holder's
option, to convert any or all of the shares of such holder's Class B Common
Stock into the same number of shares of Class A Common Stock; provided,
however, that (i) no holder of Class B Common Stock may convert shares of
Class B Common Stock into shares of Class A Common Stock if, immediately after
such conversion, any Person, together with all Affiliates of such Person,
would hold fifty percent (50%) or more of the outstanding Class A Common Stock
and (ii) Class B Common Stock held by a particular Regulated Stockholder may
only be converted into Class A Common Stock to the extent that such Regulated
Stockholder certifies in writing to the Corporation that, based on advice of
counsel such conversion will not cause such Regulated Stockholder to be in
violation of Section 23A or Section 23B of the Federal Reserve Act, as
amended.
SERIES A PREFERRED STOCK
All outstanding shares of the Company's Series A Preferred Stock will be
fully paid and nonassessable.
Rank. The Series A Preferred Stock, with respect to dividends and upon
liquidation, will rank senior to Class A and Class B Common Stock.
Dividends. Holders of shares of Series A Preferred Stock will be entitled to
receive, when and if declared by the Board of Directors out of funds legally
available therefor, cash dividends at a rate of $2.50 per share per quarter.
Dividends will accrue and will be cumulative from July 1, 1997.
Dissolution or Liquidation. In the case of voluntary or involuntary
dissolution or liquidation of the Company, the holders of the Series A
Preferred Stock will be entitled to receive out of the assets of the Company a
liquidation preference of Series A Preferred Stock ($100 per share) and any
accrued and unpaid dividends thereon before any payment may be made or any
assets distributed to the holders of Common Stock. Upon any distribution or
liquidation, whether voluntary or involuntary, if the assets distributed among
the holders of the Series A Preferred Stock are insufficient to permit the
payment to a stockholder of the full preferential amounts, the entire assets
of the Company to be distributed will be distributed ratably among the holders
of the Series A Preferred Stock and the holders of Common Stock will be
entitled to receive ratably all the remaining assets. A merger or
consolidation of the Company with or into any other corporation or
corporations, will be deemed to be a dissolution or liquidation.
Voting Rights. Holders of Series A Preferred Stock will have no voting
rights with respect to general corporate matters except as provided by law.
Under Delaware law, holders of the Series A Preferred Stock are entitled to
vote as a class upon any proposed amendment, whether or not entitled to vote
thereon by the Certificate of Incorporation, if such amendment would increase
or decrease the par value of the shares of such class, or alter or change the
powers, preferences, or special rights of the shares of such class so as to
affect them adversely.
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UNDERWRITING
Subject to the terms and conditions set forth in the underwriting agreement
(the "Underwriting Agreement") dated 1997, among the Company, the
Guarantors and the Underwriters, the Company has agreed to sell to the
Underwriters, and the Underwriters have severally agreed to purchase from the
Company, the following respective amounts of the Notes:
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
UNDERWRITER NOTES
<S> <C>
Chase Securities Inc.................................... $
Donaldson, Lufkin and Jenrette Securities Corporation...
Salomon Brothers Inc....................................
------------
Total................................................. $100,000,000
============
</TABLE>
In the Underwriting Agreement, the Underwriters have agreed, subject to the
terms and conditions set forth therein, to purchase all of the Notes offered
hereby if any of the Notes are purchased. The Company has been advised by the
Underwriters that the Underwriters propose to offer the Notes to the public
initially at the public offering price set forth on the cover page of this
Prospectus, and to certain dealers initially at such price less a discount not
in excess of % of the principal amount of the Notes. The Underwriters may
allow, and such dealers may reallow, a concession to certain other dealers not
in excess of % of the principal amount of the Notes. After the initial
offering of the Notes to the public, the Underwriters may change the public
offering price, the discount and the concession.
The Notes comprise new issues of securities with no established trading
market. The Company has been advised by the Underwriters that the Underwriters
intend to make a market in the Notes, as permitted by applicable laws and
regulations. No assurance can be given, however, that the Underwriters will
make a market in the Notes, or as to the liquidity of, or the trading market
for the Notes.
Chase Securities Inc. ("CSI") is an affiliate of The Chase Manhattan Bank,
which is the agent bank and a lender under the Existing Credit Facility and
will be the agent bank and a lender under the New Credit Facility. The Chase
Manhattan Bank will receive its proportionate share of any repayment by the
Company of amounts outstanding under the Existing Credit Facility from the
proceeds of the Offering. Chase Venture Capital Associates, L.P. ("CVCA"), an
affiliate of CSI, owns approximately 30.1% of the Company's outstanding Common
Stock and 30.1% of the Company's Series A Preferred Stock. Brian J. Richmand,
a director of the Company, is a general partner of Chase Capital Partners,
which is the general partner of CVCA. See "Principal Stockholders."
Under Rule 2720 of the Conduct Rules of the NASD ("Rule 2720"), the Company
is considered an affiliate of CSI. This offering is being conducted in
accordance with Rule 2720, which provides that, among other things, when an
NASD member participates in the underwriting of an affiliate's debt
securities, the yield to maturity can be no lower than recommended by a
"qualified independent underwriter" meeting certain standards ("QIU"). In
accordance with this requirement, Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") has assumed the responsibilities of acting as QIU and will
recommend a minumum yield to maturity in compliance with the requirements of
Rule 2720. In connection with the offering, DLJ is performing due diligence
investigations and reviewing and participating in the preparation of the
Prospectus and the Registration Statement of which this Prospectus forms a
part. As compensation for services of DLJ as QIU, the Company has agreed to
pay DLJ $5,000, which fee will be waived.
The Underwriters have informed the Company that they will not confirm sales
to any accounts over which they exercise discretionary authority without prior
written approval of such transactions by the customer.
In connection with the Offering, CSI, on behalf of the Underwriters, may
engage in overallotment, stabilizing transactions and syndicate covering
transactions in accordance with Regulation M under the Securities
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Exchange Act of 1934, as amended. Overallotment involves sales in excess of
the offering size, which creates a short position for the Underwriters.
Stabilizing transactions involve bids to purchase the Notes in the open market
for purposes of pegging, fixing or maintaining the price of the Notes.
Syndicate covering transactions involve purchases of the Notes in the open
market after the distribution has been completed in order to cover short
positions. Such stabilizing transactions and syndicate covering transactions
may cause the price of the Notes to be higher than it would otherwise be in
the absence of such transactions. Such activities, if commenced, may be
discontinued at any time.
The Company and the Guarantors have agreed to indemnify the Underwriters,
jointly and severally, against certain civil liabilities, including
liabilities under the Securities Act, and to contribute to payments which the
Underwriters might be required to make in respect thereof.
This Prospectus has been prepared for use by the Underwriters and may be
used by CSI in connection with offers and sales related to market-making
transactions in the Notes. CSI may act as principal or agent in such
transactions. Such sales will be made at prices related to prevailing market
prices at the time of sale.
CERTAIN LEGAL MATTERS
Certain legal matters with respect to the legality of the Notes offered
hereby will be passed upon for the Company by Goodwin, Procter & Hoar LLP,
Boston, Massachusetts. Cahill Gordon & Reindel (a partnership including a
professional corporation), New York, New York will pass upon certain legal
matters relating to the Offering for the Underwriters. In rendering their
opinions on the validity of the Notes, counsel for the Company and the
Underwriters will express no opinion as to federal or state laws relating to
fraudulent transfers.
EXPERTS
The consolidated financial statements of (i) OCI as of June 30, 1996, and
for the period April 4, 1996 to June 30, 1996, (ii) OCI North as of April 3,
1996 and for the period August 1, 1995 to April 3, 1996 and as of July 31,
1995, and for each of the years in the two-year period ended July 31, 1995 and
(iii) OCI South as of April 3, 1996 and for the period September 1, 1995 to
April 3, 1996 and the financial statements of Georgia Outdoor as of December
31, 1995 and 1994, and for each of the years in the two-year period ended
December 31, 1995 have been included herein and in the Registration Statement
in reliance upon the applicable reports, of KPMG Peat Marwick LLP, independent
certified public accountants, appearing elsewhere herein, and upon the
authority of said firm as experts in accounting and auditing.
The consolidated financial statements of OCI South as of August 31, 1995 and
for each of the years in the two-year period ended August 31, 1995, included
in this Prospectus and the Registration Statement of which it is a part have
been audited by Moore & Gray, independent certified public accountants, and
have been included herein and in the Registration Statement in reliance upon
the report, appearing elsewhere herein, of Moore & Gray and upon the authority
of said firm as experts in giving said report.
The consolidated financial statements of Alabama Outdoor at December 31,
1995 and the related consolidated statements of income, changes in members'
equity and cash flows for the year then ended and for the two months ended
December 31, 1994, appearing in this Prospectus and the Registration Statement
of which it is a part have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such
firm as experts in accounting and auditing.
The combined financial statements of Skoglund as of December 31, 1995 and
for the year then ended, included in this Prospectus and the Registration
Statement of which it is a part have been included herein and in the
Registration Statement in reliance upon the applicable report, appearing
elsewhere herein, of McGladrey & Pullen, LLP, independent certified public
accountants, and upon the authority of said firm as experts in giving said
reports.
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The combined financial statements of Skoglund as of December 31, 1994 and
for the year then ended included in this prospectus and elsewhere in the
registration statement have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their report with respect thereto, and is
included herein in reliance upon the authority of said firm as experts in
giving said report.
The financial statements of Outdoor West as of December 31, 1996 and 1995
and for each of the years in the two-year period ended December 31, 1996,
included in this Prospectus and the Registration Statement of which it is a
part have been audited by Morrison and Smith, independent public accountants,
and have been included herein and in the Registration Statement in reliance
upon the report, appearing elsewhere herein, of Morrison and Smith and upon
the authority of said firm as experts in giving said report.
ADDITIONAL INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-1 (including all amendments thereto, the "Registration Statement") under the
Securities Act with respect to the Notes offered hereby. As permitted by the
rules and regulations of the Securities and Exchange Commission (the
"Commission"), this Prospectus, which constitutes a part of the Registration
Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any agreement or other
document referred to are not necessarily complete. With respect to each such
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in all respects by
such reference.
The Registration Statement, including the exhibits and schedules thereto,
may be inspected at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, NW, Washington, DC
20549 and at the following regional offices of the Commission: 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 from
the public reference section of the Commission at its Washington address upon
payment of the prescribed fees. In addition, the Company is required to file
electronic versions of these documents with the Commission through the
Commission's Electronic Data Gathering, Analysis, and Retrieval (EDGAR)
system, and such electronic versions are available to the public at the
Commission's World-Wide Web Site, http://www.sec.gov.
The Company is subject to the informational reporting requirements of the
Exchange Act and, in accordance therewith, files reports and other information
with the Commission. The Company intends to furnish its stockholders with
annual reports containing financial statements audited by the Company's
independent accountants and quarterly reports for the first three fiscal
quarters of each fiscal year containing unaudited interim financial
information.
85
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INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
THE COMPANY
<S> <C>
CONSOLIDATED FINANCIAL STATEMENTS OF OCI HOLDINGS CORP. (NOW KNOWN AS
OUTDOOR COMMUNICATIONS, INC.) AND SUBSIDIARIES
. Independent Auditors' Report for the period April 4, 1996 to June 30,
1996................................................................... F-3
. Consolidated Balance Sheets as of March 31, 1997 and June 30, 1996..... F-4
. Consolidated Statements of Operations for the nine months ended March
31, 1997 and the period April 4, 1996 to June 30, 1996................. F-6
. Consolidated Statements of Stockholders' Deficit for the nine months
ended March 31, 1997 and the period April 4, 1996 to June 30, 1996..... F-7
. Consolidated Statement of Cash Flows for the period April 4, 1996 to
June 30, 1996.......................................................... F-8
. Condensed Consolidated Statement of Cash Flows for the nine months
ended March 31, 1997................................................... F-9
. Notes to Consolidated Financial Statements............................. F-10
THE PREDECESSORS
OCI NORTH
CONSOLIDATED FINANCIAL STATEMENTS OF OCI CORP. OF MICHIGAN (NOW KNOWN AS
OCI (N) CORP.) AND SUBSIDIARIES
. Independent Auditors' Report for the period August 1, 1995 to April 3,
1996 and for the years ended July 31, 1995 and 1994.................... F-21
. Consolidated Balance Sheets as of April 3, 1996 and July 31, 1995...... F-22
. Consolidated Statements of Operations for the period August 1, 1995 to
April 3, 1996 and for the years ended July 31, 1995 and 1994........... F-24
. Consolidated Statements of Stockholders' Deficit for the period August
1, 1995 to April 3, 1996 and for the years ended July 31, 1995 and
1994................................................................... F-25
. Consolidated Statements of Cash Flows for the period August 1, 1995 to
April 3, 1996 and for the years ended July 31, 1995 and 1994........... F-26
. Notes to Consolidated Financial Statements............................. F-27
OCI SOUTH
CONSOLIDATED FINANCIAL STATEMENTS OF MASS COMMUNICATIONS CORP. AND
SUBSIDIARY
. Independent Auditors' Report for the period September 1, 1995 to April
3, 1996................................................................ F-36
. Independent Auditors' Report for the years ended August 31, 1995 and
1994................................................................... F-37
. Consolidated Balance Sheets as of April 3, 1996 and August 31, 1995... F-38
. Consolidated Statements of Income for the period September 1, 1995 to
April 3, 1996 and for the years ended August 31, 1995 and 1994......... F-40
. Consolidated Statements of Stockholders' Deficit for the period
September 1, 1995 to April 3, 1996 and for the years ended August 31,
1995 and 1994.......................................................... F-41
. Consolidated Statements of Cash Flows for the period September 1, 1995
to April 3, 1996 and for the years ended August 31, 1995 and 1994...... F-42
. Notes to Consolidated Financial Statements............................. F-43
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PAGE
ACQUIRED COMPANIES
GEORGIA OUTDOOR
<S> <C>
FINANCIAL STATEMENTS OF GEORGIA OUTDOOR ADVERTISING COMPANY INC.
. Independent Auditors' Report for the years ended December 31, 1995 and
1994................................................................... F-51
. Balance Sheets as of December 31, 1995 and 1994........................ F-52
. Statements of Operations for the years ended December 31, 1995 and
1994................................................................... F-53
. Statements of Stockholders' Deficit for the years ended December 31,
1995 and 1994.......................................................... F-54
. Statements of Cash Flows for the years ended December 31, 1995 and
1994................................................................... F-55
. Notes to Financial Statements.......................................... F-56
ALABAMA OUTDOOR
CONSOLIDATED FINANCIAL STATEMENTS OF AOA HOLDING L.L.C.
. Report of Independent Auditors for the year ended December 31, 1995 and
for the two months ended December 31, 1994............................. F-59
. Consolidated Balance Sheet as of December 31, 1995..................... F-60
. Consolidated Statements of Income for the year ended December 31, 1995
and the two months ended December 31, 1994............................. F-61
. Consolidated Statements of Changes in Members' Equity for the year
ended December 31, 1995 and the two months ended December 31, 1994..... F-62
. Consolidated Statements of Cash Flows for the year ended December 31,
1995 and the two months ended December 31, 1994........................ F-63
. Notes to Consolidated Financial Statements............................. F-64
SKOGLUND
COMBINED FINANCIAL STATEMENTS OF SKOGLUND COMMUNICATIONS, INC. AND
SKOGLUND COMMUNICATIONS OF ST. CLOUD, INC.
. Independent Auditor's Report for the year ended December 31, 1995...... F-70
. Independent Auditor's Report for the year ended December 31, 1994...... F-71
. Combined Balance Sheets as of December 31, 1995 and 1994............... F-72
. Combined Statements of Operations and Retained Earnings (Deficit) for
the years ended
December 31, 1995 and 1994............................................. F-73
. Combined Statements of Cash Flows for the years ended December 31, 1995
and 1994............................................................... F-74
. Notes to Combined Financial Statements................................. F-75
OUTDOOR WEST
FINANCIAL STATEMENTS OF OUTDOOR WEST, INC. OF TENNESSEE
. Report of Independent Public Accountants for the years ended June 30,
1996 and 1995.......................................................... F-80
. Balance Sheets as of March 31, 1997 and 1996 and June 30, 1996 and
1995................................................................... F-81
. Statements of Operations and Retained Earnings (Deficit) for the nine
months ended March 31, 1997 and 1996 and for the years ended June 30,
1996 and 1995.......................................................... F-82
. Statements of Cash Flows for the nine months ended March 31, 1997 and
1996 and for the years ended June 30, 1996 and 1995.................... F-83
. Notes to Financial Statements.......................................... F-84
</TABLE>
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
OCI Holdings Corp. and Subsidiary:
We have audited the accompanying consolidated balance sheets of OCI Holdings
Corp. and subsidiaries as of June 30, 1996, and the related consolidated
statements of operations, retained deficit, and cash flows for the period
April 4, 1996 to June 30, 1996. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of OCI
Holdings Corp. as of June 30, 1996, and the results of their operations and
their cash flows for the period April 4, 1996 to June 30, 1996, in conformity
with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
East Lansing, MI
September 5, 1996
F-3
<PAGE>
OCI HOLDINGS CORP.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS OF AS OF
MARCH 31, 1997 JUNE 30, 1996
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 4,566,387 $ 1,259,441
Trade accounts receivable, less allowance for
doubtful accounts of $536,763 and $273,110 in
1997 and 1996, respectively.................... 6,318,149 5,050,490
Refundable income taxes......................... -- 185,893
Inventories..................................... 1,075,228 389,458
Prepaid rent expense............................ 1,786,469 1,077,830
Other assets.................................... 644,205 382,521
Deferred income taxes (note 9).................. 471,818 276,703
------------ -----------
Total current assets........................ 14,862,256 8,622,336
------------ -----------
Property and equipment, net (note 3).............. 63,185,184 37,765,591
Intangible assets, less accumulated amortization
(note 4)......................................... 55,864,480 45,155,192
Deferred financing costs.......................... 4,704,888 3,169,224
Other assets...................................... 114,250 116,638
------------ -----------
Total assets................................ $138,731,058 $94,828,981
============ ===========
</TABLE>
(Continued)
F-4
<PAGE>
OCI HOLDINGS CORP.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--(CONTINUED)
<TABLE>
<CAPTION>
AS OF
MARCH 31, AS OF
1997 JUNE 30, 1996
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current installments of long-term debt (note 5).. $ 4,500,000 $ 4,750,000
Obligation under non-compete agreement........... -- 100,000
Trade accounts payable........................... 313,858 770,147
Income taxes payable............................. 190,217 179,822
Accrued salaries, wages and benefits............. 566,529 708,252
Accrued interest................................. 870,344 1,038,833
Other accrued expenses........................... 520,591 620,318
Deferred advertising revenues and non-compete in-
come............................................ 329,385 303,512
------------ -----------
Total current liabilities.................... 7,290,924 8,470,884
------------ -----------
Long-term debt:
Credit facility, excluding current installments
(note 5)........................................ 103,200,000 57,750,000
Subordinated debt (note 6)....................... 22,425,000 22,100,000
Notes payable--stockholders (note 7)............. 5,876,875 5,876,875
------------ -----------
Total long-term debt......................... 131,501,875 85,726,875
Accrued interest (note 6).......................... 1,318,171 262,488
Deferred non-compete income, less current portion.. 46,667 106,667
Deferred income taxes (note 9)..................... 4,753,699 5,163,547
------------ -----------
Total liabilities............................ 144,911,336 99,730,461
------------ -----------
Stockholders' deficit (note 10):
Class A common stock, $.01 par value. Authorized
10,000 shares; issued and outstanding 8,410.72
and 8,210.72 shares, respectively............... 84 82
Class B common stock, $.01 par value. Authorized
10,000 shares; issued and outstanding 3,689.28
shares.......................................... 37 37
Additional paid-in capital....................... 3,811,475 3,636,477
Accumulated deficit.............................. (9,991,874) (8,538,076)
------------ -----------
Total stockholders' deficit.................. (6,180,278) (4,901,480)
------------ -----------
Commitments and contingencies (notes 10, 11, 12,
and 13)
Total liabilities and stockholders' deficit.. $138,731,058 $94,828,981
============ ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
OCI HOLDINGS CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE NINE FOR THE PERIOD
MONTHS ENDED APRIL 4, 1996 TO
MARCH 31, 1997 JUNE 30, 1996
(UNAUDITED)
<S> <C> <C>
Gross revenues................................. $35,105,189 $9,535,542
Less agency commissions........................ 3,363,915 987,032
----------- ----------
Net revenues............................... 31,741,274 8,548,510
----------- ----------
Operating expenses:
Direct operating expenses.................... 10,816,971 2,753,970
Selling, general, and administrative (notes
11 and 12).................................. 8,016,415 2,308,313
Depreciation and amortization................ 7,256,820 1,929,748
----------- ----------
Total operating expenses................... 26,090,206 6,992,031
----------- ----------
Operating income........................... 5,651,068 1,556,479
Interest expense............................. (7,597,020) (1,826,137)
Loss on disposal of equipment................ (94,816) (67,328)
Other income, net............................ 147,365 64,494
----------- ----------
Loss before income tax expense............. (1,893,403) (272,492)
Income tax expense (benefit) (note 9).......... (439,605) (10,814)
----------- ----------
Net loss................................... $(1,453,798) $ (261,678)
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
OCI HOLDINGS CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE NINE MONTHS ENDED MARCH 31, 1997
AND THE PERIOD APRIL 4, 1996 TO JUNE 30, 1996
<TABLE>
<CAPTION>
CLASS A CLASS B ADDITIONAL TOTAL
PREFERRED COMMON COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK STOCK STOCK CAPITAL DEFICIT DEFICIT
<S> <C> <C> <C> <C> <C> <C>
Balances at April 3,
1996................... $ 90 10 -- 1,235,326 (8,276,398) (7,040,972)
Class A shares issued
for cash............... -- 35 -- 3,536,895 -- 3,536,930
Class B shares issued
for cash -- -- 2 189,270 -- 189,272
Merger with OCI of Mich-
igan................... -- 19 -- (19) -- --
Redemption of OCI Michi-
gan stock.............. (90) (10) -- (7,589,932) -- (7,590,032)
Class A shares issued
for MCC stock.......... -- 28 -- 2,764,972 -- 2,765,000
Class B shares issued
for cash............... -- -- 35 3,499,965 -- 3,500,000
Net loss................ -- -- -- -- (261,678) (261,678)
---- --- --- ---------- ---------- ----------
Balances at June 30,
1996................... -- 82 37 3,636,477 (8,538,076) (4,901,480)
Issuance of common stock
(unaudited)............ -- 2 -- 174,998 -- 175,000
Net loss (unaudited).... -- -- -- -- (1,453,798) (1,453,798)
---- --- --- ---------- ---------- ----------
Balances at March 31,
1997
(unaudited)............ $-- 84 37 3,811,475 (9,991,874) (6,180,278)
==== === === ========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-7
<PAGE>
OCI HOLDINGS CORP.
AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD
APRIL 4, 1996
TO JUNE 30, 1996
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss...................................................... $ (261,678)
Adjustments to reconcile net loss to net cash used in operat-
ing activities:
Allowance for doubtful accounts............................. 48,265
Depreciation of equipment................................... 903,191
Amortization of intangible assets........................... 1,026,557
Loss on disposal of equipment............................... 67,328
Deferred income taxes....................................... (112,776)
Changes in assets and liabilities, net of effects from pur-
chase of company, which increase (decrease) cash flows:
Trade accounts receivable................................. (1,084,980)
Refundable income taxes................................... (81,182)
Inventories............................................... 158,197
Prepaid rent expense...................................... (116,876)
Other assets.............................................. 236,484
Trade accounts payable.................................... 79,701
Income taxes payable...................................... 179,822
Accrued expenses.......................................... (5,069,984)
Deferred advertising revenues and non-compete income...... (142,665)
------------
Net cash used in operating activities................... (4,170,596)
------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of AOA Holding, L.L.C. .............................. (34,132,908)
Purchase of Georgia Outdoor Advertising, Inc. ................ (11,650,000)
Purchase of Mass Communications Corp. warrants, common and
preferred stock.............................................. (767,850)
Capital expenditures.......................................... (597,849)
Proceeds from sale of property and equipment.................. 2,625
Other......................................................... (452,814)
------------
Net cash used in investing activities................... (47,598,796)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt...................... 80,465,000
Repayment of long-term debt................................... (23,950,000)
Deferred financing costs...................................... (3,281,537)
Proceeds from issuance of common stock........................ 7,226,202
Redemption of OCI Corp. of Michigan common and preferred stock
............................................................. (7,590,032)
Payments on obligation under non-compete agreement............ (100,000)
------------
Net cash provided by financing activities............... 52,769,633
------------
Net increase in cash and cash equivalents..................... 1,000,241
Cash and cash equivalents at beginning of the period.......... 259,200
------------
Cash and cash equivalents at end of the period................ $ 1,259,441
============
</TABLE>
See accompanying notes to consolidated financial statements.
F-8
<PAGE>
OCI HOLDINGS CORP.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
NINE MONTHS
ENDED MARCH
31, 1997
<S> <C>
Net cash provided by operating activities.......................... $ 4,674,010
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of companies.............................................. (41,467,008)
Deferred acquisition costs......................................... (1,478,222)
Capital expenditures............................................... (2,293,566)
-----------
Net cash used in investing activities............................ (45,238,796)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on long-term debt................................... 45,100,000
Deferred acquisition costs......................................... (1,728,268)
Issuance of subordinated notes..................................... 325,000
Issuance of common stock........................................... 175,000
-----------
Net cash provided by financing activities........................ 43,871,732
-----------
Net increase in cash and equivalents............................... 3,306,946
Cash and cash equivalents at beginning of the period............... 1,259,441
-----------
Cash and cash equivalents at end of the period..................... $ 4,566,387
===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-9
<PAGE>
OCI HOLDINGS CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND JUNE 30, 1996
(THE NINE MONTHS ENDED MARCH 31, 1997 IS UNAUDITED)
(1) ORGANIZATION AND ACQUISITION OF ASSETS
After the close of business on April 3, 1996, the stockholders of OCI Corp.
of Michigan ("OCIM") and Mass Communications Corp. ("MCC") (collectively the
"companies") entered into a plan of reorganization (the "Reorganization Plan")
to restructure and merge the companies. Pursuant to the Reorganization Plan,
the stockholders agreed to sell their entire interests in the common and
preferred stock of the companies. In conjunction with the Reorganization Plan,
OCI Holdings Corp. ("Holdings") was incorporated for the purpose of effecting
the reorganization and merger.
Under the Reorganization Plan, a series of planned transactions were
executed in the following order: (1) certain outside investors of OCIM (the
Investors) purchased 24.67 shares and 60 shares of OCIM's common and preferred
stock, respectively, from the minority shareholders of OCIM for $1,908,798;
(2) the Investors then exchanged these same shares, together with $14,191,202
in cash, for 5,410.73 and 3,869.28 shares of Holdings' Class A and Class B
common stock, respectively, and $10,465,000 of subordinated debt (see note 6);
and (3) the remaining 75.33 shares and 840 shares of OCIM's common and
preferred stock, respectively, were purchased by Holdings for $7,508,367,
which resulted in Holdings being the sole stockholder in OCIM's common and
preferred stock.
As a result of the above transactions, OCIM became a wholly-owned subsidiary
of Holdings. As such, the closing balance sheet of OCIM at April 3, 1996,
adjusted to reflect the above transactions, became the opening balance sheet
of Holdings.
Immediately following the execution of the Reorganization Plan transactions
listed above, the stockholders of MCC exchanged 7,731.01 shares of common
stock and 308.78 shares of preferred stock and sold 5,128.99 shares of common
stock and 691.22 shares of preferred stock for an aggregate value of
$25,747,927. This transaction resulted in MCC being a wholly owned subsidiary
of Holdings. The acquisition has been accounted for using the purchase method
of accounting and, accordingly, the purchase price has been allocated to the
assets purchased and liabilities assumed based upon the fair value at the date
of acquisition as follows:
<TABLE>
<S> <C>
Adjusted working capital........................................ $ 1,450,063
Goodwill........................................................ 8,741,590
Property and equipment.......................................... 11,529,274
Customer list................................................... 4,027,000
-----------
$25,747,927
===========
</TABLE>
The details of the acquisition for the fair value of assets acquired and
liabilities assumed are as follows: liabilities assumed of $10,750,000;
subordinated debt issued to the MCC shareholders in the amount of $11,011,875;
2,764.99 shares of OCI Holdings Inc. common stock issued to MCC shareholders
with a value of $2,765,000; and cash paid in the amount of $1,221,052 equaling
the purchase price of $25,747,927.
The business operations of OCI Holdings Corp. and subsidiaries (the
"Company") consist of outdoor billboard advertising in the states of Alabama,
Georgia, Illinois, Kentucky, Michigan, Mississippi, Tennessee, and Wisconsin.
Georgia Acquisition
Simultaneously, Outdoor Communications, Inc., a subsidiary of MCC, completed
the purchase of the business operations and certain assets of Georgia Outdoor
Advertising ("GOA"), pursuant to an Asset Purchase Agreement dated March 8,
1996, for cash of $11,650,000. The acquisition has been accounted for using
the
F-10
<PAGE>
OCI HOLDINGS CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
purchase method of accounting and, accordingly, the purchase price has been
allocated to the net assets based upon their fair values at the date of
acquisition as follows:
<TABLE>
<S> <C>
Adjusted working capital........................................ $ 415,864
Goodwill........................................................ 2,968,896
Property and equipment.......................................... 2,282,240
Non-compete agreement........................................... 700,000
Customer list................................................... 5,283,000
-----------
Cash purchase price............................................. $11,650,000
===========
</TABLE>
Alabama Acquisition
On April 30, 1996, OCI Holdings Corp. completed the purchase of certain
assets and assumed certain liabilities of AOA Acquisition, L.L.C. ("AOA"),
pursuant to an Asset Sale Agreement dated March 19, 1996, for cash of
$34,132,908. The acquisition has been accounted for using the purchase method
of accounting and, accordingly, the purchase price has been allocated to the
assets purchased and the liabilities assumed based upon the fair value at the
date of acquisition. The excess of the purchase price over the fair values of
the net assets acquired was $9,911,190 and has been recorded as goodwill. The
net purchase price was allocated as follows:
<TABLE>
<S> <C>
Adjusted working capital........................................ $ 1,959,432
Goodwill........................................................ 10,084,666
Property and equipment.......................................... 15,012,810
Customer list................................................... 7,076,000
-----------
Purchase price.................................................. $34,132,908
===========
</TABLE>
The consolidated financial statements include the operating results of each
business from the date of acquisition.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the Company, as summarized below, conform with
generally accepted accounting principles and reflect practices appropriate to
the business in which it operates.
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of
OCI Holdings Corp. and its wholly owned subsidiaries, OCI Corp. of Michigan,
New South Holdings Corp., and Mass Communications Corp. and its subsidiary
Outdoor Communications, Inc. All significant intercompany balances and
transactions have been eliminated in consolidation.
(b) CASH EQUIVALENTS
Cash equivalents consist of repurchase agreements and money market funds.
For purposes of the consolidated statement of cash flows, the Company
considers all highly liquid debt instruments with maturities of three months
or less at the time of purchase to be cash equivalents.
(c) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
(d) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation on plant and
equipment is computed using the straight-line method over the estimated useful
lives of the assets.
(e) INTANGIBLE ASSETS
Intangible assets include goodwill, non-compete agreements and customer
lists. Goodwill, which represents the excess of purchase price over fair value
of net assets acquired on their dates of acquisition, is amortized on a
F-11
<PAGE>
OCI HOLDINGS CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
straight-line basis over the expected periods to be benefited, ranging from 20
to 25 years. The non-compete agreements are amortized over the terms of the
respective agreements, which range from 4 to 10 years. Customer lists
resulting from acquisitions are amortized on the straight-line method over 8
years.
The Company assesses the recoverability of all long-lived intangible assets
by determining whether the amortization of the intangible assets over their
remaining lives can be recovered through undiscounted future operating cash
flows of the acquired operation. The amount of impairment, if any, is measured
based on projected discounted future operating cash flows using a discount
rate reflecting the Company's average cost of funds.
(f) DEFERRED FINANCING COSTS
Financing costs incurred as a result of obtaining long-term debt are
recorded as deferred financing costs and are amortized on a straight-line
basis over the term of the related debt (see note 5).
(g) EMPLOYEE BENEFITS
The Company is self-insured for its employee health care plan. The liability
for self-insurance reflects the cost for the uninsured portion of unpaid
claims at year end. The liability is based on estimates for claims reported
prior to year end, using reported claim information, and estimates for
incurred but not reported, based on historical results of the Company's plan,
as well as certain industry ratios.
(h) RETIREMENT PROGRAM
OCIM provides a defined contribution 401(k) plan, which covers all of its
full-time employees with one or more years of service. Eligible employees can
contribute up to 12% of their compensation through payroll deductions. OCIM
will contribute an amount equal to 50% of each employee's contribution up to
3% of the employee's total compensation.
(i) REVENUE RECOGNITION
The Company recognizes revenue from advertising contracts on an accrual
basis ratably over the term of the contracts, which range from 1 to 12 months,
as advertising services are provided.
(j) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(k) OTHER ASSETS
Other assets consist principally of the cash surrender value of officer life
insurance.
(l) USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
F-12
<PAGE>
OCI HOLDINGS CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(m) FINANCIAL INSTRUMENTS
The Company utilizes a hedged interest rate swap agreement. The interest
rate swap agreement involves the exchange of fixed- and floating-rate interest
payments periodically over the life of the agreement without the exchange of
the underlying principal amounts. The differential to be paid or received, on
a quarterly basis, is accrued as interest rates change and is recognized as an
adjustment to interest expense.
(n) EARNINGS PER SHARE
An earnings per share calculation has not been presented because the Company
is closely held by a private investor group and accordingly, earnings per
share is not required or meaningful.
(3) PROPERTY AND EQUIPMENT
Major categories of property, plant and equipment at April 3, 1996 were as
follows:
<TABLE>
<CAPTION>
ESTIMATED
LIFE (YEARS)
<S> <C> <C>
Land.............................................. -- $ 1,204,494
Building and improvements......................... 10-25 564,274
Advertising structures............................ 8-15 38,309,049
Leasehold improvements............................ 2-20 832,203
Equipment......................................... 3-10 2,737,091
Construction in progress.......................... -- 41,256
------------
43,688,367
Less accumulated depreciation..................... 5,922,776
------------
Net property and equipment...................... $ 37,765,591
============
</TABLE>
(4) INTANGIBLE ASSETS
Intangible assets at June 30, 1996 consist of the following:
<TABLE>
<S> <C>
Covenants not to compete........................................ $ 3,935,667
Goodwill........................................................ 29,756,723
Customer lists.................................................. 16,386,000
-----------
50,078,390
Less accumulated amortization................................... 4,923,198
-----------
$45,155,192
===========
</TABLE>
(5) CREDIT FACILITY
The Company entered into a credit agreement (the "Credit Facility") with
Chase Manhattan Bank, N.A. and a syndicate consisting of various other
financial institutions (collectively called the "Bank") on the close of
business on April 3, 1996. The Credit Facility consists of a Term Loan A
Commitment for $40,000,000, Term Loan B Commitment for $20,000,000, (the "Term
Loans") and a Revolving Loan Commitment (the "Revolver") of $30,000,000
(collectively the "Borrowings"). The Term Loans are due June 30, 2003.
Collateral includes a first lien on all tangible and intangible property of
the Company, assignment of all leases, and a guaranty by Holdings, OCIM, and
MCC.
F-13
<PAGE>
OCI HOLDINGS CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Credit Facility enables the Company to borrow funds at a rate equal to
3% plus the London Interbank Offered Rate (LIBOR) or 1.75% over the Bank's
prime lending rate. The Credit Facility also enables the Company to realize a
lower interest rate if its leverage ratio meets certain levels as stipulated
in the Credit Facility. At June 30, 1996, the interest rate was 8.5%. Accrued
interest is payable in quarterly installments on March 31, June 30, September
30, and December 31. The Credit Facility also requires payment of a commitment
fee of 1/2 of 1% per annum on the daily average aggregate unutilized
commitment from the Bank. Accrued commitment fees are due quarterly on March
31, June 30, September 30, and December 31.
Available borrowings under the Revolver are permanently reduced on the last
day of each fiscal quarter beginning September 30, 1997 by $1,250,000, thereby
reducing the availability to zero on June 30, 2003. At June 30, 1996, the
Company had borrowed $2,500,000, and $27,500,000 of the Revolver was available
for additional borrowings by the Company.
The Credit Facility contains certain warranties and affirmative covenants
that must be complied with on a continuing basis. In addition, the Credit
Facility contains certain restrictive covenants which, among other things,
restrict the Company from incurring additional debt and liens on assets,
limits the amount of capital expenditures during any fiscal year, and
prohibits the consolidation, merger or sale of assets, or issuance of common
stock except as permitted by the Credit Facility. The Credit Facility also
requires the Company to maintain certain financial ratios.
The Company has the right to prepay the Borrowings in whole or in part,
without premium or penalty, as stipulated in the Credit Facility. Annual
maturities of the long-term borrowings under the term loans at June 30, 1996,
are as follows: 1997: $4,750,000; 1998: $6,000,000; 1999: $6,750,000; 2000:
$7,750,000; 2001: $8,750,000; and $28,250,000 thereafter.
(6) SUBORDINATED DEBT
The Company entered into a Securities Purchase Agreement (the "Agreement")
after the close of business on April 3, 1996 with certain management investors
and outside investors. In connection with the reorganization discussed in note
1, the Company issued its 10% subordinated notes ("notes") due December 31,
2003 in the aggregate principal amount of $22,100,000. The subordinated notes
at June 30, 1996, were comprised of two series; Series A 10% subordinated
notes in the amount of $5,200,000, and Series B 10% subordinated notes in the
amount of $16,900,000.
Accrued interest on the outstanding principal balance of the notes is
payable at a rate of 10% per annum, computed on the basis of a 365 day year,
and is payable annually on March 31, commencing in 1997. The Agreement allows
the Company to only pay 46% of the accrued and unpaid interest on an annual
basis. The remaining 54% is deferred and bears interest at a rate of 10% per
annum and is due in accordance with the terms of the Agreement, but in any
event no later than December 31, 2003. Accrued interest at June 30, 1996
amounted to $489,370.
The Agreement contains certain warranties and affirmative covenants that
must be complied with on a continuing basis. The Agreement also contains
certain restrictive covenants which, among other things, restricts the Company
from entering into transactions with affiliates outside the ordinary course of
business, consummating a sale of the Company, or engaging in any new lines of
business.
F-14
<PAGE>
OCI HOLDINGS CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(7) NOTES PAYABLE--STOCKHOLDERS
On the close of business on April 3, 1996, New South Holdings Corp. (a
wholly owned subsidiary of Holdings) entered into written agreements with the
Company's chairman and president, borrowing in total $5,876,875. The entire
principal balance is due in full on April 3, 1998. The notes bear interest at
a rate which fluctuates quarterly based on the interest rate per the Credit
Agreement less the sum of the applicable eurodollar margin (as defined in the
Credit Agreement) and 1/8 of 1%. The interest rate at June 30, 1996 was 5.41%.
Accrued interest on the outstanding principal balance of the notes is payable
quarterly, commencing June 30, 1996. The notes are secured by a Letter of
Credit issued by The Chase Manhattan Bank, N.A.
(8) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of the Company's
financial instruments is made in accordance with the requirements of FASB
Statement No. 107, "Disclosure about Fair Value of Financial Instruments"
("Statement 107"). Statement 107 defines the fair value of a financial
instrument as the amount at which the instrument could be exchanged in a
current transaction between willing parties.
The carrying values of cash and cash equivalents, trade accounts receivable,
due from affiliated entity, trade accounts payable, accrued expenses, and
obligations under non-compete agreements approximate fair values due to the
short-term maturities of these instruments. Interest rate swaps, long-term
debt instruments and notes payable stockholders are estimated to approximate
fair values as rates are tied to short-term indices. The subordinated debt
bears interest at a rate which approximates market for unsecured debt.
(9) INCOME TAXES
Income tax expense (benefit) attributable to loss before income tax expense
for the period ended June 30, 1996 consists of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
<S> <C> <C> <C>
Federal.......................................... $ 81,962 (72,889) 9,073
State and local.................................. 20,000 (39,887) (19,887)
-------- -------- -------
Total.......................................... $101,962 (112,776) (10,814)
======== ======== =======
</TABLE>
Income tax expense differed from the amounts computed by applying the
federal income tax rate of 34% for the period ended June 30, 1996 to income
before income tax expense as a result of the following:
<TABLE>
<S> <C>
Computed "expected" tax expense (benefit)......................... $(91,677)
Increase (reduction) in income taxes resulting from:
State and local income taxes, net of federal income tax ex-
pense.......................................................... (15,891)
Non-deductible expenses......................................... 6,599
Nondeductible goodwill.......................................... 44,242
Adjustment of prior period accrual.............................. 74,292
Other, net...................................................... 11,621
Change in the beginning-of-the-year balance of the valuation al-
lowance for deferred tax assets allocated to income tax ex-
pense.......................................................... (40,000)
--------
$(10,814)
========
</TABLE>
F-15
<PAGE>
OCI HOLDINGS CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at June 30,
1996 is presented below:
<TABLE>
<S> <C>
Deferred tax assets:
Net operating loss carryforwards............................. $ 320,576
Alternative minimum tax credit carryforwards................. 60,606
Investment tax credit carryforwards.......................... 12,949
Deferred revenue, principally related to advertising leases.. 72,944
Accrued expenses, principally related to compensated
absences, health care claims and sales discounts............ 158,346
Deferred noncompete income................................... 63,466
Other........................................................ 45,413
-----------
Total gross deferred tax assets............................ 734,300
Less valuation allowance................................... (160,000)
-----------
Net deferred tax assets.................................... 574,300
-----------
Deferred tax liabilities:
Property and equipment, principally due to differences in
financial statement carrying amounts and tax basis.......... (3,952,655)
Intangible assets, principally due to differences in length
of amortization period...................................... (1,508,489)
-----------
Total gross deferred tax liabilities....................... (5,461,144)
-----------
Net deferred tax liabilities............................... $(4,886,844)
===========
</TABLE>
The net change in the total valuation allowance for the period ended June
30, 1996 was a decrease of $40,000.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversals of deferred taxes, projected future taxable
income, and tax planning strategies in making this assessment. In order to
fully realize the deferred tax assets, the Company will need to generate
future taxable income of approximately $833,000 and $110,000 for OCIM and MCC,
respectively, prior to the expiration of the net operating loss carryforwards
in 2010. Based upon the level of historical taxable income and projections for
future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not that the Company
will realize the benefits of these deductible differences, net of the existing
valuation allowance at June 30, 1996. The amount of the deferred tax assets
considered realizable, however, could be reduced in the near term if estimates
of future taxable income during the carryforward period are reduced.
The Company also has an alternative minimum tax credit carryforward of
$60,606, which is available to reduce future regular income taxes, if any,
over an indefinite period. In addition, the Company has an investment tax
credit carryforward of $12,949, which is available to reduce future regular
income taxes, if any, through 2001.
At June 30, 1996, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $943,000, of which approximately
$833,000 and $110,000 were incurred prior to the restructuring of the
ownership of OCIM and MCC, respectively, with Holdings becoming the common
parent. As a result of
F-16
<PAGE>
OCI HOLDINGS CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
the restructuring, future utilization of the net operating loss carryforwards
is limited under Internal Revenue Code Section 382 to approximately $487,000
and $110,000 annually for OCIM and MCC, respectively. Additionally, these net
operating loss carryforwards can only be utilized to offset future taxable
income of OCIM and MCC, respectively, if any, through the year 2010.
(10) STOCKHOLDERS' EQUITY
All general voting power is vested in the holders of Class A common stock.
The holders of Class B common stock are not entitled to vote at any
stockholders' meetings. Any share of Class B common stock can be converted, at
the option of the holder, into Class A common stock at the rate of one share
of Class A common stock for each share of Class B common stock, subject to
certain approvals.
Also, any share of Class A common stock can be converted, at the option of
the holder, into Class B common stock at the rate of one share of Class B
common stock for each share of Class A common stock, subject to and upon
compliance with the provisions of the Certificate of Incorporation of OCI
Holdings Corp.
Dividends or distributions of common stock shall be payable on shares of
Class A and B common stock, share and share alike.
In the event of liquidation, the holders of Class A and B common stock shall
be entitled to share ratably in the net assets of the Company after payment of
debts and other liabilities.
The Corporation shall not take any action (e.g., redeem, purchase, or
acquire) affecting outstanding shares of common stock if after giving effect
to such action any one, as defined, stockholder would own more than 24.95% of
Class A common stock.
(11) LEASES
The Company leases substantially all of the land presently used as sites for
poster panels under various terms. The leases are classified as operating
leases. These leases generally contain renewal options ranging from 1 to 15
years and require the Company to pay all executory costs, such as maintenance
and insurance. Rental expense for operating leases amounted to approximately
$931,000 for the period April 4, 1996 to June 30, 1996.
Future minimum lease payments under noncancellable operating leases with
non-related parties (with initial or remaining lease terms in excess of one
year) as of June 30, 1996 are:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30:
<S> <C>
1997........................................................... $ 3,467,502
1998........................................................... 2,843,614
1999........................................................... 2,322,841
2000........................................................... 1,957,953
2001........................................................... 1,295,727
-----------
$11,887,637
===========
</TABLE>
(12) RELATED PARTY TRANSACTIONS
MCC leases real property from a trust for which Holdings' chairman, who is a
stockholder of the Company, serves as trustee. Rental expense to the trust
amounted to approximately $6,800 for the period April 4, 1996 to June 30,
1996. The Company also leases a sign location from the chairman and president
of Holdings. The rental payment for the sign location amounted to
approximately $250 for the period April 4, 1996 to June 30, 1996.
F-17
<PAGE>
OCI HOLDINGS CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Future minimum lease payments under noncancellable operating leases with
related party (with initial or remaining lease terms in excess of one year) as
of June 30, 1996 are:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 30:
<S> <C>
1997............................................................... $27,320
1998............................................................... 27,320
1999............................................................... 27,320
2000............................................................... 13,660
2001............................................................... --
-------
$95,620
=======
</TABLE>
(13) EMPLOYEE HEALTH CARE PLAN
Under the Company's self insurance plan for employee health care, eligible
participants receive payment or reimbursement of all or a portion of eligible
participants medical expenses, after deductibles and co-payments, up to a
lifetime aggregate benefit of $1 million. Eligible participants (and their
dependents) include active full-time employees. The plan is primarily funded
by the Company, with contributions from participants for a portion of
dependent's coverage, as required under the health care plan.
The plan has obtained aggregate excess of loss coverage of $955,000 in
excess of $45,000 per eligible participant. The Company incurred approximately
$11,600 for such coverage for the period April 4, 1996 to June 30, 1996.
Additionally, the Company incurred approximately $180,000 in expense for self
insured health care claims for the period April 4, 1996 to June 30, 1996.
(14) RETIREMENT PROGRAM
Retirement program expense with respect to OCIM's defined contribution
401(k) plan approximated $11,000 for the period April 4, 1996 to June 30,
1996.
(15) SUPPLEMENTAL CASH FLOW INFORMATION
Non cash investing and financing activities:
The Company paid $3,322 for income taxes during the period April 4, 1996 to
June 30, 1996. Cash payments for interest approximated $6,981,000 for the
period April 4, 1996 to June 30, 1996, of which $6,531,384 pertained to the
interest paid on the junior and senior subordinated debt and senior debt
existing prior to the close of business on April 3, 1996.
The company issued 2,764.99 shares of its common stock valued at $2,765,000
and series A subordinated notes in the amount of $5,135,000 for the purchase
of 7,371.01 common shares and 308.78 preferred shares of MCC. Also, the
Company issued subordinated notes in the amount $5,876,875 for the purchase of
5,128.99 common shares and 562.5 preferred shares of Mass Communications Corp.
<TABLE>
<S> <C>
Details of acquisition:
Fair value of assets acquired............................... $25,747,927
Liabilities assumed......................................... (10,750,000)
Subordinated debt issued.................................... (11,011,875)
Stock issued................................................ (2,765,000)
-----------
Cash paid................................................... 1,221,052
-----------
Less cash acquired........................................... 453,202
-----------
Net cash paid for acquisition................................ $ 767,850
===========
</TABLE>
F-18
<PAGE>
OCI HOLDINGS, CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(16) FINANCIAL INSTRUMENTS
On May 30, 1996, the Company entered into a three-year interest swap
agreement, expiring on June 30, 1999, with First Union National Bank of North
Carolina to manage its interest rate exposure. Interest rate exchange
transactions generally involve the exchange of fixed and floating-rate
interest payment obligations without the exchange of the underlying principal
amounts. Entering into interest rate exchange agreements involves the risk of
dealing with counterparties and their ability to meet the terms of the
contracts. Notional principal amounts are used to express the volume of these
transactions. The floating interest rate on the interest swap agreement is
based on three month U.S. dollar LIBOR. The fixed-for-floating interest rate
swap agreement as of June 30, 1996 is summarized as follows:
<TABLE>
<S> <C>
Notional principal amount....................................... $15,000,000
Fixed rate paid................................................. 6.34%
Floating rate................................................... 5.49219%
</TABLE>
(17) SUBSEQUENT EVENTS
Acquisitions
On September 3, 1996, the Company completed the purchase of advertising
structures located in Georgia previously owned by Hawthorne Outdoor
Advertising, Inc. pursuant to an Asset Purchase Agreement for cash of
$3,832,000. The acquisition was accounted for by the purchase method.
On October 1, 1996, the Company completed the purchase of advertising
structures located in Alabama previously owned by Hawthorne Outdoor
Advertising, Inc. pursuant to an Asset Purchase Agreement for cash of
$549,167. The acquisition was accounted for by the purchase method.
The Company entered into an asset purchase agreement with Skoglund
Communications, Inc. and Skoglund Communications of St. Cloud, Inc.
("Skoglund"), for a cash purchase price of $21,246,850. The Company expects
this transaction, which includes business operations in Minnesota and
Wisconsin, to be consummated by October 31, 1996. This acquisition will be
accounted for by the purchase method.
(18) UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
applicable to interim financial statements. Accordingly, they do not include
all of the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments and reclassifications considered necessary for a fair and
comparable presentation have been included and are of a normal recurring
nature. Operating results for the nine months ended March 31, 1997, are not
necessarily indicative of the results that may be expected for the year ending
June 30, 1997.
F-19
<PAGE>
OCI HOLDINGS CORP.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Acquisitions
The Company entered into an asset purchase agreement with Skoglund for a
cash purchase price of $21,246,850. The transaction, which includes business
operations in Minnesota and Wisconsin, was consummated on October 31, 1996.
This acquisition was accounted for by the purchase method and, accordingly,
the purchase price has been allocated to the assets purchased and the
liabilities assumed based upon the fair value at the date of acquisition as
follows:
<TABLE>
<S> <C>
Adjusted working capital........................................ $ 1,336,989
Goodwill........................................................ 7,953,899
Property and equipment.......................................... 7,537,470
Customer list................................................... 4,418,492
-----------
Cash purchase price............................................. $21,246,850
===========
</TABLE>
On March 31, 1997, the Company acquired substantially all of the assets and
business operations of Outdoor West for a cash payment of $11,750,000. As a
result of this acquisition, the Company acquired display faces in Tennessee
and a right of first refusal to purchase Outdoor West, Inc. of Georgia, an
affiliate of Outdoor West. This purchase will be accounted for by the purchase
method.
In addition to the acquisition described above, the Company has recently
consummated numerous smaller acquisitions for aggregate cash payments totaling
$4,088,991.
Offering
On June 25, 1997, the Board of Directors of the Company authorized a Note
Offering of $100 million aggregate principle amount of subordinated notes (the
Notes). The Notes will be unconditionally guaranteed, on a senior subordinated
basis, as to payment of principal, premium, if any, and interest, jointly and
severally by all of the Company's subsidiaries.
Subsequent Events
In June, 1997, the Board of Directors of the Company authorized a change,
effective June 30, 1997 in the name of the Company to Outdoor Communications,
Inc. Simultaneously, the Board of Directors approved the merger of New South
Holdings Corp. and Mass Communications Corp. into the Company effective June
30, 1997. Additionally, the Company's subsidiary, Outdoor Communications, Inc.
changed its name to OCI (S) Corp. As a result of these transactions, the
Company now has two wholly owned subsidiaries, OCI (N) Corp. and OCI (S) Corp.
In July 1997, the Company entered into an agreement, effective June 30,
1997, with the Series A and B subordinated debt holders to exchange the notes
and accrued interest through June 30, 1997 for Series A 10% preferred stock.
F-20
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders OCI Corp. of Michigan:
We have audited the accompanying consolidated balance sheets of OCI Corp. of
Michigan and subsidiaries (the Company) as of April 3, 1996 and July 31, 1995,
and the related consolidated statements of operations, stockholders' deficit,
and cash flows for the period August 1, 1995 through April 3, 1996 and for the
years ended July 31, 1995 and 1994. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our 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 the
Company as of April 3, 1996 and July 31, 1995, and the results of their
operations and their cash flows for the period August 1, 1995 through April 3,
1996 and for the years ended July 31, 1995 and 1994 in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
East Lansing, Michigan
June 4, 1996
F-21
<PAGE>
OCI CORP. OF MICHIGAN
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 3, JULY 31,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 259,200 396,061
Trade accounts receivable, less allowance for doubtful
accounts of $48,900 in 1996 and $18,000 in 1995...... 1,268,800 1,293,742
Due from affiliated entity (note 12).................. 98,374 144,651
Income taxes receivable............................... 7,159 --
----------- ----------
Inventories:
Construction material................................. 113,741 76,572
Electrical supplies................................... 39,634 29,810
----------- ----------
Total inventories................................... 153,375 106,382
Prepaid rent expense.................................. 441,990 370,296
Other prepaid expenses................................ 85,005 30,977
Deferred tax assets................................... 229,929 162,647
----------- ----------
Total current assets................................ 2,543,832 2,504,756
----------- ----------
Property, plant, and equipment, net (note 3)........ 9,316,562 9,763,900
Intangible assets, less accumulated amortization
(note 4)........................................... 1,999,607 2,346,039
Other deferred costs (note 17)...................... 635,551 100,028
----------- ----------
Total assets........................................ $14,495,552 14,714,723
=========== ==========
</TABLE>
(Continued)
F-22
<PAGE>
OCI CORP. OF MICHIGAN
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS--(CONTINUED)
<TABLE>
<CAPTION>
APRIL 3, JULY 31,
1996 1995
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current installments of long-term debt (notes 5 and
17)................................................ $ 1,045,000 4,900,000
Obligations under noncompete agreements............. 200,000 400,000
Trade accounts payable.............................. 175,183 115,880
Income taxes payable (note 9)....................... -- 1,309
Due to stockholder (note 12)........................ -- 50,000
Accrued expenses:
Salaries and wages................................ 211,780 401,421
Payroll and other taxes........................... 82,013 21,194
Employee benefits................................. 114,420 104,820
Interest.......................................... 104,139 214,826
Other............................................. 103,856 70,310
----------- ----------
Total accrued expenses.......................... 616,208 812,571
Deferred advertising revenues....................... 346,177 145,671
Deferred noncompete income.......................... 80,000 80,000
----------- ----------
Total current liabilities....................... 2,462,568 6,505,431
Long-term debt, excluding current installments (notes
5 and 17)............................................ 3,555,000 --
Senior subordinated debt (notes 6 and 17)............. 4,000,000 4,000,000
Junior subordinated debt, stockholders (notes 7 and
17).................................................. 3,600,000 3,600,000
Accrued interest (notes 5, 6, 7 and 17)............... 6,332,869 5,409,848
Deferred noncompete income, less current portion...... 126,667 180,000
Deferred income taxes (note 9)........................ 1,459,420 1,236,064
----------- ----------
Total liabilities............................... 21,536,524 20,931,343
----------- ----------
Stockholders' deficit (notes 10 and 17):
12.5% cumulative preferred stock, $.10 par value.
Authorized 1,000 shares; issued and outstanding 900
shares............................................. 90 90
Class A common stock, $.10 par value. Authorized
2,000 shares; issued and outstanding 100 and 97
shares at April 3, 1996 and July 31, 1995,
respectively....................................... 10 10
Class B common stock, $.10 par value. Authorized
2,000 shares; issued and outstanding -0- shares.... -- --
Additional paid-in capital.......................... 1,235,326 1,009,168
Accumulated deficit................................. (8,276,398) (7,225,888)
----------- ----------
Total stockholders' deficit..................... (7,040,972) (6,216,620)
----------- ----------
Commitments and contingencies (notes 10, 11 and 12)
Total liabilities and stockholders' deficit..... $14,495,552 14,714,723
=========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-23
<PAGE>
OCI CORP. OF MICHIGAN
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 1, 1995 FOR THE YEARS ENDED JULY 31,
THROUGH ------------------------------
APRIL 3, 1996 1995 1994
<S> <C> <C> <C>
Revenues:
Poster........................ $ 3,581,596 6,076,107 5,219,208
Painted....................... 3,406,560 4,833,174 4,566,124
Other......................... 447,319 653,456 708,093
----------- -------------- --------------
Gross revenues.............. 7,435,475 11,562,737 10,493,425
Less commissions and dis-
counts....................... 752,093 1,193,283 992,995
----------- -------------- --------------
Net operating revenues...... 6,683,382 10,369,454 9,500,430
----------- -------------- --------------
Operating expenses:
Operations (note 12).......... 1,651,583 2,435,839 2,467,755
Selling, general, and adminis-
trative (note 12)............ 3,019,373 3,952,785 3,897,229
Depreciation.................. 1,021,901 1,472,053 1,550,296
Amortization of intangible as-
sets......................... 346,432 535,408 620,455
Amortization of other deferred
costs........................ 61,248 105,182 105,418
----------- -------------- --------------
Total operating expenses.... 6,100,537 8,501,267 8,641,153
----------- -------------- --------------
Operating income............ 582,845 1,868,187 859,277
Other income (deductions):
Gain (loss) on disposal of
property, plant, and equip-
ment......................... (9,973) 87,274 (55,160)
Loss on sale of Mansfield Di-
vision (note 16)............. -- -- (446,299)
Interest expense.............. (1,460,671) (2,126,614) (2,041,862)
Interest income............... 8,142 44,951 16,371
Management fees (note 12)..... (68,649) (195,998) (248,815)
Miscellaneous, net............ 319 4,849 17,992
Noncompete income............. 53,333 80,000 60,000
----------- -------------- --------------
Loss before income tax (ben-
efit) expense.............. (894,654) (237,351) (1,838,496)
Income tax expense (benefit)
(note 9)....................... 155,856 (132,666) (472,748)
----------- -------------- --------------
Net loss.................... $(1,050,510) (104,685) (1,365,748)
=========== ============== ==============
</TABLE>
See accompanying notes to consolidated financial statements.
F-24
<PAGE>
OCI CORP. OF MICHIGAN
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD AUGUST 1, 1995 THROUGH APRIL 3, 1996
AND FOR THE YEARS ENDED JULY 31, 1995 AND 1994
<TABLE>
<CAPTION>
12.5% UNEARNED
CUMULATIVE CLASS A ADDITIONAL RESTRICTED TOTAL
PREFERRED COMMON PAID-IN ACCUMULATED STOCK STOCKHOLDERS'
STOCK STOCK CAPITAL DEFICIT COMPENSATION DEFICIT
<S> <C> <C> <C> <C> <C> <C>
Balances at July 31,
1993................... $ 90 10 1,009,168 (5,755,455) (12,081) (4,758,268)
Restricted stock
compensation
(note 15).............. -- -- -- -- 12,081 12,081
Net loss................ -- -- -- (1,365,748) -- (1,365,748)
---- --- --------- ---------- ------- ----------
Balances at July 31,
1994................... 90 10 1,009,168 (7,121,203) -- (6,111,935)
Net loss................ -- -- -- (104,685) -- (104,685)
---- --- --------- ---------- ------- ----------
Balances at July 31,
1995................... 90 10 1,009,168 (7,225,888) -- (6,216,620)
Issuance of 3 shares of
Class A common stock
(note 15).............. -- -- 226,158 -- -- 226,158
Net loss................ -- -- -- (1,050,510) -- (1,050,510)
---- --- --------- ---------- ------- ----------
Balances at April 3,
1996................... $ 90 10 1,235,326 (8,276,398) -- (7,040,972)
==== === ========= ========== ======= ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-25
<PAGE>
OCI CORP. OF MICHIGAN
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS
FOR THE PERIOD ENDED JULY 31,
ENDED AUGUST 1, 1995 ----------------------
TO APRIL 3, 1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVI-
TIES:
Net loss......................... $(1,050,510) (104,685) (1,365,748)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Stock compensation expense..... 226,158 -- 12,081
Depreciation of plant and
equipment..................... 1,021,901 1,472,053 1,550,296
Amortization of intangible as-
sets.......................... 346,432 535,408 620,455
Amortization of other deferred
costs......................... 61,248 105,182 105,418
Noncurrent accrued interest.... 1,027,160 1,213,927 1,083,604
Loss (gain) on disposal of
property, plant, and equip-
ment.......................... 9,973 (87,274) 55,160
Loss on sale of Mansfield Divi-
sion.......................... -- -- 446,299
Changes in assets and
liabilities which increase
(decrease) cash flows:
Trade accounts receivable.... 24,942 (13,860) (83,341)
Due from affiliated entity... 46,277 48,599 (117,465)
Refundable income taxes...... (7,159) -- --
Inventories.................. (46,993) (10,266) (6,671)
Prepaid rent expense......... (71,694) (29,861) 24,843
Other prepaid expenses....... (54,028) 1,738 (2,752)
Other deferred costs......... (596,771) -- --
Trade accounts payable....... 59,303 66,196 (36,111)
Income taxes payable......... (1,309) (88,691) 90,000
Due to stockholder........... (50,000) -- 48,050
Accrued expenses............. (300,502) (5,286) 188,617
Deferred advertising reve-
nues........................ 200,506 (17,956) 6,067
Deferred noncompete income... (53,333) (80,000) 340,000
Deferred income taxes........ 156,074 (123,685) (574,352)
----------- ---------- ----------
Net cash provided by oper-
ating activities.......... 947,675 2,881,539 2,384,450
----------- ---------- ----------
CASH FLOWS FROM INVESTING ACTIVI-
TIES:
Capital expenditures............. (587,537) (521,964) (609,745)
Proceeds from sale of property,
plant, and equipment............ 3,001 177,222 26,710
Proceeds from sale of Mansfield
Division........................ -- -- 1,600,000
----------- ---------- ----------
Net cash (used in) provided
by investing activities... (584,536) (344,742) 1,016,965
----------- ---------- ----------
CASH FLOWS FROM FINANCING ACTIVI-
TIES:
Principal payments on long-term
debt............................ (300,000) (2,200,000) (3,648,207)
Payments on obligations under
noncompete agreements........... (200,000) (100,000) (100,000)
----------- ---------- ----------
Net cash used in financing
activities................ (500,000) (2,300,000) (3,748,207)
----------- ---------- ----------
Net increase (decrease) in cash
and cash equivalents............ (136,861) 236,797 (346,792)
Cash and cash equivalents at be-
ginning of the period........... 396,061 159,264 506,056
----------- ---------- ----------
Cash and cash equivalents at end
of the period................... $ 259,200 396,061 159,264
=========== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-26
<PAGE>
OCI CORP. OF MICHIGAN
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 3, 1996, JULY 31, 1995 AND JULY 31, 1994
(1) BUSINESS OPERATIONS
The business operations of OCI Corp. of Michigan and subsidiaries (the
"Company") consist of outdoor billboard advertising in the states of Michigan,
Illinois, and Wisconsin.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the Company, as summarized below, conform with
generally accepted accounting principles and reflect practices appropriate to
the business in which it operates.
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of
OCI Corp. of Michigan and its two wholly owned subsidiaries, OCI Corp. of Port
Huron and OCI Management Corp. All significant intercompany balances and
transactions have been eliminated in consolidation.
(b) CASH EQUIVALENTS
Cash equivalents of $183,718 and $148,916 at April 3, 1996 and July 31,
1995, respectively, consist of overnight repurchase agreements. For purposes
of the consolidated statements of cash flows, the Company considers all highly
liquid debt instruments with maturities of three months or less at the time of
purchase to be cash equivalents.
(c) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
(d) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation on plant and
equipment is computed using straight-line and accelerated methods over the
estimated useful lives of the assets.
