<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 15, 1998.
REGISTRATION NO.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
TRI-STATE OUTDOOR MEDIA GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
KANSAS 7312 48-1061763
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial Identification No.)
incorporation or Classification Code)
organization)
</TABLE>
Tri-State Outdoor Media Group, Inc.
3416 Highway 41 South
Tifton, Georgia 31793
800-732-8261
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
SHELDON G. HURST
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TRI-STATE OUTDOOR MEDIA GROUP, INC.
3416 Highway 41 South
Tifton, Georgia 31793
800-732-8261
(NAME, ADDRESS, INCLUDING ZIP CODE AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
WITH COPIES TO:
ST. JOHN & WAYNE, L.L.C.
Two Penn Plaza East
Newark, New Jersey 07105-2249
Attn: David C. Freinberg, Esq.
Tel: 973-491-3600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<S> <C> <C>
PROPOSED
MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE(1) REGISTRATION FEE
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11% Senior Notes due 2008.................. $100,000,000 $29,500
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</TABLE>
(1) Estimated solely for purposes of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933, as amended.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
MAY DETERMINE.
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<PAGE> 2
INFORMATION CONTAINED HEREIN IS SUBJECT TO CHANGE, COMPLETION OR AMENDMENT
WITHOUT NOTICE. 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.
THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED BEFORE THE
PROSPECTUS IS DELIVERED IN FINAL FORM.
SUBJECT TO COMPLETION -- DATED JULY 15, 1998
PRELIMINARY PROSPECTUS
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TRI-STATE
TRI-STATE OUTDOOR MEDIA GROUP, INC.
Offer to Exchange 11% Senior Notes due 2008 for Any and All
Existing Notes (as Defined Below)
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THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
1998, UNLESS EXTENDED. AS DESCRIBED HEREIN, WITHDRAWAL RIGHTS WITH
RESPECT TO THE EXCHANGE OFFER ARE EXPECTED TO EXPIRE AT THE EXPIRATION OF THE
EXCHANGE OFFER.
Tri-State Outdoor Media Group, Inc., a Kansas corporation (the "Company"),
hereby offers (the "Exchange Offer"), upon the terms and subject to the
conditions set forth in this Prospectus (the "Prospectus") and the accompanying
Letter of Transmittal (the "Letter of Transmittal") to exchange up to
$100,000,000 aggregate principal amount of its 11% Senior Notes due 2008 (the
"Exchange Notes"), which have been registered under the Securities Act of 1933,
as amended (the "Securities Act") pursuant to a Registration Statement of which
this Prospectus is a part, for a like principal amount of its issued and
outstanding 11% Senior Notes due 2008 (the "Existing Notes"). The Exchange Notes
and the Existing Notes, as the case may be, are referred to herein as the
"Notes." The Existing Notes were originally issued and sold by the Company in a
transaction that was exempt from registration under the Securities Act (the
"Initial Offering") and resold to certain qualified institutional buyers in
reliance on, and subject to the restrictions imposed pursuant to, Rule 144A
under the Securities Act ("Rule 144A") and Regulation S under the Securities
Act. The terms of the Exchange Notes are identical in all material respects to
the terms of the Existing Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the Exchange Notes will have been registered under
the Securities Act, and thus will not bear restrictive legends restricting their
transfer pursuant to the Securities Act.
Interest on each of the Exchange Notes issued pursuant to the Exchange Offer
will accrue from the last interest payment date on which interest was paid or
duly provided for on the Existing Notes surrendered in exchange therefor or, if
no interest has been paid or duly provided for, from the original date of
issuance of the Existing Notes.
Interest on the Notes is payable semi-annually on May 15 and November 15 of each
year, commencing on November 15, 1998. The Notes will mature on May 15, 2008.
The Notes will be redeemable at the option of the Company, in whole or in part,
at any time, on or after May 15, 2003 at the redemption prices set forth herein,
plus accrued interest. Upon a Change of Control (as defined herein), the Company
will be required, subject to certain conditions, to offer to purchase all
outstanding Notes at 101% of the principal amount thereof, plus accrued interest
to the date of purchase. In addition, the Company may, at its option, redeem
prior to May 15, 2001 the Notes at 111% of the principal amount thereof, plus
accrued interest, from the net proceeds of one or more Equity Offerings (as
defined herein); provided however that immediately after giving effect to any
such redemption, not less than $75 million aggregate principal amount of the
Notes remains outstanding.
On the date of the issuance of the Existing Notes (the "Closing Date"), the
Company deposited with IBJ Schroder Bank & Trust Company (the "Escrow Agent") a
portfolio of Pledged Securities (of approximately $10.6 million) consisting of
U.S. government securities that, together with the earnings thereon, will be
sufficient to pay when due the first two interest payments on the Notes, with
any balance to be retained by the Company.
The Notes are senior unsecured obligations of the Company ranking pari passu
with all existing and future unsubordinated debt of the Company, and will be
effectively subordinated to all of the Company's secured debt, to the extent of
the assets securing such debt. As of March 31, 1998, on a pro forma basis after
giving effect to the Initial Offering, the application of the estimated net
proceeds therefrom and the consummation of the other transactions described in
the unaudited Pro Forma Financial Statements included herein (and excluding
outstanding letters of credit), the Company would have had $826,000 of debt
outstanding other than the Notes, all of which would have been capitalized lease
obligations.
The Existing Notes were offered under an Indenture dated as of May 15, 1998 (the
"Indenture"). The Indenture contains certain covenants, including, but not
limited to, covenants and limitations of the following: (i) the incurrence of
additional debt; (ii) restricted payments; (iii) asset dispositions; (iv)
transactions with affiliates; (vi) liens; and (vii) the merger, consolidation or
sale of assets of the Company. In addition, subsidiaries of the Company may, in
the future, be required to guarantee payment of the Notes.
SEE "RISK FACTORS" ON PAGES 10 TO 13 FOR A DISCUSSION OF CERTAIN MATERIAL
FACTORS THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE OFFER.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
<PAGE> 3
The Exchange Offer is not conditioned upon any minimum number of Existing
Notes tendered. The Exchange Offer will expire at 5:00 p.m., New York City time,
on , 1998, unless extended by the Company (such date as it may be so
extended, the "Expiration Date"). The date of acceptance for exchange of its
Existing Notes (the "Exchange Date") will be promptly following the Expiration
Date, upon surrender of the Existing Notes. Existing Notes tendered pursuant to
the Exchange Offer may be withdrawn at any time prior to the Expiration Date;
otherwise such tenders are irrevocable. Exchange Notes to be issued in exchange
for properly tendered Existing Notes will be delivered through the facilities of
The Depository Trust Company by the Exchange Agent (as defined herein) promptly
upon acceptance thereof.
The Existing Notes were originally issued and sold on May 20, 1998 in a
transaction not registered under the Securities Act, in reliance upon the
exemption provided in Section 4(2) of the Securities Act and Rule 144A and
Regulation S under the Securities Act. Accordingly, the Existing Notes may not
be offered, resold or otherwise pledged, hypothecated or transferred in the
United States unless so registered or unless an applicable exemption from the
registration requirements of the Securities Act is available. Based upon
interpretations provided to third parties by the Staff (the "Staff") of the
Securities and Exchange Commission (the "Commission"), the Company believes that
the Exchange Notes issued pursuant to the Exchange Offer in exchange for the
Existing Notes may be offered for resale, resold or otherwise transferred by
holders thereof (other than any holder which is (i) an "affiliate" of the
Company within the meaning of the Securities Act (an "Affiliate"), (ii) a
broker-dealer who acquired Existing Notes directly from the Company or (iii) a
broker-dealer who acquired Existing Notes as a result of market-making or other
trading activities) without compliance with the registration and prospectus
delivery provisions of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holders' business and such holders have
no arrangement with any person to participate in a distribution of such Exchange
Notes. Since the Commission has not considered the Exchange Offer in the context
of a no action letter, there can be no assurance that the Staff of the
Commission would make a similar determination with respect to the Exchange Offer
as in such other circumstances. Each holder of Existing Notes that desires to
participate in the Exchange Offer will be required to make certain
representations discussed in "The Exchange Offer -- Terms and Conditions of the
Letter of Transmittal." Any holder that cannot rely upon such interpretations
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with a secondary resale transaction.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Existing Notes where
such Existing Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 90 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
The Exchange Notes may be represented by one or more Global Notes (as
defined) registered in the name of a nominee of The Depository Trust Company, as
Depositary. Beneficial interest in the Global Notes will be shown on, and
transfers will be effected only through, records maintained by the Depositary
and its participants. See "Book Entry, Delivery, and Form."
The Exchange Notes constitute a new issue of securities with no established
public trading market. The Company does not intend to list the Exchange Notes on
any securities exchange or to seek approval for quotation through any automated
quotation system. There can be no assurance that an active market for the
Exchange Notes will develop. Moreover, to the extent that Existing Notes are
tendered and accepted in the Exchange Offer, a holder's ability to sell
untendered, and tendered but unaccepted, Existing Notes could be adversely
affected. See "Risk Factors -- Absence of Public Market for the Exchange Notes;
Restrictions on Transfer."
i
<PAGE> 4
The Company will not receive any proceeds from the Exchange Offer. The
Company has agreed to pay the expenses it incurs for the Exchange Offer. No
dealer-manager is being utilized in connection with the Exchange Offer.
THE EXCHANGE OFFER IS NOT BEING MADE, NOR WILL THE COMPANY ACCEPT SURRENDER
FOR EXCHANGE FROM HOLDERS OF EXISTING NOTES, IN ANY JURISDICTION IN WHICH THE
EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE
SECURITIES OR "BLUE SKY" LAWS OF SUCH JURISDICTION.
Scotchlite(R) is a trademark of Minnesota Mining and Manufacturing Company
("3M").
ii
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by, and should be read
in conjunction with, the more detailed information and historical and pro forma
financial statements and notes thereto included in this Prospectus. Unless
otherwise indicated, as used herein, the term "Company" refers to Tri-State
Outdoor Media Group, Inc.
THE COMPANY
The Company is a leading highway directional outdoor advertising company,
operating over 9,200 advertising displays, including 7,551 bulletins and 1,726
posters, in 21 states in the eastern and central United States at March 31,
1998. Essentially all of the Company's billboards are located along interstate
highways and primary and secondary roads outside of urban areas. For the year
ended December 31, 1997, over 95% of the Company's net revenues was generated by
local businesses, including local franchisees of national chains, with no one
customer accounting for as much as 2% of the Company's net revenues. The Company
offers a full line of outdoor advertising services to its customers, including
creative design, production, installation and maintenance of the displays. After
giving pro forma effect to the transactions described in the Unaudited Pro Forma
Financial Statements included herein, the Company's net revenues and EBITDA
would have been $18.2 million and $9.3 million, respectively, for the year ended
December 31, 1997 and $4.8 million and $2.6 million, respectively, for the three
months ended March 31, 1998.
According to recent estimates by the Outdoor Advertising Association of
America ("OAAA"), total outdoor advertising expenditures during 1997 were $2.1
billion, an 8.8% increase over such expenditures in 1996. The Company operates
primarily in the non-urban highway directional segment of the outdoor
advertising industry. Highway directional billboards are utilized by local
advertisers to alert motorists to an advertiser's place of business and provide
directions to that business. Many of the Company's principal customers, which
include motels and hotels, restaurants and gasoline retailers, depend on
strategically located billboards as the only effective and cost efficient means
to reach their target customers. As a result, these advertisers will usually
purchase a billboard display under long-term contracts and leave the original
advertising copy in place for the duration of the contract. On March 31, 1998,
over 85% of the Company's bulletin advertising contracts had an original term of
at least 18 months and 48% had an original term of at least 36 months. The
Company believes that its large number of long-term contracts has generated more
stable and predictable revenues, has reduced production, installation and
maintenance costs over the term of the contracts and has permitted it to more
efficiently leverage its sales personnel.
Since formation in 1986, the Company has pursued an aggressive acquisition
strategy, completing over 20 acquisitions of outdoor advertising businesses.
During this period, the Company completed both "new market" and "fill-in"
acquisitions. New market acquisitions are acquisitions outside of the Company's
then existing markets, while fill-in acquisitions are generally small
acquisitions in the Company's existing markets that involve the purchase of
advertising displays only, resulting in the elimination of all personnel and
related costs. During the past year, the Company completed two significant new
market acquisitions, both of which are reflected in the Unaudited Pro Forma
Financial Statements included herein:
Unisign Acquisition. On March 2, 1998, the Company acquired
substantially all of the outdoor advertising assets of Unisign Corporation,
Inc. ("Unisign") and assumed certain capitalized leases for a total
acquisition cost of $22.0 million. As a result of this acquisition, the
Company acquired 1,421 display faces in Kentucky, West Virginia and Ohio.
Tri-State Systems Acquisition. On June 12, 1997, the Company acquired
substantially all of the assets of Tri-State Systems, Inc. ("TSS") for a
total acquisition cost of $32.0 million. In this acquisition, the Company
acquired 1,838 display faces in Georgia, Alabama, Florida, Kentucky,
Mississippi, South Carolina and Tennessee.
1
<PAGE> 6
BUSINESS STRATEGY
The Company's business strategy is to be a leading provider of highway
directional outdoor advertising to local advertisers in non-urban markets. The
Company entered this segment of the outdoor advertising business because it
believes that rural businesses have been underserved by the major outdoor
advertising companies. In order to implement this business strategy, the Company
focuses on the following key elements:
- Increase the Penetration of its Local Markets with 36-Month Advertising
Contracts. In order to better serve its local customers, the Company
customizes the size and pricing of its billboards to fit the budgets of
the local businesses that require these services. In addition, the
Company can produce a long-lasting sign that is strategically located
relative to the advertiser's place of business. For these reasons, the
Company believes that its local highway directional advertisers have been
willing to enter into long-term contracts and leave a display in place
for an extended period. As of March 31, 1998, 48% of the Company's
bulletin advertising contracts had an original term of at least 36
months. The billboards acquired by the Company in the TSS and Unisign
acquisitions were predominantly subject to contracts with an original
term of 18 months and 24 months, respectively. Excluding these
billboards, over 75% of the Company's bulletin advertising contracts had
an original term of at least 36 months. Accordingly, the Company believes
that the number of contracts with a 36-month original term will increase
as the Company seeks 36-month contracts for expiring TSS and Unisign
contracts. The Company believes that its large number of long-term
contracts has generated more stable and predictable revenues, has reduced
production, installation and maintenance costs over the term of the
contracts and has permitted it to more efficiently leverage its sales
personnel. As a result of these cost efficiencies and in order to
encourage advertisers to enter into long-term contracts, the Company
prices its longer term contracts with lower monthly rates than it prices
its shorter term contracts.
- Pursue Growth through Acquisitions. The Company intends to continue its
aggressive growth strategy of acquiring and developing highway
directional outdoor advertising businesses by continuing to seek both new
market and fill-in acquisitions, where the billboards are used, or can be
resold, as highway directional signs under long-term contracts. The
Company believes that the non-urban highway directional market remains
highly fragmented producing numerous acquisition opportunities that fit
its criteria. In addition, the Company is typically a major provider of
outdoor advertising services in the areas in which it operates, which, it
believes, allows it to more easily acquire and successfully integrate
fill-in acquisitions.
- Capitalize on New Build Opportunities. In addition to growth through
acquisitions, the Company seeks opportunities for growth through the
development of newly built outdoor advertising structures. The Company
actively monitors changes in local zoning restrictions and the
availability of new land lease sites in each of its existing markets so
as to develop new build opportunities. The Company erected 78 structures
and 146 display faces in 1997 and anticipates erecting up to 143
structures and up to 460 display faces in 1998. A substantial portion of
these new structures and display faces results from the Unisign
acquisition, in which the Company acquired 94 leases in Kentucky,
predominantly located along primary highways, and on which, subject only
to the receipt of routine government permits, it plans to construct 94
new structures with up to 376 display faces. In addition, the billboard
structures acquired by the Company in the Unisign acquisition have the
capacity for up to an additional 300 display faces. The Company believes
that the economics of building new advertising structures compare
favorably with the economics of purchasing structures through fill-in
acquisitions.
- Control Costs and Quality through Centralization of Production and
Vertical Integration. The Company seeks to control production costs and
maintain consistent, high quality production standards by centralizing
essentially all of its production services related to billboards leased
under 36-month contracts and vertically integrating its production
operations, thereby reducing its use of outside contractors. In addition,
because of its large number of rural signs under long-term contracts, the
Company has been able to use Scotchlite, a highly reflective vinyl
manufactured by 3M, which causes the advertising copy to be brightly
illuminated by the headlights of passing vehicles. While somewhat more
expensive to construct, a Scotchlite billboard does not need any electric
lighting on the
2
<PAGE> 7
advertising structure and thus significantly reduces the Company's operating
expenses. A photograph of a Scotchlite billboard is included on the inside back
cover of this Prospectus. Approximately 25% of the Company's bulletins in
service at March 31, 1998 used Scotchlite on the advertising copy. The
main facility in Baxter Springs, Kansas produces substantially all of the
Company's Scotchlite and non-reflective self-adhesive vinyl advertising
copy for installation throughout its markets. Each of the Company's five
divisions hires painters to produce hand painted bulletins and employs
other personnel to install and maintain bulletins and posters. At Baxter
Springs, the Company also employs staff artists to design advertising copy
for use in all of its divisions. The Company's new billboard structures
have generally been constructed by outside contractors, although the
Company has recently increased its capability to build these structures
with Company personnel.
The principal executive offices of the Company are located at 3416 Highway
41 South, Tifton, Georgia and its telephone number is (800) 732-8261.
RECENT FINANCINGS
The Company consummated the TSS acquisition on June 12, 1997. In order to
finance this acquisition, the Company entered into a $45.0 million amended and
restated credit facility (the "Original Credit Facility") with The First
National Bank of Chicago ("First Chicago"), as agent for a syndicate of lenders.
On February 27, 1998, the Company amended and restated the Original Credit
Facility in order to increase the credit thereunder to $62.5 million (the
"Senior Credit Facility"). In addition, at that time, SGH Holdings, Inc.
("Holdings"), the parent corporation of the Company, sold $10.0 million of
bridge notes (the "Bridge Notes") to affiliates of the Initial Purchasers in the
Initial Offering, Prudential Securities Incorporated and First Chicago Capital
Markets, Inc. Holdings loaned the proceeds of this sale to the Company. The
proceeds of the Bridge Notes, together with a portion of borrowings under the
Senior Credit Facility, were used to fund the Unisign acquisition. The Company
has used a portion of the net proceeds from the Initial Offering to repay all
outstanding borrowings under the Senior Credit Facility, which was thereupon
terminated, and repaid in full the loan from Holdings, which, in turn, has
repaid the Bridge Notes. See "Use of Proceeds".
RECENT DEVELOPMENTS
The Company purchased on July 14, 1998 certain assets of an outdoor
advertising company with approximately 244 advertising displays located in
Georgia. The Company would classify this acquisition as a fill-in acquisition on
the Southeast division. The purchase price was $3.0 million.
3
<PAGE> 8
THE EXCHANGE OFFER
On May 20, 1998, the Company sold the Existing Notes to Prudential
Securities Incorporated ("PSI") and First Chicago Capital Markets ("FCCM" and,
together with PSI, the "Initial Purchasers") which then resold the Existing
Notes to qualified institutional buyers.
The Exchange Offer......... The Company is offering to exchange up to
$100,000,000 aggregate principal amount of 11%
Senior Notes due 2008 (the "Exchange Notes") for up
to $100,000,000 aggregate principal amount of its
outstanding 11% Senior Notes due 2008 that were
issued and sold on May 20, 1998 in reliance upon an
exemption from registration under the Securities
Act (the "Existing Notes"). The terms of the
Exchange Notes will be substantially identical in
all respects (including principal amount, interest
rate, maturity and ranking) to the terms of the
Existing Notes for which they may be exchanged
pursuant to the Exchange Offer, except that the
Exchange Notes have been registered under the
Securities Act and therefore are not subject to
certain restrictions on transfer except as provided
herein (see "The Exchange Offer -- Terms of the
Exchange" and "-- Terms and Conditions of the
Letter of Transmittal") and will not be entitled to
registration rights except under certain limited
circumstances.
Resale of Exchange Notes... Based upon interpretations provided to third
parties by the Staff of the Commission, the Company
believes that Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Existing Notes
may be offered for resale, resold and otherwise
transferred by holders thereof (other than any
holder which is (i) an Affiliate, (ii) a
broker-dealer who acquired Existing Notes directly
from the Company or (iii) a broker-dealer who
acquired Existing Notes as a result of
market-making or other trading activities) without
compliance with the registration and prospectus
delivery provisions of the Securities Act except as
provided herein and provided that such Exchange
Notes are acquired in the ordinary course of such
holders' business and such holders have no
arrangement with any person to participate in a
distribution of such Exchange Notes.
By tendering Existing Notes in exchange for
Exchange Notes, each holder certifies (a) that it
is not an Affiliate, that it is not a broker-dealer
that owns Existing Notes acquired directly from the
Company or an Affiliate of the Company, that it is
acquiring the Exchange Notes offered hereby in the
ordinary course of such Transferor's business and
that such Transferor has no arrangement with any
person to participate in the distribution of such
Exchange Notes or (b) that it is an Affiliate of
the Company or of any of the Initial Purchasers and
that it will comply with the registration and
prospectus delivery requirements of the Securities
Act to the extent applicable to it.
Each broker-dealer that receives Exchange Notes for
its own account pursuant to the Exchange Offer must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it
is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be
amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales
of Exchange Notes re-
4
<PAGE> 9
ceived in exchange for Existing Notes where such
Existing Notes were acquired by such broker-dealer
as a result of market-making activities or other
trading activities. The Company has agreed that,
for a period of 90 days after the Expiration Date
(as defined herein), it will make this Prospectus
available to any broker-dealer for use in
connection with any such resale. Any holder that
cannot rely upon such interpretations must comply
with the registration and prospectus delivery
requirements of the Securities Act in connection
with a secondary resale transaction. See "Plan of
Distribution."
Minimum Condition.......... The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Existing
Notes being tendered for exchange.
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998 unless
extended (the "Expiration Date").
Exchange Date.............. The first date of acceptance for exchange for the
Existing Notes will be the first business day
following the Expiration Date.
Conditions to the Exchange
Offer...................... The obligation of the Company to consummate the
Exchange Offer is subject to certain conditions.
See "The Exchange Offer -- Conditions to the
Exchange Offer." The Company reserves the right to
terminate or amend the Exchange Offer at any time
prior to the Expiration Date upon the occurrence of
any such condition.
Procedures for Tendering
Existing Notes........... Each holder of Existing Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, with
any required signature guarantees, or an Agent's
Message (as defined herein) in accordance with the
instructions contained herein and therein, and mail
or otherwise deliver such Letter of Transmittal, or
such facsimile, together with any other required
documentation to the Exchange Agent (as defined
herein) at the address set forth herein and effect
a tender of Existing Notes pursuant to the
procedures for book-entry transfer as provided for
herein. Certain other procedures may apply with
respect to certain book-entry transfers. See "The
Exchange Offer -- How to Tender."
Guaranteed Delivery
Procedures................. Holders of Existing Notes who wish to tender their
Existing Notes and who cannot deliver their
Existing Notes and a properly completed Letter of
Transmittal or any other documents required by the
Letter of Transmittal to the Exchange Agent prior
to the Expiration Date may tender their Existing
Notes according to the guaranteed delivery
procedures set forth in "The Exchange Offer -- How
to Tender -- Guaranteed Delivery Procedures."
Withdrawal Rights.......... Tenders may be withdrawn at any time prior to the
Expiration Date. Any Existing Notes not accepted
for any reason will be returned without expense to
the tendering holders thereof as promptly as
practicable after the expiration or termination of
the Exchange Offer. See "The Exchange
Offer -- Withdrawal Rights."
Federal Income Tax
Consequences............. The exchange of Existing Notes for Exchange Notes
by holders should not constitute an exchange for
federal income tax purposes, and U.S.
5
<PAGE> 10
holders should not realize any gain or loss upon
receipt of Exchange Notes. See "The Exchange
Offer -- Federal Income Tax Consequences."
Effect on Holders of
Existing Notes............. As a result of the making of this Exchange Offer,
and upon acceptance for exchange of all validly
tendered Existing Notes pursuant to the terms of
this Exchange Offer, the Company will have
fulfilled covenants contained in the terms of the
Existing Notes and the Registration Rights
Agreement (the "Registration Rights Agreement")
dated as of May 13, 1998 between the Company and
the Initial Purchasers and, accordingly, the
holders of the Existing Notes will have no further
registration or other rights under the Registration
Rights Agreement, except under certain limited
circumstances. See "Existing Notes Registration
Rights." Holders of the Existing Notes who do not
tender their Existing Notes in the Exchange Offer
will continue to hold such Existing Notes and will
be entitled to all the rights and limitations
applicable thereto under the indenture covering the
Notes (the "Indenture"). All untendered, and
tendered but unaccepted, Existing Notes will
continue to be subject to the restrictions on
transfer provided for in the Existing Notes and the
Indenture. To the extent that Existing Notes are
tendered and accepted in the Exchange Offer, the
trading market, if any, for the Existing Notes
could be adversely affected. See "Risk
Factors -- Consequences of Exchange and Failure to
Exchange."
Fees and Expenses.......... Expenses incident to the Company's completion of
the Exchange Offer and compliance with the
Registration Rights Agreement will be borne by the
Company. See "The Exchange Offer -- Solicitation of
Tenders; Expenses."
Use of Proceeds............ The Company will not receive any proceeds from the
Exchange Offer. The Company used a portion of the
proceeds of from the Initial Offering to repay in
full the Senior Credit Facility and the
intercompany loan, at which time Holdings repaid
the Bridge Notes. See "Use of Proceeds."
TERMS OF THE NOTES
The Exchange Offer applies to $100,000,000 aggregate principal amount of
the Existing Notes. The form and terms of the Exchange Notes are the same as the
form and terms of the Existing Notes except that the Exchange Notes have been
registered under the Securities Act and, therefore, will not bear legends
restricting the transfer thereof. The Exchange Notes will evidence the same debt
as the Existing Notes and will be entitled to the benefits of the Indenture. See
"Description of the Notes."
6
<PAGE> 11
Issuer..................... Tri-State Outdoor Media Group, Inc.
Securities Offered......... $100,000,000 aggregate principal amount of 11%
Senior Notes due 2008 under an Indenture to be
dated as of May 15, 1998 (the "Indenture"). See
"Description of the Notes".
Maturity Date.............. May 15, 2008.
Interest Payment Dates..... May 15 and November 15 of each year commencing
November 15, 1998.
Mandatory Redemption....... None
Optional Redemption........ The Notes will be redeemable at the Company's
option, in whole or in part, at any time on or
after May 15, 2003 at the redemption prices set
forth herein, plus accrued interest to the date of
redemption. In addition, the Company may, at its
option, redeem prior to May 15, 2001 Notes at 111%
of the principal amount thereof, plus accrued
interest to the date of redemption, from the net
proceeds of one or more Equity Offerings; provided
that at least 75% of the aggregate principal amount
of the Notes issued remains outstanding after each
such redemption. See "Description of
Notes -- Optional Redemption".
Pledged Securities......... On the date of the issuance of the Existing Notes
(the "Closing Date"), the Company deposited with
IBJ Schroder Bank & Trust Company (the "Escrow
Agent") a portfolio of Pledged Securities
consisting of U.S. government securities that,
together with the earnings thereon, will be
sufficient to pay when due the first two interest
payments on the Notes, with any balance to be
retained by the Company. See "Description of the
Notes".
Ranking.................... Except as described above under "Pledged
Securities", the Notes are senior unsecured
obligations of the Company ranking pari passu with
all existing and future unsubordinated debt of the
Company, and will be effectively subordinated to
all of the Company's secured debt, to the extent of
the assets securing such debt. As of March 31,
1998, on a pro forma basis after giving effect to
the Initial Offering, the application of the
estimated net proceeds therefrom and the
consummation of the other transactions described in
the Unaudited Pro Forma Financial Statements
included herein (and excluding outstanding letters
of credit), the Company would have had $826,000 of
debt outstanding other than the Notes, all of which
would have been capitalized lease obligations. See
"Capitalization".
Change of Control.......... Upon a Change of Control, the Company will be
required, subject to certain conditions, to offer
to purchase all outstanding Notes at 101% of the
principal amount thereof, plus accrued interest to
the date of purchase. See "Description of the
Notes".
Certain Covenants.......... The Indenture contains certain covenants,
including, but not limited to, covenants and
limitations of the following: (i) the incurrence of
additional debt; (ii) restricted payments; (iii)
asset dispositions; (iv) transactions with
affiliates; (v) dividend and other payment
restrictions affecting subsidiaries; (vi) liens;
and (vii) the merger, consolidation or sale of
assets of the Company. In addition, subsidiaries of
the Company may, in the future, be required to
guarantee payment of the Notes. See "Description of
the Notes".
Risk Factors............... Prospective purchasers of the Notes should
carefully consider all of the information contained
in this Prospectus, including the information set
forth under the caption "Risk Factors", before
making an investment in the Notes.