(e) INTANGIBLE ASSETS
Intangible assets include noncompete agreements and goodwill. Goodwill,
which represents the excess of purchase price over fair value of net assets
acquired on their dates of acquisition, is amortized on a straight-line basis
over the expected periods to be benefited, generally 20 years. The noncompete
agreements are amortized over the terms of the respective agreements, which
range from 4 to 10 years.
The Company assesses the recoverability of goodwill by determining whether
the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
operation. The amount of goodwill impairment, if any, is measured based on
projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds.
(f) OTHER DEFERRED COSTS
Other deferred costs consist principally of organizational costs and debt
acquisition costs related to the reorganization plan discussed in note 17.
F-27
<PAGE>
OCI CORP. OF MICHIGAN
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(g) EMPLOYEE BENEFITS
The Company participates in a self-insured employee health care plan as
provided for in an agreement with an affiliated entity. The liability for
self-insurance reflects the estimated cost for the uninsured portion of claims
not paid prior to year end. The liability is based on estimates for losses
reported prior to year end and estimates for incurred but not reported losses.
(h) RETIREMENT PROGRAM
The Company provides a defined contribution 401(k) plan, which covers all
full-time employees of the Company with one or more years of service. Eligible
employees can contribute up to 12% of their compensation through payroll
deductions. The Company contributes an amount equal to 50% of each employee's
contribution up to 3% of the employee's total compensation.
(i) REVENUE RECOGNITION
The Company recognizes revenue from advertising contracts on an accrual
basis ratably over the term of the contracts, as advertising services are
provided.
(j) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(k) USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(l) EARNINGS PER SHARE
An earnings per share calculation had not been presented because the Company
is closely held and owned by a private investor group and accordingly,
earnings per share is not required or meaningful.
(3) PROPERTY, PLANT, AND EQUIPMENT
Major categories of property, plant, and equipment at April 3, 1996 and July
31, 1995 were as follows:
<TABLE>
<CAPTION>
ESTIMATED
LIFE (YEARS) 1996 1995
<S> <C> <C> <C>
Land.................................... -- $ 256,300 212,800
Advertising structures.................. 12-15 15,925,151 15,486,536
Leasehold improvements.................. 10-20 743,938 731,238
Equipment............................... 5-10 1,215,309 1,196,342
----------- ----------
18,140,698 17,626,916
Less accumulated depreciation........... 8,824,136 7,863,016
----------- ----------
Net property, plant, and equipment.... $ 9,316,562 9,763,900
=========== ==========
</TABLE>
F-28
<PAGE>
OCI CORP. OF MICHIGAN
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(4) INTANGIBLE ASSETS
Intangible assets at April 3, 1996 and July 31, 1995 consist of the
following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Covenants not to compete................................ $3,235,667 3,235,667
Goodwill................................................ 2,829,688 2,829,688
---------- ---------
6,065,355 6,065,355
Less accumulated amortization........................... 4,065,748 3,719,316
---------- ---------
$1,999,607 2,346,039
========== =========
</TABLE>
(5) LONG-TERM DEBT
The Company has a loan agreement with a bank which provides for a revolving
credit commitment (the "Revolving Commitment") of up to $12,000,000, which
decreases through the expiration of the loan in July 1996, and a special
purpose revolving credit commitment (the "Acquisition Commitment") not to
exceed $1,500,000, to be used solely to finance the cost of an acquisition and
permitted future acquisitions (collectively called the "Commitment"). However,
the Acquisition Commitment will be temporarily reduced by the principal amount
of any additional seller debt incurred by the Company. The Commitment is
available through July 1996. At April 3, 1996, the Company had borrowings of
$875,000 under the Acquisition Commitment and $3,725,000 under the Revolving
Commitment due July 31, 1996. At April 3, 1996, $625,000 of the Acquisition
Commitment was available for additional borrowings to finance permitted future
acquisitions. The remaining $1,475,000 of the Revolving Commitment was
available to support additional borrowings by the Company at April 3, 1996.
The loan agreement, in general, enables the Company to borrow funds at a
rate equal to either the London Interbank Offered Rate (LIBOR) plus 2.9% or
the bank's base rate plus 1.5%. The loan agreement also enables the Company to
realize a lower interest rate if certain financial results, as stipulated in
the loan agreement, are achieved. At April 3, 1996, the interest rate for the
individual loans underlying the loan agreement amounted to 9.25%. Generally,
accrued interest is payable in quarterly installments on each October 31,
January 31, April 30, and July 31, with a final payment due July 31, 1996.
The Company is obligated to pay a commitment fee to the bank for the loan
agreement. This fee is payable quarterly, and is equal to 1/2 of 1% of the
average daily unused portion of the Commitment. Collateral includes a first
lien on all tangible and intangible property of the Company, assignment of
substantially all leases, a pledge of all common stock, and a guaranty by the
subsidiaries.
The loan agreement contains certain warranties and affirmative covenants
that must be complied with on a continuing basis. In addition, the loan
agreement contains certain restrictive covenants which, among other things,
restricts the Company from incurring additional debt and liens on assets,
prohibits it from paying dividends, and limits the amount of capital
expenditures. The loan agreement also contains certain restrictions on working
capital and subordinated debt, and requires the maintenance of certain
financial ratios.
At the close of business on April 3, 1996, the Company, along with related
affiliates, entered into a Credit Agreement with Chase Manhattan Bank N.A.
(see note 17). Funds from the Credit Agreement were used to pay off the long-
term and subordinated debt as of the close of business on April 3, 1996. The
current portion of long-term debt as of April 3, 1996 reflects the current
portion due as noted in the new Credit Agreement. Interest on the debt is
payable at a rate equal to LIBOR plus 3.0% or the bank's base rate. Maturities
of long-term debt under the Credit Agreement during the next five years are:
1997, $1,045,000; 1998, $2,022,500; 1999, $2,170,625; 2000, $2,475,000; and
2001, $2,805,000.
F-29
<PAGE>
OCI CORP. OF MICHIGAN
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(6) SENIOR SUBORDINATED DEBT
The Company entered into a Note Purchase Agreement in 1989 and issued
$4,000,000 of its 14.825% senior subordinated notes due August 31, 1996.
Accrued interest on the senior subordinated notes is payable at a rate of 10%
on February 28 and August 31 of each year commencing in 1990. Interest on the
notes at a rate of 4.825% will accrue and payment of such interest is deferred
until the due date of the senior subordinated notes. The deferred interest
portion of such notes bears interest at 14.825% and is payable upon maturity
of the senior subordinated notes. At April 3, 1996 and July 31, 1995, interest
deferred on the senior subordinated notes amounted to $2,092,396 and
$1,776,908, respectively.
The Note Purchase Agreement contains certain warranties and affirmative
covenants that must be complied with on a continuing basis. The Note Purchase
Agreement also contains certain restrictive covenants which, among other
things, restricts the Company from incurring additional debt and liens on
assets, limits stock payments and purchases, and prohibits the Company from
amending its charter or by-laws.
The Note Purchase Agreement includes cross-default provisions which specify
that if the Company is in default under the terms of the loan agreement (see
note 5) or Securities Purchase Agreement (see note 7), the senior subordinated
debt holders have the right, under the provisions of an intercreditor
agreement, to demand immediate payment of the senior subordinated debt if the
long-term debt is accelerated by the bank.
(7) JUNIOR SUBORDINATED DEBT, STOCKHOLDERS
The Company entered into a Securities Purchase Agreement (the "Agreement")
in 1989 and issued $3,600,000 of its 12.5% junior subordinated notes due
August 31, 1996 to holders of its preferred stock. Accrued interest on the
junior subordinated notes is payable at a rate of 12.5%. However, such
interest is deferred and added to the outstanding principal amount on each
anniversary date of the junior subordinated notes. At April 3, 1996 and July
31, 1995, interest deferred on the junior subordinated notes amounted to
$4,240,473 and $3,632,940, respectively.
The Agreement contains certain warranties and affirmative covenants that
must be complied with on a continuing basis. The Agreement also contains
certain restrictive covenants which, among other things, restricts the Company
from incurring additional debt and liens on assets, limits stock payments and
purchases, and prohibits the Company from amending its charter or by-laws.
The Agreement includes cross-default provisions which specify that if the
Company is in default under the terms of the loan agreement (see note 5) and
Note Purchase Agreement (see note 6), the junior subordinated debt holders
have the right, under the provisions of an intercreditor agreement, to demand
immediate payment of the junior subordinated debt if the long-term debt is
accelerated by the bank.
(8) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of the Company's
financial instruments is made in accordance with the requirements of FASB
Statement No. 107, "Disclosure about Fair Value of Financial Instruments"
("Statement 107"). Statement 107 defines the fair value of a financial
instrument as the amount at which the instrument could be exchanged in a
current transaction between willing parties.
The carrying values of cash and cash equivalents, trade accounts receivable,
due from affiliated entity, trade accounts payable, accrued expenses, and
obligations under noncompete agreements approximate fair values due to the
short-term maturities of these instruments. Long-term debt instruments are
estimated to approximate fair
F-30
<PAGE>
OCI CORP. OF MICHIGAN
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
values as rates are tied to short-term indices. Senior subordinated debt and
junior subordinated debt instruments are estimated to approximate fair values
due to their current maturity dates.
(9) INCOME TAXES
Income tax expense (benefit) attributable to loss before income tax expense
(benefit) for the period ended April 3, 1996 and the year ended July 31, 1995
and 1994 consists of:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Federal--current............................... $ (1,718) 12,220 16,089
Federal--deferred.............................. 156,074 (123,685) (574,352)
State and local................................ 1,500 (21,201) 85,515
-------- -------- --------
Total........................................ $155,856 (132,666) (472,748)
======== ======== ========
</TABLE>
Income tax expense (benefit) differed from the amounts computed by applying
the federal income tax rate of 34% for the period ended April 3, 1996 and the
year ended July 31, 1995 and 1994 to loss before income tax benefit as a
result of the following:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Computed "expected" tax benefit.............. $(304,182) (80,699) (625,089)
Increase (reduction) in income taxes result-
ing from:
State and local income taxes, net of fed-
eral income tax benefit (expense)......... 990 (13,999) 56,440
Non-deductible expenses.................... 32,237 51,177 50,736
Adjustment of prior year accrual........... 226,811 (89,145) 45,165
Change in the beginning-of-the-year balance
of the valuation allowance for deferred
tax assets allocated to income tax ex-
pense..................................... 200,000 -- --
--------- -------- --------
$ 155,856 (132,666) (472,748)
========= ======== ========
</TABLE>
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at April 3,
1996 and July 31, 1995 are presented below:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards................... $ 323,001 364,257
Alternative minimum tax credit carryforwards....... 22,479 23,664
Deferred revenue, principally due to advertising
leases............................................ 117,700 49,528
Deferred noncompete income......................... 70,267 88,400
Accrued expenses, principally due to compensated
absences, health care claims and sales discounts.. 95,048 75,154
Other.............................................. 17,181 37,965
----------- ----------
Total gross deferred tax assets.................. 645,676 638,968
Less valuation allowance......................... 200,000 --
----------- ----------
Net deferred tax assets.......................... 445,676 638,968
----------- ----------
Deferred tax liabilities--property, plant, and
equipment, principally due to differences in
financial statement carrying amounts and tax bases.. (1,675,167) (1,712,385)
----------- ----------
Net deferred tax liabilities..................... $(1,229,491) (1,073,417)
=========== ==========
</TABLE>
F-31
<PAGE>
OCI CORP. OF MICHIGAN
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The net change in the total valuation allowance for the period ended April
3, 1996 was an increase of $200,000, none for the year ended July 31, 1995.
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversals of deferred taxes, projected future taxable
income, and tax planning strategies in making this assessment. In order to
fully realize the deferred tax asset, the Company will need to generate future
taxable income of approximately $1,900,000 prior to the expiration of the net
operating loss carryforwards in 2011. Based upon the level of historical
taxable income and projections for future taxable income over the periods
which the deferred tax assets are deductible, management believes it is more
likely than not that the Company will realize the benefits of these deductible
differences, net of the existing valuation allowance at April 3, 1996. The
amount of the deferred tax asset considered realizable, however, could be
reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.
At April 3, 1996, the Company had net operating loss carryforwards for
federal income tax purposes of $950,003, which are available to offset future
federal taxable income, if any, through 2011. The Company has an alternative
minimum tax credit carryforward of $22,479, which is available to reduce
future regular income taxes, if any, over an indefinite period.
(10) STOCKHOLDERS' EQUITY
All general voting power is vested in the holders of Class A common stock.
The holders of Class B common stock and preferred stock are not entitled to
vote at any stockholders' meetings. Any share of Class B common stock can be
converted, at the option of the holder, into Class A common stock at the rate
of one share of Class A common stock for each share of Class B common stock,
subject to certain approvals.
No dividends will be declared or paid on the common stock during any year
unless the full amount of dividends on the preferred stock accrued to the
proposed date of declaration has been paid. Upon declaration, the holders of
the preferred stock are entitled to receive an annual cumulative dividend at a
rate of 12.5% of the liquidation value of the preferred stock, as defined
below. Dividends, if declared, are payable in cash annually on each August 31.
If any accrued and unpaid dividends exist as of August 31 of any year, the
amount of the dividends payable in respect to the preferred stock will be
increased at a rate of 12.5%, compounded annually as of August 31. Cumulative
preferred stock dividend rights were unaccrued and unpaid at April 3, 1996 and
July 31, 1995, in the amount of $1,060,185 and $907,665, respectively.
In the event of liquidation or dissolution of the Company, the holders of
the preferred stock are entitled to receive a preferential amount equal to
$1,000 per share of the issued and outstanding preferred stock ("liquidation
value") and a further preferential amount equal to all declared and unpaid
dividends thereon. This liquidation value will be paid before the payment or
distribution of any assets of the Company to the holders of common stock.
(11) LEASES
The Company leases substantially all of the land presently used as sites for
poster panels under various terms. The leases are classified as operating
leases. These leases generally contain renewal options ranging from one to 15
years and require the Company to pay all executory costs such as maintenance
and insurance. Rental
F-32
<PAGE>
OCI CORP. OF MICHIGAN
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
expense for operating leases amounted to approximately $655,000, $922,000, and
$911,000 during the period ended April 3, 1996 and the years ended July 31,
1995 and 1994, respectively.
Future minimum lease payments under noncancelable operating leases with non-
related parties (with initial or remaining lease terms in excess of one year)
as of April 3, 1996 are:
<TABLE>
<CAPTION>
YEAR ENDING APRIL 3:
<S> <C>
1997............................................................ $ 783,962
1998............................................................ 661,937
1999............................................................ 568,413
2000............................................................ 486,875
2001............................................................ 331,651
----------
$2,832,838
==========
</TABLE>
(12) RELATED PARTY TRANSACTIONS
The Company has entered into an agreement with an affiliated entity that
requires the Company to purchase specific employee benefits. The Company and
certain affiliated entities are primarily self-insured for employee health
care costs. Employee benefit payments, for costs incurred under this
agreement, approximated $158,000, $206,000 and $230,000 during the period
ended April 3, 1996 and the years ended July 31, 1995 and 1994, respectively.
As a result of this arrangement, the consolidated balance sheets reflected
$98,374 and $144,651 due from an affiliated entity at April 3, 1996 and July
31, 1995, respectively, resulting primarily from payments in excess of
estimated employee benefit costs incurred.
The Company receives management and accounting consultation services from
certain stockholders and an affiliated entity related through common
ownership. The affiliated entity and the Company have entered into a
continuing agreement which may be canceled by either party upon 30 days
written notice. Total management fee expense incurred under the above
arrangements amounted to $68,649, $195,998 and $248,815 during the period
ended April 3, 1996 and the years ended July 31, 1995 and 1994, respectively.
The Company has several noncancelable operating leases with a stockholder
for administrative offices, operating facilities, and land presently used as
sites for billboard structures. The leases are classified as operating leases.
These leases generally contain renewal options ranging from two to five years
and require the Company to pay all executory costs such as maintenance and
insurance. Rental expense for operating leases with the stockholder amounted
to approximately $100,000, $146,000 and $153,000 during the period ended April
3, 1996 and the year ended July 31, 1995 and 1994, respectively.
Future minimum lease payments under noncancelable operating leases with the
stockholder (with initial or remaining lease terms in excess of one year) as
of April 3, 1996 are:
<TABLE>
<CAPTION>
YEAR ENDING APRIL 3:
<S> <C>
1997.............................................................. $156,898
1998.............................................................. 163,579
1999.............................................................. 170,928
2000.............................................................. 118,951
2001.............................................................. 97,814
--------
$708,170
========
</TABLE>
As a result of all the above transactions, the consolidated balance sheet
reflects $50,000 due to stockholder at July 31, 1995.
F-33
<PAGE>
OCI CORP. OF MICHIGAN
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(13) RETIREMENT PROGRAM
Retirement program expense with respect to the Company's defined
contribution 401(k) plan approximated $29,000, $40,000 and $37,000 during the
period ended April 3, 1996 and the years ended July 31, 1995 and 1994,
respectively.
(14) SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid $8,250, $59,735 and $10,000 for income taxes during the
period ended April 3, 1996 and the years ended July 31, 1995 and 1994,
respectively. Cash payments for interest approximated $648,000, $865,000 and
$967,000 during the period ended April 3, 1996 and the years ended July 31,
1995 and 1994, respectively.
(15) STOCK COMPENSATION
The Company has a restricted stock award plan whereby the Company can issue
restricted common stock to retain key employees, including officers. The
shares are awarded in the name of the employee, who has all rights of a
stockholder, subject to certain restrictions and forfeitures. Restrictions on
awards to date lapsed on July 31, 1994. Such stock awarded is subject to an
agreement requiring forfeiture by the employee in the event of termination of
employment within five years of the date of grant other than as a result of
death or disability.
The market value of shares awarded under the plan is recorded as unearned
restricted stock compensation on the date of award and is shown as a separate
component of stockholders' deficit until earned. The compensation is charged
to the consolidated statements of operations over the period in which the
employees are expected to perform services and amounted to $12,081 for the
year ended July 31, 1994. There were no such awards during the period August
1, 1995 through April 3, 1996 or for the year ended July 31, 1995.
Under a written agreement dated August 9, 1994 between the Company and
certain members of management, three shares of Class A common stock would be
granted to them upon accomplishing certain goals. The terms of the agreement
were met and the three shares of stock were issued during the period ended
April 3, 1996 at $75,386 per share, which was determined to be the fair market
value at the date of transaction. This transaction was treated as compensation
expense.
(16) SALE OF MANSFIELD DIVISION
During November 1993, the Company sold its Mansfield Division Outdoor
Advertising Plant (the "Mansfield Division") located in Ohio under an asset
purchase agreement. Through this transaction, the buyer acquired specific
tangible and intangible assets from the Company for $1,600,000 cash proceeds.
The sale resulted in a pretax loss of $446,299.
The Company agreed not to engage in competition with the buyer in the Ohio
area, for a period of five years from November 1993. In consideration for
entering into this non-compete agreement, the Company received a cash payment
of $400,000, of which $340,000 has been deferred and recognized at the rate of
$6,667 per month over the five year agreement.
The $2,000,000 cash proceeds from the sale of the Mansfield Division and
non-compete agreement were used for principal payments on long-term debt.
During fiscal 1994 and 1993, the Mansfield Division's revenues approximated
$420,000 and $1,150,000, respectively, and operating income before
depreciation approximated $50,000 and $240,000, respectively.
F-34
<PAGE>
OCI CORP. OF MICHIGAN
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(17) SUBSEQUENT EVENT
At the close of business on April 3, 1996, the Company's stockholders (the
"Stockholders") entered into a plan of reorganization (the "Reorganization
Plan") to restructure and merge the Company with an affiliated entity in the
same line of business. Pursuant to the Reorganization Plan, the Stockholders
agreed to sell and/or exchange their entire interests in the common and
preferred stock of the Company. In conjunction with the Reorganization Plan,
OCI Holdings Corp. ("Holdings") was incorporated for the purpose of effecting
the reorganization and merger.
Certain outside investors (the "Investors") purchased 24.67 shares and 60
shares of the Company's common and preferred stock, respectively, from the
Stockholders. These same shares were subsequently assigned by the Investors to
Holdings in exchange for Holdings' common stock. The remaining 75.33 shares
and 840 shares of the Company's common and preferred stock, respectively, were
purchased for cash by Holdings, which resulted in Holdings' being the sole
stockholder of all the Company's outstanding common and preferred stock.
Concurrent with the reorganization and merger, the Company, Holdings, and
Outdoor Communications, Inc. (collectively the "Borrowers") entered into a
Credit Agreement with Chase Manhattan Bank N.A. Under the Credit Agreement,
the Company borrowed $20,000,000 under a term loan which was principally used
to pay off the existing long-term debt, senior subordinated debt, and junior
subordinated debt, including all accrued interest. In addition to the
aforementioned term loan, the Credit Agreement also provides a revolving loan
commitment to the Borrowers, collectively.
The effects of the aforementioned transactions have not been included in the
financial statements as they occurred subsequent to the closing balance sheet.
F-35
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Mass Communications Corp.:
We have audited the accompanying consolidated balance sheet of Mass
Communications Corp. and subsidiary (the Company) as of April 3, 1996 and the
related consolidated statements of income, stockholders' deficit, and cash
flows for the period September 1, 1995 through April 3, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Company as of April 3, 1996 and the results of their operations and their cash
flows for the period September 1, 1995 through April 3, 1996 in conformity
with generally accepted accounting principles.
KPMG Peat Marwick LLP
East Lansing, Michigan
May 31, 1996
F-36
<PAGE>
October 18, 1995
INDEPENDENT AUDITOR'S REPORT
The Officers and Directors
Mass Communications Corp.
Corinth, Mississippi
We have audited the accompanying consolidated balance sheets of Mass
Communications Corp. and subsidiary as of August 31, 1995, and the related
consolidated statements of income, stockholders' deficit, and cash flows for
each of the years ended August 31, 1995 and 1994. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our 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 consolidated financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our 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 Mass
Communications Corp. and subsidiary as of August 31, 1995, and the results of
their operations and their cash flows for the years ended August 31, 1995 and
1994 in conformity with generally accepted accounting principles.
Moore & Gray
Corinth, Mississippi
F-37
<PAGE>
MASS COMMUNICATIONS CORP.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 3, AUGUST 31,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.............................. $ 453,202 476,636
Trade accounts receivable, less allowance for doubtful
accounts of $60,945 in 1996 and $88,817 in 1995....... 851,531 682,514
Income taxes receivable................................ 97,552 --
Other receivables...................................... 14,043 109,365
Due from affiliated entity (note 9).................... 54,310 --
Inventory--construction material....................... 92,557 106,670
Prepaid rent expense................................... 205,019 223,762
Other prepaid expenses................................. 131,118 61,448
Deferred income taxes (note 6)......................... 65,930 267,895
---------- ---------
Total current assets............................... 1,965,262 1,928,290
---------- ---------
Property, plant, and equipment, net (note 3)............. 3,439,990 3,238,981
Goodwill, less accumulated amortization.................. 2,025,973 2,066,984
Deferred financing fees, less accumulated amortization... 468,914 523,799
Deferred income taxes (note 6)........................... 801,218 723,394
Other assets (notes 4 and 13)............................ 152,315 108,564
---------- ---------
Total assets....................................... $8,853,672 8,590,012
========== =========
</TABLE>
(Continued)
F-38
<PAGE>
MASS COMMUNICATIONS CORP.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS--(CONTINUED)
APRIL 3, 1996 AND AUGUST 31, 1995
<TABLE>
<CAPTION>
APRIL 3, AUGUST 31,
1996 1995
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current installments of long-term debt (note 5)...... $2,121,600 1,050,000
Trade accounts payable............................... 300,026 186,653
Income taxes payable................................. -- 303,632
Accrued expenses:
Salaries and wages................................. 165,244 142,971
Payroll and other taxes............................ 32,766 39,812
Employee benefits.................................. 65,714 --
Interest........................................... 97,229 --
Other.............................................. 170,509 163,665
---------- ----------
Total accrued expenses........................... 531,462 346,448
---------- ----------
Total current liabilities........................ 2,953,088 1,886,733
Long-term debt, excluding current installments (note
5).................................................... 8,628,400 9,700,000
---------- ----------
Total liabilities................................ 11,581,488 11,586,733
---------- ----------
Stockholders' deficit (notes 7, 12 and 13):
10% cumulative preferred stock, $1 par value.
Authorized 5,000 shares; issued and outstanding
1,000 shares........................................ 1,000 1,000
Class A common stock, no par value. Authorized 30,000
shares; issued and outstanding 12,500 shares........ 3,500 3,500
Additional paid-in capital........................... 999,000 999,000
Accumulated deficit.................................. (3,731,316) (4,000,221)
---------- ----------
Total stockholders' deficit...................... (2,727,816) (2,996,721)
---------- ----------
Commitments and contingencies (notes 7, 8 and 12)
Total liabilities and stockholders deficit....... $8,853,672 8,590,012
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-39
<PAGE>
MASS COMMUNICATIONS CORP.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE YEARS ENDED
SEPTEMBER 1, 1995 AUGUST 31,
THROUGH ---------------------
APRIL 3, 1996 1995 1994
<S> <C> <C> <C>
Revenues:
Poster.............................. $3,097,607 5,084,371 4,795,353
Painted............................. 2,306,790 3,686,379 3,019,976
Other............................... 98,142 263,905 95,036
---------- ---------- ---------
Gross revenues.................... 5,502,539 9,034,655 7,910,365
Less commissions and discounts...... 545,537 881,273 783,551
---------- ---------- ---------
Net operating revenues............ 4,957,002 8,153,382 7,126,814
---------- ---------- ---------
Operating expenses:
Operations (note 9)................. 1,166,765 1,879,777 1,616,015
Selling, general, and administrative
(note 9)........................... 2,039,476 2,908,412 2,912,833
Depreciation........................ 550,869 897,804 848,159
Amortization of intangible assets... 41,011 70,304 70,304
Amortization of deferred financing
costs.............................. 54,885 95,995 11,124
---------- ---------- ---------
Total operating expenses.......... 3,853,006 5,852,292 5,458,435
---------- ---------- ---------
Operating income.................. 1,103,996 2,301,090 1,668,379
Other income (deductions):
Loss on disposal of property, plant,
and equipment...................... (832) (39,087) (72,040)
Interest expense.................... (644,606) (1,172,645) (852,415)
Interest income..................... 3,876 11,392 16,483
Management fee income (note 9)...... 58,333 150,000 150,000
Miscellaneous, net.................. (50,449) 56,878 (30,278)
---------- ---------- ---------
Income before income tax expense.. 470,318 1,307,628 880,129
Income tax expense (note 6)........... 201,413 523,620 339,773
---------- ---------- ---------
Net income........................ $ 268,905 784,008 540,356
========== ========== =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-40
<PAGE>
MASS COMMUNICATIONS CORP.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE PERIOD SEPTEMBER 1, 1995 THROUGH APRIL 3, 1996
AND FOR THE YEARS ENDED AUGUST 31, 1995 AND 1994
<TABLE>
<CAPTION>
5% 10%
NONCUMULATIVE CUMULATIVE ADDITIONAL TOTAL
PREFERRED PREFERRED COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK STOCK STOCK CAPITAL DEFICIT DEFICIT
<S> <C> <C> <C> <C> <C> <C>
Balances at August 31,
1993................... $ 5,000 -- 5,000 495,000 (3,127,335) (2,622,335)
Stock redemption........ (5,000) -- (1,500) (495,000) (2,097,250) (2,598,750)
Issuance of 1,000
shares................. -- 1,000 -- 999,000 -- 1,000,000
Net income.............. -- -- -- -- 540,356 540,356
------- ----- ------ -------- ---------- ----------
Balances at August 31,
1994................... -- 1,000 3,500 999,000 (4,684,229) (3,680,729)
Net income.............. -- -- -- -- 784,008 784,008
Dividend................ -- -- -- -- (100,000) (100,000)
------- ----- ------ -------- ---------- ----------
Balances at August 31,
1995................... -- 1,000 3,500 999,000 (4,000,221) (2,996,721)
Net income.............. -- -- -- -- 268,905 268,905
------- ----- ------ -------- ---------- ----------
Balances at April 3,
1996................... $ -- 1,000 3,500 999,000 (3,731,316) (2,727,816)
======= ===== ====== ======== ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-41
<PAGE>
MASS COMMUNICATIONS CORP.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE YEARS
SEPTEMBER 1, 1995 ENDED AUGUST 31,
THROUGH -------------------------
APRIL 3, 1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVI-
TIES:
Net income........................ $ 268,905 784,008 540,356
Adjustments to reconcile net in-
come to net cash provided by op-
erating activities:
Depreciation of plant and equip-
ment........................... 550,869 897,804 848,159
Amortization of intangible as-
sets........................... 41,011 70,304 70,304
Amortization of deferred financ-
ing costs...................... 54,885 95,995 11,124
Decrease in deferred income tax-
es............................. 124,141 264,827 259,193
Loss on disposal of plant and
equipment...................... 832 39,087 72,040
Changes in assets and liabili-
ties which increase (decrease)
cash flows:
Trade accounts receivable..... (169,017) (80,185) (39,609)
Income taxes receivable....... (97,552) -- --
Due from affiliated entity.... (54,310) -- --
Inventory--construction mate-
rial......................... 676 (42,414) (5,110)
Prepaid rent expense.......... 18,743 (18,614) (970)
Other prepaid expenses........ (69,670) 52,315 (41,280)
Other assets.................. 51,571 (145,152) (666,741)
Trade accounts payable........ 113,373 (10,234) 37,139
Income taxes payable.......... (303,632) 246,590 39,206
Accrued expenses.............. 185,014 (31,768) (845,220)
--------- ----------- ------------
Net cash provided by operat-
ing activities............. 715,839 2,122,563 278,591
--------- ----------- ------------
CASH FLOWS FROM INVESTING ACTIVI-
TIES:
Capital expenditures.............. (745,996) (1,313,239) (642,283)
Proceeds from sale of plant and
equipment........................ 6,723 33,930 86,294
--------- ----------- ------------
Net cash used in investing
activities................. (739,273) (1,279,309) (555,989)
--------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVI-
TIES:
Principal payments on long-term
debt............................. (500,000) (1,000,000) (10,540,000)
Proceeds from issuance of long-
term debt........................ 500,000 -- 12,000,000
Proceeds from assurance of stock.. -- -- 1,000,000
Stock redemption.................. -- -- (2,598,750)
Dividends......................... -- (100,000) --
--------- ----------- ------------
Net cash used in financing
activities................. -- (1,100,000) (138,750)
--------- ----------- ------------
Net decrease in cash and cash
equivalents...................... (23,434) (256,746) (416,148)
Cash and cash equivalents at be-
ginning of the period............ 476,636 733,382 1,149,530
--------- ----------- ------------
Cash and cash equivalents at end
of the period.................... $ 453,202 476,636 733,382
========= =========== ============
Supplemental schedule of noncash
investing activities:
Transfer of salvage materials
from inventory to property,
plant, and equipment........... $ 13,437 15,113 23,616
========= =========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
F-42
<PAGE>
MASS COMMUNICATIONS CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
APRIL 3, 1996, AUGUST 31, 1995 AND AUGUST 31, 1994
(1) BUSINESS OPERATIONS
The business operations of Mass Communications Corp. and subsidiary (the
"Company") consist of outdoor billboard advertising in the states of
Mississippi, Tennessee, Georgia, and Kentucky.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting policies of the Company, as summarized below, conform with
generally accepted accounting principles and reflect practices appropriate to
the business in which it operates.
(a) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements of
Mass Communications Corp. and its wholly owned subsidiary, Outdoor
Communications, Inc. All significant intercompany balances and transactions
have been eliminated in consolidation.
(b) CASH EQUIVALENTS
Cash equivalents of $286,705 and $268,661 at April 3, 1996 and August 31,
1995, respectively, consist of money market funds. For purposes of the
consolidated statements of cash flows, the Company considers all highly liquid
debt instruments with maturities of three months or less at the time of
purchase to be cash equivalents.
(c) INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the first-in, first-out method.
(d) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation on plant and
equipment is computed using straight-line and accelerated methods over the
estimated useful lives of the assets.
(e) GOODWILL
Goodwill, which represents the excess of purchase price over the fair value
of net assets acquired, is being amortized on a straight-line basis over a 40
year period.
The Company assesses the recoverability of goodwill by determining whether
the amortization of the goodwill balance over its remaining life can be
recovered through undiscounted future operating cash flows of the acquired
operation. The amount of goodwill impairment, if any, is measured based on
projected discounted future operating cash flows using a discount rate
reflecting the Company's average cost of funds.
(f) DEFERRED FINANCING COST
Debt financing costs incurred as a result of debt restructuring are recorded
as deferred financing costs and amortized on a straight-line basis over the
term of the related debt.
F-43
<PAGE>
MASS COMMUNICATIONS CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(g) EMPLOYEE BENEFITS
The Company participates in a self-insured employee health care plan as
provided for in an agreement with an affiliated entity. The liability for
self-insurance reflects the estimated cost for the uninsured portion of claims
not paid prior to year end. The liability is based on estimates for losses
reported prior to year end and estimates for incurred but not reported losses.
(h) INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
(i) RECLASSIFICATIONS
Certain reclassifications have been made to the 1995 and 1994 amounts to
conform to the current period presentation.
(j) REVENUE RECOGNITION
The Company recognizes revenue from advertising contracts on an accrual
basis ratably over the term of the contracts, as advertising services are
provided.
(k) USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
(l) EARNINGS PER SHARE
An earnings per share calculation has not been presented, because the
Company is closely held and owned by a private investor group, and
accordingly, earnings per share is not required or meaningful.
F-44
<PAGE>
MASS COMMUNICATIONS CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(3) PROPERTY, PLANT, AND EQUIPMENT
Major categories of property, plant, and equipment at April 3, 1996 and
August 31, 1995 were as follows:
<TABLE>
<CAPTION>
ESTIMATED
LIFE (YEARS) 1996 1995
<S> <C> <C> <C>
Land................................... -- $ 228,878 228,878
Building............................... 10-25 399,414 397,745
Advertising structures................. 8 11,517,231 11,026,147
Leasehold improvements................. 2-5 100,185 100,186
Equipment.............................. 3-5 1,004,635 957,019
Construction in progress............... -- 35,617 2,080
---------- ----------
13,285,960 12,712,055
Less accumulated depreciation.......... (9,845,970) (9,473,074)
---------- ----------
Net property, plant, and equipment... $3,439,990 3,238,981
========== ==========
</TABLE>
(4) OTHER ASSETS
Other assets consist principally of the cash surrender value of officer life
insurance and deferred acquisition costs related to the acquisition of Georgia
Outdoor Advertising as discussed in note 13.
(5) LONG-TERM DEBT
Long-term debt at April 3, 1996 and August 31, 1995 consists of the
following:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Term loans payable in quarterly installments with
the final payment due May 31, 2001; interest at
prime plus 1.5%; secured by the outstanding stock
and a first lien on all assets of the Company.
Loans payable to:
IBJ Schroder Bank and Trust Company, New York, New
York............................................. $5,125,000 5,375,000
Shawmut Bank Connecticut, National Association,
Hartford, Connecticut............................ 5,125,000 5,375,000
Revolving credit loans payable on demand with the
final payment due upon termination of the
agreement; interest at prime plus 1.5%; secured by
the outstanding stock and a first lien on all
assets of the Company. Loans payable to:
IBJ Schroder Bank and Trust Company, New York, New
York............................................. 250,000 --
Shawmut Bank Connecticut, National Association,
Hartford, Connecticut............................ 250,000 --
---------- ----------
Total long-term debt............................ 10,750,000 10,750,000
Less current portion................................ 2,121,600 1,050,000
---------- ----------
Long-term debt, excluding current installments.. $8,628,400 9,700,000
========== ==========
</TABLE>
The revolving credit and term loan agreement (the "loan agreement")
contains, among other things, restrictions with respect to payment of
dividends, additional borrowings, current ratios, acquisitions or issuance of
capital stock, capital expenditures, sale of assets, and mergers or
consolidations or formation of subsidiaries. The loan agreement contains
minimum requirements for current ratios, consolidated earnings before
interest, taxes, depreciation and amortization, and fixed charge coverage.
F-45
<PAGE>
MASS COMMUNICATIONS CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The loan agreement limits the capital expenditures for the period ended
April 3, 1996 to $550,000. Capital expenditures are defined as expenditures
for property, plant and equipment, less salvage materials from billboards
reused, and proceeds from the sale of billboards reinvested in new billboards.
Any unspent portion of the limitation can be deposited to a capital
expenditure account and used to increase the following year's capital
expenditure limitation.
On April 3, 1996, subsequent to the Company's closing balance sheet, the
Company, along with related affiliates, entered into a Credit Agreement with
Chase Manhattan Bank N.A. (see note 13). Funds from the Credit Agreement were
used to pay off the existing term loans and revolving credit loans as of April
3, 1996. The current portion of long-term debt as of April 3, 1996 reflects
the current portion due as noted in the new Credit Agreement. Maturities of
long-term debt under the Credit Agreement during the next four years are:
1997, $2,121,600; 1998, $4,060,900; 1999, $4,391,875; and 2000, $175,625.
(6) INCOME TAXES
Income tax expense attributable to income before income tax expense consists
of:
<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
<S> <C> <C> <C>
Period ended April 3, 1996:
Federal........................................ $ 80,043 108,321 188,364
State and local................................ (2,771) 15,820 13,049
-------- ------- -------
Total........................................ $ 77,272 124,141 201,413
======== ======= =======
Year ended August 31, 1995:
Federal........................................ $237,390 165,198 402,588
State and local................................ 31,455 89,577 121,032
-------- ------- -------
Total........................................ $268,845 254,775 523,620
======== ======= =======
Year ended August 31, 1994:
Federal........................................ $ 44,050 254,391 298,441
State and local................................ 36,530 4,802 41,332
-------- ------- -------
Total........................................ $ 80,580 259,193 339,773
======== ======= =======
</TABLE>
Income tax expense differed from the amounts computed by applying the
federal income tax rate of 34% for the period ended April 3, 1996 and the year
ended August 31, 1995 to income before income tax expense as a result of the
following:
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Computed "expected" tax expense................ $159,908 444,593 299,244
Increase (reduction) in income taxes resulting
from:
State and local income taxes, net of federal
income tax expense.......................... (4,436) (41,151) (14,053)
Non-deductible expenses...................... 18,900 28,096 27,563
Alternative minimum tax expense.............. 59,693 68,866 --
Other, net................................... (32,652) 23,216 27,019
-------- ------- -------
$201,413 523,620 339,773
======== ======= =======
</TABLE>
F-46
<PAGE>
MASS COMMUNICATIONS CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The tax effect of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities at April 3,
1996 and August 31, 1995 are presented below:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Deferred tax assets:
Allowance for doubtful accounts....................... $ 23,769 34,639
Property, plant, and equipment, principally due to
differences in depreciation.......................... 779,270 734,165
Net operating loss carryforwards...................... 53,258 134,730
Alternative minimum tax credit carryforwards.......... 138,993 79,300
Other................................................. 12,950 8,455
---------- -------
Total gross deferred tax assets..................... 1,008,240 991,289
Deferred tax liabilities--accrued expenses.............. 141,092 --
---------- -------
Net deferred tax assets............................. $ 867,148 991,289
========== =======
</TABLE>
The Company recorded no valuation allowance for deferred tax assets as of
April 3, 1996 and August 31, 1995. In assessing the realizability of deferred
tax assets, management considers whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. The ultimate
realization of deferred tax assets is dependent upon the generation of future
taxable income during the periods in which those temporary differences become
deductible. Management considers the scheduled reversals of deferred taxes,
projected future taxable income, and tax planning strategies in making this
assessment. Based upon the level of historical taxable income and projections
for future taxable income over the periods which the deferred tax assets are
deductible, management believes it is more likely than not that the Company
will realize the benefits of these deductible differences.
At April 3, 1996, the Company had net operating loss carryforwards for
federal income tax purposes of approximately $156,600, which are available to
offset future federal taxable income, if any, through 2006. The Company has an
alternative minimum tax credit carryforward of approximately $139,000, which
is available to reduce future regular income taxes, if any, over an indefinite
period. The Company also has an investment tax credit carryforward of
approximately $13,000, which is available to reduce future regular income
taxes, if any, through 2001.
(7) STOCKHOLDERS' EQUITY
All general voting power is vested in the holders of Class A common stock.
The holders of preferred stock are not entitled to vote at any stockholders'
meetings.
No dividends will be declared or paid on the common stock during any year
unless the full amount of dividends on the preferred stock accrued to the
proposed date of declaration has been paid. Upon declaration, the holders of
the preferred stock are entitled to receive an annual cumulative dividend at a
rate of 10% per annum of the liquidation value of the preferred stock, as
defined below. Dividends, if declared, are payable in cash annually on each
April 30. Cumulative preferred stock dividend rights were unaccrued and unpaid
at April 3, 1996 and August 31, 1995, in the amount of $92,500 and $33,333,
respectively.
In the event of liquidation or dissolution of the Company, the holders of
the preferred stock are entitled to receive a preferential amount equal to
$1,000 per share of the issued and outstanding preferred stock ("liquidation
value") and a further preferential amount equal to all declared and unpaid
dividends thereon. This liquidation value will be paid before the payment or
distribution of any assets of the Company to the holders of common stock.
F-47
<PAGE>
MASS COMMUNICATIONS CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(8) LEASES
The Company leases substantially all of the land presently used as sites for
poster panels under various terms. The leases are classified as operating
leases. These leases generally contain renewal options ranging from one to 15
years and require the Company to pay all executory costs such as maintenance
and insurance. Rental expense for operating leases amounted to approximately
$398,000, $607,000 and $689,000 during the period ended April 3, 1996 and the
years ended August 31, 1995 and 1994, respectively.
Future minimum lease payments under noncancelable operating leases with non-
related parties (with initial or remaining lease terms in excess of one year)
as of April 3, 1996 are:
<TABLE>
<CAPTION>
YEAR ENDING APRIL 3:
<S> <C>
1997............................................................ $ 497,163
1998............................................................ 440,915
1999............................................................ 386,368
2000............................................................ 321,829
2001............................................................ 280,954
----------
$1,927,229
==========
</TABLE>
(9) RELATED PARTY TRANSACTIONS
The Company leases real property from a trust for which the president, who
is a major stockholder of the Company, serves as trustee. Rental expense to
the trust amounted to approximately $18,000, $27,000, and $25,000 for the
period ended April 3, 1996 and the years ended August 31, 1995 and 1994,
respectively. The Company also leases a sign location from the president and
vice president of the Company. The rental payment for the sign location
amounted to approximately $600, $1,000 and $1,000 for the period ended April
3, 1996 and the years ended August 31, 1995 and 1994, respectively.
Future minimum lease payments under noncancelable operating leases with the
stockholder (with initial or remaining lease terms in excess of one year) as
of April 3, 1996 are:
<TABLE>
<CAPTION>
YEAR ENDING APRIL 3:
<S> <C>
1997.............................................................. $ 27,320
1998.............................................................. 27,320
1999.............................................................. 27,320
2000.............................................................. 20,996
--------
$102,956
========
</TABLE>
The Company provides management and accounting consultation services to an
affiliated entity related through common ownership. The affiliated entity and
the Company have entered into a continuing agreement which may be canceled by
either party upon 30 days written notice. Total management fee income incurred
under the above arrangements have been included as a component of other income
(deductions) in the accompanying consolidated statement of operations.
(10) SUPPLEMENTAL CASH FLOW INFORMATION
The Company paid approximately $482,000, $65,500 and $43,000 for income
taxes during the period ended April 3, 1996 and the years ended August 31,
1995 and 1994, respectively. Cash payments for interest
F-48
<PAGE>
MASS COMMUNICATIONS CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
approximated $547,000, $1,173,000 and $1,829,000 for the period ended April 3,
1996 and the years ended August 31, 1995 and 1994, respectively.
(11) FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of the Company's
financial instruments is made in accordance with the requirements of FASB
Statement No. 107, "Disclosure about Fair Value of Financial Instruments"
("Statement 107"). Statement 107 defines the fair value of a financial
instrument as the amount at which the instrument could be exchanged in a
current transaction between willing parties.
The carrying values of cash and cash equivalents, trade accounts receivable,
due from affiliated entity, trade accounts payable, and accrued expenses
approximate fair values due to the short-term maturities of these instruments.
Long-term debt instruments are estimated to approximate fair values, as rates
are tied to short-term indices.
(12) STOCK WARRANTS OUTSTANDING
In accordance with the loan agreement, the Company issued common stock
warrants to the lenders of the Company. The warrants can be exercised at any
time or from time to time prior to April 30, 2004. The exercise price of the
warrants shall be the current market price of the stock (as defined in the
stock warrants) on the date the warrants are exercised. The common stock
warrants outstanding as of April 3, 1996 and August 31, 1995 are as follows:
<TABLE>
<S> <C>
IBJ Schroder Bank and Trust Company........................... 328.947 shares
Shawmut Bank Connecticut, National Bank Association........... 328.947 shares
</TABLE>
(13) SUBSEQUENT EVENT
At the close of business on April 3, 1996, the Company's stockholders (the
"Stockholders") entered into a plan of reorganization (the "Reorganization
Plan") to restructure and merge the Company with an affiliated entity in the
same line of business. Pursuant to the Reorganization Plan, the Stockholders
agreed to sell their entire interests in the common and preferred stock of the
Company. In conjunction with the Reorganization Plan, OCI Holdings Corp.
("Holdings") was incorporated for the purpose of effecting the reorganization
and merger.
The Stockholders of the Company exchanged 7,371.01 shares of common stock,
308.78 shares of preferred stock, and their Series A subordinated notes for
2,764.99 shares of Class A common stock of OCI Holdings Corp. The Stockholders
of the Company also sold 657,895 warrants, 5,128.99 shares of common stock and
691.22 shares of preferred stock for cash and new subordinated notes totaling
$6,692,500. This transaction resulted in Holdings ultimately owning all of the
stock of the Company.
Concurrent with the reorganization and merger, the Company, Holdings, and
OCI North (collectively, the "Borrowers") entered into a Credit Agreement with
Chase Manhattan Bank N.A. Under the Credit Agreement, the Company borrowed
$40,000,000 under a term loan which was used to pay off the existing long-term
debt, including all accrued interest, and the acquisitions discussed below. In
addition to the aforementioned term loan, the Credit Agreement also provides a
revolving loan commitment to the Borrowers, collectively.
The effects of the aforementioned transactions have not been included in the
financial statements as they occurred subsequent to the closing balance sheet.
F-49
<PAGE>
MASS COMMUNICATIONS CORP.
AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Georgia Acquisition
At the close of business on April 3, 1996, Outdoor Communications, Inc.
completed the purchase of certain assets of Georgia Outdoor Advertising,
pursuant to an Asset Purchase Agreement dated March 8, 1996, for cash of
$11,650,000. The acquisition was accounted for by the purchase method.
Alabama Acquisition
On April 30, 1996, Outdoor Communications, Inc. completed the purchase of
certain assets and assumed certain liabilities of AOA Acquisition, L.L.C.,
pursuant to an Asset Sale Agreement dated March 19, 1996, for cash of
$32,000,000. The acquisition was accounted for by the purchase method.
F-50
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders
Georgia Outdoor Advertising Company, Inc.:
We have audited the accompanying balance sheets of Georgia Outdoor
Advertising Company, Inc. as of December 31, 1995 and 1994, and the related
statements of operations, stockholders' deficit, and cash flows for the years
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 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 Georgia Outdoor
Advertising Company, Inc. as of December 31, 1995 and 1994, and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
Atlanta, Georgia
May 16, 1997
F-51
<PAGE>
GEORGIA OUTDOOR ADVERTISING COMPANY, INC.
BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
(UNAUDITED)
ASSETS (NOTE 2) (NOTE 6)
Current assets:
Cash and cash equivalents............. $ 221,075 468,168 298,197
Receivables:
Trade accounts....................... 281,706 317,068 294,512
Other................................ 1,452 1,106 175
Prepaid rent expense.................. 155,985 131,986 133,294
Other prepaid expenses................ 14,432 3,995 15,511
----------- ----------- ----------
Total current assets................ 674,650 922,323 741,689
----------- ----------- ----------
Property and equipment:
Land.................................. 8,108 8,108 39,123
Buildings and improvements............ 359,001 359,001 359,001
Advertising structures................ 5,565,421 5,556,489 5,613,786
Equipment............................. 370,837 370,702 337,617
----------- ----------- ----------
6,303,367 6,294,300 6,349,527
Less accumulated depreciation......... 5,470,291 5,407,871 4,980,816
----------- ----------- ----------
Net property and equipment.......... 833,076 886,429 1,368,711
----------- ----------- ----------
Goodwill, net of accumulated amortiza-
tion of $99,167, $96,667 and $86,667 in
1996, 1995 and 1994, respectively...... 150,833 153,333 163,333
Other assets............................ 37,533 20,876 18,745
----------- ----------- ----------
$ 1,696,092 1,982,961 2,292,478
=========== =========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current installments of long-term debt
(note 2)............................. $ 375,686 376,971 767,347
Trade accounts payable................ 51,062 63,104 53,444
Accrued expenses:
Salaries and wages................... 39,080 83,242 63,783
Interest payable to related parties.. -- -- 25,820
Other................................ 11,880 1,264 1,394
----------- ----------- ----------
Total accrued expenses.............. 50,960 84,506 90,997
----------- ----------- ----------
Deferred advertising revenues......... 21,000 16,631 20,171
----------- ----------- ----------
Total current liabilities........... 498,708 541,212 931,959
Long-term debt, excluding current in-
stallments (note 2).................... 518,577 555,081 588,078
Long-term debt to related parties (notes
2 and 3)............................... 3,500,000 3,500,000 3,335,732
Interest payable to related parties..... -- -- 62,843
----------- ----------- ----------
Total liabilities................... 4,517,285 4,596,293 4,918,612
----------- ----------- ----------
Stockholders' deficit:
Common stock, no par value. Authorized
100,000 shares; issued and outstand-
ing 1,320 shares..................... 330,000 -- --
Additional paid-in capital............ 100,000 430,000 430,000
Accumulated deficit................... (3,251,193) (3,043,332) (3,056,134)
----------- ----------- ----------
Total stockholders' deficit......... (2,821,193) (2,613,332) (2,626,134)
----------- ----------- ----------
Commitments and contingencies (note 4).. $ 1,696,092 1,982,961 2,292,478
=========== =========== ==========
</TABLE>
See accompanying notes to financial statements.
F-52
<PAGE>
GEORGIA OUTDOOR ADVERTISING COMPANY, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND THE YEARS ENDED DECEMBER 31, 1995 AND
1994
<TABLE>
<CAPTION>
1996 1995 1994
(UNAUDITED)
(NOTE 6)
<S> <C> <C> <C>
Revenues:
Poster and paint............................ $925,399 3,512,944 3,209,740
Other....................................... 16,343 210,096 202,239
-------- --------- ---------
Gross revenues............................ 941,742 3,723,040 3,411,979
Less commissions and discounts.............. 138,829 575,648 496,479
-------- --------- ---------
Net operating revenues.................... 802,913 3,147,392 2,915,500
-------- --------- ---------
Operating expenses:
Operations.................................. 204,550 858,728 805,578
Selling, general, and administrative........ 353,826 976,137 976,513
Depreciation................................ 58,826 529,652 546,283
Amortization................................ 2,500 20,750 13,583
-------- --------- ---------
Total operating expenses.................. 619,702 2,385,267 2,341,957
-------- --------- ---------
Operating income.......................... 183,211 762,125 573,543
Other income (expense):
(Loss) gain on disposal of equipment........ -- (15,480) 8,577
Interest expense............................ (106,084) (129,832) (115,558)
Interest expense to related parties......... -- (303,433) (297,844)
Other income................................ 2,012 11,360 7,330
-------- --------- ---------
Net income................................ $ 79,139 324,740 176,048
======== ========= =========
</TABLE>
See accompanying notes to financial statements.
F-53
<PAGE>
GEORGIA OUTDOOR ADVERTISING COMPANY, INC.
STATEMENTS OF STOCKHOLDERS' DEFICIT
THREE MONTHS ENDED MARCH 31, 1996 AND THE YEARS ENDED DECEMBER 31, 1995 AND
1994
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON PAID-IN ACCUMULATED STOCKHOLDERS'
STOCK CAPITAL DEFICIT DEFICIT
<S> <C> <C> <C> <C>
Balances at December 31, 1993.. $ -- 430,000 (3,016,388) (2,586,388)
Net income..................... -- -- 176,048 176,048
Distributions.................. -- -- (215,794) (215,794)
-------- ------- ---------- ----------
Balances at December 31, 1994.. -- 430,000 (3,056,134) (2,626,134)
Net income..................... -- -- 324,740 324,740
Distributions.................. -- -- (311,938) (311,938)
-------- ------- ---------- ----------
Balances at December 31, 1995.. $ -- 430,000 (3,043,332) (2,613,332)
======== ======= ========== ==========
Net income (unaudited) (note
6)............................ -- -- 79,139 79,139
Distributions (unaudited) (note
6)............................ -- -- 287,000 287,000
-------- ------- ---------- ----------
Balances at March 31, 1996
(unaudited) (note 6).......... $330,000 100,000 (3,251,193) (2,821,193)
======== ======= ========== ==========
</TABLE>
See accompanying notes to financial statements.
F-54
<PAGE>
GEORGIA OUTDOOR ADVERTISING COMPANY, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND THE YEARS ENDED DECEMBER 31, 1995 AND
1994
<TABLE>
<CAPTION>
1996 1995 1994
(UNAUDITED)
(NOTE 6)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................. $ 79,139 324,740 176,048
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............. 64,920 554,643 570,580
Loss (gain) on disposal of equipment...... -- 15,488 (8,578)
(Increase) decrease in:
Receivables.............................. 35,016 (23,487) (80,500)
Prepaid rent expense..................... (23,999) 1,308 (18,493)
Other prepaid expenses and other assets.. (27,094) 9,385 39,250
(Increase) decrease in:
Trade accounts payable................... (12,042) 9,660 (23,879)
Accrued expenses--salaries............... (44,162) 19,459 9,790
Accrued expenses--interest payable to re-
lated parties........................... -- (88,663) 26,307
Accrued expenses--other.................. 10,616 (130) (1,764)
Deferred advertising revenues............ 4,369 (3,540) 11,657
-------- ---------- --------
Net cash provided by operating activi-
ties................................... 86,763 818,863 700,418
-------- ---------- --------
Cash flows from investing activities:
Purchases of property and equipment........ (9,067) (130,889) (364,120)
Proceeds from sale of property and equip-
ment...................................... -- 53,040 31,278
-------- ---------- --------
Net cash used in investing activities... (9,067) (77,849) (332,842)
-------- ---------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt... -- 3,554,486 354,291
Repayment of long-term debt................ (37,789) (3,813,591) (887,386)
Distributions to stockholders.............. (287,000) (311,938) (215,794)
-------- ---------- --------
Net cash used in financing activities... (324,789) (571,043) (748,889)
-------- ---------- --------
Net (decrease) increase in cash and cash
equivalents............................ (247,093) 169,971 (381,313)
Cash and cash equivalents at beginning of pe-
riod........................................ 468,168 298,197 679,510
-------- ---------- --------
Cash and cash equivalents at end of period... $221,075 468,168 298,197
======== ========== ========
Supplemental disclosure of cash flow
information--cash paid during the period for
interest.................................... $106,084 521,930 389,687
======== ========== ========
</TABLE>
See accompanying notes to financial statements.
F-55
<PAGE>
GEORGIA OUTDOOR ADVERTISING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996 AND DECEMBER 31, 1995 AND 1994
(1) PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Presentation
Georgia Outdoor Advertising Company, Inc. (the "Company") operates outdoor
billboard advertising in the States of Georgia and South Carolina. Management
of the Company has made a number of estimates and assumptions relating to the
reporting of assets and liabilities and the disclosure of contingent assets
and liabilities to prepare these financial statements in conformity with
generally accepted accounting principles. Actual results could differ from
those estimates.
(b) Cash Equivalents
Cash equivalents consist of money market funds. For purposes of the
statement of cash flows, the Company considers all highly liquid debt
instruments with maturities of three months or less at the time of purchase to
be cash equivalents.
(c) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation on property and equipment is provided using straight-line and
accelerated methods over the estimated useful lives of the assets. The
estimated useful lives for the major categories of property and equipment are
summarized below:
<TABLE>
<S> <C>
Buildings and improvements........................................ 31.5 years
Advertising structures............................................ 7-15 years
Equipment......................................................... 3-7 years
</TABLE>
(d) Goodwill
Goodwill, which represents the excess purchase price over fair value of net
assets acquired, is amortized using the straight-line basis over 25 years.
(e) Deferred Advertising Revenues
Amounts received from outdoor billboard advertising contracts in advance are
deferred and amortized into revenue over the life of the related contracts.
(f) Revenue Recognition
The Company recognizes revenue from advertising contracts on the accrual
basis ratably over the term of the contracts, as advertising services are
provided.
(g) Income Taxes
The Company, with the consent of its stockholders, has elected to be taxed
as an S Corporation under the Internal Revenue Code. As a result of this
election, the Company has been taxed in a manner similar to a partnership and
has not provided for any Federal or state income taxes in the financial
statements as the results of operations are passed through to, and the related
income taxes become the individual responsibility of the Company's
stockholders.
(h) Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, trade and other accounts
receivable, trade accounts payable, accrued expenses, and interest payable
approximate fair values due to the short-term maturities of these instruments.
The carrying values of long-term debt instruments approximate fair value as
they bear interest at rates which approximate market.
F-56
<PAGE>
GEORGIA OUTDOOR ADVERTISING COMPANY, INC,
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(2) LONG-TERM DEBT
Long-term debt at December 31, 1995 and 1994 consists of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
10.5% installment notes payable in monthly
installments of $16,222, including interest......... $ 792,354 897,729
Installment note payable to bank with interest at 80%
of prime plus a margin rate factor (1.204 at
December 31, 1995), payable in monthly installments
of $1,666, plus accrued interest, secured by
mortgage............................................ 72,601 92,593
Installment notes payable to stockholders with
interest at prime plus .75%, payable in monthly
installments, refinanced in 1995.................... -- 3,156,250
Installment notes payable to stockholders with
interest at prime plus 1%, payable in monthly
installments of $24,306, plus interest.............. 3,500,000 --
11.5% installment note payable to bank in monthly
installments of $1,504, including interest, due
January 1996........................................ 1,499 18,304
9.5% installment note payable to bank in monthly
installments of $887, including interest, paid
December 1995....................................... -- 10,000
12% subordinated promissory note payable to
stockholders, refinanced in 1995.................... -- 179,482
10% subordinated promissory note payable, refinanced
in 1995............................................. -- 275,000
Various installment notes payable in varying monthly
installments, including interest.................... 65,598 61,799
---------- ---------
Total long-term debt............................. 4,432,052 4,691,157
Less current maturities.............................. (376,971) (767,347)
---------- ---------
Long-term debt, excluding current maturities..... $4,055,081 3,923,810
========== =========
</TABLE>
Substantially all of the assets of the Company are pledged as security on
the debt outstanding. Certain of the debt agreements impose financial
covenants which require, among other things, provisions for the maintenance of
a minimum liquidation value and restrictions on the ability of the Company to
incur additional indebtedness. Management of the Company has stated that these
covenant restrictions have been met by the Company or waived by the creditors
as of December 31, 1995 and 1994.
The aggregate maturities of long-term debt based on amounts outstanding at
December 31, 1995 are as follows:
<TABLE>
<S> <C>
1996.............................................................. $ 376,971
1997.............................................................. 463,039
1998.............................................................. 470,152
1999.............................................................. 470,510
2000.............................................................. 2,587,896
Thereafter........................................................ 63,484
----------
$4,432,052
==========
</TABLE>
(3) RELATED PARTY TRANSACTIONS
In December 1995, the Company refinanced several loans (including balances
outstanding at December 31, 1994 of $3,156,250 payable to stockholders and
$179,482 payable to stockholders under "Keep Well" provisions of stockholder
loan agreements) by executing a $3,500,000 loan with an entity related to the
Company through partial common ownership. The $3,500,000 balance was
outstanding as of December 31, 1995.
F-57
<PAGE>
GEORGIA OUTDOOR ADVERTISING COMPANY, INC.
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Company leases property from an entity related to the Company through
common ownership. Total related party lease expense was $9,350 and $-0- during
the years ended December 31, 1995 and 1994, respectively.
The Company paid management fees to its stockholders of approximately
$10,000 and $8,000 during the years ended December 31, 1995 and 1994,
respectively.
One of the stockholders of the Company received an annual salary for his
position as President of the Company during the years ended December 31, 1995
and 1994.
(4) COMMITMENTS AND CONTINGENCIES
(a) Leases
The Company leases substantially all of the land presently used as sites for
its advertising structures under operating leases. These leases generally
contain renewal options ranging from 1 to 10 years and require the Company to
pay all executory costs such as maintenance and insurance. Rental expense for
operating leases was approximately $364,000 and $334,000 during the years
ended December 31, 1995 and 1994, respectively.
Future minimum lease payments under noncancelable operating leases (with
initial or remaining lease terms in excess of one year) as of December 31,
1995 are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
<S> <C>
1996............................................................ $ 277,000
1997............................................................ 270,000
1998............................................................ 262,000
1999............................................................ 254,000
2000............................................................ 13,000
Thereafter...................................................... --
----------
$1,076,000
==========
</TABLE>
(b) Contingencies
The Company is involved in various lawsuits arising in the normal course of
its business. In the opinion of management, the ultimate outcome of these
matters will not have a material adverse effect on the financial position or
results of operations of the Company.
(5) SALE OF OPERATIONS
On April 3, 1996, certain assets of the Company's operations were purchased
by Outdoor Communications, Inc. for cash of $11,650,000, pursuant to an asset
purchase agreement dated March 6, 1996. Substantially all of the Company's
indebtedness was repaid as a result of this transaction.
(6) UNAUDITED NOTES TO INTERIM FINANCIAL STATEMENTS
(a) Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
applicable to interim financial statements. Accordingly, they do not include
all of the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments and reclassifications considered necessary for a fair and
comparable presentation have been included and are of a normal recurring
nature. Operating results for the three months ended March 31, 1996, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996.
F-58
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Members
AOA Holding, L.L.C.
We have audited the accompanying consolidated balance sheet of AOA Holding,
L.L.C. as of December 31, 1995, and the related consolidated statements of
income, changes in members' equity and cash flows for the year then ended and
for the two months ended December 31, 1994. 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 AOA Holding, L.L.C. at
December 31, 1995, and the consolidated results of its operations and its cash
flows for the year then ended and for the two months ended December 31, 1994,
in conformity with generally accepted accounting principles.
Ernst & Young LLP
February 20, 1996
Birmingham, Alabama
F-59
<PAGE>
AOA HOLDING, L.L.C.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31
1995
<S> <C>
ASSETS
Current assets:
Cash............................................................. $ 255,755
Accounts receivable, net of allowance of $72,800................. 1,595,288
Receivable from officers......................................... 110,587
Prepaid expenses................................................. 382,993
-----------
Total current assets............................................... 2,344,623
Property, plant and equipment, net................................. 14,057,279
Debt issuance cost, net of accumulated amortization of $142,156.... 467,094
Deposits and prepaid miscellaneous................................. 182,199
-----------
Total assets....................................................... $17,051,195
===========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable................................................. $ 138,643
Accrued interest................................................. 258,625
Accrued and other liabilities.................................... 612,913
-----------
Total current liabilities.......................................... 1,010,181
Long-term debt, net of debt discount of $182,499................... 11,780,647
Deferred compensation.............................................. 158,858
Members' equity:
Class A units, no par value; 498,240 units authorized, 255,007
units issued and outstanding.................................... 211,912
Class B units, no par value; 8,466,743 units authorized,
3,250,000 units issued and outstanding.......................... 2,689,766
Unit warrants subject to put option.............................. 1,199,831
Retained earnings................................................ --
-----------
Total members' equity.............................................. 4,101,509
-----------
Total liabilities and members' equity.............................. $17,051,195
===========
</TABLE>
See accompanying notes.
F-60
<PAGE>
AOA HOLDING, L.L.C.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS TWO MONTHS
ENDED YEAR ENDED ENDED
MARCH 31 DECEMBER 31 DECEMBER 31
1996 1995 1994
(UNAUDITED)
<S> <C> <C> <C>
Advertising revenues....................... $3,258,117 $13,372,651 $2,185,119
Less commissions and discounts............. 318,329 1,313,514 232,130
---------- ----------- ----------
2,939,788 12,059,137 1,952,989
Expenses:
Operating................................ 692,453 2,562,678 377,085
Real estate.............................. 524,010 2,122,395 360,907
Selling.................................. 402,123 1,501,219 214,492
General and administrative............... 485,030 1,854,792 340,366
Depreciation and amortization............ 380,822 1,829,947 153,344
Deferred compensation.................... 85,201 368,858 --
---------- ----------- ----------
2,569,639 10,239,889 1,446,194
---------- ----------- ----------
Income from operations..................... 370,149 1,819,248 506,795
Other expense:
Interest expense......................... -- 1,317,555 258,060
Other expenses, net...................... 21,261 27,016 5,960
---------- ----------- ----------
21,261 1,344,571 264,020
---------- ----------- ----------
Net income................................. $ 348,888 $ 474,677 $ 242,775
========== =========== ==========
</TABLE>
See accompanying notes.
F-61
<PAGE>
AOA HOLDING, L.L.C.
CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS' EQUITY
<TABLE>
<CAPTION>
TOTAL
CLASS CLASS UNIT RETAINED MEMBERS'
A UNITS B UNITS WARRANTS EARNINGS EQUITY
<S> <C> <C> <C> <C> <C>
Members' contribution on
October 28, 1994....... $255,007 $3,250,000 $ -- $ -- $3,505,007
Issuance of unit
warrants subject to put
option................. -- -- 238,043 -- 238,043
Net income.............. -- -- -- 242,775 242,775
-------- ---------- ---------- -------- ----------
Balances at December 31,
1994................... 255,007 3,250,000 238,043 242,775 3,985,825
Net income.............. -- -- -- 474,677 474,677
Distributions to mem-
bers................... -- -- -- (358,993) (358,993)
Increase in redemption
price of unit warrants
subject to put option.. (43,095) (560,234) 961,788 (358,459) --
-------- ---------- ---------- -------- ----------
Members' equity at De-
cember 31, 1995........ $211,912 $2,689,766 $1,199,831 $ -- $4,101,509
======== ========== ========== ======== ==========
</TABLE>
See accompanying notes.
F-62
<PAGE>
AOA HOLDING, L.L.C.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
TWO MONTHS
YEAR ENDED ENDED
DECEMBER 31 DECEMBER 31
1995 1994
<S> <C> <C>
OPERATING ACTIVITIES:
Net income......................................... $ 474,677 $ 242,775
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization.................... 1,829,947 153,344
Amortization of debt discount.................... 55,544 --
Provision for bad debts.......................... 59,936 19,465
Changes in operating assets and liabilities:
Accounts receivable............................. (164,709) 12,026
Prepaid expenses................................ 10,501 (40,490)
Other assets.................................... (86,479) --
Accounts payable................................ 66,131 (56,138)
Deferred compensation........................... 158,858 --
Accrued interest................................ 81,877 176,748
Accrued and other liabilities................... (357,299) 2,545
----------- ------------
Net cash provided by operating activities.......... 2,128,984 510,275
INVESTING ACTIVITIES:
Business acquisition............................... -- (14,263,750)
Acquisition of property, plant and equipment....... (479,822) (23,157)
----------- ------------
Net cash used in investing activities.............. (479,822) (14,286,907)
FINANCING ACTIVITIES:
Proceeds from issuance of members' equity.......... $ -- $ 3,505,007
Capital lease payments............................. -- (48,890)
Buy-out capital lease obligation................... (1,077,045) --
Proceeds from issuance of debt, net of cost........ -- 10,868,246
Net payments on revolving credit agreement......... (200,000) (305,100)
Distributions to members........................... (358,993) --
----------- ------------
Net cash (used in) provided by financing activi-
ties.............................................. (1,636,038) 14,019,263
----------- ------------
Net increase in cash and cash equivalents.......... 13,124 242,631
Cash and cash equivalents at beginning of period... 242,631 --
----------- ------------
Cash and cash equivalents at end of period......... $ 255,755 $ 242,631
----------- ------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW:
Cash paid for interest............................. $1,180,134 $ 81,312
=========== ============
</TABLE>
See accompanying notes.
F-63
<PAGE>
AOA HOLDING, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
(1) ORGANIZATION
AOA Holding, L.L.C. (Holding) was formed on October 28, 1994 to acquire
Alabama Outdoor Advertising, Inc. through its majority-owned subsidiary AOA
Acquisition L.L.C. (Acquisition) (collectively referred to as the Company).
The Company maintains and operates outdoor advertising displays throughout
northern Alabama. The display structures are the property of the Company and
the real estate on which the structures are built is leased by the Company
under cancelable leases with terms ranging from one to twenty years. The
Company's marketing department actively seeks out businesses and organizations
to sell billboard space for defined periods of time. Sales are negotiated on
term contracts. The Company's art department creates and assembles designs for
the operations department to hang on billboard locations.
The debts, obligations and liabilities of the Company will be solely the
debts, obligations and liabilities of the Company, and no member of the
Company is liable or will be obligated personally for any such debt,
obligation or liability of the Company solely by reason of such status.
(2) ACCOUNTING POLICIES
Consolidation
The financial statements include the accounts of AOA Holding, L.L.C. and its
majority-owned subsidiary, AOA Acquisition, L.L.C. All significant
intercompany accounts and transactions have been eliminated.
PROPERTY, PLANT AND EQUIPMENT
For income tax and financial reporting purposes, the Company uses the
Modified Accelerated Cost Recovery System for fixed asset depreciation. The
estimated useful lives of the various classes of assets are as follows:
<TABLE>
<S> <C>
Buildings........................................................ 40 years
Advertising structures........................................... 16 years
Trucks and automobiles........................................... 5 years
Furniture and equipment.......................................... 5 years
</TABLE>
Replacement parts, grouped with work-in-progress (see Note 4) are not
depreciated until placed in service.
ADVERTISING REVENUES
Advertising revenues are recognized ratably on a monthly basis over the
period in which advertisement displays are posted on the advertising
structures. Discounts are granted to customers who contract for specified
levels of advertising and longer term contracts, generally at least 12 months.
Commissions represent the portion of revenues paid to the agency placing the
advertisement.
REAL ESTATE LEASES
Real estate lease payments are generally paid in advance and charged to
expense over the life of the lease. For most lease agreements, the lease term
renews if payment is accepted subsequent to the original lease term. Operating
lease expense related to real estate totaled $2,000,315 and $336,301 for 1995
and the two months ended December 31, 1994, respectively.
INCOME TAXES
The accompanying consolidated financial statements do not include provision
for income taxes because the taxable income or loss of the Company is included
in the tax returns of the members.
F-64
<PAGE>
AOA HOLDING, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
STATEMENT OF CASH FLOWS
For purposes of the statement of cash flows, the Company considers all
highly liquid securities with maturities of three months or less at the time
of purchase to be cash equivalents.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amount. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of. The Company will adopt Statement
121 in the first quarter of 1996 and, based on current circumstances, does not
believe the effect of adoption will be material.
RISKS AND UNCERTAINTIES
The use of estimates developed by management is inherent in the preparation
of financial statements in conformity with generally accepted accounting
principles.
(3) BUSINESS ACQUISITION
The Company acquired substantially all of the assets and assumed certain
liabilities of Alabama Outdoor Advertising, Inc. in October 1994. Funds for
the acquisition were provided from a $1,600,000 seller note (see Note 6),
proceeds from the issuance of 3,505,007 total Class A and Class B units at $1
per unit and from the Company's initial borrowing of approximately
$11,000,000. The purchase price was allocated as follows:
<TABLE>
<S> <C>
Assets:
Accounts receivable........................................... $ 1,632,593
Prepaid expenses.............................................. 353,004
Property, plant and equipment................................. 15,395,435
Debt issue costs.............................................. 609,250
Other......................................................... 95,720
-----------
18,086,002
Less:
Liability assumed............................................. 2,222,252
-----------
$15,863,750
===========
</TABLE>
The acquisition was accounted for using the purchase method of accounting
and is included in the Company's financial statements from the date of
acquisition.
(4) PREPAID EXPENSES
Prepaid expenses consist of the following at December 31:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
Real estate leases.................................................. $272,172
Insurance........................................................... 83,023
Other............................................................... 27,798
--------
$382,993
========
</TABLE>
F-65
<PAGE>
AOA HOLDING, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and consist of the
following at December 31:
<TABLE>
<CAPTION>
1995
-----------
<S> <C>
Land............................................................ $ 750,923
Buildings....................................................... 271,846
Advertising structures.......................................... 13,751,018
Trucks and automobiles.......................................... 412,555
Furniture and equipment......................................... 310,271
Replacement parts and work-in-progress.......................... 401,702
-----------
15,898,315
Less accumulated depreciation................................... 1,841,036
-----------
$14,057,279
===========
</TABLE>
(6) LONG-TERM DEBT
Long-term debt at December 31, 1995 consisted of the following:
<TABLE>
<S> <C>
Revolving credit facility, net of discount of $182,499........... $10,180,647
Seller note...................................................... 1,600,000
-----------
$11,780,647
Less current portion............................................. --
$11,780,647
===========
</TABLE>
The revolving credit facility is provided under a financing agreement with a
bank which expires October 28, 1999. Under the revolving credit facility, the
Company may borrow up to $14,500,000. Borrowing limits under the revolving
credit facility are reduced over the term of the agreement to the following:
<TABLE>
<S> <C>
1996............................................................. $12,500,000
1997............................................................. 10,500,000
1998............................................................. 7,500,000
1999............................................................. --
</TABLE>
Borrowings under the facility bear interest, at the Company's option, at the
bank's eurodollar rate, LIBOR plus 3.25%, or base rate, prime plus 2%. The
eurodollar rate and base rate in effect at December 31, 1995 was 9.00% and
10.25%, respectively.
The revolving credit facility agreement is collateralized with substantially
all the assets of the Company and restricts distributions to its members to
those necessary for payment of taxes. If the Company's cash balance exceeds
$500,000 for three consecutive business days, the Company must pay down the
revolving credit balance by the excess amount. The agreement also restricts
the amount of capital expenditures and requires that the Company maintain
certain financial performance measures and financial ratios related to EBITDA
on a quarterly basis (as defined).
The $1,600,000 seller note accrues interest at a rate equal to the six-month
Treasury Bill (6% at December 31, 1995), and all accrued interest is due and
payable upon maturity on October 28, 1999. Quarterly principal payments of
$50,000 are due beginning January 15, 1997. The note is secured by a letter of
credit issued in
F-66
<PAGE>
AOA HOLDING, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
conjunction with the revolving credit facility described above. The $1,600,000
seller note reduces the borrowing limits of the revolving credit facility.
The fair value of the Company's financing arrangements approximates their
carrying values.
(7) MEMBERS' EQUITY
The members' interest in the Company is divided into Class A units and Class
B units. The Company has reserved 17,175 Class A units and 297,825 Class B
units for issuance upon exercise of the unit warrants related to the financing
agreement (see unit warrants below). Each holder of Class A and Class B units
shall have the right to one vote for each unit held.
DISTRIBUTIONS
Prior to dissolution, liquidation or the occurrence of a sale transaction,
the holders of the Class B units shall be entitled to receive distributions,
when and if declared by the Management Committee. No periodic distributions
may be paid on Class A units unless, simultaneously, an identical or greater
amount is distributed with respect to each Class B unit then outstanding.
Upon dissolution, either voluntary or involuntary, the holders of the Class
B units shall be entitled to receive a distribution amount equal to $1 per
unit (original Class B purchase price) in preference to any distributions to
the Class A units. The remaining proceeds of such transaction shall be
distributed to the holders of the Class A units in accordance with their
respective holdings.
CLASS B UNIT REDEMPTION
At any time after repayment in full of all obligations under the debt
agreement, the holders of a majority of the outstanding Class B units may
elect to have the Class B units redeemed, in whole or in part as indicated in
the election, to the extent of funds legally available therefore, by paying in
cash a price equal to the original Class B purchase price of $1 per unit.
CLASS B UNIT EXCHANGE
At any time following repayment in full of the obligations under the debt
agreement, the holders of the Class B units may, by affirmative vote of the
holders of a majority of the Class B units then outstanding, require the
Company to exchange their Class B units for subordinated, interest-only notes
of the Company having other terms and conditions as follows:
(a) an aggregate principal amount equal to the original Class B purchase
price of such Class B units;
(b) a variable interest rate equal to LIBOR plus five percent (5%);
(c) a maturity of three years from the date of such exchange; and
(d) such other reasonable and customary terms as the Management Committee
shall determine.
CLASS B UNIT CONVERSION
Each Class B unit shall be convertible to a Class A unit, at any time upon
written notice by the Company of an impending sale transaction, pursuant to
the vote of the holders of a majority of the Class B units. Such a conversion
shall not actually take place until immediately prior to the consummation of
such sale transaction and if such sale transaction shall not occur then no
conversion shall occur.
F-67
<PAGE>
AOA HOLDING, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
UNIT WARRANTS
In connection with the financing agreement discussed in Note 6, the Company
issued 17,175 Class A unit warrants and 223,272 Class B unit warrants to an
affiliate of the lending institution. Each warrant entitles the holder to
purchase one unit at an exercise price of $.01 at any time after the warrants
are issued until the earlier of October 14, 2004 or the sixth anniversary of
the date in which all other units owned by the holder of the warrants have
been repurchased by the Company. Pursuant to the Warrant Agreement, under
certain circumstances the Company may in its sole discretion repurchase all
outstanding warrants for cash, on a pro rata basis among the holders of all
warrants. The Warrant Agreement contains a put option, exercisable after
October 31, 1999, which allows the holder of the warrants to require the
Company to purchase the warrants at fair market value.
A portion of the proceeds from the financing agreement (see Note 6) were
allocated to the warrants resulting in a debt discount of $238,043. The debt
discount is amortized over the term of the debt. The warrants have been
subsequently adjusted to their fair market value of $5 per warrant as
determined at December 31, 1995.
UNIT OPTION AGREEMENTS
The Company entered into unit option agreements with its President and CFO
for Class A units. The options are granted based on the Company reaching
certain performance measures in 1995 and 1996, with catch-up provisions in
1997 and 1998 if not previously reached. The options have an exercise price of
$.005 and vest over three years (25%, 25% and 50%). Total Units of 14,630 are
available to be awarded and the 1995 compensation expense related to these
options was $18,125. The unit option agreements also contain provisions for
substantially more options in the event a class B unit conversion occurs as
described above, and upon a liquidity event, as defined, if the Company meets
the stated internal rate of return.
(8) RELATED PARTY TRANSACTIONS
An affiliate of the bank providing the financing agreement (see Note 6) owns
approximately 41% of the total outstanding Class A and B units. The bank was
paid fees of $25,000 and the bank's affiliate was paid a distribution of
$146,190 during 1995.
(9) EMPLOYEE RETIREMENT PLAN
The Company maintains a 401(k) retirement plan in which all employees are
eligible upon reaching twenty one years of age and after providing one year of
service. The Company matches a percentage of the employee's contributions up
to certain limits. The Company incurred $13,527 of expense in 1995 relating to
this retirement plan.
(10) DEFERRED COMPENSATION
The Company maintains a deferred compensation award plan for employees in
the management group as determined by the Management Committee. The President
and CFO are not eligible for the plan. The award is based on a percentage of
earnings in any plan year provided the Company meets certain financial
performance measures as outlined in the plan document. Awards under the plan,
effective January 1, 1995, accrue over the vesting period which is one to five
years from the effective date of the plan or when the Company is sold, if
sooner. After vesting, the Management Committee shall allocate such bonus
awards to each participant in accordance with the plan document. Deferred
compensation expense related to this plan totaled $140,733 for 1995.
F-68
<PAGE>
AOA HOLDING, L.L.C.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The Company maintains a deferred compensation award plan for the President
and CFO as part of the acquisition agreement. The award is calculated as a
percentage of the executives annual salary and is paid annually. The
percentage paid is up to 100% based on the Company's EBITDA, as defined, at
year end. Deferred compensation expense related to this agreement totaled
$210,000 for the year ended December 31, 1995.
(11) UNAUDITED NOTE TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Basis of Presentation
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
applicable to interim financial statements. Accordingly, they do not include
all of the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
all adjustments and reclassifications considered necessary for a fair and
comparable presentation have been included and are of a normal recurring
nature. Operating results for the three months ended March 31, 1996, are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996.
F-69
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Skoglund Communications, Inc. and Skoglund Communications of St. Cloud, Inc.
Duluth, Minnesota
We have audited the accompanying combined balance sheet of Skoglund
Communications, Inc. and Skoglund Communications of St. Cloud, Inc. as of
December 31, 1995, and the related combined statements of operations, retained
earnings (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 Skoglund
Communications, Inc. and Skoglund Communications of St. Cloud, Inc. as of
December 31, 1995, and the results of their operations and their cash flows
for the year then ended in conformity with generally accepted accounting
principles.
McGLADREY & PULLEN, LLP
Duluth, Minnesota
February 2, 1996
F-70
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Skoglund Communications, Inc. and
Skoglund Communications of St. Cloud, Inc.:
We have audited the accompanying combined balance sheet of Skoglund
Communications, Inc. and Skoglund Communications of St. Cloud, Inc. (Minnesota
corporations) as of December 31, 1994 and the related combined statements of
operations and retained earnings (deficit) and cash flows for the year then
ended. The combined financial statements referred to below are the
responsibility of the Company's management. Our responsibility is to express
an opinion on the combined 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 Skoglund
Communications, Inc. and Skoglund Communications of St. Cloud, Inc. as of
December 31, 1994 and the results of their operations and their cash flows for
the year then ended, in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
Minneapolis, Minnesota
March 24, 1995
F-71
<PAGE>
SKOGLUND COMMUNICATIONS, INC. AND
SKOGLUND COMMUNICATIONS OF ST. CLOUD, INC.
COMBINED BALANCE SHEETS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------------
1996 1995 1994
ASSETS (Note 3) (UNAUDITED)
<S> <C> <C> <C>
Current Assets:
Cash and cash equivalents............ $ 164,620 $ 239,629 $ 406,553
Trade receivables, less allowance for
doubtful accounts of September 30,
1996 $177,000, $141,000 in 1995 and
$116,000 in 1994.................... 780,532 728,900 740,530
Note receivable from shareholder
(Note 6)............................ -- -- 300,000
Note receivable, current maturities
(Note 8)............................ 3,185 3,185 --
Inventories, at cost................. 67,666 63,882 74,671
Prepaid rent expense................. 247,552 202,103 217,091
Other prepaid expenses............... 128,520 109,889 176,432
----------- ----------- -----------
Total current assets............. 1,392,075 1,347,588 1,915,277
----------- ----------- -----------
Property and Equipment, at cost:
Land................................. 548,807 529,380 529,163
Advertising display structures....... 6,677,930 6,336,340 6,078,081
Buildings............................ 1,128,432 1,122,984 1,112,349
Equipment............................ 1,259,644 1,215,987 1,190,230
----------- ----------- -----------
9,614,813 9,204,691 8,909,823
Accumulated depreciation............. (4,916,351) (4,574,251) (4,218,413)
----------- ----------- -----------
Net property and equipment....... 4,698,462 4,630,440 4,691,410
----------- ----------- -----------
Other Assets:
Investment in partnership............ 167,367 166,127 163,197
Note receivable, less current
maturities (Note 8)................. 142,505 144,598 --
Property held for resale............. 167,228 -- 140,888
Other................................ 296,549 131,660 158,510
----------- ----------- -----------
Total other assets............... 773,649 442,385 462,595
----------- ----------- -----------
$ 6,864,186 $ 6,420,413 $ 7,069,282
=========== =========== ===========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Note Payable ........................ $ 367,228 $ -- $ --
Current maturities of long-term debt
(Note 3)............................ 592,443 527,443 467,253
Accounts payable..................... 69,071 52,509 88,230
Accrued expenses:
Salaries and wages................. 92,204 162,680 139,492
Payroll and other taxes............ 49,946 74,021 63,861
Employee benefits.................. 106,651 90,661 113,496
Other.............................. 66,831 64,966 50,984
Distributions payable (Note 6)....... -- 200,000 300,000
----------- ----------- -----------
Total current liabilities........ 1,344,374 1,172,280 1,223,316
Long-Term Debt, less current
maturities (Note 3)................. 2,943,992 3,211,591 3,839,385
Subordinated Note Payable to
Stockholder (Note 6)................ 1,100,000 1,100,000 1,100,000
----------- ----------- -----------
Total liabilities................ 5,388,366 5,483,871 6,162,701
----------- ----------- -----------
Stockholder's Equity (Note 6):
Common stock....................... 130,000 130,000 130,000
Additional paid-in capital......... 2,800,000 2,800,000 2,800,000
Retained earnings (deficit)........ (1,454,180) (1,993,458) (2,023,419)
----------- ----------- -----------
Total stockholder's equity....... 1,475,820 936,542 906,581
----------- ----------- -----------
$ 6,864,186 $ 6,420,413 $ 7,069,282
=========== =========== ===========
</TABLE>
See Notes to Combined Financial Statements.
F-72
<PAGE>
SKOGLUND COMMUNICATIONS, INC. AND
SKOGLUND COMMUNICATIONS OF ST. CLOUD, INC.
COMBINED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ----------------------
1996 1995 1994
(UNAUDITED)
<S> <C> <C> <C>
REVENUES:
Poster.................................. $2,147,909 $2,558,572 $2,439,560
Painted................................. 2,700,266 3,363,323 3,126,131
Other................................... 158,772 192,865 225,786
---------- ---------- ----------
Gross revenues........................ 5,006,947 6,114,760 5,791,477
Less commissions and discounts.......... 493,924 623,542 638,890
---------- ---------- ----------
Net operating revenues................ 4,513,023 5,491,218 5,152,587
---------- ---------- ----------
OPERATING EXPENSES:
Operations.............................. 1,605,663 1,926,350 1,885,250
Selling, general, and administrative.... 1,327,288 1,833,347 1,779,297
Depreciation............................ 326,023 435,240 433,337
Amortization............................ 28,967 50,835 106,117
---------- ---------- ----------
Total operating expenses.............. 3,287,941 4,245,772 4,204,001
---------- ---------- ----------
Operating income...................... 1,225,082 1,245,446 948,586
---------- ---------- ----------
OTHER INCOME (EXPENSE):
Interest expense........................ (347,937) (509,483) (453,357)
Interest income......................... 8,323 33,578 25,942
Miscellaneous, net...................... (110,718) 9,614 31,721
---------- ---------- ----------
(450,332) (466,291) (395,694)
---------- ---------- ----------
Net income............................ $ 774,750 $ 779,155 $ 552,892
========== ========== ==========
PRO FORMA DATA (UNAUDITED):
Net income, as reported................. $ 774,750 $ 779,155 $ 552,892
Pro forma provision for income taxes.... 313,500 315,300 223,738
---------- ---------- ----------
Pro forma net income.................. $ 461,250 $ 463,855 $ 329,154
========== ========== ==========
Pro forma net income per common share... $ 576.56 $ 579.82 $ 411.44
========== ========== ==========
Weighted average shares outstanding..... 800 800 800
========== ========== ==========
</TABLE>
COMBINED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER ------------------------
30, 1996 1995 1994
(UNAUDITED)
<S> <C> <C> <C>
(Deficit), beginning of year............ $(1,993,458) $(2,023,419) $(2,276,311)
Distributions to stockholder.......... (235,472) (749,194) (300,000)
Net income............................ 774,750 779,155 552,892
----------- ----------- -----------
(Deficit), end of year (Note 6)......... $(1,454,180) $(1,993,458) $(2,023,419)
=========== =========== ===========
</TABLE>
See Notes to Combined Financial Statements.
F-73
<PAGE>
SKOGLUND COMMUNICATIONS, INC. AND
SKOGLUND COMMUNICATIONS OF ST. CLOUD, INC.
COMBINED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1996 AND YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------
1996 1995 1994
(UNAUDITED)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income................................ $ 774,750 $ 779,155 $552,892
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............ 354,990 486,075 539,454
Gain on sale of property and equipment... (7,817) (10,816) --
Equity in earnings of partnership........ (1,239) (2,930) (18,137)
Change in working capital components
(Increase) decrease in:
Trade receivables...................... (25,579) (33,965) (74,089)
Inventories............................ (3,784) 10,789 (27,818)
Prepaid rent expense and other prepaid
expenses.............................. (64,076) 81,531 (99,676)
Increase (decrease) in:
Accounts payable....................... 16,562 (35,721) (125,561)
Accrued expenses....................... (102,748) 20,896 97,194
--------- ---------- --------
Net cash provided by operating activi-
ties................................. 941,059 1,295,014 844,259
--------- ---------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment....... (346,954) (399,614) (301,458)
Proceeds from sale of property and equip-
ment..................................... 28,649 23,426 --
Payments received on notes receivable..... 2,094 2,217 --
Increase in other assets.................. 2,141 (33,097) --
Condemnation proceeds..................... 16,075 12,734 22,647
Payment for asset acquisitions............ (447,228) -- (154,773)
--------- ---------- --------
Net cash used for investing activi-
ties................................. (745,223) (394,334) (433,584)
--------- ---------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on term note........... (359,493) (516,796) (381,737)
Principal payments on other long-term
debt..................................... (38,106) (50,808) (378,317)
Proceeds from long-term debt.............. 195,000 -- 300,000
Net payments on revolving credit note..... 367,228 -- (48,482)
Distributions paid to stockholder......... (435,474) (500,000) --
--------- ---------- --------
Net cash used for financing activi-
ties................................. (270,845) (1,067,604) (508,536)
--------- ---------- --------
Net decrease in cash and cash equiva-
lents................................ (75,009) (166,924) (97,861)
CASH AND CASH EQUIVALENTS:
Beginning of year ........................ 239,629 406,553 504,414
--------- ---------- --------
End of year............................... $ 164,620 $ 239,629 $406,553
========= ========== ========
</TABLE>
See Notes to Combined Financial Statements.
F-74
<PAGE>
SKOGLUND COMMUNICATIONS, INC. AND
SKOGLUND COMMUNICATIONS OF ST. CLOUD, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND PRESENTATION
Nature of business: The Company is engaged in outdoor advertising through
the display of posters and painted bulletins, principally in Duluth and St.
Cloud, Minnesota, and Eau Claire, Wisconsin. The Company extends credit to its
customers, all on an unsecured basis, on terms that it establishes for
individual customers.
Presentation: The accompanying combined financial statements include the
accounts of Skoglund Communications, Inc. (SCI) and Skoglund Communications of
St. Cloud, Inc. (SCSC), collectively referred to as the Company. Combined
financial statements are being presented due to the common ownership and
interdependence of SCI and SCSC. All significant intercompany accounts and
transactions have been eliminated in combination. Both companies are wholly-
owned by the same individual.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
Cash and cash equivalents: The Company considers all investments with an
original maturity of 90 days or less to be cash equivalents. The Company
invests primarily in short-term money market instruments.
Disclosures about fair value of financial instruments: The following methods
and assumptions were used to estimate the fair value of each class of
financial instruments for which it is practicable to estimate that value:
Cash and cash equivalents--The carrying amount approximates fair value
because of the short maturity of those instruments.
Note receivable--The carrying amount approximates fair value because the
note was received in 1995 and no significant changes have occurred since
that time.
Long-term debt and note payable to shareholder--The carrying amount
approximates fair value because the interest rate is at a variable rate
corresponding to the prime rate.
Property and equipment: Depreciation of advertising display structures,
buildings and equipment was provided principally on a straight-line basis for
financial reporting purposes, using the following estimated lives:
<TABLE>
<CAPTION>
YEARS
<S> <C>
Advertising display structures......................................... 15
Buildings.............................................................. 25
Equipment.............................................................. 3-10
</TABLE>
The Company follows the composite method of depreciation for advertising
display structures whereby the cost and related accumulated depreciation of
advertising display structures retired or otherwise disposed of are eliminated
from the respective accounts and the resulting gains or losses are credited or
charged to the allowance for accumulated depreciation. In addition, proceeds
received for the condemnation of advertising display structures are credited
to accumulated depreciation to the extent such proceeds exceed the direct
legal and other related costs incurred during the condemnation proceedings.
Accumulated depreciation included in the accompanying combined balance
sheets consists of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Advertising display structures........................ $3,018,310 $2,736,202
Buildings............................................. 504,166 457,817
Equipment............................................. 1,051,775 1,024,394
---------- ----------
$4,574,251 $4,218,413
========== ==========
</TABLE>
F-75
<PAGE>
SKOGLUND COMMUNICATIONS, INC. AND
SKOGLUND COMMUNICATIONS OF ST. CLOUD, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Investment in partnership: The Company owns a 1% general and 41.5% limited
partnership interest in a partnership that engages in outdoor advertising
activities in Florida. These partnership interests are accounted for by the
equity method of accounting under which the Company's share of the income or
loss of the partnership is recognized as income in the Company's income
statement and added to the investment account and distributions received are
deducted from the investment account.
Revenue recognition: The Company recognizes revenue from advertising
contracts on an accrual basis ratably over the term of the contract, as
advertising services are provided.
Amortization: Deferred financing costs are amortized on a straight-line
basis over the term of the related debt. The cost of noncompete agreements are
amortized on a straight-line basis over the term of the agreements, generally
three to five years.
Income taxes: SCI and SCSC have elected to be taxed as S corporations. As
such, the taxable income of SCI and SCSC is includable in the individual
returns of the shareholder for federal and state tax purposes. The Company
reports certain income and expense items, principally depreciation methods and
lives, for income tax purposes on a basis different from that reflected in the
combined financial statements. Total accumulated taxable temporary differences
amounted to $2,100,000 as of December 31, 1995. The Company also has federal
investment tax credit carryforwards of $152,000 and net operating loss
carryforwards of $1,816,000 as of December 31, 1995 which relate to years
prior to the S corporation election and expire in varying amounts from 1998 to
2003. These carryforwards will only be available for use if the Company
reverts to a C corporation during the carryforward period and generates
taxable income.
Use of estimates in the preparation of financial statements: The preparation
of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Pro forma net income per common share (unaudited): Pro forma net income per
common share is computed based upon the total weighted average number of
common shares outstanding during the period of Skoglund Communications, Inc.
and Skoglund Communications of St. Cloud, Inc.
Pro forma income taxes (unaudited): The unaudited pro forma adjustment to
reflect income taxes in the accompanying statement of operations is for
informational purposes only and has been calculated based on the estimated
effective tax rate in each year, assuming the Company had been subject to
corporate income taxes.
Unaudited financial information: The unaudited information reflects all
adjustments, consisting of normal recurring accruals, which are, in the
opinion of management, necessary to a fair presentation of the financial
position as of September 30, 1996 and the results of operations and cash flows
for the ten months then ended. The results of the ten month period is not
necessarily indicative of the results of the Company which may be expected for
the entire year.
F-76
<PAGE>
SKOGLUND COMMUNICATIONS, INC. AND
SKOGLUND COMMUNICATIONS OF ST. CLOUD, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3. LONG-TERM DEBT
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Term note, interest at 0.75% over bank's base rate
(base rate 8.5% at December 31, 1995 and 1994), due
in monthly installments of $65,000 including
interest, through December 1997 when the remaining
balance of the note is due........................... $3,501,841 $4,018,263
Industrial development revenue note, interest at 85%
of the bank's base rate (base rate 9.5% at December
31, 1995 and 1994), due in monthly installments of
$3,944, plus interest, through March 2000,
collateralized by certain property and equipment and
personally guaranteed by the shareholder............. 198,191 245,519
Other................................................. 39,002 42,856
---------- ----------
3,739,034 4,306,638
Current maturities................................ (527,443) (467,253)
---------- ----------
$3,211,591 $3,839,385
========== ==========
</TABLE>
The Company has a credit agreement with a bank which provides the Company
with a revolving credit note and a term note. Under the revolving credit note
the amount of funds available to the Company ($368,000 as of December 31,
1995) is based on the Company's qualified trade receivables, as defined in the
agreement, with a maximum borrowing level of $500,000. In addition, the
Company may borrow any amounts which have been prepaid on the term note
($100,000 as of December 31, 1995) up to an additional $500,000. The credit
agreement is collateralized by substantially all the Company's assets and is
guaranteed by the shareholder.
The credit agreement and the industrial development revenue note contain
restrictive covenants which require, among other matters, that the Company
maintain a defined level of combined tangible net worth and meet other
financial performance measures. The covenants also restrict additional
indebtedness and certain payments, including dividends (except for
distribution of current year profits) and officers' compensation. As of
December 31, 1995 the Company was in compliance with the terms of these
agreements.
Aggregate annual maturities required on long-term debt as of December 31,
1995 are approximately as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
<S> <C>
1996............................................................ $ 527,000
1997............................................................ 3,078,000
1998............................................................ 52,000
1999............................................................ 53,000
2000............................................................ 15,000
Thereafter........................................................ 14,000
----------
$3,739,000
==========
</TABLE>
NOTE 4. RETIREMENT PLANS
The Company has an employee retirement savings 401(k) plan for employees not
covered by a collective bargaining agreement. Employees become eligible for
participation in the plan upon completion of one year of service and
attainment of age 21. Under the terms of the plan, participants may elect to
contribute up to 10% of their salaries to the plan. The Company matches 50% of
all participant contributions until the participant's
F-77
<PAGE>
SKOGLUND COMMUNICATIONS, INC. AND
SKOGLUND COMMUNICATIONS OF ST. CLOUD, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
contribution reaches 6% of eligible wages. Company contributions to an
individual participant's account vest after three years of service;
forfeitures are reallocated among the remaining plan participants. The
Company's contributions totaled approximately $29,000 in 1995 and $26,000 in
1994.
The Company also contributes to a multiemployer defined benefit pension plan
covering union employees. These contributions are determined in accordance
with the provisions of a negotiated labor contract and are based on the number
of employee hours worked. The Company's contributions totaled approximately
$26,000 in 1995 and $23,000 in 1994.
NOTE 5. OPERATING LEASES
The Company leases certain facilities, equipment and vehicles under
operating leases which expire at various dates through 2000. Rent expense
related to these operating leases was approximately $162,000 in 1995 and
$128,000 in 1994. Future minimum lease commitments for all noncancelable
operating leases with initial or remaining terms in excess of one year are
approximately as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
<S> <C>
1996.............................................................. $101,000
1997.............................................................. 76,000
1998.............................................................. 76,000
1999.............................................................. 78,000
2000.............................................................. 46,000
--------
$377,000
========
</TABLE>
A number of the Company's advertising display structures are located on
leased property. Total expense applicable to these leases was approximately
$682,000 in 1995 and $611,000 in 1994.
NOTE 6. RELATED PARTY AND INTERCOMPANY TRANSACTIONS
STOCKHOLDER'S EQUITY:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
SCI common stock, no par value, 2,500 shares autho-
rized; 300 shares issued and outstanding........... $ 30,000 $ 30,000
SCSC common stock, no par value, 25,000 shares
authorized; 500 shares issued and outstanding...... 100,000 100,000
----------- -----------
130,000 130,000
----------- -----------
SCI additional paid-in capital...................... -- --
SCSC additional paid-in capital..................... 2,800,000 2,800,000
----------- -----------
2,800,000 2,800,000
----------- -----------
SCI retained earnings............................... 82,357 200,742
SCSC retained earnings (deficit).................... (2,075,815) (2,224,161)
----------- -----------
(1,993,458) (2,023,419)
----------- -----------
$ 936,542 $ 906,581
=========== ===========
</TABLE>
F-78
<PAGE>
SKOGLUND COMMUNICATIONS, INC. AND
SKOGLUND COMMUNICATIONS OF ST. CLOUD, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Stockholder transactions: SCI declared a $300,000 distribution to the
stockholder in 1994 that was paid in 1995. During 1995 SCI declared
distributions to the stockholder of $749,194 of which $200,000 was paid in
1995, $349,194 was distributed in the form of cancellation of a note
receivable and accrued interest from the stockholder in 1995 and $200,000 was
paid in January 1996.
The note receivable from the stockholder was collected in the form of a
distribution to the stockholder during 1995. Interest income on the note
receivable was approximately $23,000 and $26,000 for the years ended December
31, 1995 and 1994, respectively.
The subordinated note payable to the stockholder of $1,100,000 at December
31, 1995 and 1994 bears interest at prime rate plus 1% (prime 8.5% at December
31, 1995 and 1994). The note is due on demand after January 1, 1997 and is
subordinated to the revolving credit note and the term note. Interest expense
on the note payable was approximately $108,000 and $90,000 for the years ended
December 31, 1995 and 1994, respectively.
Management agreement: SIC has an agreement with SCSC to provide management,
accounting, advertising, maintenance and other services as required for the
day-to-day operations of the business. All direct costs incurred on behalf of
SCI or SCSC are charged directly to the respective company. The indirect costs
of these services are allocated between SCI and SCSC based on their pro-rata
share of revenues. Total allocated expenses to SCSC were approximately
$272,000 and $272,000 for the years ended December 31, 1995 and 1994,
respectively, and have been eliminated in the combination.
NOTE 7. SUPPLEMENTARY CASH FLOW INFORMATION
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1995 1994
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash paid for interest..................................... $509,485 $463,966
======== ========
Supplemental Schedule of Noncash Investing and Financing Ac-
tivity:
Note receivable............................................ $150,000 $ --
======== ========
Note receivable and accrued interest distributed to stock-
holder.................................................... $349,194 $ --
======== ========
</TABLE>
NOTE 8. NOTE RECEIVABLE
The note requires monthly installments of $1,302, including interest at
8.5%, through March 2000 when the remaining balance of the note is due.
NOTE 9. EVENT SUBSEQUENT TO DECEMBER 31, 1995 (UNAUDITED)
On October 31, 1996, OCI (N) Corp. acquired substantially all of the assets
of Skoglund Communications, Inc. and Skoglund Communications of St. Cloud,
Inc. (the Companies). The Companies ceased operations in the outdoor
advertising industry at that time.
F-79
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Outdoor West, Inc. of Tennessee
Atlanta, Georgia
We have audited the accompanying balance sheets of Outdoor West, Inc. of
Tennessee as of June 30, 1996 and 1995 and the related statements of
operations and retained earnings (deficit), and cash flows for the years 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 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 Outdoor West, Inc. of
Tennessee as of June 30, 1996 and 1995 and the results of its operations and
its cash flows for the years then ended in conformity with generally accepted
accounting principles.
MORRISON AND SMITH
Certified Public Accountants
Tuscaloosa, Alabama
August 22, 1996
(Except for Note 14, as to which the date is February 7, 1997,
and Note 15, as to which the date is May 26, 1997)
F-80
<PAGE>
OUTDOOR WEST, INC. OF TENNESSEE
BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, MARCH 31, MARCH 31,
1996 1995 1997 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current Assets
Cash in Banks.............. $ 207,137 $ 96,971 $4,142,342 $ 128,779
Receivables, Net of
Allowance for Doubtful
Accounts.................. 507,722 367,279 2,444 429,512
Materials Inventory........ 17,802 5,743 5,743
Prepayments................ 59,206 54,424 65,871
Insurance Escrow Deposits.. 24,376 31,680
----------- ----------- ---------- ----------
791,867 548,793 4,144,786 661,585
----------- ----------- ---------- ----------
Properties and Facilities--
Cost........................ 4,336,972 4,198,697 470,521 4,360,755
Less: Accumulated Deprecia-
tion and Amortization....... (3,549,183) (3,546,803) (172,500) (3,572,706)
----------- ----------- ---------- ----------
787,789 651,894 298,021 788,049
----------- ----------- ---------- ----------
Other Assets
Cash Held in Escrow........ 4,480,383
Receivables, Affiliates.... 587,903 612,254
Intangible Assets.......... 63,778 115,472 66,927
Deposits................... 1,555 1,555 1,755 1,555
Deferred Tax Benefit....... 97,820 999,935 97,820
----------- ----------- ---------- ----------
751,056 1,116,962 4,482,138 778,556
----------- ----------- ---------- ----------
TOTAL ASSETS............. $ 2,330,712 $ 2,317,649 $8,924,945 $2,228,190
=========== =========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities
Accounts Payable........... $ 106,893 $ 94,291 $ 197,156 $ 100,808
Long-term Debt, Current
Portion................... 241,534 1,453,577 37,748 216,338
Net Obligations under
Capital Leases--Current
Portion................... 7,208 6,606 7,864 6,606
Accrued Expenses........... 98,748 120,913 83,852 15,537
Unearned Income............ 177,107 98,544 161,282
Income Taxes Payable....... 70,099 1,684,039 40,195
----------- ----------- ---------- ----------
701,589 1,773,931 2,010,659 540,766
----------- ----------- ---------- ----------
Long-Term Liabilities
Notes Payable.............. 1,095,618 1,178,754 180,456 1,130,233
Notes Payable, Affiliates.. 2,560,282 1,067,402 2,244,420 2,802,915
Net Obligations Under Capi-
tal Leases................ 77,284 84,491 71,892 79,591
Deferred Income Tax Pay-
able...................... 1,350,121
----------- ----------- ---------- ----------
3,733,184 2,330,647 3,846,889 4,012,739
----------- ----------- ---------- ----------
TOTAL LIABILITIES........ 4,434,773 4,104,578 5,857,548 4,553,505
----------- ----------- ---------- ----------
Stockholders' Equity (Defi-
cit)
Common Stock ($1 par value,
250,000 shares authorized;
1,000 shares issued and
outstanding).............. 1,000 1,000 1,000 1,000
Retained Earnings (Defi-
cit)...................... (2,105,061) (1,787,929) 3,066,397 (2,326,315)
----------- ----------- ---------- ----------
Total Stockholders' Eq-
uity (Deficit).......... (2,104,061) (1,786,929) 3,067,397 (2,325,315)
----------- ----------- ---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS EQUITY
(DEFICIT)............... $ 2,330,712 $ 2,317,649 $8,924,945 $2,228,190
=========== =========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-81
<PAGE>
OUTDOOR WEST, INC. OF TENNESSEE
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (DEFICIT)
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
JUNE 30, JUNE 30, MARCH 31, MARCH 31,
1996 1995 1997 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Outdoor Advertising........ $ 3,982,830 $ 3,706,759 $3,219,089 $ 2,951,323
Less: Agency Commissions... (383,611) (367,214) (269,224) (280,328)
----------- ----------- ---------- -----------
3,599,219 3,339,545 2,949,865 2,670,995
Other Income................ 38,275 (7,100) 2,259 37,709
----------- ----------- ---------- -----------
Net Revenues.............. 3,637,494 3,332,445 2,952,124 2,708,704
----------- ----------- ---------- -----------
Operating Expenses:
Direct Advertising......... 1,263,620 1,083,245 1,068,156 896,543
General and
Administrative............ 1,424,764 1,476,097 1,371,035 1,176,417
Depreciation and
Amortization.............. 138,338 153,838 107,309 114,921
----------- ----------- ---------- -----------
Total Operating Expenses.. 2,826,722 2,713,180 2,546,500 2,187,881
----------- ----------- ---------- -----------
Operating Income............ 810,772 619,265 405,624 520,823
Gain on Sale of
Substantially all Operating
Assets..................... 8,072,220
Interest expense............ (172,048) (279,167) (95,451) (142,768)
Net loss on sale of fixed
assets..................... (9,511) (319) (71)
----------- ----------- ---------- -----------
Net income before income
taxes and extraordinary
item....................... 629,213 339,779 8,382,322 378,055
----------- ----------- ---------- -----------
Provision for income tax
expense:
Current.................... 60,427 981 1,762,923 30,523
Deferred................... 902,115 132,691 1,447,941 902,115
----------- ----------- ---------- -----------
Total provision for income
taxes...................... 962,542 133,672 3,210,864 932,638
----------- ----------- ---------- -----------
Net income before
extraordinary items........ (333,329) 206,107 5,171,458 (554,583)
Extraordinary item--gain on
early extinguishment of
debt (net of income taxes
of $9,671)................. 16,197 16,197
----------- ----------- ---------- -----------
Net income (loss)........... (317,132) 206,107 5,171,458 (538,386)
Retained earnings
(deficit)--beginning....... (1,787,929) (1,994,036) (2,105,061) (1,787,929)
----------- ----------- ---------- -----------
Retained earnings
(deficit)--ending.......... $(2,105,061) $(1,787,929) $3,066,397 $(2,326,315)
=========== =========== ========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-82
<PAGE>
OUTDOOR WEST, INC. OF TENNESSEE
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS NINE MONTHS
YEAR ENDED YEAR ENDED ENDED ENDED
JUNE 30, JUNE 30, MARCH 31, MARCH 31,
1996 1995 1997 1996
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Cash received from
customers & affiliates.... $3,537,339 $3,290,228 $2,842,136 $2,671,500
Cash paid for direct
advertising............... (1,275,679) (1,086,654) (1,050,354) (896,543)
Cash paid for general &
administrative............ (1,372,937) (1,390,195) (1,312,974) (1,270,217)
Interest expense........... (188,013) (286,943) (96,295) (159,577)
Income taxes paid.......... (981) (148,983)
Interest & dividends
received.................. 1,685 390 2,220 515
Other income (expense)..... 62,459 (7,490) 39 63,063
---------- ---------- ---------- ----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES........ 764,854 518,355 235,789 408,741
---------- ---------- ---------- ----------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Proceeds from sale of
property & equipment...... 6,499 526 9,150,000
Proceeds from sale placed
in escrow................. (4,480,383)
Payments for purchase of
property & equipment...... (245,052) (162,900) (118,358) (209,532)
Payments from deposits..... (125) (200)
Payments (to) from
employees for advances.... 109
Payments (to) from
affiliates for advances... 898,023 (95,403) 278,995 1,123,259
Payments (for) from
investments &
intangibles............... (19,328) 16,602
---------- ---------- ---------- ----------
NET CASH PROVIDED (USED) BY
INVESTING ACTIVITIES........ 640,142 (241,191) 4,830,054 913,727
---------- ---------- ---------- ----------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from borrowings... 1,421,511 64,464 163,973 1,421,511
Repayment of debt.......... (2,716,341) (323,330) (1,294,611) (2,712,171)
---------- ---------- ---------- ----------
NET CASH USED BY FINANCING
ACTIVITIES.................. (1,294,830) (258,866) (1,130,638) (1,290,660)
---------- ---------- ---------- ----------
NET CHANGE IN CASH AND CASH
EQUIVALENTS................. 110,166 18,298 3,935,205 31,808
CASH AND CASH EQUIVALENTS--
BEGINNING................... 96,971 78,673 207,137 96,971
---------- ---------- ---------- ----------
CASH AND CASH EQUIVALENTS--
ENDING...................... $ 207,137 $ 96,971 $4,142,342 $ 128,779
========== ========== ========== ==========
Reconciliation of net income
to net cash provided by
operating activities:
Net income (loss).......... $ (317,132) $ 206,107 $5,171,458 $ (554,583)
Depreciation and
Amortization.............. 138,338 153,838 107,309 114,921
(Gain) loss on sale of
property & equipment...... 9,511 319 (8,072,149)
(Gain) loss on early
extinguishment of debt.... 25,831 25,831
(Increase) decrease in
accounts receivable....... (140,443) (28,693) 55,659 (62,233)
(Increase) decrease in
inventory................. (12,059) (3,409) 9,827
(Increase) decrease in
prepayments & escrow...... 19,594 (31,484) 3,544 (18,751)
Increase (decrease) in
accounts payable, accrued
expenses & unearned
income.................... 139,099 88,986 1,512,200 1,441
Increase (decrease) in
deferred taxes ........... 902,115 132,691 1,447,941 902,115
---------- ---------- ---------- ----------
NET CASH PROVIDED BY
OPERATING ACTIVITIES........ $ 764,854 $ 518,355 $ 235,789 $ 408,741
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-83
<PAGE>
OUTDOOR WEST, INC. OF TENNESSEE
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1: ORGANIZATIONAL HISTORY OF THE COMPANY
Outdoor West, Inc. of Tennessee ("the Company"), organized in 1980, operates
an outdoor advertising business in the east Tennessee market. The Company
currently has 958 displays.
The Company is a wholly owned subsidiary of Outdoor West, Inc., a management
and holding company. Outdoor West, Inc. also owns one other subsidiary which
operates in the outdoor advertising business, Outdoor West, Inc. of Georgia,
and Data Management Business Records Storage, Inc., a subsidiary formerly in
the data management and storage service business.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Method of Accounting
The Company's financial statements are presented on the accrual basis.
Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include
money market accounts and highly liquid debt instruments purchased with a
maturity of three months or less.
The Company maintains cash balances at several financial institutions.
Accounts at each institution are insured by the Federal Deposit Insurance
Corporation up to $100,000. Uninsured balances held in accounts aggregate to
$55,843 at June 30, 1996.
Allowance for Doubtful Trade Receivables
Bad debts are accounted for on the reserve method. The allowances for
doubtful accounts at June 30, 1996 and 1995 were $640 and $1,860,
respectively.
Materials Inventory
Materials inventory is construction and maintenance materials on hand, new
and used. New materials are valued at original cost. Used materials are priced
at cost when purchased or one-half estimated new cost, when original cost is
not available.
Billboard Capitalization and Depreciation Policy
Billboards are capitalized at materials cost, freight, subcontract fees,
direct labor and related overhead. Depreciation on billboards is calculated
using the straight-line method at estimated useful lives ranging from five to
twenty years, depending on the tax law in effect at the time of
capitalization.
Property and Depreciation
Property and equipment are recorded at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the respective assets.
Maintenance and repairs are charged to expense as incurred; major renewals and
betterments are capitalized. When items of property and equipment are sold or
retired, the related cost and accumulated depreciation are removed from the
accounts and any gain or loss is recognized.
F-84
<PAGE>
OUTDOOR WEST, INC. OF TENNESSEE
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Intangible Assets
In acquisitions of billboard businesses, agreements not to compete were part
of the purchase price. Non-compete agreements are amortized over the lives of
the agreements. Loan costs are amortized over the lives of the loans.
Income Taxes
The Company is included in a consolidated federal income tax return of an
affiliated group. Income tax expense in the Company's statement of operations
has been allocated based on the ratio that each member's separate taxable
income bears to the sum of the separate taxable incomes of all members having
taxable income for the year. Unused net operating losses and tax credits
available for carryforward to future years are detailed in Note 4.
Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
NOTE 3: INTANGIBLE ASSETS
Intangible assets as of June 30, 1996 and 1995 consist of:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Non-compete agreements...................................... $45,834 $ 58,335
Loan costs.................................................. 17,944 57,137
------- --------
Total..................................................... $63,778 $115,472
======= ========
</TABLE>
NOTE 4: INCOME TAXES
The Company accounts for income taxes in accordance with the provisions of
Statements of Financial Accounting Standards Number 109, "Accounting for
Income Taxes". Under the provisions of Statement 109, a current tax liability
or asset should be recognized for the estimated taxes currently payable or
refundable for the current year and a deferred tax liability or asset should
be recognized for the estimated future tax effects attributable to temporary
differences and carryforwards. Temporary differences represent the difference
between the book and tax bases of assets or liabilities that will result in
taxable or deductible amounts in future years when the asset or liability is
recovered or settled.
Summaries of the provision for income tax expense for the years ended June
30, 1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Currently payable.......................................... $ 60,427 $ 981
Deferred................................................... 26,948 4,605
Utilization of operating loss carryforward................. 875,167 128,086
-------- --------
Provision for income tax expense......................... $962,542 $133,672
======== ========
</TABLE>
F-85
<PAGE>
OUTDOOR WEST, INC. OF TENNESSEE
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
A reconciliation of income tax at the statutory rate to the Company's
effective rate for the years ended June 30, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Computed at the expected statutory rate............................ 38.0% 38.0%
Utilization of deferred tax asset by affiliate..................... 114.0
Other differences.................................................. 1.0 1.3
----- ----
Effective rate..................................................... 153.0% 39.3%
===== ====
</TABLE>
During the fiscal year ended June 30, 1996, a member of the Company's
affiliated group recognized a significant gain on the sale of substantially
all operating assets. As a result, a significant portion of net operating loss
carryforwards generated by the Company and recorded as a deferred tax asset
was utilized by the affiliate.
For the year ended June 30, 1996, the Company was included in a consolidated
federal income tax return. The Company has carryovers as follows:
<TABLE>
<CAPTION>
CARRYOVER AMOUNT EXPIRATION
<S> <C> <C>
Net operating loss--state only............................ $1,739,537 1999-2008
</TABLE>
The deferred tax benefit comprised the following at June 30, 1996:
<TABLE>
<S> <C>
Deferred tax benefit:
Net operating loss carryforward..................................... $104,372
Other temporary differences......................................... (6,552)
Valuation Allowance................................................. -0-
--------
Net deferred tax benefit.............................................. $ 97,820
========
</TABLE>
Management believes it is more likely than not that it will generate taxable
income sufficient to realize the tax benefit associated with state net
operating loss carryforwards. This belief is based upon, among other factors,
expectations of continued growth in sales, changes in operations, and the
significant reduction of notes payable which occurred during the fiscal year
ended June 30, 1996. If the Company is unable to generate sufficient taxable
income in the future through operating results, increases in the valuation
allowance will be required through a charge to income tax expense.
NOTE 5: CAPITAL STOCK
The par value of the common stock of the Company is $1. 250,000 shares are
authorized, 1,000 shares are issued and outstanding.
NOTE 6: PROPERTIES AND FACILITIES
<TABLE>
<CAPTION>
ESTIMATED
JUNE 30, JUNE 30, LIVES
1996 1995 (IN YEARS)
<S> <C> <C> <C>
Leasehold improvements......................... $ 96,985 $ 96,985 5-40
Billboards and vinyl........................... 3,633,028 3,578,053 15-20
Autos and trucks............................... 315,208 224,943 3-6
Equipment...................................... 25,963 32,407 5-12
Computer equipment............................. 92,639 92,639 5
Office furniture and fixtures.................. 54,999 55,520 5-10
Leased assets.................................. 118,150 118,150 7-25
---------- ----------
4,336,972 4,198,697
Less accumulated depreciation.................. 3,549,183 3,546,803
---------- ----------
$ 787,789 $ 651,894
========== ==========
</TABLE>
F-86
<PAGE>
OUTDOOR WEST, INC. OF TENNESSEE
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7: NOTES PAYABLE
<TABLE>
<CAPTION>
BALANCE
JUNE 30,
MATURITY COLLATERAL INTEREST RATE 1996
<C> <S> <C> <C>
12/00-12/02 Substantially all assets of the
Company except those subject to prior
liens................................. 8.125%-8.375% $1,141,324
8/97-10/02 Rolling stock and equipment........... Various 195,828
</TABLE>
Principal maturities of notes payable for the five years ending after June
30, 1996 are:
<TABLE>
<S> <C>
6/30/97.......................................................... $ 241,534
6/30/98.......................................................... 242,849
6/30/99.......................................................... 217,339
6/30/00.......................................................... 235,174
6/30/01.......................................................... 190,132
Maturities after 5 years......................................... 210,124
----------
Total Maturities............................................... 1,337,152
Less: current maturities......................................... 241,534
----------
Long-Term Maturities........................................... $1,095,618
==========
</TABLE>
Additional Restrictions Required by Long-Term Debt
The Company entered into loan agreements with First American National Bank.
The Company is required to comply with certain restrictive covenants which
require, among other things, minimum net worth and a maximum debt to net worth
ratio. While the Company was in violation of these two covenants, the lender
has issued a waiver for these violations as of June 30, 1996.
NOTE 8: TRANSACTIONS WITH RELATED PARTIES
The Company has various lease and management agreements with affiliates.
Amounts included in the statement of income with respect to transactions with
affiliates for June 30, 1996 and 1995 are:
<TABLE>
<CAPTION>
1996
---------------------------------
OUTDOOR THE EAGLE PEACHTREE
WEST, INC. GROUP PROPERTIES
<S> <C> <C> <C>
Expenses
Land lease................................. $ $ 74,520 $ 27,650
Interest................................... 1,033
Management fees............................ 275,000
--------- -------- --------
Net transactions with related parties........ $(275,000) $(75,553) $(27,650)
========= ======== ========
<CAPTION>
1995
---------------------------------
OUTDOOR THE EAGLE PEACHTREE
WEST, INC. GROUP PROPERTIES
<S> <C> <C> <C>
Expenses
Land lease................................. $ $ 34,800 $ 25,500
Management fees............................ 275,000
--------- -------- --------
Net transactions with related parties........ $(275,000) $(34,800) $(25,500)
========= ======== ========
</TABLE>
F-87
<PAGE>
OUTDOOR WEST, INC. OF TENNESSEE
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Receivables from and payables to affiliates as of June 30, 1996 and 1995
are:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
RECEIVABLES FROM:
Outdoor West, Inc. of Georgia....................... $ 587,903 $
========== ==========
NOTES PAYABLE TO:
The Eagle Group..................................... $ 18,774 $
Outdoor West, Inc................................... 753,234 995,358
Data Management Business Records Storage, Inc....... 1,788,274
Outdoor West, Inc. of Georgia....................... 72,044
---------- ----------
$2,560,282 $1,067,402
========== ==========
</TABLE>
Charles H. Renfroe is the Chairman of the Board of Directors of Outdoor
West, Inc. The Eagle Group is a sole proprietorship, owned by Mr. Renfroe,
which operates a mini-warehouse project and leases office and warehouse space
to Outdoor West, Inc. of Georgia. In addition, The Eagle Group owns 19 parcels
of land leased to Outdoor West, Inc. of Georgia and the Company.
Peachtree Properties, a general partnership, was created by Charles H.
Renfroe to allow key personnel to participate in acquiring parcels of land to
be leased to the outdoor advertising companies for billboard sites. Ten
billboard sites were leased to Outdoor West, Inc. of Georgia and Tennessee.
Peachtree Properties was liquidated effective April 1, 1996.
In the opinion of management, all of the transactions with related parties
are at rates and terms equivalent to those that prevail in arm's-length
transactions.
NOTE 9: UNEARNED INCOME
Unearned income represents primarily income billed one month in advance for
billboard advertising. Most of this was recognized as income in July, 1996.
NOTE 10: OBLIGATIONS UNDER CAPITAL LEASE
The Company is the lessee of property under capital leases with expirations
as disclosed in the following table. Assets and liabilities under capital
leases are recorded at the lower of the present value of the minimum lease
payments or the fair value of the asset. The assets are depreciated over the
lower of their related lease terms or their estimated productive lives.
Depreciation of assets under capital leases is included in depreciation
expense for 1996 and 1995.
Interest rates on capitalized leases are imputed based on the lower of the
Company's incremental borrowing rate at the inception of the lease or the
lessor's implicit rate of return.
F-88
<PAGE>
OUTDOOR WEST, INC. OF TENNESSEE
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
General Description of Capital Leases
<TABLE>
<CAPTION>
JUNE 30, 1996
LEASED PROPERTY BALANCE TERMINATION DATE
<S> <C> <C>
Land and building................................ $84,492 11/01/04
=======
</TABLE>
Net Obligations Under Capital Leases
at June 30, 1996:
<TABLE>
<CAPTION>
CAPITAL LESS: BALANCE
LEASE IMPUTED SHEET
BALANCE INTEREST VALUES
<S> <C> <C> <C>
Current liabilities................................. $ 14,316 $ 7,108 $ 7,208
======== ======= =======
Long-term liabilities............................... $106,177 $28,893 $77,284
======== ======= =======
</TABLE>
Gross Assets and Accumulated Depreciation
<TABLE>
<CAPTION>
JUNE 30, 1996
<S> <C>
Land and office building........................................ $118,150
Less accumulated depreciation................................... (59,990)
--------
$ 58,160
========
</TABLE>
Minimum Future Lease Payments
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30
<S> <C>
1997.............................................................. $14,316
1998.............................................................. 14,316
1999.............................................................. 14,316
2000.............................................................. 14,316
2001.............................................................. 14,316
After 2001........................................................ 48,913
-------
Total Minimum Lease Payments...................................... 120,493
Less imputed interest............................................. 36,001
-------
Present value of net minimum lease payments....................... $84,492
=======
</TABLE>
NOTE 11: OPERATING LEASES
The Company leases equipment and ground space for billboard sites under
cancelable operating leases. Rental expense under operating leases for the
fiscal years ended June 30, 1996 and 1995 was $380,853 and $335,196,
respectively.
NOTE 12: PROFIT SHARING PLAN
Effective January 1, 1994, the Company implemented a profit sharing plan
described in Internal Revenue Code Section 401(k). All employees of the
Company are eligible to participate once they meet the eligibility and
participation requirements of the plan. Employees become eligible for
participation in the plan after attaining age 21 and completed 12 months of
service.
F-89
<PAGE>
OUTDOOR WEST, INC. OF TENNESSEE
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Under the terms of the plan, participants may contribute a portion of their
compensation to the plan on a tax deferred basis. Employee contributions may
not exceed the annual limitations established by the Treasury. The Company
matches 10% of the first 6% of compensation contributed by each participant.
During the years ended June 30, 1996 and 1995, the cost of the plan to the
Company totaled $7,165 and $3,777, respectively.
NOTE 13: EXTRAORDINARY ITEM
At June 30, 1995, the Company was obligated to pay its major lenders an
amendment fee of $79,599 at such time that all debts with the major lenders
are repaid. The entire amendment fee of $79,599 is included in notes payable
due within one year as of June 30, 1995. However, the major lenders agreed to
forgive $59,199 of the amendment fee if all debts were repaid by December 31,
1995. In December, 1995, the Company repaid all debts to the major lenders and
amendment fee was forgiven. The debt forgiveness of $59,199 less $33,331
unamortized loan costs and $9,671 income taxes resulted in an extraordinary
gain of $16,197 which was recognized during the fiscal year ended June 30,
1996.
NOTE 14: SUBSEQUENT EVENTS
On February 7, 1997, the Company entered into an agreement to sell
substantially all of its operating assets. The sale is expected to result in a
gain of approximately $8,000,000.
NOTE 15: UNAUDITED NOTES TO INTERIM FINANCIAL STATEMENTS
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles applicable to interim
financial statements. Accordingly, they do not include all of the information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments and
reclassifications considered necessary for a fair and comparable presentation
have been included and are of normal recurring nature. Operating results for
the nine months ended March 31, 1997 are not necessarily indicative of the
results that may be expected for the year ending June 30, 1997.
F-90
<PAGE>
NO DEALER, SALESMAN OR OTHER PERSON HAS BEEN AUTHORIZED TO BE GIVEN ANY INFOR-
MATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PRO-
SPECTUS IN CONNECTION WITH THE OFFER CONTAINED HEREIN, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AU-
THORIZED BY THE COMPANY OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTI-
TUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, SUCH SECURITIES
IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AF-
FAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
----------------------
UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE NOTES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS
AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
- -------------------------------------------------------------------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 10
Use of Proceeds........................................................... 15
Capitalization............................................................ 16
Unaudited Pro Forma Consolidated Financial Statements..................... 17
Selected Historical Consolidated Financial and Other Information.......... 26
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 29
Business.................................................................. 36
Management................................................................ 48
Principal Stockholders.................................................... 52
Certain Relationships and Related Transactions............................ 54
Description of New Credit Facility........................................ 56
Description of Notes...................................................... 58
Description of Capital Stock.............................................. 81
Underwriting.............................................................. 83
Certain Legal Matters..................................................... 84
Experts................................................................... 84
Additional Information.................................................... 85
Index to Financial Statements............................................. F-1
</TABLE>
PROSPECTUS
$100,000,000
OUTDOOR COMMUNICATIONS, INC.
% SENIOR SUBORDINATED NOTES DUE 2007
[LOGO]
CHASE SECURITIES INC.
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
SALOMON BROTHERS INC
, 1997
<PAGE>
PART II
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an estimate of the fees and expenses payable by the
Company in connection with the issuance and distribution of the shares of
Common Stock:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................ $37,879
NASD filing fees................................................... 13,000
Blue Sky fees and expenses......................................... 6,000
*Printing expenses..................................................
*Legal fees and expenses............................................
*Accounting fees and expenses.......................................
*Indenture Trustee fees.............................................
*Miscellaneous......................................................
-------
Total............................................................. $
=======
</TABLE>
---------------------
* To be completed by Amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Reference is made to Article V of the Amended and Restated By-laws of the
Company which provides for indemnification by the Company of its directors and
officers under certain circumstances against expenses (including attorneys'
fees, judgments, fines and amounts paid in settlement) actually and reasonably
incurred in connection with the defense or settlement of any threatened,
pending or completed legal proceeding in which any such person is involved by
reason of the fact that such person is or was a director or officer of the
Company if such person acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to criminal actions or proceedings, if such person
had no reasonable cause to believe that his or her conduct was unlawful.