7
<PAGE> 12
SUMMARY FINANCIAL DATA
<TABLE>
<CAPTION>
THREE MONTHS PRO FORMA
PRO FORMA ENDED THREE MONTHS
YEARS ENDED DECEMBER 31, YEAR ENDED MARCH 31, ENDED
--------------------------------------------- DECEMBER 31, ---------------- MARCH 31,
1993 1994 1995 1996 1997 1997(1) 1997 1998 1998(1)
------ ------ ------- ------- ------- ------------ ------ ------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues............. $2,828 $4,096 $ 7,892 $ 8,021 $11,831 $ 18,196 $1,971 $ 4,242 $ 4,838
------ ------ ------- ------- ------- -------- ------ ------- -------
Operating expenses:
Direct operating
expenses........... 590 1,021 2,315 2,427 3,817 5,669 572 1,291 1,458
General and
administrative..... 717 1,230 1,934 2,345 2,417 3,253 498 720 745
Depreciation and
amortization....... 1,161 1,429 2,713 2,648 4,699 8,947 612 1,781 2,239
------ ------ ------- ------- ------- -------- ------ ------- -------
Total operating
expenses........... 2,468 3,680 6,962 7,420 10,933 17,869 1,682 3,792 4,442
------ ------ ------- ------- ------- -------- ------ ------- -------
Operating income......... 360 416 930 601 898 327 289 450 396
Gain (loss) on sale of
assets................. -- -- 1,334 443 (143) (143) -- -- --
Interest expense......... (476) (880) (2,094) (1,941) (4,200) (11,420) (481) (1,673) (2,855)
Other income (expense)... 1 (164) (153) 2 -- 43 -- -- --
------ ------ ------- ------- ------- -------- ------ ------- -------
Income (loss) before
income tax benefit..... (115) (628) 17 (895) (3,445) (11,193) (192) (1,223) (2,459)
Income tax benefit....... -- -- 8 324 1,424 4,523 77 489 983
------ ------ ------- ------- ------- -------- ------ ------- -------
Net income (loss)........ $ (115) $ (628) $ 25 $ (571) $(2,021) $ (6,670) $ (115) $ (734) $(1,476)(2)
====== ====== ======= ======= ======= ======== ====== ======= =======
OTHER DATA:
EBITDA(3)................ $1,521 $1,845 $ 3,643 $ 3,249 $ 5,597 $ 9,274 $ 901 $ 2,231 $ 2,635
EBITDA margin(3)......... 53.8% 45.0% 46.2% 40.5% 47.3% 51.0% 45.7% 52.6% 54.5%
Capital expenditures..... $ 672 $1,301 $ 1,083 $ 1,655 $ 2,334 -- $ 356 $ 960 --
Ratio of earnings to
fixed charges(4)....... -- -- 1.0x -- -- -- -- -- --
Pro forma ratios:
EBITDA to cash
interest expense... 0.8x 1.0x
Net debt to
EBITDA(5).......... 7.5x 6.7x
Number of displays(6)
Bulletins............ 2,506 3,570 3,815 3,975 6,106 7,551
Posters.............. 50 1,778 1,623 1,461 1,432 1,726
------ ------ ------- ------- ------- -------
Total displays... 2,556 5,348 5,438 5,436 7,538 9,277
====== ====== ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1998
-------------------------
ACTUAL PRO FORMA(1)
------- ------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents............................... $ 108 $ 29,758(7)
Working capital (deficit)............................... (7,239) 32,011
Total assets............................................ 79,003 111,093
Total debt (including current maturities)............... 82,814 100,826
Stockholder's equity (deficiency)....................... (5,618) 8,060
</TABLE>
(footnotes on following page)
8
<PAGE> 13
(1) The unaudited pro forma statement of operations data give effect to the
Initial Offering and the application of the net proceeds thereof, the
conversion of $15.8 million of the subordinated intercompany promissory
notes payable to Holdings into equity and the TSS and Unisign acquisitions
as if they had occurred on January 1, 1997. The unaudited pro forma balance
sheet data give effect to the Initial Offering and the application of the
net proceeds thereof and the debt-to-equity conversion as if they had
occurred on March 31, 1998. See "Unaudited Pro Forma Financial Statements".
(2) The pro forma financial information for the three months ended March 31,
1998 does not give effect to an extraordinary loss from the early
extinguishment of debt (net of income tax benefit) of $2.2 million the
Company would expect to record.
(3) "EBITDA" is defined as operating income (loss) before depreciation and
amortization. EBITDA represents a measure that management believes is
customarily used to evaluate the financial performance of companies in the
media industry. However, EBITDA is not a measure of financial performance
under generally accepted accounting principles and should not be considered
an alternative to operating income (loss) as an indicator of the Company's
operating performance or to net cash provided by operating activities as a
measure of its liquidity. EBITDA margin is EBITDA stated as a percentage of
net revenues.
(4) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as income before income taxes plus fixed charges. Fixed charges
consist of interest expense (including amortization of deferred debt
issuance costs) and the portion of rental expense that is deemed
representative of the interest factor. Earnings were insufficient to cover
fixed charges by $115,000 in 1993, $628,000 in 1994, $895,000 in 1996, $3.4
million in 1997, $11.2 million in 1997 on a pro forma basis, $192,000 in the
three months ended March 31, 1997, $1.2 million in the three months ended
March 31, 1998 and $2.5 million in the three months ended March 31, 1998 on
a pro forma basis.
(5) The pro forma ratio of net debt to EBITDA is calculated with net debt
representing total debt minus cash and cash equivalents of $31.1 million and
$29.8 million as of December 31, 1997 and March 31, 1998, respectively, both
of which include $10.6 million of cash pledged as security for the first two
interest payments on the Notes. The pro forma ratio of net debt to EBITDA
for the three months ended March 31, 1998 is calculated utilizing the pro
forma EBITDA for three months ended March 31, 1998 multiplied by four.
(6) All display faces, including unoccupied display faces, are classified based
on the last sale to an advertiser as either a bulletin or poster. For 1995,
the table does not reflect display faces located in and around Watertown,
New York that were acquired in November 1995 and disposed of in January
1996.
(7) Includes $10.6 million of securities pledged as security for the first two
interest payments on the Notes.
9
<PAGE> 14
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.
SUBSTANTIAL LEVERAGE. The Company has been and will continue to be highly
leveraged. As of March 31, 1998, after giving pro forma effect to the conversion
into equity of $15.8 million of subordinated intercompany promissory notes due
Holdings, the Initial Offering and the application of the estimated net proceeds
therefrom as described in Note (a) to the Unaudited Pro Forma Financial
Statements, the Company's debt would have been $100.8 million, its stockholders'
equity would have been $8.1 million and its ratio of debt to stockholders'
equity would have been 12.5 to 1.0. See "Capitalization". In addition, for the
year ended December 31, 1997 and the three months ended March 31, 1998, the
Company's pro forma earnings would have been insufficient to cover its pro forma
fixed charges by $11.2 million and $2.5 million, respectively. See "Unaudited
Pro Forma Financial Statements".
The Indenture permits the Company to incur additional debt, subject to
certain limitations. The degree to which the Company is leveraged 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 debt and will not be
available for other purposes; (ii) the ability of the Company to obtain
additional 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 leverage
may increase its vulnerability to economic downturns and limit its ability to
withstand competitive pressures and capitalize on significant business
opportunities.
The ability of the Company to meet its debt service obligations will depend
on the future operating performance and financial results of the Company, which
will be subject in part to factors beyond the control of the Company. Although
management believes that the Company's cash flow will be adequate to meet its
interest and principal payments, there can be no assurance that the Company will
generate earnings in the future sufficient to cover its fixed charges. If the
Company is unable to generate earnings in the future sufficient to cover its
fixed charges and is unable to borrow sufficient funds from other sources, it
may be required to refinance all or a portion of its existing debt (including
the Notes) or to sell all or a portion of its assets. There can be no assurance
that a refinancing would be possible, nor can there be any assurance as to the
timing of any asset sales or the proceeds that the Company could realize
therefrom. In addition, the terms of the Indenture restrict the Company's
ability to sell assets and the use of the proceeds therefrom. See "Management's
Discussion and Analysis".
HISTORY OF NET LOSSES. The Company reported net losses for the years ended
December 31, 1996 and 1997 of $571,000 and $2.0 million, respectively, and
$734,000 for the three months ended March 31, 1998. For each of the past five
years the Company reported a stockholder's deficiency. The net losses primarily
reflect high levels of depreciation and amortization charges relating to the
depreciation of assets obtained in acquisitions, as well as high levels of
interest expense relating to debt incurred to finance these acquisitions.
Interest expense and depreciation and amortization charges will continue at high
levels throughout 1998 and future years as a result of previously completed
acquisitions. The Company expects to continue incurring substantial losses for
at least the next two years, and there can be no assurance if or when the
Company will have net income. The Company anticipates that it will incur an
extraordinary loss to reflect the write-off of existing loan and financing costs
and other related costs (net of income tax benefit) of approximately $2.2
million upon completion of the Initial Offering. See "Note (b) to the Unaudited
Pro Forma Financial Statements".
OBSTACLES TO 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 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
10
<PAGE> 15
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 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. The Company had approximately $17.6
million of net proceeds from the Initial Offering for general corporate
purposes, capital expenditures and potential future acquisitions. If additional
funds are needed, 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 if at all.
MANAGEMENT OF GROWTH AND EXPANSION; INTEGRATION OF ACQUISITIONS. The
Company is undergoing substantial growth. This growth places significant demands
on the Company's management and its technical, financial and other resources. To
manage its growth effectively, the Company must maintain a high level of
operational quality and efficiency, continue to enhance its operational,
financial and management systems and expand, train and manage its management and
staff. There can be no assurance that the Company will be able to manage its
growth effectively or attract suitable management and other personnel and
maintain its operational systems, and any failure to do so could have a material
adverse effect on the Company.
POTENTIAL ELIMINATION OR REDUCTION OF 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 these 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 this
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
Congress. Congress is presently considering various legislative proposals
regarding tobacco. At this time, it is unclear whether a definitive settlement
will be reached, what the terms of any such settlement would be or what the
terms of any legislation passed by Congress might be. In addition, the states of
Mississippi, Florida, Texas and Minnesota have entered into separate settlements
of litigation with the tobacco industry. None of these settlements is
conditioned on federal government approval and each is reported to provide for
the elimination of all outdoor advertising of tobacco products.
According to the OAAA, tobacco advertising accounted for approximately 7.3%
of outdoor billboard advertising revenues for the year ended December 31, 1997.
A reduction in billboard advertising by the tobacco industry as a result of
either the FDA regulations, the proposed settlement or federal legislation could
cause an immediate reduction in industry revenues 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. Thus, even though less
than 3% of the Company's annual net revenues is typically derived from tobacco
advertising, if outdoor advertising of tobacco products were reduced or
eliminated and the industry were unable to replace the lost revenues, the change
could have a material adverse effect on the Company by forcing advertising rates
down or inhibiting rate increases. See "Management's Discussion and Analysis"
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
restrict 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 jurisdictions 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
11
<PAGE> 16
through amortization or otherwise, are being challenged in various state and
federal courts with conflicting results. Currently, none of the Company's
existing inventory is subject to any amortization ordinance. However, no
assurance can be given as to the effect on the Company of additional laws and
regulations that may be adopted in the future. See "-- Potential Elimination or
Reduction of Tobacco Advertising" above and "Business -- Government Regulation".
POTENTIAL LOSSES FROM NATURAL DISASTERS. A significant portion of the
Company's structures are located in the southeast and central regions of the
United States. These areas are susceptible to flooding, tornadoes and/or
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. The Company has not
incurred any material losses in the past due to weather-related incidents, but
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 in which the Company operates 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, highway logo sign operators, and companies
that install commercial signs on an advertiser's own property, 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 advertising displays in shopping centers and
malls, airports, stadiums, movie theaters and supermarkets and on buses. 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 the
outdoor advertising medium will be able to compete with other types of media, or
that the Company will be able to compete either within the outdoor advertising
industry or with other media. See "Business -- Competition".
RELIANCE ON KEY EXECUTIVES. The Company's success depends to a significant
extent upon the continued services of its executive officers and other key
personnel. The loss of the services of any one or more of such key personnel
could have an adverse effect on the Company and there can be no assurance that
the Company would be able to find suitable replacements for such key personnel.
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 business of the
Company.
CONTROL OF THE COMPANY BY STOCKHOLDERS. The Company is a wholly-owned
subsidiary of Holdings. The capital stock of Holdings is privately held. The
officers and directors of the Company and Mesirow Capital Partners VI ("Mesirow
VI") and Mesirow Capital Partners VII ("Mesirow VII") (Mesirow VI and Mesirow
VII collectively, "Mesirow"), or entities affiliated with such persons, hold all
of the issued and outstanding capital stock of Holdings. All of Holdings'
stockholders are party to a Second Amended and Restated Stockholders Agreement
(the "Holdings Stockholders Agreement") pursuant 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 and Mesirow. As a result, such
stockholders can effectively control the affairs and policies of Holdings and
its subsidiary, the Company. There can be no assurance that the interests of
Holdings' 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, there may be
circumstances in which actions taken by the Company in the interests of its
stockholders will diverge from the interests of holders of the Notes. See
"Description of Notes -- Limitation on Transactions with Affiliates".
12
<PAGE> 17
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
repurchase the Notes at a purchase price equal to 101% of the outstanding
principal amount thereof, plus accrued interest to the date of redemption. The
Change of Control repurchase feature may make more difficult a sale or takeover
of the Company. There can be no assurance that sufficient funds would be
available at the time of any Change of Control to make any required repurchase
of the Notes. Furthermore, these provisions would not necessarily afford
protection to holders of the Notes in the event of a highly leveraged
transaction that does not result in a Change in Control.
LACK OF PUBLIC MARKET FOR THE EXCHANGE NOTES; RESTRICTIONS ON RESALE. The
Exchange Notes are a new issue of securities for which there is currently no
trading market. Although the Initial Purchasers have informed the Company that
they currently intend to make a market in the Exchange Notes, they are not
obligated to do so and any such market-making may be discontinued at any time
without notice. In addition, such market-making activity may be limited during
the pendency of the Exchange Offer or the effectiveness of a shelf registration
statement in lieu thereof. Accordingly, there can be no assurance as to the
liquidity of any market that may develop for the Exchange Notes. The Existing
Notes are eligible for trading by qualified buyers in the Private Offerings,
Resales and Trading through Automated Linkages (PORTAL) market. The Company does
not currently intend to apply for listing of the Notes or, if issued, the
Exchange Notes, on any securities exchange or for quotation of the Notes through
the National Association of Securities Dealers Automated Quotation System
("Nasdaq").
To the extent that Existing Notes are tendered and accepted in the Exchange
Offer, the trading market for the remaining untendered or tendered but not
accepted Existing Notes could be adversely affected. Because the Company
anticipates that most holders of the Existing Notes will elect to exchange such
Existing Notes for Exchange Notes due to the absence of restrictions on the
resale of Exchange Notes under the Securities Act, the Company anticipates that
the liquidity of the market for any Existing Notes remaining after the
consummation of the Exchange Offer may be substantially limited.
The liquidity of, and trading market for, the Existing Notes or the
Exchange Notes also may be adversely affected by general declines in the market
or by declines in the market for similar securities. Such declines may adversely
affect such liquidity and trading markets independent of the financial
performance of, and prospects for, the Company.
------------------------
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Prospectus contains certain forward-looking statements and information
relating to the Company that are based on the beliefs of management, as well as
assumptions made by and information currently available to management. These
forward-looking statements are principally contained in the sections "Prospectus
Summary", "Risk Factors", "Management's Discussion and Analysis" and "Business"
and include, without limitation, management's expectations and estimates as to
the Company's business operations, including future financial performance,
financing plans, trends affecting the Company's financial condition or results
of operations, impact of competition, acquisition opportunities and expansion of
the Company's operations. In addition, in those and other portions of this
Prospectus, the words "believes", "may", "will", "estimates", "continue",
"anticipates", "intends", "expects" and words of similar import, as they relate
to the Company or its management, are intended to identify forward-looking
statements. Such statements reflect the current views of the Company and its
management with respect to future events and are subject to certain risks,
uncertainties and assumptions, including, among others, the following: general
economic and business conditions, both nationally and in the Company's markets;
competition; changes in business strategy; the significant leverage of the
Company; existing governmental regulations and changes in the governmental
regulations affecting the outdoor advertising of tobacco or of products
generally; losses from natural disasters and other risk factors set forth under
"Risk Factors" in this Prospectus. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results may vary materially from those described herein as anticipated,
believed, estimated or expected. The Company does not intend to update these
forward-looking statements.
13
<PAGE> 18
USE OF PROCEEDS
There will be no cash proceeds payable to the Company for the issuance of
the Exchange Notes pursuant to the Exchange Offer. The net proceeds to the
Company from the sale of the Existing Notes (the "Initial Offering") were
approximately $95.8 million after deducting discounts and fees and expenses
incurred in connection therewith. The Company used such net proceeds as follows:
(i) To repay in full all outstanding borrowings and accrued interest
under the Senior Credit Facility, which totaled $57.4 million on the
Closing Date. The Senior Credit Facility has been terminated.
(ii) To repay the $10.0 million loan, plus accrued interest thereon of
$232,000, from Holdings to permit Holdings to repay a like amount of Bridge
Notes.
(iii) To purchase approximately $10.6 million of Pledged Securities,
consisting of U.S. government securities, which were pledged to the Escrow
Agent as security for the first two interest payments on the Notes.
The remaining net proceeds (approximately $17.6 million) are to be used for
general corporate purposes, including capital expenditures and potential
acquisitions. Pending the application of the net proceeds as described above,
the Company has invested the proceeds in short-term investment grade securities.
Borrowings under the Senior Credit Facility and the predecessor Original
Credit Facility were used to help finance the TSS and Unisign acquisitions and
for general corporate purposes. These borrowings mature between September 30,
2005 and March 31, 2006 and bore interest at the weighted average rate of 8.8%
per annum on March 31, 1998. The Bridge Notes were used to help finance the
Unisign acquisition, bore interest at the rate of 10.4% per annum on March 31,
1998 and mature on February 27, 1999.
A significant element of the Company's strategy is to expand through
acquisitions. The Company is presently evaluating, as it does on a regular
basis, other outdoor advertising companies for possible acquisition. The Company
purchased on July 14, 1998 certain assets of an outdoor advertising company with
approximately 244 advertising displays located in Georgia. The Company would
classify this acquisition as a fill-in acquisition in its Southeast division.
The purchase price was $3.0 million.
14
<PAGE> 19
CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1998 on an actual basis and as adjusted to give pro forma effect to
(i) the Initial Offering of the Existing Notes and the application of the
estimated net proceeds therefrom and (ii) the conversion into stockholder's
equity of $15.8 million of the subordinated intercompany promissory notes
payable to Holdings, as if such transactions occurred on March 31, 1998. See
"Use of Proceeds". The following table should be read in conjunction with the
Unaudited Pro Forma Financial Statements and related notes thereto and the
Company's financial statements and accompanying notes thereto included elsewhere
in this Prospectus.
<TABLE>
<CAPTION>
MARCH 31, 1998
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
------- -----------
(IN THOUSANDS)
<S> <C> <C>
Cash and cash equivalents................................... $ 108 $ 29,758(1)
======= ========
Short-term debt:
Intercompany loan of proceeds of Bridge Notes(3).......... $10,000 $ --
======= ========
Long-term debt:(2)
Original Credit Facility/Senior Credit Facility(3)........ $56,150 $ --
Notes offered hereby...................................... -- 100,000
Other debt................................................ 826 826
Subordinated intercompany promissory notes payable to
Holdings(4)............................................ 15,838 --
------- --------
Total long-term debt.............................. 72,814 100,826
------- --------
Stockholder's equity (deficiency):
Common stock, par value -- $10 per share; authorized
10,000 shares; 200 shares issued and outstanding....... 2 2
Paid-in capital........................................... 25 15,863(4)
Accumulated deficit....................................... (5,645) (7,805)(5)
------- --------
Total stockholder's equity (deficiency)........... (5,618) 8,060
------- --------
Total capitalization.............................. $67,196 $108,886
======= ========
</TABLE>
- ---------------
(1) Includes $10.6 million of cash pledged as security for the first two
interest payments on the Notes.
(2) See Note 5 to the Company's audited financial statements included elsewhere
herein for a description of the terms of the Company's long-term debt.
(3) In connection with the acquisition of Unisign, the Original Credit Facility
was amended and restated by the Senior Credit Facility and additional
amounts were borrowed thereunder. All borrowings and accrued interest under
the Senior Credit Facility, which were expected to total $57.4 million on
the Closing Date, have been repaid from the net proceeds of the Initial
Offering, whereupon the Senior Credit Facility will be terminated. Also in
connection with the acquisition of Unisign, Holdings issued $10.0 million of
Bridge Notes and loaned the proceeds to the Company on a demand basis. The
Company has repaid this intercompany loan, plus accrued interest, from the
proceeds of the Initial Offering, at which time Holdings repaid the Bridge
Notes.
(4) The $15.8 million of subordinated intercompany promissory notes payable to
Holdings will be converted into stockholder's equity.
(5) Reflects the effects of an extraordinary loss (net of tax benefit) of $2.2
million related to the write-off of certain loan and financing costs and
interest rate swap agreements. See Note (b) to the Unaudited Pro Forma
Financial Statements.
15
<PAGE> 20
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial statements have been prepared
by the Company's management from its historical financial statements which are
contained elsewhere in this Prospectus. The Unaudited Pro Forma Statement of
Operations presents the Company's results of operations adjusted to give effect
to the Initial Offering, the conversion of $15.8 million of subordinated
intercompany promissory notes payable to Holdings into equity, and the TSS and
Unisign acquisitions (accounted for as purchases) as if they had occurred on
January 1, 1997. The Unaudited Pro Forma Balance Sheet presents the Company's
financial position adjusted to give effect to the Initial Offering and the
conversion of $15.8 million of subordinated intercompany promissory notes
payable to Holdings into equity as if they had occurred on March 31, 1998. The
pro forma adjustments described in the accompanying notes are based upon
estimates and certain assumptions that management of the Company believes are
reasonable in such circumstances.
The unaudited pro forma financial statements are not necessarily indicative
of what the financial position or results of operations actually would have been
if the Initial Offering, the debt-to-equity conversion and the TSS and Unisign
acquisitions had occurred on the applicable dates indicated. Moreover, they are
not intended to be indicative of future results of operations or financial
position. The unaudited pro forma financial statements should be read in
conjunction with the historical financial statements of the Company, TSS and
Unisign and the related notes thereto which are included elsewhere in this
Prospectus.
The unaudited pro forma financial statements do not reflect the financial
impact of the acquisition of Knapp Displays, L.L.C. and 3-H Sign Company, Inc.
completed during 1998 or the acquisition of Mid-American Advertising Company,
Sunbelt Outdoor Systems, Inc. and Supreme Outdoor, Inc. completed during 1997.
See "Business -- General".
16
<PAGE> 21
TRI-STATE OUTDOOR MEDIA GROUP, INC.
UNAUDITED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS
FOR THE
HISTORICAL INITIAL OFFERING PRO FORMA
---------- ---------------- ---------
<S> <C> <C> <C>
ASSETS
Current Assets
Cash.................................................... $ 108 $ 19,079(a) $ 19,187
Restricted cash......................................... -- 10,571(a) 10,571
Accounts receivable, net................................ 1,848 -- 1,848
Other current assets.................................... 2,612 -- 2,612
------- -------- --------
Total current assets............................ 4,568 29,650 34,218
Property and Equipment, net............................... 43,510 43,510
Intangible Assets, net.................................... 27,502 4,200(a) 28,502
(3,200)(b)
Other Assets.............................................. 3,423 1,440(b) 4,863
------- -------- --------
Total assets.................................... $79,003 $ 32,090 $111,093
======= ======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY)
Current Liabilities
Short-term debt......................................... $10,000 $(10,000)(a) $ --
Other current liabilities............................... 1,807 400(b) 2,207
------- -------- --------
Total current liabilities....................... 11,807 (9,600) 2,207
Long-Term Debt............................................ 72,814 100,000(a) 100,826
(56,150)(a)
(15,838)(c)
------- -------- --------
Total liabilities............................... 84,621 18,412 103,033
------- -------- --------
Stockholder's Equity (Deficiency)
Common stock............................................ 2 -- 2
Divisional equity....................................... -- -- --
Paid-in capital......................................... 25 15,838(c) 15,863
Accumulated deficit..................................... (5,645) (2,160)(b) (7,805)
------- -------- --------
(5,618) 13,678 8,060
------- -------- --------
Total liabilities and stockholder's equity
(deficiency).................................. $79,003 $ 32,090 $111,093
======= ======== ========
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements.
17
<PAGE> 22
TRI-STATE OUTDOOR MEDIA GROUP, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS ADJUSTMENTS
UNISIGN FOR FOR THE
HISTORICAL ACQUISITION(d) UNISIGN SUBTOTAL INITIAL OFFERING PRO FORMA
---------- -------------- ----------- -------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net revenues.............. $ 4,242 $596 $ -- $ 4,838 $ -- $ 4,838
------- ---- ----- ------- ----- -------
Operating expenses:
Direct operating
expenses............. 1,291 167 1,458 1,458
General and
administrative....... 720 87 (62)(e) 745 745
Depreciation and
amortization......... 1,781 71 387(f) 2,239 2,239
------- ---- ----- ------- ----- -------
3,792 325 325 4,442 4,442
------- ---- ----- ------- ----- -------
Operating income..... 450 271 (325) 396 396
Interest expense.......... (1,673) (16) (360)(g) (2,049) (806)(i) (2,855)
------- ---- ----- ------- ----- -------
Income (loss) before
income tax benefit and
extraordinary item...... (1,223) 255 (685) (1,653) (806) (2,459)
Income tax benefit........ 489 -- 172(h) 661 322(h) 983
------- ---- ----- ------- ----- -------
Income (loss) before
extraordinary item... $ (734) $255 $(513) $ (992) $(484) $(1,476)(j)
======= ==== ===== ======= ===== =======
OTHER DATA:
EBITDA(k)................. $ 2,231 $342 -- $ 2,635 -- $ 2,635
======= ==== ======= =======
Ratio of earnings to fixed
charges(l).............. -- --
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements.
18
<PAGE> 23
TRI-STATE OUTDOOR MEDIA GROUP, INC.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADJUSTMENTS ADJUSTMENTS
ACQUIRED FOR THE FOR THE
HISTORICAL COMPANIES(m) ACQUISITIONS SUBTOTAL INITIAL OFFERING PRO FORMA
---------- ------------ ------------ -------- ---------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net revenues................. $ 11,831 $6,365 $ -- $18,196 $ -- $ 18,196
-------- ------ ------- ------- ------- --------
Operating expenses:
Direct operating
expenses................ 3,817 1,852 -- 5,669 -- 5,669
General and
administrative.......... 2,417 1,429 (593)(e) 3,253 -- 3,253
Depreciation and
amortization............ 4,699 982 3,266(f) 8,947 -- 8,947
-------- ------ ------- ------- ------- --------
10,933 4,263 2,673 17,869 -- 17,869
-------- ------ ------- ------- ------- --------
Operating income........ 898 2,102 (2,673) 327 -- 327
Interest expense............. (4,200) (767) (3,502)(g) (8,469) (2,951)(i) (11,420)
Other income (expense)....... (143) 43 -- (100) -- (100)
-------- ------ ------- ------- ------- --------
Income (loss) before income
tax benefit and
extraordinary item......... (3,445) 1,378 (6,175) (8,242) (2,951) (11,193)
Income tax benefit........... 1,424 -- 1,919(h) 3,343 1,180(h) 4,523
-------- ------ ------- ------- ------- --------
Income (loss) before
extraordinary item...... $ (2,021) $1,378 $(4,256) $(4,899) $(1,771) $ (6,670)(j)
======== ====== ======= ======= ======= ========
OTHER DATA:
EBITDA(k).................... $ 5,597 $3,084 -- $ 9,274 -- $ 9,274
======== ====== ======= ========
Ratio of earnings to fixed
charges(l)................. -- --
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements.
19
<PAGE> 24
TRI-STATE OUTDOOR MEDIA GROUP, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(a) Reflects the issuance of the Existing Notes and application of the
estimated net proceeds from the Initial Offering as follows (in thousands):
<TABLE>
<S> <C>
Gross proceeds.............................................. $100,000
Underwriting discount and estimated expenses of the Initial
Offering.................................................. (4,200)
--------
Net proceeds from the Initial Offering...................... 95,800
Restricted cash............................................. (10,571)
Paydown of debt............................................. (66,150)
--------
Remaining proceeds.......................................... $ 19,079
========
</TABLE>
(b) Reflects the following adjustments related to financing costs resulting
from the Initial Offering (and related tax effect at 40%) as follows (in
thousands):
<TABLE>
<CAPTION>
GROSS TAX EFFECT NET
------ ---------- ------
<S> <C> <C> <C>
Write off of existing loan and financing $3,200 $1,280 $1,920
costs.........................................
Fair value of interest rate swap agreements..... 400 160 240
------ ------ ------
$3,600 $1,440 $2,160
====== ====== ======
</TABLE>
The Company expects to reflect an extraordinary loss related to the
foregoing items in the period in which the Closing Date occurs.
As a result of the early extinguishment of floating rate debt contemplated
by the Initial Offering, the Company would be required to record the estimated
fair value of the interest rate swap agreements in its financial statements. At
March 31, 1998, the interest rate swap agreements were accounted for as a hedge.
(c) Reflects conversion of the subordinated intercompany promissory notes
due Holdings of $15,838,000 into paid-in capital.
(d) Reflects the revenues and expenses of Unisign for the period from
January 1, 1998 to March 2, 1998, the date of acquisition.
(e) To eliminate costs reflected in the historical financial statements of
the Company, TSS or Unisign which the Company believes would not have been
incurred had the acquisitions occurred as of January 1, 1997 (in thousands).
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, 1997 MARCH 31, 1998
-------------------------------- ------------------
COMPANY TSS UNISIGN TOTAL UNISIGN
------- ---- ------- ----- ------------------
<S> <C> <C> <C> <C> <C>
Executive compensation....... $-- $107 $297 $404 $49
Other employees'
compensation............... -- 41 31 72 5
Directors' fees.............. -- 11 -- 11 --
Advertising.................. -- -- 31 31 5
Facility costs............... 60 -- -- 60 --
Other administrative costs... -- -- 15 15 3
--- ---- ---- ---- ---
$60 $159 $374 $593 $62
=== ==== ==== ==== ===
</TABLE>
20
<PAGE> 25
TRI-STATE OUTDOOR MEDIA GROUP, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
(f) Reflects the increase in depreciation and amortization expense arising
from purchase accounting adjustments in connection with the TSS and Unisign
acquisitions as follows (dollars in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, 1997 MARCH 31, 1998
AMORTIZATION ----------------------------- ------------------
ASSETS PERIOD TSS UNISIGN TOTAL UNISIGN
- ------ ------------ -------- ------- -------- ------------------
<S> <C> <C> <C> <C> <C>
Property and
equipment............. 5-30 years $ 990 $ 460 $ 1,450 $ 115
Goodwill................ 15 years 585 679 1,264 170
Other intangibles....... 1-5 years 1,695 1,610 3,305 402
------- ------- ------- -------------
Total depreciation and
amortization
expense............... 3,270 2,749 6,019 687
Less amounts recorded in
the historical
financial
statements............ (2,362)* (391) (2,753) (300)**
------- ------- ------- -------------
$ 908 $2,358 $ 3,266 $ 387
======= ======= ======= =============
</TABLE>
- ---------------
* Reflects $1,771,000 recorded in the Company's financial statements subsequent
to the TSS acquisition and $591,000 recorded in the historical financial
statements of TSS prior to the acquisition.
** Reflects $229,000 recorded in the Company's financial statements subsequent
to the Unisign acquisition and $71,000 recorded in the historical financial
statements of Unisign prior to the acquisition.
(g) Reflects incremental interest and amortization expense as if the
financing for the TSS and Unisign acquisitions took place on January 1, 1997 as
follows (dollars in thousands):
<TABLE>
<CAPTION>
MARCH 31,
AVERAGE 1997 1998
BORROWINGS INTEREST RATE EXPENSE EXPENSE
---------- ------------- ------- ---------
<S> <C> <C> <C> <C>
TSS............................................ $32,000 13.22% $ 4,231 $ 1,058
Unisign........................................ 22,400 9.49 2,126 531
Financing costs (ten-year amortization
period)...................................... 2,910 -- 291 73
------- -------
6,648 1,662
Less amounts recorded in the historical
financial statements:
Unisign...................................... (95) (16)
TSS.......................................... (672) --
The Company (as it relates to the TSS and
Unisign acquisitions)..................... (2,379) (1,286)
------- -------
$ 3,502 $ 360
======= =======
</TABLE>
(h) The provision for income taxes has been adjusted to reflect the tax
effect of the historical income of the acquired companies and the pro forma
adjustments based on the statutory rate in effect during the period of 40%.