Reference is made to the form of Underwriters Agreement (to be attached as
Exhibit 1 to this Registration Statement) which provides for indemnification
by the Underwriters of the directors and officers of the Company signing the
Registration Statement and certain controlling persons of the Company against
certain liabilities, including those arising under the Securities Act.
The Company carries directors' and officers' liability insurance covering
its directors and officers.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
During the past three years, the Company has issued unregistered securities
to a limited number of persons, as described below. No underwriters or
underwriting discounts or commissions were involved. There was no public
offering in any such transaction, and the Company believes that each
transaction was exempt from registration requirements of the Securities Act,
by reason of Section 4(2) thereof, based on the private nature of the
transactions and the financial sophistication of the purchasers, all of whom
had access to complete information concerning the Company and acquired the
securities for investment and not with a view to the distribution thereof.
On April 3, 1996, under the terms of a Securities Purchase Agreement (the
"Holdings Agreement"), (i) Mr. A.B. Isbell purchased from the Company 1,050
shares of Class A Common Stock, par value $.01 per share, of the Registrant
("Class A Common Stock") and $1,950,000 principal amount of Series A 10%
Subordinated Notes ("Series A Notes") in exchange for 2,923.98 shares of
Common Stock of Mass Communication Corp. ("OCI South Common Stock"); (ii) Mr.
John C Stanley IV purchased from the Company 1,204.16 shares of Class A Common
Stock and $2,236,304.68 principal amount of Series A Notes in exchange for
3,353.28 shares of OCI South Common Stock; (iii) Mr. Norman Isbell purchased
from the Company 51.95 shares of Class A Common Stock and $96,481.04 principal
amount of Series A Notes in exchange for 78.12 shares of OCI South
II-1
<PAGE>
Common Stock and 62.50 shares of 10% Cumulative Preferred Stock, par value $1
per share, of Mass Communication Corp. ("OCI South Preferred Stock"); (iv) Ms.
Priscilla S. Denton purchased from the Company 87.50 shares of Class A Common
Stock and $162,500 principal amount of Series A Notes in exchange for 156.25
shares of OCI South Common Stock and 82.09 shares of OCI South Preferred
Stock; (v) Mr. William Hull Davis purchased from the Company 87.50 shares of
Class A Common Stock and $162,500 principal amount of Series A Notes in
exchange for 156.25 shares of OCI South Common Stock and 82.09 shares of OCI
South Preferred Stock; (vi) Mr. Douglas W. Ferris, Jr. purchased from the
Company 87.50 shares of Class A Common Stock and $162,500 principal amount of
Series A Notes in exchange for 156.25 shares of OCI South Common Stock and
82.09 shares of OCI South Preferred Stock; (vii) Mr. Richard W. Ebersole
purchased from the Company 35.00 shares of Class A Common Stock and $65,000
principal amount of Series A Notes in exchange for $100,000 cash; (viii) John
C Stanley IV, as trustee of the JCS Trust, purchased from the Company 98.19
shares of Class A Common Stock and $182,357.14 principal amount of Series A
Notes in exchange for 273.44 shares of OCI South Common Stock; (ix) John C
Stanley, as trustee of the LWS Trust, purchased from the Company 98.19 shares
of Class A Common Stock and $182,357.14 principal amount of Series A Notes in
exchange for 273.44 shares of OCI South Common Stock; (x) Media/Communications
Partners II Limited Partnership ("M/C II") purchased from the Company 3,227.67
shares of Common Stock and $5,994,236.05 principal amount of Series B 10%
Subordinated Notes of the Registrant ("Series B Notes") in exchange for 23.68
shares of common stock of OCI (N) Corp. ("OCI North Common Stock"), 57.60
shares of 12.5% Cumulative Preferred Stock of OCI (N) Corp. ("OCI North
Preferred Stock"), and $7,389,455.47 cash; (xi) Media/Communications Investors
Limited Partnership ("M/C Investors") purchased from the Company 134.49 shares
of Class A Common Stock and $249,759.99 principal amount of Series B Notes in
exchange for 0.99 shares of OCI North Common Stock, 2.40 shares of OCI North
Preferred Stock, and $307,894.21 cash; and (xii) Chase Venture Capital
Associates, L.P. ("CVCA") purchased from the Company 2,048.57 shares of
Class A Common Stock, 189.28 shares of Class B Common Stock, par value $.01
per share, of the Registrant ("Class B Common Stock"), and $4,156,003.96
principal amount of Series B Notes in exchange for $6,393,852.24 cash.
On April 30, 1996, pursuant to the terms of the OCI Agreement, and in
connection with the acquisition of Alabama Outdoor: (i) M/C II purchased from
the Company 2,017.29 shares of Class B Common Stock and $3,746,397.53
principal amount of Series B Notes from the Company in exchange for
$5,763,687.53 cash; (ii) M/C Investors purchased from the Company 84.05 shares
of Class B Common Stock and $156,100 principal amount of Series B Notes in
exchange for $240,150 cash; (iii) CVCA purchased from the Company 1,398.66
shares of Class B Common Stock and $2,597,502.47 principal amount of Series B
Notes in exchange for $3,996,162.47 cash.
On September 10, 1996, each of Mr. Gerald P. Scott and Mr. G. Robert Joiner,
pursuant to an amendment to the OCI Agreement, purchased from the Company
52.50 shares of Common Stock and $97,500 principal amount of Series A Notes of
the Company in exchange for a payment of $150,000 cash.
On January 27, 1997, each of Mr. John Andrews and Mr. Mark Sherwood,
pursuant to an amendment to the OCI Agreement, purchased from the Company 35
shares of Common Stock and $65,000 principal amount of Series A Notes in
exchange for a cash payment of $100,000 cash.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits. The following is a complete list of Exhibits filed as part of
this Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
**1 Form of Underwriting Agreement among the Underwriters, the
Guarantors named therein and the Company
3.1 Amended and Restated Certificate of Incorporation of the Company
3.2 By-laws of the Company
*3.3 Certificate of Amendment to Amended and Restated Certificate of
Incorporation of the Company
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
4.1 Form of Indenture among the Company, the Guarantors named therein
and the Trustee
*4.2 Form of Note
*5 Opinion of Goodwin, Procter & Hoar LLP
**10.1 Registration Rights Agreement dated as of April 3, 1996 among the
Registrant, certain management investors and certain venture
investors
10.3 Shareholders Agreement dated as of April 3, 1997, as amended
*10.4 Amended and Restated Senior Credit Facility of the Company
12.1 Computation of Ratio of Earnings to Fixed Charges
**21.1 Subsidiaries of the Company
*23.1 Consent of Goodwin, Procter & Hoar LLP (included in their opinion
filed as Exhibit 5 hereto)
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of KPMG Peat Marwick LLP
23.5 Consent of Moore & Gray
23.6 Consent of KPMG Peat Marwick LLP
23.7 Consent of Ernst & Young LLP
23.8 Consent of McGladrey & Pullen, LLP
23.9 Consent of Arthur Andersen LLP
23.10 Consent of Morrison and Smith
**24 Power of Attorney (included on signature page of Registration
Statement as filed)
25.1 Form T-1
27 Financial Data Schedule
</TABLE>
- ---------------------
* To be filed by amendment.
** Previously filed.
(b) Financial Statement Schedules.
<TABLE>
<CAPTION>
SCHEDULE NO. DESCRIPTION
<C> <S>
99.1 Schedule I--Condensed Financial Information of Registrant
</TABLE>
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.
II-3
<PAGE>
Insofar as indemnification 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 above, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, 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 Act and will be governed by the final adjudication
of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes 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
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(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>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THE REGISTRANT HAS DULY
CAUSED THIS AMENDMENT NO. 1 TO REGISTRATION STATEMENT TO BE SIGNED ON ITS
BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF CORINTH,
STATE OF MISSISSIPPI ON THE 18TH DAY OF JULY 1997.
Outdoor Communications, Inc.
/s/ John C Stanley IV
By: _________________________________
JOHN C STANLEY IV
CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that we, the undersigned officers and
directors of OCI Holdings Corp. hereby severally constitute John C Stanley IV
and Richard W. Ebersole and each of them singly, our true and lawful attorneys
with full power to them, and each of the singly, to sign for us and in our
names in the capacities indicated below, the Registration Statement filed
herewith and any and all amendments (including any post-effective amendments)
to said Registration Statement (or any other registration statement for the
same offering that is to be effective upon filing pursuant to Rule 462(b)
under the Securities Act), and generally to do all such things in our names
and in our capacities as officers and directors to enable OCI Holdings Corp.
to comply with the provisions of the Securities Act of 1933, and all
requirements of the Securities and Exchange Commission, hereby ratifying and
confirming our signatures as they may be signed by our said attorneys, or any
of them, to said Registration Statement and any and all amendments (including
any post-effective amendments) thereto (or any other registration statement
for the same offering that is to be effective upon filing pursuant to Rule
462(b) under the Securities Act).
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 1 TO
REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT IN THE CAPACITIES AND ON THE DATES INDICATED.
SIGNATURE TITLE DATE
/s/ John C Stanley IV Director, Chief
- ------------------------------------- Executive Officer July 18, 1997
JOHN C STANLEY IV and Chairman
(Principal
Executive Officer)
Director, Chief
* Operating Officer July 18, 1997
- ------------------------------------- and President
A.B. ISBELL
Treasurer and Chief
* Financial Officer July 18, 1997
- ------------------------------------- (Principal
RICHARD W. EBERSOLE Financial Officer
and Principal
Accounting Officer)
II-5
<PAGE>
SIGNATURE TITLE DATE
Director
* July 18, 1997
- -------------------------------------
DOUGLAS W. FERRIS, JR.
Director
* July 18, 1997
- -------------------------------------
STEPHEN F. GORMLEY
Director
* July 18, 1997
- -------------------------------------
JOHN G. HAYES
Director
* July 18, 1997
- -------------------------------------
BRIAN J. RICHMAND
/s/ John C Stanley IV
*By: ___________________________
(JOHN C STANLEY IV, AS ATTORNEY-IN-
FACT FOR THE PERSONS INDICATED)
II-6
<PAGE>
OCI HOLDINGS CORP.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, JUNE 30,
1997 1996
(UNAUDITED)
<S> <C> <C>
ASSETS:
Cash and cash equivalents................................ $ 135 $ 40
Accounts receivable, net................................. --
Accounts receivable, affiliates.......................... 11,705 11,527
Other current assets..................................... 337 99
Investment in subsidiaries............................... 19,794 19,794
Property and equipment, net.............................. -- --
Intangible assets, net................................... 143 590
Other assets.............................................
------- -------
Total assets........................................... $32,114 $32,050
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities, excluding current portion of long-
term debt............................................... $ -- $ 227
Deferred federal income tax.............................. --
Other long-term liabilities.............................. 1,318 263
Accounts payable, affiliates............................. 666 --
Series A and Series B notes, including current portion
(Note 1)................................................ 22,425 22,100
------- -------
Total liabilities...................................... 24,409 22,590
Additional paid in capital............................. 10,166 9,991
Retained deficit......................................... (2,461) (531)
------- -------
Total stockholders' equity............................. 7,705 9,460
Total liabilities and stockholders' equity............. $32,114 $32,050
======= =======
</TABLE>
Note (1) The Company's Series A and Series B Notes mature on December 31,
2003.
These financial statements should be read in conjunction with the consolidated
financial statements and the accompanying notes thereto.
S-1
<PAGE>
OCI HOLDINGS CORP.
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE FOR THE PERIOD
MONTHS ENDED APRIL 4, 1996 TO
MARCH 31, 1997 JUNE 30, 1996
(UNAUDITED)
<S> <C> <C>
Net revenues................................... $ -- $ --
------- -----
Operating expenses............................. -- --
Sales, general and administrative expenses..... -- --
Depreciation and amortization.................. 446 141
------- -----
Operating income (loss)........................ (446) (141)
Other expense:
Interest expense............................. 1,672 489
------- -----
Total other expense........................ 1,672 489
Loss before income taxes....................... (2,118) (630)
Income tax benefit............................. (188) (99)
------- -----
Net loss................................... $(1,930) $(531)
======= =====
</TABLE>
These financial statements should be read in conjunction with theconsolidated
financial statements and the accompanying notes thereto.
S-2
<PAGE>
OCI HOLDINGS CORP.
SCHEDULE 1--CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE NINE FOR THE PERIOD
MONTHS ENDED APRIL 4, 1996
MARCH 31, 1997 TO JUNE 30, 1996
(UNAUDITED)
<S> <C> <C>
Net cash used in operating activities......... $(405) $(9,226)
----- -------
Cash flows from investing activities:
Capital contribution to New South Holdings.. -- (3,898)
Deferred acquisition costs.................. -- (3,031)
----- -------
Net cash used in investing activities..... -- (6,929)
----- -------
Cash flows from financing activities:
Issuance of subordinated notes.............. 325 16,965
Issuance of common stock.................... 175 7,226
Stock redemption............................ (7,259)
Distribution to shareholders................ (737)
----- -------
Net cash used in investing activities..... 500 16,195
----- -------
Net increase in cash and cash equivalents..... 95 40
Cash and cash equivalents at beginning of the
period....................................... 40 --
----- -------
Cash and cash equivalents at end of period.... $ 135 $ 40
===== =======
</TABLE>
These financial statements should be read in conjunction with the consolidated
financial statements and the accompanying notes thereto.
S-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
<C> <S>
**1 Form of Underwriting Agreement among the Underwriters, the
Guarantors named therein and the Company
3.1 Amended and Restated Certificate of Incorporation of the Company
3.2 By-laws of the Company
*3.3 Certificate of Amendment to Amended and Restated Certificate of
Incorporation of the Company
4.1 Form of Indenture among the Company, the Guarantors named therein
and the Trustee
*4.2 Form of Note
*5 Opinion of Goodwin, Procter & Hoar LLP as to the legality of the
Notes
**10.1 Registration Rights Agreement dated as of April 3, 1996 among the
Registrant, certain management investors and certain venture
investors
10.3 Shareholders Agreement dated as of April 3, 1996, as amended
*10.4 Amended and Restated Senior Credit Facility of the Company
12.1 Computation of Ratio of Earnings to Fixed Charges
**21.1 Subsidiaries of the Company
*23.1 Consent of Goodwin, Procter & Hoar LLP (included in their opinion
filed as Exhibit 5 hereto)
23.2 Consent of KPMG Peat Marwick LLP
23.3 Consent of KPMG Peat Marwick LLP
23.4 Consent of KPMG Peat Marwick LLP
23.5 Consent of Moore & Gray
23.6 Consent of KPMG Peat Marwick LLP
23.7 Consent of Ernst & Young LLP
23.8 Consent of McGladrey & Pullen, LLP
23.9 Consent of Arthur Andersen LLP
23.10 Consent of Morrison and Smith
**24 Power of Attorney (included on signature page of Registration
Statement as filed)
25.1 Form T-1
27 Financial Data Schedule
</TABLE>
- ---------------------
* To be filed by amendment.
** Previously filed.
<PAGE>
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
OCI HOLDINGS CORP.
OCI Holdings Corp., a corporation organized and existing under the laws of
the State of Delaware (hereinafter referred to as the "Corporation"), hereby
certifies as follows:
1. The name of the Corporation is OCI Holdings Corp. The date of the
filing of the original Certificate of Incorporation with the Secretary of State
of the State of Delaware was March 18, 1996.
2. The Corporation has not received any payment for any of its capital
stock.
3. This Amended and Restated Certificate of Incorporation amends, restates
and integrates the provisions of the original Certificate of Incorporation and
was duly adopted by the written consent of the Directors of the Corporation in
accordance with the applicable provisions of Section 241 of the General
Corporation Law of the State of Delaware.
4. The text of the Certificate of Incorporation is hereby amended and
restated in its entirety to provide as herein set forth in full.
FIRST: The name of the Corporation is OCI Holdings Corp.
-----
SECOND: The address of the Corporation's registered office in the State of
------
Delaware is Corporation Trust Center, 1209 Orange Street, in the City of
Wilmington, County of New Castle. The name of the Corporation's registered
agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act or
-----
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
FOURTH: The total number of shares of all classes of stock which the
------
Corporation shall have authority to issue is 40,000 shares of Common Stock,
consisting of (a) 20,000 shares of Class A Common Stock, par value $.01 per
share and (b) 20,000 shares of Class B Common Stock, par value $.01 per share.
All shares of Common Stock will be identical and will entitle the holders
thereof to the same rights and privileges, except as otherwise provided herein.
<PAGE>
A. Voting Rights.
-------------
1. Class A Common Stock. Except as set forth herein or as otherwise
--------------------
required by law, each outstanding share of Class A Common Stock shall be
entitled to vote on each matter on which the stockholders of the Corporation
shall be entitled to vote, and each holder of Class A Common Stock shall be
entitled to one vote for each share of such stock held by such holder. Except
as otherwise provided by law, the Class A Common Stock shall possess full and
complete voting power for the election of directors.
2. Class B Common Stock. Except as set forth herein or as otherwise
--------------------
required by law, each outstanding share of Class B Common Stock shall not be
entitled to vote on any matter on which the stockholders of the Corporation
shall be entitled to vote, and shares of Class B Common Stock shall not be
included in determining the number of shares voting or entitled to vote on any
such matters; provided that the holders of Class B Common Stock shall have the
right to vote as a separate class on any merger or consolidation of the
Corporation with or into another entity or entities, or any recapitalization or
reorganization, in which shares of Class B Common Stock would receive or be
exchanged for consideration different on a per share basis from consideration
received with respect to or in exchange for the shares of Class A Common Stock
or would otherwise be treated differently from shares of Class A Common Stock in
connection with such transaction, except that shares of Class B Common Stock
may, without such a separate class vote, receive or be exchanged for non-voting
securities which are otherwise identical on a per share basis in amount and form
to the voting securities received with respect to or exchanged for the, Class A
Common Stock so long as (i) such non-voting securities are convertible into such
voting securities on the same terms as the Class B Common Stock is convertible
into Class A Common Stock and (ii) all other consideration is equal on a per
share basis. Notwithstanding the foregoing, holders of shares of the Class B
Common Stock shall be entitled to vote as a separate class on any amendment to
this paragraph (2) of this Section A and on any amendment, repeal or
modification of any provision of this Certificate of Incorporation that
adversely affects the powers, preferences or special rights of holders of the
Class B Common Stock.
B. Dividends. Any dividend or distribution on the Common Stock shall be
---------
payable on shares of Class A Common Stock and Class B Common Stock, share and
share alike; provided, that (i) in the case of dividends payable in shares of
Common Stock of the Corporation, or options, warrants or rights to acquire
shares of such Common Stock, or securities convertible into or exchangeable for
shares of such Common Stock, the shares, options, warrants, rights or securities
so payable shall be payable in shares of, or options, warrants or rights to
acquire, or securities convertible into or exchangeable for, Common Stock of the
same class upon which the dividend or distribution is being paid and (ii) if the
dividends consist of other voting securities of the Corporation, the Corporation
shall make available to each holder of Class B Common Stock at such holder's
request, dividends consisting of non-voting securities of the Corporation which
are otherwise identical to the voting securities and which are convertible into
or exchangeable for such voting securities on the same terms as the Class B
----
Common Stock is convertible into the Class A Common Stock.
2
<PAGE>
C. Liquidation. In the event of any voluntary or involuntary liquidation,
-----------
dissolution or winding up of the Corporation, after payment or provision for
payment of the debts and other liabilities of the Corporation, the holders of
shares of Class A Common Stock and Class B Common Stock shall be entitled to
share ratably, share and share alike, in the remaining net assets of the
Corporation.
D. Conversion.
----------
1. Conversion of Class A Common Stock. Subject to and upon compliance
----------------------------------
with the provisions of this Section D, any Regulated Stockholder (defined below)
shall be entitled to convert, at any time and from time to time, any or all of
the shares of Class A Common Stock held by such stockholder into the same number
of shares of Class B Common Stock; provided, however, that no shares of Class A
-------- -------
Common Stock may be converted into Class B Common Stock by a Regulated Holder
if, immediately after such conversion, any Person, together with all Affiliates
of such Person, would hold fifty percent (50%) or more of the outstanding Class
A Common Stock.
2. Conversion of Class B Common Stock. Subject to and upon compliance
----------------------------------
with the provisions of this Section D, each record holder of Class B Common
Stock shall be entitled at any time and from time to time in such holder's sole
discretion and at such holder's option, to convert any or all of the shares of
such holder's Class B Common Stock into the same number of shares of Class A
Common Stock; provided, however, that (i) no holder of Class B Common Stock may
-------- -------
convert shares of Class B Common Stock into shares of Class A Common Stock if,
immediately after such conversion, any Person, together with all Affiliates of
such Person, would hold fifty percent (50%) or more of the outstanding Class A
Common Stock and (ii) Class B Common Stock held by a particular Regulated
Stockholder may only be converted into Class A Common Stock to the extent that
such Regulated Stockholder certifies in writing to the Corporation that, based
on advice of counsel such conversion will not cause such Regulated Stockholder
to be in violation of Section 23A or Section 23B of the Federal Reserve Act, as
amended. Each Regulated Stockholder may provide for further restrictions upon
the conversion of any shares of stock held by such Regulated Stockholder by
providing the Corporation with signed, written instructions specifying such
additional restrictions and legending such shares as to the existence of such
restrictions.
3. Conversion Procedure. Each conversion of shares of Common Stock
--------------------
of the Corporation into shares of another class of Common Stock of the
Corporation shall be effected by the surrender of the certificate or
certificates representing the shares to be converted (the "Converting Shares")
at the principal office of the Corporation (or such other office or agency of
the Corporation as the Corporation may designate by written notice to the
holders of Common Stock) at any time during its usual business hours, together
with written notice by the holder of such Converting Shares, stating that such
holder desires to convert the Converting Shares, or a stated number of the
shares represented by such certificate or certificates, into an equal number of
shares of the class into which such shares may be converted (the "Converted
Shares"). Such notice shall also state the name or names (with
3
<PAGE>
addresses) and denominations in which the certificate or certificates for
Converted Shares are to be issued and shall include instructions for the
delivery thereof. The Corporation shall promptly notify each Regulated
Stockholder of its receipt of such notice. Promptly after such surrender and
the receipt of such written notice, the Corporation will issue, and deliver in
accordance with the surrendering holder's instructions the certificate or
certificates evidencing the Converted Shares issuable upon such conversion, and
the Corporation will deliver to the converting holder a certificate (which shall
contain such legends as were set forth on the surrendered certificate or
certificates) representing any shares which were represented by the certificate
or certificates that were delivered to the Corporation in connection with such
conversion, but which were not converted; provided, however, that if such
-------- -------
conversion is subject to paragraph (4) of this Section D, the Corporation shall
not issue such certificate or certificates until the expiration of the Deferral
Period referred to therein. Such conversion, to the extent permitted by law,
shall be deemed to have been effected as of the close of business on the date on
which such certificate or certificates shall have been surrendered and such
notice shall have been received by the Corporation, and at such time the rights
of the holder of the Converting Shares as such holder shall cease (except that,
in the case of a conversion subject to paragraph (4) of this Section D below,
the conversion shall be deemed to be effective upon the expiration of the
Deferral Period referred to therein) and the person or persons in whose name or
names the certificate or certificates for the Converted Shares are to be issued
upon such conversion shall be deemed to have become the holder or holders of
record of the Converted Shares. Upon issuance of shares in accordance with this
Section D, such Converted Shares shall be deemed to be duly authorized, validly
issued, fully paid and non-assessable. The Corporation shall take all such
actions as may be necessary to assure that all such shares of Common Stock may
be so issued without violation of any applicable law or governmental regulation
or any requirements of any domestic securities exchange upon which shares of
Common Stock may be listed (except for official notice of issuance which will be
immediately transmitted by the Corporation upon issuance). The Corporation
shall not close its books against the transfer of shares of Common Stock in any
manner which would interfere with the timely conversion of any shares of Common
Stock.
4. Notice of Conversion to Other Regulated Stockholders, Deferral. The
--------------------------------------------------------------
Corporation shall not convert or directly or indirectly redeem, purchase or
otherwise acquire any shares of Class A Common Stock or any other class of
capital stock of the Corporation or take any other action affecting the voting
rights of such shares, if such action will increase the percentage of any class
of outstanding voting securities owned or controlled by any Regulated
Stockholder (other than any such stockholder which requested that the
Corporation take such action, or which otherwise waives in writing its rights
under this paragraph (4) of this Section D), unless the Corporation gives
written notice (the "Deferral Notice" ) of such action to each Regulated
Stockholder. The Corporation will defer making any such conversion, redemption,
purchase or other acquisition, or taking any such other action for a period of
twenty (20) days (the "Deferral Period") after giving the Deferral Notice in
order to allow each Regulated Stockholder to determine whether it wishes to
convert or take any other action with respect to the Common Stock it owns,
controls or has the power to vote, and if any such Regulated Stockholder then
elects to convert any shares of Class A Common Stock, it shall notify the
4
<PAGE>
Corporation in writing within ten (10) days of the issuance of the Deferral
Notice, in which case the Corporation shall (i) promptly notify from time to
time prior to the end of such 20-day period each other Regulated Stockholder
holding shares of each proposed conversion, and (ii) effect the conversions
requested by all Regulated Stockholders in response to the notices issued
pursuant to this paragraph (4) of this Section D at the end of the Deferral
Period. Upon complying with the procedures hereinabove set forth in this
paragraph (4) of this Section D, the Corporation may so convert or directly or
indirectly redeem, purchase or otherwise acquire any shares of Class A Common
Stock or any other class of capital stock of the Corporation or take any other
action affecting the voting rights of such shares.
E. Miscellaneous.
-------------
1. Restrictions on Redemptions, Etc. The Corporation shall not
--------------------------------
redeem, purchase, acquire or take any other action affecting outstanding shares
of Common Stock if, after giving effect to such redemption, purchase,
acquisition or other action, (i) any Person, together with all Affiliates of
such Person, would hold fifty percent (50%) or more of any class of voting
securities of the Corporation or (ii) a Regulated Stockholder would own more
than 24.95% of any class of voting securities of the Corporation (other than any
class of voting securities which is (or is made prior to any such redemption,
purchase, acquisition or other action) convertible into a class of non-voting
securities which are otherwise identical to the voting securities and
convertible into such voting securities on terms reasonably acceptable to such
Regulated Stockholder), determined by assuming such Regulated Stockholder (but
no other holder) has exercised, converted or exchanged all of its options,
warrants and other convertible or exchangeable securities.
2. Stock Splits; Adjustments. If the Corporation shall in any manner
-------------------------
subdivide (by stock split, stock dividend or otherwise) or combine (by reverse
stock split or otherwise) the outstanding shares of the Class A Common Stock or
the Class B Common Stock, then the outstanding shares of each other class of
Common Stock shall be subdivided or combined, as the case may be, to the same
extent, share and share alike, and effective provision shall be made for the
protection of the conversion rights hereunder.
In case of any reorganization, reclassification or change of shares of
the Class A Common Stock or Class B Common Stock (other than a change in par
value or from par to no par value or as a result of subdivision or combination),
or in case of any consolidation of the Corporation with one or more corporations
or a merger of the Corporation with another corporation (other than a
consolidation or merger in which the Corporation is the resulting or surviving
corporation and which does not result in any reclassification or change of
outstanding shares of Class A Common Stock or Class B Common Stock), each holder
of a share of Class A Common Stock or Class B Common Stock shall have the right
at any time thereafter, so long as the conversion right hereunder with respect
to such share would exist had such event not occurred, to convert such share
into the kind and amount of shares of stock and other securities and properties
(including cash) receivable upon such reorganization, reclassification, change,
consolidation or merger by a holder of the number of shares of Class
5
<PAGE>
A Common Stock or Class B Common Stock into which such shares of Class A Common
Stock or Class B Common Stock, as the case may be, might have been converted
immediately prior to such reorganization, reclassification, change,
consolidation or merger. In the event of such reorganization, reclassification,
change, consolidation or merger, effective provision shall be made in the
certificate of incorporation of the resulting or surviving corporation or
otherwise for the protection of the conversion rights of the shares of Class A
Common Stock and Class B Common Stock that shall be applicable, as nearly as
reasonably may be, to any such other shares of stock and other securities and
property deliverable upon conversion of such shares of Class A Common Stock or
Class B Common Stock into which such Class A Common Stock or Class B Common
Stock might have been converted immediately prior to such event.
3. Reservation of Shares. The Corporation shall at all times reserve and
---------------------
keep available out of its authorized but unissued shares of Class A Common Stock
and Class B Common Stock or its treasury shares, solely for the purpose of
issuance upon the conversion of shares of Class A Common Stock and Class B
Common Stock, such number of shares of such class as are then issuable upon the
conversion of all outstanding shares of Class A Common Stock and Class B Common
Stock which may be converted.
4. No Charge. The issuance of certificates for shares of any class of
---------
Common Stock (upon conversion of shares of any other class of Common Stock or
otherwise) shall be made without charge to the holders of such shares for any
issuance tax in respect thereof or other cost incurred by the Corporation in
connection with such conversion and/or the issuance of shares of Common Stock;
provided, however, that the Corporation shall not be required to pay any tax
- -------- -------
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name, other than that of the holder of the
Common Stock converted.
5. Registration of Transfer. The Corporation shall keep at its principal
------------------------
office (or such other place as the Corporation reasonable designates) a register
for the registration of shares of Common Stock. Upon the surrender of any
certificate representing shares of any class of Common Stock at such place, the
Corporation shall, at the request of the registered holder of such certificate,
execute and deliver a new certificate or certificates in exchange therefor
representing in the aggregate the number of shares of such class represented by
the surrendered certificate, and the Corporation forthwith shall cancel such
surrendered certificate. Each such new certificate will represent such number
of shares of such class as is requested by the holder of the surrendered
certificate and will be substantially identical in form to the surrendered
certificate. Subject to any other restrictions on transfer to which such holder
or such shares may be bound, the Corporation will also register such new
certificate in such name as requested by the holder of the surrendered
certificate.
6. Replacement. Upon receipt of evidence reasonably satisfactory to the
-----------
Corporation (an affidavit of the registered holder will be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing one or more shares of any
6
<PAGE>
class of Common Stock, and in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonable satisfactory to the Corporation (provided
that if the holder is a financial institution or other institutional investor
its own agreement will be satisfactory), or, in the case of any such mutilation
upon surrender of such certificate, the Corporation shall (at its expense)
execute and deliver in lieu of such certificate a new certificate of like kind
representing the number of shares of such class represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate.
7. Notices. All notices referred to herein shall be in writing,
-------
shall be delivered personally or by first class mail, postage prepaid, and shall
be deemed to have been given when so delivered or mailed to the Corporation at
its principal executive offices and to any stockholder at such holder's address
as it appears in the stock records of the Corporation (unless otherwise
specified in a written notice to the Corporation by such holder).
F. Definitions. As used herein, the following terms shall have the
-----------
meanings shown below.
1. "Affiliate" shall mean with respect to any Person, any other
---------
person, directly or indirectly controlling, controlled by or under common
control with such Person. For the purpose of the above definition, the term
"control" (including with correlative meaning, the terms "controlling",
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the Ownership of voting securities or by contract or otherwise.
2. "Person" or "person" shall be construed broadly and shall include
------ ------
an individual, a partnership, a limited liability company, a corporation, a
trust, a joint venture, an unincorporated organization or a government or any
department or agency thereof.
3. "Regulated Stockholder" shall mean any stockholder (i) that is,
---------------------
or is an Affiliate of any entity that is, subject to the provisions of Section
23A or Section 23B of the Federal Reserve Act, as amended (or any successor to
either such Section), and (ii) that holds shares of Common Stock of the
Corporation and (iii) that has provided written notice to the Corporation of its
status as a "Regulated Stockholder" hereunder.
FIFTH: The Corporation is to have perpetual existence.
-----
SIXTH: In furtherance and not in limitation of the powers conferred by
-----
statute, the Board of Directors is hereby authorized to make, alter, amend or
repeal the bylaws of the Corporation.
SEVENTH: Meetings of stockholders may be held within or without the
-------
State of Delaware, as the bylaws may provide. The books of the Corporation may
be kept outside the State of Delaware at such place or places as may be
designated from time to time by the Board
7
<PAGE>
of Directors or in the bylaws of the Corporation. Elections of directors need
not be by written ballot unless the bylaws of the Corporation so provide.
EIGHTH: To the fullest extent permitted by the General Corporation Law of
------
the State of Delaware (including, without limitation, Section 102(b)(7)), as
amended from time to time, no director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. Any repeal or amendment of this Article EIGHTH or adoption
--------------
of any provision of this Certificate of Incorporation inconsistent with this
Article EIGHTH shall have prospective effect only and shall not adversely affect
- --------------
the liability of a director of the Corporation with respect to any act or
omission occurring at or before the time of such repeal amendment or adoption of
an inconsistent provision.
NINTH: (a) To the fullest extent permitted by the General Corporation Law
-----
of the State of Delaware, as amended, the Corporation shall indemnify any
director or officer who is or was made, or threatened to be made, a party to any
threatened, pending or completed action, suit or proceeding (a "Proceeding"),
whether civil, criminal, administrative or investigative, including, without
limitation, an action by or in the right of the Corporation to procure a
judgment in its favor, by reason of the fact that such person, or a person of
whom such person is the legal representative, is or was a director or officer of
the Corporation, or is or was serving in any capacity at the request of the
Corporation for any other corporation, partnership, joint ventures trust,
employee benefit plan or other enterprise (any "Other Entity"), against
liabilities, losses, judgments, fines, penalties, excise taxes, amounts paid in
settlement and costs, charges and expenses (including attorneys' fees and
disbursements). Persons who are not directors or officers of the Corporation may
be similarly indemnified in respect of service to the Corporation or to any
Other Entity at the request of the Corporation to the extent the Board at any
time specifies that such persons are entitled to the benefits of this Article
-------
NINTH.
- -----
(b) The Corporation shall from time to time, reimburse or advance to
any director or officer or other person entitled to indemnification hereunder
the funds necessary for payment of expenses, including attorneys' fees and
disbursements, incurred in connection with any Proceeding, in advance of the
final disposition of such Proceeding; provided, however, that, such expenses
-------- -------
incurred by or on behalf of any director or officer or other person may be paid
in advance of the final disposition of a Proceeding only upon receipt by the
Corporation of an undertaking by or on behalf of such director or officer (or
other person indemnified hereunder), to repay any such amount so advanced if it
shall ultimately be determined by final judicial decision from which there is no
further right of appeal that such director, officer or other person is not
entitled to be indemnified for such expenses.
(c) The rights to indemnification and reimbursement or advancement of
expenses provided by, or granted pursuant to, this Article NINTH shall not be
-------------
deemed exclusive of any other rights to which a person seeking indemnification
or reimbursement or advancement of expenses may have or hereafter be entitled,
including without limitation any right arising under any statute, this
Certificate of Incorporation, the bylaws of the Corporation
8
<PAGE>
(the "Bylaws"), any agreement any vote of stockholders or disinterested
directors or otherwise, both as to action in his or her official capacity and as
to action in another capacity while holding such office.
(d) The rights to indemnification and reimbursement or advancement of
expenses provided by, or granted pursuant to, this Article NINTH shall continue
-------------
as to a person who has ceased to be a director or officer (or other person
indemnified hereunder) and shall inure to the benefit of the heirs, executors,
administrators, legatees and distributees of such person.
(e) The Corporation shall have power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of any Other Entity, against any liability
asserted against such person and incurred by such person in any such capacity,
or arising out of such person's status as such, whether or not the Corporation
would have the power to indemnify such person against such liability under the
provisions of this Article NINTH, the Bylaws of under Section 145 of the General
-------------
Corporation Law of the State of Delaware, as amended, or any other provision of
law.
(f) The provisions of this Article NINTH shall be a contract between the
-------------
Corporation, on the one hand, and each director and officer who serves in such
capacity at any time while this Article NINTH is in effect and any other person
-------------
indemnified hereunder, on the other hand, pursuant to which the Corporation and
each such director, officer, or other person intend to be legally bound. No
repeal or modification of this Article NINTH shall limit or otherwise adversely
-------------
affect any rights or obligations with respect to any state of facts then or
theretofore existing, or arising thereafter but before notice of such repeal or
modification is delivered to the persons so affected or any Proceeding
theretofore or thereafter brought or threatened based in whole or in part upon
any such state of facts. Until notice of such repeal or modification is given
to any person whose rights hereunder are adversely affected, such repeal or
modification shall have no affect on such rights of such person hereunder.
(g) The rights to indemnification and reimbursement or advancement of
expenses provided by, or granted pursuant to, this Article NINTH shall be
-------------
enforceable by any person entitled to such indemnification or reimbursement or
advancement of expenses in any court of competent jurisdiction. The burden of
proving that such indemnification or reimbursement or advancement of expense is
not appropriate shall be on the Corporation. Neither the failure of the
Corporation (including its independent legal counsel, its stockholders or the
board of directors) to have made a determination prior to the commencement of
such action that such indemnification or reimbursement or advancement of
expenses is proper in the circumstances nor an actual determination by the
Corporation (including its independent legal counsel its stockholders or the
board of directors) that such person is not entitled to such indemnification or
reimbursement or advancement of expenses shall constitute a defense to the
action or create a presumption that such person is not so entitled. Such a
person shall also be indemnified for any expenses incurred in connection with
successfully establishing his or her
9
<PAGE>
right to such indemnification or reimbursement or advancement of expenses, in
whole or in part, in any such proceeding.
(h) Any director or officer of the Corporation serving in any capacity
for (i) another corporation of which a majority of the shares entitled to vote
in the election of its, directors is held, directly or indirectly, by the
Corporation or (ii) any employee benefit plan of the Corporation or any
corporation referred to in clause (a) shall be deemed to be doing so at the
request of the Corporation.
(i) Any person entitled to be indemnified or to reimbursement or
advancement of expenses as a matter of right pursuant to this Article NINTH may
-------------
elect, to the extent permitted by law, to have the right to indemnification or
reimbursement or advancement of expenses interpreted on the basis of the
applicable law in effect at the time of the occurrence of the event or events
giving rise to the applicable Proceeding or on the basis of the applicable law
in effect at the time such indemnification or reimbursement or advancement of
expenses is sought. Such election shall be made, by a notice in writing to the
Corporation, at the time indemnification or reimbursement or advancement of
expenses is sought; provided, however, that if no such notice is given, the
-------- -------
right to indemnification or reimbursement or advancement of expenses shall to
the extent permitted by law, be determined by the law in effect at the time
indemnification or reimbursement or advancement of expenses is sought.
TENTH: The Corporation elects not to be governed by Section 203 of the
-----
General Corporation Law of the State of Delaware.
ELEVENTH: The Corporation reserves the right to amend or repeal any
--------
provision contained in this Certificate of Incorporation in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are granted subject to this reservation.
10
<PAGE>
WE, THE UNDERSIGNED, being the directors of the Corporation, for the
purpose of amending and restating the Corporation's Certificate of Incorporation
pursuant to the General Corporation Law of the State of Delaware, do make this
certificate, hereby declaring and certifying that this is our act and deed on
behalf of the Corporation this 3rd day of April, 1996.
/s/ John C. Stanley, IV
---------------------------
John C. Stanley, IV
/s/ Stephen F. Gormley
---------------------------
Stephen F. Gormley
11
<PAGE>
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
OCI HOLDINGS CORP.
Pursuant to Section 242 of the
General Corporation Law of the State of Delaware
------------------------------------------------
OCI Holdings Corp. (hereinafter called the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation, a resolution was
duly adopted, pursuant to Sections 141 and 242 of the General Corporation Law of
the State of Delaware, setting forth an amendment to the Amended and Restated
Certificate of Incorporation of the Corporation and declaring said amendment to
be advisable. The stockholders of the Corporation duly approved said proposed
amendment by written consent in accordance with Sections 228 and 242 of the
General Corporation Law of the State of Delaware. The resolution setting forth
the amendment is as follows:
RESOLVED, that effective as of June 30, 1997, this Corporation change its
corporate name by changing the FIRST Article of the Amended and Restated
Certificate of Incorporation to read as follows:
FIRST: The name of the corporation is Outdoor Communications, Inc.
-----
This Certificate of Amendment shall be effective as of June 30, 1997.
IN WITNESS WHEREOF, said OCI Holdings Corp. has caused this Certificate to
be signed by David F. Dietz, its Secretary, this 27th day of June, 1997.
OCI HOLDINGS CORP.
By: /s/ David F. Dietz
---------------------------
David F. Dietz
Secretary
<PAGE>
EXHIBIT 3.2
BY-LAWS
of
OUTDOOR COMMUNICATIONS, INC.
ARTICLE I
---------
Stockholders
------------
1. Annual Meeting. The annual meeting of stockholders shall be held at
--------------
the place, date and time determined by the Board of Directors. The purposes for
which the annual meeting is to be held, in addition to those prescribed by law,
by the Certificate of Incorporation or by these By-laws, may be specified by the
Board of Directors or the President or Chairman. If no annual meeting is held,
a special meeting in lieu thereof may be held or there may be action by written
consent of the stockholders on matters to be voted on at the annual meeting, and
such special meeting or written consent shall have for the purposes of these By-
Laws or otherwise all the force and effect of an annual meeting.
2. Special Meetings. Special meetings of stockholders may be called by
----------------
the President or Chairman or by the Board of Directors. Special meetings shall
be called by the Secretary, or in case of death, absence, incapacity or refusal
of the Secretary, by any other officer, upon written application of one or more
stockholders who hold at least fifty percent in interest of the capital stock
entitled to vote at such meeting. The call for the meeting shall state the
place, date, hour and purposes of the meeting. Only the purposes specified in
the notice of special meeting shall be considered or dealt with at such special
meeting.
3. Notice of Meetings. A written notice stating the place, date and hour
------------------
of all meetings of stockholders, and in the case of special meetings, the
purposes of the meeting shall be given by the Secretary (or other person
authorized by these By-Laws or by law) not less than ten nor more than sixty
days before the meeting to each stockholder entitled to vote thereat and to each
stockholder who, under the Certificate of Incorporation or under these By-laws
is entitled to such notice, by delivering such notice to him or by mailing it,
postage prepaid, and addressed to such stockholder at his address as it appears
in the records of the corporation. Notice need not be given to a stockholder if
a written waiver of notice is executed before or after the meeting by such
stockholder, if communication with such stockholder is unlawful, or if such
stockholder attends the meeting in question, unless such attendance was for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting was not lawfully called or
convened. If a meeting is adjourned to another time or place, notice need not
be given of the adjourned meeting if the time and place are announced at the
meeting at which the adjournment is taken, except that if the adjournment is for
more than thirty 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.
<PAGE>
4. Quorum. The holders of a majority in interest of all stock issued,
------
outstanding and entitled to vote at a meeting shall constitute a quorum. Any
meeting may be adjourned from time to time by a majority of the votes properly
cast upon the question, whether or not a quorum is present. The stockholders
present at a duly constituted meeting may continue to transact business until
adjournment notwithstanding the withdrawal of enough stockholders to reduce the
voting shares below a quorum.
5. Voting and Proxies. Stockholders shall have one vote for each share of
------------------
stock entitled to vote owned by them of record according to the books of the
corporation unless otherwise provided by law or by the Certificate of
Incorporation. Stockholders may vote either in person or by written proxy or
express directly or by written proxy their consent or dissent to a corporate
action taken without a meeting, but no proxy shall be voted or acted upon after
three years from its date, unless the proxy provides for a longer period or is
irrevocable and coupled with an interest. Proxies shall be filed with the
Secretary of the meeting, or of any adjournment thereof. Except as otherwise
limited therein, proxies shall entitle the persons authorized thereby to vote at
any adjournment of such meeting.
6. Action at Meeting. When a quorum is present, any matter before the
-----------------
meeting shall be decided by vote of the holders of a majority of the shares of
stock voting on such matter except where a different vote is required by law, by
the Certificate of Incorporation, by these By-laws, or by the Shareholders
Agreement dated April 3, 1996 by and among the corporation and the management
investors and venture investors named therein (the "Shareholders Agreement").
Any election by stockholders shall be determined by a plurality of the votes
cast, except where a larger vote is required by law, by the Certificate of
Incorporation or by these By-laws. The corporation shall not directly or
indirectly vote any share of its own stock; provided, however, that the
corporation may vote shares which it holds in a fiduciary capacity to the extent
permitted by law.
7. Action without a Meeting. Any action required or permitted by law to
------------------------
be taken at any annual or special meeting of stockholders, may be taken without
a meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted and shall be delivered to the
corporation by delivery to its registered office, by hand or by certified mail,
return receipt requested or to the corporation's principal place of business or
to the officer of the corporation having custody of the minute book. Every
written consent shall bear the date of signature and no written consent shall be
effective unless, within sixty days of the earliest dated consent delivered
pursuant to these By-laws, written consents signed by a sufficient number of
stockholders entitled to take action are delivered to the corporation in the
manner set forth in these By-laws. Prompt notice of the taking of the corporate
action without a meeting by less than unanimous written consent shall be given
to those stockholders who have not consented in writing.
2
<PAGE>
8. Stockholder Lists. The officer who has charge of the stock ledger of
-----------------
the corporation 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 days prior to the meeting, either at a place within the city where the
meeting is to be held, which place shall be specified in the notice of the
meeting, or, if not so specified, at the place where the meeting is to be held.
The list shall also be produced and kept at the time and place of the meeting
during the whole time thereof, and may be inspected by any stockholder who is
present.
ARTICLE II
----------
Directors
---------
1. Powers. The business of the corporation shall be managed by or under
------
the direction of a Board of Directors who may exercise all the powers of the
corporation except as otherwise provided by law, by the Certificate of
Incorporation or by these By-laws. In the event of a vacancy in the Board of
Directors, the remaining Directors, except as otherwise provided by law, may
exercise the powers of the full Board until the vacancy is filled.
2. Election and Qualification. Unless otherwise provided in the
--------------------------
Certificate of Incorporation or in these By-laws, the number of Directors which
shall constitute the whole board shall be determined by the stockholders at any
meeting. Directors need not be stockholders.
3. Vacancies; Reduction of Board. A majority of the Directors then in
-----------------------------
office, although less than a quorum, or a sole remaining Director, may fill, in
a manner not inconsistent with the provisions of the Shareholders Agreement,
vacancies in the Board of Directors occurring for any reason and newly created
directorships resulting from any increase in the authorized number of Directors.
In lieu of filling any vacancy the stockholders or the Board of Directors may
reduce the number of Directors, in a manner not inconsistent with the provisions
of the Shareholder Agreement.
4. Enlargement of the Board. The Board of Directors may be enlarged by
------------------------
the stockholders at any meeting, in a manner not inconsistent with the
provisions of the Shareholder Agreement.
5. Tenure. Except as otherwise provided by law, by the Certificate of
------
Incorporation or by these By-laws, Directors shall hold office until their
successors are elected and qualified or until their earlier resignation or
removal. Any Director may resign by delivering his written resignation to the
corporation. Such resignation shall be effective upon
3
<PAGE>
receipt unless it is specified to be effective at some other time or upon the
happening of some other event.
6. Removal. To the extent permitted by law and except as otherwise
-------
provided in the Shareholders Agreement, a Director may be removed from office
with or without cause by vote of the holders of a majority of the shares of
stock entitled to vote in the election of Directors. A Director may be removed
for cause only after reasonable notice and opportunity to be heard before the
body proposing to remove him.
7. Meetings. Regular meetings of the Board of Directors may be held
--------
without notice at such time, date and place as the Board of Directors may from
time to time determine. Special meetings of the Board of Directors may be
called, orally or in writing, by the President, Chairman, Treasurer or two or
more Directors, designating the time, date and place thereof. Directors may
participate in meetings of the Board of Directors by means of conference
telephone or similar communications equipment by means of which all Directors
participating in the meeting can hear each other, and participation in a meeting
in accordance herewith shall constitute presence in person at such meeting.
8. Notice of Meetings. Notice of the time, date and place of all special
------------------
meetings of the Board of Directors shall be given to each Director by the
Secretary, or Assistant Secretary, or in case of the death, absence, incapacity
or refusal of such persons, by the officer or one of the Directors calling the
meeting. Notice shall be given to each Director in person or by telephone or by
telegram sent to his business or home address at least twenty-four hours in
advance of the meeting, or by written notice mailed to his business or home
address at least forty-eight hours in advance of the meeting. Notice need not
be given to any Director if a written waiver of notice is executed by him before
or after the meeting, or if communication with such Director is unlawful. A
notice or waiver of notice of a meeting of the Board of Directors need not
specify the purposes of the meeting.
9. Quorum. At any meeting of the Board of Directors, a majority of the
------
Directors then in office shall constitute a quorum. Less than a quorum may
adjourn any meeting from time to time and the meeting may be held as adjourned
without further notice.
10. Action at Meeting. At any meeting of the Board of Directors at which
-----------------
a quorum is present, a majority of the Directors present may take any action on
behalf of the Board of Directors, unless a different number is required by law,
by the Certificate of Incorporation, by these By-laws or the Shareholders
Agreement.
11. Action by Consent. Any action required or permitted to be taken at
-----------------
any meeting of the Board of Directors may be taken without a meeting if a
written consent thereto is signed by all the Directors and filed with the
records of the meetings of the Board of Directors. Such consent shall be
treated as a vote of the Board of Directors for all purposes.
4
<PAGE>
12. Committees. The Board of Directors, by vote of a majority of the
----------
Directors then in office, may establish one or more committees, each committee
to consist of one or more Directors, and may delegate thereto some or all of its
powers except those which by law, by the Certificate of Incorporation, or by
these By-laws may not be delegated. Except as the Board of Directors may
otherwise determine, any such committee may make rules for the conduct of its
business, but in the absence of such rules its business shall be conducted so
far as possible in the same manner as is provided in these By-laws for the Board
of Directors. All members of such committees shall hold their committee offices
at the pleasure of the Board of Directors, and the Board may abolish any
committee at any time. Each such committee shall report its action to the Board
of Directors who shall have the power to rescind any action of any committee
without retroactive effect.
ARTICLE III
-----------
Officers
--------
1. Enumeration. The officers of the corporation shall consist of a
-----------
Chairman, a President, a Treasurer, a Secretary, and such other officers,
including one or more Vice Chairmen, Vice Presidents, Assistant Treasurers and
Assistant Secretaries, as the Board of Directors may determine.
2. Election. The Chairman, President, Treasurer and Secretary shall be
--------
elected annually by the Board of Directors at their first meeting following the
annual meeting of stockholders. Other officers may be chosen by the Board of
Directors at such meeting or at any other meeting.
3. Qualification. No officer need be a stockholder or Director. Any two
-------------
or more offices may be held by the same person. Any officer may be required by
the Board of Directors to give bond for the faithful performance of his duties
in such amount and with such sureties as the Board of Directors may determine.
4. Tenure. Except as otherwise provided by the Certificate of
------
Incorporation or by these By-laws, each of the officers of the corporation shall
hold his office until his successor is elected and qualified or until his
earlier resignation or removal. Any officer may resign by delivering his
written resignation to the corporation, and such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon
the happening of some other event.
5. Removal. The Board of Directors may remove any officer with or without
-------
cause by a vote of a majority of the entire number of Directors then in office;
provided, that an officer may be removed for cause only after reasonable notice
and opportunity to be heard by the Board of Directors.
5
<PAGE>
6. Vacancies. Any vacancy in any office may be filled for the unexpired
---------
portion of the term by the Board of Directors.
7. Chairman of the Board and Vice Chairman. The Chairman of the Board
---------------------------------------
shall be the chief executive officer of the corporation and shall have general
supervision and control of its business and affairs, subject to the direction of
the Board of Directors. Unless otherwise provided by the Board of Directors,
the Chairman shall preside, when present, at all meetings of the stockholders
and the Board of Directors.
Any Vice Chairman of the Board shall have such powers and shall perform
such duties as the Board of Directors may from time to time designate.
8. President and Vice Presidents. The President shall be the chief
-----------------------------
operating officer of the corporation and shall have general charge of its
business operations, subject to the direction of the Board of Directors. In the
absence of the Chairman, the President shall preside, when present, at all
meetings of stockholders and the Board of Directors. The Board of Directors
shall have the authority to appoint a temporary presiding officer to serve at
any meeting of the stockholders or Board of Directors if the Chairman or the
President is unable to do so for any reason.
Any Vice President shall have such powers and shall perform such duties as
the Board of Directors may from time to time designate.
9. Treasurer and Assistant Treasurers. The Treasurer shall, subject to
----------------------------------
the direction of the Board of Directors, have general charge of the financial
affairs of the corporation and shall cause to be kept accurate books of account.
He shall have custody of all funds, securities, and valuable documents of the
corporation, except as the Board of Directors may otherwise provide.
Any Assistant Treasurer shall have such powers and perform such duties as
the Board of Directors may from time to time designate.
10. Secretary and Assistant Secretaries. The Secretary shall record the
-----------------------------------
proceedings of all meetings of the stockholders and the Board of Directors in
books kept for that purpose. In his absence from any such meeting an Assistant
Secretary, or if he is absent, a temporary secretary chosen at the meeting,
shall record the proceedings thereof.
The Secretary shall have charge of the stock ledger (which may, however, be
kept by any transfer or other agent of the corporation) and shall have such
other duties and powers as may be designated from time to time by the Board of
Directors or the President.
Any Assistant Secretary shall have such powers and perform such duties as
the Board of Directors may from time to time designate.
6
<PAGE>
11. Other Powers and Duties. Subject to these By-laws, each officer of
-----------------------
the corporation shall have in addition to the duties and powers specifically set
forth in these By-laws, such duties and powers as are customarily incident to
his office, and such duties and powers as may be designated from time to time by
the Board of Directors.
ARTICLE IV
----------
Capital Stock
-------------
1. Certificates of Stock. Each stockholder shall be entitled to a
---------------------
certificate of the capital stock of the corporation in such form as may from
time to time be prescribed by the Board of Directors. Such certificate shall be
signed by the Chairman, Vice Chairman, President or a Vice President and by the
Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary.
Such signatures may be facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed on such
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 time
of its issue. Every certificate for shares of stock which are subject to any
restriction on transfer and every certificate issued when the corporation is
authorized to issue more than one class or series of stock shall contain such
legend with respect thereto as is required by law. The corporation shall be
permitted to issue fractional shares.
2. Transfers. Subject to any restrictions on transfer, shares of stock
---------
may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate therefor properly endorsed
or accompanied by a written assignment or power of attorney properly executed,
with transfer stamps (if necessary) affixed, and with such proof of the
authenticity of signature as the corporation or its transfer agent may
reasonably require.
3. Record Holders. Except as may otherwise be required by law, by the
--------------
Certificate of Incorporation or by these By-laws, the corporation shall be
entitled to treat the record holder of stock as shown on its books as the owner
of such stock for all purposes, including the payment of dividends and the right
to vote with respect thereto, regardless of any transfer, pledge or other
disposition of such stock, until the shares have been transferred on the books
of the corporation in accordance with the requirements of these By-laws.
It shall be the duty of each stockholder to notify the corporation of his
post office address.
4. Record Date. 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 consent to corporate action in writing without a
meeting, or entitled to receive payment of any
7
<PAGE>
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, in
advance, a record date, which shall not precede the date on which it is
established, and which shall not be more than sixty nor less than ten days
before the date of such meeting, more than ten days after the date on which the
record date for stockholder consent without a meeting is established, nor more
than sixty days prior to any other action. In such case only stockholders of
record on such record date shall be so entitled notwithstanding any transfer of
stock on the books of the corporation after the record date.
If no record date is fixed, (a) 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, (b) the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the Board of Directors is necessary,
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 by delivery
to its registered office in this state, to its principal place of business, or
to an officer or agent of the corporation having custody of the book in which
proceedings of meetings of stockholders are recorded, and (c) 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.
5. Replacement of Certificates. In case of the alleged loss, destruction
---------------------------
or mutilation of a certificate of stock, a duplicate certificate may be issued
in place thereof, upon such terms as the Board of Directors may prescribe.
ARTICLE V
---------
Miscellaneous Provisions
------------------------
1. Fiscal Year. Except as otherwise determined by the Board of Directors,
-----------
the fiscal year of the corporation shall end on June 30 of each year.
2. Seal. The Board of Directors shall have power to adopt and alter the
----
seal of the corporation.
3. Execution of Instruments. All deeds, leases, transfers, contracts,
------------------------
bonds, notes and other obligations authorized to be executed by an officer of
the corporation in its behalf shall be signed by the Chairman, President or
Treasurer, or by any other officer of the corporation designated by the Board of
Directors, except as the Board of Directors may generally or in particular cases
otherwise determine.
8
<PAGE>
4. Voting of Securities. Unless otherwise provided by the Board of
--------------------
Directors, the Chairman or President or Treasurer may waive notice of and act on
behalf of this corporation, or appoint another person or persons to act as proxy
or attorney in fact for this corporation with or without discretionary power
and/or power of substitution, at any meeting of stockholders or shareholders of
any other corporation or organization, any of whose securities are held by this
corporation.
5. Resident Agent. The Board of Directors may appoint a resident agent
--------------
upon whom legal process may be served in any action or proceeding against the
corporation.
6. Corporate Records. The original or attested copies of the Certificate
-----------------
of Incorporation, By-laws and records of all meetings of the incorporators,
stockholders and the Board of Directors and the stock and transfer records,
which shall contain the names of all stockholders, their record addresses and
the amount of stock held by each, shall be kept at the principal office of the
corporation, at the office of its counsel, or at an office of its transfer
agent.
7. Indemnification of Employees and Agents. The corporation may, to the
---------------------------------------
extent authorized from time to time by the Board of Directors, grant rights to
indemnification and to an advancement of expenses, in a manner and to an extent
consistent with the Certificate of Incorporation, to any person who was or is a
party or is threatened to be made a party to or is otherwise involved in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, investigative or otherwise, and whether by or in right
of the corporation, its stockholders, a third party or otherwise, by reason of
the fact that he is or was an employee or agent of the corporation or is or was
serving at the request of the corporation, as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise.
8. Certificate of Incorporation. All references in these By-laws to the
----------------------------
Certificate of Incorporation shall be deemed to refer to the Certificate of
Incorporation of the corporation, as amended and in effect from time to time.
9. No Inconsistency with Shareholders Agreement. No provision of these
--------------------------------------------
By-laws shall be inconsistent with the provisions of the Shareholders Agreement.
In the event that one or more provisions in these By-laws is deemed or
interpreted to be inconsistent with one or more provisions in the Shareholders
Agreement, the provision or provisions in the Shareholders Agreement shall be
the operative provision or provisions.
10. Amendments. These By-laws may be amended or repealed or additional
----------
By-laws adopted by the stockholders or by the Board of Directors; provided, that
(a) the Board of Directors may not amend or repeal (i) this Section 10 of this
Article V, (ii) any provision of these By-laws which by law, by the Certificate
of Incorporation or by these By-laws requires action by the stockholders or
(iii) any provision of these By-laws if such repeal or amendment would be
contrary to or inconsistent with the provisions of the Shareholders Agreement
and (b)
9
<PAGE>
any amendment or repeal of these By-laws by the Board of Directors and any
By-law adopted by the Board of Directors may be amended or repealed by the
stockholders.
10
<PAGE>
EXHIBIT 4.1
- --------------------------------------------------------------------------------
OUTDOOR COMMUNICATIONS, INC.,
as Company,
OCI(N) CORP. and
OCI(S) CORP.,
as Guarantors,
and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Trustee
----------------------------
INDENTURE
Dated as of [ ], 1997
-----------------------
$100,000,000
[ ]% Senior Subordinated Notes due 2007
- --------------------------------------------------------------------------------
<PAGE>
CROSS-REFERENCE TABLE
<TABLE>
<CAPTION>
TIA Indenture
Section Section
- ------- ---------
<S> <C>
ss. 310(a)(1).............................................................. 7.10; 12.1
(a)(2)............................................................... 7.10; 12.1
(a)(3)............................................................... N.A.
(a)(4)............................................................... N.A.
(b).................................................................. 7.8; 7.10; 12.2
(c).................................................................. N.A.
ss. 311(a)................................................................. 7.11
(b).................................................................. 7.11
(c).................................................................. N.A.
ss. 312(a)................................................................. 2.5
(b).................................................................. 12.3
(c).................................................................. 12.3
ss. 313(a)................................................................. 7.6
(b)(1)............................................................... 7.6
(b)(2)............................................................... 7.6
(c).................................................................. 7.6; 12.2
(d).................................................................. 7.6
ss. 314(a)................................................................. 4.6; 4.7; 12.2
(b).................................................................. N.A.
(c)(1)............................................................... 12.4
(c)(2)............................................................... 12.4
(c)(3)............................................................... 12.4
(d).................................................................. N.A.
(e).................................................................. 12.5
(f).................................................................. N.A.
ss. 315(a)................................................................. 7.1(b)
(b).................................................................. 7.5; 12.2
(c).................................................................. 7.1(a)
(d).................................................................. 7.1(c)
(e).................................................................. 6.11
ss. 316(a) (last sentence)................................................. 2.9
(a)(1)(A)............................................................ 6.5
(a)(1)(B)............................................................ 6.4
(a)(2)............................................................... N.A.
(b).................................................................. 6.7
ss. 317(a)(1).............................................................. 6.8
(a)(2)............................................................... 6.9
(b).................................................................. 2.4
ss. 318(a)................................................................. 12.1
</TABLE>
- ---------------
N.A. means Not Applicable.
NOTE: This Cross-Reference Table shall not, for any purpose, be deemed
to be a part of this Indenture.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I DEFINITIONS AND INCORPORATION BY REFERENCE
----------------------------------------------------
SECTION 1.1. Definitions...............................................................................1
SECTION 1.2. Incorporation by Reference of Trust Indenture Act........................................21
SECTION 1.3. Rules of Construction....................................................................21
ARTICLE II THE SECURITIES
SECTION 2.1. Form and Dating..........................................................................22
SECTION 2.2. Execution and Authentication.............................................................22
SECTION 2.3. Registrar and Paying Agent...............................................................23
SECTION 2.4. Paying Agent To Hold Money in Trust......................................................24
SECTION 2.5. Securityholder Lists.....................................................................24
SECTION 2.6. Transfer and Exchange....................................................................24
SECTION 2.7. Replacement Securities...................................................................25
SECTION 2.8. Outstanding Securities...................................................................25
SECTION 2.9. Treasury Securities......................................................................26
SECTION 2.10. Temporary Securities....................................................................26
SECTION 2.11. Cancellation............................................................................26
SECTION 2.12. Defaulted Interest......................................................................27
SECTION 2.13. CUSIP Number............................................................................27
SECTION 2.14. Deposit of Moneys.......................................................................27
ARTICLE III REDEMPTION
SECTION 3.1. Election To Redeem; Notices to Trustee...................................................28
SECTION 3.2. Selection of Securities To Be Redeemed...................................................28
SECTION 3.3. Notice of Redemption.....................................................................29
SECTION 3.4. Effect of Notice of Redemption...........................................................30
SECTION 3.5. Deposit of Redemption Price..............................................................30
SECTION 3.6. Securities Redeemed in Part..............................................................30
ARTICLE IV COVENANTS
SECTION 4.1. Payment of Securities....................................................................31
SECTION 4.2. Maintenance of Office or Agency..........................................................31
SECTION 4.3. Corporate Existence......................................................................32
SECTION 4.4. Payment of Taxes and Other Claims........................................................32
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SECTION 4.5. Maintenance of Properties; Insurance; Books and Records; Compliance with Law.............32
SECTION 4.6. Compliance Certificates..................................................................33
SECTION 4.7. Reports..................................................................................34
SECTION 4.8. Limitation on Additional Indebtedness....................................................34
SECTION 4.9. Limitation on Restricted Payments........................................................35
SECTION 4.10. Limitation on Liens.....................................................................37
SECTION 4.11. Limitation on Guarantees of Certain Indebtedness........................................37
SECTION 4.12. Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries...........38
SECTION 4.13. Asset Sales.............................................................................38
SECTION 4.14. Limitation on Transactions with Affiliates..............................................39
SECTION 4.15. Change of Control.......................................................................40
SECTION 4.16. Limitation on Issuance and Sales of Preferred Stock by Subsidiaries.....................43
SECTION 4.17. Limitation on Activities of the Company and Its Subsidiaries............................43
SECTION 4.18. Limitation on Other Senior Subordinated Debt............................................43
SECTION 4.19. Waiver of Stay, Extension or Usury Laws.................................................43
ARTICLE V SUCCESSOR CORPORATION
SECTION 5.1. Consolidation, Merger, Sale of Assets, Etc...............................................44
SECTION 5.2. Successor Entity Substituted.............................................................46
SECTION 5.3. Status of Subsidiaries...................................................................46
ARTICLE VI DEFAULT AND REMEDIES
SECTION 6.1. Events of Default........................................................................47
SECTION 6.2. Acceleration.............................................................................49
SECTION 6.3. Other Remedies...........................................................................50
SECTION 6.4. Waiver of Past Default...................................................................50
SECTION 6.5. Control by Majority......................................................................50
SECTION 6.6. Limitation on Suits......................................................................51
SECTION 6.7. Rights of Holders To Receive Payment.....................................................51
SECTION 6.8. Collection Suit by Trustee...............................................................52
SECTION 6.9. Trustee May File Proofs of Claim.........................................................52
SECTION 6.10. Priorities..............................................................................53
SECTION 6.11. Undertaking for Costs...................................................................53
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ARTICLE VII TRUSTEE
SECTION 7.1. Duties of Trustee........................................................................54
SECTION 7.2. Rights of Trustee........................................................................55
SECTION 7.3. Individual Rights of Trustee.............................................................56
SECTION 7.4. Trustee's Disclaimer.....................................................................56
SECTION 7.5. Notice of Defaults.......................................................................57
SECTION 7.6. Reports by Trustee to Holders............................................................57
SECTION 7.7. Compensation and Indemnity...............................................................57
SECTION 7.8. Replacement of Trustee...................................................................58
SECTION 7.9. Successor Trustee by Merger, Etc.........................................................60
SECTION 7.10. Eligibility; Disqualification...........................................................60
SECTION 7.11. Preferential Collection of Claims Against the Company...................................60
SECTION 7.12. Money Held in Trust.....................................................................60
SECTION 7.13. Preferred Collection of Claims..........................................................60
ARTICLE VIII DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1. Satisfaction and Discharge...............................................................61
SECTION 8.2. Legal Defeasance and Covenant Defeasance.................................................62
SECTION 8.3. Application of Trust Money...............................................................65
SECTION 8.4. Repayment to the Company or a Guarantor..................................................65
SECTION 8.5. Reinstatement............................................................................66
ARTICLE IX AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1. Without Consent of Holders...............................................................66
SECTION 9.2. With Consent of Holders..................................................................67
SECTION 9.3. Compliance with Trust Indenture Act......................................................68
SECTION 9.4. Revocation and Effect of Amendments and Consents.........................................68
SECTION 9.5. Notation on or Exchange of Securities....................................................69
SECTION 9.6. Trustee To Sign Amendments, Etc..........................................................70
SUBORDINATION OF SECURITIES AND THE GUARANTEES..........................................70
SECTION 10.1. Securities Subordinate to Senior
Indebtedness and Guarantor Senior
Indebtedness, as the case may be,
including obligations under the new
Credit Facility......................................................................70
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Securities Subordinate to Senior Indebtedness
and Guarantor Senior Indebtedness, as the case
may be, including obligations under the new
Credit Facility......................................................................70
SECTION 10.2. Payment Over of Proceeds upon Dissolution, etc..........................................70
SECTION 10.3. Suspension of Payment When Senior Indebtedness in Default...............................72
SECTION 10.4. Trustee's Relation to Senior
Indebtedness and Guarantor Senior
Indebtedness, as the case may be,
including obligations under the
new Credit Facility..................................................................74
Trustee's Relation to Senior Indebtedness and Guarantor Senior Indebtedness,
as the case may be, including obligations under
the new Credit Facility..............................................................74
SECTION 10.5. Subrogation to Rights of Holders of
Senior Indebtedness and Guarantor Senior Indebtedness, as the case may be,
including obligations under the new Credit Facility..................................75
Subrogation to Rights of Holders of Senior Indebtedness and Guarantor
Senior Indebtedness, as the case may be, including obligations under
the new Credit Facility..............................................................75
SECTION 10.6. Provisions Solely To Define Relative Rights.............................................76
SECTION 10.7. Trustee To Effectuate Subordination.....................................................77
SECTION 10.8. No Waiver of Subordination Provisions...................................................77
SECTION 10.9. Notice to Trustee.......................................................................78
SECTION 10.10. Reliance on Judicial Order or Certificate of Liquidating Agent.........................80
SECTION 10.11. Rights of Trustee as a Holder of
Senior Indebtedness and Guarantor Senior Indebtedness,
as the case may be, including obligations under the new
Credit Facility; Preservation of Trustee's Rights....................................80
SECTION 10.12. Article Applicable to Paying Agents....................................................81
SECTION 10.13. No Suspension of Remedies..............................................................81
</TABLE>
-iv-
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ARTICLE XI GUARANTEE
SECTION 11.1. Unconditional Guarantee.................................................................81
SECTION 11.2. Severability............................................................................82
SECTION 11.3. Limitation of Liability.................................................................82
SECTION 11.4. Guarantors May Consolidate, etc., on Certain Terms......................................83
SECTION 11.5. Contribution............................................................................84
SECTION 11.6. Waiver of Subrogation...................................................................84
SECTION 11.7. Execution of Guarantee..................................................................85
SECTION 11.8. Waiver of Stay, Extension or Usury Laws.................................................85
ARTICLE XII MISCELLANEOUS
SECTION 12.1. Trust Indenture Act Controls............................................................86
SECTION 12.2. Notices.................................................................................86
SECTION 12.3. Communications by Holders with Other Holders............................................87
SECTION 12.4. Certificate and Opinion of Counsel as to Conditions Precedent...........................87
SECTION 12.5. Statements Required in Certificate and Opinion of Counsel...............................87
SECTION 12.6. Rules by Trustee, Paying Agent, Registrar...............................................88
SECTION 12.7. Legal Holidays..........................................................................88
SECTION 12.8. Governing Law...........................................................................88
SECTION 12.9. No Recourse Against Others..............................................................88
SECTION 12.10. Successors.............................................................................89
SECTION 12.11. Duplicate Originals....................................................................89
SECTION 12.12. Joint and Several Obligations..........................................................89
SECTION 12.13. Separability...........................................................................89
SECTION 12.14. Table of Contents, Headings, Etc.......................................................89
EXHIBIT A - Form of Security
EXHIBIT B - Form of Guarantee
</TABLE>
-v-
<PAGE>
INDENTURE dated as of [ ], 1997 by and among OUTDOOR COMMUNICATIONS,
INC., a Delaware corporation (the "Company"), the Guarantors (as defined) and
FIRST UNION NATIONAL BANK OF NORTH CAROLINA, [a North Carolina banking
corporation,] as Trustee (the "Trustee").
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of the Securities to be issued as provided
for in this Indenture. All things necessary to make the Securities the valid and
binding obligations of the Company have been done.
The Securities will be unconditionally guaranteed (the "Guarantees")
on a senior unsecured basis, jointly and severally, by OCI (N) Corp. and OCI (S)
Corp., the Company's Subsidiaries (the "Guarantors").
The parties hereto agree as follows for the benefit of each other and
for the equal and ratable benefit of the Holders of the Securities:
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
------------------------------------------
SECTION 1.1. Definitions.
-----------
"Acquired Indebtedness" means Indebtedness of a Person existing at the
time such Person becomes a Subsidiary or assumed in connection with an Asset
Acquisition by such Person and not incurred in connection with, or in
anticipation of, such Person becoming a Subsidiary or such Asset Acquisition.
"Advertising Displays" mean all posters, signs, billboards and other
outdoor advertising displays and related sites therefor owned or leased (as
lessee) by the Company and its Subsidiaries.
"Affiliate" of any specified Person means any other Person that,
directly or indirectly through one or more intermediaries, controls, is
controlled by or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative meanings,
the terms "controlling," "controlled by," and "under common control with") as
used with respect to any Person, means the possession, directly or indirectly,
of the power to direct or cause the direction of the management or policies of
such Person, whether through the ownership of voting securities, by
<PAGE>
-2-
agreement or otherwise. For purposes of this definition, none of The Chase
Manhattan Bank or any of its Affiliates shall be deemed an Affiliate of the
Company.
"Affiliate Transaction" has the meaning provided in Section 4.14.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Asset Acquisition" means (i) an Investment by the Company or any of
its Subsidiaries in any other Person pursuant to which such Person shall become
a Subsidiary of the Company or shall be consolidated or merged with the Company
or any Subsidiary of the Company, or (ii) the acquisition by the Company or any
Subsidiary of the Company of assets of any Person comprising a division or line
of business of such Person or which is otherwise outside of the ordinary course
of business, or (iii) the acquisition by the Company or any Subsidiary of the
Company of Advertising Displays of any Person with a Fair Market Value in excess
of $100,000.
"Asset Sale" means any direct or indirect sale, conveyance, transfer
or lease (that has the effect of a disposition and is not for security purposes)
or other disposition (that is not for security purposes) to any Person other
than the Company or a Subsidiary of the Company, in one transaction or a series
of related transactions, of (i) any Capital Stock of any Subsidiary of the
Company, (ii) any assets of the Company or any Subsidiary of the Company which
constitute substantially all of an operating unit or line of business of the
Company and its Subsidiaries, (iii) any other property or asset of the Company
or any Subsidiary of the Company outside of the ordinary course of business or
(iv) any Advertising Displays of the Company or any Subsidiary of the Company
with a Fair Market Value in excess of $100,000. For the purposes of this
definition, the term "Asset Sale" shall not include (i) any disposition of
property or assets of the Company that is governed under Section 5.1, (ii) sales
of property and equipment that have become worn out, obsolete or damaged or
otherwise unsuitable for use in connection with the business of the Company or
any Subsidiary of the Company, as the case may be, (iii) dispositions of
property pursuant to any condemnation or other taking by any governmental
authority, provided, that any net cash proceeds of such taking are applied
--------
pursuant to Section 4.13(iii) and (iv) for purposes of Section 4.13, any sale,
conveyance, transfer, lease or other disposition of any property or asset,
whether in one transaction or a series of re-
<PAGE>
-3-
lated transactions occurring within one year, either (x) involving assets with a
Fair Market Value not in excess of $500,000 or (y) which constitutes an
incurrence of a Capitalized Lease Obligation.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Company or any of its Subsidiaries from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Subsidiary of the Company as a result of such Asset Sale and (d)
deduction of appropriate amounts to be provided by the Company or such
Subsidiary as a reserve, in accordance with GAAP, against any liabilities
associated with the assets sold or disposed of in such Asset Sale and retained
by the Company or such Subsidiary after such Asset Sale, including, without
limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the assets sold or disposed of in such Asset Sale,
and (ii) promissory notes and other non-cash consideration received by the
Company or any Subsidiary from such Asset Sale or other disposition upon the
liquidation or conversion of such notes or non-cash consideration into cash.
"Available Asset Sale Proceeds" means, with respect to any Asset Sale,
the aggregate Asset Sale Proceeds from such Asset Sale that has not been applied
in accordance with Section 4.13(iii).
"Average Life to Stated Maturity" means, with respect to any
Indebtedness, as at any date of determination, the quotient obtained by dividing
(i) the sum of the products of (a) the number of years (or any fraction thereof)
from such date to the date or dates of each successive scheduled principal
payment (including, without limitation, any sinking fund requirements) of such
Indebtedness multiplied by (b) the amount of each such principal payment by (ii)
the sum of all such principal payments.
"Bankruptcy Law" means Title 11 of the U.S. Code or any other similar
Federal, state or foreign law for the relief of debtors.
<PAGE>
-4-
"Board" of any Person means the board of directors, management
committee or other governing body of such Person.
"Board Resolution" means a copy of a resolution certified by a
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the board of directors of the Company to be in full force and effect on the date
of such certification, and delivered to the Trustee.
"Business Day" means any day except a Saturday, a Sunday or
any day on which banking institutions in New York, New York, are required or
authorized by law or other governmental action to be closed.
"Capital Stock" means, with respect to any Person, any and all
shares or other equivalents (however designated) of capital stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any option, warrant or other security
convertible into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented
by obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and for purposes of this definition,
the amount of such Indebtedness shall be the capitalized amount of such
obligations determined in accordance with GAAP.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
not more than six months from the date of acquisition, (iii) certificates of
deposit and eurodollar time deposits with maturities of six months or less from
the date of acquisition, bankers' acceptances with maturities not exceeding six
months and overnight bank deposits, in each case with any lender party to the
New Credit Facility or with any domestic commercial bank having capital and
surplus in excess of $500 million and a Thompson Bank Watch Rating of "B" or
better, (iv) repurchase obligations with a term of not more than seven days for
underlying securities of the types described in clauses (ii) and (iii) above
entered into with any financial institution meeting the qualifications specified
in clause (iii) above, (v) commercial paper having a rating of at least P1 from
Moody's or a rating of at least Al from S&P and (vi) money market mutual or
similar funds having assets in excess of $100 million.
<PAGE>
-5-
"Change of Control" means the occurrence of any of the
following events (whether or not approved by the Board of Directors of the
Company); (i) any Person (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act, including any group acting for the purpose of acquiring,
holding or disposing of securities within the meaning of Rule 13d-5(b)(1)under
the Exchange Act), other than one or more Permitted Holders, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 and 13d-5 under the Exchange Act,
except that a Person shall be deemed to have "beneficial ownership" of all
shares that any such Person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time, upon the happening of
an event or otherwise), directly or indirectly, of more than 35% of the total
voting power of the then outstanding Voting Stock of the Company; (ii) the
Company consolidates with, or merges with or into, another Person (other than
the Company or a Wholly Owned Subsidiary) or the Company or any or its
Subsidiaries sells, assigns, conveys, transfers, leases or otherwise disposes of
all or substantially all of the assets of the Company and its Subsidiaries
(determined on a consolidated basis) to any Person (other than the Company or
any Wholly Owned Subsidiary), other than any such transaction where immediately
after such transaction the Person or Persons that "beneficially owned" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a Person
shall be deemed to have "beneficial ownership" of all securities that such
Person has the right to acquire, whether such right is exercisable immediately
or only after the passage of time) immediately prior to such transaction,
directly or indirectly, a majority of the total voting power of the then
outstanding Voting Stock of the Company, as the case may be, "beneficially own"
(as so determined), directly or indirectly, a majority of the total voting power
of the then outstanding Voting Stock of the surviving or transferee Person;
(iii) during any period of two consecutive years, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election by such Board of Directors or
whose nomination for election by the shareholders of the Company was approved by
a vote of a majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office;
or (iv) the Company is liquidated or dissolved or adopts a plan of liquidation
or dissolution other than in a transaction which complies with the provisions
described in Section 5.1
"Change of Control Date" has the meaning provided in
Section 4.15.
"Change of Control Offer" has the meaning provided in
Section 4.15.
"Change of Control Payment Date" has the meaning provided
in Section 4.15.
"Commission" means the Securities and Exchange Commission.
"Common Stock" of any Person means all Capital Stock of such
Person that is generally entitled to (i) vote in the election of directors of
such Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
<PAGE>
-6-
"Company" has the meaning provided in the introductory
paragraph.
"Consolidated Interest Expense" means, with respect to any
Person, for any period, the aggregate amount of interest that, in conformity
with GAAP, would be set forth opposite the caption "interest expense" or any
like caption on an income statement for such Person and its Subsidiaries on a
consolidated basis (including, but not limited to, imputed interest included in
Capitalized Lease Obligations, all commissions, discounts and other fees and
charges owed with respect to letters of credit and bankers' acceptance
financing, the net costs associated with hedging obligations, amortization of
other financing fees and expenses, the interest portion of any deferred payment
obligation, amortization of discount or premium, if any, and all other non-cash
interest expense (other than interest amortized to cost of sales)) plus, without
duplication, all net capitalized interest for such period and all interest
incurred or paid under any guarantee of Indebtedness (including a guarantee of
principal, interest or any combination thereof) of any Person, plus the amount
of all dividends or distributions paid on Disqualified Capital Stock (other than
dividends paid or payable in shares of Capital Stock of the Company).
"Consolidated Net Income" means, with respect to any Person,
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided, however, that (i) the Net Income (but not loss) of any
Person that is accounted for by the equity method of accounting shall be
included only to the extent of the amount of dividends or distributions paid in
cash to the referent Person or a Subsidiary thereof, (ii) the Net Income of any
Subsidiary of such Person shall be excluded to the extent that the declaration
or payment of dividends or similar distributions by that Subsidiary of that Net
Income to such Person or one of its other Subsidiaries is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded, (iv)
extraordinary gains and losses shall be excluded from Consolidated Net Income
for purposes of Section 4.8 and (v) the cumulative effect of a change in
accounting principles shall be excluded.
<PAGE>
-7-
"consolidation" means, with respect to the Company, the
consolidation of the accounts of its Subsidiaries with those of the Company, all
in accordance with GAAP.
"covenant defeasance" has the meaning provided in Section 8.2.
"Cumulative Consolidated Interest Expense" means, as of any
date of determination, Consolidated Interest Expense of the Company from the
Issue Date to the end of the Company's most recently ended full fiscal quarter
prior to such date, taken as a single accounting period.
"Cumulative EBITDA" means, as of any date of determination,
EBITDA of the Company from the Issue Date to the end of the Company's most
recently ended full fiscal quarter prior to such date, taken as a single
accounting period.
"Currency Agreement" means any foreign exchange contract,
currency swap agreement or other similar agreement or arrangement designed to
protect against fluctuations in currency values.
"Debt Securities" means any debt securities (including any
guarantee of such securities) issued by the Company and/or any Subsidiary in
connection with a public offering (whether or not underwritten) or a private
placement (provided such private placement is underwritten for resale pursuant
to Rule 144A, Regulation S or otherwise under the Securities Act or sold on an
agency basis by a broker-dealer or one of its Affiliates to 10 or more
beneficial holders), it being understood that the term "Debt Securities" shall
not include any evidence of Indebtedness under the New Credit Facility or any
other commercial bank borrowings or similar borrowings, recourse transfers of
financial assets, capital leases or other types of borrowings incurred in a
manner not customarily viewed as a "securities offering."
"Default" means any event that is, or after notice or passage
of time or both would be, an Event of Default.
"Default Amount" means 100% of the principal amount of all
outstanding Securities, plus accrued and unpaid interest, if any, thereon.
"Designated Senior Indebtedness" means (i) all Senior
Indebtedness under or in respect of the New Credit Facility and (ii) any other
Senior Indebtedness that, at the time of the In-
<PAGE>
-8-
currence of such Indebtedness, is specifically designated in the instrument
evidencing such Senior Indebtedness as "Designated Senior Indebtedness" by the
Company.
"Designation Amount" has the meaning provided in Section 4.16.
"Disinterested Director" means, with respect to any
transaction or series of transactions, a member of the Board of the Company, as
the case may be, other than any such Board member who has any material direct or
indirect financial interest in or with respect to such transaction or series of
transactions.
"Disqualified Capital Stock" means any Capital Stock of the
Company or any of its Subsidiaries that, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the fixed maturity date of the Securities, for cash and/or securities
constituting Indebtedness, provided, however, that (i) such Capital Stock shall
-------- -------
only constitute Disqualified Capital Stock to the extent it so matures or is
redeemable or exchangeable at the option of the holder thereof on or prior to
the final maturity date of the Securities and (ii) Preferred Stock that is
issued with the benefit of provisions requiring a change of control offer to be
made for such Preferred Stock in the event of a change of control of the
Company, which provisions have substantially the same effect as Section 4.15,
shall not be deemed to be Disqualified Capital Stock solely by virtue of such
provisions.
"EBITDA" means, for any Person, for any period, an amount
equal to (a) the sum of, without duplication, Consolidated Net Income for such
period, plus, to the extent reducing such Consolidated Net Income, (i) the
provision for taxes for such period based on income or profits to the extent
such income or profits were included in computing Consolidated Net Income and
any provision for taxes utilized in computing net loss under clause (i) hereof,
plus (ii) Consolidated Interest Expense for such period, plus (iii) depreciation
for such period on a consolidated basis, plus (iv) amortization of intangibles
for such period on a consolidated basis, plus (v) any other non-cash items
reducing Consolidated Net Income for such period, minus (b) all non-cash items
increasing such Consolidated Net Income for such period, all for such Person and
its
<PAGE>
-9-
Subsidiaries determined in accordance with GAAP, except that with respect to the
Company each of the foregoing items shall be determined on a consolidated basis
with respect to the Company and the Subsidiaries only; and provided, however,
-------- -------
that, for purposes of calculating EBITDA during any fiscal quarter, cash income
from a particular Investment of such Person (other than a consolidated
Subsidiary of the Company) shall be included only (x) if cash income has been
received by such Person with respect to such Investment during each of the
previous four fiscal quarters, or (y) if the cash income derived from such
Investment is attributable to Cash Equivalents.
"Event of Default" has the meaning provided in Section 6.1.
"Excess Proceeds" means, with respect to any Asset Sale, the
then Available Asset Sale Proceeds less any such Available Asset Sale Proceeds
that are required to be applied and are applied in accordance with Section 4.13.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means, with respect to any asset or
property, the price that could be negotiated in an arms'-length free market
transaction, for cash, between a willing seller and a willing buyer, neither of
whom is under pressure or compulsion to complete the transaction. Unless
otherwise specified in this Indenture, Fair Market Value shall be determined by
the Board of the Company acting in good faith and shall be evidenced by a Board
Resolution delivered to the Trustee.
"GAAP" means generally accepted accounting principles
consistently applied as in effect in the United States on the Issue Date.
"guarantee" means, as applied to any obligation, (i) a
guarantee (other than by endorsement of negotiable instruments for collection in
the ordinary course of business), direct or indirect, in any manner, of any part
of all of such obligation and (ii) an agreement, direct or indirect, contingent
or otherwise, the practical effect of which is to assure in any way the payment
or performance (or payment of damages in the event of non-performance) of all or
any part of such obligation including, without limiting the foregoing, the
payment of amounts drawn down by letters of credit.
<PAGE>
-10-
"Guarantee" has the meaning provided in the third
introductory paragraph hereto.
"Guarantor" has the meaning provided in the third
introductory paragraph hereto.
"Guarantor Senior Indebtedness" means, with respect to the
Indebtedness of any Guarantor, any such Indebtedness represented by a guarantee
by such Guarantor of any Senior Indebtedness.
"Holder" or "Securityholder" means the Person in whose name a
Security is registered on the Registrar's books.
"incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such person (and "incurrence," "incurred," "incurrable," and "incurring"
shall have meanings correlative to the foregoing); provided that a change in
--------
GAAP that by itself results in an obligation of such Person that exists at such
time becoming Indebtedness shall not be deemed an incurrence of such
Indebtedness.
"Indebtedness" means (without duplication), with respect to
any Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, that is for borrowed money (whether or not the recourse
of the lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other accrued liabilities arising in the ordinary
course of business) if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, and shall also include, to the extent not otherwise included (i) any
Capitalized Lease Obligations, (ii) obligations secured by a lien to which the
property or assets owned or held by such Person is subject, whether or not the
obligation or obligations secured thereby shall have been assumed, (iii)
guarantees of items of other Persons which would be included within this
definition for such other Persons (whether or not such items would appear upon
the balance sheet of the guarantor), (iv) all obligations
<PAGE>
-11-
for the reimbursement of any obligor on any letter of credit, banker's
acceptance or similar credit transaction, (v) Disqualified Capital Stock of such
Person or any of its Subsidiaries and (vi) obligations of any such Person under
any Interest Rate Agreement applicable to any of the foregoing (if and to the
extent such Interest Rate Agreement obligations would appear as a liability upon
a balance sheet of such Person prepared in accordance with GAAP). The amount of
Indebtedness of any Person at any date shall be the outstanding balance at such
date of all unconditional obligations as described above and, with respect to
contingent obligations, the maximum liability upon the occurrence of the
contingency giving rise to the obligation, provided that (i) the amount
--------
outstanding at any time of any Indebtedness issued with original issue discount,
including the Notes, is the principal amount of such Indebtedness less the
remaining unamortized portion of the original issue discount of such
Indebtedness at such time as determined in conformity with GAAP, (ii)
Indebtedness shall not include any liability for federal, state, local or other
taxes and (iii) the principal amount of any Indebtedness shall be reduced by the
aggregate amount of Cash Equivalents of the Company and its Subsidiaries that
are pledged to secure, and are required to be applied solely to, the repayment
of the principal of such Indebtedness. Notwithstanding any other provision of
the foregoing definition, any trade payable arising from the purchase of goods
or materials or for services obtained in the ordinary course of business shall
not be deemed to be "Indebtedness" of the Company or any of its Subsidiaries for
purposes of this definition.
"Indenture" means this Indenture as amended or supplemented
from time to time pursuant to the terms hereof.
"Interest Payment Date," when used with respect to any
Security, means the stated maturity of an installment of interest specified in
such Security.
"Interest Rate Agreement" means, for any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance, loan
or other extension of credit (including by means of a guarantee) or capital
contribution to (by means of transfers of property to others, payments for
property or services for the account or use of others or otherwise) the
acquisition,
<PAGE>
-12-
by purchase or otherwise, of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities or other evidence of beneficial
interest of any Person. Investments shall exclude extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices. In
addition to the foregoing, any foreign exchange contract, currency swap,
Interest Rate Agreement or similar agreement shall constitute an Investment.
"Issue Date" means the date the Securities are first issued by
the Company and authenticated by the Trustee under this Indenture.
"legal defeasance" has the meaning provided in Section 8.2.
"Legal Holiday" means any day other than a Business Day.
"Leverage Ratio" means the ratio of (i) the sum of the
aggregate outstanding amount of Indebtedness of the Company and its Subsidiaries
as of the date of calculation on a consolidated basis in accordance with GAAP to
(ii) the Company's EBITDA for the four full fiscal quarters (the "Four Quarter
Period") ending on or prior to the date of determination for which financial
statements are available. For purposes of this definition, the Company's
"EBITDA" shall be calculated on a pro forma basis after giving effect to any
Asset Sales or Asset Acquisitions (including, without limitation, any Asset
Acquisition giving rise to the need to make such calculation as a result of the
Company or one of its Subsidiaries (including any Person who becomes a
Subsidiary of the Company as a result of such Asset Acquisition) incurring,
assuming or otherwise becoming liable for Indebtedness) at any time on or
subsequent to the first day of the Four Quarter Period and on or prior to the
date of determination, as if such Asset Sale or Asset Acquisition (including any
EBITDA associated with such Asset Acquisition and including any pro forma
expense and cost reductions determined in accordance with Article 11 of
Regulation S-X) occurred on the first day of the Four Quarter Period.
"Lien" means with respect to any property or assets of any
Person, any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority, or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such property or assets
(including without limitation, any Capitalized Lease
<PAGE>
-13-
Obligation, conditional sales, or other title retention agreement having
substantially the same economic effect as any of the foregoing).
"Maturity Date" means, with respect to any Security, the date
specified in such Security as the fixed date on which principal of such Security
is due and payable.
"Moody's" means Moody's Investors Service, Inc.
"Net Income" means, with respect to any Person for any period,
the net income (loss) of such Person determined in accordance with GAAP.
"New Credit Facility" means that certain Credit Agreement,
dated as of , 1997 by and among the Company, the Guarantors, Chase Manhattan
Bank, as agent and as a lender, and certain banks, financial institutions and
other entities, as lenders, including any related notes, letters of credit
issued thereunder, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, restated,
modified, renewed, refunded, increased, replaced or refinanced, in whole or in
part, from time to time, whether or not with the same lenders or agents.
"Non-Payment Event of Default" means any event (other than a
Payment Default) the occurrence of which entitles one or more Persons to
accelerate the maturity of any Designated Senior Indebtedness.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means Chairman of the Board and the Chief Executive
Officer, the President, any Vice President, the Chief Financial Officer, the
Treasurer or the Secretary, of the Company or any Guarantor, as the case may be.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chairman, Chief Executive Officer, the President or
any Vice President and the Chief Financial Officer or any Treasurer of such
Person that shall comply with applicable provisions of the Indenture.
"Opinion of Counsel" means a written opinion from legal
counsel who is acceptable to the Trustee, which may include
<PAGE>
-14-
an individual employed as counsel to the Company or a Guarantor.
"Other Pari Passu Debt" means Indebtedness of the Company or
any Guarantor that neither constitutes Senior Indebtedness nor Guarantor Senior
Indebtedness, as applicable, nor Subordinated Indebtedness.
"Other Pari Passu Debt Pro Rata Share" means the amount of the
applicable Available Asset Sale Proceeds obtained by multiplying the amount of
such Available Asset Sale Proceeds by a fraction, (i) the numerator of which is
the aggregate accreted value and/or principal amount, as the case may be, of all
Other Pari Passu Debt outstanding at the time of the applicable Asset Sale with
respect to which the Company is required to use Available Asset Sale Proceeds to
repay or make an offer to purchase or repay and (ii) the denominator of which is
the sum of (a) the aggregate principal amount of all Securities outstanding at
the time of the applicable Asset Sale and (b) the aggregate principal amount or
the aggregate accreted value, as the case may be, of all Other Pari Passu Debt
outstanding at the time of the applicable Asset Sale Offer with respect to which
the Company is required to use the applicable Available Asset Sale Proceeds to
offer to repay or make an offer to purchase or repay.
"Paying Agent" has the meaning provided in Section 2.3.
"Payment Default" means any default, whether or not any
requirement for the giving of notice, the lapse of time or both, or any other
condition to such default becoming an event of default has occurred, in the
payment of principal of (or premium, if any) or interest on or any other amount
payable in connection with Designated Senior Indebtedness.
"Permitted Asset Swap" means the exchange of any interest of
the Company or any of its Subsidiaries in any Advertising Display or Displays
for a similar interest in an Advertising Display or Displays of a Person other
than the Company or such Subsidiary; provided that (i) the aggregate Fair Market
--------
Value of the Advertising Display or Displays being transferred by the Company or
such Subsidiary is not greater than the aggregate Fair Market Value of the
Advertising Display or Displays received by the Company or such Subsidiary in
such exchange, or (ii) if the aggregate Fair Market Value of the Advertising
Display or Displays being transferred by the Company or such Subsidiary is
greater than the aggregate Fair Market
<PAGE>
-15-
Value of the Advertising Display or Displays received by the Company or such
Subsidiary in such exchange, so long as the Company or such Subsidiary receives
cash or other property with a Fair Market Value equal to the difference between
the Fair Market Value of the Advertising Display or Displays being transferred
by the Company or such Subsidiary and the Fair Market Value of the Advertising
Display or Displays received by the Company or such Subsidiary in such exchange,
the transaction shall be bifurcated and treated as a "Permitted Asset Swap" to
the extent of the Fair Market Value of the Advertising Display or Displays
received by the Company or such Subsidiary in such exchange, and as an "Asset
Sale" to the extent of the difference between the Fair Market Value of the
Advertising Display or Displays being transferred by the Company or such
Subsidiary and the Fair Market Value of the Advertising Display or Displays
received by the Company or such Subsidiary in such exchange.
"Permitted Indebtedness" means each of the following: (i)
Indebtedness of the Company, as borrower, and/or any Guarantor, as guarantor,
under the New Credit Facility in an amount not to exceed $200,000,000, less the
aggregate amount of all principal repayments thereunder (to the extent, in the
case of payments of revolving credit Indebtedness, that the corresponding
commitments have been permanently reduced) or scheduled payments actually made
thereunder; (ii) Indebtedness under the Securities and the Guarantees; (iii) (i)
Indebtedness of any Subsidiary of the Company owed to and held by the Company or
a Subsidiary of the Company and (ii) Indebtedness of the Company owed to and
held by any Subsidiary of the Company; provided that an incurrence of
--------
Indebtedness shall be deemed to have occurred upon (x) any sale or other
disposition (excluding assignments as security to financial institutions) of any
Indebtedness of the Company or a Subsidiary of the Company referred to in this
clause (iii) to a Person (other than the Company or a Subsidiary of the Company)
or (y) any sole or other disposition of Capital Stock of a Subsidiary of the
Company which holds Indebtedness of the Company or another Subsidiary of the
Company such that such Subsidiary, in any such case, ceases to be a Subsidiary
of the Company; (iv) (i) Interest Rate Agreements of the Company and/or any
Subsidiary of the Company relating to Indebtedness of the Company and/or such
Subsidiary, as the case may be (which Indebtedness (x) bears interest at
fluctuating interest rates and (y) is otherwise permitted to be incurred under
Section 4.8), and/or (ii) Indebtedness (which Indebtedness would bear interest
at fluctuating interest rates) for which a lender has provided a commitment
(subject to customary conditions) in an amount reasonably
<PAGE>
-16-
anticipated to be incurred by the Company and/or a Subsidiary of the Company in
the following 12 months after such Interest Rate Agreement has been incurred,
but only to the extent, in the case of either subclause (i) or (ii), that the
notional principal amount of such Interest Rate Agreements does not exceed the
principal amount of the Indebtedness (and/or Indebtedness subject to
commitments) to which such Interest Rate Agreements relate; (v) Purchase Money
Indebtedness and Capitalized Lease Obligations of the Company and/or any
Subsidiary of the Company incurred to acquire property in the ordinary course of
business, which Purchase Money Indebtedness and Capitalized Lease Obligations do
not in the aggregate exceed 5% of the Company's consolidated total assets; (vi)
Indebtedness ("Refinancing Indebtedness") of the Company and/or any Subsidiary
of the Company to the extent it represents a replacement, renewal, refinancing
or extension (a "Refinancing") of outstanding Indebtedness of the Company and/or
of any Subsidiary of the Company incurred or outstanding pursuant to clause (ii)
or (vii) of this definition or the proviso to Section 4.8, provided that (1)
--------
Indebtedness of the Company may not be Refinanced to such extent under this
clause (vi) with Indebtedness of any Subsidiary of the Company and (2) any such
Refinancing shall only be permitted under this clause (vi) to the extent that
(x) it does not result in a lower Average Life to Stated Maturity of such
Indebtedness as compared with the Indebtedness being Refinanced and (y) it does
not exceed the sum of the principal amount (or, if such Indebtedness provides
for a lesser amount to be due and payable upon a declaration of acceleration
thereof, an amount no greater than such lesser amount) of the Indebtedness being
Refinanced plus the amount of accrued interest thereon and the amount of any
reasonably determined prepayment premium necessary to accomplish such
Refinancing and such reasonable fees and expenses incurred in connection
therewith; and (vii) in addition to the items referred to above, Indebtedness of
the Company and/or any Subsidiary of the Company having an aggregate principal
amount not to exceed $25,000,000 at any time outstanding.
"Permitted Investments" means (i) Investments in any of the
Securities; (ii) Investments in Cash Equivalents; (iii) Investments by the
Company or any of its Subsidiaries in a Subsidiary of the Company or another
Person, if as a result of such Investment (a) such other Person becomes a
Subsidiary of the Company or (b) such other Person is merged or consolidated
with or into, or transfers or conveys all or substantially all of its assets to,
the Company or a Subsidiary of the Company; (iv) Investments received in
connection with the bankruptcy or reorganization of suppliers and customers and
in settlement of
<PAGE>
-17-
delinquent obligations of, and other disputes with, customers and suppliers, in
each case arising in the ordinary course of business; (v) Investments in
Interest Rate Agreements permitted by Section 4.8; and (vi) loans or advances to
officers or employees of the Company and its Subsidiaries in the ordinary course
of business for bona fide business purposes of the Company and its Subsidiaries
(including travel and moving expenses) not in excess of $1,000,000 in the
aggregate at any one time outstanding.
"Permitted Junior Securities" means unsecured equity
---------
securities or subordinated securities of an issuer as reorganized or readjusted
or securities of the Company or any other company, trust, corporation or
partnership provided for by a plan of reorganization or readjustment that, in
the case of any such subordinated securities as junior or the payment of which
is otherwise subordinated, at least to the extent provided in this Indenture
with respect to the Securities, to the payment and satisfaction in full in cash
of all Senior Indebtedness of the Company at the time outstanding, and to the
payment of all securities issued in exchange therefor, to the holders of the
Senior Indebtedness at the time outstanding and that has no shorter a maturity
than the Securities.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however
designated, that entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"principal" of a debt security (including the Securities)
means the principal amount of the security plus, when appropriate, the premium,
if any, on the security. Such amount shall, if applicable, be calculated by
reference to the last sentence of "Indebtedness."
"Public Equity Offering" means a public offering by the
Company of shares of its common stock on a primary basis pursuant to a
registration statement filed and declared effective pursuant to the Securities
Act for gross proceeds of not less than $20,000,000 in cash.
<PAGE>
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"Purchase Money Indebtedness" means any Indebtedness incurred
in the ordinary course of business by a Person to finance the cost (including
the cost of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Redemption Date" means, with respect to any Security, the
date on which such Security is to be redeemed by the Company pursuant to the
terms of the Securities.
"Registrar" has the meaning provided in Section 2.3.
"Restricted Payment" means any of the following: (i) the
declaration or payment of any dividend or any other distribution or payment on
Capital Stock of the Company or any of its Subsidiaries or any payment made to
the direct or indirect holders (in their capacities as such) of Capital Stock of
the Company or any of its Subsidiaries (other than (x) dividends or
distributions payable solely in Capital Stock (other than Disqualified Stock) or
in options, warrants or other rights to purchase Capital Stock (other than
Disqualified Stock), and (y) in the case of Subsidiaries of the Company,
dividends or distributions payable to the Company or to a Wholly Owned
Subsidiary or dividends or distributions made on a pro rata basis to all holders
of Capital Stock of a Restricted Subsidiary), (ii) the purchase, redemption or
other acquisition or retirement for value of any Capital Stock of the Company or
any of its Subsidiaries (other than Capital Stock owned by the Company or a
Subsidiary of the Company), (iii) the making of any principal payment on, or the
purchase, defeasance, repurchase, redemption or other acquisition or retirement
for value, prior to any scheduled maturity, scheduled repayment or scheduled
sinking fund payment, of any Subordinated Indebtedness other than Subordinated
Indebtedness acquired in anticipation of satisfying a scheduled sinking fund
obligation, principal installment or final maturity, in each case due within one
year of the date of acquisition) and (iv) the making of any Investment in any
Person other than a Permitted Investment.
"S&P" means Standard & Poor's Corporation.
"Securities" means the [ ]% Senior Subordinated Notes
Due 2007 issued, authenticated and delivered under this Indenture, as amended or
supplemented from time to time pursuant to the terms of this Indenture.
<PAGE>
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"Securities Act" means the Securities Act of 1933, as amended.
"Senior Indebtedness" means the principal of and premium, if
any, and interest (including, without limitation, interest accruing or that
would have accrued but for the filing of a bankruptcy, reorganization or other
insolvency proceeding whether or not such interest constitutes an allowable
claim in such proceeding) on, and any and all other fees, charges, expense
reimbursement obligations and other amounts due pursuant to the terms of all
agreements, documents and instruments providing for, creating, securing or
evidencing or otherwise entered into in connection with (a) all obligations of
the Company owed to lenders under the New Credit Facility, (b) all obligations
of the Company with respect to any Interest Rate Agreement, (c) all obligations
of the Company to reimburse any bank or other person in respect of amounts paid
under letters of credit, acceptances or other similar instruments, (d) all other
Indebtedness of the Company that does not provide that it is to rank pari passu
with or subordinate to the Securities and (e) all deferrals, renewals,
extensions and refundings of, and amendments, modifications and supplements to,
any of the Senior Indebtedness described above. Notwithstanding anything to the
contrary in the foregoing, Senior Indebtedness will not include (i) Indebtedness
of the Company to any of its Subsidiaries, (ii) Indebtedness represented by the
Securities, (iii) any Indebtedness which provides that it is subordinated or
junior in right of payment to any other Indebtedness of the Company, or (iv) any
trade payable arising from the purchase of goods or materials or for services
obtained in the ordinary course of business or any obligation that is by
operation of law or judicial decision subordinate to any general unsecured
obligations of the Company or (v) Indebtedness of the Company to the extent that
such Indebtedness is owed to and held by Federal, State, local or other
governmental authority.
"Significant Subsidiary" means any Subsidiary of the Company
that would be a "significant subsidiary" as defined in Article I, Rule 1-02 of
Regulation S-X, promulgated pursuant to the Securities Act, as such Regulation
is in effect on the date hereof.
"Subordinated Indebtedness" means with respect to the Company,
Indebtedness of the Company that is expressly subordinated in right of payment
to the Securities or, with respect to any Guarantor, Indebtedness of such
Guarantor that is expressly subordinated in right of payment to the Guarantee of
such Guarantor.
<PAGE>
-20-
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the direction
of the management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the first-named Person for
financial statement purposes.
"Surviving Entity" has the meaning provided in Section 5.1.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
(S)(S) 77aaa-77bbbb) as in effect on the date of this Indenture.
"Trust Officer" means an officer or assistant officer of the
Trustee assigned to the corporate trustee department (or any successor group) of
the Trustee, or any successor to such department or, in the case of a successor
trustee, an officer or assistant officer assigned to the department, division or
group performing the corporate trust work of such successor.
"Trustee" means the party named as such in this Indenture
until a successor replaces it in accordance with the provisions of this
Indenture and thereafter means such successor.
"U.S. Government Obligations" has the meaning provided in
Section 8.2(d).
"U.S. Legal Tender" means such coin or currency of the United
States of America as at the time of payment shall be legal tender for the
payment of public and private debts.
"Voting Stock" means, with respect to any Person, securities
of any class or classes of Capital Stock in such Person entitling the holders
thereof to vote under ordinary circumstances in the election of members of the
board of directors or other governing body of such Person.
<PAGE>
-21-
"Wholly Owned Subsidiary" means any Subsidiary of the Company,
all of the outstanding voting securities (other than directors' qualifying
shares) of which are owned, directly or indirectly, by the Company.
SECTION 1.2. Incorporation by Reference of Trust Indenture
Act.
---------------------------------------------
Whenever this Indenture refers to a provision of the TIA, the
provision shall be deemed incorporated by reference in and made a part of this
Indenture. The following TIA terms used in this Indenture have the following
meanings:
(a) "indenture securities" means the Securities;
(b) "indenture security holder" means a Holder or
Securityholder;
(c) "indenture to be qualified" means this Indenture;
(d) "indenture trustee" or "institutional trustee"
means the Trustee; and
(e) "obligor" on the indenture securities means the
Company, each Guarantor or any other obligor on the Securities.
All other TIA terms used in this Indenture that are defined by
the TIA, defined by TIA reference to another statute or defined by Commission
rule and not otherwise defined herein have the meanings so assigned to them
therein.
SECTION 1.3. Rules of Construction.
---------------------
Unless the context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) words in the singular include the plural, and words
in the plural include the singular;
(d) "herein," "hereof" and other words of similar import
refer to this Indenture as a whole and not to any particular
Article, Section or other Subsection; and
<PAGE>
-22-
(e) unless otherwise specified herein, all accounting
terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial
statements required to be delivered hereunder shall be prepared in
accordance with GAAP.
ARTICLE II
THE SECURITIES
--------------
SECTION 2.1. Form and Dating.
---------------
The Securities and the Trustee's certificates of
authentication with respect thereto shall be substantially in the form set forth
in Exhibit A, which is annexed hereto and hereby incorporated in and expressly
made a part of this Indenture. The Securities may have notations, legends or
endorsements (including notations relating to any Guarantee) required by law,
rule or usage to which the Company or any Guarantor is subject. Each Security
shall be dated the date of its authentication. The terms and provisions
contained in the Securities shall constitute, and are expressly made, a part of
this Indenture.
SECTION 2.2. Execution and Authentication.
----------------------------
Two Officers (each of whom shall have been duly authorized by
all requisite partnership or corporate action, as the case may be) shall execute
the Securities on behalf of the Company by manual or facsimile signature.
If an Officer whose signature is on a Security no longer holds
that office at the time the Trustee authenticates the Security or at any time
thereafter, the Security shall be valid nevertheless.
A Security shall not be valid until an authorized officer of
the Trustee manually signs the certificate of authentication on the Security.
Such signature shall be conclusive evidence that the Security has been
authenticated under this Indenture.
The Trustee shall authenticate Securities for original issue
in an aggregate principal amount not to exceed $125,000,000 upon receipt of the
Officers' Certificate of the Company signed by two Officers of the Company
directing the Trustee to authenticate the Securities and certifying that all
conditions precedent to the issuance of the Securities con-
<PAGE>
-23-
tained herein have been complied with. The aggregate principal amount of
Securities outstanding at any time may not exceed $125,000,000, except as
provided in Section 2.8.
The Trustee may appoint an authenticating agent acceptable to
the Company to authenticate Securities. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. Such authenticating agent shall
have the same rights as the Trustee in any dealings hereunder with the Company
or with any of the Company's Affiliates.
The Securities shall be issuable in fully registered form
only, without coupons, in denominations of $1,000 principal amount and any
integral multiple thereof.
SECTION 2.3. Registrar and Paying Agent.
--------------------------
The Company shall maintain an office or agency (which shall be
located in the Borough of Manhattan in The City of New York, State of New York)
where (a) Securities may be presented for registration of transfer or for
exchange (the "Registrar"), (b) Securities may be presented for payment (the
"Paying Agent") and (c) notices and demands to or upon the Company and any
Guarantor in respect of the Securities, the Guarantees and this Indenture may be
served. The Registrar shall keep a register of the Securities and of their
transfer and exchange. The Company may have one or more co-registrars and one or
more additional paying agents. The term "Paying Agent" includes any additional
paying agent. Neither the Company nor any Affiliate thereof may act as Paying
Agent.
The Company shall enter into an appropriate agency agreement
with any Agent not a party to this Indenture that shall incorporate the
provisions of the TIA. The agreement shall implement the provisions of this
Indenture that relate to such Agent. The Company shall notify the Trustee of the
name and address of any such Agent. If the Company fails to maintain a Registrar
or Paying Agent, or fail to give the foregoing notice, the Trustee shall act as
such.
The Company initially appoints the Trustee located at the
address set forth in Section 12.2 as Registrar, Paying Agent and agent for
service of notices and demands in connection with the Securities, the Guarantees
and this Indenture.
<PAGE>
-24-
SECTION 2.4. Paying Agent To Hold Money in Trust.
-----------------------------------
Each Paying Agent shall hold in trust for the benefit of the
Securityholders or the Trustee all money held by the Paying Agent for the
payment of principal of or interest on the Securities (whether such money has
been paid to it by the Company or any other obligor on the Securities), and the
Company and the Paying Agent shall notify the Trustee of any default by the
Company (or any other obligor on the Securities) in making any such payment.
Money held in trust by the Paying Agent need not be segregated except as
required by law and in no event shall the Paying Agent be liable for any
interest on any money received by it hereunder. The Company at any time may
require the Paying Agent to pay all money held by it to the Trustee and account
for any funds disbursed and the Trustee may at any time during the continuance
of any Event of Default specified in Section 6.1(a)(i) or (ii), upon written
request to the Paying Agent, require such Paying Agent to pay forthwith all
money so held by it to the Trustee and to account for any funds disbursed. Upon
making such payment, the Paying Agent shall have no further liability for the
money delivered to the Trustee.
SECTION 2.5. Securityholder Lists.
--------------------
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of the Holders of Securities. If the Trustee is not the Registrar, the
Company shall furnish to the Trustee at least five Business Days before each
Interest Payment Date, and at such other times as the Trustee may request in
writing, a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of the Holders of Securities, if any.
SECTION 2.6. Transfer and Exchange.
---------------------
(a) When Securities are presented to the Registrar or a co-
registrar with a request from the Holder of such Securities to register a
transfer, the Registrar shall register the transfer as requested. Every Security
presented or surrendered for registration of transfer or exchange shall be duly
endorsed or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Registrar, duly executed by the Holder
thereof or his attorneys duly authorized in writing.
At the option of the Holder, Securities may be exchanged for
other Securities of any authorized denomination or
<PAGE>
-25-
denominations, of a like aggregate principal amount, upon surrender of the
Securities to be exchanged at the office or agency maintained for such purpose
pursuant to Section 2.3.
To permit registrations of transfers and exchanges, the
Company shall issue and execute and the Trustee shall authenticate new
Securities evidencing such transfer or exchange at the Registrar's request.
SECTION 2.7. Replacement Securities.
----------------------
If a mutilated Security is surrendered to the Registrar or the
Trustee or if the Holder of a Security claims that the Security has been lost,
destroyed or wrongfully taken, the Company shall issue and the Trustee shall
authenticate a replacement Security. If required by the Trustee or the Company,
an indemnity bond shall be posted, sufficient in the judgment of each of the
Company and the Trustee to protect the Company, the Trustee or any Paying Agent
from any loss that any of them may suffer if such Security is replaced. The
Company may charge such Holder for the Company's reasonable out-of-pocket
expenses in replacing such Security and the Trustee may charge the Company for
the Trustee's expenses in replacing such Security. Every replacement Security
shall constitute an additional obligation of each of the Company.
SECTION 2.8. Outstanding Securities.
----------------------
Securities outstanding at any time are all Securities that
have been authenticated by the Trustee except for (a) those cancelled by it, (b)
those delivered to it for cancellation, (c) to the extent set forth in Sections
8.1 and 8.2, on or after the date on which the conditions set forth in Section
8.1 or 8.2 have been satisfied, those Securities theretofore authenticated and
delivered by the Trustee hereunder and (d) those described in this Section 2.8
as not outstanding. Subject to Section 2.9, a Security does not cease to be
outstanding because the Company or one of its Affiliates holds the Security.
If a Security is replaced pursuant to Section 2.7, it ceases
to be outstanding unless the Trustee receives an Officer's Certificate stating
that the replaced Security is held by a bona fide purchaser in whose hands such
Security is a legal, valid and binding obligation of the Company.
If the Paying Agent holds, in its capacity as such, on any
Maturity Date or on any optional redemption date, money
<PAGE>
-26-
sufficient to pay all accrued interest and principal with respect to such
Securities payable on that date and is not prohibited from paying such money to
the Holders thereof pursuant to the terms of this Indenture, then on and after
that date such Securities cease to be outstanding and interest on them ceases to
accrue.
SECTION 2.9. Treasury Securities.
-------------------
In determining whether the Holders of the required principal
amount of Securities have concurred in any declaration of acceleration or notice
of default or direction, waiver or consent or any amendment, modification or
other change to this Indenture, Securities owned by the Company or an Affiliate
of the Company shall be disregarded as though they were not outstanding, except
that for the purposes of determining whether the Trustee shall be protected in
relying on any such direction, waiver or consent or any amendment, modification
or other change to this Indenture, only Securities that the Trustee actually
knows are so owned shall be so disregarded.
SECTION 2.10. Temporary Securities.
--------------------
Until definitive Securities are prepared and ready for
delivery, the Company may prepare and the Trustee shall authenticate temporary
Securities. Temporary Securities shall be substantially in the form of
definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate definitive Securities in
exchange for temporary Securities. Until such exchange, temporary Securities
shall be entitled to the same rights, benefits and privileges as definitive
Securities.
SECTION 2.11. Cancellation.
------------
The Company at any time may deliver Securities to the Trustee
for cancellation. The Registrar and the Paying Agent shall forward to the
Trustee any Securities surrendered to them for registration of transfer,
exchange or payment or purchase. The Trustee shall cancel all Securities
surrendered for registration of transfer, exchange, payment, replacement or
cancellation or purchase and return such Securities to the Company. The Company
may not reissue or resell, or issue new Securities to replace, Securities that
the Company has redeemed or paid or purchased, or that have been delivered to
the Trustee for cancellation.
<PAGE>
-27-
SECTION 2.12. Defaulted Interest.
------------------
If the Company defaults on a payment of interest on the
Securities, they shall pay the defaulted interest, plus (to the extent permitted
by law) any interest payable on the defaulted interest, in accordance with the
terms hereof, to the Persons who are Holders of Securities on a subsequent
special record date, which date shall be at least five Business Days prior to
the payment date. The Company shall fix such special record date and payment
date in a manner satisfactory to the Trustee. At least 15 days before such
special record date, the Company shall mail to each Holder of Securities a
notice that states the special record date, the payment date and the amount of
defaulted interest, and interest payable on such defaulted interest, if any, to
be paid.
SECTION 2.13. CUSIP Number.
------------
The Company in issuing the Securities may use a "CUSIP"
number, and if so, such CUSIP number shall be included in notices of redemption
or exchange as a convenience to Holders; provided that any such notice may state
--------
that no representation is made as to the correctness or accuracy of the CUSIP
number printed in the notice or on the Securities and that reliance may be
placed only on the other identification numbers printed on the Securities. The
Company will promptly notify the Trustee of any change in the CUSIP number.
SECTION 2.14. Deposit of Moneys.
-----------------
On each Interest Payment Date and Maturity Date and on any
Business Day immediately following any acceleration of the Securities pursuant
to Section 6.2, the Company shall have deposited with the Paying Agent in
immediately available funds money sufficient to make cash payments, if any, due
on such Interest Payment Date, Maturity Date or Business Day, as the case may
be, in a timely manner that permits the Trustee to remit payment to the Holders
on such Interest Payment Date, Maturity Date or Business Day, as the case may
be.
<PAGE>
-28-
ARTICLE III
REDEMPTION
----------
SECTION 3.1. Election To Redeem; Notices to Trustee.
--------------------------------------
If the Company elects to redeem Securities pursuant to
Paragraph 6 or 7 of the Securities, they shall notify the Trustee and the Paying
Agent in writing of the Redemption Date and the principal amount of Securities
to be redeemed.
The Company shall give each notice provided for in this
Section 3.1 at least 30 days before the Redemption Date (unless a shorter notice
shall be agreed to by the Trustee in writing), together with an Officers'
Certificate of the Company stating that such redemption will comply with the
conditions contained herein and in the Securities.
SECTION 3.2. Selection of Securities To Be Redeemed.
--------------------------------------
If less than all of the Securities are to be redeemed, the
Trustee shall select the Securities to be redeemed in compliance with the
requirements of the principal national securities exchange, if any, on which the
Securities are listed or, if the Securities are not then listed on a national
securities exchange, on a pro rata basis, by lot or by such other method as the
--- ----
Trustee deems fair and appropriate; provided that any redemption pursuant to
--------
Paragraph 7 of the Securities shall be made on a pro rata basis or on as nearly
a pro rata basis as is practicable (subject to the procedures of The Depository
--- ----
Trust Company) based on the aggregate principal amount of Securities held by
each Holder. The Trustee shall make the selection from the Securities
outstanding and not previously called for redemption. The Trustee shall promptly
notify the Company in writing of such Securities selected for redemption and, in
the case of Securities selected for partial redemption, the principal amount to
be redeemed. The Trustee may select for redemption portions of the principal
amount of Securities that have denominations equal to or larger than $1,000
principal amount. Securities and portions of them the Trustee selects shall be
in amounts of $1,000 principal amount or integral multiples thereof. Provisions
of this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption.
<PAGE>
-29-
SECTION 3.3. Notice of Redemption.
--------------------
At least 30 days but not more than 60 days before a Redemption
Date, the Company shall mail or cause the mailing of a notice of redemption by
first-class mail to each Holder of Securities to be redeemed at such Holder's
registered address. Notice of a redemption in connection with a Public Equity
Offering shall be mailed within 60 days of the particular Public Equity
Offering. A copy of such notice shall be mailed to the Trustee on the same day
the notice is mailed to Holders of Securities.
The notice shall identify the Securities to be redeemed and
shall state:
(a) the Redemption Date;
(b) the paragraph of the Securities pursuant to which the
Securities are being redeemed;
(c) the redemption price and the amount of accrued interest,
if any, to be paid;
(d) the name and address of the Paying Agent;
(e) that Securities called for redemption must be
surrendered to the Paying Agent to collect the redemption price and
accrued interest, if any;
(f) that, unless the Company defaults in making the
redemption payment, interest on Securities called for redemption ceases
to accrue on and after the Redemption Date and the only remaining right
of the Holders of such Securities is to receive payment of the
redemption price upon surrender to the Paying Agent of the Securities
redeemed;
(g) if any Security is to be redeemed in part, the portion
of the principal amount (equal to $1,000 or any integral multiple
thereof) of such Security to be redeemed and that, on or after the
Redemption Date, upon surrender of such Security, a new Security or
Securities in aggregate principal amount equal to the unredeemed
portion thereof will be issued without charge to the Securityholder;
(h) if less than all of the Securities are to be redeemed,
the identification of the particular Securities (or portion thereof) to
be redeemed, as well as the aggre-
<PAGE>
-30-
gate principal amount of Securities to be redeemed and the aggregate
principal amount of Securities to be outstanding after such partial
redemption; and
(i) the CUSIP number, if any, pursuant to Section 2.13.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
SECTION 3.4. Effect of Notice of Redemption.
------------------------------
Once notice of redemption is mailed, Securities called for
redemption become due and payable on the Redemption Date and at the redemption
price. Upon surrender to the Paying Agent, such Securities shall be paid at the
redemption price plus accrued interest, if any, to the Redemption Date, but
interest installments whose maturity is on or prior to such Redemption Date will
be payable on the relevant Interest Payment Dates to the Holders that would
otherwise have been entitled thereto pursuant to this Indenture and the
Securities.
SECTION 3.5. Deposit of Redemption Price.
---------------------------
At least one Business Day prior to the Redemption Date, the
Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to pay
the redemption price of and accrued interest, if any, on all Securities or
portions thereof to be redeemed on that date.
If any Security surrendered for redemption in the manner
provided in the Securities shall not be so paid on the Redemption Date due to
the failure of the Company to deposit with the Paying Agent U.S. Legal Tender,
the principal and accrued and unpaid interest, if any, thereon shall, until paid
or duly provided for, bear interest as provided in Section 4.1 with respect to
any payment default.
SECTION 3.6. Securities Redeemed in Part.
---------------------------
Upon the surrender to the Paying Agent of a Security that is
redeemed in part, the Company shall execute and the Trustee shall authenticate
for the Holder a new Security equal in principal amount to the principal amount
of the unredeemed portion of the Security surrendered.
<PAGE>
-31-
ARTICLE IV
COVENANTS
---------
SECTION 4.1. Payment of Securities.
---------------------
The Company shall pay the principal of and interest on the
Securities on the dates and in the manner provided in the Securities and this
Indenture.
An installment of principal or interest shall be considered
paid on the date due if the Trustee or the Paying Agent holds on such date U.S.
Legal Tender designated for and sufficient to pay such installment.
The Company shall pay cash interest on overdue principal and
(to the extent permitted by law) on overdue installments of interest at the rate
borne by the Securities. Interest will be computed on the basis of a 360-day
year comprised of twelve 30-day months.
SECTION 4.2. Maintenance of Office or Agency.
-------------------------------
The Company shall maintain the office or agency required under
Section 2.3. The Company will give prompt written notice to the Trustee of the
location, and any change in the location, of each such office or agency. If at
any time the Company shall fail to maintain any such required office or agency
or shall fail to furnish the Trustee with the address thereof, such
presentations, surrenders, notices and demands may be made or served at the
address of the Trustee set forth in Section 12.2.
The Company may also from time to time designate one or more
other offices or agencies where the Securities may be presented or surrendered
for any or all such purposes and may from time to time rescind such
designations; provided that no such designation or rescission shall in any
--------
manner relieve the Company of their obligation to maintain an office or agency
in the Borough of Manhattan, The City of New York, for such purposes. The
Company will give prompt written notice to the Trustee of any such designation
or rescission and of any change in the location of any such other office or
agency.
The Company hereby initially designates the corporate trust
office of the Trustee set forth in Section 12.2 as an agency of the Company with
respect to the Securities in accordance with Section 2.3.
<PAGE>
-32-
SECTION 4.3. Corporate Existence.
-------------------
Subject to Article V, the Company shall do or cause to be
done, at their own cost and expense, all things necessary to, and will cause
each Subsidiary to, preserve and keep in full force and effect the corporate
existence and rights (charter and statutory), licenses and/or franchises of the
Company and each Subsidiary; provided that the Company or any Subsidiaries shall
--------
be required to preserve any such rights, licenses or franchises if such rights,
licenses or franchises will be replaced or if the Board of the Company shall
reasonably determine that the preservation thereof is no longer desirable in the
conduct of the business of the Company or such Subsidiary, as the case may be,
and the loss thereof is not adverse in any material respect to the Holders;
provided, further, that any Subsidiary may be wound up and liquidated into the
- -------- -------
Company or any other Subsidiary.
SECTION 4.4. Payment of Taxes and Other Claims.
---------------------------------
The Company shall pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (a) all taxes, assessments
and governmental charges levied or imposed upon their or their Subsidiaries'
income, profits or property and (b) all lawful claims for labor, materials and
supplies that, if unpaid, might by law become a Lien upon the property of the
Company or a Subsidiary; provided that the Company shall not be required to pay
--------
or discharge or cause to be paid or discharged any such tax, assessment, charge
or claim whose amount, applicability or validity is being contested in good
faith by appropriate negotiations or proceedings and for which disputed amounts
any reserves required in accordance with GAAP have been made.
SECTION 4.5. Maintenance of Properties; Insurance;
Books and Records; Compliance with Law.
--------------------------------------
(a) The Company shall, and shall cause each of the
Subsidiaries to, at all times cause all properties used or useful in the conduct
of its business to be maintained and kept in good condition, repair and working
order (reasonable wear and tear excepted) and supplied with all necessary
equipment, and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereto.
<PAGE>
-33-
(b) The Company shall, and shall cause each of its
Subsidiaries to, maintain insurance (which may include self-insurance) in such
amounts and covering such risks as are usually and customarily carried with
respect to similar facilities according to their respective locations.
(c) The Company shall, and shall cause each of its
Subsidiaries to, keep proper books of record and account, in which full and
correct entries shall be made of all of its financial transactions and the
assets and business, in accordance with GAAP consistently applied.
(d) The Company shall, and shall cause each of its
Subsidiaries to, comply with all statutes, laws, ordinances, or government rules
and regulations to which it is subject, non-compliance with which would
materially adversely affect the business, earnings, properties, assets or
financial condition of the Company and its Subsidiaries, taken as a whole.
SECTION 4.6. Compliance Certificates.
-----------------------
(a) The Company shall deliver to the Trustee, within 45 days
after the end of each of the first three quarters of the Company's fiscal year,
and within 90 days after the end of such fiscal year, an Officers' Certificate
stating (i) that a review of the activities of the Company during the preceding
fiscal quarter or year, as the case may be, has been made under the supervision
of the signing Officers with a view to determining whether the Company has kept,
observed, performed and fulfilled its obligations under this Indenture and (ii)
that, to the best knowledge of each Officer signing such certificate, the
Company has kept, observed, performed and fulfilled each and every covenant and
condition contained in this Indenture and is not in default in the performance
or observance of any of the terms, provisions, conditions and covenants hereof
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which such Officers may have knowledge, their
status and what action the Company is taking or proposes to take with respect
thereto).
(b) The annual financial statements delivered pursuant to
Section 4.7 shall be accompanied by a written statement of the Company's
independent public accountants that in making the examination necessary for
certification of such annual financial statements nothing as to which such
accountants have professional competence has come to their attention that would
lead them to believe that the Company has violated any provisions of this
Indenture as to which such accountants have pro-
<PAGE>
-34-
fessional competence, or, if any such violation has occurred, specifying the
nature and period of existence thereof, it being understood that such
accountants shall not be liable directly or indirectly to any Person for any
failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Securities are
outstanding, deliver to the Trustee, promptly after any Officer of the Company
becomes aware of any Default or Event of Default, an Officers' Certificate
specifying such Default or Event of Default and what action the Company is
taking or proposes to take with respect thereto.
SECTION 4.7. Reports.
-------
Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, to the extent
permitted by the Exchange Act, the Company will file with the Commission and
provide, within 15 days after such filing, the Trustee and Holders of Securities
and prospective holders of Securities (upon request) with the annual reports and
the information, documents and other reports which are specified in Sections 13
and 15(d) of the Exchange Act. In the event that the Company is not permitted to
file such reports, documents and information with the Commission, the Company
will provide substantially similar information to the Trustee, the Holders of
Securities and the prospective holders of Securities (upon request) as if the
Company were subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act. The Company also will comply with the other provisions of TIA (S)
314(a).
SECTION 4.8. Limitation on Additional Indebtedness.