(i) Reflects incremental interest expense and amortization of deferred
financing fees as if the Initial Offering had occurred on January 1, 1997 and
the application of the estimated net proceeds as described in "Use of Proceeds"
occurred on that date as follows (in thousands):
<TABLE>
<CAPTION>
MARCH 31,
1997 1998
EXPENSE EXPENSE
------------ ---------
<S> <C> <C>
Interest expense and amortization of deferred financing
costs on the Existing Notes.............................. $11,420 $ 2,855
Less amounts included in Subtotal.......................... (8,469) (2,049)
------- -------
$ 2,951 $ 806
======= =======
</TABLE>
21
<PAGE> 26
TRI-STATE OUTDOOR MEDIA GROUP, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS -- (CONTINUED)
The $8,469,000 and $2,049,000 include interest on the $15.8 million of
subordinated intercompany promissory notes which were converted into equity.
(j) Does not reflect an extraordinary loss related to the early
extinguishment of debt (net of income tax benefit) of approximately $2,160,000
the Company would expect to record. (See Note (b) above.)
(k) "EBITDA" is defined as operating income (loss) before depreciation and
amortization. EBITDA represents a measure that management believes is
customarily used to evaluate the financial performance of companies in the media
industry. However, EBITDA is not a measure of financial performance under
generally accepted accounting principles and should not be considered an
alternative to operating income (loss) as an indicator of the Company's
operating performance or to net cash provided by operating activities as a
measure of its liquidity.
(l) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as income before income taxes plus fixed charges. Fixed
charges consist of interest expense (including amortization of deferred debt
issuance costs) and the portion of rental expense that is deemed representative
of the interest factor. Earnings were insufficient to cover fixed charges by
$3.4 million and $11.2 million in 1997 on a historical and pro forma basis,
respectively, and by $1.2 million and $2.5 million in the three months ended
March 31, 1998 on a historical and pro forma basis, respectively.
(m) The results of operations of TSS have been included in the historical
results of the Company from the date of acquisition. Set forth below are the
revenues and expenses of TSS and Unisign for the period from January 1, 1997 to
June 11, 1997 in the case of TSS and for the year ended December 31, 1997 in the
case of Unisign (in thousands).
<TABLE>
<CAPTION>
TSS UNISIGN TOTAL
------ ------- ------
<S> <C> <C> <C>
Net revenues..................................... $2,690 $3,675 $6,365
------ ------ ------
Expenses
Direct operating expenses...................... 718 1,134 1,852
General and administrative..................... 769 660 1,429
Depreciation and amortization.................. 591 391 982
------ ------ ------
2,078 2,185 4,263
------ ------ ------
Operating income................................. 612 1,490 2,102
Interest expense................................. (672) (95) (767)
Other income (expenses).......................... 82 (39) 43
------ ------ ------
Income before income taxes....................... $ 22 $1,356 $1,378
====== ====== ======
</TABLE>
22
<PAGE> 27
SELECTED HISTORICAL FINANCIAL AND OTHER DATA
The selected financial data presented below for and as of the end of each
of the years in the five-year period ended December 31, 1997 are derived from
the financial statements of the Company, of which (i) the financial statements
as of and for the year ended December 31, 1997 were audited by McGladrey &
Pullen, LLP, independent auditors, (ii) the financial statements as of and for
the years ended December 31, 1995 and 1996 were audited by McGrail Merkel Quinn
& Associates, independent auditors, and (iii) the financial statements as of and
for the years ended December 31, 1993 and 1994 and for the three months ended
March 31, 1997 and 1998 are unaudited. In the opinion of management, the
unaudited financial statements for the three months ended March 31, 1997 and
1998 and the years ended December 31, 1993 and 1994 include all adjustments,
consisting only of normal recurring adjustments, necessary to fairly present the
results of operations and financial position for such periods. The results for
the three months ended March 31, 1998 are not necessarily indicative of the
results for the full fiscal year. The following data should be read in
conjunction with the historical financial statements and notes related thereto
of the Company and "Management's Discussion and Analysis", included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
----------------------------------------------- -----------------
1993 1994(1) 1995(1) 1996 1997(1) 1997(1) 1998(1)
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues..................... $ 2,828 $ 4,096 $ 7,892 $ 8,021 $11,831 $1,971 $4,242
------- ------- ------- ------- ------- ------ ------
Operating expenses:
Direct operating expenses... 590 1,021 2,315 2,427 3,817 572 1,291
General and
administrative............ 717 1,230 1,934 2,345 2,417 498 720
Depreciation and
amortization.............. 1,161 1,429 2,713 2,648 4,699 612 1,781
------- ------- ------- ------- ------- ------ ------
Total operating expenses.... 2,468 3,680 6,962 7,420 10,933 1,682 3,792
------- ------- ------- ------- ------- ------ ------
Operating income................. 360 416 930 601 898 289 450
Gain (loss) on sale of assets.... -- -- 1,334 443 (143) -- --
Interest expense................. (476) (880) (2,094) (1,941) (4,200) (481) (1,673)
Other income (expense)........... 1 (164) (153) 2 -- -- --
------- ------- ------- ------- ------- ------ ------
Income (loss) before income tax
benefit........................ (115) (628) 17 (895) (3,445) (192) (1,223)
Income tax benefit............... -- -- 8 324 1,424 77 489
------- ------- ------- ------- ------- ------ ------
Net income (loss)................ $ (115) $ (628) $ 25 $ (571) $(2,021) $ (115) $ (734)
======= ======= ======= ======= ======= ====== ======
OTHER DATA:
EBITDA(2)........................ $ 1,521 $ 1,845 $ 3,643 $ 3,249 $ 5,597 $ 901 $2,231
EBITDA margin(2)................. 53.8% 45.0% 46.2% 40.5% 47.3% 45.7% 52.6%
Capital expenditures............. $ 672 $ 1,301 $ 1,083 $ 1,655 $ 2,334 $ 356 $ 960
Ratio of earnings to fixed
charges(3)..................... -- -- 1.0x -- -- -- --
Number of displays(4)
Bulletins................... 2,506 3,570 3,815 3,975 6,106 7,551
Posters..................... 50 1,778 1,623 1,461 1,432 1,726
------- ------- ------- ------- ------- ------
Total displays.......... 2,556 5,348 5,438 5,436 7,538 9,277
======= ======= ======= ======= ======= ======
</TABLE>
(continued on following page)
23
<PAGE> 28
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, MARCH 31,
----------------------------------------------- -------------------
1993 1994(1) 1995(1) 1996 1997(1) 1997(1) 1998(1)
------- ------- ------- ------- ------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash
equivalents.............. $ -- $ 39 $ 74 $ 133 $ 132 $ 4 $ 108
Working capital
(deficit)................ 4 (879) (2,057) (195) 2,733 (459) (7,239)
Total assets............... 3,902 17,579 19,214 17,128 54,106 17,059 79,003
Total debt (including
current
maturities).............. 5,708 19,724 19,798 19,474 57,998 19,440 82,814
Stockholder's equity
(deficiency)............. (1,967) (3,268) (3,194) (2,863) (4,884) (2,978) (5,618)
</TABLE>
- ---------------
(1) See "Prospectus Summary -- The Company", "Prospectus Summary -- Recent
Financing" and "Business" regarding acquisitions made by the Company in
1994, 1997 and 1998, which affect the comparability of the information
contained in "Selected Historical Financial and Other Data".
(2) "EBITDA" is defined as operating income (loss) before depreciation and
amortization. EBITDA represents a measure that management believes is
customarily used to evaluate the financial performance of companies in the
media industry. However, EBITDA is not a measure of financial performance
under generally accepted accounting principles and should not be considered
an alternative to operating income (loss) as an indicator of the Company's
operating performance or to net cash provided by operating activities as a
measure of its liquidity. EBITDA margin is EBITDA stated as a percentage of
net revenues.
(3) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as income before income taxes plus fixed charges. Fixed charges
consist of interest expense (including amortization of deferred debt
issuance costs) and the portion of rental expense that is deemed
representative of the interest factor. Earnings were insufficient to cover
fixed charges by $115,000 in 1993, $628,000 in 1994, $895,000 in 1996, $3.4
million in 1997, $192,000 in the three months ended March 31, 1997 and $1.2
million in the three months ended March 31, 1998.
(4) All display faces, including unoccupied display faces, are classified based
on the last sale to an advertiser as either a bulletin or poster. For 1995,
the table does not reflect display faces located in and around Watertown,
New York that were acquired in November 1995 and disposed of in January
1996.
24
<PAGE> 29
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis, together with the accompanying
financial statements and related notes thereto, are intended to aid in
understanding the Company's results of operations as well as its financial
position, cash flows, debt, liquidity and other key financial information.
OVERVIEW
The Company was formed in 1986, and since then net revenues and EBITDA have
grown significantly primarily through the acquisition of outdoor advertising
businesses and individual display faces in specific markets and the construction
of new display faces in existing markets.
Net revenues are a function of the number of display faces operated by the
Company, 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
selling 36-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 its occupancy levels and rates for a number of reasons,
including the recent expansion of the Company's sales force, benefits derived
from the application of the Company's existing incentive compensation-based
sales strategy in its newly acquired operations and general economic conditions
in its new markets. Operating results are affected by general economic
conditions, as well as trends in the advertising industry.
The Company's net revenues are gross revenues net of withheld commissions
retained by advertising agencies that contract for the use of advertising
displays on behalf of their advertisers and other miscellaneous credits. Agency
commissions are typically 15% of gross revenues per contract. The Company enters
into agreements with advertising agencies on a customer-by-customer basis.
Because of the Company's reliance on local advertisers, many of which do not
employ agencies, the Company believes that it depends less on the placement of
advertising through agencies than most other major outdoor advertising companies
and that its agency commission levels are lower than industry averages. In 1997,
direct sales to local advertisers represented over 95% of the Company's net
revenues.
Direct operating expenses consist of sales, production and lease expense.
Selling expense primarily consists of compensation to the Company's sales force,
travel and entertainment related to sales, and outside commissions other than to
advertising agencies. Commissions to the Company's sales force are based on the
total advertising contract value and are paid upon contract receipt. The total
advertising contract value is the monthly billing multiplied by the number of
months in the contract. Therefore, a salesperson would receive a commission
payment three times higher on a 36-month contract than on a 12-month contract
with the same monthly billing. Production expense mainly consists of
illumination expense, maintenance of billboard structures, the cost of
purchasing and applying poster advertisements and the cost of producing display
faces for contracts of 18 months or less. The cost of producing advertising
display faces for any contract longer than 18 months is capitalized and
depreciated over the life of the contract. The Company believes that its
illumination expense is generally lower than industry averages because it
produces a significant number of bulletins (25% of its bulletins as of March 31,
1998) using Scotchlite, which require no illumination expense, and many of the
remaining displays are not illuminated. The Company's illumination expense in
1997 was 3.2% of net revenues. Lease expense consists mainly of rental payments
to owners of the land underlying billboard structures. Lease costs are generally
lower in the non-urban segment of the outdoor advertising market because
landlords in rural areas generally have fewer alternative uses for their
properties, many of which are located in agricultural areas. The Company's site
lease expense was 13.8% of net revenues in 1997.
General and administrative expenses include salaries, bonuses and other
compensation, permit fees, utilities, supplies, professional fees, rent for its
executive offices and facilities and travel.
ACQUISITIONS
The Company's display faces grew from 2,556 faces at December 31, 1993 to
7,538 faces at December 31, 1997, a 31.1% compounded annual growth rate,
primarily as a result of acquisitions. The Company's acquisitions can be
classified into two categories: new market acquisitions and fill-in
acquisitions.
25
<PAGE> 30
New market acquisitions are acquisitions outside of the Company's then existing
markets, while fill-in acquisitions are generally small acquisitions in the
Company's existing markets that involve the purchase of advertising displays
only, resulting in the elimination of all personnel and related costs. From
January 1, 1995 to March 31, 1998, the Company completed two new market
acquisitions, TSS and Unisign, and nine fill-in acquisitions (excluding the
Watertown, New York acquisition).
The Company achieves operating leverage through both new market and fill-in
acquisitions by spreading acquired contract revenues over relatively fixed
general and administrative costs. With new market acquisitions, the Company
eliminates duplicative management personnel, thereby reducing compensation
expense, and generally integrates the art and accounting functions into the
Company's existing general and administrative structure. The Company's corporate
office, established in 1995, provides all billing and collection functions for
all of the Company's divisions, as well as cash management, payable functions
and strategic marketing directions. In the TSS acquisition, the Company was able
to reduce certain annual executive costs, including approximately $259,000 of
chief executive officer compensation and directors' fees. Additional annual
savings of $98,000 were generated by replacing the general manager and
eliminating the art department. In addition, the Company expects to realize net
savings of $80,000 annually from closing its Southeast divisional headquarters
following the TSS acquisition. Similarly, annual cost savings realized through
the integration of the Unisign business included $297,000 from the elimination
of prior management's compensation and $77,000 from eliminating Unisign's
accounting functions and realigning general and administrative personnel
(including the elimination of local artists).
In addition to growth through acquisitions, the Company seeks opportunities
for growth through the development of newly built outdoor advertising
structures. The Company actively monitors changes in local zoning restrictions
and the availability of new land lease sites in each of its existing markets so
as to develop new build opportunities. The Company erected 78 structures and 146
display faces in 1997 and anticipates erecting up to 143 structures and up to
460 display faces in 1998. A substantial portion of these new structures and
display faces results from the Unisign acquisition, in which the Company
acquired 94 leases in Kentucky, predominantly located along primary highways,
and on which, subject only to the receipt of routine government permits, it
plans to construct 94 new structures with up to 376 display faces. In addition,
the billboard structures acquired by the Company in the Unisign acquisition have
the capacity for up to an additional 300 display faces. The Company believes
that the economics of building new advertising structures compare favorably with
the economics of purchasing structures through fill-in acquisitions.
In June 1995, the Company sold certain outdoor advertising assets in and
around Erie, Pennsylvania, which assets were acquired by the Company in October
1994. These assets accounted for $140,000 of net revenue in 1995.
In January 1996, the Company sold for $3.1 million certain outdoor
advertising assets located in and around Watertown, New York, which assets were
acquired by the Company in November 1995. These assets did not have a material
impact on revenues in either 1995 or 1996.
26
<PAGE> 31
PRODUCT MIX; REGIONAL OPERATIONS
The following table sets forth information on the bulletins and posters
operated by each of the Company's divisions at the dates indicated. The Company
did not acquire its Mid-Atlantic division until March 1998.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1995 1996 1997 MARCH 31, 1998
-------------------- -------------------- -------------------- --------------------
DIVISION BULLETINS POSTERS BULLETINS POSTERS BULLETINS POSTERS BULLETINS POSTERS
-------- --------- ------- --------- ------- --------- ------- --------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Midwest.............. 2,288 -- 2,284 -- 2,308 -- 2,670 --
Northeast(1)......... 833 476 903 443 923 450 541 462
Northcentral......... 477 490 476 485 513 463 930 361
Southeast............ 217 657 312 533 2,362(2) 519 2,370 519
Mid-Atlantic(3)...... -- -- -- -- -- -- 1,040 384
----- ----- ----- ----- ----- ----- ----- -----
Total................ 3,815 1,623 3,975 1,461 6,106 1,432 7,551 1,726
===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
- ---------------
(1) Does not reflect display faces in and around Watertown, New York that were
acquired in November 1995 and disposed of in January 1996.
(2) Increase reflects primarily the TSS acquisition.
(3) Reflects the acquisition of Unisign.
The Company derived over 72%, 72% and 75% of its net revenues from the sale
of advertising on bulletins in 1995, 1996 and 1997, respectively, and the
balance from the sale of advertising on posters. Because of this large
percentage of bulletin revenues and the long-term nature of its bulletin
contracts, the Company's net revenues have experienced little seasonality,
historically varying less than 2% per quarter. However, poster revenues are
typically lower during the first quarter, reflecting seasonal patterns in
advertising spending.
The Company emphasizes the sale of long-term (36-month) contracts for its
bulletins. In the Northeast and Midwest divisions, which have been operated by
current management for approximately 12 and 9 years, respectively, over 90% of
all bulletin advertising contracts in effect on December 31, 1997 had an
original term of at least 36 months. Because of the acquisition of the
shorter-term contracts of TSS and Unisign, at March 31, 1998 approximately 48%
of the Company's bulletin advertising contracts had an original term of 36
months of more. As the advertising contracts assumed by the Company in the TSS
and Unisign acquisitions expire, the Company is seeking to sell 36-month
contracts for these bulletins. As a result, the Company believes that the
percentage of bulletins subject to 36-month contracts will increase over time in
these markets.
The average monthly rate per display varies in each region in which the
Company operates, primarily as a result of the average size and location of
displays in each division. In the Midwest and Northeast divisions, the majority
vary in size from 6 feet high by 12 feet wide to 14 feet high by 48 feet wide.
In addition, the Company's displays in these divisions are located primarily
along secondary roads, rather than along interstate highways or primary roads.
Both the smaller size and location of the signs result in lower rates. In the
Northcentral division, the Company's displays are substantially larger and are
located along primary roads and interstate highways. The average rates for
displays in this division are the highest of all the Company's divisions. In the
Southeast, the average display size increased as result of the TSS acquisition.
In addition, the TSS displays were located to a greater extent along interstate
highways. The TSS acquisition resulted in higher average rates in the Southeast
division.
27
<PAGE> 32
RESULTS OF OPERATIONS
The following table sets forth the specified components of expense for the
Company expressed as a percentage of net revenues for the last three years.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------- ------------------
1995 1996 1997 1997 1998
----- ----- ----- ------ ------
<S> <C> <C> <C> <C> <C>
Net revenues............................. 100.0% 100.0% 100.0% 100.0% 100.0%
Direct operating expenses................ 29.3 30.3 32.3 29.0 30.4
General and administrative............... 24.5 29.2 20.4 25.3 17.0
Depreciation and amortization............ 34.4 33.0 39.7 31.0 42.0
----- ----- ----- ----- -----
Total operating expenses............ 88.2 92.5 92.4 85.3 89.4
----- ----- ----- ----- -----
Operating income......................... 11.8 7.5 7.6 14.7 10.6
----- ----- ----- ----- -----
Interest expense......................... (26.5) (24.2) (35.5) (24.4) (39.4)
Other income (expense)................... 15.0 5.5 (1.2) -- --
----- ----- ----- ----- -----
Total other income (expense)........ (11.5) (18.7) (36.7) (24.4) (39.4)
----- ----- ----- ----- -----
Income (loss) before income tax
benefit................................ 0.2 (11.2) (29.1) (9.7) (28.8)
Income tax benefit....................... 0.1 4.1 12.0 3.9 11.5
----- ----- ----- ----- -----
Net income (loss)........................ 0.3% (7.1)% (17.1)% (5.8)% (17.3)%
===== ===== ===== ===== =====
OTHER DATA:
EBITDA................................... 46.2% 40.5% 47.3% 45.7% 52.6%
</TABLE>
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1997
Net revenues. Net revenues increased 115.2% to $4.2 million for the three
months ended March 31, 1998 from $2.0 million for the three months ended March
31, 1997. Most of this increase was the result of the acquisition of Unisign,
completed in March 1998, and TSS, completed in June 1997. These acquisitions
accounted for approximately $2.0 million of the period-to-period revenue growth.
Direct operating expenses. Direct operating expenses (which include sales,
lease and production expense) increased to $1.3 million for the first quarter of
1998 from $572,000 for the comparable period in 1997. Most of this increase was
the result of the acquisition of Unisign, completed in March 1998, and TSS,
completed in June 1997. Sales expense decreased as a percentage of net sales
from 8.1% in the first quarter of 1997 to 5.3% in 1998, due to increased
operating leverage in the sales force and minimal selling expense required for
acquired contracts. Lease expense increased as a percentage of net revenues from
13.4% in the first quarter of 1997 to 14.7% in 1998, due to higher lease cost
assumed in the TSS acquisition, reflecting the higher costs of TSS's interstate
highway locations. Production expense increased as a percentage of net revenues
from 7.5% in the first quarter of 1997 to 10.4% in 1998, due to production costs
associated with the shorter-term contracts assumed in the TSS acquisition.
General and administrative expenses. General and administrative expenses
increased by 44.6% to $720,000 for the quarter ended March 31, 1998 from
$498,000 in 1997, but decreased as a percentage of net revenues to 17.0% from
25.3%. The decrease in general and administrative expense as a percentage of net
revenues was due to increased operating leverage provided by higher net revenues
from the Unisign and TSS acquisitions over relatively fixed general and
administrative expenses. In addition, the Company was able to reduce Unisign's
and TSS's general and administrative expenses through a reduction of executive
compensation, and the elimination of the general manager and art and accounting
personnel.
Depreciation and amortization expense. Depreciation and amortization
expense increased to $1.8 million for the quarter ended March 31, 1998 from
$612,000 in 1997 due to the Unisign and TSS acquisitions.
Interest expense. Interest expense increased to $1.7 million for the first
quarter ended 1998 from $481,000 for the comparable period in 1997. This
increase was the result of additional debt incurred in connection with the
financing of the Unisign and TSS acquisitions.
28
<PAGE> 33
Income taxes. The Company recorded a $489,000 income tax benefit for the
three months ended March 31, 1998 resulting from the increase in interest
expense and depreciation and amortization.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996
Net revenues. Net revenues increased 47.5% to $11.8 million for the year
ended December 31, 1997 from $8.0 million for the year ended December 31, 1996.
Most of this increase was the result of the acquisition of TSS completed in June
1997. This acquisition accounted for approximately $3.4 million of the
year-over-year revenue growth.
Direct operating expenses. Direct operating expenses (which include sales,
lease and production expense) increased to $3.8 million for 1997 from $2.4
million for the prior year. Most of this increase was the result of the
acquisition of TSS. Sales expense decreased as a percentage of net revenues to
8.2% in 1997 from 8.9% in 1996, due to increased operating leverage in the sales
force and minimal selling expense required for acquired contracts until they are
resold. Lease expense increased as a percentage of net revenues to 13.8% in 1997
from 12.6% in 1996, due to higher lease costs assumed in the TSS acquisition,
reflecting the higher costs of TSS's interstate highway locations. Production
expense increased as a percentage of net revenues to 10.0% in 1997 from 8.6% in
1996, due to production costs associated with the shorter-term contracts assumed
in the TSS acquisition.
General and administrative expenses. General and administrative expenses
increased slightly to $2.4 million for 1997 from $2.3 million for 1996, but
decreased sharply as a percentage of net revenues. The increase in
administrative expenses was more than accounted for by a one-time expense of
$250,000 relating to the relocation of the Company's personnel and offices to
Tifton, Georgia. However, the overall decrease in general and administrative
expenses as a percentage of net revenues was due to increased operating leverage
provided by higher net revenues from the TSS acquisition over relatively fixed
general and administrative expenses. In addition, the Company was able to reduce
TSS's general and administrative expenses through a reduction of executive
compensation and directors' fees, and the elimination of the general manager and
accounting personnel.
Depreciation and amortization expense. Depreciation and amortization
expense increased to $4.7 million for 1997 from $2.6 million for 1996, due
primarily to the TSS acquisition. Depreciation and amortization as a percentage
of net revenues increased from 1996 to 1997 as a result of amortization related
to the intangible assets acquired in the TSS acquisition.
Interest expense. Interest expense increased to $4.2 million for 1997 from
$1.9 million for 1996. This increase was the result of additional debt incurred
in connection with the financing of the TSS acquisition.
Income taxes. The Company recorded a $1.4 million income tax benefit for
1997 due to losses resulting from increased interest expense and depreciation
and amortization.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO THE YEAR ENDED DECEMBER 31, 1995
Net revenues. Net revenues increased to $8.0 million for 1996 from $7.9
million for 1995. Net revenues remained substantially unchanged since no
significant acquisitions occurred in 1995 or 1996 due to capital constraints and
management's exercise of price discipline on the available new market
acquisition opportunities.
Direct operating expenses. Direct operating expenses increased to $2.4
million for 1996 from $2.3 million for 1995. This increase was due to certain
salary increases and the fixed costs retained upon the disposal of the Erie,
Pennsylvania displays.
General and administrative expenses. General and administrative expenses
increased 21.3% to $2.3 million for 1996 from $1.9 million for 1995. This
increase was due to the Company's establishment at the end of 1995 of separate
corporate offices for its executives and centralizing accounting and billing
operations in order to support the anticipated growth of the Company's
operations.
Depreciation and amortization expense. Depreciation and amortization
expense decreased to $2.6 million for 1996 from $2.7 million for 1995. This
decrease was due to the sale of the Erie displays.
29
<PAGE> 34
Interest expense. Interest expense decreased to $1.9 million for 1996 from
$2.1 million for 1995. This decrease was due primarily to lower interest rates.
Income taxes. The Company recorded a $324,000 income tax benefit for 1996
due to losses resulting from interest expense and depreciation and amortization.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically satisfied its cash requirements with cash from
operations, revolving credit borrowings and other long-term debt financings and
sales of assets. Its acquisitions have been financed primarily with borrowed
funds.
The Company financed its acquisition activity in 1994 through the
combination of a $16.5 million credit facility with First Chicago, as agent for
a syndicate of lenders, and an equity and subordinated debt investment of $3.9
million from Mesirow in Holdings (the proceeds of which were loaned by Holdings
to the Company). See "Principal Stockholders".
In June 1997, this credit facility was amended and restated by the Original
Credit Facility in order to increase the available credit to $45.0 million. The
Original Credit Facility, together with an additional equity and subordinated
debt investment of $9.0 million from Mesirow in Holdings (the proceeds of which
were loaned by Holdings to the Company), were used to finance the TSS
acquisition.
In February 1998, the Original Credit Facility was amended and restated by
the Senior Credit Facility in order to increase the available credit to $62.5
million. Borrowings under the Senior Credit Facility, together with the proceeds
of the Bridge Notes ($10.0 million) sold by Holdings (the proceeds of which were
loaned by Holdings to the Company), were used to finance the Unisign
acquisition. The Company used a portion of the proceeds of the Initial Offering
to repay all borrowings and accrued interest under the Senior Credit Facility,
which totaled $57.4 million, whereupon the Senior Credit Facility was
terminated. The Company used the proceeds of the Initial Offering to repay the
$10.0 million loan, plus $232,000 of accrued interest, from Holdings at which
time Holdings repaid the Bridge Notes. Additionally, in conjunction with the
Initial Offering, $15.8 million of subordinated intercompany promissory notes
due Holdings were converted into stockholder's equity. The Senior Credit
Facility bore interest at rates specified in the agreement (with an aggregate
effective interest rate at December 31, 1997 of 9.125%), was collateralized by
substantially all of the assets of the Company, as well as by a pledge from
Holdings of the Company's common stock, required the maintenance of certain
financial covenants and matured in varying amounts through March 2006. The
subordinated intercompany promissory notes payable to Holdings bore interest at
rates ranging from 12% to 15% and were due and payable during 2003 and 2005. The
$10.0 million intercompany loan from Holdings (which was made by Holdings on
March 2, 1998 with the proceeds of the Bridge Notes) bore interest at LIBOR,
plus 4.75% (10.4% at March 2, 1998), and was due on demand. See "Use of
Proceeds".
The Company put in place a $3.0 million credit facility used principally to
fund potential obligations on outstanding letters of credit. The facility is
secured by certificates of deposit, bears interest at either an Alternate Base
Rate (as defined in the related credit agreement) or an Eurodollar Rate (as
defined in the related credit agreement) and has a termination date of May 20,
2000.
Net cash provided by operating activities increased to $1.8 million for
1997 from $1.5 million for 1996, and to $469,000 for the first quarter of 1998
from $243,000 for the first quarter of 1997. Net cash provided by operating
activities reflects the Company's net loss adjusted for non-cash items and net
changes in working capital components. The Company had a working capital deficit
of $7.2 million as of March 31, 1998, working capital of $2.7 million as of
December 31, 1997 and a deficit of $195,000 as of December 31, 1996.
The Company's net cash used in investing activities of $37.3 million for
the year ended December 31, 1997 included cash used for acquisitions of $34.8
million and capital expenditures of $2.3 million. For the three months ended
March 31, 1998, the Company's net cash used in investing activities of $23.2
million included $22.3 million used for acquisitions, primarily Unisign, and
$1.0 million of capital expenditures.
30
<PAGE> 35
For the year ended December 31, 1997, $35.5 million was provided by
financing activities, primarily as a result of additional borrowings under the
Company's various credit facilities and equity and debt investments in Holdings
by Mesirow, which proceeds were loaned to the Company. For the year ended
December 31, 1996, $2.6 million was used in financing activities, primarily
relating to principal repayments of debt, with the proceeds from the sale of the
Watertown assets. For the three months ended March 31, 1998, $22.7 million was
provided by financing activities, primarily as a result of additional borrowings
under the Senior Credit Facility and proceeds from Holdings' issuance of the
Bridge Notes, which proceeds were loaned to the Company.
Capital expenditures are made to build new billboard structures and display
faces, to upgrade the Company's existing display faces, to produce advertising
display faces under contracts longer than 18 months and for other capital items.
Management estimates that capital expenditures will total approximately $3.4
million in 1998, which includes the planned construction of up to 143 structures
and up to 460 display faces, the estimated cost of producing display faces sold
under new long-term contracts and other capital items.
After completion of the Initial Offering of the Existing Notes, the Company
had approximately $17.6 million available to fund the above capital expenditures
and any possible future acquisitions, including the proposed Southeast division
fill-in acquisition described above. The Company has funded one year of cash
interest expense with the net proceeds of the Initial Offering. Following the
disbursement of all of the funds in the escrow account in May 1999, a
substantial portion of the Company's cash flow will be devoted to interest
payments on the Notes. See "Unaudited Pro Forma Financial Statements".
The Company believes that its cash from operations, together with the
proceeds of the Initial Offering, will be sufficient to satisfy its cash
requirements, including anticipated capital expenditures, for at least the next
several years. However, in the event these cash sources are insufficient to
satisfy its cash requirements, including as a result of future acquisitions, the
Company may require additional debt or equity. There can be no assurance that
additional debt or equity financing will be available on terms satisfactory to
the Company, if at all, or that the Company will be able to incur such
additional debt under the terms of the Notes. See "Description of
Notes -- Certain Covenants -- Limitation on Additional Debt".
INFLATION
In the last three years, inflation has not had a significant impact on the
Company or its predecessors.
INCOME TAXES
At December 31, 1997, the Company had net operating loss carryforwards of
approximately $6,010,000 for federal and state income tax purposes, which expire
in varying amounts from 2009 through 2012.
Although realization is not assured, the Company believes, based on its
expectations for the future, that taxable income of the Company will more likely
than not be sufficient to utilize all of the $6,010,000 net operating loss
carryforwards prior to their ultimate expiration in 2012. 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.
YEAR 2000 ISSUE
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 issue. Based on the
review of the computer systems, management does not believe there will be any
material impact to the Company's financial position or results of operations.
31
<PAGE> 36
BUSINESS
GENERAL
The Company is a leading highway directional outdoor advertising company,
operating over 9,200 advertising displays, including 7,551 bulletins and 1,726
posters, in 21 states in the eastern and central United States at March 31,
1998. Essentially all of the Company's billboards are located along interstate
highways and primary and secondary roads outside of urban areas. For the year
ended December 31, 1997, over 95% of the Company's net revenues was generated by
local businesses, including local franchisees of national chains, with no one
customer accounting for as much as 2% of the Company's net revenues. The Company
offers a full line of outdoor advertising services to its customers, including
creative design, production, installation and maintenance of the displays. After
giving pro forma effect to the transactions described in the Unaudited Pro Forma
Financial Statements included herein, the Company's net revenues and EBITDA
would have been $18.2 million and $9.3 million, respectively, for the year ended
December 31, 1997 and $4.8 million and $2.6 million, respectively, for the three
months ended March 31, 1998.
According to recent estimates by the OAAA, total outdoor advertising
expenditures during 1997 were $2.1 billion, an 8.8% increase over such
expenditures in 1996. The Company operates primarily in the rural highway
directional segment of the outdoor advertising industry. Highway directional
billboards are utilized by local advertisers to alert motorists to an
advertiser's place of business and provide directions to that business. Many of
the Company's principal customers, which include motels and hotels, restaurants
and gasoline retailers, depend on strategically located billboards as the only
effective and cost efficient means to reach their target customers. As a result,
these advertisers will usually purchase a billboard display under long-term
contracts and leave the original advertising copy in place for the duration of
the contract. On March 31, 1998, over 85% of the Company's bulletin advertising
contracts had an original term of at least 18 months and 48% had an original
term of at least 36 months. The Company believes that its large number of
long-term contracts has generated more stable and predictable revenues, has
reduced production, installation and maintenance costs over the term of the
contracts and has permitted it to more efficiently leverage its sales personnel.
Since its formation in 1986, the Company has pursued an aggressive
acquisition strategy, completing over 20 acquisitions of outdoor advertising
businesses. During this period, the Company completed both "new market" and
"fill-in" acquisitions. New market acquisitions are acquisitions outside of the
Company's then existing markets, while fill-in acquisitions are generally small
acquisitions in the Company's existing markets that involve the purchase of
advertising displays only, resulting in the elimination of all personnel and
related costs. During the past year, the Company completed the TSS and Unisign
acquisitions, both of which are included in the Unaudited Pro Forma Financial
Statements included herein.
32
<PAGE> 37
Set forth below is a summary of the Company's acquisitions since January 1,
1994 through March 31, 1998:
<TABLE>
<CAPTION>
NEW
MARKET DISPLAY FACES
OR PURCHASE NET -------------------
COMPANY(1) FILL-IN DATE PRICE STATES REVENUES(2) BULLETINS POSTERS
---------- ---------- -------------- -------------- ------------ -------------- --------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
Unisign Corporation, Inc. ... New February 1998 $21,800 KY, WV, OH $3,675 1,037 384
Tri-State Systems, Inc. ..... New June 1997 31,400 GA, AL, FL, 6,056 1,838 --
KY, MS, SC,
TN
Vogel Outdoor Advertising,
Inc........................ New October 1994 7,042 MN, IA 2,900 395 356
Heard Communications, Inc.
(d/b/a Gateway Outdoor
Advertising)............... New September 1994 1,037 SC, NC, MO, N/A(3) -- 669
OH
Knapp Displays, L.L.C. ...... Fill-in February 1998 213 MO 46 33 --
3-H Sign Company, Inc. ...... Fill-in January 1998 980 MO 305 325 --
Mid-American Advertising
Company.................... Fill-in October 1997 400 MO 121 47 --
Sunbelt Outdoor Systems,
Inc. ...................... Fill-in September 1997 2,754 GA 543 152 --
Supreme Outdoor, Inc......... Fill-in July 1997 333 MN 74 18 --
Bryant Outdoor............... Fill-in October 1996 125 AR 54 65 --
DeMaria Advertising.......... Fill-in March 1996 75 PA 26 24 --
Brasington Sign Company...... Fill-in Various in 164 SC 64 49 --
1995, 1996 &
1997
E.M. Parker Outdoor.......... Fill-in November 1995 152 NY, OH, PA 38 101 --
Park Outdoor Advertising of
New York, Inc. ............ Fill-in October 1994 3,066 NY, PA 1,386 93 370
Outdoor Visions, Inc. (d/b/a
Bruening Outdoor
Advertising)............... Fill-in September 1994 425 PA 135 133 --
Mid-Town Enterprises (d/b/a
Iowa Outdoor).............. Fill-in September 1994 200 IA 61 62 --
Lewis Outdoor Advertising,
Inc. ...................... Fill-in September 1994 587 AR, LA, TX 218 216 --
-------
Total................ $70,753
=======
</TABLE>
- ---------------
(1) This table does not reflect display faces located in and around Watertown,
New York that were acquired in November 1995 and disposed of in January
1996. See Notes 4 and 6 to the Company's Financial Statements.
(2) Net revenues have been calculated on the basis of the number of bulletins
and posters acquired, as follows: in the case of bulletins, the revenues
generated in the last month before the acquisition for which financial
information was available multiplied by 12 and, in the case of posters, the
revenues generated in the 12 months before the acquisition, except in the
case of Unisign where net revenues have been calculated on the basis of
Unisign's audited financial statements included elsewhere herein.
(3) The net revenues of Heard Communications Inc. are not available.
33
<PAGE> 38
BUSINESS STRATEGY
The Company's business strategy is to be a leading provider of highway
directional outdoor advertising services to local advertisers in non-urban
markets. The Company entered this segment of the outdoor advertising business
because it believes that rural businesses have been underserved by the major
outdoor advertising companies. In order to implement this business strategy, the
Company focuses on the following key elements:
- Increase the Penetration of its Local Markets with 36-Month Advertising
Contracts. In order to better serve its local customers, the Company
customizes the size and pricing of its billboards to fit the budgets of
the local businesses that require these services. In addition, the
Company can produce a long-lasting sign that is strategically located
relative to the advertiser's place of business. For these reasons, the
Company believes that its local highway directional advertisers have been
willing to enter into long-term contracts and leave a display in place
for an extended period. As of March 31, 1998, 48% of the Company's
bulletin advertising contracts had an original term of at least 36
months. The billboards acquired by the Company in the TSS and Unisign
acquisitions were predominantly subject to contracts with an original
term of 18 months and 24 months, respectively. Excluding these
billboards, as of March 31, 1998 over 75% of the Company's bulletin
advertising contracts had an original term of at least 36 months.
Accordingly, the Company believes that the number of contracts with a
36-month original term will increase as the Company seeks 36-month
contracts for expiring TSS and Unisign contracts. The Company believes
that its large number of long-term contracts has generated more stable
and predictable revenues, has reduced production, installation and
maintenance costs over the term of the contracts and has permitted it to
more efficiently leverage its sales personnel. As a result of these cost
efficiencies and in order to encourage advertisers to enter into
long-term contracts, the Company prices its longer term contracts with
lower monthly rates than it prices its shorter term contracts.
- Pursue Growth through Acquisitions. The Company intends to continue its
aggressive growth strategy of acquiring and developing highway
directional outdoor advertising businesses, by continuing to seek both
new market and fill-in acquisitions, where the billboards are used, or
can be resold, as highway directional signs under long-term contracts.
The Company believes that the non-urban highway directional market
remains highly fragmented producing numerous acquisition opportunities
that fit its criteria. In addition, the Company is typically a major
provider of outdoor advertising services in the areas in which it
operates, which, it believes, allows it to more easily acquire and
successfully integrate fill-in acquisitions.
- Capitalize on New Build Opportunities. In addition to growth through
acquisitions, the Company seeks opportunities for growth through the
development of newly built outdoor advertising structures. The Company
actively monitors changes in local zoning restrictions and the
availability of new land lease sites in each of its existing markets so
as to develop new build opportunities. The Company erected 78 structures
and 146 display faces in 1997 and anticipates erecting up to 143
structures and up to 460 display faces in 1998. A substantial portion of
these new structures and display faces results from the Unisign
acquisition, in which the Company acquired 94 leases in Kentucky,
predominantly located along primary highways, and on which, subject only
to the receipt of routine government permits, it plans to construct 94
new structures with up to 376 display faces. In addition, the billboard
structures acquired by the Company in the Unisign acquisition have the
capacity for up to an additional 300 display faces. The Company believes
that the economics of building new advertising structures compare
favorably with the economics of purchasing structures through fill-in
acquisitions.
- Control Costs and Quality through Centralization of Production and
Vertical Integration. The Company seeks to control production costs and
maintain consistent, high quality production standards by centralizing
essentially all of its production services related to billboards leased
under 36-month contracts and vertically integrating its production
operations, thereby reducing its use of outside contractors. In addition,
because of its large number of rural signs under long-term contracts, the
Company has been able to use Scotchlite, a highly reflective vinyl
manufactured by 3M, which causes
34
<PAGE> 39
the advertising copy to be brightly illuminated by the headlights of
passing vehicles. Scotchlite is effective only where there is little or
no competing light sources around the sign. While somewhat more expensive
to construct, a Scotchlite billboard does not need any electric lighting
on the advertising structure and thus significantly reduces the Company's
operating expenses. A photograph of a Scotchlite billboard is included on
the inside back cover of this Offering Memorandum. Approximately 25% of
the Company's bulletins in service at March 31, 1998 used Scotchlite on
the advertising copy. The main facility in Baxter Springs, Kansas,
produces substantially all of the Company's Scotchlite and non-reflective
self-adhesive vinyl advertising copy for installation throughout its
markets. Each of the Company's five divisions hires painters to produce
hand painted bulletins and employs other personnel to install and
maintain bulletins and posters. At Baxter Springs, the Company also
employs staff artists to design advertising copy for use in all of its
divisions. The Company's new billboard structures have generally been
constructed by outside contractors, although the Company has recently
increased its capability to build these structures with Company
personnel.
INVENTORY
The Company operates three types of outdoor billboards.
Bulletins consist of panels on which advertising copy is displayed. The
Company's bulletins range in size from 4 feet high by 6 feet wide to 20 feet
high by 80 feet wide, with the majority ranging from 12 feet high by 24 feet
wide to 10 feet high by 32 feet wide. In order to better serve its local
customers, the Company customizes the size and pricing of its bulletins to fit
the budgets of the local businesses. As a result, many of the Company's
bulletins are smaller than the standard-sized bulletins offered by its
competitors, most of which are 10 1/2 feet high by 36 feet wide or 14 feet high
by 48 feet wide. At March 31, 1998, approximately 48% of the Company's bulletin
advertising contracts provided for bulletins made from Scotchlite or
non-reflective self-adhesive vinyl attached to pre-painted plywood panels.
Substantially all of this vinyl advertising copy is produced at the Company's
Baxter Springs, Kansas facility and shipped to the site. These vinyl display
faces generally last between three and five years without replacement. Most of
the Company's remaining billboards are hand painted, in most cases by outside
contractors either at the Company's divisional facilities or on-site. Hand
painted signs generally last between 12 and 18 months. A small number of the
Company's bulletins are made from computer-generated graphics on a single sheet
of vinyl that is wrapped around the billboard structure. These single sheet
vinyl faces are produced by outside contractors and are usually sold under
shorter-term contracts. Because of their greater impact and higher cost,
bulletins are usually located on major highways.
30-Sheet Posters, the most common type of billboard in the outdoor
advertising industry, are 12 feet high by 25 feet wide. Advertising copy for
30-sheet posters usually consists of lithographed or silk-screened paper sheets
that are pasted and applied like wallpaper to the face of the display. All of
the lithographed and silk-screened paper sheets are prepared by outside parties,
but in most cases are installed on billboards by the Company's divisional
personnel. Thirty-sheet posters are primarily located on major traffic arteries.
All display faces originally constructed by the Company as 30-sheet posters are
generally maintained as such. If a bulletin display face is unoccupied, the
Company may sell it as one or two poster displays on a short-term basis, pending
the procurement of a long-term contract.
Junior (8-Sheet) Posters are 6 feet wide by 12 feet wide. Displays are
typically prepared and mounted in the same manner as 30-sheet posters. The
Company generally seeks to resell its 8-sheet posters as bulletins as soon as it
procures a long-term contract for the space.
Display faces generally are mounted on structures owned by the Company and
located on sites that are leased by it. The Company also owns a small number of
its sites. Billboard structures are made of wood, steel and other durable
materials built to withstand variable climates, have long useful lives and do
not require substantial maintenance. Virtually all of the Company's new
billboard structures are made of steel. The Company expects its billboard
structures to last at least 20 years without significant refurbishment.
35
<PAGE> 40
The following tables sets forth certain information on the Company's
operations in each of the states in its market areas.
<TABLE>
<CAPTION>
AS OF MARCH 31, 1998
---------------------------------------------------
MARCH 1998 MARCH 1998 LAND BULLETINS 30-SHEET 8-SHEET TOTAL
STATE NET REVENUES(1) LEASE COSTS(2) (3) POSTERS(3) POSTERS(3) DISPLAY FACES
----- --------------- --------------- --------- ---------- ---------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Georgia.................. $ 472 $ 72 1,523 -- -- 1,523
Kentucky................. 290 14 861 362 -- 1,223
Minnesota................ 254 45 454 458 -- 912
Pennsylvania............. 80 8 452 143 3 598
Oklahoma................. 76 8 789 -- -- 789
Missouri................. 75 8 815 -- -- 815
Arkansas................. 68 7 658 -- -- 658
New York................. 53 5 447 170 -- 617
West Virginia............ 30 1 172 19 -- 191
Florida.................. 30 4 220 -- -- 220
Texas.................... 30 2 217 -- -- 217
Kansas................... 25 1 227 -- -- 227
South Carolina........... 19 4 279 -- 386 665
North Carolina........... 18 -- 152 1 132 285
Tennessee................ 14 1 27 -- -- 27
Alabama.................. 13 -- 152 -- -- 152
Iowa..................... 6 -- 56 -- -- 56
Ohio..................... 6 -- 10 3 49 62
Louisiana................ 3 -- 37 -- -- 37
Mississippi and South
Dakota................. 2 1 3 -- -- 3
------ ---- ----- ----- --- -----
Total:.............. $1,564 $181 7,551 1,156 570 9,277
====== ==== ===== ===== === =====
</TABLE>
- ---------------
(1) Billings under existing advertising contracts for March 1998.
(2) Land lease costs are typically paid one year in advance. March 1998 costs
are based on the estimated monthly average of all land lease costs for 1998
under existing leases.
(3) Each display face, including an unoccupied display face, is classified
either as a bulletin or poster based on the last sale to an advertiser.
MARKETS
The Company operates through five divisions covering particular regions of
its market area: Midwest division, Northcentral division, Northeast division,
Southeast division and Mid-Atlantic division. Certain of the Company's divisions
operate in the same states but their coverage areas do not overlap.
The following is a summary of the market and plants associated with each
division.
Midwest Division: The Midwest division, based in Baxter Springs, Kansas,
currently provides outdoor advertising services in Arkansas, Kansas, Louisiana,
Missouri, Oklahoma and Texas. The Company's Midwest division consisted of 2,670
bulletins as of March 31, 1998, varying in size from 8 feet by 20 feet to 14
feet by 48 feet. The average monthly price per bulletin (based on those
bulletins occupied on March 31, 1998) for the month of March 1998 was $147.
Northcentral Division: The Northcentral division, based in Rochester,
Minnesota, currently provides outdoor advertising services in southern Minnesota
(including Rochester) and Iowa. At March 31, 1998, the Company's Northcentral
division operated 541 bulletins, varying in size with the majority being 12 feet
by 50 feet, and 462 posters including 35 8-sheet posters. For the month of March
1998, the average monthly price
36
<PAGE> 41
per bulletin was $432 and the average monthly price per poster (based on the
March 1998 revenues and average occupancy of all posters determined on a daily
basis) was $323.
Northeast Division: The Northeast division, based in Jamestown, New York,
provides outdoor advertising services in western New York, northwestern
Pennsylvania and Youngstown, Ohio. At March 31, 1998, the Company's Northeast
division operated 930 bulletins, with the majority varying in size from 6 feet
wide by 12 feet high to 14 feet high by 48 feet wide, and 361 posters including
39 8-sheet posters in Youngstown, Ohio. For the month of March 1998, the average
monthly price per bulletin was $131 and the average monthly price per poster was
$262.
Southeast Division: The Southeast division, based in Tifton, Georgia, is a
combination of the Company's existing Southeast division, formerly based in
Newberry, South Carolina, and the assets purchased by the Company in the TSS
acquisition. This division provides outdoor advertising services primarily in
Georgia, Florida and Alabama. At March 31, 1998, the Company's Southeast
division operated 2,370 bulletins with the majority varying in size from 10 1/2
feet by 36 feet to 14 feet by 48 feet, except in North Carolina and South
Carolina where the typical size is 6 feet by 12 feet, and 519 8-sheet posters.
For the month of March 1998, the average monthly price per bulletin was $328 and
the average monthly price per poster was $89. In addition, this division also
operates a public service display business consisting of over 1,000 small
advertising faces on public benches. Public service displays contributed less
than 1% of the Company's net revenues in 1997.
Mid-Atlantic Division: The Mid-Atlantic division, based in Ivel, Kentucky,
consists of the business acquired in the Unisign acquisition on March 2, 1998
and provides outdoor advertising in West Virginia, eastern Kentucky and southern
Ohio. At March 31, 1998, the Company's Mid-Atlantic division operated 1,040
bulletins, with the majority varying in size from 12 feet high by 24 feet wide
to 20 feet high by 60 feet wide and 384 30-sheet posters and had an additional
94 undeveloped leased sites. For the month of March 1998, the average monthly
price per bulletin was $435 and the average monthly price per poster was $225.
CUSTOMERS
For the year ended December 31, 1997, over 95% of the Company's net
revenues was generated by local businesses, including local franchisees of
national chains. The Company believes that its customer base of local
advertisers offers several advantages over a more national customer base. In the
case of local advertisers, the Company is more likely to deal directly with the
customer without an advertising agency acting as an intermediary. The Company is
also more likely to develop a long-term working relationship with a local
advertiser, which, the Company believes, gives it greater influence over the
advertiser's purchasing decisions and helps it obtain contract renewals from the
advertiser.
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<PAGE> 42
The Company's customers are engaged in a wide range of businesses as shown
in the following table which sets forth an estimated breakdown of the businesses
in which the Company's customers were engaged for the year ended December 31,
1997.
<TABLE>
<CAPTION>
PERCENTAGE OF
NET REVENUES
FOR YEAR ENDED
INDUSTRY DECEMBER 31, 1997
-------- -----------------
<S> <C>
Hotels & Motels...................................... 25.2%
Restaurants.......................................... 22.5
Retail............................................... 12.4
Automotive........................................... 10.4
Gasoline Retailers and Other Services................ 8.3
Entertainment/Sports................................. 3.2
Hospital............................................. 2.9
Financial Institutions............................... 2.1
Tobacco.............................................. 0.2(1)
All Other............................................ 12.8
-----
Total........................................... 100.0%
=====
</TABLE>
- ---------------
(1) Tobacco advertisers typically advertise on posters under short-term
contracts. The Company believes that annual net revenues from tobacco
advertisers have not exceeded 3% in the last several years.
No customer of the Company accounted for as much as 2% of the Company's net
revenues during the month of March 1998. The following table sets forth the
Company's top ten advertisers for the month of March 1998.
<TABLE>
<CAPTION>
ANNUALIZED
AMOUNT
(IN
ADVERTISER(1) INDUSTRY THOUSANDS)(2)
------------- --------------- ----------------
<S> <C> <C>
Georgia Lottery Other $ 151
Kahler Lodging Hotels & Motels 141
Rochester Hospitality Hotels & Motels 117
Fariboo Woolens Retail 113
Treasure Island Hotels & Motels 100
Burger King Franchisee Restaurants 96
Tanger Outlet Retail 90
J. Walter Thompson Automotive 90
Ranch Restaurant Restaurants 88
McDonald's Franchisee Restaurants 87
</TABLE>
- ---------------
(1) Based on the party that pays for the advertising, which, in the case of an
advertising agency or franchisee, may not necessarily be the party that
contracts for the outdoor advertising or controls the decision to contract
with the Company.
(2) Total March 1998 billings multiplied by 12. This amount may not necessarily
reflect the actual revenues received from an advertiser over a 12-month
period.
Tobacco revenues have historically accounted for a significantly lower
portion of the Company's outdoor advertising revenues than for the outdoor
advertising industry as a whole. Tobacco advertisers have typically accounted
for less than 3% of the Company's annual net revenues, well below the estimated
7.3% for the outdoor advertising industry as a whole in 1997, as reported by
Competitive Media Reporting and Publishers Information Bureau Inc. Thus, the
reduction by tobacco companies in their expenditures for outdoor advertising has
had a less dramatic effect on the Company's inventories than on the outdoor
advertising
38
<PAGE> 43
industry as a whole. See "-- Government Regulation" and "Risk
Factors -- Potential Elimination or Reduction of Tobacco Advertising".
CONTRACTS
The Company emphasizes the use of advertising contracts with a term of 36
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 net revenues and allow
sales personnel time to devote greater attention to servicing their accounts and
generating new customers. The Company believes that once its customers enter
into 36-month contracts they tend to view their outdoor advertising expenses as
a routine cost of doing business. As a result, the Company believes that such
customers are more likely to renew their contracts.
To encourage customers to sign 36-month contracts, the Company charges
advertisers a lower monthly rate for 36-month contracts than that for
shorter-term contracts. The Company also provides incentives to its sales force
to sell longer-term contracts by paying commissions applicable to revenues for
the entire term of the advertising contract in advance upon contract receipt.
As of January 1, 1998, the future contract revenue associated with occupied
bulletins was $17.1 million, of which $10.4 million is expected to be collected
in 1998 (the foregoing amounts include future contract revenues for Unisign as
of March 1, 1998). Since posters are sold under short-term contracts, net
revenues from poster contracts are not included in future contract revenue
amounts.
LOCAL MARKET OPERATIONS
The Company conducts its operations through its five regional offices
consistent with management's belief that decentralization of operations is most
responsive to local market demands while providing greater incentive to its
regional employees. Each division has a general manager who oversees regional
leasing and creative production, and a sales manager who reports to the Director
of Marketing in the Company's headquarters. In addition, each division has
limited facilities for the production of outdoor advertising. (See
"-- Production"). Management believes that by relying on regional personnel to
study and assess local market conditions and to procure new site leases, it is
better able to respond to increases in advertiser demand.
This decentralized approach is complemented by the Company's centralized
administration and oversight that includes direct management of each division's
sales, accounting and strategic planning. Division general managers report
directly to the President as do the Chief Financial Officer and Director of
Marketing. Division sales managers report directly to the Director of Marketing.
Management encourages its sales force to maintain a hands-on approach to
marketing within their local business communities. This mandates substantial
customer and business contact, evaluation of sites and potential locations, and
an understanding of the prevailing business community. Since most small
communities lack exposure to sophisticated advertising agencies, the Company
satisfies this need with its design and production staff.
PRODUCTION
The Company has internal production facilities and staff to perform a full
range of activities required to construct and install outdoor advertising
structures and display faces, to develop, create and install outdoor advertising
in all of its markets, and to maintain its outdoor advertising properties.
Production work for display faces includes creating the advertising copy
design and layout, painting the design or coordinating its printing, and
installing the designs on display faces. The Company produces substantially all
advertising on its bulletin display faces, especially since local advertisers
generally are not represented by advertising agencies.
The Company's bulletin display faces are panels to which advertising copy
is attached, and will be one of three types depending upon the length of the
advertising contract under which the copy is to be displayed: self-
39
<PAGE> 44
adhesive vinyl, hand painted or vinyl wrap. Self-adhesive vinyl bulletins, which
are generally sold under contracts with a term of at least 36 months,
substantially all of which are produced in-house at the Company's Baxter
Springs, Kansas facility, consist of vinyl letters and other advertising copy
that contain an adhesive backing placed on pre-painted, roller-coated plywood
sheets that are hung on the outdoor advertising structure. Where no illumination
source exists on a structure, the self-adhesive vinyl copy may be coated with
Scotchlite, which causes the advertising copy to be illuminated brightly by the
headlights of passing vehicles. Hand painted bulletins, which are generally sold
under contracts with a term of 12 to 18 months, contain advertising copy painted
on plywood sheets, and are hand painted by an outside contractor either on-site
or in-house at a Company facility. Vinyl wraps, which are sold under short-term
contracts, are produced by outside contractors and consist of vinyl sheets
painted with computer-generated graphics that are wrapped around rectangular
plywood sheets attached to the outdoor advertising structure. The Company's
poster display faces are lithographs or silk-screened paper sheets produced by
outside contractors that are pasted to the face of the display, much like
wallpaper.
The Company has facilities for the construction of new outdoor advertising
structures in Baxter Springs, Kansas and Tifton, Georgia. The Company's new
billboard structures have generally been constructed by outside contractors;
however, the Company has increased its capability to build these structures with
Company personnel by adding construction personnel at its Tifton facility.
The Company believes that it can generally construct outdoor advertising
structures for approximately 80% of the price charged by an outside contractor.
The majority of the Company's new structures constructed by outside contractors
range in price from $10,000 to $30,000, whereas the cost for such structures
when constructed by the Company range from $8,000 to $24,000.
The Company believes it has adequate capacity to meet the needs of its
anticipated in-house structure construction and advertising production.
COMPETITION
In most cases, the Company is a leading provider of outdoor advertising in
the areas in which it operates. Most of the Company's customers are local
businesses purchasing highway directional billboards under long-term contracts.
The Company competes for these customers primarily with other outdoor
advertising companies in the area, highway logo sign operators and companies
that install commercial signs on an advertiser's own property. To a lesser
extent, the Company also competes with a number of other local competitors,
including local newspapers, direct mail and other print media, as well as radio
and television, especially in cases where the local advertiser is seeking to
attract local residents to its business. In competing for local highway
directional advertisers, price, location and availability are important factors,
as are service and customer relationships.
The Company competes for non-highway directional customers principally
through the sale of space on its posters. The Company competes for these
customers against a full range of competitors, including other outdoor
advertisers, print media, radio and television, as well as a variety of other
"out-of-home" media, including advertising in shopping centers and malls,
airports, stadiums, movie theaters and supermarkets and on buses.
Advertisers compare relative costs of available media and cost-per-thousand
impressions, particularly when delivering a message to customers from particular
geographic areas. In competing with other media, outdoor advertising relies on
its low cost-per-thousand-impressions and its ability to target a particular
geographic area.
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. In several of its
markets, the Company encounters direct competition from other major outdoor
media companies, including Outdoor Systems, Inc., Whiteco, Inc. and Lamar
Advertising Company, each of which has a larger national network and greater
resources than the Company. The Company believes that its emphasis on local
highway directional advertisers
40
<PAGE> 45
and its position as a major provider of advertising services in each of the
areas in which it operates enable it to compete effectively with the other
outdoor media operators, as well as other media. The Company also competes with
other outdoor advertising companies for sites on which to build new structures.
See "Risk Factors -- Competition".
PROPERTIES
The Company conducts its operations at the facilities set forth below:
<TABLE>
<CAPTION>
LOCATION USE SQUARE FOOTAGE LEASED/OWNED
-------- --- -------------- ------------
<S> <C> <C> <C>
Tifton, Georgia.................. Office; billboard structure 45,000 Owned
construction; limited display
face production
Baxter Springs, Kansas........... Office; billboard structure 14,000 Owned
construction; full display face
production
Jamestown, New York.............. Office; limited display face 5,000 Leased
production
Rochester, Minnesota............. Office; limited display face 8,000 Leased
production
Ivel, Kentucky................... Office; limited display face 5,000 Leased
production
</TABLE>
OUTDOOR ADVERTISING SITES
As of March 31, 1998, the Company owned 30 parcels of real property that
serve or may serve as the sites for outdoor displays. The Company's remaining
6,243 advertising display sites are leased. The Company's site leases are for
varying terms ranging from month-to-month or year-to-year to terms of ten years
or longer, and many provide for renewal options. Approximately 60% of these
leases will expire prior to the end of 1998. Historically, the Company has had
no difficulty renewing these leases. 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-sided structures and multiple displays on individual
structures on individual sites, the Company averages approximately 1.5 display
faces for every occupied site it owns or leases.
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, encourages states, by the threat of withholding federal
appropriations for the construction and improvement of highways within such
states, to implement legislation to restrict billboards located within 660 feet
of, or visible from, interstate and primary highways except in commercial or
industrial areas. 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.
All the states in which the Company operates require the owner of a
billboard to obtain a state or local permit before erecting the structure. All
the states have implemented regulations at least as restrictive as the Highway
Beautification Act, including limitations 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. In addition, a
number of states and localities, including all the principal states in which the
Company operates, have passed additional and more restrictive regulations, often
in the form of municipal building, sign or zoning ordinances, on the
construction, repair, upgrading, height, lighting, 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. For instance, Maine, Vermont, Hawaii and
41
<PAGE> 46
Alaska ban billboards on a state-wide basis. Common restrictions in the states
in which the Company operates generally include requirements that billboards be
at least 500 feet apart.
Most outdoor advertisers, including the Company, operate a significant
number of billboards that do not conform with current state or local regulations
governing the height, size or location of billboards. A non-conforming is one
that was lawfully erected; but, due to either a change in zoning laws or the
enactment of zoning laws where none previously existed, the billboard is no
longer in compliance. However, the owner of a non-conforming billboard is still
legally permitted to own, operate and maintain the billboard for the rest of its
life. Typically, most laws provide that in the event a non-conforming billboard
is damaged, including damage caused by natural events such as tornados or
hurricanes, the Company is not permitted to repair the structure if either the
cost of doing so exceeds 50% of the cost of building a new billboard structure
or the physical damage to the structure exceeds 50% of the structure. In recent
years, the number of non-conforming billboards lost by the Company in this
fashion has been nominal. An outdoor advertising company that holds a permit for
a non-conforming structure has the exclusive right to maintain and operate that
structure, and is free to transfer the permit to another owner.
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 various jurisdictions and more typically in some urban metropolitan
areas, ordinances authorizing the amortization of billboards have been adopted.
Amortization permits the billboard owner to operate its billboard as a
non-conforming use for a specified period of time until it has recouped its
investment, after which it must remove or otherwise conform its billboard to the
applicable regulations at its own cost without any compensation. Amortization
and other regulations requiring the removal of billboards without compensation
have been subject to vigorous litigation in state and federal courts and cases
have reached differing conclusions as to the constitutionality of these
regulations. Currently, none of the Company's existing inventory is subject to
any amortization ordinance.
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.