-------------------------------------
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, incur (as defined) any Indebtedness
(including Acquired Indebtedness), except for Permitted Indebtedness; provided
--------
that (i) the Company will be permitted to incur Indebtedness (including Acquired
Indebtedness) and (ii) a Subsidiary of the Company will be permitted to incur
Acquired Indebtedness, if, in either case, after giving pro forma effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the Company's Leverage Ratio is less than (x) 6.50 to 1.00 if such
Indebtedness is incurred on or prior to , 2000, (y) 6.25 to 1.00 if such
Indebtedness is incurred after , 2000 and on or prior to , 2002
and (z) 6.00 to 1.00 if
<PAGE>
-35-
such Indebtedness is incurred thereafter. Notwithstanding the foregoing,
a Guarantor will be permitted to guarantee any Indebtedness of the Company
incurred pursuant to clause (i) of the proviso of the immediately preceding
sentence.
SECTION 4.9. Limitation on Restricted Payments.
---------------------------------
The Company will not make, and will not permit any of its
Subsidiaries to make, directly or indirectly, any Restricted Payment, unless:
(a) no Default shall have occurred and be continuing at
the time of or immediately after giving effect to such Restricted
Payment;
(b) immediately after giving pro forma effect to such
---------
Restricted Payment, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section 4.8; and
(c) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Issue Date does not exceed the sum of (1) the difference
between (x) the Cumulative EBITDA and (y) 1.4 times the Cumulative
Consolidated Interest Expense, plus (2) the aggregate net cash proceeds
received by the Company either (x) as capital contributions in the form
of common equity to the Company after the Issue Date or (y) from the
issuance or sale of Capital Stock (excluding proceeds from Disqualified
Capital Stock and excluding the proceeds to the Company from the Common
Stock Offering, but including Capital Stock issued upon the conversion
of convertible Indebtedness, in exchange for outstanding Indebtedness
or from the exercise of options, warrants or rights to purchase Capital
Stock (other than Disqualified Capital Stock)) of the Company to any
person (other than to a Subsidiary of the Company) after the Issue
Date, plus (3) in the case of the disposition or repayment of any
Investment constituting a Restricted Payment made after the Issue Date,
an amount equal to the lesser of the return of capital with respect to
such Investment and the initial amount of such Investment, in either
case, less the cost of the disposition of such Investment. For purposes
of the preceding subclause (2)(y), upon the issuance of Capital Stock
either from the conversion of convertible Indebtedness or exchange for
outstanding Indebtedness or upon the exercise of options, warrants
<PAGE>
-36-
or rights, the amount counted as net cash proceeds received will be the
cash amount received by the Company at the original issuance of the
Indebtedness that is so converted or exchanged or from the issuance of
options, warrants or rights, as the case may be, plus the incremental
amount of cash received by the Company, if any, upon the conversion,
exchange or exercise thereof For purposes of determining under this
clause (c) the amount expended for Restricted Payments, cash
distributed shall be valued at the face amount thereof and property
other than cash shall be valued at its Fair Market Value.
The provisions of this Section 4.9 shall not prohibit (i) the
payment of any distribution within 60 days after the date of declaration
thereof, if at such date of declaration such payment would comply with the
provisions of the Indenture, (ii) the retirement of any shares of Capital Stock
of the Company or Subordinated Indebtedness by conversion into, or by or in
exchange for, shares of Capital Stock (other than Disqualified Capital Stock),
or out of, the net cash proceeds of the substantially concurrent sale (other
than to a Subsidiary of the Company) of other shares of Capital Stock of the
Company (other than Disqualified Capital Stock), (iii) the redemption or
retirement of Subordinated Indebtedness other than Disqualified Capital Stock of
the Company (including any related guarantees) in exchange for, by conversion
into, or out of the net cash proceeds of, a substantially concurrent sale or
incurrence of Subordinated Indebtedness (other than any Indebtedness owed to a
Subsidiary of the Company) of the Company (including any related guarantees)
that is contractually subordinated in right of payment to the Notes to at least
the same extent as the subordinated Indebtedness being redeemed or retired, (iv)
the purchase, redemption or other acquisition for value of shares of Capital
Stock of the Company (other than Disqualified Capital Stock) or options on such
shares held by officers or employees or former officers or employees (or their
estates or beneficiaries under their estates) upon the death, disability,
retirement or termination of employment of such current or former officers or
employees pursuant to the terms of an employee benefit plan or any other
agreement pursuant to which such shares of Capital Stock or options were issued
or pursuant to a severance, buy-sell or right of first refusal agreement with
such current or former officer or employee; provided that the aggregate cash
--------
consideration paid, or distributions made, pursuant to this clause (iv) do not
in any one fiscal year exceed $1,000,000, (v) Investments constituting
Restricted Payments made as a result of the receipt of non-cash consideration
from any Asset Sale made pursuant to and in compliance with Section
<PAGE>
-37-
4.13 or (vi) any other Investments constituting Restricted Payments made after
the Issue Date in an aggregate amount not in excess of $10,000,000; provided,
--------
however, that in the case of clauses (iii), (iv), (v) and (vi), no Default shall
- -------
have occurred or be continuing at the time of such payment or as a result
thereof. In determining the amount of Restricted Payments made subsequent to the
Issue Date for purposes of clause (c) of the first paragraph above, amounts
expended pursuant to clauses (i), (ii), (iv), (v) and (vi) shall be included in
such calculation.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.9 were computed, which calculations may
be based upon the Company's latest available financial statements, and that no
Default exists and is continuing and no Default will occur immediately after
giving effect to any Restricted Payments.
SECTION 4.10. Limitation on Liens.
-------------------
The Company will not, and will not permit any of its
Subsidiaries to, create, incur, assume or suffer to exist any Lien of any kind,
upon any of its property or assets, whether now owned or acquired after the
Issue Date, or any proceeds therefrom, that secure either (i) Subordinated
Indebtedness unless the Securities and the Guarantees, as applicable, are
secured by a Lien on such property, assets or proceeds that is senior in
priority to the Liens securing such Subordinated Indebtedness or (ii)
Indebtedness that is pari passu with the Securities unless the Securities and
---- -----
the Guarantees, as applicable, are equally and ratably secured with the Liens
securing such Indebtedness.
SECTION 4.11. Limitation on Guarantees of Certain
Indebtedness.
-----------------------------------
The Company will not permit any of its Subsidiaries (other
than the Guarantors) to (a) guarantee any Indebtedness of the Company (other
than Indebtedness incurred under clause (vii) of Permitted Indebtedness) or (b)
pledge any intercompany notes representing obligations of any of its
Subsidiaries (other than the Guarantors) to secure the payment of any
Indebtedness of the Company (other than Indebtedness incurred under clause (vii)
of Permitted Indebtedness), in each case unless such Subsidiary, the Company,
the other Guarantors and
<PAGE>
-38-
the Trustee execute and deliver a supplemental indenture evidencing such
Subsidiary's Guarantee under this Indenture. Thereafter, such Subsidiary shall
be a Guarantor for all purposes of this Indenture.
SECTION 4.12. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries.
-----------------------------------------
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any of its Subsidiaries to (a) pay dividends or make any other
distributions to the Company or any of its Subsidiaries on its Capital Stock,
(b) pay any Indebtedness owed to the Company or any of its Subsidiaries, (c)
make loans or advances to the Company or any Subsidiary, (d) transfer any of its
properties or assets to the Company or any Subsidiary, (e) grant liens or
security interests on the assets of the Company or any of its Subsidiaries in
favor of the holders of the Notes or (f) guarantee the Notes or any renewals or
refinancings thereof, except for (i) such encumbrances or restrictions arising
by reason of Acquired Indebtedness of any of the Company's Subsidiaries existing
at the time such Person became a Subsidiary of the Company; provided that such
--------
encumbrances or restrictions were not created in anticipation of such Person
becoming a Subsidiary and are not applicable to the Company or any of its other
Subsidiaries, (ii) such encumbrances or restrictions arising under Refinancing
Indebtedness; provided that the terms and conditions of any such restrictions
are no less favorable to the holders of Notes than those under the Indebtedness
being refinanced, (iii) customary provisions restricting the assignment of any
contract or interest of the Company or any of its Subsidiaries, (iv)
restrictions under the New Credit Facility no more restrictive than those in
effect on the Issue Date and (v) restrictions contained in this Indenture or
any other indenture governing debt securities that is no more restrictive than
the restrictions contained in this Indenture.
SECTION 4.13. Asset Sales.
-----------
The Company will not, and will not permit any of its
Subsidiaries to, consummate an Asset Sale unless (i) the Company or such
Subsidiary, as the case may be, receives consideration at the time of such sale
or other disposition at least equal to the fair market value thereof (as
determined in good faith by the Company's board of directors, and evidenced by a
<PAGE>
-39-
board resolution); (ii) not less than 75% of the consideration received by the
Company or such Subsidiary, as the case may be, is in the form of cash or Cash
Equivalents; provided that the Company or such Subsidiary will not be required
--------
to comply with this clause (ii) with respect to a Permitted Asset Swap; and
(iii) the Asset Sale Proceeds received by the Company or such Subsidiary are
applied (a) first, to the extent the Company elects, or is required, to prepay,
repay or purchase debt under any then existing Senior Indebtedness of the
Company or any Guarantor Senior Indebtedness of any Guarantor that is a
Subsidiary of the Company within 180 days following the receipt of the Asset
Sale Proceeds from any Asset Sale; provided that any such repayment shall result
--------
in a permanent reduction of the commitments thereunder in an amount equal to the
principal amount so repaid; (b) second, to the extent of the balance of Asset
Sale Proceeds after application as described above, to the extent the Company
elects, to an investment in assets (including Capital Stock or other securities
purchased in connection with the acquisition of Capital Stock or property of
another Person) used or useful in businesses similar or ancillary to the
business of the Company and its Subsidiaries as conducted at the time of such
Asset Sale, provided that such investment occurs and such Asset Sale Proceeds
are so applied within 270 days following the receipt of such Asset Sale Proceeds
(the "Reinvestment Date"); and (c) third, (1) to the repayment of an amount of
Other Pari Passu Debt not exceeding the Other Pari Passu Debt Pro Rata Share
(provided that any such repayment shall result in permanent reduction of any
--------
commitment in respect thereof in an amount equal to the principal amount so
repaid) and (2) if on the Reinvestment Date with respect to any Asset Sale the
Excess Proceeds exceed $10.0 million, the Company shall apply an amount equal to
such Excess Proceeds to an offer to repurchase the Securities, at a purchase
price in cash equal to 100% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase (an "Excess Proceeds Offer").
If an Excess Proceeds Offer is not fully subscribed, the Company may retain the
portion of the Excess Proceeds not required to repurchase Securities.
SECTION 4.14. Limitation on Transactions with Affiliates.
------------------------------------------
The Company will not, and will not permit any of its
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with any
Affiliate or
<PAGE>
-40-
holder of 10% or more of the Common Stock of the Company or any Affiliate (each
of the foregoing, an "Affiliate Transaction") or extend, renew, waive or
otherwise modify the terms of any Affiliate Transaction entered into prior to
the Issue Date unless (i) such Affiliate Transaction is between or among the
Company and/or Wholly Owned Subsidiaries or (ii) the terms of such Affiliate
Transaction are fair and reasonable to the Company or such Subsidiary, as the
case may be, and the terms of such Affiliate Transaction are at least as
favorable as the terms that could be obtained by the Company or such Subsidiary,
as the case may be, in a comparable transaction made on an arm's-length basis
between unaffiliated parties. In any Affiliate Transaction involving an amount
or having a value in excess of $1.0 million that is not permitted under clause
(i) above, the Company must obtain a resolution of the board of directors
approved by a majority of the members of the board of directors (and a majority
of the independent directors) of the Company certifying that such Affiliate
Transaction complies with clause (ii) above. In transactions with a value in
excess of $5.0 million that are not permitted under clause (i) above, the
Company must obtain a written opinion as to the fairness of such a transaction
to the Company or its Subsidiary from an independent investment banking firm of
nationally recognized standing.
The foregoing provisions will not apply to (i) any dividend
that is not prohibited by the provisions described in Section 4.9 contained
herein, (ii) any transaction, approved by the board of directors of the Company,
with an officer or director of the Company or of any Subsidiary of the Company
in his or her capacity as officer or director entered into in the ordinary
course of business, including compensation and employee benefit arrangements
with any officer or director of the Company or of any of its Subsidiaries that
are customary for public companies in the outdoor advertising industry or (iii)
transactions with The Chase Manhattan Bank or any of its Affiliates in the
ordinary course of providing banking, financial advisory, securities or other
financial services.
SECTION 4.15. Change of Control.
-----------------
(a) Upon the occurrence of a Change of Control (the date of
such occurrence being the "Change of Control Date"), the Company shall notify
the holders of the Securities, in the manner prescribed by this Indenture, of
such occurrence and shall make an offer to purchase (a "Change of Control
Offer"), on a Business Day (the "Change of Control Payment Date") not later than
30 days following the Change of Control Date, all
<PAGE>
-41-
Securities then outstanding at a purchase price equal to 101% of the principal
amount of the Securities, plus accrued and unpaid interest, if any, thereon to
the Change of Control Payment Date. The Change of Control Offer shall remain
open for at least 20 Business Days or such longer period as may be required by
law and until the close of business on the Change of Control Payment Date. The
Company's obligations under this Section 4.15 may be satisfied if a third party
makes the Change of Control Offer in the manner, at the times and otherwise in
compliance with the requirements applicable to a Change of Control Offer made by
the Company and purchases all Securities validly tendered and not withdrawn
under such Change of Control Offer.
(b) Not less than 30 days nor more than 60 days before the
Change of Control Payment Date, the Company shall send, by first class mail, a
notice to each Holder of Securities, with a copy to the Trustee and the Paying
Agent. The notice, which shall govern the terms of the Change of Control Offer,
shall include such disclosures as are required by law and shall state:
(i) that a Change of Control Offer is being made pursuant
to this Section 4.15 and that all Securities tendered will be accepted
for payment;
(ii) the purchase price (including the amount of accrued
interest, if any) for each Security and the Change of Control Payment
Date;
(iii) that any Security not tendered for payment will
continue to accrue interest in accordance with the terms thereof;
(iv) that, unless the Company defaults on making the payment,
any Security accepted for payment pursuant to the Change of Control
Offer shall cease to accrue interest after the Change of Control
Payment Date;
(v) that Holders accepting the offer to have their
Securities purchased pursuant to a Change of Control Offer will be
required to surrender their Securities to the Paying Agent at the
address specified in the notice prior to the close of business on the
Business Day preceding the Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their
acceptance if the Paying Agent receives, not later than the close of
business on the third Business Day preceding
<PAGE>
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the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the Holder, the
principal amount of Securities the Holder delivered for purchase and a
statement that such Holder is withdrawing his election to have such
Securities purchased;
(vii) that Holders whose Securities are purchased only in part
will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered, provided that each
Security purchased and each such new Security issued shall be in an
original principal amount in denominations of $1,000 and integral
multiples thereof;
(viii) any other procedures that a Holder must follow to accept
a Change of Control Offer or effect withdrawal of such acceptance; and
(ix) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to
the extent lawful, (i) accept for payment Securities or portions thereof
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent U.S. Legal Tender sufficient to pay the purchase price of all Securities
or portions thereof so tendered and accepted and (iii) deliver or cause to be
delivered to the Trustee the Securities so accepted together with an Officers'
Certificate of the Company setting forth the Securities or portions thereof
tendered to and accepted for payment by the Company. The Paying Agent shall
promptly (but in any case no later than 10 calendar days after the Change of
Control Payment Date) mail or deliver to the Holders of Securities so accepted
payment in an amount equal to the purchase price for such Securities, and the
Company shall execute and issue, and the Trustee shall promptly authenticate and
mail to such Holders, a new Security equal in principal amount to any
unpurchased portion of the Security surrendered; provided that each such new
--------
Security shall be issued in an original principal amount in denominations of
$1,000 and integral multiples thereof. The Company will send to the Trustee and
the Holders of Securities on or as soon as practicable after the Change of
Control Payment a notice setting forth the results of the Change of Control
Offer. Any Securities not so accepted shall be promptly mailed or delivered by
the Company to the Holder thereof.
<PAGE>
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For purposes of this Section 4.15, the Trustee shall act as
Paying Agent.
In connection with the purchase of Securities pursuant to a
Change of Control Offer, the Company shall comply with all applicable tender
offer laws and regulations, including, to the extent applicable, Section 14(e)
and Rule 14(e)-1 under the Exchange Act, and any other applicable Federal or
state securities laws and regulations and any applicable requirements of any
securities exchange on which the Securities are listed.
SECTION 4.16. Limitation on Issuance and Sales of
Preferred Stock by Subsidiaries.
-----------------------------------
The Company (i) will not permit any of its Subsidiaries to
issue any Preferred Stock (other than to the Company or a Wholly Owned
Subsidiary) and (ii) will not permit any person (other than the Company or a
Wholly Owned Subsidiary) to own any Preferred Stock of any Subsidiary.
SECTION 4.17. Limitation on Activities of the Company
and Its Subsidiaries.
---------------------------------------
The Company will not, and will not permit any of its
Subsidiaries to, engage in any business other than the business of outdoor
advertising or a substantially similar or related business.
SECTION 4.18. Limitation on Other Senior Subordinated Debt.
--------------------------------------------
The Company will not, and will not permit any of the
Guarantors to, directly or indirectly, incur, contingently or otherwise, any
Indebtedness (other than the Securities and the Guarantees, as the case may be)
that is both (i) subordinate in right of payment to any Indebtedness of the
Company or any Guarantor, as the case may be, and (ii) senior in right of
payment to the Securities or any of the Guarantees, as the case may be. In
addition, the Company will not permit any of the Guarantors to, directly or
indirectly, incur, contingently or otherwise, any guarantee on a senior basis
any Indebtedness of the Company that is subordinate in right of payment to any
other Indebtedness of the Company.
<PAGE>
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SECTION 4.19. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
The Company covenants, and each Guarantor shall be deemed to
covenant (to the extent permitted by law), that it will not at any time insist
upon, plead, or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law or any usury law or other law that would prohibit
or forgive the Company or such Guarantor, as the case may be, from paying all or
any portion of the principal of or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or that may
affect the covenants or the performance of this Indenture; and (to the extent
permitted by law) the Company hereby expressly waives and each Guarantor shall
be deemed to expressly waive, all benefit or advantage of any such law, and
covenants, and each Guarantor shall be deemed to covenant, that it will not
hinder, delay or impede the execution of any power herein granted to the
Trustee, but will suffer and permit the execution of every such power as though
no such law had been enacted.
ARTICLE V
SUCCESSOR CORPORATION
---------------------
SECTION 5.1. Consolidation, Merger, Sale of Assets, Etc.
------------------------------------------
The Company will not, in any transaction or series of
transactions, merge or consolidate with or into, or sell, assign, convey,
transfer, lease or otherwise dispose of all or substantially all of its
properties and assets as an entirety to, any Person or Persons, and the Company
will not permit any of its Subsidiaries to enter into any such transaction or
series of transactions if such transaction or series of transactions, in the
aggregate, would result in a sale, assignment, conveyance, transfer, lease or
other disposition of all or substantially all of the properties and assets of
the Company and its Subsidiaries, taken as a whole, to any other Person or
Persons, unless:
(i) either (a) (1) if the transaction or transactions is a
merger or consolidation involving the Company, the Company shall be the
surviving Person of such merger or consolidation, or (2) if the
transaction or transactions is a merger or consolidation involving a
Subsidiary of the Company, such Subsidiary shall be the surviving
Person of such merger or consolidation and such surviving
<PAGE>
-45-
Person shall be a Subsidiary of the Company, or (b) (1) the Person
formed by any such consolidation or into which the Company or such
Subsidiary is merged or to which the properties and assets of the
Company and/or such Subsidiary, as the case may be, are transferred
(any such surviving Person or transferee Person being a "Surviving
Entity") shall be a corporation organized and existing under the laws
of the United States of America, any state thereof or the District of
Columbia and (2)(A) in the case of a transaction involving the Company,
the Surviving Entity shall expressly assume by a supplemental indenture
executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Securities and
this Indenture, and, in each case, this Indenture shall remain in full
force and effect, or (B) in the case of a transaction involving a
Subsidiary that is a Guarantor, the Surviving Entity shall expressly
assume by a supplemental indenture executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of
such Subsidiary under its Guarantee and related supplemental indenture,
and, in each case, such Guarantee and supplemental indenture shall
remain in full force and effect;
(ii) immediately after giving effect to such related
transaction or series of transactions on a pro forma basis (including,
--- -----
without limitation, any Indebtedness incurred or anticipated to be
incurred in connection with or in respect of such transaction or series
of transactions), no Default shall have occurred and be continuing;
(iii) immediately after giving effect to such transaction or
series of transactions on a pro forma basis (including, without
--- -----
limitation, any Indebtedness incurred or anticipated to be incurred in
connection with or in respect of such transaction or series of
transactions), the Company or the Surviving Entity, as the case may be,
could incur $1.00 of additional Indebtedness pursuant to the proviso to
the first paragraph of clause (a) of Section 4.8; and
(iv) the Company shall deliver, or cause to be delivered, to
the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an Opinion of Counsel, each
stating that such consolidation, merger, transfer, lease, assignment or
other disposition and the supplemental indenture in respect thereof
comply with the requirements of this Indenture.
<PAGE>
-46-
Each Guarantor, unless it is the other party to the
transaction or unless its Guarantee will be released and discharged in
accordance with its terms as a result of the transaction, will be required to
confirm, by supplemental indenture, that its Guarantee will continue to apply to
the obligations of the Company or the Surviving Entity under this Indenture.
SECTION 5.2. Successor Entity Substituted.
----------------------------
Upon any consolidation or merger or any transfer of all or
substantially all of the assets of the Company in accordance with the foregoing
in which the Company or any Subsidiary of the Company, as the case may be, is
not the continuing corporation, the successor corporation formed by such a
consolidation or into which the Company or such Subsidiary is merged or to which
such transfer is made will succeed to, and be substituted for, and may exercise
every right and power of, the Company or such Subsidiary, as the case may be,
under this Indenture with the same effect as if such successor corporation had
been named as the Company or such Subsidiary herein; and thereafter, except in
the case of (i) a lease or (ii) any sale, assignment, conveyance, transfer,
lease or other disposition to a Subsidiary of the Company, the Company or such
Guarantor, as the case may be, shall be discharged from all obligations and
covenants under this Indenture and the Securities; provided that, solely
--------
for purposes of computing Cumulative EBITDA for purposes of Section 4.9, the
Cumulative EBITDA of any Persons other than the Company and its Subsidiaries
shall only be included for periods subsequent to the effective time of such
merger, consolidation, combination or transfer of assets.
SECTION 5.3. Status of Subsidiaries.
----------------------
For all purposes of this Indenture and the Securities
(including the provisions of this Article V and Sections 4.8, 4.9 and 4.10),
Subsidiaries of any Surviving Entity will, upon such transaction or series of
related transactions, become Subsidiaries of the Company and all Indebtedness,
and all Liens on property or assets, of the Company and the Subsidiaries in
existence immediately prior to such transaction or series of related
transactions will be deemed to have been incurred upon such transaction or
series of related transactions.
<PAGE>
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ARTICLE VI
DEFAULT AND REMEDIES
--------------------
SECTION 6.1. Events of Default.
-----------------
(a) An "Event of Default" occurs if:
(i) there is a default in the payment of the principal of or
premium, if any, when due or payable, on any of the Securities; or
(ii) there is a default in the payment of an installment
of interest on the Securities when due and payable for 30 days; or
(iii) the Company or any Guarantor fails to comply with any
of its obligations described in Section 4.13 or 5.1; or
(iv) the Company or any Guarantor fails to perform or observe
any other term, covenant or agreement contained in the Securities, the
Guarantees or this Indenture (other than those specified in clause (i),
(ii) or (iii) above) for a period of 30 days after written notice of
such failure requiring the Company to remedy the same shall have been
given to the Company by the Trustee or to the Company and the Trustee
by the Holders of 25% in aggregate principal amount of the Securities
then outstanding; or
(v) default or defaults under any agreement, indenture or
instrument under which the Company or any Subsidiary of the Company
then has outstanding Indebtedness in excess of $10.0 million in the
aggregate, and either (a) such Indebtedness is already due and payable
in full by its terms or (b) such default or defaults have resulted in
the acceleration of the maturity of such Indebtedness; or
(vi) any Guarantee ceases to be in full force and effect or
is declared null and void or a Guarantor denies that it has any further
liability under its Guarantee or gives notice to such effect (other
than by reason of the termination of this Indenture or the release of
any such Guarantee in accordance with Section 4.11); or
(vii) one or more judgments, orders or decrees of any court or
regulatory or administrative agency of competent
<PAGE>
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jurisdiction for the payment of money in excess of $10.0 million,
either individually or in the aggregate, shall be entered against the
Company or any of its Subsidiaries or any of their respective
properties and shall not be discharged and either (a) any creditor
shall have commenced an enforcement proceeding upon such judgment,
order or decree or (b) there shall have been a period of 60 days during
which a stay of enforcement of such judgment, order or decree, by
reason of pending appeal or otherwise, will not be in effect; or
(viii) the Company, any Guarantor or any Subsidiary (a) admits
in writing its inability to pay its debts generally as they become due,
(b) commences a voluntary case or proceeding under any Bankruptcy Law
with respect to itself, (c) consents to the entry of a judgment, decree
or order for relief against it in an involuntary case or proceeding
under any Bankruptcy Law, (d) consents to the appointment of a
Custodian (as defined below) of it or for substantially all of its
property, (e) consents to or acquiesces in the institution of a
bankruptcy or an insolvency proceeding against it, (f) makes a general
assignment for the benefit of its creditors or (g) takes any corporate
action to authorize or effect any of the foregoing; or
(ix) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the Company, any Guarantor or
any Subsidiary in an involuntary case or proceeding under any
Bankruptcy Law, which shall (a) approve as properly filed a petition
seeking reorganization, arrangement, adjustment or composition in
respect of the Company, any Guarantor or any Subsidiary, (b) appoint a
Custodian of the Company, a Guarantor or any Subsidiary or for
substantially all of any of their property or (c) order the winding-up
or liquidation of its affairs; and such judgment, decree or order shall
remain unstayed and in effect for a period of 60 consecutive days; or
(x) either (a) the collateral agent under the New Credit
Facility or (b) if the New Credit Facility shall no longer be in force
and effect, any holder of at least $10 million in aggregate principal
amount of Indebtedness of the Company or any Guarantor shall commence
judicial proceedings to foreclose upon assets of the Company or any of
its Subsidiaries having an aggregate Fair Market Value, individually or
in the aggregate, in excess of $10 million or shall have exercised any
right under applicable law or
<PAGE>
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applicable security documents to take ownership of any such assets in
lieu of foreclosure.
(b) For purposes of this Article VI, the term "Custodian"
means any receiver, interim receiver, receiver and manager, trustee, assignee,
liquidator, sequestrator or similar official charged with maintaining possession
or control over property for one or more creditors, whether under any Bankruptcy
Law or otherwise.
SECTION 6.2. Acceleration.
------------
If an Event of Default (other than an Event of Default
specified in Section 6.1(a)(viii) or (ix) with respect to the Company) occurs
and is continuing, then the Trustee or the Holders of not less than 25% in
aggregate principal amount of the Securities then outstanding may declare to be
immediately due and payable the Default Amount. Upon any such declaration such
amounts shall become due and payable immediately. If an Event of Default
specified in Section 6.1(a)(viii) or (ix) occurs and is continuing with respect
to the Company, then the Default Amount shall ipso facto become and be
---- -----
immediately due and payable without any declaration or other act on the part of
the Trustee or any Holder; provided, however, that after such acceleration but
-------- -------
before a judgment or decree based on acceleration is obtained by the Trustee,
the Holders of a majority in aggregate principal amount of outstanding
Securities may rescind or annul such declaration of acceleration if all Events
of Default have been cured or waived, other than the non-payment of the Default
Amount and any accrued interest on the Securities that has become due solely as
a result of such acceleration and if the rescission of acceleration would not
conflict with any judgment or decree. No such rescission shall affect any
subsequent default or impair any right consequent thereto. After a declaration
of acceleration, but before a judgment or decree for payment of the money due
has been obtained by the Trustee, the Holders of a majority in aggregate
principal amount of the outstanding Securities, by written notice to the Company
and the Trustee, may rescind such declaration if (i) the Company has paid or
deposited with the Trustee a sum sufficient to pay (a) all sums paid or advanced
by the Trustee under this Indenture and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, (b) all
overdue interest on all Securities, (c) the principal of and premium, if any, on
any Securities which have become due otherwise than by such declaration of
acceleration and interest thereon at the rate borne by the Securities, and (d)
to the extent that payment of such interest is
<PAGE>
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lawful, interest upon overdue interest at the rate borne by the Securities; and
(ii) all Defaults, other than the non-payment of principal of, premium, if any,
and interest on the Securities that have become due solely by such declaration
of acceleration, have been cured or waived.
SECTION 6.3. Other Remedies.
--------------
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities, or to enforce the
performance of any provision of the Securities, this Indenture or any Guarantee.
All rights of action and claims under this Indenture, or the
Securities or any Guarantee may be enforced by the Trustee even if the Trustee
does not possess any of the Securities or does not produce any of them in the
proceeding. A delay or omission by the Trustee or any Securityholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative to the extent permitted by law.
SECTION 6.4. Waiver of Past Default.
----------------------
Subject to Sections 6.7 and 9.2, the Holders of, in the
aggregate, a majority in aggregate principal amount of the outstanding
Securities by notice to the Trustee may waive an existing Default or Event of
Default and its consequences, except a Default specified in Section 6.1(a)(i) or
(ii) or in respect of any provision hereof that cannot be modified or amended
without the consent of the Holder so affected pursuant to Section 9.2. When a
Default or Event of Default is so waived, it shall be deemed cured and shall
cease to exist.
SECTION 6.5. Control by Majority.
-------------------
The Holders of at least a majority in principal amount of the
outstanding Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it; provided that the Trustee may refuse to follow any
--------
direction that (i) conflicts with law or this Indenture, (ii) the Trustee
determines may be unduly prejudicial to the rights of another Securityholder or
(iii) may involve the Trustee in personal liability unless the Trustee has
indemnifica-
<PAGE>
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tion satisfactory to it in its sole discretion against any loss or expense
caused by its following such direction; and provided, further, that the Trustee
-------- -------
may take any other action deemed proper by the Trustee that is not inconsistent
with such direction.
SECTION 6.6. Limitation on Suits.
-------------------
A Securityholder may not pursue any remedy with respect to
this Indenture, the Securities or any Guarantee unless:
(a) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the
outstanding Securities make a written request to the Trustee to pursue
a remedy;
(c) such Holder or Holders offer and, if requested, provide
to the Trustee security or indemnity reasonably satisfactory to the
Trustee against any loss, liability or expense;
(d) the Trustee does not comply with the request within 60
days after receipt of the request and the offer and, if requested,
provision of indemnity; and
(e) during such 30-day period the Holders of a majority in
principal amount of the outstanding Securities do not give the Trustee
a direction inconsistent with the request.
The foregoing limitations shall not apply to a suit instituted
by a Holder for the enforcement of the payment of the Default Amount, principal
of or accrued interest on the Securities on or after the respective due dates
set forth or provided for in the Securities.
A Securityholder may not use this Indenture to obtain a
preference or priority over any other Securityholder.
SECTION 6.7. Rights of Holders To Receive Payment.
------------------------------------
Notwithstanding any other provision of this Indenture, the
right of any Holder to receive payment of the Default Amount, principal of and
interest on a Security, on or after
<PAGE>
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the respective due dates expressed or provided for in the Security, or to bring
suit for the enforcement of any such payment on or after such respective dates,
is absolute and unconditional and shall not be impaired or affected without the
consent of such Holder.
SECTION 6.8. Collection Suit by Trustee.
--------------------------
If an Event of Default specified in Section 6.1(a)(i) or (ii)
occurs and is continuing, the Trustee may recover judgment in its own name and
as trustee of an express trust against the Company or any other obligor on the
Securities for the whole amount of principal and accrued interest remaining
unpaid, together with interest overdue on principal and, to the extent that
payment of such interest is lawful, interest on overdue installments of
interest, in each case at the interest rate borne by the Securities and such
further amount as shall be sufficient to cover the costs and expenses of
collection, including the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel.
SECTION 6.9. Trustee May File Proofs of Claim.
--------------------------------
The Trustee shall be entitled and empowered to file such
proofs of claim and other papers or documents as may be necessary or advisable
in order to have the claims of the Trustee (including any claim for the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel) and the Securityholders allowed in any judicial
proceedings relative to the Company or any Guarantor (or any other obligor upon
the Securities), their creditors or their property and shall be entitled and
empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same, and any Custodian in
any such judicial proceedings is hereby authorized by each Securityholder to
make such payments to the Trustee and, in the event that the Trustee shall
consent to the making of such payments directly to the Securityholders, to pay
to the Trustee any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agent and counsel, and any other
amounts due the Trustee under Section 7.7. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Securityholder any plan of reorganization, arrangement, adjustment
or composition affecting the Securities or the rights of any Holder thereof, or
to authorize the Trustee to vote in respect of the claim of any Securityholder
in any such proceeding.
<PAGE>
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SECTION 6.10. Priorities.
----------
If the Trustee collects any money pursuant to this Article VI,
it shall pay out such money in the following order:
First: to the Trustee for amounts due under Section 7.7;
Second: to Holders for interest accrued on the Securities,
ratably, without preference or priority of any kind, according to the
amounts due and payable on the Securities for interest;
Third: to Holders for principal amounts owing under the
Securities, ratably, without preference or priority of any kind,
according to the amounts due and payable on the Securities for
principal; and
Fourth: to the Company or any Guarantor, as their respective
interests may appear.
The Trustee, upon prior written notice to the Company, may fix
a record date and payment date for any payment to Securityholders pursuant to
this Section 6.10.
SECTION 6.11. Undertaking for Costs.
---------------------
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.7 or a suit by Holders of more than 10% in
aggregate principal amount of the outstanding Securities.
<PAGE>
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ARTICLE VII
TRUSTEE
-------
SECTION 7.1. Duties of Trustee.
-----------------
(a) If an Event of Default has occurred and is continuing,
the Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise or use under the circumstances in the conduct of such
person's own affairs.
(b) Except during the continuance of an Event of Default:
(i) The Trustee undertakes to perform such duties as are
specifically set forth in this Indenture and no implied covenants or
obligations shall be read into this Indenture against the Trustee.
(ii) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture.
(c) The Trustee may not be relieved from liability for its
own negligent action, its own negligent failure to act or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph
(b) of this Section 7.1;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Trust Officer, unless it is proved
that the Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any
action it takes or omits to take in good faith and reasonably believed
by it to be authorized or within the discretion or rights or powers
conferred upon it by this Indenture.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any
<PAGE>
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financial liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
(e) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1.
(f) The Trustee may refuse to perform any duty or exercise any right
or power unless it is provided adequate funds to enable it to do so and it
receives indemnity satisfactory to it in its sole discretion against any loss,
liability, fee or expense.
SECTION 7.2. Rights of Trustee.
-----------------
Subject to TIA (S)(S)315(a)-(d) and except as provided in Section 7.1:
(a) The Trustee may rely upon any document believed by it to be
genuine and to have been signed or presented by the proper Person. The
Trustee shall not be bound to make any investigation into the facts or
matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document,
but the Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit, and, if the
Trustee shall determine to make such further inquiry or investigation, it
shall be entitled, upon reasonable notice, to examine the books, records
and premises of the Company, personally or by agent or attorney at the sole
cost of the Company and shall incur no liability or additional liability of
any kind by reason of such inquiry or investigation.
(b) Before the Trustee acts or refrains from acting with respect to
any matter contemplated by this Indenture, it may require an Officers'
Certificate from the Company or an Opinion of Counsel from the Company,
that shall conform to the provisions of Section 11.5. The Trustee shall not
be liable for any action it takes or omits to take in good faith in
reliance on such certificate or opinion.
<PAGE>
-56-
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent (other
than the negligence or willful misconduct of an agent who is an employee of
the Trustee) appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it reasonably believes to be authorized or
within its rights or powers; provided, however, that the foregoing shall
-------- -------
apply only if the Trustee's conduct does not constitute negligence or bad
faith.
(e) The Trustee may consult with counsel of its selection and the
advice or opinion of such counsel as to matters of law shall be full and
complete authorization and protection from liability in respect of any
action taken, omitted or suffered by it hereunder in good faith and in
accordance with the advice or opinion of such counsel.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any Holder pursuant to this Indenture, unless such Holder shall have
offered to the Trustee reasonable security or indemnity against the costs,
expenses and liabilities which might be incurred by it in compliance with
such request or direction.
SECTION 7.3. Individual Rights of Trustee.
----------------------------
The Trustee in its individual capacity or any other capacity may
become the owner or pledgee of Securities and may otherwise deal with the
Company or its Affiliates with the same rights it would have if it were not
Trustee. Any Agent may do the same with like rights. However, the Trustee is
subject to Sections 7.10 and 7.11.
SECTION 7.4. Trustee's Disclaimer.
--------------------
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture, the Securities or any
Guarantee, it shall not be accountable for the Company's use of the proceeds
from the issuance of the Securities and it shall not be responsible for any
statement of the Company in this Indenture or any document issued in connection
with the sale of Securities or any statement in the
<PAGE>
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Securities other than the Trustee's certificate of authentication.
SECTION 7.5. Notice of Defaults.
------------------
If a Default or an Event of Default with respect to the Securities
occurs and is continuing and is known to the Trustee, the Trustee shall give
notice of the Default or Event of Default within 30 days after the Trustee
acquires knowledge of the occurrence thereof to all Holders as their names and
addresses appear on the Register, unless such Default shall have been cured or
waived before the mailing of such notice. Except in the case of a Default or an
Event of Default in payment of principal of or interest on any Security, the
Trustee may withhold the notice to the Securityholders if a committee of its
Trust Officers in good faith determines that withholding the notice is in the
interest of Securityholders.
SECTION 7.6. Reports by Trustee to Holders.
-----------------------------
To the extent required by TIA (S)313(a), within 60 days after of
each year commencing with 199 and for as long as there are Securities
outstanding hereunder, the Trustee shall mail to each Securityholder the
Trustee's brief report dated as of such date that complies with TIA (S)313(a).
The Trustee also shall comply with TIA (S)313(b) and TIA (S)313(c) and (d). A
copy of such report at the time of its mailing to Securityholders shall be filed
with the Commission, if required, and each stock exchange, if any, on which the
Securities are listed.
SECTION 7.7. Compensation and Indemnity.
--------------------------
The Company shall pay to the Trustee, the Paying Agent and the
Registrar from time to time such compensation as shall be agreed to in writing
from time to time by the Trustee and the Company for their respective services
rendered hereunder. The Trustee's, the Paying Agent's and the Registrar's
compensation shall not be limited by any law on compensation of a trustee of an
express trust. The Company shall reimburse the Trustee, the Paying Agent and the
Registrar upon request for all reasonable out-of-pocket disbursements, expenses
and advances (including reasonable fees and expenses of counsel) incurred or
made by each of them in addition to the compensation for their respective
services. Such expenses shall include the reasonable compensation, out-of-pocket
disbursements and expenses of the Trustee's, the Paying Agent's and the
Registrar's agents and counsel.
<PAGE>
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The Company shall indemnify each of the Trustee, any predecessor
Trustee, the Paying Agent and the Registrar for, and hold each of them harmless
against, any claim, demand, expense (including but not limited to their
respective reasonable attorneys' fees and expenses), loss or liability,
including taxes (other than taxes based upon, measured by or determined by the
income of the Trustee) incurred by each of them arising out of or in connection
with the administration of this Indenture and their respective duties hereunder
or thereunder. Each of the Trustee, the Paying Agent and the Registrar shall
notify the Company promptly of any claim asserted against it for which it may
seek indemnity. However, failure by the Trustee, the Paying Agent or the
Registrar to so notify the Company shall not relieve the Company of their
obligations hereunder. The Company need not reimburse any expense or indemnify
against any loss or liability incurred by the Trustee, the Paying Agent or the
Registrar through the Trustee's, the Paying Agent's or the Registrar's, as the
case may be, own willful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section 7.7 and in
Section 6.9 (insofar as the Trustee is concerned), each of the Trustee, the
Paying Agent and the Registrar shall have a lien prior to the Securities on all
money or property held or collected by it, in its capacity as Trustee, Paying
Agent or Registrar, as the case may be, except money or property held in trust
to pay principal of or interest on particular Securities. Such lien shall
survive the satisfaction and discharge of this Indenture or any other
termination under the Bankruptcy Law.
Subject to any other rights available to the Trustee, the Registrar
and the Paying Agent under any Bankruptcy Law, when any of the Trustee, the
Paying Agent and the Registrar incurs expenses or renders services after an
Event of Default specified in Section 6.1(a)(ix) or (x) with respect to the
Company occurs, the parties hereto and the Securityholders, by acceptance of the
Securities, hereby agree that the expenses and the compensation for the services
are intended to constitute expenses of administration under any Bankruptcy Law.
The provisions of this Section 7.7 shall survive the termination of
this Indenture.
SECTION 7.8. Replacement of Trustee.
----------------------
The Trustee may resign at any time by so notifying the Company in
writing, such resignation to be effective upon
<PAGE>
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the appointment of a successor Trustee. The Holders of a majority in principal
amount of the outstanding Securities may remove the Trustee by so notifying the
Trustee in writing and may appoint a successor Trustee with the Company's
consent, which consent shall not be unreasonably withheld. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10;
(b) the Trustee is adjudged a bankrupt or an insolvent;
(c) a receiver or other public officer takes charge of the Trustee or
its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of the Trustee for any reason (the Trustee in such event being referred
to herein as the retiring Trustee), the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office, the
Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately after that,
the retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee (subject to the lien provided in Section 7.7), the resignation
or removal of the retiring Trustee shall become effective, and the successor
Trustee shall have all the rights, powers and duties of the Trustee under this
Indenture. A successor Trustee shall mail notice of its succession to each
Securityholder.
If a successor Trustee does not take office within 30 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or the
Holders of at least 25% in principal amount of the outstanding Securities may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
<PAGE>
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Notwithstanding replacement of the Trustee pursuant to this
Section 7.8, the Company's obligations under Section 7.7 shall continue for the
benefit of the retiring Trustee.
SECTION 7.9. Successor Trustee by Merger, Etc.
--------------------------------
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall be the successor Trustee provided such corporation shall be otherwise
qualified and eligible under this Article VII.
SECTION 7.10. Eligibility; Disqualification.
-----------------------------
This Indenture shall always have a Trustee who satisfies the
requirements of TIA (S)310(a)(1) and (2). The Trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIA
(S)310(b) subject to its rights to apply for a stay of its duty to resign under
the penultimate paragraph of TIA (S)310(b). The provisions of TIA (S)310 shall
refer to the Company and any Guarantor as obligors in respect of the Securities.
SECTION 7.11. Preferential Collection of Claims Against the Company.
-----------------------------------------------------
The Trustee shall comply with TIA (S)311(a), excluding any creditor
relationship listed in TIA (S)311(b). A Trustee who has resigned or been removed
shall be subject to TIA (S)311(a) to the extent indicated therein. The
provisions of TIA (S)311 shall refer to the Company and any Guarantor, if
applicable, as obligors in respect of the Securities.
SECTION 7.12. Money Held in Trust.
-------------------
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall be
under no liability for interest on any money received by it hereunder except as
otherwise agreed in writing with the Company.
SECTION 7.13. Preferred Collection of Claims.
------------------------------
If and when the Trustee shall be or become a creditor of the Company
(or any other obligor upon the Securities), the
<PAGE>
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Trustee shall be subject to the provisions of the TIA regarding the collection
of claims against the Company (or any such other obligor).
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
----------------------------------
SECTION 8.1. Satisfaction and Discharge.
--------------------------
This Indenture will upon request of the Company cease to be of further
effect (except as to certain provisions governing registration of transfer or
exchange of the Securities and payments thereon when
(A) either (1) all Securities theretofore authenticated and delivered
(other than (i) Securities that have been destroyed, lost or stolen and
that have been replaced or paid and (ii) Securities for whose payment (x)
cash in United States dollars or (y) U.S. Government Obligations maturing
as to principal, premium, if any, and interest in such amounts of money and
at such times as are sufficient without consideration of any reinvestment
of such interest, to pay principal of and interest on the outstanding
Securities not later than one day before the past due date of any payment,
have theretofore been deposited in trust with the Trustee or any Paying
Agent) have been delivered to the Trustee for cancellation, or (2) all such
Securities not theretofore delivered to the Trustee for cancellation (i)
have become due and payable, or (ii) will become due and payable at their
stated maturity within one year, or (iii) are to be called for redemption
within one year under arrangements satisfactory to the Trustee for the
giving of notice of redemption by the Trustee in the name, and at the
expense, of the Company, and the Company, in the case of (2)(i), (2)(ii) or
(2)(iii) above, has irrevocably deposited or caused to be deposited with
the Trustee funds in an amount sufficient to pay and discharge the entire
indebtedness on such Securities not theretofore delivered to the Trustee
for cancellation, for principal and interest to the date of such deposit
(in the case of Securities which have become due and payable) or the stated
maturity or Redemption Date, as the case may be, together with instructions
from the Company irrevocably directing the Trustee to apply such funds to
the payment thereof at maturity or redemption, as the case may be;
<PAGE>
-62-
(B) the Company has paid or caused to be paid all other sums
then due and payable hereunder by the Company; and
(C) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel that, taken together, state that all conditions
precedent herein relating to the satisfaction and discharge of this
Indenture have been complied with.
SECTION 8.2. Legal Defeasance and Covenant Defeasance.
----------------------------------------
(a) The Company may, at its option and at any time, terminate
its obligations with respect to the outstanding Securities and elect to have
either paragraph (b) or paragraph (c) below be applied to the outstanding
Securities upon compliance with the conditions set forth in paragraph (d).
(b) Upon the Company's exercise under paragraph (a) of the option
applicable to this paragraph (b), the Company shall be deemed to have been
released and discharged from its obligations with respect to the outstanding
Securities on the date the conditions set forth below are satisfied
(hereinafter, "legal defeasance"). For this purpose, such legal defeasance means
that the Company shall be deemed to have paid and discharged the entire
indebtedness represented by the then outstanding Securities, which shall
thereafter be deemed to be "outstanding" only for the purposes of paragraph (e)
below and the other Sections of and matters under this Indenture referred to in
(i) and (ii) below, except for the following that shall survive until otherwise
terminated or discharged hereunder: (i) the rights of Holders of outstanding
Securities to receive payment in respect of the principal of, premium, if any,
and interest on such Securities when such payments are due, (but without being
subject to the subordination provisions of this Indenture) (ii) the Company's
obligations with respect to such Securities under Sections 2.2, 2.3, 2.6, 2.7,
2.8, 4.1, 4.2 and 4.19, and, with respect to the Trustee, under Sections 7.7 and
7.8, (iii) the rights, powers, trusts, duties and immunities of the Trustee
hereunder and (iv) this Section 8.2 and Sections 8.3, 8.4 and 8.5. Subject to
compliance with this Section 8.2, the Company may exercise its option under this
paragraph (b) notwithstanding the prior exercise of its option under paragraph
(c) below with respect to the Securities.
(c) Upon the Company's exercise under paragraph (a) of the
option applicable to this paragraph (c), the Company
<PAGE>
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shall be released and discharged from its obligations under any covenant
contained in Article V and in Sections 4.4 through 4.18 (except for obligations
mandated by the TIA) with respect to the outstanding Securities on and after the
date the conditions set forth below are satisfied (hereinafter, "covenant
defeasance"), and the Securities and each Guarantee, if any, shall thereafter be
deemed to be not "outstanding" for the purpose of any direction, waiver, consent
or declaration or act of Holders (and the consequences of any thereof) in
connection with such covenants, but shall continue to be deemed "outstanding"
for all other purposes hereunder. For this purpose, such covenant defeasance
means that, with respect to the outstanding Securities, the Company and any
Guarantor, if any, may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Sections 6.1(a)(iii)
or 6.1(a)(iv), but, except as specified above, the remainder of this Indenture
and such Securities shall be unaffected thereby.
(d) The following shall be the conditions to application of either
paragraph (b) or paragraph (c) above to the outstanding Securities:
(i) the Company must irrevocably deposit with the Trustee, in trust,
for the benefit of the holders of the Securities, cash in United States
Dollars, direct non-callable obligations of, or non-callable obligations
guaranteed by, the United States of America for the payment of which
obligation or guarantee the full faith and credit of the United States is
pledged ("U.S. Government Obligations"), or a combination thereof, in such
amounts as will be sufficient to pay the principal of and interest on the
outstanding Securities to redemption or maturity (except lost, stolen or
destroyed Securities that have been replaced or paid);
(ii) the Company shall have delivered to the Trustee an Opinion of
Counsel to the effect that the holders of the outstanding Securities will
not recognize income, gain or loss for Federal income tax purposes as a
result of such legal defeasance or covenant defeasance and will be subject
to Federal income tax on the same amounts, in the same manner and at the
same times as would have been the
<PAGE>
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case if such legal defeasance or covenant defeasance had not occurred (in
the case of legal defeasance, such opinion must refer to and be based upon
a ruling of the Internal Revenue Service or a change in applicable Federal
income tax laws);
(iii) no Default under this Indenture shall have occurred and be
continuing on the date of such deposit or at any time during the 90-day
period following such date;
(iv) such legal defeasance or covenant defeasance shall not cause the
Trustee to have a conflicting interest under this Indenture or the TIA with
respect to any securities of the Company;
(v) such legal defeasance or covenant defeasance shall not result in
a breach or violation of, or constitute a default under, any agreement or
instrument to which the Company or any of their Subsidiaries is a party or
by which it is bound; and
(vi) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel that, taken together, state that all
conditions precedent under this Indenture to either legal defeasance or
covenant defeasance, as the case may be, have been complied with and that
no violations under agreements governing any other outstanding Indebtedness
would result therefrom.
(e) All United States Dollars and U.S. Government Obligations
(including the proceeds thereof) deposited with the Trustee (or other qualifying
trustee, collectively for purposes of this paragraph (e), the "Trustee")
pursuant to paragraph (d) above in respect of the outstanding Securities shall
be held in trust and applied by the Trustee, in accordance with the provisions
of such Securities and this Indenture, to the payment, either directly or
through any Paying Agent as the Trustee may determine, to the Holders of such
Securities of all sums due and to become due thereon in respect of principal and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the U.S. Government Obligations
deposited pursuant to paragraph (d) above or the principal and interest received
in respect thereof other than any such tax, fee or other charge
<PAGE>
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that by law is for the account of the Holders of the outstanding Securities.
Anything in this Section 8.2 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request,
in writing, by the Company any money or U.S. Government Obligations held by it
as provided in paragraph (d) above that, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Trustee, are in excess of the amount
thereof that would then be required to be deposited to effect an equivalent
legal defeasance or covenant defeasance.
SECTION 8.3. Application of Trust Money.
--------------------------
The Trustee shall hold in trust money or U.S. Government Obligations
deposited with it pursuant to Sections 8.1 and 8.2, and shall apply the
deposited money and the money from U.S. Government Obligations in accordance
with this Indenture to the payment of principal of and interest on the
Securities.
SECTION 8.4. Repayment to the Company or a Guarantor.
---------------------------------------
Subject to Sections 7.7, 8.1 and 8.2, the Trustee and the Paying Agent
shall promptly pay to the Company, or if deposited with the Trustee by any
Guarantor, to such Guarantor upon receipt by the Trustee and the Paying Agent of
Officers' Certificates stating the amount to which each of the Company or such
Guarantor, as the case may be, is entitled, any excess money, determined in
accordance with Section 8.2(e), held by it at any time. The Trustee and the
Paying Agent shall pay to the Company or such Guarantor, as the case may be,
upon receipt by the Trustee or the Paying Agent, as the case may be, of
Officers' Certificates stating the amount to which the Company or such
Guarantor, as the case may be, is entitled, any money held by it for the payment
of principal or interest that remains unclaimed for two years after payment to
the Holders is required; provided, however, that the Trustee and the Paying
-------- -------
Agent before being required to make any payment may, but need not, at the
expense of the Company, mail by first-class mail to each Holder of Securities
entitled to such money at such Holder's address as set forth on the Register
notice that such money remains unclaimed and that after a date specified
therein, which shall be at least one year from the date of such publication or
mailing, any unclaimed balance of such money then remaining will be repaid to
the Company or such Guarantor, as the case may be. Af-
<PAGE>
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ter payment to the Company or such Guarantor, as the case may be,
Securityholders entitled to money must look solely to the Company and such
Guarantor for payment as general creditors unless an applicable abandoned
property law designates another Person, and all liability of the Trustee or
Paying Agent with respect to such money shall thereupon cease.
SECTION 8.5. Reinstatement.
-------------
With respect to the circumstances referred to in Section 8.1 and 8.2,
if the Trustee or Paying Agent is unable to apply any money or U.S. Government
Obligations in accordance with this Indenture by reason of any legal proceeding
or by reason of any order or judgment of any court or governmental authority
enjoining, restraining or otherwise prohibiting such application, then and only
then the Company's and any Guarantor's (if any) obligations under this Indenture
and the Securities shall be revived and reinstated as though no deposit had been
made pursuant to this Indenture until such time as the Trustee or Paying Agent
is permitted to apply all such money or U.S. Government Obligations in
accordance with this Indenture; provided, that if the Company or any such
--------
Guarantor has made any payment of principal of or interest on any Securities
because of the reinstatement of its obligations, the Company or any such
Guarantor, as the case may be, shall be subrogated to the rights of the Holders
of such Securities to receive such payment from the money or U.S. Government
Obligations held by the Trustee or Paying Agent.
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
-----------------------------------
SECTION 9.1. Without Consent of Holders.
--------------------------
The Company, the Guarantors and the Trustee may amend, waive or
supplement this Indenture and the Securities without notice to or consent of any
Securityholder:
(a) to cure any ambiguity, defect or inconsistency, provided that
such amendment or supplement does not adversely affect the rights of any
Holder;
(b) to provide for uncertificated Securities in addition to
certificated Securities;
(c) to make any change that does not adversely affect the rights of
any Holder.
<PAGE>
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SECTION 9.2. With Consent of Holders.
-----------------------
Subject to Section 6.7 and the provisions of this Section 9.2, the
Company, the Guarantors and the Trustee may amend or supplement this Indenture
or the Securities in any respect with the written consent of the Holders of not
less than a majority in aggregate principal amount of the Securities then
outstanding. Subject to Section 6.7 and the provisions of this Section 9.2, the
Holders of, in the aggregate, at least a majority in aggregate principal amount
of the outstanding Securities affected may waive compliance by the Company or
any Guarantor with any provision of this Indenture, the Securities or any
Guarantee, as the case may be, without notice to any other Securityholder.
Notwithstanding the foregoing, without the consent of each
Securityholder affected, an amendment, supplement or waiver, including a waiver
pursuant to Section 6.4, may not:
(i) reduce the amount of Securities whose holders must consent to
an amendment, supplement or waiver to this Indenture or the Securities,
(ii) reduce the rate of or change the time for payment of interest
on any Security,
(iii) reduce the principal of or premium on or change the stated
maturity of any Security,
(iv) make any Security payable in money other than that stated in
the Securities or change of place of payment from New York, New York,
(v) change the amount or time of any payment required by the
Securities or reduce the premium payable upon any redemption of Securities,
or change the time before which no such redemption may be made,
(vi) waive a default on the payment of the principal of, interest on
or redemption payment with respect to any Security,
(vii) following the occurrence of a Change of Control or an Asset
Sale, amend, alter, change or modify the obligation of the Company to make
and consummate a Change of Control Offer or make and consummate an Excess
Proceeds Offer or waive any Default in the performance of any such offer to
the extent relating to such Change of Control or
<PAGE>
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Asset Sale or modify any of the provisions or definitions with respect to
any such offer or
(viii) take any other action otherwise prohibited by this Indenture to
be taken without the consent of each Holder affected thereby.
It shall not be necessary for the consent of the Holders under this
Section 9.2 to approve the particular form of any proposed amendment, supplement
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment or waiver under this Section 9.2 becomes effective,
the Company shall mail to the Holders affected thereby a notice briefly
describing the amendment or waiver. Any failure of the Company to mail such
notice, or any defect therein, shall not, however, in any way impair or affect
the validity of any such amendment or waiver.
Promptly after the execution by the Company and any Guarantors and the
Trustee of any supplemental indenture pursuant to the provisions of this
Section 9.2, the Trustee shall give notice thereof, at the expense of the
Company, to the Holders of then outstanding Securities, by mailing a notice
thereof by first-class mail to such Holders at their addresses as they shall
appear on the books of the Registrar, and such notice shall set forth in general
terms the substance of such supplemental indenture. Any failure of the Trustee
to give such notice, or any defect therein, shall not, however, in any way
impair or affect the validity of any such supplemental indenture.
SECTION 9.3. Compliance with Trust Indenture Act.
-----------------------------------
Every amendment to or supplement of this Indenture or the Securities
or any Guarantee shall comply with the TIA as then in effect.
SECTION 9.4. Revocation and Effect of Amendments and Consents.
------------------------------------------------
Until an amendment or waiver becomes effective, a consent to it by a
Holder is a continuing consent by the Holder and every subsequent Holder of that
Security or portion of that Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
Security. Any such Holder or subsequent Holder, how-
<PAGE>
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ever, may revoke the consent as to his Security or portion of a Security. Such
revocation shall be effective only if the Trustee receives the notice of
revocation before the date the amendment, supplement or waiver becomes
effective. Notwithstanding the above, nothing in this paragraph shall impair the
right of any Securityholder under TIA (S)316(b).
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders of Securities entitled to consent to any
amendment, supplement or waiver. If a record date is fixed, then notwithstanding
the second and third sentences of the immediately preceding paragraph, those
Persons who were Holders of Securities at such record date (or their duly
designated proxies), and only those Persons, shall be entitled to consent to
such amendment, supplement or waiver or to revoke any consent previously given,
whether or not such Persons continue to be Holders of Securities after such
record date. Such consent shall be effective only for actions taken within 90
days after such record date.
After an amendment, supplement or waiver becomes effective, it shall
bind every Securityholder (and every subsequent Securityholder), unless it makes
a change described in any of clauses (a) through (j) of Section 9.2; if it makes
such a change, the amendment, supplement or waiver shall bind every Holder
consenting thereto and every subsequent Holder of a Security or portion of a
Security that evidences the same debt as the consenting Holder's Security.
SECTION 9.5. Notation on or Exchange of Securities.
-------------------------------------
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee shall (in accordance with the specific direction of the Company)
request the Holder of the Security to deliver it to the Trustee. The Trustee
shall (in accordance with the specific direction of the Company) place an
appropriate notation on the Security about the changed terms and return it to
the Holder. Alternatively, if the Company or the Trustee so determines, the
Company in exchange for the Security shall issue and the Trustee shall
authenticate a new Security that reflects the changed terms. Failure to make the
appropriate notation or issue a new Security shall not affect the validity and
effect of such amendment, supplement or waiver.
<PAGE>
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SECTION 9.6. Trustee To Sign Amendments, Etc.
-------------------------------
The Trustee shall sign any amendment, supplement or waiver
authorized pursuant to this Article IX if the amendment, supplement or waiver
does not adversely affect the rights, duties or immunities of the Trustee. If it
does, the Trustee may, but need not, sign it.
ARTICLE X
SUBORDINATION OF SECURITIES AND THE GUARANTEES
----------------------------------------------
SECTION 10.1. Securities Subordinate to Senior Indebtedness
and Guarantor Senior Indebtedness.
---------------------------------------------
The Company covenants and agrees, and each Holder of
Securities, by its acceptance thereof, likewise covenants and agrees, that, to
the extent and in the manner hereinafter set forth in this Article X, the
Indebtedness represented by the Securities and the Guarantees and the payment of
the principal of, premium, if any, and interest on the Securities are hereby
expressly made subordinate and subject in right of payment as provided in this
Article X to the prior payment in full in cash or Cash Equivalents or, as
acceptable to the holders of Senior Indebtedness and Guarantor Senior
Indebtedness, as the case may be, in any other manner, of all Senior
Indebtedness and Guarantor Senior Indebtedness, as the case may be.
This Article X shall constitute a continuing offer to all
Persons who, in reliance upon such provisions, become holders of or continue to
hold Senior Indebtedness and Guarantor Senior Indebtedness, as the case may be,
and such provisions are made for the benefit of the holders of Senior
Indebtedness and Guarantor Senior Indebtedness, as the case may be, and such
holders are made obligees hereunder and they or each of them may enforce such
provisions.
<PAGE>
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SECTION 10.2. Payment Over of Proceeds upon Dissolution, etc.
----------------------------------------------
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, arrangement, reorganization or
other similar case or proceeding in connection therewith, relative to the
Company or to its creditors, as such, or to its assets, whether voluntary or
involuntary, or (b) any liquidation, dissolution or other winding-up of the
Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshalling of assets or liabilities of the Company (except in
connection with the merger or consolidation of the Company or its liquidation or
dissolution following the transfer of substantially all of its assets, upon the
terms and conditions permitted under the circumstances described in Section
5.1), then and in any such event:
(1) the holders of Senior Indebtedness and Guarantor Senior
Indebtedness, as the case may be, will be entitled to receive payment
and satisfaction of all Obligations due or in respect of all Senior
Indebtedness and Guarantor Senior Indebtedness, as the case may be,
before the Holders of the Securities are entitled to receive or retain
any payment or distribution of any kind or character (other than a
payment or distribution made out of the Defeasance Trust) on account of
principal of, premium, if any, or interest on the Securities; and
(2) in the event that, notwithstanding the foregoing
provisions of this Section 10.2, the Trustee or the Holder of any
Security shall have received any payment or distribution of assets of
the Company of any kind, whether in cash, property or securities,
including, without limitation, by way of set-off or otherwise, in
respect of principal of, premium, if any, and interest on the
Securities before all Obligations in respect of Senior Indebtedness and
Guarantor Senior Indebtedness, as the case may be, are paid and
satisfied in full in cash, then such payment or distribution (other
than payment made out of the Defeasance Trust) will be held by the
recipient in trust for the benefit of holders of Senior Indebtedness
and Guarantor Senior In-
<PAGE>
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debtedness, as the case may be, and will be immediately paid over or
delivered to the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee, agent or other Person making payment or
distribution of assets of the Company for an application to the payment
of all Obligations with respect to Senior Indebtedness and Guarantor
Senior Indebtedness, as the case may be, remaining unpaid, after giving
effect to any concurrent payment or distribution to or for the holders
of Senior Indebtedness and Guarantor Senior Indebtedness, as the case
may be.
The consolidation of the Company with, or the merger of the
Company with or into, another Person or the liquidation or dissolution of the
Company following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another Person upon the terms and conditions set
forth in Article V hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of the Company for the purposes of this
Article if the Person formed by such consolidation or the surviving entity of
such merger or the Person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, comply
with the conditions set forth in Article V hereof.
SECTION 10.3. Suspension of Payment When Senior Indebtedness
and Guarantor Senior Indebtedness, as the case
may be, in Default.
----------------------------------------------
(a) Unless Section 10.2 hereof shall be applicable, after the
occurrence of a Payment Default no payment or distribution (other than payments
made out of the Defeasance Trust) of any assets or securities of the Company or
any of its Subsidiaries of any kind or character may be made by or on behalf of
the Company, including, without limitation, by way of set-off or otherwise, for
or on account of principal of, premium, if any, or interest on the Securities or
for or on account of the purchase, redemption or other acquisition of the
Securities and the Guarantees and neither the Trustee nor any Holder or owner of
any Securities
<PAGE>
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shall take or receive from the Company or any Subsidiary of the Company,
directly or indirectly in any manner, payment in respect of all or any portion
of the Securities and the Guarantees following the delivery by the
representative of the holders of Designated Senior Indebtedness and Guarantor
Senior Indebtedness, as the case may be, (the "Representative") to the Trustee
of written notice of the occurrence of a Payment Default, and in any such event,
such prohibition shall continue until such Payment Default is cured, waived in
writing or ceases to exist. At such time as the prohibition set forth in the
preceding sentence shall no longer be in effect, subject to the provisions of
the following paragraph, the Company shall resume making any and all required
payments in respect of the Securities, including any missed payments.