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 Congress. Congress is
presently considering various legislative proposals regarding tobacco. At this
time, it is unclear whether a definitive settlement will be reached, what the
terms of any such settlement would be or what the terms of any legislation
passed by Congress might be. In addition, the states of Mississippi, Florida,
Texas and Minnesota have entered into separate settlements of litigation with
the tobacco industry. None of these settlements is conditioned on federal
government approval and each is reported to provide for the elimination of all
outdoor advertising of tobacco products.
While tobacco advertising has constituted less than 3% of the Company's
annual net revenues in recent years, a reduction in billboard advertising by the
tobacco industry could cause a reduction in the Company's direct revenue from
such advertisers while simultaneously increasing the available inventory of
billboards throughout the outdoor advertising industry. If outdoor advertising
of tobacco products were reduced or eliminated, the Company may suffer reduced
revenues due to an anticipated surplus of inventory and price competition. See
"-- Customers" and "Risk Factors -- Potential Elimination or Reduction of
Tobacco Advertising".
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<PAGE> 47
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.
EMPLOYEES
At March 31, 1998, the Company employed 125 people, of whom 36 were
primarily engaged in sales and marketing, 63 were engaged in painting, bill
posting and construction and maintenance of displays, and the balance were
employed in executive, financial, administrative and similar capacities. The
Company is not a party to any collective bargaining agreement.
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.
43
<PAGE> 48
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the names, ages and positions of the
directors and executive officers of the Company as of March 31, 1998:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Sheldon G. Hurst.......................... 50 President, Chief Executive Officer and director
Anthony LaMarca........................... 44 Vice President and director
A. Wayne Lamm............................. 44 Director of Marketing and director
William G. McLendon....................... 42 Chief Financial Officer and director
William P. Sutter, Jr..................... 40 Director
</TABLE>
Sheldon G. Hurst founded and has served as President and Chief Executive
Officer of the Company since 1986. Prior to founding the Company from 1972 to
1986, Mr. Hurst was vice president of Hurst Sign Company, a billboard
construction company in Scranton, Pennsylvania owned by his father. During this
period, he was responsible for designing and managing the construction of over
1,000 advertising displays for outdoor advertising companies.
Anthony LaMarca, a co-founder of the Company, has served as the Company's
Vice President since 1986, with primary responsibilities in the sales and
marketing of bulletins.
A. Wayne Lamm has been Director of Marketing of the Company since September
1, 1997. From September 1, 1989 to July 1, 1997, Mr. Lamm was the president and
chief operating officer of Penn Advertising, one of the largest outdoor
advertising companies in the Northeast. From November 1986 to September 1989,
Mr. Lamm was the regional supervisor of the Buffalo, New York plant of Penn
Advertising. From June 1984 to September 1986, he was the general manager and
national director of sales at Naegele Outdoor Advertising.
William G. McLendon joined the Company in October 1994 as Chief Financial
Officer. From December 1993 to October 1994, Mr. McLendon was the chief
financial officer of Naegele Outdoor Advertising. From 1991 to December 1993, he
was a partner at Brush & Associates, an investment banking boutique specializing
in outdoor advertising. From 1986 to 1990, Mr. McLendon was employed at Heller
Financial and, from 1978 to 1986, Mr. McLendon worked at General Electric
Capital Corp.
William P. Sutter, Jr. has been a director of the Company since October
1994. Since 1984, Mr. Sutter has been associated with affiliates of Mesirow
Financial Holdings, Inc., a Chicago-based financial services firm. Mr. Sutter is
an executive vice president of Mesirow Private Equity Investments, Inc. and a
vice president of Mesirow Financial Services, Inc. Mr. Sutter is a director of
New West Eyeworks, Inc., an optical retail chain. Mesirow Financial Services,
Inc. is the general partner of Mesirow, a holder of warrants in Holdings. See
"Principal Stockholders".
Pursuant to the Holdings Stockholders Agreement, the board of directors of
Holdings (and each of its subsidiaries, including the Company) shall be
comprised of seven individuals, four of whom are designated by the executive
employees of Holdings owning a majority of the Common Stock held by such
executives, and three of whom are designated by Mesirow (as of the date of this
Offering Memorandum, Mesirow has only designated one such individual, William P.
Sutter, Jr.). See "Certain Relationships and Related Transactions".
Executive officers are appointed annually and serve at the discretion of
the Board of Directors.
DIRECTOR COMPENSATION
All directors of the Company serve without compensation (other than
reimbursement of expenses) in connection with rendering services as a director.
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<PAGE> 49
EXECUTIVE COMPENSATION
The compensation of executive officers of the Company is determined by the
Board of Directors of the Company. The following table sets forth certain
information concerning compensation received by the Chief Executive Officer and
each executive officer of the Company whose total annual salary and bonus
exceeded $100,000 in 1997 for services rendered to the Company in all capacities
(including service as an officer or director). No stock options or similar
awards had been granted as of the end of fiscal 1997, to the individuals named
below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
1997
ANNUAL COMPENSATION
-----------------------
NAME AND PRINCIPAL POSITION SALARY BONUS
- --------------------------- -------- -------
<S> <C> <C>
Sheldon G. Hurst............................................ $142,000 $62,000
President and Chief Executive Officer
William G. McLendon......................................... 119,000 52,000
Chief Financial Officer and Secretary
</TABLE>
45
<PAGE> 50
PRINCIPAL STOCKHOLDERS
All of the Company's common stock is owned by Holdings. The following table
sets forth certain information with respect to the beneficial ownership of
Holdings' common stock, par value $.0001 per share (the "Common Stock"), and
Holdings' preferred stock, par value $.0001 per share (the "Preferred Stock"),
as of March 31, 1998 (i) by each person who is known by the Company to own
beneficially 5% percent or more of the outstanding shares of Common Stock or
Preferred Stock, (ii) by each of the Company's directors, (iii) by each of the
named executives, and (iv) by all current directors and officers of the Company
as a group. Unless indicated otherwise, each of the stockholders has sole voting
and investment power with respect to the shares beneficially owned.
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
----------------------------- -----------------------
NUMBER OF PERCENT OF NUMBER OF PERCENT OF
NAME AND ADDRESS SHARES CLASS(1) SHARES CLASS(2)
---------------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Sheldon G. Hurst(3)........................ 844.1(4) 82.7%
3416 Highway 41 South
Tifton, Georgia 31793
William G. McLendon........................ 110.0(4) 10.8
3416 Highway 41 South
Tifton, Georgia 31793
A. Wayne Lamm.............................. 51.1(4)(5) 5.0
3416 Highway 41 South
Tifton, Georgia 31793
Anthony LaMarca............................ 20.4(4) 2.0
Mesirow Capital Partners VI(6)............. 716.0 41.2 7,308.0 46.7%
350 North Clark Street
Chicago, Illinois 60610
Mesirow Capital Partners VII(7)............ 383.0 27.3 8,331.0 53.3
350 North Clark Street
Chicago, Illinois 60610
William P. Sutter, Jr.(8).................. --
350 North Clark Street
Chicago, Illinois 60610
All directors and executive officers
as a group (5 persons)(8)................ 1,025.6 100.0
</TABLE>
- ---------------
(1) Mesirow VI in 1994 was granted warrants to purchase 640 shares of Common
Stock (the "1994 Warrants"), and in 1997 was granted warrants to purchase 76
shares of Common Stock (the "Mesirow VI 1997 Warrants"). Mesirow VII in 1997
was granted warrants to purchase 383 shares of Common Stock (the "Mesirow
VII 1997 Warrants") (the Mesirow VI 1997 Warrants and the Mesirow VII 1997
Warrant are collectively referred to as the "1997 Warrants"). The 1994
Warrants and the 1997 Warrants are currently exercisable. Total outstanding
Common Stock (on a fully diluted basis) consists of 1,020.4 shares rounded
to the nearest tenth prior to any exercise of the 1994 Warrants the 1997
Warrants or Mr. Lamm's options.
(2) Total outstanding Preferred Stock consists of 15,639 shares.
(3) All shares are owned by Hurst Enterprises, L.P., a Georgia limited
partnership in which Mr. Hurst holds a 2% general partnership interest and a
96% limited partnership interest, and Sharon Hurst (the wife of Mr. Hurst)
owns a 2% general partnership interest.
(4) In the event of the exercise by Mesirow of the 1994 Warrants and/or the 1997
Warrants (the "Mesirow Exercise"), Holdings has agreed to issue certain
Common Stock to A. Wayne Lamm to maintain the 2% of the Common Stock of
Holdings purchased by A. Wayne Lamm from Holdings in 1997. Messrs. Hurst,
McLendon, Lamm and LaMarca have agreed to transfer Common Stock among
themselves in the event
46
<PAGE> 51
of the Mesirow Exercise and/or the exercise of the Lamm options in order to
provide certain percentage ownership anti-dilution protection for Messrs.
McLendon, Lamm and LaMarca.
(5) Includes 5.2 shares subject to outstanding options to purchase Common Stock
which are exercisable within the next 60 days.
(6) Includes 640 shares of Common Stock subject to outstanding warrants to
purchase Common Stock granted pursuant to the 1994 Warrants and 76 shares of
Common Stock subject to outstanding warrants to purchase granted pursuant to
the Mesirow VI 1997 Warrants.
(7) Includes 383 shares of Common Stock subject to outstanding warrants to
purchase granted pursuant to the Mesirow VII 1997 Warrants.
(8) Mr. Sutter, a director of the Company, is a vice president of Mesirow
Financial Services, Inc., which is the general partner of Mesirow VI and
Mesirow VII. Mr. Sutter disclaims beneficial ownership of shares
beneficially owned by Mesirow VI and Mesirow VII.
47
<PAGE> 52
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to the Holdings Stockholders Agreement, the board of directors of
Holdings (and each of its subsidiaries, including the Company) is required to be
comprised of seven individuals, four of whom are designated by the executive
employees of Holdings owning a majority of the Common Stock held by such
executives, and three of whom are designated by Mesirow (as of the date of this
Offering Memorandum, Mesirow has only designated one such individual, William P.
Sutter, Jr.). The Holdings Stockholders Agreement provides that upon the
occurrence of certain events (including the failure of Holdings to purchase from
Mesirow the 1994 Warrant and/or 1997 Warrants pursuant to such agreements, or to
redeem Mesirow's Preferred Stock pursuant to the certificate of incorporation of
Holdings), Mesirow can cause the re-constitution of the board of directors of
Holdings (and each of its subsidiaries, including the Company) to be comprised
of five individuals, four of whom are designated by Mesirow and one of whom is
designated by the executive employees of Holdings owning a majority of the
Common Stock held by such executives, in order to pursue the sale of Holdings
and its subsidiaries (or any assets or properties thereof).
Sheldon G. Hurst, President and Chief Executive Officer, and William G.
McLendon, Chief Financial Officer of the Company, jointly own 13 parcels of real
property which are leased to the Company and on which the Company maintains
billboards. The aggregate rent paid by the Company for these sites for 1997 was
$14,450. The aggregate rent to be paid to Messrs. Hurst and McLendon over the
life of these leases is $72,250. The leases are all for a term of five years. In
addition, Mr. Hurst owns 29 parcels of real property which are leased to the
Company principally on a one year basis (four leases are for terms of five
years) and on which the Company maintains billboards. The aggregate rent paid by
the Company for these sites for 1997 was $9,600.
Messrs Hurst, McLendon and Anthony LaMarca, Vice President of the Company,
jointly owned the building in Joplin, Missouri in which the Company maintained
its corporate headquarters until June 1997, at which time the Company's
corporate headquarters was relocated to Tifton, Georgia. The Joplin, Missouri
building was sold by Messrs. Hurst, McLendon and LaMarca to a third party in
September 1997. The lease was for a term of five years at a rate of $34,000 per
year.
The Company believes the terms of these lease arrangements are no less
favorable to the Company than similar arm's-length arrangements with unrelated
parties would be.
Sheldon G. Hurst owns a six-seat, single engine airplane which is leased to
the Company. The Company pays Mr. Hurst monthly lease payments equal to the
total amount paid by Mr. Hurst monthly under the financing he obtained to
acquire the airplane. Mr. Hurst borrowed $145,000 bearing interest at a rate per
annum equal to 1.4% in excess of the prime rate. The borrowing is to be repaid
in monthly installments over a ten-year period ending in 2007. The Company also
pays all insurance (currently $2,100 per year) and maintenance costs for the
airplane.
William G. McLendon, as a shareholder of TSS, received $161,000 for his
ownership in TSS in connection with the acquisition of the assets of TSS by the
Company.
48
<PAGE> 53
DESCRIPTION OF THE NOTES
The Existing Notes were issued, and the Exchange Notes offered hereby will
be issued, under an indenture dated as of May 15, 1998 (the "Indenture") between
the Company and IBJ Schroder Bank & Trust Company, 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.
Upon the issuance of the Exchange Notes, if any, or the effectiveness of
the Shelf Registration Statement, as the case may be, the Indenture will be
subject to and governed by the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act"). The following summary of the material provisions of the
Indenture does not purport to be complete and is subject to, and qualified in
its entirety by, reference to the provisions of the Indenture, including the
definitions of certain terms contained therein and those terms made part of the
Indenture by reference to the Trust Indenture Act. For definitions of certain
capitalized terms used in the following summary, see "Certain Definitions"
below.
GENERAL
The Notes will mature on May 15, 2008, will be initially limited to
$100,000,000 aggregate principal amount and will be unsecured (except as
described under "Security" below) senior obligations of the Company. Each Note
will bear interest at the rate set forth on the cover page hereof from May 20,
1998 or from the most recent interest payment date to which interest has been
paid or duly provided for, payable semiannually on May 15 and November 15 in
each year, commencing November 15, 1998, until the principal thereof is paid or
duly provided for, to the person in whose name the Note (or any predecessor
Note) is registered at the close of business on May 1 or November 1 next
preceding such interest payment date. Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months.
The principal of and premium, if any, and interest on the Notes will be
payable, and the Notes will be exchangeable and transferable, at the office or
agency of the Company in The City of New York maintained for such purposes
(which initially will be the office of the Trustee located at One State Street,
New York, New York 10004); provided, however, that, at the option of the
Company, interest may be paid by check mailed to the address of the person
entitled thereto as such address appears in the security register. The Notes
will be issued only in registered form without coupons and only in denominations
of $1,000 and any integral multiple thereof. No service charge will be made for
any registration of transfer or exchange or redemption of Notes, but the Company
may require payment in certain circumstances of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection therewith.
Subject to the covenants described below under "Certain Covenants" and
applicable laws, the Company may, from time to time, issue additional Notes (the
"Additional Notes") under the Indenture. The Notes offered hereby and any
Additional Notes subsequently issued would be treated as a single class for all
purposes under the Indenture.
As of the Closing Date, the Company will have no Subsidiaries. However,
under certain circumstances, the Company will be able to designate future
Subsidiaries as Unrestricted Subsidiaries, subject to certain limitations.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants set forth in the Indenture.
Any Notes that remain outstanding after the consummation of the Exchange
Offer and Exchange Notes issued in connection with the Exchange Offer will be
treated as a single class of securities under the Indenture.
The Notes will not be entitled to the benefit of any sinking fund.
RANKING
The Notes will be unsecured except as described below under "Security,"
senior obligations of the Company, ranking pari passu with all existing and
future unsubordinated debt of the Company. The Notes will be effectively
subordinated to all of the Company's secured debt to the extent of the assets
securing such loans.
49
<PAGE> 54
As of March 31, 1998, on a pro forma basis after giving effect to the Initial
Offering, the application of the estimated net proceeds therefrom and the
consummation of other transactions referred to herein, the Company would have
had $826,000 of debt outstanding other than the Notes, excluding outstanding
letters of credit.
REDEMPTION
The Notes will be redeemable at the election of the Company, as a whole or
from time to time in part, at any time on or after May 15, 2003, on not less
than 30 nor more than 60 days' prior notice at the redemption prices (expressed
as percentages of principal amount) set forth below, together with accrued
interest, if any, to the redemption date, if redeemed during the 12-month period
beginning on May 15 of the years indicated below (subject to the right of
holders of record on the relevant record date to receive interest due on an
interest payment date):
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
---- ----------
<S> <C>
2003...................................................... 105.500%
2004...................................................... 103.667
2005...................................................... 101.833
</TABLE>
and thereafter at 100% of the principal amount, together with accrued interest,
if any, to the redemption date.
In addition, at any time or from time to time prior to May 15, 2001, the
Company may at its option redeem Notes with the net proceeds of one or more
Equity Offerings at a redemption price equal to 111% of the principal amount
thereof, together with accrued interest, if any, to the date of redemption
(subject to the rights of holders of record on the relevant record date to
receive interest due on an interest payment date); provided that, immediately
after giving effect to any such redemption, at least 75% of the aggregate
principal amount of the Notes issued under the Indenture remains outstanding.
Any such redemption must be made within 90 days of the related Equity Offering.
If less than all the Notes are to be redeemed, the particular Notes to be
redeemed will be selected not more than 60 days prior to the redemption date by
the Trustee by lot or such other method as the Trustee deems fair and
appropriate.
SECURITY
The Notes will be collateralized, pending disbursement, pursuant to the
Escrow Agreement dated as of May 15, 1998 (the "Escrow Agreement"), among the
Company, the Trustee and IBJ Schroder Bank & Trust Company, Escrow Agent, by a
pledge of the Escrow Account created in the Escrow Agreement, which will
initially contain a portfolio of U.S. Government securities (estimated at $10.6
million) that, together with the interest thereon (the "Escrow Collateral"),
will be sufficient to pay interest on the Notes for two scheduled interest
payments.
The Company will enter into the Escrow Agreement providing for the grant by
the Company to the Trustee, for the benefit of the holders of Notes, of security
interests in the Escrow Collateral. All such security interests will
collateralize the payment and performance when due of all obligations of the
Company under the Indenture and the Notes, as provided in the Escrow Agreement.
The Liens created by the Escrow Agreement will be first priority security
interests in the Escrow Collateral. The ability of holders of the Notes to
realize upon any such funds or securities may be subject to certain bankruptcy
law limitations in the event of the bankruptcy of the Company.
Pursuant to the Escrow Agreement, funds may be disbursed from the Escrow
Account only to pay interest on the Notes (or, if a portion of the Notes has
been retired by the Company, funds representing the lesser of (i) the excess of
the amount sufficient to pay interest through and including May 15, 1999 on the
Notes not so retired and (ii) the interest payments that have not previously
been made on such retired Notes for each interest payment date through the
interest payment date to occur on May 15, 1999 will be paid to the Company if no
Default then exists under the Indenture).
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<PAGE> 55
Pending the two scheduled interest payments, all funds contained in the
Escrow Account were invested in U.S. Government securities (the "Pledged
Securities"). Interest earned on the Pledged Securities will be placed in the
Escrow Account. Upon the acceleration of the maturity of the Notes, the Escrow
Agreement will provide for the foreclosure by the Trustee upon the net proceeds
of the Escrow Account. Under the terms of the Indenture, the proceeds of the
Escrow Account will be applied, first, to amounts owing to the Trustee in
respect of fees and expenses of the Trustee and, second, to all obligations
under the Notes and the Indenture. Under the Escrow Agreement, after the Company
makes the first two scheduled interest payments on the Notes in a timely manner,
any remaining funds and Pledged Securities held in the Escrow Account will be
released and returned to the Company and, thereafter, the Notes will be
unsecured.
CERTAIN DEFINITIONS
"Acquired Debt" means Debt of a person (a) existing at the time such person
is merged with or into the Company or becomes a Restricted Subsidiary or (b)
assumed in connection with the acquisition of assets from such person.
"Affiliate" means, with respect to any specified person, any other person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For the purposes of this definition,
"control," when used with respect to any specified person, means the power to
direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction) (collectively, a "transfer") by the Company or a
Restricted Subsidiary, directly or indirectly, in one or a series of related
transactions, of (a) any Capital Stock of any Restricted Subsidiary, (b) all or
substantially all of the properties and assets of the Company and its Restricted
Subsidiaries representing a division or line of business or (c) any other
properties or assets of the Company or any Restricted Subsidiary, other than in
the ordinary course of business. For the purposes of this definition, the term
"Asset Sale" does not include any transfer of properties or assets (i) that is
governed by the provisions of the Indenture described under "Consolidation,
Merger and Sale of Assets", (ii) between or among the Company and its Restricted
Subsidiaries pursuant to transactions that do not violate any other provision of
the Indenture, (iii) any transfer constituting a Restricted Payment that is
permitted to be made, and is made, under paragraph (a) of the covenant described
under "Limitation on Restricted Payments", (iv) that is permitted to be made,
and is made, pursuant to the definition of "Permitted Investments", (v)
representing obsolete or permanently retired equipment and facilities or (vi)
the gross proceeds of which (exclusive of indemnities) do not exceed $100,000
for any particular item or $500,000 in the aggregate for any fiscal year.
"Capital Stock" of any person means any and all shares, interests,
partnership interests, participations, rights in or other equivalents of, or
interest in, the equity of such person, but excluding any debt securities
convertible into such equity.
"Capital Lease Obligation" means, at any time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Change of Control" means the occurrence of any of the following events:
(a) Any person or "group" (as such term is used in Sections 13(d) and
14(d) of the Exchange Act), other than (i) Sheldon G. Hurst, Hurst
Enterprises, L.P., William G. McLendon, A. Wayne Lamm, Anthony La Marca or
any trust existing solely for the benefit of any of the above individuals
and the estate or any executor, administrator, conservator or other legal
representative of any of the above individuals and (ii) Mesirow or its
affiliated entities, is or becomes the "beneficial owner" (as defined in
Rules 13d-3 and 13d-5 under the Exchange Act, except that a person will be
deemed to have "beneficial ownership" of all securities that such person
has the right to acquire, whether such right is exercisable
51
<PAGE> 56
immediately or only after the passage of time), directly or indirectly, of
more than a majority of the voting power of all classes of Voting Stock of
the Company.
(b) During any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board of Directors,
or whose nomination for election by the stockholders of the Company, was
approved by a vote of 66 2/3% of the directors 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.
(c) The Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution, other than a transaction that complies with the
provisions described under "Consolidation, Merger and Sales of Assets".
"Closing Date" means the date on which the Notes are originally issued
under the Indenture.
"Consolidated Adjusted Net Income" means, for any period, the net income
(or net loss) of the Company and its Restricted Subsidiaries for such period as
determined on a consolidated basis in accordance with GAAP, adjusted to the
extent included in calculating such net income or loss by excluding (a) any net
after-tax extraordinary gains or losses (less all fees and expenses relating
thereto), (b) any net after-tax gains or losses (less all fees and expenses
relating thereto) attributable to Asset Sales, (c) the portion of net income
(but not the net loss) of any person (other than the Company or a Restricted
Subsidiary), including Unrestricted Subsidiaries, in which the Company or any
Restricted Subsidiary has an equity interest, except to the extent of the amount
of dividends or other distributions actually paid to the Company or any
Restricted Subsidiary in cash during such period by such person, (d) the net
income (or loss) of any person acquired by the Company or any Restricted
Subsidiary in a "pooling of interests" transaction attributable to any period
prior to the date of such acquisition and (e) the net income (but not the net
loss) of any Restricted Subsidiary to the extent that the declaration or payment
of dividends or similar distributions by such Restricted Subsidiary is at the
date of determination restricted, directly or indirectly, except to the extent
that such net income could be paid to the Company or a Restricted Subsidiary
thereof by loans, advances, intercompany transfers, principal repayments or
otherwise; provided that, if any Restricted Subsidiary is not a Wholly Owned
Restricted Subsidiary, Consolidated Adjusted Net Income will be reduced (to the
extent not otherwise reduced in accordance with GAAP) by an amount equal to (A)
the amount of the Consolidated Adjusted Net Income otherwise attributable to
such Restricted Subsidiary multiplied by (B) the quotient of (1) the number of
shares of outstanding common stock of such Restricted Subsidiary not owned on
the last day of such period by the Company or any of its Restricted Subsidiaries
divided by (2) the total number of shares of outstanding common stock of such
Restricted Subsidiary on the last day of such period.
"Consolidated EBITDA" means, for any period, the sum of, without
duplication, Consolidated Adjusted Net Income for such period, plus (or, in the
case of clause (d) below, plus or minus) the following items to the extent
included in computing Consolidated Adjusted Net Income for such period (a)
Consolidated Fixed Charges for such period, plus (b) the federal, state, local
and foreign income tax expense of the Company and its Restricted Subsidiaries
for such period, plus (c) the aggregate depreciation and amortization expense of
the Company and its Restricted Subsidiaries for such period, plus (d) any other
non-cash charges for such period, and minus non-cash credits for such period,
other than non-cash charges or credits resulting from changes in prepaid assets
or accrued liabilities in the ordinary course of business; provided that income
tax expense, depreciation and amortization expense and non-cash charges and
credits of a Restricted Subsidiary will be included in Consolidated EBITDA only
to the extent (and in the same proportion) that the net income of such
Restricted Subsidiary was included in calculating Consolidated Adjusted Net
Income for such period.
"Consolidated Fixed Charges" means, for any period, without duplication,
the sum of (a) the amount that, in conformity with GAAP, would be set forth
opposite the caption "interest expenses" (or any like caption) on a consolidated
statement of operations of the Company and its Restricted Subsidiaries for such
period, including, without limitation, (i) amortization of debt discount, (ii)
the net cost of interest rate contracts (including amortization of discounts),
(iii) the interest portion of any deferred payment obligation, (iv) amortization
of debt issuance costs and (v) the interest component of Capitalized Lease
Obligations, plus
52
<PAGE> 57
(b) cash dividends paid on Preferred Stock and Disqualified Stock by the Company
and any Restricted Subsidiary (to any person other than the Company or a
Restricted Subsidiary), plus (c) all interest on any Debt of any person
guaranteed by the Company or any of its Restricted Subsidiaries; provided,
however, that Consolidated Fixed Charges will not include (i) any gain or loss
from extinguishment of debt, including the write-off of debt issuance costs and
(ii) the fixed charges of a Restricted Subsidiary to the extent (and in the same
proportion) that the net income of such Subsidiary was excluded in calculating
Consolidated Adjusted Net Income pursuant to clause (e) of the definition
thereof for such period.
"Consolidated Leverage Ratio" means, on any date of determination, the
ratio of (i) the aggregate amount of Debt of the Company and its Restricted
Subsidiaries on a consolidated basis as on such date of determination to (ii)
the aggregate amount of Consolidated EBITDA for the immediately preceding four
full fiscal quarters for which internal financial statements are available.
"Consolidated Net Worth" means, at any date of determination, stockholders'
equity of the Company and its Restricted Subsidiaries as set forth on the most
recently available quarterly or annual consolidated balance sheet of the Company
and its Restricted Subsidiaries, less any amounts attributable to Disqualified
Stock or any equity security convertible into or exchangeable for Debt, the cost
of treasury stock and the principal amount of any promissory notes receivable
from the sale of the Capital Stock of the Company or any of its Restricted
Subsidiaries and less, to the extent included in calculating such stockholders'
equity of the Company and its Restricted Subsidiaries, the stockholders' equity
attributable to Unrestricted Subsidiaries, each item to be determined in
conformity with GAAP (excluding the effects of foreign currency adjustments
under Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 52).
"Debt" means (without duplication), with respect to any person, whether
recourse is to all or a portion of the assets of such person and whether or not
contingent, (a) every obligation of such person for money borrowed, (b) every
obligation of such person evidenced by bonds, debentures, notes or other similar
instruments, (c) every reimbursement obligation of such person with respect to
letters of credit, bankers' acceptances or similar facilities issued for the
account of such person, (d) every obligation of such person issued or assumed as
the deferred purchase price of property or services, (e) the amount of every
Capitalized Lease Obligation of such person, (f) all Disqualified Stock of such
person valued at its maximum fixed repurchase price, plus accrued and unpaid
dividends, (g) all obligations of such person under or in respect of Hedging
Obligations if and to the extent such Hedging Obligations would appear as a
liability upon a balance sheet of such person in accordance with GAAP and (h)
every obligation of the type referred to in clauses (a) through (g) of another
person and all dividends of another person the payment of which, in either case,
such person has guaranteed. For purposes of this definition, the "maximum fixed
repurchase price" of any Disqualified Stock that does not have a fixed
repurchase price will be calculated in accordance with the terms of such
Disqualified Stock as if such Disqualified Stock were repurchased on any date on
which Debt is required to be determined pursuant to the Indenture, and if such
price is based upon, or measured by, the fair market value of such Disqualified
Stock, such fair market value will be determined in good faith by the board of
directors of the issuer of such Disqualified Stock. Notwithstanding the
foregoing, trade accounts payable and accrued liabilities arising in the
ordinary course of business and any liability for federal, state or local taxes
or other taxes owed by such person will not be considered Debt for purposes of
this definition.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Disinterested Director" means, with respect to any transaction or series
of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under the Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions (other than as the holder of Voting Stock of the Company).
"Disqualified Stock" means any class or series of Capital Stock that,
either by its terms, or by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise (a) is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to one year after the final Stated Maturity of the Notes, (b) is redeemable at
the option of the holder thereof at any time prior to one
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year after such final Stated Maturity or (c) at the option of the holder
thereof, is convertible into or exchangeable for debt securities at any time
prior to one year after such final Stated Maturity; provided that any Capital
Stock that would not constitute Disqualified Stock but for provisions therein
giving holders thereof the right to cause the issuer thereof to repurchase or
redeem such Capital Stock upon the occurrence of an "asset sale" or "change of
control" occurring prior to the Stated Maturity of the Notes will not constitute
Disqualified Stock if the "asset sale" or "change of control" provisions
applicable to such Capital Stock are no more favorable to the holders of such
Capital Stock than the provisions contained in the "Limitation on Certain Asset
Sales" and "Purchase of Notes upon a Change of Control" covenants described
below and such Capital Stock specifically provides that the issuer will not
repurchase or redeem any of such stock pursuant to such provision prior to the
Company's repurchase of such of the Notes as are required to be repurchased
pursuant to the "Limitation on Certain Asset Sales" and "Purchase of Notes upon
a Change of Control" covenants described below.
"Equity Offering" means an offer and sale by the Company of its common
stock (which is Qualified Stock) to one or more persons other than a Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, as applied from time to
time by the Company in the preparation of its consolidated financial statements.
"guarantee" means, as applied to any obligation, (a) a guarantee (other
than by endorsement of negotiable instruments for collection in the ordinary
course of business), direct or indirect, in any manner, of all or any part of
such obligation and (b) 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 limitation, the payment of
amounts drawn down under letters of credit.
"Hedging Obligations" means the obligations of any person under (i)
interest rate swap agreements, interest rate cap agreements and interest rate
collar agreements and (ii) other agreements or arrangements designed to protect
such person against fluctuations in interest rates or the value of foreign
currencies.
"Investment" in any person means, (a) directly or indirectly, any advance,
loan or other extension of credit (including, without limitation, by way of
guarantee or similar arrangement) or capital contribution to any person, the
purchase or other acquisition of any stock, bonds, notes, debentures or other
securities issued by such person, the acquisition (by purchase or otherwise) of
all or substantially all of the business or assets of such person, or the making
of any investment in such person, (b) the designation of any Restricted
Subsidiary as an Unrestricted Subsidiary, (c) the transfer of any assets or
properties from the Company or a Restricted Subsidiary to an Unrestricted
Subsidiary, other than the transfer of assets or properties made in the ordinary
course of business and (d) the fair market value of the Capital Stock (or any
other Investment), held by the Company or any of its Restricted Subsidiaries, of
(or in) any person that has ceased to be a Restricted Subsidiary, including,
without limitation, by reason of any transaction permitted by clause (d) of the
"Limitation on Issuances and Sales of Capital Stock of Restricted Subsidiaries"
covenant described below. Investments exclude extensions of trade credit on
commercially reasonable terms in accordance with normal trade practices.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement, capital lease or other lease in the nature thereof).
"Net Cash Proceeds" means, with respect to any Asset Sale, the proceeds
thereof in the form of cash or cash equivalents, including payments in respect
of deferred payment obligations as and when received in the form of, or stock or
other assets when disposed of for, cash or cash equivalents (except to the
extent that such obligations are financed or sold with recourse to the Company
or any Restricted Subsidiary), net of (a) brokerage commissions and other fees
and expenses (including fees and expenses of legal counsel, accountants and
investment banks) related to such Asset Sale, (b) provisions for all taxes
payable as a result of such Asset Sale, (c) payments made to retire Debt where
payment of such Debt is secured by a Lien on the
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assets that are the subject of such Asset Sale, (d) amounts required to be paid
to any person (other than the Company or any Restricted Subsidiary) owning a
beneficial interest in the assets that are subject to the Asset Sale and (e)
appropriate amounts to be provided by the Company or any Restricted Subsidiary,
as the case may be, as a reserve required in accordance with GAAP against any
liabilities associated with such Asset Sale and retained by the seller after
such Asset Sale, including pension and other post-employment benefit
liabilities, liabilities related to environmental matters and liabilities under
any indemnification obligations associated with such Asset Sale.
"Pari Passu Debt" means any Debt of the Company or any Subsidiary
Guarantor, whether outstanding on the Closing Date or incurred thereafter, that
ranks pari passu in right of payment with the Notes or any Subsidiary Guarantee,
as the case may be.
"Permitted Investment" means any of the following:
(a) Investments in (i) securities with a maturity of 180 days or less
issued or directly and fully guaranteed or insured by the United States or
any agency or instrumentality thereof (provided that the full faith and
credit of the United States is pledged in support thereof); (ii)
certificates of deposit or acceptances with a maturity of 180 days or less
of any financial institution that is a member of the Federal Reserve System
having combined capital and surplus of not less than $500,000,000; and
(iii) commercial paper with a maturity of 180 days or less issued by a
corporation that is not an Affiliate of the Company and is organized under
the laws of any state of the United States or the District of Columbia and
having the highest rating obtainable from Moody's Investors Service, Inc.
or Standard & Poor's Ratings Services.
(b) Investments by the Company in another person, if as a result of
such Investment such other person (i) becomes a Subsidiary Guarantor or
(ii) is merged or consolidated with or into, or transfers or conveys all or
substantially all of its assets to, the Company or a Subsidiary Guarantor.
(c) Investments by the Company or any of the Subsidiary Guarantors in
any one of the other of them.
(d) Investments in existence on the Closing Date.
(e) Promissory notes received as a result of Asset Sales permitted
under the "Limitation on Certain Asset Sales" covenant.
(f) Direct or indirect loans to officers, directors or employees, or
to a trustee for the benefit of such employees, of the Company or any
Restricted Subsidiary in an aggregate amount outstanding at any time not
exceeding $250,000, plus the amount of direct or indirect loans to
employees for relocation assistance.
(g) Investments in assets owned or used in the ordinary course of
business.
(h) Investments in any person in the form of a capital contribution of
the Company's common stock.
"Preferred Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated) of such
person's preferred or preference stock, whether now outstanding or issued after
the Closing Date, and including, without limitation, all classes and series of
preferred or preference stock of such person.
"Qualified Equity Interest" means any Qualified Stock and all warrants,
options or other rights to acquire Qualified Stock (but excluding any debt
security that is convertible into or exchangeable for Capital Stock).
"Qualified Stock" of any person means any and all Capital Stock of such
person, other than Disqualified Stock.
"Restricted Subsidiary" means any Subsidiary other than an Unrestricted
Subsidiary.
"Significant Subsidiary" means any Restricted Subsidiary of the Company
that together with its Subsidiaries, (a) for the most recent fiscal year of the
Company, accounted for more than 10% of the
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consolidated net sales of the Company and its Restricted Subsidiaries or (b) as
of the end of such fiscal year, was the owner of more than 10% of the
consolidated assets of the Company and its Restricted Subsidiaries, in the case
of either (a) or (b), as set forth on the most recently available consolidated
financial statements of the Company for such fiscal year or (c) was organized or
acquired after the beginning of such fiscal year and would have been a
Significant Subsidiary if it had been owned during the entire fiscal year.
"Stated Maturity" means, when used with respect to any Note or any
installment of interest thereon, the date specified in such Note as the fixed
date on which the principal of such Note or such installment of interest is due
and payable and, when used with respect to any other Debt, means the date
specified in the instrument governing such Debt as the fixed date on which the
principal of such Debt or any installment of interest thereon is due and
payable.
"Subordinated Debt" means Debt of the Company that is subordinated in right
of payment to the Notes.
"Subsidiary" means any person a majority of the equity ownership or Voting
Stock of which is at the time owned, directly or indirectly, by the Company
and/or one or more other Subsidiaries of the Company.
"Subsidiary Guarantee" means any guarantee by any Subsidiary Guarantor of
the Company's obligations under the Notes and the Indenture as required by the
terms of the Indenture.
"Subsidiary Guarantor" means any Restricted Subsidiary of the Company that
guarantees the Company's obligations under the Notes and the Indenture pursuant
to its Subsidiary Guarantee.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of May 20,
1998 between the Company and Holdings, as in effect on the Closing Date.
"Unrestricted Subsidiary" means (a) any Subsidiary that is designated by
the Board of Directors as an Unrestricted Subsidiary in accordance with the
"Unrestricted Subsidiaries" covenant and (b) any Subsidiary of an Unrestricted
Subsidiary.
"Voting Stock" means any class or classes of Capital Stock pursuant to
which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any person (irrespective of whether or not, at the time, stock of
any other class or classes has, or might have, voting power by reason of the
happening of any contingency).
"Weighted Average Life" means, as of the date of determination with respect
to any Debt or Disqualified Stock, the quotient obtained by dividing (a) the sum
of the products of (i) the number of years from the date of determination to the
date or dates of each successive scheduled principal or liquidation value
payment of such Debt or Disqualified Stock, respectively, multiplied by (ii) the
amount of each such principal or liquidation value payment by (b) the sum of all
such principal or liquidation value payments.
"Wholly Owned Restricted Subsidiary" means any Restricted Subsidiary, all
of the outstanding voting securities (other than directors' qualifying shares or
shares of foreign Restricted Subsidiaries required to be owned by foreign
nationals pursuant to applicable law) of which are owned, directly or
indirectly, by the Company.
CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants:
Limitation on Debt. The Company will not, and will not permit any
Restricted Subsidiary to, create, issue, assume, guarantee or in any manner
become directly or indirectly liable for the payment of, or otherwise incur
(collectively, "incur"), any Debt (including Acquired Debt and the issuance of
Disqualified Stock), except that the Company or a Restricted Subsidiary may
incur Debt or issue Disqualified Stock if, at the time of such event, the
Consolidated Leverage Ratio would have been (i) less than 6.50 to 1 through May
15, 2001, (ii) less than 6.25 to 1 from May 15, 2001 through May 15, 2003 and
(iii) less than 6.0 to 1 thereafter.
In making the foregoing calculation, pro forma effect will be given to: (i)
the incurrence of such Debt and (if applicable) the application of the net
proceeds therefrom, including to refinance other Debt, as if such
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Debt was incurred and the application of such proceeds occurred at the beginning
of the four-quarter period ending on the last day of the immediately preceding
fiscal quarter of the Company for which internal financial statements are
available, (ii) the incurrence, repayment or retirement of any other Debt by the
Company or its Restricted Subsidiaries since the first day of such four-quarter
period as if such Debt was incurred, repaid or retired at the beginning of such
four-quarter period, (iii) the acquisition (whether by purchase, merger or
otherwise) or disposition (whether by sale, merger or otherwise) of any company,
entity or business acquired or disposed of by the Company or its Restricted
Subsidiaries, as the case may be, since the first day of such four-quarter
period, as if such acquisition or disposition occurred at the beginning of such
four-quarter period. In making a computation under the foregoing clause (i) or
(ii), (A) interest on Debt bearing a floating interest rate will be computed as
if the rate in effect on the date of computation had been the applicable rate
for the entire period, (B) if such Debt bears, at the option of the Company, a
fixed or floating rate of interest, interest thereon will be computed by
applying, at the option of the Company, either the fixed or floating rate and
(C) the amount of Debt under a revolving credit facility will be computed based
upon the average daily balance of such Debt during such four-quarter period and
(iv) if such four-quarter period ends before September 30, 1998, the TSS
acquisition and, if such four-quarter period ends before March 31, 1999, the
Unisign acquisition, in each case as if such acquisitions occurred at the
beginning of such four-quarter period.
Notwithstanding the foregoing, the Company may, and may, to the extent
expressly permitted below, permit its Restricted Subsidiaries to, incur any of
the following Debt ("Permitted Debt"):
(i) Debt of the Company or any Restricted Subsidiary under one or more
credit facilities in an aggregate principal amount at any one time
outstanding not to exceed $20,000,000 less any amounts applied to the
permanent reduction of such credit facilities pursuant to the "Limitation
on Certain Asset Dispositions" covenant (and any guarantees of such Debt by
a Restricted Subsidiary).
(ii) Debt of the Company or any Restricted Subsidiary outstanding on
the Closing Date, other than Debt described under clause (i)above, and
obligations under Hedging Obligations in effect on the Closing Date.
(iii) Debt owed by the Company to any Restricted Subsidiary or owed by
any Restricted Subsidiary to the Company or any other Restricted Subsidiary
(provided that such Debt is held by the Company or such Restricted
Subsidiary).
(iv) Debt represented by the Notes (other than any Additional Notes)
and any Subsidiary Guarantee.
(v) (A) Capitalized Lease Obligations of the Company or any Restricted
Subsidiary, and (B) Debt of the Company or any Restricted Subsidiary under
purchase money mortgages or secured by purchase money security interests so
long as (x) such Debt is not secured by any property or assets of the
Company or any Restricted Subsidiary other than the property and assets so
acquired and (y) such Debt is created prior to, at the time of or within
six months after the later of the acquisition, the completion of
construction or the commencement of full operation of the related property;
provided that the aggregate amount of Debt under the foregoing clauses (A)
and (B) above does not exceed $5.0 million at any one time outstanding.
(vi) Debt of the Company or any Restricted Subsidiary consisting of
guarantees, indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of assets,
including, without limitation, shares of Capital Stock.
(vii) Guarantees by any Restricted Subsidiary made in accordance with
the provisions of the "Guarantees of Debt by Restricted Subsidiaries"
covenant.
(viii) Any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of any
outstanding Debt, other than Debt incurred pursuant to clause (i), (iii),
(v) (vi) or (vii) of this definition, including any successive refinancings
thereof, so long as (A) any such new Debt is in a principal amount that
does not exceed the principal amount so refinanced, plus the amount of any
premium required to be paid in connection with such refinancing pursuant to
the terms of
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the Debt refinanced or the amount of any premium reasonably determined by
the Company as necessary to accomplish such refinancing, plus the amount of
the expenses of the Company reasonably estimated to be incurred in
connection with such refinancing, (B) in the case of any refinancing of
Subordinated Debt, such new Debt is made subordinate to the Notes at least
to the same extent as the Debt being refinanced and (C) such refinancing
Debt does not have a Weighted Average Life less than the Weighted Average
Life of the Debt being refinanced and does not have a final scheduled
maturity earlier than the final scheduled maturity, or permit redemption at
the option of the holder earlier than the earliest date of redemption at
the option of the holder, of the Debt being refinanced.
Limitation on Restricted Payments. The Company will not, and will not
permit any Restricted Subsidiary to, directly or indirectly, take any of the
following actions:
(a) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Capital Stock of the Company or any
Restricted Subsidiary, other than (i) dividends or distributions payable
solely in Qualified Equity Interests, (ii) dividends or distributions by a
Restricted Subsidiary payable to the Company or another Restricted
Subsidiary or (iii) pro rata dividends or distributions on common stock of
a Restricted Subsidiary held by minority stockholders, provided that such
dividends do not in the aggregate exceed the minority stockholders' pro
rata share of such Restricted Subsidiary's net income from the first day of
the Company's fiscal quarter during which the Closing Date occurs;
(b) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock (or any options,
warrants or other rights to acquire shares of Capital Stock) of (i) the
Company, Holdings or any Unrestricted Subsidiary or (ii) any Restricted
Subsidiary held by any Affiliate of the Company (other than, in either
case, any such Capital Stock owned by the Company or any of its Restricted
Subsidiaries);
(c) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Debt; or
(d) make any Investment (other than a Permitted Investment) in any
person
(such payments or other actions described in (but not excluded from) clauses (a)
through (d) being referred to as "Restricted Payments"), unless at the time of,
and immediately after giving effect to, the proposed Restricted Payment:
(i) no Default or Event of Default has occurred and is continuing,
(ii) the Company could incur at least $1.00 of additional Debt (other
than Permitted Debt) pursuant to the first paragraph of the "Limitation on
Debt" covenant and
(iii) the aggregate amount of all Restricted Payments declared or made
after the Closing Date does not exceed the sum of:
(A) the remainder of (x) 100% of the aggregate cumulative
Consolidated EBITDA for the period beginning on the first day of the
Company's fiscal quarter during which the Closing Date occurs and ending
on the last day of the Company's most recent fiscal quarter for which
internal financial statements are available ending prior to the date of
such proposed Restricted Payment (the "Computation Period") minus (y)
the product of 1.4 times the aggregate cumulative Consolidated Fixed
Charges for the Computation Period, plus
(B) the aggregate net proceeds, including the fair market value of
property other than cash (as determined by the Board of Directors, whose
good faith determination will be conclusive), after the Closing Date
from the issuance or sale (other than to a Subsidiary) of debt
securities or Disqualified Stock that have been converted into or
exchanged for Qualified Stock of the Company, together with the
aggregate net cash proceeds received by the Company at the time of such
conversion or exchange, plus received by the Company after the Closing
Date from the issuance or sale (other than to a Subsidiary) of Qualified
Equity Interests of the Company (excluding from this
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computation proceeds of an Equity Offering received by the Company that
are used by it to redeem Notes as discussed above), plus
(C) the aggregate net proceeds, including the fair market value of
property other than cash (as determined by the Board of Directors, whose
good faith determination will be conclusive), after the Closing Date
from the issuance or sale (other than to a Subsidiary) of debt
securities or Disqualified Stock that have been converted into or
exchanged for Qualified Stock of the Company, together with the
aggregate net cash proceeds received by the Company at the time of such
conversion or exchange, plus received by the Company after the Closing
Date from the issuance or sale (other than to a Subsidiary) of debt
securities or Disqualified Stock that have been converted into or
exchanged for Qualified Stock of the Company, together with the
aggregate net proceeds received by the Company at the time of such
conversion or exchange, plus
(D) $5.0 million.
Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may take any of the following actions, so long as (with respect to clauses (e)
and (f) below) no Default or Event of Default has occurred and is continuing or
would occur:
(a) The payment of any dividend within 60 days after the date of
declaration thereof, if at the declaration date such payment would not have
been prohibited by the foregoing provision.
(b) The repurchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of the Company, in exchange for, or
out of the net cash proceeds of a substantially concurrent issuance and
sale (other than to a Subsidiary) of, Qualified Equity Interests of the
Company.
(c) The purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Debt in exchange for, or out of
the net cash proceeds of a substantially concurrent issuance and sale
(other than to a Subsidiary) of Qualified Equity Interests of the Company.
(d) The purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Debt in exchange for, or out of the
net cash proceeds of a substantially concurrent issuance or sale (other
than to a Subsidiary) of, Subordinated Debt, so long as the Company or a
Restricted Subsidiary would be permitted to refinance such original
Subordinated Debt with such new Subordinated Debt pursuant to clause (viii)
of the definition of Permitted Debt.
(e) The repurchase of any Subordinated Debt at a purchase price not
greater than 101% of the principal amount of such Subordinated Debt in the
event of a "change of control" in accordance with provisions similar to the
"Purchase of Notes upon a Change of Control" covenant; provided that, prior
to or simultaneously with such repurchase, the Company has made the Change
of Control Offer as provided in such covenant with respect to the Notes and
has repurchased all Notes validly tendered for payment in connection with
such Change of Control Offer.
(f) The purchase, redemption, acquisition, cancellation or other
retirement for value of shares of Capital Stock of the Company or Holdings,
options on any such shares or related stock appreciation rights or similar
securities held by officers or employees or former officers or employees
(or their estates or beneficiaries under their estates) or by any employee
benefit plan, upon death, disability, retirement or termination of
employment or pursuant to the terms of any employee benefit plan or any
other agreement under which such shares of stock or related rights were
issued; provided that the aggregate cash consideration paid for such
purchase, redemption, acquisition, cancellation or other retirement of such
shares of Capital Stock after the Closing Date does not exceed in any
fiscal year the sum of (i) $1.0 million and (ii) any proceeds received by
the Company under a related key man or other life insurance policy.
(g) Make payments to Holdings pursuant to the Tax Sharing Agreement as
in effect on the Closing Date; and reimburse Holdings for out-of-pocket
administrative expenses incurred by Holdings, provided such reimbursement
may not exceed $50,000 in any fiscal year.
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The payments described in clauses (b), (c), (e) and (f) of this paragraph will
be Restricted Payments that will be permitted to be taken in accordance with
this paragraph but will reduce the amount that would otherwise be available for
Restricted Payments under the foregoing clause (iii) of the first paragraph of
this covenant and the payments described in clauses (a), (d) and (g) of this
paragraph will be Restricted Payments that will be permitted to be taken in
accordance with this paragraph and will not reduce the amount that would
otherwise be available for Restricted Payments under the foregoing clause (iii)
of the first paragraph of this covenant.
For the purpose of making any calculations under the Indenture (i) if a
Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company will
be deemed to have made an Investment in amount equal to the fair market value of
the net assets of such Restricted Subsidiary at the time of such designation as
determined by the Board of Directors of the Company, whose good faith
determination will be conclusive, (ii) any property transferred to or from an
Unrestricted Subsidiary will be valued at fair market value at the time of such
transfer, as determined by the Board of Directors of the Company, whose good
faith determination will be conclusive and (iii) subject to the foregoing, the
amount of any Restricted Payment, if other than cash, will be determined by the
Board of Directors of the Company, whose good faith determination will be
conclusive.
If the aggregate amount of all Restricted Payments calculated under the
foregoing provision includes an Investment in an Unrestricted Subsidiary or
other person that thereafter becomes a Restricted Subsidiary, the aggregate
amount of all Restricted Payments calculated under the foregoing provision will
be reduced by the lesser of (x) the net asset value of such Subsidiary at the
time it becomes a Restricted Subsidiary and (y) the initial amount of such
Investment.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under the foregoing
provision will be reduced by the amount of any net reduction in such Investment
(resulting from the payment of interest or dividends, loan repayment, transfer
of assets or otherwise), to the extent such net reduction is not included in the
Company's Consolidated Adjusted Net Income; provided that the total amount by
which the aggregate amount of all Restricted Payments may be reduced may not
exceed the lesser of (x) the cash proceeds received by the Company and its
Restricted Subsidiaries in connection with such net reduction and (y) the
initial amount of such Investment.
In computing Consolidated Adjusted Net Income of the Company for purposes
of the foregoing clause (iii)(A), (i) the Company may use audited financial
statements for the portions of the relevant period for which audited financial
statements are available on the date of determination and unaudited financial
statements and other current financial data based on the books and records of
the Company for the remaining portion of such period and (ii) the Company will
be permitted to rely in good faith on the financial statements and other
financial data derived from the books and records of the Company that are
available on the date of determination. If the Company makes a Restricted
Payment that, at the time of the making of such Restricted Payment, would in the
good faith determination of the Company be permitted under the requirements of
the Indenture, such Restricted Payment will be deemed to have been made in
compliance with the Indenture notwithstanding any subsequent adjustments made in
good faith to the Company's financial statements affecting Consolidated Adjusted
Net Income of the Company for any period.
Purchase of Notes upon a Change of Control. If a Change of Control occurs
at any time, then each holder of Notes will have the right to require that the
Company purchase such holder's Notes, in whole or in part in integral multiples
of $1,000, at a purchase price in cash equal to 101% of the principal amount of
such Notes, plus accrued and unpaid interest, if any, to the date of purchase,
pursuant to the offer described below (the "Change of Control Offer") and the
other procedures set forth in the Indenture.
Within 30 days following any Change of Control, the Company will notify the
Trustee thereof and give written notice of such Change of Control to each holder
of Notes by first-class mail, postage prepaid, at its address appearing in the
security register, stating, among other things, (i) the purchase price and the
purchase date, which will be a Business Day no earlier than 30 days nor later
than 60 days from the date such notice is mailed or such later date as is
necessary to comply with requirements under the Exchange Act; (ii) that any Note
not tendered will continue to accrue interest; (iii) that, unless the Company
defaults in the payment of
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the purchase price, any Notes accepted for payment pursuant to the Change of
Control Offer will cease to accrue interest after the Change of Control purchase
date; and (iv) certain other procedures that a holder of Notes must follow to
accept a Change of Control Offer or to withdraw such acceptance.
If a Change of Control Offer is made, there can be no assurance that the
Company will have available funds sufficient to pay the purchase price for all
of the Notes that might be tendered by holders of the Notes seeking to accept
the Change of Control Offer. The failure of the Company to make or consummate
the Change of Control Offer or pay the applicable Change of Control purchase
price when due would result in an Event of Default and would give the Trustee
and the holders of the Notes the rights described under "Events of Default".
One of the events that constitutes a Change of Control under the Indenture
is the disposition of "all or substantially all" of the Company's assets. This
term has not been interpreted under New York law (which is the governing law of
the Indenture) to represent a specific quantitative test. As a consequence, in
the event holders of the Notes elect to require the Company to purchase the
Notes and the Company elects to contest such election, there can be no assurance
as to how a court interpreting New York law would interpret the phrase in many
circumstances.
The existence of a holder's right to require the Company to purchase such
holder's Notes upon a Change of Control may deter a third party from acquiring
the Company in a transaction that constitutes a Change of Control.
The definition of "Change of Control" in the Indenture is limited in scope.
The provisions of the Indenture may not afford holders of Notes the right to
require the Company to repurchase such Notes in the event of a highly leveraged
transaction or certain transactions with the Company's management or its
affiliates, including a reorganization, restructuring, merger or similar
transaction involving the Company (including, in certain circumstances, an
acquisition of the Company by management or its affiliates) that may adversely
affect holders of the Notes, if such transaction is not a transaction defined as
a Change of Control. See "Certain Definitions" above for the definition of
"Change of Control". A transaction involving the Company's management or its
affiliates, or a transaction involving a recapitalization of the Company, would
result in a Change of Control if it is the type of transaction specified in such
definition.
The Company will comply with the applicable tender offer rules including
Rule 14e-l under the Exchange Act, and any other applicable securities laws and
regulations in connection with a Change of Control Offer.
The Company will not, and will not permit any Restricted Subsidiary to,
create any restriction (other than restrictions existing under Debt as in effect
on the Closing Date or in refinancings of such Debt) that would materially
impair the ability of the Company to make a Change of Control Offer to purchase
the Notes or, if such Change of Control Offer is made, to pay for the Notes
tendered for purchase.
Limitation on Certain Asset Sales. (a) The Company will not, and will not
permit any Restricted Subsidiary to, engage in any Asset Sale unless (i) the
consideration received by the Company or such Restricted Subsidiary for such
Asset Sale is not less than the fair market value of the assets sold (as
determined by the Board of Directors of the Company, whose good faith
determination will be conclusive) and (ii) the consideration received by the
Company or the relevant Restricted Subsidiary in respect of such Asset Sale
consists of at least 85% (A) cash or cash equivalents or (B) the assumption by
the transferee of Debt of the Company or a Restricted Subsidiary ranked pari
passu with the Notes and release of the Company or such Restricted Subsidiary
from all liability on such Debt, or a combination of the foregoing.
(b) If the Company or any Restricted Subsidiary engages in an Asset Sale,
the Company may, at its option, within 270 days after such Asset Sale, (i) apply
all or a portion of the Net Cash Proceeds to the permanent reduction of amounts
outstanding under one or more credit facilities referred to in clause (i) of the
definition of Permitted Debt or to the repayment of other senior Debt of the
Company or a Restricted Subsidiary or (ii) invest (or enter into a legally
binding agreement to invest) all or a portion of such Net Cash Proceeds in
properties and assets to replace the properties and assets that were the subject
of the Asset Sale or in properties and assets that will be used in businesses of
the Company or its Restricted Subsidiaries, as the case may be, existing on the
Closing Date. If any such legally binding agreement to invest such Net Cash
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Proceeds is terminated, the Company may, within 90 days of such termination or
within 270 days of such Asset Sale, whichever is later, invest such Net Cash
Proceeds as provided in clause (b)(i) or (b)(ii) (without regard to the
parenthetical contained in such clause (b)(ii)) above. The amount of such Net
Cash Proceeds not so used as set forth above in this paragraph (b) constitutes
"Excess Proceeds".
(c) When the aggregate amount of Excess Proceeds exceeds $5,000,000, the
Company will, within 30 days thereafter, make an offer to purchase from all
holders of Notes and from the holders of any Pari Passu Debt, to the extent
required by the terms thereof, on a pro rata basis, in accordance with the
procedures set forth in the Indenture or the agreements governing any such Pari
Passu Debt, the maximum principal amount (expressed as a multiple of $1,000) of
the Notes and any such Pari Passu Debt that may be purchased with the Excess
Proceeds. The offer price as to each Note and any such Pari Passu Debt will be
payable in cash in an amount equal to (solely in the case of the Notes) 100% of
the principal amount of such Note and (solely in the case of Pari Passu Debt) no
greater than 100% of the principal amount (or accreted value, as applicable) of
such Pari Passu Debt, plus in each case accrued interest, if any, to the date of
repurchase. To the extent that the aggregate principal amount of Notes and any
such Pari Passu Debt tendered pursuant to an excess proceeds offer is less than
the Excess Proceeds, the Company may use the portion of the Excess Proceeds not
required to be used to repurchase the Notes and such Pari Passu Debt for general
corporate purposes. If the aggregate principal amount of Notes and any such Pari
Passu Debt validly tendered and not withdrawn by holders thereof exceeds the
Excess Proceeds, the Notes and any such Pari Passu Debt to be purchased will be
selected on a pro rata basis (based upon the principal amount of Notes and the
principal amount or accreted value of such Pari Passu Debt tendered by each
holder). Upon completion of such offer to purchase, the amount of Excess
Proceeds will be reset to zero.
Limitation on Transactions with Affiliates. The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into or
suffer to exist any transaction with, or for the benefit of, any Affiliate of
the Company unless (a) such transaction is on terms that are no less favorable
to the Company or such Restricted Subsidiary, as the case may be, than those
that could have been obtained in an arm's length transaction with third parties
who are not Affiliates and (b) either (i) with respect to any transaction or
series of related transactions involving aggregate payments in excess of
$250,000 but less than $2,500,000, the Company delivers an officers' certificate
to the Trustee certifying that such transaction or transactions comply with
clause (a) above or (ii) with respect to a transaction or series of related
transactions involving aggregate payments equal or greater than $2,500,000, such
transaction or transactions have been approved by the Board of Directors
(including a majority of the Disinterested Directors) of the Company or the
Company has obtained a written opinion from a nationally recognized investment
banking firm to the effect that such transaction or transactions are fair to the
Company or such Restricted Subsidiary from a financial point of view.
The foregoing covenant will not restrict any of the following:
(A) Transactions among the Company and/or its Restricted Subsidiaries.
(B) The Company from paying reasonable and customary regular
compensation and fees to directors of the Company or any Restricted
Subsidiary who are not employees of the Company or any Restricted
Subsidiary.
(C) Transactions permitted by the provisions of the "Limitation on
Restricted Payments" covenant.
Limitation on Dividends and Other Payment Restrictions Affecting Restricted
Subsidiaries. The Company will not, and will not permit any Restricted
Subsidiary 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 Restricted Subsidiary to (a) pay dividends, in cash or
otherwise, or make any other distributions on or in respect of its Capital
Stock, (b) pay any Debt owed to the Company or any other Restricted Subsidiary,
(c) make loans or advances to the Company or any other Restricted Subsidiary or
(d) transfer any of its properties or assets to the Company or any other
Restricted Subsidiary, except for such encumbrances or restrictions existing
under or by reason of any of the following:
(i) Any agreement or instrument in effect on the Closing Date.
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(ii) Customary non-assignment provisions of any lease governing a
leasehold interest of the Company or any Restricted Subsidiary.
(iii) Any agreement or instrument of a person acquired by the Company
or any Restricted Subsidiary in existence at the time of such acquisition
(but not created in contemplation thereof), which encumbrance or
restriction is not applicable to any person, or the properties or assets of
any person, other than the person, or the property or assets of the person,
so acquired.
(iv) The refinancing or successive refinancings of Debt incurred under
agreements or instruments referred to in the foregoing clause (i) or (iii),
so long as the encumbrances or restrictions contained therein are no less
favorable to the Company or any Restricted Subsidiary than those contained
in such original agreement or instrument.
(v) Any agreement providing for the incurrence of Debt by a Restricted
Subsidiary in compliance with the "Limitation on Debt" covenant, provided
that such Restricted Subsidiary is or becomes a Subsidiary Guarantor.
(vi) Contained in any agreement pursuant to which Debt was issued if
(A) the encumbrance or restriction applies only in the event of a payment
default or a default with respect to a financial covenant contained in such
Debt, (B) the encumbrance or restriction is not materially more
disadvantageous to the holders of the Notes than is customary in comparable
financings (as determined by the Company) and (C) the Company determines
that any such encumbrance or restriction will not materially affect the
Company's ability to make principal or interest payments on the Notes.
Limitation on Issuances and Sales of Capital Stock of Restricted
Subsidiaries. The Company will not sell, and will not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell, any shares of Capital
Stock of a Restricted Subsidiary (including options, warrants or other rights to
purchase shares of such Capital Stock) except (a) to the Company or a Wholly
Owned Restricted Subsidiary, (b) issuances or sales to foreign nationals of
shares of Capital Stock of foreign Restricted Subsidiaries, to the extent
required by applicable law, or issuances or sales to directors of directors'
qualifying shares, (c) if, immediately after giving effect to such issuance or
sale, neither the Company nor any of its Subsidiaries owns any shares of Capital
Stock of such Restricted Subsidiary (including options, warrants or other rights
to purchase shares of such Capital Stock) or (d) if, immediately after giving
effect to such issuance or sale, such Restricted Subsidiary would no longer
constitute a Restricted Subsidiary and any remaining Investment in such person
would have been permitted to be made under the "Limitation on Restricted
Payments" covenant if made on the date of such issuance or sale.