(b) Unless Section 10.2 hereof shall be applicable, upon the
occurrence of a Non-Payment Event of Default in respect of Designated Senior
Indebtedness and Guarantor Senior Indebtedness, as the case may be, and upon
receipt by the Trustee and the Company from the Representative of written notice
of such occurrence, no payment or distribution (other than payments made out of
the Defeasance Trust) of any assets of the Company of any kind or character may
be made by the Company, including, without limitation, by way of set-off or
otherwise, for or on account of any principal of, premium, if any, or interest
on the Securities or on account of the purchase, redemption or other acquisition
of Securities, and neither the Trustee nor any Holder or owner of any Securities
shall take or receive from the Company, directly or indirectly in any manner,
payment in respect of all or a portion of the Securities and the Guarantees, for
a period (a "Payment Blockage Period") commencing on the date of receipt by the
Trustee of such notice, unless and until the earliest to occur of the following
events: (w) more than 179 days shall have elapsed since the receipt of such
written notice by the Trustee, (x) such Non-Payment Event of Default shall have
been cured or waived in writing or shall have ceased to exist or such Designated
Senior Indebtedness and Guarantor Senior Indebtedness, as the case may be, shall
have been paid in full or (y) such Payment Blockage Period shall have been
terminated by written notice to the Company or the Trustee from the
Representative initiating such Payment Blockage Period, or the holders of at
least a majority in principal amount of such issue of Designated Senior
Indebtedness and Guarantor Senior Indebtedness, as the case may be,
<PAGE>
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after which, in the case of clause (w), (x) or (y), the Company shall resume
making any and all required payments in respect of the Securities and the
Guarantees, including any missed payments. In no event will a Payment Blockage
Period extend beyond 179 days from the date of receipt by the Trustee of the
notice initiating such Payment Blockage Period. Only one Payment Blockage Period
may be commenced within any 365-day period. Notwithstanding any other provisions
of this Indenture, no Non-Payment Event of Default that existed or was
continuing on the date of the commencement of any Payment Blockage Period shall
be, or be made, the basis for the commencement of a second Payment Blockage
Period unless such Event of Default shall have been cured or waived for a period
of not less than 90 consecutive days. In no event shall a Payment Blockage
Period extend beyond 179 days from the date of the receipt by the Trustee of the
notice referred to in this Section 10.3(b) and there must be a 186-consecutive-
day period in any 365-consecutive-day period during which no Payment Blockage
Period is in effect.
(c) In the event that, notwithstanding the foregoing, the Trustee or
the Holder of any Security shall have received any payment prohibited by the
foregoing provisions of this Section 10.3, then and in such event such payment
shall be paid over and delivered to the Representative initiating the Payment
Blockage Period, in trust for distribution to the holders of Senior Indebtedness
and Guarantor Senior Indebtedness, as the case may be, or, if no amounts are
then due in respect of Senior Indebtedness and Guarantor Senior Indebtedness, as
the case may be, promptly returned to the Company, or otherwise as a court of
competent jurisdiction shall direct.
SECTION 10.4. Trustee's Relation to Senior Indebtedness and
Guarantor Senior Indebtedness
---------------------------------------------
With respect to the holders of Senior Indebtedness and Guarantor
Senior Indebtedness, as the case may be, the Trustee undertakes to perform or to
observe only the covenants and obligations of the Trustee as are specifically
set forth in this Article X, and no implied covenants or obligations of the
Trustee with respect to the holders of Senior Indebtedness and
<PAGE>
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Guarantor Senior Indebtedness as the case may be, shall be read into this
Indenture against the Trustee. The Trustee shall not be deemed to owe any
fiduciary or other duty to the holders of Senior Indebtedness and Guarantor
Senior Indebtedness, as the case may be, and the Trustee shall not be liable to
any holder of Senior Indebtedness and Guarantor Senior Indebtedness, as the case
may be, if it shall mistakenly pay over or deliver to Holders, the Company or
any other Person moneys or assets to which any holder of Senior Indebtedness and
Guarantor Senior Indebtedness, as the case may be, shall be entitled by virtue
of this Article X or otherwise.
SECTION 10.5. Subrogation to Rights of Holders of Senior
Indebtedness and Guarantor Senior
Indebtedness, as the case may be.
------------------------------------------
Upon the payment in full of all Obligations in respect of
Senior Indebtedness and Guarantor Senior Indebtedness, as the case may be, the
Holders of the Securities shall be subrogated to the rights of the holders of
such Senior Indebtedness and Guarantor Senior Indebtedness, as the case may be,
to receive payments and distributions of cash, property and securities
applicable to the Senior Indebtedness and Guarantor Senior Indebtedness, as the
case may be, until the principal of, premium, if any and interest on the
Securities shall be paid in full. For purposes of such subrogation, no payments
or distributions to the holders of Senior Indebtedness and Guarantor Senior
Indebtedness, as the case may be, of any cash, property or securities to which
the Holders of the Securities or the Trustee would be entitled except for the
provisions of this Article X, and no payments over pursuant to the provisions of
this Article 10 to the holders of Senior Indebtedness and Guarantor Senior
Indebtedness, as the case may be, by Holders of the Securities or the Trustee
shall, as among the Company, its creditors other than holders of Senior
Indebtedness and Guarantor Senior
<PAGE>
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Indebtedness, as the case may be, and the Holders of the Securities, be deemed
to be a payment or distribution by the Company to or on account of the Senior
Indebtedness and Guarantor Senior Indebtedness, as the case may be.
If any payment or distribution to which the Holders would
otherwise have been entitled but for the provisions of this Article X shall have
been applied, pursuant to the provisions of this Article X, to the payment of
all amounts payable under the Senior Indebtedness and the Guarantor Senior
Indebtedness, as the case may be, of the Company, then and in such case the
Holders shall be entitled to receive from the holders of such Senior
Indebtedness and Guarantor Senior Indebtedness, as the case may be, at the time
outstanding any payments or distributions received by such holders of such
Senior Indebtedness and Guarantor Senior Indebtedness, as the case may be, in
excess of the amount sufficient to pay all amounts payable under or in respect
of such Senior Indebtedness and Guarantor Senior Indebtedness, as the case may
be, in full in cash or Cash Equivalents.
SECTION 10.6. Provisions Solely To Define Relative Rights.
-------------------------------------------
The provisions of this Article X are and are intended solely
for the purpose of defining the relative rights of the Holders of the Securities
on the one hand and the holders of Senior Indebtedness and Guarantor Senior
Indebtedness, as the case may be, on the other hand. Nothing contained in this
Article or elsewhere in this Indenture or in the Securities and the Guarantees
is intended to or shall (a) impair, as among the Company, its creditors other
than holders of Senior Indebtedness and Guarantor Senior Indebtedness, as the
case may be, and the Holders of the Securities, the obligation of the Company,
which is absolute and unconditional, to pay to the Holders of the Securities the
principal of, premium, if any, and interest on the Securities as and when the
same shall become due and payable in accordance with their terms; or (b) affect
the relative rights against the Company of the Holders of the Securities and
creditors of the Company
<PAGE>
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other than the holders of Senior Indebtedness and Guarantor Senior Indebtedness,
as the case may be, or (c) prevent the Trustee or the Holder of any Security
from exercising all remedies otherwise permitted by applicable law upon a
Default or an Event of Default under this Indenture, subject to the rights, if
any, under this Article of the holders of Senior Indebtedness and Guarantor
Senior Indebtedness, as the case may be, (1) in any case, proceeding,
dissolution, liquidation or other winding-up, assignment for the benefit of
creditors or other marshaling of assets and liabilities of the Company referred
to in Section 10.2 hereof, to receive, pursuant to and in accordance with such
Section, cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder, or (2) under the conditions specified in Section 10.3,
to prevent any payment prohibited by such Section or enforce their rights
pursuant to Section 10.3(c) hereof.
The failure to make a payment on account of principal of,
premium, if any, or interest on the Securities by reason of any provision of
this Article X shall not be construed as preventing the occurrence of a Default
or an Event of Default hereunder.
SECTION 10.7. Trustee To Effectuate Subordination.
-----------------------------------
Each Holder of a Security by his acceptance thereof authorizes
and directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the indebtedness of the Company owing to such Holder in the form required in
such proceedings and the causing of such claim to be approved. If the Trustee
does not file such a claim prior to 30 days before the expiration of the time to
file such a claim, the holders of Senior Indebtedness and Guarantor Senior
Indebtedness, as the case may be, or any Representative, may file such a claim
on behalf of Holders of the Securities.
<PAGE>
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SECTION 10.8. No Waiver of Subordination Provisions.
-------------------------------------
(a) No right of any present or future holder of any Senior
Indebtedness and Guarantor Senior Indebtedness, as the case may be, to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act, in good faith, by any such holder, or by any non-compliance
by the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
(b) Without limiting the generality of subsection (a) of this
Section 10.8, the holders of Senior Indebtedness and Guarantor Senior
Indebtedness, as the case may be, may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the
Securities, without incurring responsibility to the Holders of the Securities
and without impairing or releasing the subordination provided in this Article X
or the obligations hereunder of the Holders of the Securities to the holders of
Senior Indebtedness and Guarantor Senior Indebtedness, as the case may be, do
any one or more of the following: (1) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Senior Indebtedness
and Guarantor Senior Indebtedness, as the case may be, or any instrument
evidencing the same or any agreement under which Senior Indebtedness and
Guarantor Senior Indebtedness, as the case may be, is outstanding; (2) sell,
exchange, release or otherwise deal with any property pledged, mortgaged or
otherwise securing Senior Indebtedness and Guarantor Senior Indebtedness, as the
case may be, (3) release any Person liable in any manner for the collection or
payment of Senior Indebtedness and Guarantor Senior Indebtedness, as the case
may be, and (4) exercise or refrain from exercising any rights against the
Company and any other Person; provided, however, that in no event shall any such
-------- -------
actions limit the right of the Holders of the Securities to take any action to
accelerate the maturity of the Securities and the Guarantees pursuant to Article
VI hereof or to pursue any rights or remedies hereunder or un-
<PAGE>
-79-
der applicable laws if the taking of such action does not otherwise violate the
terms of this Indenture.
SECTION 10.9. Notice to Trustee.
-----------------
(a) The Company shall give prompt written notice to the
Trustee of any fact known to the Company that would prohibit the making of any
payment to or by the Trustee at its Corporate Trust Office in respect of the
Securities and the Guarantees. Notwithstanding the provisions of this Article X
or any other provision of this Indenture, the Trustee shall not be charged with
knowledge of the existence of any facts that would prohibit the making of any
payment to or by the Trustee in respect of the Securities and the Guarantees,
unless and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Indebtedness and Guarantor Senior Indebtedness, as
the case may be, or from any trustee, fiduciary or agent therefor; and, prior to
the receipt of any such written notice, the Trustee, subject to the provisions
of this Section 10.9, shall be entitled in all respects to assume that no such
facts exist; provided, however, that if the Trustee shall not have received the
-------- -------
notice provided for in this Section 10.09 at least five Business Days prior to
the date upon which by the terms hereof any money may become payable for any
purpose under this Indenture (including, without limitation, the payment of the
principal of, premium, if any, or interest on any Security), then, anything
herein contained to the contrary notwithstanding but without limiting the rights
and remedies of the holders of Senior Indebtedness and Guarantor Senior
Indebtedness, as the case may be, or any trustee, fiduciary or agent therefor,
the Trustee shall have full power and authority to receive such money and to
apply the same to the purpose for which such money was received and shall not be
affected by any notice to the contrary which may be received by it within five
Business Days prior to date of such application; nor shall the Trustee be
charged with knowledge of the curing of any such default or the elimination of
the act or condition preventing any such payment unless and until the Trustee
shall have received an Officers' Certificate to such effect.
(b) Subject to the provisions of Section 7.1 hereof, the
Trustee shall be entitled to rely on the delivery to it of a written notice to
the Trustee and the Company by a Person representing itself to be a holder of
Senior Indebtedness and Guarantor Senior Indebtedness, as the case may be,
including obligations under the new Credit Facility (or a trustee, fiduciary,
agent or other representative therefor) to establish that such notice has been
given by a holder of Senior Indebtedness and Guarantor Senior Indebtedness, as
the case may be,
<PAGE>
-80-
(or a trustee, fiduciary, agent or other representative therefor) to establish
that such notice has been given by a holder of Senior Indebtedness and Guarantor
Senior Indebtedness, as the case may be, (or a trustee, fiduciary, agent or
other representative therefor); provided, however, that failure to give such
-------- -------
notice to the Company shall not affect in any way the ability of the Trustee to
rely on such notice. In the event that the Trustee determines in good faith that
further evidence is required with respect to the right of any Person as a holder
of Senior Indebtedness and Guarantor Senior Indebtedness, as the case may be, to
participate in any payment or distribution pursuant to this Article X, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness and
Guarantor Senior Indebtedness, as the case may be, held by such Person, the
extent to which such Person is entitled to participate in such payment or
distribution and any other facts pertinent to the rights of such Person under
this Article X, and if such evidence is not furnished, the Trustee may defer any
payment to such Person pending judicial determination as to the right of such
Person to receive such payment.
SECTION 10.10. Reliance on Judicial Order or Certificate of
Liquidating Agent.
--------------------------------------------
Upon any payment or distribution of assets of the Company
referred to in this Article X, the Trustee, subject to the provisions of Section
7.1 hereof, and the Holders shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders, for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
Senior Indebtedness and Guarantor Senior Indebtedness, as the case may be, and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article X; provided that the foregoing shall apply only if
--------
such court has been fully apprised of the provisions of this Article X.
<PAGE>
-81-
SECTION 10.11. Rights of Trustee as a Holder of Senior
Indebtedness and Guarantor Senior
Indebtedness, Preservation of Trustee's
Rights.
---------------------------------------
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article X with respect to any Senior
Indebtedness and Guarantor Senior Indebtedness, as the case may be, that may at
any time be held by it, to the same extent as any other holder of Senior
Indebtedness and Guarantor Senior Indebtedness, as the case may be, and nothing
in this Indenture shall deprive the Trustee of any of its rights as such holder.
Nothing in this Article X shall apply to claims of, or payments to, the Trustee
under or pursuant to Section 7.7 hereof.
SECTION 10.12. Article Applicable to Paying Agents.
-----------------------------------
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article X shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article X in addition to or in place of the Trustee.
SECTION 10.13. No Suspension of Remedies.
-------------------------
Nothing contained in this Article X shall limit the right of
the Trustee or the Holders of Securities to take any action
to accelerate the maturity of the Securities and the Guarantees pursuant to
Article VI or to pursue any rights or remedies hereunder or under applicable
law, subject to the rights, if any, under this Article X of the holders, from
time to time, of Senior Indebtedness and Guarantors Senior Indebtedness, as the
case may be.
<PAGE>
-82-
ARTICLE XI
GUARANTEE
---------
SECTION 11.1. Unconditional Guarantee.
-----------------------
Each Guarantor hereby fully and unconditionally guarantees to
each Holder of a Security authenticated and delivered by the Trustee and to the
Trustee and its successors and assigns, that: (i) the principal of and interest
on the Securities will be promptly paid in full when due, subject to any
applicable grace period, whether at maturity, by acceleration or otherwise and
interest on the overdue principal, if any, and interest on any interest, to the
extent lawful, of the Securities to the Holders or the Trustee will be promptly
paid in full or performed, all in accordance with the terms hereof and thereof;
and (ii) in case of any extension of time of payment or renewal of any
Securities, the same will be promptly paid in full when due or performed in
accordance with the terms of the extension or renewal, subject to any applicable
grace period, whether at stated maturity, by acceleration or otherwise, subject,
however, in the case of clauses (i) and (ii) above, to the limitations set forth
in Section 11.3. Each Guarantor hereby agrees that its obligations hereunder
shall be full and unconditional, irrespective of the validity, regularity or
enforceability of the Securities or this Indenture, the absence of any action to
enforce the same, any waiver or consent by any Holder of the Securities with
respect to any provisions hereof or thereof, the recovery of any judgment
against the Company, any action to enforce the same or any other circumstance
that might otherwise constitute a legal or equitable discharge or defense of a
guarantor. Each Guarantor hereby waives diligence, presentment, demand of
payment, filing of claims with a court in the event of insolvency or bankruptcy
of the Company, any right to require a proceeding first against the Company,
protest, notice and all demands whatsoever and covenants that its Guarantee will
not be discharged except by complete performance of the obligations contained in
the Securities, this Indenture and in its Guarantee. If any Securityholder or
the Trustee is required by any court or otherwise to return to the Company, any
Guarantor or any custodian, trustee, liquidator or other similar official acting
in relation to the Company or any such Guarantor, any amount paid by the Company
or any such Guarantor to the Trustee or such Securityholder, each Guarantee to
the extent theretofore discharged, shall be reinstated in full force and effect.
Each Guarantor further agrees that, as between it and all other Guarantors, on
the one hand, and the Holders and the Trustee, on the other hand,
<PAGE>
-83-
(x) the maturity of the obligations guaranteed hereby may be accelerated as
provided in Article VI for the purposes of a Guarantee notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
obligations guaranteed hereby, and (y) in the event of any acceleration of such
obligations as provided in Article VI, such obligations (whether or not due and
payable) shall forthwith become due and payable by the Guarantors for the
purpose of the Guarantees.
SECTION 11.2. Severability.
------------
In case any provision of this Article XI shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
SECTION 11.3. Limitation of Liability.
-----------------------
Each Guarantor, and by its acceptance hereof each Holder, hereby
confirms that it is the intention of all such parties that the guarantee by each
Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or
conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance
Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law. To
effectuate the foregoing intention, the Holders and each Guarantor hereby
irrevocably agree that the obligations of each Guarantor under its Guarantee
shall be limited to the maximum amount as will, after giving effect to all other
contingent and fixed liabilities of such Guarantor and after giving effect to
any collections from or payments made by or on behalf of any of the other
Guarantors in respect of the obligations of such other Guarantors under the
other Guarantees or pursuant to Section 11.5, result in the obligations of such
Guarantor under its Guarantee not constituting such fraudulent transfer or
conveyance.
SECTION 11.4. Guarantors May Consolidate, etc., on Certain Terms.
--------------------------------------------------
(a) Nothing contained in this Indenture or in the Securities
shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor or shall prevent any sale of assets or conveyance
of the property of a Guarantor as an entirety or substantially as an entirety,
to the Company or another Guarantor. Upon any such consolidation, merger, sale
or conveyance, the Guarantee given by such Guarantor shall no longer have any
force or effect.
<PAGE>
-84-
(b) Upon the sale or disposition as an entirety (whether by
merger, stock purchase, asset sale or otherwise) of a Guarantor (or all or
substantially all its assets) to a Person that is not a Subsidiary of the
Company and which sale or disposition is otherwise in compliance with Section
4.17 and the other terms of this Indenture, such Guarantor shall be deemed
released from all obligations under this Article XI without any further action
required on the part of the Trustee or any Holder.
The Trustee shall deliver an appropriate instrument evidencing
such release upon receipt of a request by the Company accompanied by Officers'
Certificates and Opinions of Counsel certifying as to the compliance with this
Section 11.4. Any Guarantor not so released remains liable for the full amount
of principal of and interest on the Securities as provided in this Article XI.
SECTION 11.5. Contribution.
------------
In order to provide for just and equitable contribution among
the Guarantors, the Guarantors agree, inter se, that in the event any payment or
--------
distribution is made by any Guarantor (a "Funding Guarantor") under any of the
Guarantees, such Funding Guarantor shall be entitled to a contribution from all
other Guarantors in a pro rata amount based on the Adjusted Net Assets (as
--------
defined below) of each of the Guarantors (including the Funding Guarantor) for
all payments, damages and expenses incurred by that Funding Guarantor in
discharging the Company's obligations with respect to the Securities or any
obligations of any of the other Guarantors with respect to any of the
Guarantees. "Adjusted Net Assets" of any Person at any date shall mean the
lesser of the amount by which (x) the fair value of the property of such Person
exceeds the total amount of liabilities, including, without limitation,
contingent liabilities (after giving effect to all other fixed and contingent
liabilities incurred or assumed on such date), but excluding liabilities under a
Guarantee of such Person at such date and (y) the present fair salable value of
the assets of such Person at such date exceeds the amount that will be required
to pay the probable liability of such Person on its debts (after giving effect
to all other fixed and contingent liabilities incurred or assumed on such date),
excluding debt in respect of the Guarantee of such Person, as they become
absolute and matured.
<PAGE>
-85-
SECTION 11.6. Waiver of Subrogation.
---------------------
Until all Obligations under each of the Guarantees, the Securities
and this Indenture are paid in full, each of the Guarantors hereby irrevocably
waives any claims or other rights that it may now or hereafter acquire against
the Company that arise from the existence, payment, performance or enforcement
of its obligations under its Guarantee and this Indenture, including, without
limitation, any right of subrogation, reimbursement, exoneration,
indemnification and any right to participate in any claim or remedy of any
Holder of Securities against the Company, whether or not such claim, remedy or
right arises in equity, or under contract, statute or common law, including,
without limitation, the right to take or receive from the Company, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other rights. If any amount
shall be paid to any of the Guarantors in violation of the preceding sentence
and the Securities shall not have been paid in full, such amount shall have been
deemed to have been paid to such Person for the benefit of, and held in trust
for the benefit of, the Holders of the Securities, and shall, forthwith be paid
to the Trustee for the benefit of such Holders to be credited and applied upon
the Securities, whether matured or unmatured, in accordance with the terms of
this Indenture. Each of the Guarantors acknowledges that it will receive direct
and indirect benefits from the financing arrangements contemplated by this
Indenture and that the waiver set forth in this Section 10.06 is knowingly made
in contemplation of such benefits.
SECTION 11.7. Execution of Guarantee.
----------------------
To evidence their guarantee to the Securityholders set forth in this
Article XI, each Guarantor hereby agrees to execute a Guarantee in substantially
the form of Exhibit B to this Indenture, which shall be endorsed on each
Security ordered to be authenticated and delivered by the Trustee. Each
Guarantor hereby agrees that its Guarantee set forth in this Article XI shall
remain in full force and effect notwithstanding any failure to endorse on each
Security a notation of a Guarantee. A Guarantee shall be signed on behalf of a
Guarantor by two Officers, or an Officer and an Assistant Secretary, or one
Officer shall sign and one Officer or an Assistant Secretary (each of whom
shall, in each case, have been duly authorized by all requisite corporate or
partnership actions) shall attest to the Guarantee prior to the authentication
of the Security on which it is endorsed, and the delivery of such Security by
the Trustee, after the authentication thereof here-
<PAGE>
-86-
under, shall constitute due delivery of the Guarantee on behalf of such
Guarantor. Such signatures upon a Guarantee may be by manual or facsimile
signature of such officers and may be imprinted or otherwise reproduced on the
Guarantee and in case any such officer who shall have signed a Guarantee shall
cease to be such officer before the Security on which the Guarantee is endorsed
shall have been authenticated and delivered by the Trustee or disposed of by the
Company, such Security nevertheless may be authenticated and delivered or
disposed of as though the Person who signed the Guarantee had not ceased to be
such officer of the Guarantor.
SECTION 11.8. Waiver of Stay, Extension or Usury Laws.
---------------------------------------
Each Guarantor, if any, covenants (to the extent that it may
lawfully do so) that it will not at any time insist upon, plead, or in any
manner whatsoever claim or take the benefit or advantage of, any stay or
extension law or any usury law or other law that would prohibit or forgive such
Guarantor from performing a Guarantee as contemplated herein, wherever enacted,
now or at any time hereafter in force, or which may affect the covenants or the
performance of this Indenture; and (to the extent that it may lawfully do so)
each Guarantor, if any, hereby expressly waives all benefit or advantage of any
such law, and covenants that it will not hinder, delay or impede the execution
of any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE XII
MISCELLANEOUS
-------------
SECTION 12.1. Trust Indenture Act Controls.
----------------------------
If and to the extent that any provision of this Indenture
limits, qualifies or conflicts with the duties imposed by, or with another
provision (an "incorporated provision") included in this Indenture by operation
of, Sections 310 to 318, inclusive, of the TIA, such imposed duties or
incorporated provision shall control.
SECTION 12.2. Notices.
-------
Any notice or communication shall be deemed given if in writing and
delivered in Person or mailed by first-class mail, addressed as follows, and
received by the addressee:
<PAGE>
-87-
(a) if to the Company or any Guarantor:
512 Taylor Street
Corinth, MS 38834
Attention: [ ]
(b) if to the Trustee:
First Union National Bank
of North Carolina
[
]
Attention: [ ]
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Holder of a Security,
including any notice delivered in connection with TIA (S) 310(b), TIA (S)
313(c), TIA (S) 314(a) and TIA (S) 315(b), shall be mailed to him, first-class
postage prepaid, at his address as it appears on the registration books of the
Registrar and shall be deemed given to him if so mailed within the time
prescribed.
Failure to mail a notice or communication to a Securityholder
or any defect in it shall not affect its sufficiency with respect to other
Securityholders. Except for a notice to the Trustee, which is deemed given only
when received, if a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 12.3. Communications by Holders with Other Holders
--------------------------------------------
Securityholders may communicate pursuant to TIA (S) 312(b)
with other Securityholders with respect to their rights under this Indenture or
the Securities. The Company, the Trustee, the Registrar and any other Person
shall have the protection of TIA (S) 312(c).
<PAGE>
-88-
SECTION 12.4. Certificate and Opinion of Counsel as to Conditions
Precedent.
---------------------------------------------------
Upon any request or application by the Company or any Guarantor to
the Trustee to take any action under this Indenture, the Company or any
Guarantor, as the case may be, shall furnish to the Trustee (a) Officers'
Certificates in form and substance satisfactory to the Trustee stating that, in
the opinion of the signers, all conditions precedent, if any, provided for in
this Indenture relating to the proposed action have been complied with, (b)
Opinions of Counsel in form and substance satisfactory to the Trustee stating
that, in the opinion of such counsel, all such conditions have been complied
with and (c) where applicable, a certificate or opinion by an accountant that
complies with TIA (S) 314(c).
SECTION 12.5. Statements Required in Certificate and Opinion of
Counsel.
-------------------------------------------------
Each certificate and Opinion of Counsel with respect to compliance
with a condition or covenant provided for in this Indenture shall include:
(a) a statement that the Person making such certificate or Opinion
of Counsel has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements contained in such certificate
or Opinion of Counsel are based;
(c) a statement that, in the opinion of such Person, he has made
such examination or investigation as is necessary to enable him to express
an informed opinion as to whether or not such covenant or condition has
been complied with; and
(d) a statement as to whether or not, in the opinion of
such Person, such condition or covenant has been complied with.
<PAGE>
-89-
SECTION 12.6. Rules by Trustee, Paying Agent, Registrar.
-----------------------------------------
The Trustee may make reasonable rules in accordance with the
Trustee's customary practices for action by or at a meeting of Securityholders.
The Paying Agent or Registrar may make reasonable rules for its functions.
SECTION 12.7. Legal Holidays.
--------------
If a payment date is a Legal Holiday at a place of payment, payment
may be made at that place on the next succeeding day that is not a Legal
Holiday, and no interest shall accrue for the intervening period.
SECTION 12.8. Governing Law.
-------------
The internal laws of the State of New York shall govern this
Indenture, the Securities and the Guarantees without regard to principles of
conflict of laws.
SECTION 12.9. No Recourse Against Others.
--------------------------
A trustee, director, officer, employee, stockholder or incorporator,
as such, of the Company or a Guarantor shall not have any liability for any
obligations of the Company or a Guarantor under the Securities, this Indenture
or any Guarantee or for any claim based on, in respect of or by reason of such
obligations or their creation. Each Securityholder by accepting a Security
waives and releases all such liability.
SECTION 12.10. Successors.
----------
All agreements of the Company and the Guarantors in this Indenture,
the Securities and the Guarantees shall bind their respective successors. All
agreements of the Trustee in this Indenture shall bind its successor.
SECTION 12.11. Duplicate Originals.
-------------------
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.12. Joint and Several Obligations.
-----------------------------
The Company shall have joint and several liability in respect
of all obligations hereunder. The Company hereby ac-
<PAGE>
-90-
knowledges that this Agreement is the independent and several obligation of the
Company and may be enforced against the Company, whether or not enforcement of
any right or remedy hereunder has been sought against any other party hereto.
The Company hereby expressly waives, with respect to any of the amounts owing
hereunder by the Company in respect of the obligations (collectively, the "Other
Obligations"), diligence, presentment, demand of payment, protest and all
notices whatsoever, and any requirement that any other party exhaust any right,
power or remedy or proceed against the Company under this Indenture or against
any other Person under any other guarantee of, or security for, any of such
Other Obligations.
SECTION 12.13. Separability.
------------
In case any provision in this Indenture, the Securities or in any
Guarantee shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, and a Holder shall have no claim therefor against any party
hereto.
SECTION 12.14. Table of Contents, Headings, Etc.
--------------------------------
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, and are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
<PAGE>
-91-
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the date first written above.
OUTDOOR COMMUNICATIONS, INC.
By:
-------------------------------
Name:
Title:
OCI(N) CORP.
By:
--------------------------------
Name:
Title:
OCI(S) CORP.
By:
--------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK OF
NORTH CAROLINA,
as Trustee
By:
--------------------------------
Name:
Title:
<PAGE>
Exhibit A
---------
OUTDOOR COMMUNICATIONS, INC.
Cusip No.:
No. $100,000,000
% SENIOR SUBORDINATED NOTE DUE 2007
OUTDOOR COMMUNICATIONS, INC. promises to pay to
or registered assigns upon surrender hereof the principal sum of One Hundred
Million Dollars ($100,000,000) on , 2007.
Interest Payment Dates: , .
OUTDOOR COMMUNICATIONS, INC.
By:
----------------------------
Name:
Title:
By:
----------------------------
Name:
Title:
Dated:
<PAGE>
A-2
Certificate of Authentication
This is one of the Senior Subordinated Notes due 2007 referred
to in the within-mentioned Indenture.
FIRST UNION NATIONAL BANK
OF NORTH CAROLINA, as Trustee
By:
-----------------------------
Authorized Signatory
<PAGE>
A-3
(REVERSE OF SECURITY)
OUTDOOR COMMUNICATIONS, INC.
% SENIOR SUBORDINATED NOTE DUE 2007
1. Interest. OUTDOOR COMMUNICATIONS, INC., a Delaware corporation (the
--------
"Company"), promises to pay to the registered holder of this Security, until the
principal hereof is paid or duly provided for, interest on the principal amount
set forth on the face of this Security at a rate of % per annum. Interest on
---------
the Securities will accrue from and including the most recent date to which
interest has been paid or duly provided for or, if no interest has been paid or
duly provided for, from and including through but excluding the date
on which interest is paid or duly provided for. Interest shall be payable in
arrears on each and and at stated maturity, commencing
, 1998. Interest will be computed on the basis of a 360-day year of twelve
30-day months. Interest on overdue principal and on overdue installments of
interest will accrue at the rate of interest borne by this Security. Interest on
any overdue principal or interest shall be payable on demand.
2. Method of Payment. The Company will pay interest on the Securities
-----------------
(except defaulted interest) to the registered Holder of this Security. Holders
must surrender Securities to a Paying Agent to collect principal payments. The
Company will pay principal and interest in money of the United States that at
the time of payment is legal tender for the payment of public and private debts
("U.S. Legal Tender"). However, the Company may pay principal and interest by
wire transfer of Federal funds or interest by check payable in U.S. Legal
Tender.
3. Paying Agent. Initially, First Union National Bank of North Carolina
------------
(the "Trustee") will act as a Paying Agent. The Company may change any Paying
Agent without notice. Neither the Company nor any of its Affiliates may act as
Paying Agent.
4. Indenture and Guarantees. The Company issued the Securities under an
------------------------
Indenture dated as of , 1997 (the "Indenture") among the Company, the
Guarantors named therein and the Trustee. This Security is one of an issue of
Securities of the Company issued, or to be issued, under the Indenture.
Capitalized terms herein are used as defined in the Indenture unless otherwise
defined herein. The terms of the Se-
<PAGE>
A-4
curities include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code (S) (S)
77aaa-77bbbb), as amended from time to time. The Securities are subject to all
such terms, and Holders are referred to the Indenture and such Act for a
statement of them. The Securities are senior obligations of the Company limited
in aggregate principal amount to $100,000,000. The Securities are guaranteed on
a senior subordinated basis, jointly and severally, by the Guarantors pursuant
to Article Eleven of the Indenture.
5. Subordination. The Securities are subordinated to Senior Indebtedness
-------------
of the Company. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company agrees, and each
Holder by accepting a Security agrees, that the Indebtedness evidenced by the
Securities, including, but not limited to, the payment of principal of, premium,
if any, and interest on the Securities, and any other payment Obligation of the
Company in respect of the Securities is subordinated in right of payment, to the
extent and in the manner provided in the Indenture, to the prior payment in full
in cash of all Senior Indebtedness of the Company (whether outstanding on the
date hereof or hereafter created, incurred, assumed or guaranteed) and
authorizes the Trustee to give effect and appoints the Trustee as attorney-in-
fact for such purpose.
6. Optional Redemption. The Company, at its option, may redeem all or
-------------------
any of the Securities, in whole or in part, at any time on or after
, 2002, at the redemption prices (expressed as percentages of principal amount)
set forth below, plus accrued and unpaid interest, if any, to the redemption
date, if redeemed during the 12-month period beginning on
of the years indicated below:
Year Redemption Price
---- ----------------
2002............................................ %
2003............................................ %
2004............................................ %
2005 and thereafter............................. 100.00%
7. Mandatory Redemption. Except as set forth in paragraph 8 below, the
--------------------
Company shall not be required to make mandatory redemption or sinking fund
payments with respect to the Securities.
<PAGE>
A-5
8. Redemption upon Public Equity Offering. Notwithstanding the foregoing,
--------------------------------------
the Company may redeem in the aggregate up to one-third of the original
principal amount of Securities at any time and from time to time prior to
, 2000 at a redemption price equal to % of the aggregate principal amount
so redeemed, plus accrued interest to the redemption date, out of the Net
Proceeds of one or more Public Equity Offerings (other than the Common Stock
Offering); provided that at least two-thirds of the principal amount of
--------
Securities originally issued remain outstanding immediately after the occurrence
of any such redemption and that any such redemption occurs within 60 days
following the closing of any such Public Equity Offering.
9. Notice of Redemption. Notice of redemption will be mailed at least 30
--------------------
days but not more than 60 days before the redemption date to each Holder of
Securities to be redeemed. On and after the Redemption Date, unless the Company
defaults in making the redemption payment, interest ceases to accrue on
Securities or portions thereof called for redemption.
10. Offers To Purchase. The Indenture provides that upon the occurrence
------------------
of a Change of Control or an Asset Sale and subject to further limitations
contained therein, the Company shall make an offer to purchase outstanding
Securities in accordance with the procedures set forth in the Indenture.
11. Denominations. The Securities are in registered form without coupons
-------------
and only in denominations of $1,000 of principal amount and integral multiples
thereof.
12. Persons Deemed Owners. The registered Holder of this Security may be
---------------------
treated as the owner of this Security for all purposes.
13. Unclaimed Money. If money for the payment of principal or interest
---------------
remains unclaimed for one year, the Trustee or Paying Agent will pay the money
back to the Company or a Guarantor, as the case may be, at its request. After
that, Holders entitled to the money must look to the Company or a Guarantor for
payment as general creditors unless an "abandoned property" law designates
another Person.
14. Amendment, Supplement, Waiver, Etc. The Company, any Guarantors and
----------------------------------
the Trustee (if a party thereto) may, without the consent of the Holders of any
outstanding Securities, amend, waive or supplement the Indenture, the Securities
or any Guarantee for certain specified purposes, including, among
<PAGE>
A-6
other things, curing ambiguities, defects or inconsistencies, maintaining the
qualification of the Indenture under the Trust Indenture Act of 1939, as
amended, and making any change that does not adversely affect the rights of any
Holder. Other amendments and modifications of the Indenture, the Securities or
any Guarantee may be made by the Company, any Guarantor and the Trustee with the
consent of the Holders of not less than a majority of the aggregate principal
amount of the outstanding Securities, subject to certain exceptions requiring
the consent of the Holders of the particular Securities to be affected.
15. Successor Corporation. When a successor corporation assumes all the
---------------------
obligations of its predecessor under the Securities or a Guarantee, as the case
may be, and the Indenture and the transaction complies with the terms of Article
V of the Indenture, the predecessor corporation will, except as provided in
Article V, be released from those obligations.
16. Restrictive Covenants. The Indenture contains certain covenants that,
---------------------
among other things, limit the ability of the Company and the Restricted
Subsidiaries to make restricted payments, to incur indebtedness, to create
liens, to sell assets, to permit restrictions on dividends and other payments by
Restricted Subsidiaries to the Company, to consolidate, merge or sell all or
substantially all of its assets, to engage in transactions with affiliates or to
engage in certain businesses. The limitations are subject to a number of
important qualifications and exceptions. The Company must annually report to the
Trustee on compliance with such limitations.
17. Defaults and Remedies. Events of Default are set forth in the
---------------------
Indenture. Subject to certain limitations in the Indenture, if an Event of
Default (other than an Event of Default specified in Section 6.1(a)(ix) or (x)
of the Indenture with respect to the Company) occurs and is continuing, then the
Holders of not less than 25% in aggregate principal amount of the outstanding
Securities may, and the Trustee upon the request of the Holders of not less than
25% in aggregate principal amount of the outstanding Securities shall, declare
the Default Amount of and any accrued interest on all of the Securities to be
due and payable immediately. If an Event of Default specified in Section
6.1(a)(ix) or (x) of the Indenture occurs with respect to the Company, the
Default Amount shall ipso facto become and be immediately due and payable
----------
without any declaration or other act on the part of the Trustee or any Holder.
Holders may not enforce the Indenture, the Securities or any Guarantee except as
provided in the Indenture. The Trustee may require indemnity satisfactory to it
before it en-
<PAGE>
A-7
forces the Indenture, the Securities or any Guarantee. Subject to certain
limitations, Holders of a majority in principal amount of the then outstanding
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Holders notice of any continuing default (except a
default in payment of the Default Amount, principal or interest) if it
determines that withholding notice is in their interests.
18. Trustee Dealings with the Company. The Trustee, in its individual or
---------------------------------
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not Trustee.
19. No Recourse Against Others. A director, officer, employee, partner,
--------------------------
stockholder or incorporator, as such, of the Company or any Guarantor shall not
have any liability for any obligations of the Company or any such Guarantor
under the Indenture, the Securities or any Guarantee or for any claim based on,
in respect of, or by reason of, such obligations or their creation. Each Holder
by accepting a Security waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities and any
Guarantee.
20. Discharge. The Company's and any Guarantor's obligations pursuant to
---------
the Indenture will be discharged, except for obligations pursuant to certain
sections thereof, subject to the terms of the Indenture, upon the payment of all
the Securities or upon the irrevocable deposit with the Trustee of U.S. Legal
Tender or U.S. Government Obligations sufficient to pay when due principal of
and interest on the Securities to maturity or redemption, as the case may be.
21. Authentication. This Security shall not be valid until the Trustee
--------------
signs the certificate of authentication on the other side of this Security.
The internal laws of the State of New York shall govern this Security
without regard to principles of conflict of laws.
<PAGE>
A-8
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to:
OUTDOOR COMMUNICATIONS, INC.
512 Taylor Street
Corinth, MS 38834
Attention:
<PAGE>
ASSIGNMENT FORM
If you the Holder want to assign this Security, fill in the form below and have
your signature guaranteed:
I or we assign and transfer this Security to
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax ID number)
---------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint
- --------------------------------------------------------------------------------
agent to transfer this Security on the books of the Company. The agent may
substitute another to act for him.
Date: Your Signature:
-------------------- ----------------------------------
(Sign exactly as your name appears
on the other side of this Security)
Signature Guarantee:
-----------------------------------------------------------
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company
pursuant to Section 4.13 or 4.15 of the Indenture, check the Box: [_]
If you wish to have a portion of this Security purchased by
the Company pursuant to Section 4.13 or 4.15 of the Indenture, state the amount:
$____________
Date: Your Signature:
-------------------- ----------------------------------
Signature Guarantee:
-----------------------------------------------------------
<PAGE>
EXHIBIT B
---------
GUARANTEE
---------
The undersigned hereby unconditionally guarantees on a senior
unsecured basis to the Holder of this Security the payments of principal of and
interest on this Security in the amounts and at the time when due and interest
on the overdue principal and interest, if any, of this Security, if lawful, and
the payment or performance of all other obligations of the Company under the
Indenture or the Securities, to the Holder of this Security and the Trustee, all
in accordance with and subject to the terms and limitations of this Security,
Article XI of the Indenture and this Guarantee. This Guarantee will become
effective in accordance with Article XI of the Indenture and its terms shall be
evidenced therein. The validity and enforceability of any Guarantee shall not be
affected by the fact that it is not affixed to any particular Security.
The obligations of the undersigned to the Holders of
Securities and to the Trustee pursuant to this Guarantee and the Indenture are
expressly set forth in Article XI of the Indenture and reference is hereby made
to the Indenture for the precise terms of this Guarantee and all of the other
provisions of the Indenture to which this Guarantee relates.
The internal laws of the State of New York shall govern this
Guarantee without regard to principles of conflict of laws.
OCI(N) CORP.
By:
----------------------------------
Name:
Title:
By:
----------------------------------
Name:
Title:
<PAGE>
================================================================================
EXHIBIT 10.3
SHAREHOLDERS AGREEMENT
Dated as of April 3, 1996
by and among
OCI HOLDINGS CORP.
and
THE VENTURE INVESTORS
AND MANAGEMENT INVESTORS
NAMED IN THE SECURITIES PURCHASE AGREEMENT
OF EVEN DATE HEREWITH
================================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS .....................................................................1
SECTION 1. DEFINITIONS........................................................2
1.1 Construction of Terms..............................................2
1.2 Terms not Defined..................................................2
1.3 Defined Terms......................................................2
SECTION 2. RESTRICTIONS ON TRANSFER...........................................4
2.1 Generally..........................................................4
2.2 Transfers in Compliance with First Refusal and Go-Along............5
2.3 [Intentionally Omitted.]...........................................7
2.4 Certain Other Permitted Transfers by Management Investors..........7
2.5 Certain Other Permitted Transfers by Venture Investors.............7
2.6 Qualifying Initial Public Offering.................................8
2.7 Agreement to be Bound; Provisions Applicable to Permitted
Transferees.....................................................8
2.8 Compliance with Provisions.........................................8
SECTION 3. EXERCISE OF VOTING RIGHTS..........................................8
3.1 Generally..........................................................8
3.2 Board Composition..................................................8
3.3 Removal............................................................9
3.4 Vacancies..........................................................9
3.5 Charter Documents and By-Laws......................................9
3.6 Approved Sale.....................................................10
SECTION 4. SALE OF THE COMPANY...............................................10
4.1 Approved Sale.....................................................10
4.2 In furtherance of an Approved Sale; Mandatory Come-Along..........10
4.3. Mandatory Sale....................................................10
4.4. Conditions to Company and Purchasers' Obligations.................10
SECTION 5. RIGHTS OF FIRST OFFER.............................................11
SECTION 6. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS.................12
6.1 Organization and Authority........................................12
6.2 Authorization and Binding Obligations.............................12
6.3 Absence of Conflicting Agreements or Consents.....................12
6.4 Regulatory Compliance Cooperation.................................13
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
6.5 Transactions with Affiliates...................................14
6.6 Modification of North and South Acquisition Agreements.........15
SECTION 7. MISCELLANEOUS..................................................15
7.1 Incorporation by Reference.....................................15
7.2 Amendments, Modifications and Waivers..........................15
7.3 Legend on Securities...........................................15
7.4 Governing Law..................................................16
7.5 Notices........................................................16
7.6 Management Investors' Agent; Power of Attorney.................16
7.7 Successors and Assigns.........................................16
7.8 Termination....................................................17
7.9 Dispute Resolution; Consent to Jurisdiction and Service........17
7.10 Specific Performance...........................................17
7.11 Counterparts...................................................17
7.12 Effect of Headings.............................................17
7.13 Entire Agreement...............................................18
</TABLE>
(ii)
<PAGE>
SHAREHOLDERS AGREEMENT
----------------------
SHAREHOLDERS AGREEMENT (the "Agreement") dated as of April 3, 1996, by
and among OCI HOLDINGS CORP., a Delaware corporation (the "Company"), A.B.
ISBELL, JOHN C. STANLEY, IV, NORMAN ISBELL, PRISCILLA S. DENTON, WILLIAM HULL
DAVIS, DOUGLAS W. FERRIS, JR., RICHARD W. EBERSOLE, JOHN C. STANLEY, IV, TRUSTEE
OF THE JCS TRUST, and JOHN C. STANLEY, IV, TRUSTEE OF THE LWS TRUST
(collectively, the "Management Investors" and individually, each a "Management
Investor"), MEDIA/COMMUNICATIONS PARTNERS II LIMITED PARTNERSHIP and
MEDIA/COMMUNICATIONS INVESTORS LIMITED PARTNERSHIP (collectively, the "M/C II
Investors" and individually, each an "M/C II Investor"), and CHASE VENTURE
CAPITAL ASSOCIATES, L.P. ("CVCA"). The M/C II Investors and CVCA may be
referred to herein collectively as the "Venture Investors" and each as a
"Venture Investor". The Management Investors and the Venture Investors may be
referred to herein collectively as the "Purchasers" and each as a "Purchaser."
RECITALS:
--------
WHEREAS, concurrently with the execution hereof, the Company and the
Purchasers are entering into a Securities Purchase Agreement (the "Securities
Purchase Agreement"), pursuant to which, among other things, the Company is
issuing and selling to the Purchasers and the Purchasers are acquiring from the
Company, certain debt and equity securities of the Company; and
WHEREAS, upon consummation of the transactions contemplated by the
Securities Purchase Agreement and the other Transaction Documents (as such term
is defined in the Securities Purchase Agreement), the Purchasers will be the
holders of all of the issued and outstanding debt and equity securities of the
Company; and
WHEREAS, the Company and the Purchasers desire to agree on certain
arrangements that will govern the parties' relationship as investors in the
Company, and to effectuate certain provisions of the Securities Purchase
Agreement;
NOW, THEREFORE, to induce the Purchasers to enter into the Securities
Purchase Agreement, and in consideration of the mutual promises and agreements
hereinafter set forth, the parties hereto hereby agree as follows:
<PAGE>
SECTION 1. DEFINITIONS.
- --------- -----------
1.1 Construction of Terms. The terms in this Agreement shall include
---------------------
the plural as well as the singular and the use of any gender herein shall be
deemed to include the other genders. References to sections or exhibits shall
mean sections of this Agreement and Exhibits to this Agreement unless otherwise
specified.
1.2 Terms not Defined. Capitalized terms used herein without
-----------------
definition shall have the meanings assigned to them in the Securities Purchase
Agreement.
1.3 Defined Terms. The following capitalized terms, as used in this
-------------
Agreement, shall have the meanings set forth below.
"Affiliate" means, with respect to any Person, any other Person (a)
---------
that directly or indirectly through one or more intermediaries controls, is
controlled by, or is under common control with, the specified Person; (b) that
is a director or officer of, partner in, or trustee of, or serves in a similar
capacity with respect to, the specified Person or of which the specified Person
is a director, officer, partner or trustee, or with respect to which the
specified Person serves in a similar capacity; (c) of which the specified Person
is directly or indirectly through one or more intermediaries the owner of ten
percent (10%) or more of the equity securities, or (d) that is acting at the
direction and primarily in furtherance of the interests of the specified Person.
"Approved Sale" has the meaning set forth in Section 4.1 of this
-------------
Agreement.
"Common Stock" means the capital stock of the Company, however
------------
designated, which is not limited as to the amount of dividends, or which is not
limited as to the amount of distributions to which it is entitled upon
liquidation or dissolution of the Company, and shall include, without
limitation, the Company's presently authorized Class A Common Stock, $.01 par
value per share, and Class B Common Stock, $.01 par value per share.
"Common Stock Percentage" means, with respect to any Purchaser, a
-----------------------
fraction, the numerator of which is the aggregate number of shares of Common
Stock held by such Purchaser as of the date of determination (assuming the
exercise of all warrants, options or other rights to acquire shares of Common
Stock held by such Purchaser as of the date of determination but excluding all
Employee Shares), and the denominator of which is the aggregate number of
Purchasers' Shares (assuming the exercise of all warrants, options or other
rights to acquire shares of Common Stock outstanding as of the date of
determination).
"Company" has the meaning set forth in the preamble and shall include
-------
the Company's successors by merger, acquisition, reorganization or otherwise.
2
<PAGE>
"Company Securities" means, collectively, the Purchasers' Shares and
------------------
the Subordinated Notes.
"Employee Shares" means, with respect to any Purchaser who is an
---------------
officer, director or employee of the Company, all shares of Common Stock and all
options, warrants or other rights to acquire shares of Common Stock that may
from time to time be issued and/or sold to such Purchaser as part of the
compensation paid or other benefits made available to such Purchaser in
connection with his or her employment with the Company pursuant to a stock,
stock option or similar benefit plan approved by the board of directors of the
Company.
"M/C III" means a new venture capital fund to be established by
-------
Media/Communications Partners after the date of this Agreement.
"Modification" has the meaning set forth in Section 7.2 hereof.
------------
"Offer" means a legally sufficient, written offer to purchase a
-----
specified number of Company Securities owned by one or more Purchasers, (A)
which is made by an offer or that is not another Purchaser or an Affiliate of
any Purchaser, (B) which the recipient believes has been made in good faith by
an offeror that is financially capable of carrying out the terms of the offer,
(C) which specifies that the closing of the purchase shall occur not later than
(i) if no regulatory approvals are required in connection with the sale of the
Company Securities pursuant to the offer, ninety days after the date the offer
is made, or (ii) in all other cases, the earlier of ninety days after the
receipt of all regulatory approvals required in connection with the sale of
Company Securities pursuant to the offer or one hundred eighty days after the
date the offer is made, and (D) which provides for payment of the purchase price
for the Company Securities entirely in cash.
"Offeror" means any Person making an Offer.
-------
"Permitted Transferee" has the meaning set forth in Section 2.7.
--------------------
"Person" means any individual, corporation, association, partnership,
------
joint venture, trust, estate or other entity or organization.
"Purchasers' Shares" means all shares of Common Stock from time to
------------------
time issued to or acquired by any of the Purchasers or any of their Affiliates,
other than Employee Shares.
"Qualifying Initial Public Offering" means the first public offering
----------------------------------
of the Common Stock of the Company pursuant to a registration statement under
the Securities Act of 1933, as amended, in which the gross proceeds from the
offering to the Company and any selling security holders exceed $10,000,000.
3
<PAGE>
"Regulated Holder" means any holder of the Company Securities that is
----------------
(or that is a subsidiary of a bank holding company that is) (a) subject to the
various provisions of Regulation Y of the Board of Governors of the Federal
Reserve Systems, 12 C.F.R., Part 225 (or any successor to Regulation Y) or that
is (or is an Affiliate of an entity that is) subject to Section 23A or 23B of
the Federal Reserve Act, as amended.
"Regulatory Problem" means (i) any set of facts or circumstances
------------------
wherein it has been asserted by any governmental regulatory agency (or CVCA
believes that there is a significant risk of such assertion) than such Person
(or any bank holding company that controls such Person or any Affiliate or such
Person (as the case may be) is not entitled to hold, or exercise any material
right with respect to, all or any portion of the securities of the Company which
such Person holds or (ii) when such Person and its Affiliates would own, control
or have power (including voting rights) over a greater quantity of securities of
the Company than is permitted under any law or regulation or any requirement of
any governmental authority applicable to such Person or to which such Person is
subject.
"Requisite Holders" means both (a) Persons holding fifty-one percent
-----------------
(51%) or more of the aggregate outstanding Purchasers' Shares, and (b) Persons
holding fifty-one percent (51%) or more of the aggregate outstanding principal
amount of Subordinated Notes.
"Sale" means any transaction or series of transactions involving: (a)
----
the sale, transfer, conveyance, exchange or other disposition, other than in the
usual and regular course of business, of all or substantially all of the
consolidated assets or properties of the Company and its Subsidiaries taken as a
whole to one or more Persons who are not Affiliates of any of the Purchasers, or
(b) the sale, transfer, conveyance, exchange or other disposition (including,
without limitation, by merger or consolidation) of all or substantially all of
the Common Stock of the Company to one or more Persons who are not Affiliates of
any of the Purchasers.
"Selling Security Holder" shall mean any Purchaser or group of
-----------------------
Purchasers acting collectively that has received an Offer and desires to accept
the Offer upon compliance with the provisions of Section 2.2(a).
"Transfer" shall have the meaning set forth in Section 2.1.
--------
SECTION 2. RESTRICTIONS ON TRANSFER.
- --------- ------------------------
2.1 Generally. Except as otherwise expressly provided in Sections
---------
2.2, 2.4, 2.5, 2.6, 4.2 and 4.3 of this Agreement, no Purchaser shall sell,
exchange, deliver or assign, dispose of, bequeath or gift, pledge, mortgage,
hypothecate, or otherwise encumber, transfer or permit to be transferred
(hereinafter "Transfer" and any such action a "Transfer"), whether voluntarily,
involuntarily or by operation of law (including the laws of bankruptcy and
4
<PAGE>
insolvency), any Company Securities or any rights in connection therewith or
attendant thereto.
2.2 Transfers in Compliance with First Refusal and Go-Along.
-------------------------------------------------------
Notwithstanding Section 2.1, each Purchaser shall be permitted to sell any or
all Company Securities held by such Purchaser pursuant to an Offer in compliance
with the provisions of this Section 2.2.
(a) Receipt of Offer; Notice to Other Purchasers. Following
--------------------------------------------
receipt of an Offer that any Selling Security Holder desires to accept, such
Selling Security Holder shall promptly send a notice to the Company and to each
of the other Purchasers:
(1) containing a true and complete copy of the Offer, setting
forth the numbers of shares of Common Stock and aggregate principal amount
of Subordinated Notes that are the subject of the Offer, the price
thereof, and all the terms and conditions of the proposed sale;
(2) stating that the Selling Security Holder desires to sell
the specified Company Securities on the terms described in the Offer, that
the Selling Security Holder believes that the Offer has been made in good
faith and that the Offeror is financially capable of carrying out the
terms of the Offer, and that the Offeror is not another Purchaser or an
Affiliate of any other Purchaser;
(3) setting forth the name, business address, and business or
other occupation of the Offeror;
(4) offering to sell all the Company Securities that are the
subject of the Offer to the Company and, contingent on the Company's
failure to accept such offer in a timely manner, to the other Purchasers,
in each case on the terms and conditions set forth in the Offer; and
(5) offering each other Purchaser the right (the "Go-Along
Right") to sell to the Company, the other Purchasers or the Offeror, as
applicable, on the same terms and conditions as set forth in the Offer, a
portion of the Company Securities held by such Purchaser, which portion
shall be computed such that the ratio of (a) the amounts of Company
Securities to be sold by such Purchaser to (b) the aggregate amounts of
Company Securities then held by such Purchaser is equal to the ratio of
(x) the amounts of Company Securities to be sold by the Selling Security
Holder to (y) the aggregate amounts of Company Securities then held by
such Selling Security Holder.
(b) Right of Purchasers to Sell Other Classes and Series of
-------------------------------------------------------
Securities. The Go-Along Right of each Purchaser shall apply to all classes and
- ----------
series of Company Securities held by such Purchaser. If any Purchaser
exercising its Go-Along Right elects to sell any class or series of Company
Securities that is different from the class or series specified in the Offer,
5
<PAGE>
then the Selling Security Holder shall use reasonable efforts to cause the
Offeror (or the Company or the other Purchasers, as applicable) to purchase such
different class or series of Company Securities on the terms specified in the
Offer and if the Offeror (or the Company or the other Purchasers, as applicable)
is unwilling or unable to purchase such Company Securities in accordance with
the terms of the Offer, the Selling Security Holder shall be prohibited from
selling any of its Company Securities pursuant to such Offer.
(c) Acceptance of Selling Security Holder's Offer. If the Company
---------------------------------------------
desires to purchase from the Selling Security Holder all of the Company
Securities that are the subject of the Offer on the same terms and conditions as
the Offer, and if the Company is permitted to purchase such shares on those
terms and conditions without violating the provisions of the Loan Documents, the
Company shall deliver a written acceptance of the offer to the Selling Security
Holder within fifteen days after the Company's receipt of the Selling Security
Holder's offer. If any other Purchaser or group of Purchasers desires to
purchase all of the Company Securities that are the subject of the Offer on the
same terms and conditions as the Offer, such other Purchaser or group of
Purchasers shall deliver a written acceptance of the offer to the Company and to
the Selling Security Holder within fifteen days after its receipt of the Selling
Security Holder's offer. Any acceptance of the Selling Security Holder's offer
by any other Purchaser or group of Purchasers shall be contingent on the
Company's failure to accept in a timely manner the offer made to it by the
Selling Security Holder.
(d) Exercise of Go-Along Rights. If any Purchaser who has not
---------------------------
elected to purchase the Company Securities from the Selling Security Holder
pursuant to Section 2.2(c) desires to exercise its Go-Along Right, such
Purchaser shall deliver a written notice to the Selling Security Holder within
fifteen days after receipt of the Selling Security Holder's offer specifying
that such Purchaser desires to exercise its Go-Along Right.
(e) Sale of Securities After Offer to Company and Other
---------------------------------------------------
Purchasers. After compliance with the foregoing provisions of this Section 2.2,
- ----------
the Selling Security Holder (and all other Purchasers that have elected to
exercise their Go-Along Rights) may sell the Company Securities (subject to
adjustment to include the Company Securities to be sold by all Purchasers
exercising Go-Along Rights) to the Company or to the other Purchaser or group of
Purchasers that accepted the offer of the Selling Security Holder, as
applicable, or, if neither the Company nor any other Purchaser or group of
Purchasers accepted the offer of the Selling Security Holder or if the Company
or the other Purchaser or group of Purchasers failed to purchase the Company
Securities of the Selling Security Holder pursuant to its or their acceptance of
the Selling Security Holder's offer, to the Offeror on the terms of the Offer,
subject to the Go-Along Rights of the other Purchasers. If any of the Purchasers
shall have exercised their Go-Along Rights, the Company and the other Purchaser
or group of Purchasers shall, or the Selling Security Holder shall cause the
Offeree, as applicable, to purchase from the Purchasers that have exercised
their Go-Along Rights the amounts of Company Securities to be sold by the other
Purchasers (calculated in accordance with Section 2.2(a)(5)). If neither the
Company nor any other Purchaser or group of Purchasers accepts the offer of the
Selling Security Holder
6
<PAGE>
and, thereafter, the Selling Security Holder proposes (i) to sell its Company
Securities to any Person other than the Offeror or (ii) to sell its Company
Securities on terms and conditions that are not the same as those set forth in
the Offer (including a sale of Company Securities to the Offeror on a date later
than the latest date specified in the Offer for the closing of the purchase of
the Selling Security Holder's Company Securities), then the Selling Security
Holder shall submit a new notice conforming with Section 2.2(a) to the Company
and the other Purchasers, and the provisions of this Section 2.2 shall apply as
if the Selling Security Holder was proposing a new sale to a new Offeror.
2.3 [Intentionally Omitted.]
---------------------
2.4 Certain Other Permitted Transfers by Management Investors.
---------------------------------------------------------
Notwithstanding Section 2.1, any Management Investor shall be permitted to make
the following additional Transfers:
(a) Transfers by any Management Investor to one or more trusts of
which such Management Investor is the sole trustee, with sole power and
authority to direct the disposition of and voting with respect to the assets
thereof, and the sole beneficiaries thereof are such Management Investor, and/or
his or her spouse and/or his or her direct descendants;
(b) Transfers by any Management Investor to or for the benefit of
his or her spouse and/or his or her direct descendants, provided that each such
transferee shall have executed an irrevocable power of attorney in favor of such
Management Investor (in form and substance satisfactory to the Company and the
Requisite Holders), granting such Management Investor complete and total
discretion to sell, assign, transfer or otherwise dispose of, to exercise all
voting rights with respect to, and to take any and all actions required or
permitted to be taken under this Agreement or any under any instrument,
agreement or other document executed in connection herewith with respect to, all
Company Securities that are the subject of such Transfer; and
(c) Transfers of Company Securities held by any Management
Investors to or for the benefit of such Management Investor's spouse and/or his
direct descendants upon the death or mental incapacity of such Management
Investor.
2.5 Certain Other Permitted Transfers by Venture Investors.
------------------------------------------------------
Notwithstanding Section 2.1, the Venture Investors shall be permitted to make
the following additional Transfers:
(a) Transfers by any Venture Investor to any Affiliate of such
Venture Investor;
(b) Transfers by any Venture Investor to any other Venture
Investor or any Affiliate of such other Venture Investor;
7
<PAGE>
(c) Transfers by the M/C II Investors to any third party of a
portion of the Company Securities held by the M/C II Investors in the event that
M/C III is not established within one year from the date of this Agreement,
provided that (i) after giving effect to such Transfers by the M/C II Investors
pursuant to this clause (c) the M/C II Investors shall continue to hold in the
aggregate Company Securities having a cost of not less than $10,000,000, and
(ii) the M/C II Investors shall enter into an amendment to this Agreement which
provides for the reduction of the number of M/C Investor Directors set forth in
Section 3.2(b) hereof from three to two, and the addition of the right to
nominate one member of the Board of Directors of the Company by either the
transferee of such Company Securities or CVCA, as determined by the M/C II
Investors in their sole discretion; and
(d) Transfers by CVCA (or any Permitted Transferee of CVCA that
is a Regulated Holder) pursuant to Section 6.4 of this Agreement.
2.6 Qualifying Initial Public Offering. Notwithstanding Section 2.1
----------------------------------
and subject to the terms and conditions of the Registration Rights Agreement,
each Purchaser shall be permitted to sell any or all of its shares of Common
Stock in connection with a Qualifying Initial Public Offering.
2.7 Agreement to be Bound; Provisions Applicable to Permitted
---------------------------------------------------------
Transferees. Any transferee of any Purchaser permitted by Sections 2.2, 2.4 and
- -----------
2.5 (a "Permitted Transferee") shall acquire the Company Securities and other
rights, subject to all provisions of this Agreement as if such Company
Securities and other rights were still held by such Purchaser, whether or not
such Permitted Transferee so agrees with the transferring Purchaser, provided,
--------
however, that no Transfer pursuant to Sections 2.2, 2.4 or 2.5 shall be
- -------
effective unless the transferee agrees in writing to be a party to and be bound
by all of the terms of this Agreement.
2.8 Compliance with Provisions. The Company shall not transfer on
--------------------------
its books any Company Securities which are subject to this Agreement unless the
provisions of this Agreement have been complied with. Any purported transfer of
Company Securities without full compliance with the provisions of this Agreement
shall be null and void.
SECTION 3. EXERCISE OF VOTING RIGHTS.
- --------- -------------------------
3.1 Generally. Each of the Purchasers shall vote all shares of
---------
Common Stock which such Purchaser from time to time owns in a manner consistent
with the performance by the Company and its Subsidiaries of their covenants and
obligations under this Agreement, the Securities Purchase Agreement and the
other Transaction Documents.
3.2 Board Composition. At each annual meeting of the stockholders of
-----------------
the Company, and at each special meeting of the stockholders of the Company
involving the
8
<PAGE>
election of directors of the Company, and at any other time at which the
stockholders of the Company shall have the right to or shall vote for or consent
in writing regarding the nomination or election of directors of the Company,
then and in each event from and after the date hereof, the Purchasers shall vote
all shares of Common Stock which are presently or hereafter owned or controlled
by them (and shall take such other actions as are necessary) so as to fix the
number of members of the Board of Directors of the Company at seven (7) and to
nominate, elect and thereafter continue in office (and not remove from office
(except as provided in Section 3.3 below)) as members of the Board of Directors
of the Company:
(a) three (3) designated representatives of the Management
Investors, who shall initially be John C. Stanley, IV, A.B. Isbell and Richard
W. Ebersole (such representatives shall be referred to herein as the "Management
Investor Directors");
(b) three (3) designated representatives of the M/C II Investors,
who shall initially be Stephen F. Gormley, John G. Hayes and David D. Croll
(such representatives shall be referred to herein as the "M/C II Investor
Directors"); and
(c) one (1) designated representative of CVCA, who shall
initially be Brian Richmand (such representative shall be referred to herein as
the "CVCA Director").
3.3 Removal. Each Purchaser agrees to vote all shares of Common
-------
Stock which such Purchaser from time to time owns for (i) the removal of any
Management Investor Director upon the written request of the Management
Investors and for the election to the Board of Directors of a substitute
designated by the Management Investors, (ii) the removal of any M/C II Investor
Director upon the written request of the M/C II Investors and for the election
to the Board of Directors of a substitute designated by the M/C II Investors,
and (iii) the removal of any CVCA Director upon the written request of CVCA and
for the election to the Board of Directors of a substitute designated by CVCA.