Guarantees of Debt by Restricted Subsidiaries. All of the Company's future
Restricted Subsidiaries will be Subsidiary Guarantors.
In addition, the Company will not permit any Restricted Subsidiary,
directly or indirectly, to guarantee, assume or in any other manner become
liable for the payment of any Debt of the Company or any Debt of any other
Restricted Subsidiary, unless (a) such Restricted Subsidiary has executed and
delivered, or simultaneously executes and delivers, a Subsidiary Guarantee and
(b) with respect to any guarantee of Subordinated Debt by a Restricted
Subsidiary, any such guarantee is subordinated to such Restricted Subsidiary's
guarantee with respect to the Notes at least to the same extent as such
Subordinated Debt is subordinated to the Notes.
Any Subsidiary Guarantee may provide by its terms that it will be
automatically and unconditionally released and discharged upon (i) any sale,
exchange or transfer to any person not an Affiliate of the Company of all of the
Company's and the Restricted Subsidiaries' Capital Stock in, or all or
substantially all the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by the Indenture) or (iii) the
designation of such Restricted Subsidiary as an Unrestricted Subsidiary in
accordance with the terms of the Indenture.
Unrestricted Subsidiaries. (a) The Board of Directors of the Company may
designate any Subsidiary (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary so long as (i) neither the Company
nor any Restricted Subsidiary is directly or indirectly liable for any Debt of
such Subsidiary, (ii) no default with respect to any Debt of such Subsidiary
would permit (upon notice, lapse of time or otherwise) any holder of any other
Debt of the Company or any Restricted Subsidiary to declare a
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default on such other Debt or cause the payment thereof to be accelerated or
payable prior to its stated maturity, (iii) any Investment in such Subsidiary
made as a result of designating such Subsidiary an Unrestricted Subsidiary will
not violate the provisions of the "Limitation on Restricted Payments" covenant,
(iv) neither the Company nor any Restricted Subsidiary has a contract,
agreement, arrangement, understanding or obligation of any kind, whether written
or oral, with such Subsidiary other than those that might be obtained at the
time from persons who are not Affiliates of the Company and (v) neither the
Company nor any Restricted Subsidiary has any obligation to subscribe for
additional shares of Capital Stock or other equity interest in such Subsidiary,
or to maintain or preserve such Subsidiary's financial condition or to cause
such Subsidiary to achieve certain levels of operating results.
(b) The Board of Directors of the Company may designate any Unrestricted
Subsidiary as a Restricted Subsidiary; provided that (i) no Default or Event of
Default has occurred and is continuing following such designation and (ii) the
Company could incur at least $1.00 of additional Debt (other than Permitted
Debt) pursuant to the first paragraph of the covenant described under the
caption "Limitation on Debt" (treating any Debt of such Unrestricted Subsidiary
as the incurrence of Debt by a Restricted Subsidiary).
Limitation on Liens. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create, incur, assume or
suffer to exist any Lien of any kind on or with respect to any of its property
or assets, including any shares of stock or debt of any Restricted Subsidiary,
whether owned at the Closing Date or thereafter acquired, or any income, profits
or proceeds therefrom, or assign or otherwise convey any right to receive income
thereon, unless (a) in the case of any Lien securing Subordinated Debt, the
Notes are secured by a Lien on such property, assets or proceeds that is senior
in priority to such Lien and (b) in the case of any other Lien, the Notes are
equally and ratably secured with the obligation or liability secured by such
Lien.
Notwithstanding the foregoing, the Company may, and may permit any
Restricted Subsidiary to, incur any of the following Liens ("Permitted Liens"):
(i) Liens existing as of the Closing Date.
(ii) Liens on property or assets of the Company or any Restricted
Subsidiary securing Debt under one or more credit facilities in a principal
amount not to exceed the principal amount of the outstanding Debt permitted
by clause (i) of the definition of "Permitted Debt".
(iii) Liens on any property or assets of a Restricted Subsidiary
granted in favor of the Company or any Restricted Subsidiary.
(iv) Liens securing the Notes or any Subsidiary Guarantee.
(v) Liens representing the interest or title of lessors under
Capitalized Lease Obligations or Liens securing purchase money mortgages or
purchase money security interests, so long as the aggregate amount secured
by such Liens does not exceed the respective amounts permitted by clause
(v) of the definition of "Permitted Debt".
(vi) Liens securing Acquired Debt created prior to (and not in
connection with or in contemplation of) the incurrence of such Debt by the
Company or any Restricted Subsidiary; provided that such Lien does not
extend to any property or assets of the Company or any Restricted
Subsidiary other than the property and assets acquired in connection with
the incurrence of such Acquired Debt.
(vii) Liens securing Hedging Obligations incurred in the ordinary
course of business.
(viii) Statutory Liens or landlords', carriers', warehouseman's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business and with respect to amounts not
yet delinquent or being contested in good faith by appropriate proceedings.
(ix) Liens for taxes, assessments, government charges or claims that
are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted.
(x) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance bonds and other obligations of a like
nature incurred in the ordinary course of business (other than contracts
for the payment of money).
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(xi) Easements, rights-of-way, restrictions and other similar charges
or encumbrances not interfering in any material respect with the business
of the Company or any Restricted Subsidiary incurred in the ordinary course
of business.
(xii) Liens arising by reason of any judgment, decree or order of any
court, so long as such Lien is adequately bonded and any appropriate legal
proceedings that may have been duly initiated for the review of such
judgment, decree or order have not been finally terminated or the period
within which such proceedings may be initiated has not expired.
(xiii) Liens securing reimbursement obligations with respect to
letters of credit that encumber documents and other property relating to
such letters of credit and the products and proceeds thereof.
(xiv) Liens upon specific items of inventory or other goods and
proceeds of the Company or any Restricted Subsidiary securing its
obligations in respect of bankers' acceptances issued or created for the
account of any person to facilitate the purchase, shipment or storage of
such inventory or other goods.
(xv) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods.
(xvi) Any extension, renewal or replacement, in whole or in part, of
any Lien described in the foregoing clauses (i) through (xv); provided that
any such extension, renewal or replacement is no more restrictive in any
material respect than the Lien so extended, renewed or replaced and does
not extend to any additional property or assets.
Reports. At all times from and after the earlier of (i) the date of the
commencement of an Exchange Offer or the effectiveness of the Shelf Registration
Statement (the "Registration") and (ii) the date six months after the Closing
Date, in either case, whether or not the Company is then required to file
reports with the Commission, the Company will file with the Commission all such
annual reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Sections 13(a) or 15(d) under of the
Exchange Act. The Company will also be required (a) to supply to the Trustee and
each holder of Notes, or supply to the Trustee for forwarding to each such
holder, without cost to such holder, copies of such reports and other documents
within 15 days after the date on which the Company files such reports and
documents with the Commission or the date on which the Company would be required
to file such reports and documents if the Company were so required and (b) if
filing such reports and documents with the Commission is not accepted by the
Commission or is prohibited under the Exchange Act, to supply at the Company's
cost copies of such reports and documents to any prospective holder of Notes
promptly upon written request. In addition, at all times prior to the earlier of
the date of the Registration and the date six months after the Closing Date, the
Company will, at its cost, deliver to each holder of the Notes quarterly and
annual reports substantially equivalent to those that would be required by the
Exchange Act. Furthermore, at all times prior to the Registration, the Company
will supply at the Company's cost copies of such reports and documents to any
prospective holder of the Notes promptly upon written request.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company may not consolidate with or merge with or into any other person
or, directly or indirectly, convey, sell, assign, transfer, lease or otherwise
dispose of its properties and assets substantially as an entirety to any other
person (in one transaction or a series of related transactions), unless each of
the following conditions is satisfied:
(a) Either (i) the Company is the surviving corporation or (ii) the
person (if other than the Company) formed by such consolidation or into
which the Company is merged or the person that acquires by conveyance,
sale, assignment, transfer, lease or other disposition the properties and
assets of the Company substantially as an entirety (the "Surviving Entity")
(A) is a corporation, partnership or trust organized and validly existing
under the laws of the United States, any state thereof or the District of
Columbia and (B) expressly assumes, by a supplemental indenture in form
satisfactory to the Trustee, all of the Company's obligations under the
Indenture and the Notes.
(b) Immediately after giving effect to such transaction, no Default or
Event of Default has occurred and is continuing.
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(c) Immediately after giving effect to such transaction on a pro forma
basis, the Consolidated Net Worth of the Company (or of the Surviving
Entity if the Company is not the continuing obligor under the Indenture) is
equal to or greater than the Consolidated Net Worth of the Company
immediately prior to such transaction.
(d) Immediately after giving effect to such transaction on a pro forma
basis (on the assumption that the transaction occurred at the beginning of
the most recently ended four full fiscal quarter period for which internal
financial statements are available), the Company (or the Surviving Entity
if the Company is not the continuing obligor under the Indenture) could
incur at least $1.00 of additional Debt (other than Permitted Debt)
pursuant to the first paragraph of the "Limitation on Debt" covenant.
(e) If the Company is not the continuing obligor under the Indenture,
each Subsidiary Guarantor, unless it is the other party to the transaction
described above, has by supplemental indenture confirmed that its
Subsidiary Guarantee applies to the Surviving Entity's obligations under
the Indenture and the Notes.
(f) If any of the property or assets of the Company or any of its
Restricted Subsidiaries would thereupon become subject to any Lien, the
provisions of the "Limitation on Liens" covenant are complied with.
(g) The Company delivers, or causes 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 transaction
complies with the requirements of the Indenture.
In the event of any transaction described in and complying with the
conditions listed in the first paragraph of this covenant in which the Company
is not the continuing obligor under the Indenture, the Surviving Entity will
succeed to, and be substituted for, and may exercise every right and power of,
the Company under the Indenture, and thereafter the Company will, except in the
case of a lease, be discharged from all its obligations and covenants under the
Indenture and Notes.
EVENTS OF DEFAULT
Each of the following will be "Events of Default" under the Indenture:
(a) Default in the payment of any interest on any Note when it becomes
due and payable, and continuance of such default for a period of 30 days.
(b) Default in the payment of the principal of (or premium, if any,
on) any Note when due.
(c) Failure to perform or comply with the Indenture provisions
described under "Consolidation, Merger and Sale of Assets".
(d) Default in the performance, or breach, of any covenant or
agreement of the Company contained in the Indenture (other than a default
in the performance, or breach, of a covenant or agreement that is
specifically dealt with elsewhere herein), and continuance of such default
or breach for a period of 60 days after written notice has been given to
the Company by the Trustee or to the Company and the Trustee by the holders
of at least 25% in aggregate principal amount of the Notes then
outstanding.
(e) (i) An event of default has occurred under any mortgage, bond,
indenture, loan agreement or other document evidencing an issue of Debt of
the Company or any Restricted Subsidiary, which issue has an aggregate
outstanding principal amount of not less than $1,000,000, and such default
has resulted in such Debt becoming, whether by declaration or otherwise,
due and payable prior to the date on which it would otherwise become due
and payable or (ii) a default in any payment when due at final maturity of
any such Debt.
(f) Failure by the Company or any of its Restricted Subsidiaries to
pay one or more final judgments the uninsured portion of which exceeds in
the aggregate $1,000,000, which judgment or judgments are not paid,
discharged or stayed for a period of 60 days.
(g) Any Subsidiary Guarantee issued by a Significant Subsidiary ceases
to be in full force and effect or is declared null and void or any
Subsidiary Guarantor denies that it has any further liability under any
Subsidiary Guarantee, or gives notice to such effect (other than by reason
of the termination of the Indenture or the release of any such Subsidiary
Guarantee in accordance with the Indenture), and such
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condition has continued for a period of 30 days after written notice of
such failure requiring the Subsidiary Guarantor and the Company to remedy
the same has been given (x) to the Company by the Trustee or (y) to the
Company and the Trustee by the holders of 25% in aggregate principal amount
of the Notes then outstanding.
(h) The occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to the Company or any Significant Subsidiary.
If an Event of Default (other than as specified in clause (h) above) occurs
and is continuing, the Trustee or the holders of not less than 25% in aggregate
principal amount of the Notes then outstanding may, and the Trustee at the
request of such holders will, declare the principal of all of the outstanding
Notes immediately due and payable and, upon any such declaration, such principal
will become due and payable immediately. If an Event of Default specified in
clause (h) above occurs and is continuing, then the principal of all of the
outstanding Notes will ipso facto become and be immediately due and payable
without any declaration or other act on the part of the Trustee or any holder of
Notes.
At any time after a declaration of acceleration under the Indenture, 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 and its consequences if (i) the Company has paid or deposited
with the Trustee a sum sufficient to pay (A) all overdue interest on all Notes,
(B) all unpaid principal of (and premium, if any, on) any outstanding Notes that
has become due otherwise than by such declaration of acceleration and interest
thereon at the rate borne by the Notes, (C) to the extent that payment of such
interest is lawful, interest upon overdue interest and overdue principal at the
rate borne by the Notes and, (D) 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; and (ii) all Events of Default,
other than the non-payment of amounts of principal of (or premium, if any, on)
or interest on the Notes that have become due solely by such declaration of
acceleration, have been cured or waived. No such rescission will affect any
subsequent default or impair any right consequent thereon.
The holders of not less than a majority in aggregate principal amount of
the outstanding Notes may, on behalf of the holders of all of the Notes, waive
any past defaults under the Indenture, except a default in the payment of the
principal of (and premium, if any) or interest on any Note, or in respect of a
covenant or provision that under the Indenture cannot be modified or amended
without the consent of the holder of each Note outstanding.
If a Default or an Event of Default occurs and is continuing and is known
to the Trustee, the Trustee will mail to each holder of the Notes notice of the
Default or Event of Default within 90 days after the occurrence thereof. Except
in the case of a Default or an Event of Default in payment of principal of (and
premium, if any, on) or interest on any Notes, the Trustee may withhold the
notice to the holders of the Notes if a committee of its trust officers in good
faith determines that withholding such notice is in the interests of the holders
of the Notes.
The Company is required to furnish to the Trustee annual statements as to
the performance by the Company and the Subsidiary Guarantors of their respective
obligations under the Indenture and as to any default in such performance. The
Company is also required to notify the Trustee within five days of any Default.
DEFEASANCE OR COVENANT DEFEASANCE OF INDENTURE
The Company may, at its option and at any time, terminate the obligations
of the Company and any Subsidiary Guarantors with respect to the outstanding
Notes ("defeasance"). Such defeasance means that the Company will be deemed to
have paid and discharged the entire Debt represented by the outstanding Notes,
except for (i) the rights of holders of outstanding Notes to receive payments in
respect of the principal of (and premium, if any, on) and interest on such Notes
when such payments are due, (ii) the Company's obligations to issue temporary
Notes, register the transfer or exchange of any Notes, replace mutilated,
destroyed, lost or stolen Notes, maintain an office or agency for payments in
respect of the Notes and segregate and hold such payments in trust, (iii) the
rights, powers, trusts, duties and immunities of the Trustee and (iv) the
defeasance
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provisions of the Indenture. In addition, the Company may, at its option and at
any time, elect to terminate the obligations of the Company and any Subsidiary
Guarantor with respect to certain covenants set forth in the Indenture and
described under "Certain Covenants" above, and any omission to comply with such
obligations would not constitute a Default or an Event of Default with respect
to the Notes ("covenant defeasance").
In order to exercise either defeasance or covenant defeasance, (a) the
Company must irrevocably deposit or cause to be deposited with the Trustee, as
trust funds in trust, specifically pledged as security for, and dedicated solely
to, the benefit of the holders of the Notes, money in an amount, or U.S.
Government Obligations (as defined in the Indenture) that through the scheduled
payment of principal and interest thereon will provide money in an amount, or a
combination thereof, sufficient, in the opinion of a nationally recognized firm
of independent public accountants, to pay and discharge the principal of (and
premium, if any, on) and interest on the outstanding Notes at maturity (or upon
redemption, if applicable) of such principal or installment of interest; (b) no
Default or Event of Default has occurred and is continuing on the date of such
deposit or, insofar as an event of bankruptcy under clause (h) of "Events of
Default" above is concerned, at any time during the period ending on the 91st
day after the date of such deposit; (c) such defeasance or covenant defeasance
may not result in a breach or violation of, or constitute a default under, the
Indenture or any material agreement or instrument to which the Company or any
Subsidiary Guarantor is a party or by which it is bound; (d) in the case of
defeasance, the Company must deliver to the Trustee an opinion of counsel
stating that the Company has received from, or there has been published by, the
Internal Revenue Service a ruling, or since the date hereof there has been a
change in applicable federal income tax law, to the effect, and based thereon
such opinion must confirm 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 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 had not occurred; (e) in the case of covenant defeasance, the Company
must have delivered to the Trustee an opinion of counsel to the effect that the
Holders of the Notes outstanding will not recognize income, gain or loss for
federal income tax purposes as a result of such 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 covenant defeasance had not
occurred; and (f) the Company must have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to either the defeasance or the covenant
defeasance, as the case may be, have been complied with.
SATISFACTION AND DISCHARGE
Upon the request of the Company, the Indenture will cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Notes, as expressly provided for in the Indenture) and the Trustee, at the
expense of the Company, will execute proper instruments acknowledging
satisfaction and discharge of the Indenture when (a) either (i) all the Notes
theretofore authenticated and delivered (other than destroyed, lost or stolen
Notes that have been replaced or paid and Notes that have been subject to
defeasance under "Defeasance or Covenant Defeasance of Indenture") have been
delivered to the Trustee for cancellation or (ii) all Notes not theretofore
delivered to the Trustee for cancellation (A) have become due and payable, (B)
will become due and payable at maturity within one year or (C) 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 has irrevocably deposited or caused to
be deposited with the Trustee funds in trust for the purpose 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
premium, if any, on) and interest on the Notes to the date of such deposit (in
the case of Notes that have become due and payable) or to the Stated Maturity or
redemption date, as the case may be; (b) the Company has paid or caused to be
paid all sums payable under the Indenture by the Company; and (c) the Company
has delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent provided in the Indenture relating to
the satisfaction and discharge of the Indenture have been complied with.
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AMENDMENTS AND WAIVERS
Modifications and amendments of the Indenture and any Subsidiary Guarantee
may be made by the Company, any affected Subsidiary Guarantor and the Trustee
with the consent of the holders of a majority in aggregate outstanding principal
amount of the Notes; provided, however, that no such modification or amendment
may, without the consent of the holder of each outstanding Note affected
thereby,
(a) change the Stated Maturity of the principal of, or any installment
of interest on, any Note, or reduce the principal amount thereof or the
rate of interest thereon or any premium payable upon the redemption
thereof, or change the place of payment where, or the coin or currency in
which any Note or any premium or the interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment after
the Stated Maturity thereof (or, in the case of redemption, on or after the
Redemption Date);
(b) reduce the percentage in principal amount of outstanding Notes,
the consent of whose holders is required for any such amendment or for any
waiver of compliance with certain provisions of, or certain defaults and
their consequences provided for under, the Indenture; or
(c) waive a default in the payment of principal of, or premium, if
any, or interest on the Notes or reduce the percentage or aggregate
principal amount of outstanding Notes the consent of whose holders is
necessary for waiver of compliance with certain provisions of the Indenture
or for waiver of certain defaults.
Without the consent of the holders of at least 75% in principal amount of
the Notes then outstanding (including consents obtained in connection with a
tender offer or exchange offer for such Notes), no waiver or amendment to the
Indenture may make any change in the provisions described above under the
caption "Change of Control" after the mailing of an offer with respect to a
Change of Control Offer that adversely affects the rights of any holder of
Notes.
The holders of a majority in aggregate principal amount of the Notes
outstanding may waive compliance with certain restrictive covenants and
provisions of the Indenture.
Without the consent of any holders, the Company and the Trustee, at any
time and from time to time, may enter into one or more indentures supplemental
to the Indenture for any of the following purposes: (1) to evidence the
succession of another person to the Company and the assumption by any such
successor of the covenants of the Company in the Indenture and in the Notes; or
(2) to add to the covenants of the Company for the benefit of the holders, or to
surrender any right or power herein conferred upon the Company; or (3) to add
additional Events of Defaults; or (4) to provide for uncertificated Notes in
addition to or in place of the certificated Notes; or (5) to evidence and
provide for the acceptance of appointment under the Indenture by a successor
Trustee; or (6) to secure the Notes; or (7) to cure any ambiguity, to correct or
supplement any provision in the Indenture that may be defective or inconsistent
with any other provision in the Indenture, or to make any other provisions with
respect to matters or questions arising under the Indenture, provided that such
actions pursuant to this clause (7) do not adversely affect the interests of the
holders in any material respect; or (8) to comply with any requirements of the
Commission in order to effect and maintain the qualification of the Indenture
under the Trust Indenture Act.
THE TRUSTEE
IBJ Schroder Bank & Trust Company, the Trustee under the Indenture, will be
the initial paying agent and registrar for the Notes.
The Indenture provides 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. Under the Indenture, the holders of a majority in outstanding
principal amount of the Notes will have the right to direct the time, method and
place of conducting any proceeding for exercising any remedy available to the
Trustee, subject to certain exceptions. If an Event of Default has occurred and
is continuing, the Trustee will exercise such rights and powers vested
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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.
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee thereunder,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize on certain property received by it in respect of any
such claims, as security or otherwise. The Trustee is permitted to engage in
other transactions; provided, however, that, if it acquires any conflicting
interest (as defined), it must eliminate such conflict upon the occurrence of an
Event of Default or else resign.
GOVERNING LAW
The Indenture, the Notes and the Subsidiary Guarantees will be governed by,
and construed in accordance with, the laws of the State of New York.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth in the next paragraph, the Notes to be resold as set
forth herein will initially be issued in the form of one Global Note (the
"Global Note"). The Global Note will be deposited on the Closing Date with the
Trustee as custodian for The Depository Trust Company (the "Depositary") and
registered in the name of Cede & Co., as nominee of the Depositary (such nominee
being referred to herein as the "Global Note Holder").
Notes originally purchased by persons outside the United States pursuant to
sales in accordance with Regulation S under the Securities Act will be
represented upon issuance by a temporary global Note certificate (the "Temporary
Certificate"), which will not be exchangeable for Certificated Notes until the
expiration of the "40-day restricted period" within the meaning of Rule
903(c)(3) of Regulation S under the Securities Act. The Temporary Certificate
will be registered in the name of, and held by, a temporary certificate holder
until the expiration of such 40-day period, at which time the Temporary
Certificate will be delivered to the Trustee in exchange for Certificated Notes
registered in the names requested by such temporary certificate holder. In
addition, until the expiration of such 40-day period, transfers of interests in
the Temporary Certificate can only be effected through such temporary
certificate holder in accordance with the requirements set forth in "Notice to
Investors".
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants designated by the Initial Purchasers with portions of
the principal amount of the Global Note and (ii) ownership of the Notes
evidenced by the Global Note will be shown on, and the transfer of ownership
thereof will be effected only through, records maintained by the Depositary
(with respect to the interests of the Depositary's Participants), the
Depositary's Participants and the Depositary's Indirect Participants.
Prospective purchasers are advised that the laws of some states require that
certain persons take physical delivery in definitive form of securities that
they own. Consequently, the ability to own, transfer or pledge Notes evidenced
by the Global Note will be limited to such extent. For certain other
restrictions on the transferability of the Notes, see "Notice to Investors".
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So long as the Global Note Holder is the registered owner of any Notes, the
Global Note Holder will be considered the sole holder under the Indenture of any
Notes evidenced by the Global Note. Beneficial owners of Notes evidenced by the
Global Note will not be considered the owners or holders thereof under the
Indenture for any purpose, including with respect to the giving of any
directions, instructions or approvals to the Trustee thereunder. Neither the
Company nor the Trustee will have any responsibility or liability for any aspect
of the records of the Depositary or for maintaining, supervising or reviewing
any records of the Depositary relating to the Notes.
Payments in respect of the principal of and premium, if any, and interest
on any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Note Holder in its capacity as the registered Holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons in
whose names Notes, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes. The Company believes,
however, that it is currently the policy of the Depositary to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
Certificated Notes
If (i) the Company notifies the Trustee in writing that the Depositary is
no longer willing or able to act as a depositary and the Company is unable to
locate a qualified successor within 90 days or (ii) the Company, at its option,
notifies the Trustee in writing that it elects to change the issuance of Notes
in the form of Certificated Securities under the Indenture then, upon surrender
by the Global Note Holder of its Global Note, Certificated Notes will be issued
to each person that the Global Note Holder and the Depositary identify as being
the beneficial owner of the related Notes.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
Same-Day Settlement and Payment
The Indenture will require that payments in respect of the Notes
represented by the Global Note (including principal, premium, if any, and
interest) be made by wire transfer of immediately available funds to the
accounts specified by the Global Note Holder. With respect to Certificated
Notes, the Company will make all payments of principal, premium, if any, and
interest by wire transfer of immediately available funds to the accounts
specified by the Holders thereof or, if no such account is specified, by mailing
a check to each such Holder's registered address. Secondary trading in long-term
notes and debentures of corporate issuers is generally settled in clearinghouse
or next-day funds. In contrast, the Notes represented by the Global Note are
expected to be eligible to trade in the PORTAL market and to trade in the
Depositary's Same-Day Funds Settlement System, and any permitted secondary
market trading activity in such Notes will, therefore, be required by the
Depositary to be settled in immediately available funds. The Company expects
that secondary trading in the Certificated Notes will also be settled in
immediately available funds.
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THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
The Existing Notes were originally issued and sold on May 20, 1998 (the
"Issue Date"). Such sales were not registered under the Securities Act in
reliance upon the exemption provided by Section 4(2) of the Securities Act and
Rule 144A under the Securities Act. The Company and the Initial Purchasers
entered into the Registration Rights Agreement on the Issue Date, pursuant to
which the Company agreed to (i) file with the Commission on or prior to 60 days
after the Issue Date a registration statement on Form S-3, or Form S-4, if the
use of such form is then available (the "Exchange Offer Registration Statement")
relating to a registered exchange offer for the Existing Notes under the
Securities Act and (ii) use their reasonable best efforts to cause the Exchange
Offer Registration Statement to be declared effective under the Securities Act
within 210 days after the Issue Date. Upon the effectiveness of the Exchange
Offer Registration Statement, the Company will offer to the holders of Existing
Notes who are not prohibited by any law or policy of the Commission from
participating in the Exchange Offer the opportunity to exchange their Existing
Notes for Exchange Notes. The Company will keep the Exchange Offer open for not
less than 30 days (or longer, if required by applicable law) after the date
notice of the Exchange Offer is mailed to the holders of the Existing Notes. For
each Existing Note surrendered to the Company for exchange pursuant to the
Exchange Offer, the holder of such Existing Note will receive an Exchange Note
having a principal amount at maturity equal to that of the surrendered Existing
Note. Interest on each Exchange Note will accrue from the last interest payment
date on which interest was paid on the Existing Note surrendered in exchange
therefor or, if no interest has been paid on such Existing Note, from the date
of original issuance.
The sole purpose of the Exchange Offer is to fulfill the obligations of the
Company under the Registration Rights Agreement.
TERMS OF THE EXCHANGE OFFER
The Company hereby offers to exchange, upon the terms and subject to the
conditions set forth herein and in the Letter of Transmittal, $1,000 principal
amount of Exchange Notes for each $1,000 principal amount of Existing Notes. The
terms of the Exchange Notes are identical in all respects to the terms of the
Existing Notes for which they may be exchanged pursuant to this Exchange Offer,
except that (i) the Exchange Notes will generally be freely transferable by
holders thereof and (ii) the holders of the Exchange Notes will not be entitled
to registration rights under the Registration Rights Agreement except under
certain limited circumstances. See "Existing Notes Registration Rights." The
Exchange Notes will evidence the same debt as the Existing Notes and will be
entitled to the benefits of the Indenture. See "Description of Notes."
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Existing Notes being tendered or accepted for exchange.
Based on interpretations set forth in no-action letters issued by the Staff
of the Commission to third parties, the Company believes that Exchange Notes
issued pursuant to the Exchange Offer in exchange for the Existing Notes may be
offered for resale, resold or otherwise transferred by holders thereof (other
than any holder which is (i) an Affiliate, (ii) a broker-dealer who acquired
Existing Notes directly from the Company or (iii) a broker-dealer who acquired
Existing Notes as a result of market-making or other trading activities) without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such Exchange Notes are acquired in the ordinary
course of such holders' business, and such holders have no arrangement with any
person to participate in a distribution of such Exchange Notes. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Existing Notes, where such Existing Notes were acquired by such broker-dealer as
a result of market-making activities or other trading activities, must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution." Any holder that cannot rely
upon such interpretations must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction.
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Tendering holders of Existing Notes will not be required to pay brokerage
commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Existing Notes
pursuant to the Exchange Offer.
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer will expire on the Expiration Date. The term "Expiration
Date" means 5:00 p.m., New York City time, on , 1998 unless the
Company in its sole discretion extends the period during which the Exchange
Offer is open, in which event the term "Expiration Date" means the latest time
and date on which the Exchange Offer, as so extended by the Company, expires.
The Company reserves the right to extend the Exchange Offer at any time and from
time to time prior to the Expiration Date by giving written notice to IBJ
Schroder Bank & Trust Company (the "Exchange Agent") and by timely public
announcement communicated by no later than 5:00 p.m. on the next business day
following the Expiration Date, unless otherwise required by applicable law or
regulation, by making a release to the [Dow Jones News Service]. During any
extension of the Exchange Offer, all Existing Notes previously tendered pursuant
to the Exchange Offer will remain subject to the Exchange Offer.
The Exchange Date will be the first business day following the Expiration
Date. The Company expressly reserves the right to (i) terminate the Exchange
Offer and not accept for exchange any Existing Notes for any reason, including
if any of the events set forth below under "Conditions to the Exchange Offer"
shall have occurred and shall not have been waived by the Company and (ii) amend
the terms of the Exchange Offer in any manner, whether before or after any
tender of the Existing Notes. If any such termination or amendment occurs, the
Company will notify the Exchange Agent in writing and will either issue a press
release or give written notice to the holders of the Existing Notes as promptly
as practicable. Unless the Company terminates the Exchange Offer prior to 5:00
p.m., New York City time, on the Expiration Date, the Company will exchange the
Exchange Notes for the Existing Notes on the Exchange Date.
If the Company waives any material condition to the Exchange Offer, or
amends the Exchange Offer in any other material respect, and if at the time that
notice of such waiver or amendment is first published, sent or given to holders
of Existing Notes in the manner specified above, the Exchange Offer is scheduled
to expire at any time earlier than the expiration of a period ending on the
fifth business day from, and including, the date that such notice is first so
published, sent or given, then the Exchange Offer will be extended until the
expiration of such period of five business days.