3.4 Vacancies. Each Purchaser agrees to vote all shares of Common
---------
Stock in such manner (and to cause its designated representatives of the Board
of Directors to vote in such manner) as shall be necessary or appropriate to
ensure that any vacancy on the Board of Directors of the Company (occurring for
any reason) shall be filled only in accordance with the provisions of this
Section 3.
3.5 Charter Documents and By-Laws. The charter documents and by-laws
-----------------------------
of the Company shall not be inconsistent with the voting provisions set forth in
this Section 3, and the Board of Directors of the Company shall not take any
action to modify or amend the charter documents or by-laws of the Company in a
manner inconsistent with the voting provisions set forth in this Section 3
without such approval of the Purchasers as would be required for a Modification
of this Section 3.
9
<PAGE>
3.6 Approved Sale. Each of the Purchasers agrees to vote all shares
-------------
of Common Stock which such Purchaser from time to time owns in favor of an
Approved Sale.
SECTION 4. SALE OF THE COMPANY
- --------- -------------------
4.1 Approved Sale. Neither the Company nor any of the Purchasers
-------------
shall take any action to effectuate a Sale unless such Sale shall have been
approved (i) by the Requisite Holders, and (ii) in addition, during the period
from the date hereof through the third anniversary of the date hereof, by the
holders of a majority of the shares of Common Stock held by the Management
Investors. Any Sale which is approved in accordance with this Section 4.1 shall
be referred to as an "Approved Sale."
4.2 In furtherance of an Approved Sale; Mandatory Come-Along. Subject
--------------------------------------------------------
to the provisions of Section 4.4, in connection with any Approved Sale, the
Company and each of the Purchasers shall take all reasonably necessary or
desirable actions to facilitate the consummation of the Approved Sale,
including, but not limited to, the release of information and documentation and
the execution of such agreements and such instruments and other actions
reasonably necessary to provide the representations, warranties, indemnities,
covenants, conditions, noncompete agreements (provided that no Venture Investor
shall be required to execute a noncompete agreement), escrow agreements and
other provisions and agreements relating to such Approved Sale; it being
expressly acknowledged and agreed by each Purchaser that the Requisite Holders
shall have the right to require all of the Purchasers to sell all of their
shares of Common Stock in connection with an Approved Sale by giving written
notice, or causing the Company to give written notice, to the Purchasers no less
than fifteen days prior to the proposed date of consummation of the Sale, and
upon receipt of such notice each Purchaser shall take such actions as the
Company or the Requisite Holders may reasonably request to effectuate the sale
of such Purchaser's shares of Common Stock.
4.3. Mandatory Sale. Subject to the provisions of Section 4.4 but
--------------
notwithstanding the provisions of Section 4.1, at any time from and after the
seventh anniversary of the date of this Agreement, (i) the Management Investors,
(ii) the M/C II Investors, or (iii) CVCA, shall have the right to require the
Company and each other Purchaser to take such actions (including selling all of
their shares of Common Stock) as may be reasonably necessary or appropriate to
consummate a Sale.
4.4. Conditions to Company and Purchasers' Obligations. The
-------------------------------------------------
obligations of the Company and the Purchasers in connection with any Sale under
this Section 4 are subject to all of the following conditions:
(a) All holders of Common Stock shall receive the same
consideration per share for their shares of Common Stock (taking into account
all consideration received including disguised purchase price), or if any
holders of Common Stock are given an option as
10
<PAGE>
to the form of consideration to be received, all holders of Common Stock will be
given the same option.
(b) No holder of Common Stock shall be obligated to pay more than such
holder's pro rata share (based upon the number of shares of Common Stock held)
--- ----
of reasonable costs and expenses incurred in connection with such Sale to the
extent such costs and expenses are incurred for the benefit of all holders of
Common Stock and are not otherwise paid by the Company or the acquiring party
(including the reasonable costs of one counsel chosen by the Requisite Holders
on behalf of all holders), it being understood that costs and expenses incurred
by or on behalf of any holder for such holder's sole benefit will not be
considered costs of the transaction hereunder, and provided that a holder's pro
---
rata share of allocated costs and expenses shall not exceed the total purchase
- ----
price received by such holder for such holder's Common Stock.
(c) In the event that the holders of Common Stock are required to
provide any representations or indemnities in connection with a Sale (other than
representations or indemnities concerning such holder's title to such holder's
Common Stock and such holder's authority, power and right to enter into and
consummate such purchase or merger agreement without violating any other
agreement or legal requirement), then each holder shall not be liable for more
than such holder's pro rata share (based upon the number of shares of Common
--- ----
Stock held) of any liability for misrepresentation or indemnity and such
liability shall not exceed the total purchase price received by such holder for
such holder's Common Stock, provided that the portion of such holder's liability
attributable to non-cash purchase price received shall be satisfied solely out
of such non-cash property.
SECTION 5. RIGHTS OF FIRST OFFER
- --------- ---------------------
In the event the Company proposes to offer or sell any additional
shares of Common Stock or any security that is convertible into or carries the
right to purchase shares of Common Stock to any of the Purchasers or any of
their Affiliates, the Company shall offer each Purchaser and its Affiliates the
right to subscribe to and purchase an amount of the securities to be so offered
or sold corresponding to such Purchaser's Common Stock Percentage, subject to
the terms, conditions, limitations and exemptions set forth below. The rights
created by this Section 5 shall not apply to (a) the issuance and sale of
Employee Shares, provided that the aggregate amount of Employee Shares shall not
at any time exceed five percent (5%) of the outstanding Common Stock (on a
fully-diluted basis), (b) the issuance of Company Securities to the Venture
Investors at the Second Closing in accordance with the Securities Purchase
Agreement, (c) the issuance of securities in connection with a Qualifying
Initial Public Offering, or (d) the issuance of shares of Class A Common Stock
or Class B Common Stock upon conversion of shares of Class B Common Stock or
Class A Common Stock, respectively. The price and other terms and conditions
upon which each of the Purchasers and their Affiliates may exercise the rights
granted to them under this Section 5 shall be as established
11
<PAGE>
by the Company in connection with the authorization or approval of the subject
offering or sale, which shall be set forth or summarized in a written notice
issued to each of the Purchasers not less than thirty (30) days in advance of
the date of the proposed offering or sale and which terms and conditions shall
be no less favorable to each Purchaser and its Affiliates than those to be
offered to all other Purchasers and their Affiliates. Each Purchaser and its
Affiliates may exercise the subscription right granted pursuant to this Section
5 during the period of ten (10) days next following receipt of such written
notice, such exercise to be signed and documented in such manner as the Company
shall reasonably specify.
SECTION 6. GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS.
- --------- -------------------------------------------------
Each of the original or subsequent parties to this Agreement
represents, warrants and covenants to the other parties, to the extent
applicable to its or his status as a corporation, partnership or individual, as
follows:
6.1 Organization and Authority. Such party is duly organized,
--------------------------
validly existing, and in good standing under the laws of its state of
organization or formation and has the requisite power and authority to execute,
deliver, and perform this Agreement and the documents contemplated hereby
according to their respective terms.
6.2 Authorization and Binding Obligations. The execution, delivery,
-------------------------------------
and performance of this Agreement by such party have been duly authorized by all
necessary corporate or partnership action on its part. This Agreement has been
duly executed and delivered by such party and constitutes the legal, valid, and
binding obligation of such party, enforceable against him or it in accordance
with its terms, except as the enforceability of this Agreement may be affected
by bankruptcy, insolvency, or similar laws affecting creditors' rights generally
or by judicial discretion in the enforcement of equitable remedies.
6.3 Absence of Conflicting Agreements or Consents. The execution,
---------------------------------------------
delivery, and performance by such party of this Agreement and the documents
contemplated hereby (with or without the giving of notice, the lapse of time, or
both): (a) do not require the consent of any third party; (b) if such party is
not an individual, will not conflict with any provision of such party's
organizational documents; (c) will not conflict with, result in a breach of, or
constitute a default under any applicable law, judgment, order, ordinance,
injunction, decree, rule, regulation, or ruling of any court or governmental
instrumentality; and (d) will not conflict with, constitute grounds for
termination of, result in a breach of, constitute a default under, or accelerate
or permit the acceleration of any performance required by the terms of any
agreement, instrument, license, or permit to which such party is a party or by
which such party or its assets may be bound. Except for this Agreement, the
Securities Purchase Agreement and the other Transaction Documents, such party is
not a party to or otherwise bound by any other agreement with respect to the
ownership, disposition, or voting of any shares of any of the capital stock
issued by the Company.
12
<PAGE>
6.4 Regulatory Compliance Cooperation.
---------------------------------
(a) If CVCA (or any Permitted Transferee of CVCA that is a Regulated
Holder) determines that it has a Regulatory Problem, the Company and the other
holders of Company Securities shall use commercially reasonable efforts to (i)
take all such actions to avoid or cure such Regulatory Problem as are reasonably
requested by CVCA (or such other Regulated Holder) in order (A) to effectuate
and facilitate any Transfer by CVCA (or such other Regulated Holder) of any
Company Securities then held by CVCA (or such Regulated Holder) to any Person
designated by CVCA (or such Regulated Holder), (B) to permit CVCA (or such
Regulated Holder or any Affiliate of such Regulated Holder) to exchange all or
any portion of its shares of Class A Common Stock for shares of Class B Common
Stock, and (C) to preserve and continue the respective allocation of the voting
interests and powers with respect to the Company arising out of CVCA's (or such
Regulated Holder's) ownership of shares of Class B Common Stock and as provided
in this Agreement before the Transfers and exchanges referred to above
(including entering into such additional agreements as are reasonably requested
by CVCA (or such Regulated Holder) to permit a Person designated by CVCA (or
such Regulated Holder) to exercise the voting rights relinquished by CVCA (or
such Regulated Holder) upon the exchange of shares of Class A Common Stock for
shares of Class B Common Stock), and (ii) enter into such additional agreements,
adopt such amendments to this Agreement, the Company's Certificate of
Incorporation and the Company's bylaws and other relevant agreements and take
such additional actions, in each case as are reasonably requested by CVCA (or
such Regulated Holder), in order to effectuate the purpose and intent of the
foregoing.
(b) If CVCA (or any Permitted Transferee of CVCA that is a Regulated
Holder) elects to Transfer any of its Company Securities to an Affiliate which
is a Regulated Holder in order to avoid or cure a Regulatory Problem, the
Company and the other holders of Company Securities shall enter into such
agreements with such other Regulated Holder and its Affiliates as it may
reasonably request in order to assist such Regulated Holder and its Affiliates
in complying with all applicable regulatory laws. Such agreements may include
restrictions on the conversion, redemption, repurchase or retirement of the
Company Securities that would result or be reasonably expected to result in such
Regulated Holder or its Affiliates holding more voting securities or total
equity than it is permitted to hold under such applicable regulatory laws.
(c) If CVCA (or any Permitted Transferee of CVCA that is a Regulated
Holder) has the right or opportunity to acquire any shares of Class A Common
Stock (or other voting securities of the Company), as the result of a preemptive
offer, pro-rata offer or otherwise, at the request of CVCA (or such Regulated
Holder) the Company will use commercially reasonable efforts to offer to sell
(or if the Company is not the seller, to cooperate with the seller and CVCA (or
such Regulated Holder) to permit such seller to sell) such Class B Common Stock
(or other non-voting securities of the Company) on the same terms as would have
existed had CVCA (or such Regulated Holder) acquired the shares of
13
<PAGE>
Class A Common Stock (or other voting securities of the Company so offered) and
immediately requested their exchange for shares of Class B Common Stock (or
other non-voting securities) pursuant to Section 6.4(a).
(d) In the event that any Subsidiary of the Company ever offers to
sell any of its securities (other than to the Company or any of its other
Subsidiaries), then the Company will cause such Subsidiary to enter into
agreements with CVCA (or any Permitted Transferee of CVCA that is a Regulated
Holder) substantially similar to those set forth in this Agreement.
(e) Each holder of Company Securities agrees to use commercially
reasonable efforts to cooperate with the Company in complying with this Section
6.4, including voting to approve amending this Agreement, the Company's
Certificate of Incorporation, or the Company's bylaws in a manner reasonably
requested by CVCA (or any Permitted Transferee of CVCA that is a Regulated
Holder).
(f) The Company and each holder of Company Securities agrees not to
amend or waive the voting or other provisions of this Agreement, the Company's
Certificate of Incorporation or the Company's bylaws if such amendment or waiver
would cause CVCA (or any Permitted Transferee of CVCA that is a Regulated
Holder) to have a Regulatory Problem, provided that CVCA (or any such Regulated
Holder) notifies the Company that it would have a Regulatory Problem promptly
after it has notice of such proposed amendment or waiver.
(g) CVCA (and each Permitted Transferee of CVCA that is a Regulated
Holder) agrees that in the event CVCA (or any such Regulated Holder) takes
action to effectuate a Transfer pursuant to this Section 6.4 to cure a
Regulatory Problem, to the extent laws and regulations then applicable to CVCA
(or any such Regulated Holder) so permit, CVCA (or such Regulated Holder) shall
use commercially reasonable efforts (i) to comply with all of the provisions of
Section 2.2 of this Agreement (except that CVCA (or such Regulated Holder) shall
not be required to extend to any other Purchaser, and no other Purchaser shall
be entitled to exercise, any Go-Along Right in connection with such Transfer by
CVCA (or such Regulated Holder)), or (ii) to designate a transferee reasonably
acceptable to the Company and the other Purchasers.
6.5 Transactions with Affiliates. The Company shall not, and shall
----------------------------
not permit any of its Subsidiaries to, enter into or be a party to any
transaction with or for the benefit of any Affiliate (or any spouse, parent,
sibling or lineal descendant of an Affiliate), except (i) for compensation paid
to employees of the Company and its Subsidiaries in the ordinary course of
business, (ii) transactions between the Company and any of its Subsidiaries,
(iii) transactions between any Subsidiary of the Company and any other
Subsidiary of the Company, and (iv) transactions expressly disclosed in or
contemplated by the Securities Purchase Agreement and the Exhibits and Schedules
thereto.
14
<PAGE>
6.6 Modification of North and South Acquisition Agreements. The
------------------------------------------------------
Company shall not, and shall not permit any of its Subsidiaries to, modify,
waive or supplement any term, covenant, agreement or provision set forth in the
North Acquisition Agreement or the South Acquisition Agreement.
SECTION 7. MISCELLANEOUS.
- --------- -------------
7.1 Incorporation by Reference. All exhibits appended to this
--------------------------
Agreement and all documents delivered pursuant to or referred to in this
Agreement are incorporated herein by reference and made a part hereof.
7.2 Amendments, Modifications and Waivers. Unless otherwise
-------------------------------------
expressly set forth herein, any consent, notice, discretionary decision, change,
modification, supplement, or waiver of, or with respect to, any term, covenant,
agreement, condition or provision set forth herein (collectively, a
"Modification") shall be effective with, but only with, the written consent of:
(a) the Management Investors; (b) the M/C II Investors; and (c) CVCA. For
purposes of this Agreement, any Modification requiring the consent of, or any
right which by its terms is exercisable by: (i) the Management Investors shall
be effective with the written consent of the holders of a majority of the
Company Securities held by the Management Investors (and their Permitted
Transferees), (ii) the M/C II Investors shall be effective with the written
consent of the holders of a majority of the Company Securities held by the M/C
Investors (and their Permitted Transferees), and (iii) CVCA shall be effective
with the written consent of the holders of a majority of the Company Securities
held by CVCA (and its Permitted Transferees).
7.3 Legend on Securities. The Company and each of the Purchasers
--------------------
acknowledges and agrees that a legend in substantially the following form shall
be typed on each certificate evidencing any of the securities issued hereunder
held at any time by an Investor:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES AND BLUE
SKY LAWS AND MAY NOT BE SOLD, TRANSFERRED, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED EXCEPT (1) PURSUANT TO A REGISTRATION STATEMENT WITH RESPECT TO
SUCH SECURITIES WHICH IS EFFECTIVE UNDER THE ACT OR (2) PURSUANT TO AN AVAILABLE
EXEMPTION FROM REGISTRATION UNDER THE ACT RELATING TO THE DISPOSITION OF
SECURITIES AND (3) IN ACCORDANCE WITH APPLICABLE STATE SECURITIES AND BLUE SKY
LAWS.
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF A
SHAREHOLDERS AGREEMENT DATED AS OF APRIL 3, 1996,
15
<PAGE>
INCLUDING THEREIN CERTAIN RESTRICTIONS ON TRANSFER, AND VOTING AGREEMENTS.
7.4 Governing Law. This Agreement shall be deemed a contract made
-------------
under the laws of The Commonwealth of Massachusetts and, together with the
rights and obligations of the parties hereunder, shall be construed under and
governed by the laws of The Commonwealth of Massachusetts, without giving effect
to the conflicts of law provisions thereof, except that matters of corporate law
shall be governed by the laws of the State of Delaware.
7.5 Notices. All necessary notices, demands and requests permitted or
-------
required under this Agreement shall be in writing and shall be deemed effective
(a) if given by facsimile, when such facsimile is transmitted to the applicable
party at the facsimile number specified in the Securities Purchase Agreement,
the appropriate answer back is received and a copy is sent by a nationally
recognized overnight courier service to such party at the address indicated in
the Securities Purchase Agreement, (b) three (3) days after being mailed by
certified mail, return receipt requested, postage and charges prepaid to the
applicable party at the address indicated in the Securities Purchase Agreement,
(c) one (1) business day after being sent by a nationally recognized overnight
courier service to the applicable party at the address indicated in the
Securities Purchase Agreement, or (d) when delivered either by hand or by
messenger to the applicable party at the address indicated in the Securities
Purchase Agreement; or to such other address or facsimile number as may be
furnished by any party in writing to each of the other parties hereto.
7.6 Management Investors' Agent; Power of Attorney. Each Management
----------------------------------------------
Investor (other than A.B. Isbell and Richard W. Ebersole) hereby irrevocably
appoints John C. Stanley, IV as his or her agent and true and lawful attorney,
coupled with an interest (the "Management Investors' Agent"), to execute any and
all instruments, agreements and other documents, and to vote all shares of
Common Stock, and to take any and all actions required by or permitted to be
taken by such Management Investor under this Agreement or under any instrument,
agreement or other document executed in connection herewith, as the Management
Investors' Agent shall deem necessary or appropriate. Each Management Investor
(other than A.B. Isbell and Richard W. Ebersole) hereby acknowledges such
appointment of the Management Investors' Agent and agrees to recognize and
accept any and all actions of the Management Investors' Agent as the actions of
the Management Investor hereunder.
7.7 Successors and Assigns. The duties and obligations of, and
----------------------
restrictions on, the Company hereunder shall be binding upon all successors and
assigns of the Company. The duties and obligations of, and restrictions
(including transfer restrictions) on, the Purchasers hereunder shall be binding
upon any transferee of any of the Company Securities (other than a transferee of
Company Securities pursuant to a Public Sale). The rights and remedies afforded
to the Purchasers hereunder shall not be assignable to any Person other than to
a Permitted
16
<PAGE>
Transferee that has agreed in writing to be a party to and be bound by the terms
of this Agreement.
7.8 Termination. This Agreement shall terminate upon consummation of
-----------
a Qualifying Initial Public Offering.
7.9 Dispute Resolution; Consent to Jurisdiction and Service. Any
-------------------------------------------------------
dispute arising out of or relating to this Agreement or the breach, termination
or validity hereof shall be finally determined in accordance with the dispute
resolution provisions of the Securities Purchase Agreement. In the event that
the dispute resolution provisions of the Securities Purchase Agreement do not
apply because any of the parties is seeking an equitable remedy, each of the
parties hereto (a) irrevocably submits to the jurisdiction of the state and
federal courts in The Commonwealth of Massachusetts for the purpose of
prosecuting or defending any claim for equitable relief, and (b) hereby waives,
and agrees not to assert, by way of motion, as a defense, or otherwise, in any
such suit, action or proceeding, any claim that such party is not subject
personally to the jurisdiction of the above-named court, that the suit, action
or proceeding is brought in an inconvenient forum, that the venue of the suit,
action or proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced in or by such court. Each of the parties hereto
hereby consents to service of process by registered mail at the address to which
notices are to be given. Each of the parties hereto agrees that such party's
submission to jurisdiction and such party's consent to service of process by
mail is made for the express benefit of the other parties hereto. Any equitable
relief awarded, of any nature, against any party hereto in any such action, suit
or proceeding may be enforced in other jurisdictions in any manner provided by
or pursuant to the laws of such other jurisdiction; provided, however, that any
-------- -------
party hereto may at such party's option bring suit, or institute other judicial
proceedings, in any state or federal court of the United States or of any
country or place where the other parties may be found.
7.10 Specific Performance. The parties agree that the failure of any
--------------------
party to perform the obligations provided by this Agreement could result in
irreparable damage to the other parties, and that monetary damages alone would
not be adequate to compensate the non-defaulting party for its or his injury.
Any party shall therefore be entitled, in addition to any other remedies that
may be available, including money damages, to obtain specific performance of the
terms of this Agreement. If any action is brought by any party to enforce this
Agreement, any party against which the action is brought shall waive the defense
that there is an adequate remedy at law.
7.11 Counterparts. This Agreement may be executed in counterparts,
------------
all of which together shall constitute one and the same instrument.
7.12 Effect of Headings. The section and paragraph headings herein
------------------
are for convenience only and shall not affect the construction hereof.
17
<PAGE>
7.13 Entire Agreement. This Agreement (together with the Securities
----------------
Purchase Agreement and the SBA Compliance Documents (as such term is defined in
the Securities Purchase Agreement) constitutes the entire Agreement between the
parties and supersedes and cancels any and all prior or contemporaneous
arrangements, understandings and agreements between them relating to the subject
matter hereof, including, without limitation, that certain Shareholders
Agreement dated August 31, 1989 among the shareholders of OCI Corp. of Michigan
relating to the capital stock of OCI Corp. of Michigan, that certain Agreement
between John C. Stanley, IV and A.B. Isbell relating to the capital stock of
Mass Communications Corp., and any and all other prior agreements between any of
the parties hereto with respect to any shares of capital stock of any
Subsidiaries of the Company.
[Remainder of page intentionally left blank.]
18
<PAGE>
FIRST AMENDMENT
TO THE
SHAREHOLDERS AGREEMENT
OF
OCI HOLDINGS CORP.
FIRST AMENDMENT (the "First Amendment") dated as of September 10, 1996
by and among OCI Holdings Corp. (the "Company"), the Venture Investors, the
Management Investors and the new management investors listed on the signature
pages hereto (the "New Management Investors").
WHEREAS the Company, the Venture Investors and the Management
Investors are parties to a Securities Purchase Agreement dated as of April 3,
1996 (the "Securities Purchase Agreement") and a Shareholders Agreement dated as
of April 3, 1996 (the "Shareholders Agreement"); and
WHEREAS the Company, the Venture Investors, the Management Investors
and the New Management Investors are parties to a First Amendment to the
Securities Purchase Agreement dated as of September 10, 1996 pursuant to which
the New Management Investors acquired certain shares of Class A Common Stock and
certain Series A Notes of the Company (the "Company Securities"); and
WHEREAS the Company, the Venture Investors, the Management Investors
and the New Management Investors desire to amend the Shareholders Agreement to
provide for the New Management Investors to become parties to the Shareholders
Agreement upon the terms and subject to the conditions set forth herein;
NOW, THEREFORE, for good and valuable consideration, the undersigned
hereby agree as follows:
1. Capitalized terms not otherwise defined herein shall have the
meaning ascribed to such terms in the Securities Purchase Agreement.
2. Each of the Company, the Venture Investors and the Management
Investors hereby consents to this First Amendment, to each New Management
Investor becoming a party to the Shareholders Agreement and to the amendment of
the Shareholders Agreement as set forth herein.
3. Each New Management Investor hereby acknowledges that he has
received and fully reviewed a complete copy of the Shareholders Agreement and
agrees that, from and after the date of this First Amendment, such New
Management Investor shall be deemed to be a
19
<PAGE>
party to the Shareholders Agreement and shall be bound by all provisions of the
Shareholder Agreement.
4. Each New Management Investor hereby severally makes to and for the
benefit of the Company the representations and warranties set forth in this
Paragraph 4 with respect to such Management Investor.
4.1 Capacity and Binding Obligations. Such New Management
--------------------------------
Investor has full right, authority, power and capacity to enter into this First
Amendment and the Shareholders Agreement. This First Amendment and the
Shareholder Agreement constitute the legal, valid, and binding obligations of
such New Management Investor, enforceable against him in accordance with their
terms, except as the enforceability of this First Amendment or the Agreement may
be affected by bankruptcy, insolvency, or similar laws affecting creditors'
rights generally or by judicial discretion in the enforcement of equitable
remedies.
4.2 Absence of Conflicting Agreements or Consents. The
---------------------------------------------
execution, delivery, and performance by such party of this First Amendment and
the Shareholders Agreement and the documents contemplated hereby and thereby
(with or without the giving of notice, the lapse of time, or both): (a) do not
require the consent of any third party; (b) will not conflict with, result in a
breach of, or constitute a default under any applicable law, judgment, order,
ordinance, injunction, decree, rule, regulation, or ruling of any court or
governmental instrumentality; and (c) will not conflict with, constitute grounds
for termination of, result in a breach of, constitute a default under, or
accelerate or permit the acceleration of any performance required by the terms
of any agreement, instrument, license, or permit to which such party is a party
or by which such party or its assets may be bound. Except for this First
Amendment, the Shareholders Agreement, the Securities Purchase Agreement and the
other Transaction Documents, such party is not a party to or otherwise bound by
any other agreement with respect to the ownership, disposition, or voting of any
shares of any of the capital stock issued by the Company.
5. Section 2 of the Agreement is hereby amended, as of the effective
date of this First Amendment, by adding thereto the following subsection:
"2.9 Repurchase at the Option of the Company. The Company shall
---------------------------------------
have the right to purchase all or any part of the Company Securities held by a
New Management Investor and the Company Securities held by any transferee of
such New Management Investor pursuant to Section 2.4 of the Agreement (a
"Subject Transferee") in the circumstances set forth in this Section 2.9. Said
right is referred to herein as the "Repurchase Option." The Repurchase Option is
exercisable by the Company in its sole discretion, and nothing herein shall be
interpreted as requiring the Company to repurchase Company Securities under any
circumstances. If any New Management Investor or Subject Transferee fails to
deliver Company Securities for purchase upon exercise of the Repurchase Option,
the Company shall refuse to recognize such New
20
<PAGE>
Management Investor or Subject Transferee as holder of such Company
Securities for any purpose, including without limitation dividend and
voting rights.
(a) Circumstances Giving Rise to Repurchase Option. The
----------------------------------------------
Repurchase Option shall be effective and exercisable with respect to a New
Management Investor in accordance with the provisions of paragraphs (b) and
(c) of this Section 2.9 in any of the circumstances set forth below:
(1) termination of such New Management Investor's employment
with the Company or any direct or indirect Subsidiary of the Company
for any reason, whether voluntary or involuntary;
(2) death or mental incapacity of such New Management
Investor, in which case the executor, administrator, guardian or
legal representative of such New Management Investor shall give the
Company written notice of such event within 30 days after the date of
death or mental incapacity of such New Management Investor; or
(3) if such New Management Investor (A) files a voluntary
petition under any bankruptcy or insolvency law or a petition for the
appointment of a receiver, or makes an assignment for the benefit of
creditors, or (B) is subjected involuntarily to such a petition or
assignment, or to an attachment or other legal or equitable interest
with respect to his or her Company Securities, and such involuntary
petition, assignment or attachment is not discharged within 30 days;
or (C) is subject to a transfer of his Company Securities to a
guardian or legal representative, or other transfer by operation of
law.
(b) Exercise of Repurchase Option. The Company may exercise the
-----------------------------
Repurchase Option by providing written notice to the New Management
Investor subject thereto (or, if applicable, such New Management Investor's
executor, administrator, guardian or legal representative) and/or any
Subject Transferee of such New Management Investor, within 30 days after
(i) the date of termination of such New Management Investor's employment,
(ii) the date the Company receives written notice of death or mental
incapacity from such New Management Investor's executor, administrator,
guardian or legal representative or (iii) the date the Company receives
actual notice of an event described in Section 2.9(a)(3). The Company shall
designate in such notice a date, time and place for the closing of the
repurchase, which shall be not more than 60 days after the date of the
Company's notice, unless otherwise agreed by the parties. The Company may
assign its rights hereunder with respect to a particular repurchase by
written notice to the selling New Management Investor or Subject Transferee
at or prior to the scheduled date of a repurchase. The closing of each such
repurchase shall take place at the offices of the Company or of its
counsel,
21
<PAGE>
unless otherwise agreed by the parties. At the closing of each such
repurchase, the Company or its assignee shall purchase, and the selling New
Management Investor or Subject Transferee shall sell to the Purchaser, the
Company Securities as to which the Repurchase Option has been exercised
(the "Purchased Securities") at the price and on the terms set forth in
paragraph (c) of this Section 2.9. If the Repurchase Option is not
exercised, the Company Securities subject thereto shall remain subject to
all provisions of this Agreement, and if the holder of such Company
Securities is not already a party to this Agreement such holder shall
become a party to this Agreement by executing a counterpart hereof, and
shall be bound by the provisions of this Agreement whether or not such
transferee does so.
(c) Purchase Price and Terms of Sale. The purchase price to be
--------------------------------
paid by the Company for any Purchased Securities under this Section 2.9
shall be the fair market value of such Company Securities as determined in
good faith by the Board of Directors of the Company. At the closing of any
such repurchase, (a) the Company or its assignee shall pay to the seller of
such Purchased Securities the aggregate purchase price for the Purchased
Shares by certified or bank check and (b) such seller shall deliver to the
Purchaser the certificate or certificates and note or notes representing
the Purchased Securities, duly endorsed for transfer, free and clear of any
liens, pledges or encumbrances."
6. Section 7.6 of the Shareholders Agreement is hereby amended, as of the
effective of this First Amendment, by adding thereto the following paragraph:
"As of the Third Closing Date, each New Management Investor hereby
irrevocably appoints John C Stanley IV as such New Management Investor's
agent and true and lawful attorney, coupled with an interest (the "New
Management Investors' Agent") to execute any and all instruments,
agreements and other documents, and to take any and all action required by
or permitted to be taken by such New Management Investor under this
Agreement or under any instrument, agreement or other document executed in
connection herewith, as the New Management Investors' Agent shall deem
necessary or appropriate. Each New Management Investor hereby acknowledges
such appointment of the New Management Investors' Agent and agrees to
recognize and accept any and all actions of the New Management Investors'
Agent as the actions of the New Management Investor hereunder. In
furtherance of such appointment, each New Management Investor is delivering
to the New Management Investors' Agent all original certificates
representing shares of Class A Common Stock and all original Series A Notes
issued by the Company to such New Management Investor, together with duly
executed transfer powers endorsed in blank."
22
<PAGE>
SECOND AMENDMENT
TO
SHAREHOLDERS AGREEMENT
OF
OCI HOLDINGS CORP.
SECOND AMENDMENT (the "Second Amendment") dated as of January 27, 1997 by
and among OCI Holdings Corp. (the "Company"), the Venture Investors, the
Management Investors and the additional management investors listed on the
signature pages hereto (the "Additional Management Investors").
WHEREAS, the Company, the Venture Investors and the Management Investors
are parties to a Securities Purchase Agreement dated as of April 3, 1996, as
amended by the First Amendment to Securities Purchase Agreement dated as of
September 10, 1996 (the "Securities Purchase Agreement") and a Shareholders
Agreement dated as of April 3, 1996, as amended by the First Amendment to
Shareholders Agreement dated as of September 10, 1996 (the "Shareholders
Agreement"); and
WHEREAS, the Company, the Venture Investors, the Management Investors and
the Additional Management Investors are parties to a Second Amendment to the
Securities Purchase Agreement dated as of January 27, 1997 pursuant to which the
Additional Management Investors acquired certain shares of Class A Common Stock
and certain Series A Notes of the Company (the "Company Securities"); and
WHEREAS, the Company, the Venture Investors, the Management Investors and
the Additional Management Investors desire to amend the Shareholders Agreement
to provide for the Additional Management Investors to become parties to the
Shareholders Agreement upon the terms and subject to the conditions set forth
herein;
NOW, THEREFORE, for good and valuable consideration, the undersigned hereby
agree as follows:
1. Capitalized terms not otherwise defined herein shall have the meaning
ascribed to such terms in the Securities Purchase Agreement, as amended.
2. Each of the Company, the Venture Investors and the Management Investors
hereby consents to this Second Amendment, to each Additional Management Investor
becoming a party to the Shareholders Agreement and to the amendment of the
Shareholders Agreement as set forth herein.
3. Each Additional Management Investor hereby acknowledges that he has
received and fully reviewed a complete copy of the Shareholders Agreement and
agrees that, from and after the date of this Second Amendment, such Additional
Management Investor shall be
23
<PAGE>
deemed to be a party to the Shareholders Agreement and shall be bound by all
provisions of the Shareholder Agreement.
4. Each Additional Management Investor hereby severally makes to and
for the benefit of the Company the representations and warranties set forth in
this Paragraph 4 with respect to such Additional Management Investor.
4.1 Capacity and Binding Obligations. Such Additional Management
--------------------------------
Investor has full right, authority, power and capacity to enter into this Second
Amendment and the Shareholders Agreement. This Second Amendment and the
Shareholder Agreement constitute the legal, valid, and binding obligations of
such Additional Management Investor, enforceable against him in accordance with
their terms, except as the enforceability of this Second Amendment or the
Agreement may be affected by bankruptcy, insolvency, or similar laws affecting
creditors' rights generally or by judicial discretion in the enforcement of
equitable remedies.
4.2 Absence of Conflicting Agreements or Consents. The execution,
---------------------------------------------
delivery, and performance by such party of this Second Amendment and the
Shareholders Agreement and the documents contemplated hereby and thereby (with
or without the giving of notice, the lapse of time, or both): (a) do not
require the consent of any third party; (b) will not conflict with, result in a
breach of, or constitute a default under any applicable law, judgment, order,
ordinance, injunction, decree, rule, regulation, or ruling of any court or
governmental instrumentality; and (c) will not conflict with, constitute grounds
for termination of, result in a breach of, constitute a default under, or
accelerate or permit the acceleration of any performance required by the terms
of any agreement, instrument, license, or permit to which such party is a party
or by which such party or its assets may be bound. Except for this Second
Amendment, the Shareholders Agreement, the Securities Purchase Agreement and the
other Transaction Documents, such party is not a party to or otherwise bound by
any other agreement with respect to the ownership, disposition, or voting of any
shares of any of the capital stock issued by the Company.
5. Section 2.1 of the Agreement is hereby amended, as of the effective
date of this Second Amendment, by adding thereto the following proviso:
"provided, however, that any Additional Management Investor may pledge to
-------- -------
John C Stanley IV, and grant to John C Stanley IV a security interest in,
any Company Securities purchased by such Additional Management Investor as
security for repayment of funds advanced by John C Stanley IV to such
Additional Management Investor for the purchase of such Company
Securities."
6. Section 2.9 of the Agreement is hereby amended, as of the effective
date of this Second Amendment, by adding thereto the following subsection:
24
<PAGE>
"(d) For purposes of this Section 2.9, the term 'New Management
Investor' shall include each Additional Management Investor."
7. Section 7.6 of the Shareholders Agreement is hereby amended, as of the
effective of this Second Amendment, by adding thereto the following paragraph:
"As of the Fourth Closing Date, each Additional Management Investor
hereby irrevocably appoints John C Stanley IV as such Additional Management
Investor's agent and true and lawful attorney, coupled with an interest
(the "Additional Management Investors' Agent") to execute any and all
instruments, agreements and other documents, and to take any and all action
required by or permitted to be taken by such Additional Management Investor
under this Agreement or under any instrument, agreement or other document
executed in connection herewith, as the Additional Management Investors'
Agent shall deem necessary or appropriate. Each Additional Management
Investor hereby acknowledges such appointment of the Additional Management
Investors' Agent and agrees to recognize and accept any and all actions of
the Additional Management Investors' Agent as the actions of the Additional
Management Investor hereunder. In furtherance of such appointment, each
Additional Management Investor is delivering to the Additional Management
Investors' Agent all original certificates representing shares of Class A
Common Stock and all original Series A Notes issued by the Company to such
Additional Management Investor, together with duly executed transfer powers
endorsed in blank."
8. Each of the Company, the Venture Investors, the Management
Investors and the Additional Management Investors hereby agrees that the
Shareholders Agreement, as amended by this Second Amendment, shall be read,
taken and construed as one and the same instrument.
25
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
be executed as of the date first set forth above.
COMPANY:
-------
OCI HOLDINGS CORP.
By: /s/ John C Stanley IV
-----------------------------------
Name
Title
26
<PAGE>
MANAGEMENT INVESTORS:
--------------------
/s/ John C Stanley IV
--------------------------------------
John C Stanley IV
/s/ A.B. Isbell
--------------------------------------
A.B. Isbell
NORMAN ISBELL
By: /s/ John C Stanley IV
-----------------------------------
John C Stanley IV, Attorney-in-Fact
WILLIAM HULL DAVIS
By: /s/ John C Stanley IV
-----------------------------------
John C Stanley IV, Attorney-in-Fact
THE JCS TRUST
By: /s/ John C Stanley IV
-----------------------------------
John C Stanley IV, Trustee
THE LWS TRUST
By: /s/ John C Stanley IV
-----------------------------------
John C Stanley IV, Trustee
<PAGE>
PRISCILLA S. DENTON
By: /s/ John C Stanley IV
-----------------------------------
John C Stanley IV, Attorney-in-Fact
DOUGLAS W. FERRIS, JR.
By: /s/ John C Stanley IV
-----------------------------------
John C Stanley IV, Attorney-in-Fact
/s/ Richard W. Ebersole
--------------------------------------
Richard W. Ebersole
JAMES R. JOINER
By: /s/ John C Stanley IV
-----------------------------------
John C Stanley IV, Attorney-in-Fact
GERALD P. SCOTT
By: /s/ John C Stanley IV
-----------------------------------
John C Stanley IV, Attorney-in-Fact
<PAGE>
VENTURE INVESTORS
-----------------
MEDIA/COMMUNICATIONS PARTNERS II
LIMITED PARTNERSHIP
By: M/CP II L.P., General Partner
By: M/CP II General Partner-S, Inc.,
a General Partner
By: /s/ Stephen F. Gormley
-----------------------------------
Stephen F. Gormley
President
MEDIA/COMMUNICATIONS INVESTORS
LIMITED PARTNERSHIP
By: M/C Investors General Partner --
S, Inc., a General Partner
By: /s/ Stephen F. Gormley
-----------------------------------
Stephen F. Gormley
President
CHASE VENTURE CAPITAL
ASSOCIATES, L.P.
By: Chase Capital Partners,
its General Partner
By: /s/ Brian J. Richmand
-----------------------------------
Brian J. Richmand
<PAGE>
ADDITIONAL MANAGEMENT INVESTORS:
-------------------------------
/s/ John Andrews
--------------------------------------
John Andrews
/s/ Mark Sherwood
--------------------------------------
Mark Sherwood
30
<PAGE>
EXHIBIT 12.1
OCI HOLDINGS CORP.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR END
------------------------------------------------------------------------------------
JULY 31, AUGUST 31, JULY 31, AUGUST 31, JULY 31, AUGUST 31, JULY 31, AUGUST 31, AUGUST 1, 1995
1992 1992 1993 1993 1994 1994 1995 1995 TO APRIL 3, 1996
OCI NORTH OCI SOUTH OCI NORTH OCI SOUTH OCI NORTH OCI SOUTH OCI NORTH OCI SOUTH OCI NORTH
--------- ----------- --------- ---------- --------- ---------- --------- ---------- ----------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income
(loss).......... $(1,570) $ (204) $(1,564) $ 77 $(1,366) $ 540 $ (104) $ 784 $(1,051)
Income tax
expense
(benefit)....... -- 14 (723) 170 (473) 340 (133) 524 156
------- ------ ------- ------ ------- ------ ------ ------ -------
Income (loss)
before income
taxes........... (1,570) (190) (2,287) 247 (1,839) 880 (237) 1,308 (895)
Plus fixed
charges......... 2,479 1,273 2,407 1,080 2,395 1,102 2,483 1,523 1,719
------- ------ ------- ------ ------- ------ ------ ------ -------
Earnings........ $ 909 $1,083 $ 120 $1,327 $ 556 $1,982 $2,246 $2,831 $ 824
======= ====== ======= ====== ======= ====== ====== ====== =======
<CAPTION>
SEPTEMBER 1, 1995
TO APRIL 3, 1996
OCI SOUTH
-----------------
<S> <C>
Net income
(loss).......... $ 269
Income tax
expense
(benefit)....... 201
-----------------
Income (loss)
before income
taxes........... 470
Plus fixed
charges......... 845
-----------------
Earnings........ $1,315
=================
Interest
expense......... $ 2,120 $1,040 $ 2,030 $ 845 $ 2,042 $ 853 $2,127 $1,173 $ 1,461
Amortization of
deferred
financing
costs........... -- -- -- -- -- 11 -- 96 --
Interest factor
of rent
expense......... 359 233 377 235 353 238 356 254 258
------- ------ ------- ------ ------- ------ ------ ------ -------
Fixed charges .. $ 2,479 $1,273 $ 2,407 $1,080 $ 2,395 $1,102 $2,483 $1,523 $ 1,719
======= ====== ======= ====== ======= ====== ====== ====== =======
Ratio of
earnings to
fixed charges... -- -- -- 1.2x -- 1.8x -- 1.9x --
Fixed charges
exceed earnings
by (1).......... $ 1,570 $ 190 $ 2,287 $ -- $ 1,839 $ -- $ 237 $ -- $ 895
======= ====== ======= ====== ======= ====== ====== ====== =======
Interest
expense......... $ 645
Amortization of
deferred
financing
costs........... 55
Interest factor
of rent
expense......... 145
-----------------
Fixed charges .. $ 845
=================
Ratio of
earnings to
fixed charges... 1.6x
Fixed charges
exceed earnings
by (1).......... $ --
=================
</TABLE>
<TABLE>
<CAPTION>
OCI
------------------------------------------------------------------------
PRO FORMA PRO FORMA
APRIL 4, 1996 NINE MONTHS PRO FORMA NINE FISCAL YEAR TWELVE MONTHS
TO JUNE 30, ENDED MONTHS ENDED ENDED ENDED
1996 MARCH 31, 1997 MARCH 31, 1996 JUNE 30, 1996 MARCH 31, 1997
------------- -------------- -------------- ------------- -------------- ---
<S> <C> <C> <C> <C> <C> <C>
Net income (loss)....... $ (84) $ (762) $(3,005) $(4,209) $(3,149)
Income tax expense
(benefit)............... 106 22 (2,563) (1,933) (480)
------ ------ ------- ------- -------
Income (loss) before
income taxes............ 22 (740) (5,568) (6,142) (3,629)
Plus fixed charges...... 2,255 9,430 10,734 14,124 14,141
------ ------ ------- ------- -------
Earnings................ $2,277 $8,690 $ 5,166 $ 7,982 $10,512
====== ====== ======= ======= =======
Interest expense........ 1,826 7,597 9,074 12,098 12,098
Amortization of deferred
financing costs......... 123 485 347 462 462
Interest factor of rent
expense................. 306 1,348 1,313 1,564 1,581
------ ------ ------- ------- -------
Fixed charges .......... $2,255 $9,430 $10,734 $14,124 $14,141
====== ====== ======= ======= =======
Ratio of earnings to
fixed charges........... 1.0x -- -- -- --
Fixed charges exceed
earnings by (1)......... $ -- $ 740 $ 5,568 $ 6,142 $ 3,629
====== ====== ======= ======= =======
</TABLE>
NOTE TO THE COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(1) Earnings were not adequate to cover fixed changes.
<PAGE>
EXHIBIT 23.2
ACCOUNTANTS' CONSENT
The Board of Directors Outdoor Communications, Inc.
The audits referred to in our report dated September 5, 1996 on the
consolidated financial statements of OCI Holdings Corp. (now known as Outdoor
Communications, Inc.) and subsidiaries, included the related financial
statement schedules as of June 30, 1996, and for the period April 4, 1996 to
June 30, 1996, included in the Registration Statement. These financial
statement schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement schedules
based on our audits. In our opinion, such financial statement schedules, when
considered in relation to the basic consolidated financial statements taken as
a whole, present fairly in all material respects the information set forth
therein.
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the Registration Statement (No. 333-
28439) and related Prospectus.
KPMG Peat Marwick LLP
East Lansing, Michigan
July 18, 1997
<PAGE>
EXHIBIT 23.3
ACCOUNTANTS' CONSENT
The Shareholders and Board of Directors
Outdoor Communications, Inc. and Subsidiaries:
We consent to the use of our report dated June 4, 1996, related to the
consolidated financial statements of OCI Corp. of Michigan (now known as OCI
(N) Corp.) and Subsidiaries included herein, and to the references to our firm
under the headings "Selected Historical Consolidated Financial and Other
Information" and "Experts" in this Registration Statement (No. 333-28489) and
related Prospectus.
KPMG Peat Marwick LLP
East Lansing, Michigan
July 18, 1997
<PAGE>
EXHIBIT 23.4
ACCOUNTANTS' CONSENT
The Shareholders and Board of Directors
Outdoor Communications, Inc. and Subsidiaries:
We consent to the use of our report dated May 31, 1996, related to the
consolidated financial statements of Mass Communications Corp and Subsidiary
included herein, and to the references to our firm under the headings
"Selected Historical Consolidated Financial and Other Information" and
"Experts" in this Registration Statement (No. 333-28489) and related
Prospectus.
KPMG Peat Marwick LLP
East Lansing, Michigan
July 18, 1997
<PAGE>
EXHIBIT 23.5
ACCOUNTANT'S CONSENT
The Shareholders and Board of Directors
Outdoor Communications, Inc. and Subsidiaries:
We consent to use of our report dated October 18, 1995, related to the
consolidated financial statements of Mass Communications Corp. and Subsidiary
included herein, and to the references to our firm under the headings
"Selected Historical Consolidated Financial and Other Information" and
"Experts" in this Registration Statement (No. 333-28489) and related
Prospectus.
Moore & Gray
Corinth, Mississippi
July 18, 1997
<PAGE>
EXHIBIT 23.6
INDEPENDENT ACCOUNTANTS' CONSENT
The Shareholders and Board of Directors
Georgia Outdoor Advertising Company, Inc.:
We consent to the use of our report dated May 16, 1997, related to the
financial statements of Georgia Outdoor Advertising Company, Inc. included
herein, and to the reference to our firm under the heading "Experts" in this
Registration Statement and related Prospectus.
KPMG Peat Marwick LLP
Atlanta, Georgia
July 18, 1997
<PAGE>
EXHIBIT 23.7
CONSENT OF ERNST & YOUNG LLP
We consent to reference to our firm under the caption "Experts" and to the use
of our report dated February 20, 1996, with respect to the consolidated
financial statements of AOA Holding, L.L.C. including in the Registration
Statement (Form S-1 No. 333-28489) and related Prospectus of OCI Holdings
Corp. for the registration of its Senior Subordinated Notes.
/s/ Ernst & Young LLP
July 18, 1997
Birmingham, Alabama
<PAGE>
EXHIBIT 23.8
ACCOUNTANT'S CONSENT
The Shareholders and Board of Directors
Skoglund Communications of St. Cloud, Inc. and Skoglund Communications, Inc.:
We consent to use of our report dated February 2, 1996, related to the
combined financial statement of Skoglund Communications, Inc. and Skoglund
Communications of St. Cloud, Inc. included herein, and to the reference to our
firm under the heading "Experts" in this Registration Statement (No. 333-
28489) and related Prospectus.
McGladrey & Pullen, LLP
Duluth, Minnesota
July 18, 1997
<PAGE>
EXHIBIT 23.9
ACCOUNTANTS' CONSENT
As independent public accountants, we hereby consent to the use of our report
on the December 31, 1994 financial statements of Skoglund Communications, Inc.
and Skoglund Communications of St. Cloud, Inc. and to all references to our
firm included in or made a part of this registration statement.
Arthur Andersen LLP
Minneapolis, Minnesota
July 18, 1997
<PAGE>
EXHIBIT 23.10
ACCOUNTANTS' CONSENT
The Shareholders and Board of Directors
Outdoor West, Inc. of Tennessee:
We consent to the use of our report dated August 22, 996, related to the
financial statements of Outdoor West, Inc. of Tennessee included herein, and
to the reference to our firm under the heading "Experts" in this Registration
Statement (No. 333-28489) and related Prospectus.
Morrison and Smith
Tuscaloosa, Alabama
July 18, 1997
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------------------
FORM T-1
------------------------------------------
STATEMENT OF ELIGIBILITY AND QUALIFICATION
UNDER THE TRUST INDENTURE ACT FOR 1939, AS AMENDED,
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
-----------------------------------------
FIRST UNION NATIONAL BANK
(Exact name of Trustee as specified in its charter)
230 SOUTH TRYON STREET, 9TH FLOOR
CHARLOTTE, NORTH CAROLINA 28288-1179 56-0900030
(Address of principal executive office) (Zip Code) (I.R.S. Employer
Identification No.)
-------------------------------------------------
OUTDOOR COMMUNICATIONS, INC.
Delaware 38-3286430
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
OCI (N) CORP.
Delaware 38-2885263
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
OCI (S) CORP.
Mississippi 64-0520092
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
(Exact name of obligor as specified in its charter)
512 Taylor Street
Corinth, Mississippi 38834
(Address of principal executive offices)(Zip Code)
-----------------------------------------------
% Senior Subordinated Notes due 2007
(Title of the indenture securities)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
1. GENERAL INFORMATION.
(a) The following are the names and addresses of each examining or supervising
authority to which the Trustee is subject:
Board of Governors of the Federal Reserve SystemWashington, DC
The Comptroller of the CurrencyWashington, D.C.
Securities and Exchange Commission,
Division of Market RegulationWashington, D.C.
Federal Deposit Insurance Corporation Washington, D.C.
(b) The Trustee is authorized to exercise corporate trust powers.
2. AFFILIATIONS WITH OBLIGOR.
The obligor is not an affiliate of the Trustee.
(See Note 1 on Page 4)
3. VOTING SECURITIES OF THE TRUSTEE.
The following information is furnished as to each class of voting securities of
the Trustee:
As of July 1, 1997
- --------------------------------------------------------------------------------
Column A Column B
- --------------------------------------------------------------------------------
Title of ClassAmount Outstanding
- --------------------------------------------------------------------------------
Common Stock, par value $3.33-1/3 a share 278,196,706 shares
4. TRUSTEESHIPS UNDER OTHER INDENTURES.
The Trustee is not a trustee under another indenture under which any other
securities, or certificates of interest or participation in any other
securities, of the obligor are outstanding.
5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR
UNDERWRITERS.
Neither the Trustee nor any of the directors or executive officers of the
Trustee is a director, officer, partner, employee, appointee or representative
of the obligor or of any underwriter for the obligor.
6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
The amount of voting securities of First Union Corporation, the parent of the
trustee owned, beneficially by the obligor and its directors, partners,
executive officers, taken as a group, do not exceed one (1) percent of the
outstanding voting securities of First Union Corporation.
7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR OFFICIALS.
The amount of voting securities of First Union Corporation, the parent of the
Trustee, owned beneficially by any underwriter for the obligor and its
directors, partners, and executive officers, taken as a group, do not exceed
one(1) percent of the outstanding voting securities of First Union Corporation.
8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
The trustee does not own beneficially or hold as collateral security for
obligations in default any securities of any class of the obligor in excess of
one (1) percent of the outstanding securities of such class.
2
<PAGE>
9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
The trustee does not own beneficially or hold as collateral security for
obligations in default any securities of an underwriter for the obligor in
excess of one (1) percent of the outstanding securities of such class.
10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
The Trustee does not own beneficially or hold as collateral security for
obligations in default any voting securities of any class of a person who, to
the knowledge of the Trustee (1) owns 10% or more of the voting securities of
the obligor or (2) is an affiliate, other than a subsidiary, of the obligor, in
excess of one (1) percent of the outstanding voting securities of such class.
11. OWNERSHIP OF HOLDERS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON OWNING 50
PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
The Trustee does not own beneficially or hold as collateral security for
obligations in default any securities of any class of a person who, to the
knowledge of Trustee, owns 50% or more of the voting securities of the obligor,
in excess of one (1) percent of the outstanding securities of such class.
12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
$9,857,142 revolving line of credit to obligor maturing September 2003 and
secured by stock and other assets.
Term Loan A in the amount of $5,142,857 maturing September 2003 and
Term Loan B in the amount of $6,571,428 maturing September 2003.
13. DEFAULTS BY THE OBLIGOR.
Not applicable.
14. AFFILIATIONS WITH THE UNDERWRITERS.
No underwriter is an affiliate of the Trustee.
15. FOREIGN TRUSTEE.
Not applicable.
16. LIST OF EXHIBITS.
(1) Articles of Association of the Trustee as now in effect. Incorporated in
Exhibit (1) filed with Form T-1 Statement included in Registration Statement No.
33-45946.
(2) Certificate of Authority of the Trustee to commence business. Incorporated
by reference in Exhibit (2) filed with Form T-1 Statement included in
Registration Statement No. 33-45946.
(3) Authorization of the Trustee to exercise corporate trust powers, if such
authorization is not contained in the documents specified in exhibits (1) and
(2) above. Included at Page 6 of this Form T-1 Statement.
(4) By-Laws of the Trustee. Incorporated by reference in Exhibit (4) filed with
Form T-1 Statement included in Registration Statement No. 33-45946.
(5) Not applicable.
(6) Consent by the Trustee required by Section 321(b) of the Trust Indenture Act
of 1939. Included at Page 5 of this Form T-1 Statement.
(7) Report of condition of Trustee.
(8) Not applicable.
(9) Not applicable.
3
<PAGE>
---------------------
NOTES
---------------------
1. Since the trustee is a member of First Union Corporation, a bank holding
company, all of the voting securities of the trustee are held by First Union
Corporation. The securities of First Union Corporation are described in Item
3.
4
<PAGE>
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the Trustee, FIRST UNION NATIONAL BANK, a national banking
organization, has duly caused this statement of eligibility and qualification to
be signed on its behalf by the undersigned, thereunto duly authorized, all in
the City of Charlotte, and State of North Carolina on the 14th day of July,
1997.
FIRST UNION NATIONAL BANK
(Trustee)
BY: /s/ Shawn K. Bednasek Shawn K. Bednasek, Assistant Vice President
--------------------------------
EXHIBIT T-1 (6)
CONSENTS OF TRUSTEE
Pursuant to the requirements of section 321(b) of the Trust Indenture Act of
1939 and in connection with the proposed issuance by Outdoor Communications Inc.
of its % Senior Subordinate Notes due 2007, First Union National Bank, as the
Trustee herein named, hereby consents that reports of examinations of said
Trustee by Federal, State, Territorial or District authorities may be furnished
by such authorities to the Securities and Exchange Commission upon requests
therefor.
FIRST UNION NATIONAL BANK
BY: /s/ Daniel J. Ober Daniel J. Ober, Vice President
--------------------------------
Dated: July 14, 1997
5
<PAGE>
EXHIBIT T-1 (3)
EXTRACT FROM THE BY-LAW OF
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
SECTION 8.2. Execution of Instruments. All agreements, indentures,
------------------------
mortgages, deeds, conveyances, transfers, certificates, declarations, receipts,
discharges, releases, satisfactions, settlements, petitions, schedules,
accounts, affidavits, bonds, undertakings, proxies, and other instruments or
documents may be signed, executed, acknowledged, verified, delivered or accepted
in behalf of the Association by the Chairman of the Board, or the President, or
any Vice Chairman of the Board, any Vice president or Assistant Vice President,
or the Secretary or Assistant Secretary, Cashier, or Assistant Cashier, or, if
in connection with the exercise of fiduciary powers of the Association, by any
of said officers or by any Trust Officer or Assistant Trust Office; provided,
however, that where required, any such instruments may also be executed,
acknowledge, verified, delivered, or accepted in behalf of The Association in
such other manner and by such other officers as the Board of Directors may from
time to time direct. the provisions of this Section 8.2 are supplementary to any
other provision of these By Laws.
I HEREBY CERTIFY THAT THE forgoing is a true and complete extract from the By-
Laws of First Union National Bank, a national banking association, now in full
force and affect.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of
said Association on July 14, 1997.
/s/ Shawn K. Bednasek
----------------------------
Assistant Secretary
6
<PAGE>
Call Date: 3/31/97 ST-BK: 37-0351 FFIEC 031
Page RC-1
Legal Title of Bank: First Union National Bank of NC
Address: Two First Union Center
City, State, Zip: Charlotte, NC 28288-0201
FDIC Certificate No.: 0 4 8 8 5
---------
Consolidated Report of Condition for Insured Commercial
United State-Chartered Savings Banks for March 31, 1997
schedules are to be reported in thousands of dollars. Unless otherwise
indicated, the amount outstanding as of the last business day of the quarter.
Schedule RC--Balance Sheet
<TABLE>
<CAPTION>
------------------
C400
------------------
Dollar Amounts in Thousands RCFD Bil Mil Thou
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS //////////////////
Cash and balances due from depository institutions (from Schedule RC-A): //////////////////
a. Noninterest-bearing balances and currency and coin(1)....................................... 0081 2,003,276 1.a.
b. Interest-bearing balances(2)................................................................ 0071 297,579 1.b.
Securities: //////////////////
a. Held-to-maturity securities (from Schedule RC-B, column A).................................. 1754 569,806 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)................................ 1773 1,641,071 2.b.
Federal funds sold and securities purchased under agreements to resell......................... 1350 2,536,841 3.
Loans and lease financing receivables: ------------------------------- //////////////////
a. Loans and leases, net of unearned income (from Schedule RC-C) RCFD 2122 22,332,077 ////////////////// 4.a.
b. LESS: Allowance for loan and lease losses.................... RCFD 3123 174,675 ////////////////// 4.b.
c. LESS: Allocated transfer risk reserve........................ RCFD 3128 0 ////////////////// 4.c.
d. Loans and leases, net of unearned income, ------------------------------- //////////////////
allowance, and reserve (item 4.a minus 4.b and 4.c)......................................... 2125 22,157,402 4.d.
Trading assets (from Schedule RC-D)............................................................ 3545 2,112,168 5.
Premises and fixed assets (including capitalized leases)....................................... 2145 858,917 6.
Other real estate owned (from Schedule RC-M)................................................... 2150 7,718 7.
Investments in unconsolidated subsidiaries and associated companies (from Schedule RC-M)....... 2130 18,614 8.
Customers' liability to this bank on acceptances outstanding................................... 2155 403,090 9.
Intangible assets (from Schedule RC-M)......................................................... 2143 346,564 10.
Other assets (from Schedule RC-F).............................................................. 2160 2,301,064 11.
Total assets (sum of items 1 through 11)....................................................... 2170 35,254,110 12.
------------------
</TABLE>
- ---------------
Includes cash items in process of collection and unposted debits.
Includes time certificates of deposit not held for trading.
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Legal Title of Bank: First Union National Bank of NC Call Date: 3/31/97 ST-BK; 37-0351 FFIET
Address: Two First Union Center Page :
City, State Zip: Charlotte, NC 28288-0201
FDIC Certificate No.: /0/4/8/8/5/
-----------
Schedule RC -- Continued
Dollar Amounts in Thousands /////////// Bil Mil Thou
- ------------------------------------------------------------------------------------------------- ---------------------------
LIABILITIES //////////////////////////
13. Deposits: //////////////////////////
a. In domestic offices (sum of totals of columns A and C fro Schedule RC-E. //////////////////////////
part I)................................................................................... RCON 2200 12,901,568 13.a.
(1) Noninterest-bearing (1)..................................... RCON 6631 4,616,676 ////////////////////////// 13.a
(2) Interest-bearing (1)........................................ RCON 6636 8,284,892 ////////////////////////// 13.a
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs (from Schedule RC-E. //////////////////////////
part II).................................................................................. RCFN 2200 7,149,255 13.b.
(1) Noninterest-bearing......................................... RCFN 6631 0 ////////////////////////// 13.b.
(2) Interest-bearing............................................ RCFN 6636 7,149,255 ////////////////////////// 13.b.
14. Federal funds purchased and securities sold under agreements to repurchase................... RCFD 2800 6,274,314 14.
15. a. Demand notes issued to the U.S. Treasury.................................................. RCON 2840 115,931 15.a.
b. Trading liabilities (from Schedule RC-D).................................................. RCFD 3548 2,201,346 15.b.
16. Other borrowed money (includes mortgage indebtedness and obligations under //////////////////////////
capitalized leases): //////////////////////////
a. With a remaining maturity of one year or less............................................. RCFD 2332 1,754,025 16.a.
b. With a remaining maturity of more than one year........................................... RCFD 2333 416,761 16.b.
17. Not applicable //////////////////////////
18. Bank's liability on acceptance executed and outstanding...................................... RCFD 2920 403,090 18.
19. Subordinated notes and debentures (2)........................................................ RCFD 3200 925,000 19.
20. Other liabilities (from Schedule RC-G) ...................................................... RCFD 2930 808,495 20.
21. Total liabilities (sum of items 13 through 20)............................................... RCFD 2948 32,949,785 21.
22. Not applicable //////////////////////////
EQUITY CAPITAL //////////////////////////
23. Perpetual preferred stock and related surplus................................................ RCFD 3838 0 23.
24. Common stock................................................................................. RCFD 3230 82,795 24.
25. Surplus (exclude all surplus related to preferred stock)..................................... RCFD 3839 763,989 25.
26. a. Undivided profits and capital reserves.................................................... RCFD 3632 1,468,980 26.a.
b. Net unrealized holding gains (losses) on available-for-sale securities.................... RCFD 8434 (11,439) 26.b.
27. Cumulative foreign currency translation adjustments.......................................... RCFD 3284 0 27.
28. Total equity capital (sum of items 23 through 27)............................................ RCFD 3210 2,304,325 28.
29. Total liabilities, limited-life preferred stock, and equity capital (sum of items 21 //////////////////////////
and 28)...................................................................................... RCFD 3300 35,254,110 29.
--------------------------
</TABLE>
Memorandum
To be reported only with the March Report of Condition.
<TABLE>
<S> <C>
1. Indicate in the box at the right the number of the statement below that best describes the Number
most comprehensive level of auditing work performed for the bank by independent external ---------------
auditors as of any date during 1996................................................................. RCFD 6724 2 M.I.
---------------
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which submits
a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company (but
not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4 = Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ----------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
(2) Includes limited-life preferred stock and related surplus.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS OF OCI HOLDINGS CORP. AND SUBSIDIARIES AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001040332
<NAME> OUTDOOR COMMUNICATIONS, INC.
<S> <C> <C>
<PERIOD-TYPE> 9-MOS 3-MOS
<FISCAL-YEAR-END> JUN-30-1997 JUN-30-1996
<PERIOD-START> JUL-01-1996 APR-04-1996
<PERIOD-END> MAR-31-1997 JUN-30-1996
<CASH> 4,566,387 1,259,441
<SECURITIES> 0 0
<RECEIVABLES> 6,854,912 5,323,600
<ALLOWANCES> (536,763) (273,110)
<INVENTORY> 1,075,228 (389,458)
<CURRENT-ASSETS> 14,862,256 8,622,336
<PP&E> 75,735,464 43,688,367
<DEPRECIATION> 12,550,280 5,922,776
<TOTAL-ASSETS> 138,731,058 94,828,981
<CURRENT-LIABILITIES> 7,290,924 8,470,884
<BONDS> 0 0
0 0
0 0
<COMMON> 121 119
<OTHER-SE> (6,180,399) (4,901,599)
<TOTAL-LIABILITY-AND-EQUITY> 138,731,058 94,828,981
<SALES> 35,105,189 9,535,542
<TOTAL-REVENUES> 31,741,274 8,548,510
<CGS> 0 0
<TOTAL-COSTS> 26,090,206 6,992,031
<OTHER-EXPENSES> (52,549) 2,834
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,597,020 1,826,137
<INCOME-PRETAX> (1,893,403) (272,492)
<INCOME-TAX> (439,605) (10,814)
<INCOME-CONTINUING> (1,453,798) (261,678)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,453,798) (261,678)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