This Prospectus and the related Letter of Transmittal and other relevant
materials will be mailed by the Company to record holders of Existing Notes and
will be furnished to brokers, banks and similar persons whose names, or the
names of whose nominees, appear on the lists of holders for subsequent
transmittal to beneficial owners of Existing Notes.
INTEREST ON THE EXCHANGE NOTES
Interest on each Exchange Note issued pursuant to the Exchange Offer will
accrue from the last interest payment date to which interest was paid on the
Existing Notes surrendered in exchange therefor or, if no interest has been paid
on the Existing Notes, from the date of original issue of the Existing Notes.
HOW TO TENDER
The tender to the Company of Existing Notes by a holder thereof pursuant to
one of the procedures set forth below will constitute an agreement between such
holder and the Company in accordance with the terms and subject to the
conditions set forth herein and in the Letter of Transmittal.
GENERAL PROCEDURES. A holder of an Existing Note may tender the same by
(i) properly completing and signing the Letter of Transmittal or a facsimile
thereof (all references in this Prospectus to the Letter of Transmittal shall be
deemed to include a facsimile thereof) and delivering the same, together with
the certificate or certificates representing the Existing Notes being tendered
and any required signature guarantees (or a timely confirmation of a book-entry
transfer (a "Book-Entry Confirmation") pursuant to the procedure
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described below), to the Exchange Agent at its address set forth below on or
prior to the Expiration Date or (ii) complying with the guaranteed delivery
procedures described below. Each broker-dealer that receives Exchange Notes for
its own account in exchange for Existing Notes, where such Existing Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
If tendered Existing Notes are registered in the name of the signer of the
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Existing Notes are to be reissued) in the
name of the registered holder, the signature of such signer need not be
guaranteed. In any other case, the tendered Existing Notes must be endorsed or
accompanied by written instruments of transfer in form satisfactory to the
Company and duly executed by the registered holder and the signature on the
endorsement or instrument of transfer must be guaranteed by a bank, broker,
dealer, credit union, savings association, clearing agency or other institution
(each an "Eligible Institution") that is a member of a recognized signature
guarantee medallion program within the meaning of Rule 17Ad-15 under the
Exchange Act. If the Exchange Notes and/or Existing Notes not exchanged are to
be delivered to an address other than that of the registered holder appearing on
the note register for the Existing Notes, the signature on the Letter of
Transmittal must be guaranteed by an Eligible Institution.
Any beneficial owner whose Existing Notes are registered in the name of a
broker, dealer, commercial bank, trust company or other nominee and who wishes
to tender Existing Notes should contact such holder promptly and instruct such
holder to tender Existing Notes on such beneficial owner's behalf. If such
beneficial owner wishes to tender such Existing Notes himself or herself, such
beneficial owner must, prior to completing and executing the Letter of
Transmittal and delivering such Existing Notes, either make appropriate
arrangements to register ownership of the Existing Notes in such beneficial
owner's name or follow the procedures described in the immediately preceding
paragraph. The transfer of record ownership may take considerable time.
BOOK ENTRY TRANSFER. The Exchange Agent will make a request to establish
an account with respect to the Existing Notes at The Depository Trust Company
(the "Book-Entry Transfer Facility") for purposes of the Exchange Offer within
two business days after receipt of this Prospectus, and any financial
institution that is a participant in the Book-Entry Transfer Facility's system
may make book-entry delivery of Existing Notes by causing the Book-Entry
Transfer Facility to transfer such Existing Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility in accordance with the Book-Entry
Transfer Facility's procedures for transfer. However, although delivery of
Existing Notes may be effected through book-entry transfer at the Book-Entry
Transfer Facility, the Letter of Transmittal, with any required signature
guarantees and any other required documents, must, in any case, be transmitted
to and received by the Exchange Agent at the address specified below on or prior
to the Expiration Date or the guaranteed delivery procedures described below
must be complied with.
The Exchange Agent and the Book-Entry Transfer Facility have confirmed that
any financial institution that is a participant in the Book-Entry Transfer
facility may utilize the Book-Entry Transfer Facility Automated Tender Offer
Program ("ATOP") procedures to tender Existing Notes.
Any participant in the Book-Entry Transfer Facility may make book-entry
delivery of Existing Notes by causing the Book Entry Transfer Facility to
transfer such Existing Notes into the Exchange Agent's account in accordance
with the Book Entry Transfer Facility's ATOP procedures for transfer. However,
the exchange for the Existing Notes so tendered will only be made after a
Book-Entry Confirmation of such book-entry transfer of Existing Notes into the
Exchange Agent's account, and timely receipt by the Exchange Agent of an Agent's
Message (as such term is defined in the next sentence) and any other documents
required by the Letter of Transmittal. The term "Agent's Message" means a
message, transmitted by the Book Entry Transfer Facility and received by the
Exchange Agent and forming part of a Book-Entry Confirmation, which states that
the Book Entry Transfer Facility has received an express acknowledgment from a
participant tendering Existing Notes that are the subject of such Book-Entry
Confirmation that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal, and that the Company may enforce such
agreement against such participant.
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THE METHOD OF DELIVERY OF EXISTING NOTES AND ALL OTHER DOCUMENTS, INCLUDING
DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY AND ANY ACCEPTANCE OF AN
AGENT'S MESSAGE THROUGH ATOP, IS AT THE ELECTION AND RISK OF THE HOLDER. IF SENT
BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, RETURN RECEIPT REQUESTED, BE
USED, PROPER INSURANCE BE OBTAINED, AND THE MAILING BE MADE SUFFICIENTLY IN
ADVANCE OF THE EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR
BEFORE THE EXPIRATION DATE.
GUARANTEED DELIVERY PROCEDURES. If a holder desires to accept the Exchange
Offer, and time will not permit a Letter of Transmittal or Existing Notes to
reach the Exchange Agent before the Expiration Date, a tender may be effected if
the Exchange Agent has received at its office listed on the back cover hereof on
or prior to the Expiration Date a letter, telegram or facsimile transmission
from an Eligible Institution setting forth the name and address of the tendering
holder, the principal amount of the Existing Notes being tendered, the names in
which the Existing Notes are registered and, if possible, the certificate
numbers of the Existing Notes to be tendered, and stating that the tender is
being made thereby and guaranteeing that within three New York Stock Exchange
trading days after the date of execution of such letter, telegram or facsimile
transmission by the Eligible Institution, the Existing Notes, in proper form for
transfer, will be delivered by such Eligible Institution together with a
properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless Existing Notes being tendered by the above-described
method (or a timely Book-Entry Confirmation) are deposited with the Exchange
Agent within the time period set forth above (accompanied or preceded by a
properly completed Letter of Transmittal and any other required documents), the
Company may, at its option, reject the tender. Copies of a Notice of Guaranteed
Delivery which may be used by Eligible Institutions for the purposes described
in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when the
tendering holder's properly completed and duly signed Letter of Transmittal or
Agent's Message accompanied by the Existing Notes (or a timely Book-Entry
Confirmation) is received by the Exchange Agent. Issuances of Exchange Notes in
exchange for Existing Notes tendered pursuant to a Notice of Guaranteed Delivery
or letter, telegram or facsimile transmission to similar effect (as provided
above) by an Eligible Institution will be made only against deposit of the
Letter of Transmittal (and any other required documents) and the tendered
Existing Notes (or a timely Book-Entry Confirmation).
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for exchange of any tender of Existing Notes will be
determined by the Company, whose determination will be final and binding. The
Company reserves the absolute right to reject any and all tenders not in proper
form or the acceptances for exchange of which may, in the opinion of counsel to
the Company, be unlawful. The Company also reserves the absolute right to waive
any of the conditions of the Exchange Offer or any defect or irregularities in
tenders of any particular holder whether or not similar defects or
irregularities are waived in the case of other holders. Neither the Company, the
Exchange Agent nor any other person will be under any duty to give notification
of any defects or irregularities in tenders or shall incur any liability for
failure to give any such notification. The Company's interpretation of the terms
and conditions of the Exchange Offer (including the Letter of Transmittal and
the instructions thereto) will be final and binding.
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
The party tendering Existing Notes for exchange (the "Transferor")
exchanges, assigns and transfers the Existing Notes to the Company and
irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Existing Notes to be assigned,
transferred and exchanged. The Transferor represents and warrants that it has
full power and authority to tender, exchange, assign and transfer the Existing
Notes and to acquire Exchange Notes issuable upon the exchange of such tendered
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Existing Notes, and that, when the same are accepted for exchange, the Company
will acquire good and unencumbered title to the tendered Existing Notes, free
and clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim. The Transferor also warrants that it will, upon request,
execute and deliver any additional documents deemed by the Company to be
necessary or desirable to complete the exchange, assignment and transfer of
tendered Existing Notes by the Company, and the issuance of Exchange Notes in
exchange therefor shall constitute performance in full by the Company of its
obligations under the Registration Rights Agreement and that the Company shall
have no further obligations or liabilities thereunder (except in certain limited
circumstances). All authority conferred by the Transferor will survive the death
or incapacity of the Transferor, and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
By tendering Existing Notes and executing the Letter of Transmittal, or
transmitting an Agent's Message, as the case may be, the Transferor certifies
that (a) it is not an Affiliate, that it is not a broker-dealer that owns
Existing Notes acquired directly from the Company or an Affiliate of the
Company, that it is acquiring the Exchange Notes offered hereby in the ordinary
course of such Transferor's business and that such Transferor has no arrangement
with any person to participate in the distribution of such Exchange Notes or (b)
that it is an Affiliate of the Company or of any of the Initial Purchasers and
that it will comply with the registration and prospectus delivery requirements
of the Securities Act to the extent applicable to it.
WITHDRAWAL RIGHTS
Existing Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Exchange Agent at its
address set forth on the back cover of this Prospectus prior to the Expiration
Date. Any such notice of withdrawal must specify the person named in the Letter
of Transmittal as having tendered Existing Notes to be withdrawn, the
certificate numbers of Existing Notes to be withdrawn, the principal amount of
Existing Notes to be withdrawn, a statement that such holder is withdrawing his
or her election to have such Existing Notes exchanged, and the name of the
registered holder of such Existing Notes, and must be signed by the holder in
the same manner as the original signature on the Letter of Transmittal
(including any required signature guarantees) or be accompanied by evidence
satisfactory to the Company that the person withdrawing the tender has succeeded
to the beneficial ownership of the Existing Notes being withdrawn. The Exchange
Agent will return the properly withdrawn Existing Notes promptly following
receipt of notice of withdrawal. All questions as to the validity of notices of
withdrawal, including time of receipt, will be determined by the Company, and
such determination will be final and binding on all parties.
ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon the terms and subject to the conditions of the Exchange Offer, the
acceptance for exchange of Existing Notes validly tendered and not withdrawn and
the issuance of the Exchange Notes will be made on the Exchange Date. For the
purposes of the Exchange Offer, the Company shall be deemed to have accepted for
exchange validly tendered Existing Notes when the Company has given written
notice thereof to the Exchange Agent.
The Exchange Agent will act as agent for the tendering holders of Existing
Notes for the purposes of receiving Exchange Notes from the Company and causing
the Existing Notes to be assigned, transferred and exchanged. Upon the terms and
subject to the conditions of the Exchange Offer, delivery of the Exchange Notes
to be issued in exchange for accepted Existing Notes will be made by the
Exchange Agent promptly after acceptance of the tendered Existing Notes.
Existing Notes not accepted for exchange by the Company will be returned without
expense to the tendering holders (or in the case of Existing Notes tendered by
book-entry transfer into the Exchange Agent's account at the Book-Entry Transfer
Facility pursuant to the procedures described above, such non-exchanged Existing
Notes will be credited to an account maintained with such Book-Entry Transfer
Facility) promptly following the Expiration Date, or, if the Company
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terminates the Exchange Offer prior to the Expiration Date, promptly after the
Exchange Offer is so terminated.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Company will not be required to issue Exchange Notes
in respect of any properly tendered Existing Notes not previously accepted and
may terminate the Exchange Offer (by oral or written notice to the Exchange
Agent and by timely public announcement, unless otherwise required by applicable
law or regulation) or, at its option, modify or otherwise amend the Exchange
Offer, if (a) there shall be threatened, instituted or pending any action or
proceeding before, or any injunction, order or decree shall have been issued by,
any court or governmental agency or other governmental regulatory or
administrative agency or commission, (i) seeking to restrain or prohibit the
making or consummation of the Exchange Offer or any other transaction
contemplated by the Exchange Offer, (ii) assessing or seeking any damages as a
result thereof or (iii) resulting in a material delay in the ability of the
Company to accept for exchange or exchange some or all of the Existing Notes
pursuant to the Exchange Offer; (b) any statute, rule, regulation, order or
injunction shall be sought, proposed, introduced, enacted, promulgated or deemed
applicable to the Exchange Offer or any of the transactions contemplated by the
Exchange Offer by any government or governmental authority, domestic or foreign,
or any action shall have been taken, proposed or threatened, by any government,
governmental authority, agency or court, domestic or foreign, that in the sole
judgment of the Company might directly or indirectly result in any of the
consequences referred to in clauses (a)(i) or (ii) above or, in the sole
judgment of the Company, might result in the holders of Exchange Notes having
obligations with respect to resales and transfers of Exchange Notes which are
greater than those described in the interpretations of the Commission referred
to on the cover page of this Prospectus, or would otherwise make it inadvisable
to proceed with the Exchange Offer or (c) a material adverse change shall have
occurred in the business, condition (financial or otherwise), operations, or
prospects of the Company.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by it with respect to all or any portion of the Exchange Offer
regardless of the circumstances (including any action or inaction by the
Company) giving rise to such condition or may be waived by the Company in whole
or in part at any time or from time to time in its sole discretion. The failure
by the Company at any time to exercise any of the foregoing rights will not be
deemed a waiver of any such right, and each right will be deemed an ongoing
right which may be asserted at any time or from time to time. In addition, the
Company has reserved the right, notwithstanding the satisfaction of each of the
foregoing conditions, to terminate or amend the Exchange Offer.
Any determination by the Company concerning the fulfillment or
non-fulfillment of any conditions will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Existing Notes
tendered, and no Exchange Notes will be issued in exchange for any such Existing
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or qualification of the Indenture under the Trust Indenture Act of 1939, as
amended (the "Trust Indenture Act").
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EXCHANGE AGENT
IBJ Schroder Bank & Trust Company has been appointed as the Exchange Agent
for the Exchange Offer. Questions and requests for assistance and requests for
additional copies of this Prospectus or of the Letter of Transmittal should be
directed to the Exchange Agent as follows:
<TABLE>
<S> <C> <C>
By Mail: Telephone: By Hand:
One State Street (212) 858-2103 One State Street
New York, New York 10004 New York, New York 10004
Attn: Reorganization Operations Facsimile: Attn: Reorganization Operations
Department Department
(212) 858-2611
</TABLE>
Delivery to an address other than as set forth herein, or transmissions of
instructions via a facsimile or telex number other than the ones set forth
herein, will not constitute a valid delivery.
SOLICITATION OF TENDERS; EXPENSES
The Company has not retained any dealer-manager or similar agent in
connection with the Exchange Offer and will not make any payments to brokers,
dealers or others for soliciting acceptances of the Exchange Offer. The Company
will, however, pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for reasonable out-of-pocket expenses in
connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding tenders for their customers.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of Existing Notes in any jurisdiction in
which the making of the Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Exchange Offer
in any such jurisdiction and extend the Exchange Offer to holders of Existing
Notes in such jurisdiction. In any jurisdiction the securities laws or blue sky
laws of which require the Exchange Offer to be made by a licensed broker or
dealer, the Exchange Offer is being made on behalf of the Company by one or more
registered brokers or dealers which are licensed under the laws of such
jurisdiction.
APPRAISAL RIGHTS
HOLDERS OF EXISTING NOTES WILL NOT HAVE DISSENTERS' RIGHTS OR APPRAISAL
RIGHTS IN CONNECTION WITH THE EXCHANGE OFFER.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of certain material federal income
tax consequences of an exchange of Existing Notes for Exchange Notes and of the
purchase, ownership and disposition of the Exchange Notes. This summary does not
purport to deal with all aspects of federal income taxation that may be relevant
to a particular investor, nor any tax consequences arising under the laws of any
state, locality, or foreign jurisdiction, and it is not intended to be
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations, foreign
persons, persons that hold Exchange Notes as part of a straddle or conversion
transaction or holders subject to the alternative minimum tax, may be subject to
special rules. In addition, this summary is limited to persons that will hold
the Exchange Notes as "capital assets" (generally, property held for investment)
within the meaning of Section 1221 of the Internal Revenue Code of 1986, as
amended. All investors are advised to consult their own
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<PAGE> 83
tax advisors regarding the federal, state, local and foreign tax consequences of
an exchange of Existing Notes for Exchange Notes and the ownership and
disposition of Exchange Notes.
THE EXCHANGE. The exchange of the Existing Notes for the Exchange Notes in
the Exchange Offer should not be a taxable event for federal income tax
purposes, either because the exchange does not constitute an exchange for
federal income tax purposes or because the exchange constitutes a tax-free
recapitalization. Accordingly, (i) holders should not recognize any taxable gain
or loss as a result of the exchange; (ii) the adjusted tax basis of an Exchange
Note immediately after the exchange should be the same as the adjusted tax basis
of the Existing Note exchanged therefore immediately before the exchange; (iii)
the holding period of the Exchange Note should include the holding period of the
Existing Note; and (iv) the Exchange Note should have the same issue price as
the Existing Note.
MARKET DISCOUNT. If a holder acquired an Existing Note other than at
original issue for an amount that is less than its principal amount, the amount
of the difference will be treated as "market discount" (unless such difference
is less than a statutorily defined de minimis amount), and the Existing Note
will be subject to the market discount rules. If a holder exchanges an Existing
Note that is subject to the market discount rules for an Exchange Note, the
Exchange Note will also be subject to the market discount rules. In addition,
Exchange Notes purchased by a subsequent purchaser will be subject to the market
discount rules if the Exchange Notes are purchased with more than the statutory
de minimis amount of market discount.
The holder of an Exchange Note that is subject to the market discount rules
will be required to treat any full or partial principal payment or any gain
recognized on the maturity, sale or other disposition of the Note as ordinary
income, to the extent that such gain does not exceed the accrued market discount
on the Note. The amount of market discount treated as having accrued will be
determined either (i) on a straight-line basis by multiplying the market
discount times a fraction, the numerator of which is the number of days the
Exchange Note was held by the holder and the denominator of which is the total
number of days after the date such holder acquired the Exchange Note up to and
including the date of its maturity, or (ii) if the holder so elects, on a
constant interest rate method.
The holder of an Exchange Note subject to the market discount rules may
elect to include market discount in income currently, through the use of either
the straight-line inclusion method or the elective constant interest method, in
lieu of recharacterizing gain upon disposition as ordinary income to the extent
of accrued market discount at the time of disposition. Once made, this election
will apply to all debt instruments with market discount acquired by the electing
holder during the taxable year for which the election is made, and all
subsequent taxable years, unless the Internal Revenue Service (the "IRS")
consents to a revocation of the election. If an election is made to include
market discount on a debt instrument in income currently, the basis of the debt
instrument in the hands of the holder will be increased by the market discount
thereon as it is included in income.
A holder who does not elect to include the market discount on an Exchange
Note in income currently may be required to defer interest expense deductions
for a portion of the interest paid on indebtedness allocable to such Note, until
the maturity of the Note or its earlier disposition in a taxable transaction.
AMORTIZABLE BOND PREMIUM. A holder that purchased an Existing Note for an
amount in excess of its principal amount may elect to treat such excess as
"amortizable bond premium," in which case the amount required to be included in
the holder's income each year with respect to interest on the Existing Note will
be reduced by the amount of amortizable bond premium allocable (based on the
yield to maturity of the Existing Note) to such year. If a holder made an
election to amortize bond premium with respect to an Existing Note and exchanges
the Existing Note for an Exchange Note pursuant to the Exchange Offer, the
election will apply to the Exchange Note. A holder who exchanges an Existing
Note for which an election has not been made for an Exchange Note, and a
subsequent purchaser of an Exchange Note, may also elect to amortize bond
premium, if any, on the Note. Any election to amortize bond premium will apply
to all debt instruments (other than debt instruments the interest on which is
excludable from gross income) held by the holder at the beginning of the first
taxable year to which the election applies or thereafter acquired by the holder,
and the election is irrevocable without the consent of the IRS.
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DISPOSITION OF THE EXCHANGE NOTES. Subject to the market discount rules
discussed above, a holder of an Exchange Note will generally recognize gain or
loss upon the sale, redemption, retirement or other disposition of the Note
equal to the difference between (i) the amount of cash and the fair market value
of any property received (except to the extent attributable to the payment of
accrued interest) and (ii) the holder's adjusted tax basis in the Note. Gain or
loss recognized will be capital gain or loss if the Notes are held as capital
assets by the holder and will be long-term capital gain or loss if the holder's
holding period is more than eighteen months and midterm capital gain or loss if
the holder's holding period is more than one year but not more than eighteen
months. Holders who are individuals will generally be taxed on long-term capital
gains at a maximum marginal rate of 20% and on midterm capital gains at a
maximum marginal rate of 28%, and corporate holders will be taxed on long-term
and midterm capital gains at a maximum marginal rate of 35%.
BACKUP WITHHOLDING AND INFORMATION REPORTING. The holder of an Exchange
Note may be subject to backup withholding at a rate of 31% with respect to
interest, principal and premium, if any, paid on the Note, unless such holder
(a) is a corporation or comes within certain other exempt categories and, when
required, demonstrates this fact or (b) provides a correct taxpayer
identification number, certifies that the holder is not subject to backup
withholding and otherwise complies with the requirements of the backup
withholding rules.
The Company will report to the holders of the Exchange Notes and the IRS
the amount of any "reportable payment" for each calendar year and the amount of
tax withheld, if any, with respect to payments on the Exchange Notes. The amount
of any backup withholding from a payment to a holder will be allowed as a credit
against the holder's federal income tax liability and may entitle the holder to
a refund, provided that the required information is furnished to the IRS.
OTHER
Participation in the Exchange Offer is voluntary, and holders should
carefully consider whether to accept the Exchange Offer and tender their
Existing Notes. Holders of the Existing Notes are urged to consult their
financial and tax advisors in making their own decisions on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Existing Notes pursuant to the terms of, this Exchange Offer,
the Company will have fulfilled covenants contained in the terms of the Existing
Notes and the Registration Rights Agreement. Holders of the Existing Notes who
do not tender their certificates in the Exchange Offer will continue to hold
such certificates and will be entitled to all the rights, and subject to all the
limitations applicable thereto, under the Indenture, except for any such rights
under the Registration Rights Agreement which by their terms terminate or cease
to have further effect as a result of the making of this Exchange Offer. See
"Description of Notes." All untendered Existing Notes will continue to be
subject to the restrictions on transfer set forth in the legend thereon as a
consequence of the issuance of the Existing Notes pursuant to exemptions from,
or in transactions not subject to, the registration requirements of the
Securities Act and applicable state securities laws. To the extent that Existing
Notes are tendered and accepted in the Exchange Offer, the trading market, if
any, for the Existing Notes could be adversely affected. See "Risk
Factors -- Absence of Public Market for the Exchange Notes; Restrictions on
Transfer."
The Company may in the future seek to acquire untendered Existing Notes in
the open market or privately negotiated transactions, through subsequent
exchange offers or otherwise. The Company has no present plan to acquire any
Existing Notes that are not tendered in the Exchange Offer.
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CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain federal income tax consequences
associated with the acquisition, ownership, and disposition of the Notes by
initial investors who acquire the Notes at original issue for cash in an amount
equal to the original issue price. The following summary does not discuss all of
the aspects of federal income taxation that may be relevant to a prospective
holder of the Notes in light of his or her particular circumstances, or to
certain types of holders (including dealers in securities, insurance companies,
tax-exempt organizations, financial institutions, broker-dealers, S
corporations, and except as discussed below, foreign corporations, persons who
are not citizens or residents of the United States and persons who hold the
Notes as part of a hedge, straddle, "synthetic security" or other integrated
investment) which are subject to special treatment under the federal income tax
laws. This discussion also does not address the tax consequences to nonresident
aliens or foreign corporations that are subject to United States federal income
tax on a net basis on income with respect to a Note because such income is
effectively connected with the conduct of a U.S. trade or business. Such holders
generally are taxed in a similar manner to U.S. Holders (as defined below);
however, certain special rules apply. In addition, this discussion is limited to
holders who hold the Notes as capital assets within the meaning of Section 1221
of the Internal Revenue Code of 1986, as amended (the "Code"). This summary also
does not describe any tax consequences under state, local, or foreign tax laws.
The discussion is based upon the Code, Treasury Regulations, IRS rulings
and pronouncements and judicial decisions all in effect as of the date hereof,
all of which are subject to change at any time by legislative, judicial or
administrative action. Any such changes may be applied retroactively in a manner
that could adversely affect a holder of the Notes. The Company has not sought
and will not seek any rulings or opinions from the IRS or counsel with respect
to the matters discussed below. There can be no assurance that the IRS will not
take positions concerning the tax consequences of the purchase, ownership or
disposition of the Notes that are different from those discussed herein.
PROSPECTIVE PURCHASERS OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE U.S. FEDERAL INCOME TAX CONSEQUENCES THAT MAY APPLY TO THEM, AS
WELL AS THE APPLICATION OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS
A U.S. Holder is any holder who or which is (i) a citizen or resident of
the United States; (ii) a domestic corporation or domestic partnership; (iii) an
estate other than a "foreign estate" as defined in Section 7701(a)(31) of the
Code; or (iv) a trust if a court within the United States is able to exercise
primary supervision over the administration of the trust and one or more United
States persons have the authority to control all substantial decisions of the
trust.
Taxation of Stated Interest. In general, U.S. Holders of the Notes will be
required to include interest received thereon in taxable income as ordinary
income at the time it accrues or is received, in accordance with the holder's
regular method of accounting for federal income tax purposes.
Effect of Optional Redemption and Repurchase. Under certain circumstances
the Company may be entitled to redeem a portion of the Notes. In addition, under
certain circumstances, each holder of Notes will have the right to require the
Company to repurchase all or any part of such holder's Notes. Treasury
Regulations contain special rules for determining the yield to maturity and
maturity on a debt instrument in the event the debt instrument provides for a
contingency that could result in the acceleration or deferral of one or more
payments. The Company does not believe that these rules are likely to apply to
either the Company's right to redeem the Notes or to the holders' rights to
require the Company to repurchase the Notes. Therefore, the Company does not
intend to treat such redemption and repurchase provisions of the Notes as
affecting the computation of the yield to maturity or maturity date of the
Notes.
Sale or other Taxable Disposition of the Notes. The sale, exchange,
redemption, retirement or other taxable disposition of a Note will result in the
recognition of gain or loss to a U.S. Holder in an amount equal
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to the difference between (a) the amount of cash and fair market value of
property received in exchange therefor (except to the extent attributable to the
payment of accrued but unpaid stated interest) and (b) the holder's adjusted tax
basis in such Note.
A holder's initial tax basis in a Note purchased by such holder will be
equal to the price paid for the Note.
Any gain or loss on the sale or other taxable disposition of a Note
generally will be capital gain or loss. Payments on such disposition for accrued
interest not previously included in income will be treated as ordinary interest
income.
The exchange of a Note by a U.S. Holder for an Exchange Note should not
constitute a taxable exchange. A U.S. Holder should have the same basis and
holding period in the Exchange Note as such U.S. Holder had in the Note.
Backup Withholding. The backup withholding rules require a payor to deduct
and withhold a tax if (i) the payee fails to furnish a taxpayer identification
number ("TIN") in the prescribed manner, (ii) the IRS notifies the payor that
the TIN furnished by the payee is incorrect, (iii) the payee has failed to
report properly the receipt of "reportable payments" and the IRS has notified
the payor that withholding is required, or (iv) the payee fails to certify under
the penalty of perjury that such payee is not subject to backup withholding. If
any one of the events discussed above occurs with respect to a holder of Notes,
the Company, its paying agent or other withholding agent will be required to
withhold a tax equal to 31% of any "reportable payment" made in connection with
the Notes of such holder. A "reportable payment" includes, among other things,
amounts paid in respect of interest on a Note. Any amounts withheld from a
payment to a holder under the backup withholding rules will be allowed as a
refund or credit against such holder's federal income tax, provided that the
required information is furnished to the IRS. Certain holders (including, among
others, corporations and certain tax-exempt organizations) are not subject to
backup withholding.
CERTAIN U.S. FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS
This section discusses specific rules applicable to a Non-U.S. Holder (as
defined below) of Notes. This summary does not address the tax consequences to
stockholders, partners or beneficiaries in a Non-U.S. Holder. For purposes
hereof, a "Non-U.S. Holder" is any person who is not a U.S. Holder and is not
subject to U.S. federal income tax on a net basis on income with respect to a
Note because such income is effectively connected with the conduct of a U.S.
trade or business.
Interest. Payments of interest to a Non-U.S. Holder that do not qualify
for the portfolio interest exception discussed below will be subject to
withholding of U.S. federal income tax at a rate of 30% unless a U.S. income tax
treaty applies to reduce, or eliminate, the rate of withholding. To claim a
treaty reduced rate, the Non-U.S. Holder must provide a properly executed Form
1001 or applicable successor form.
Interest that is paid to a Non-U.S. Holder on a Note will not be subject to
U.S. income or withholding tax if the interest qualifies as "portfolio
interest." Generally, interest on the Notes that is paid by the Company will
qualify as portfolio interest if (i) the Non-U.S. Holder does not own, actually
or constructively, 10% or more of the total combined voting power of all classes
of stock of the Company entitled to vote; (ii) the Non-U.S. Holder is not a
controlled foreign corporation that is related to the Company actually or
constructively through stock ownership for U.S. federal income tax purposes;
(iii) the Non-U.S. Holder is not a bank receiving interest on a loan entered
into in the ordinary course of business; and (iv) either (x) the beneficial
owner of the Note provides the Company or its paying agent with a properly
executed certification on IRS Form W-8 (or a suitable substitute form), signed
under penalties of perjury, that the beneficial owner is not a "U.S. person" for
U.S. federal income tax purposes and that provides the beneficial owner's name
and address, or (y) a securities clearing organization, bank or other financial
institution that holds customers' securities in the ordinary course of its
business holds the Note and certifies to the Company or its agent under
penalties of perjury that the IRS Form W-8 (or a suitable substitute) has been
received by it from the beneficial owner of the Note or a qualifying
intermediary and furnishes the payor a copy thereof.
Treasury regulations that will be effective with respect to payments made
after December 31, 1998 (the "Withholding Regulations") provide alternative
methods for satisfying the certification requirements de-
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scribed in clause (iv) above. The Withholding Regulations also will require, in
the case of Notes held by a foreign partnership, that (x) the certification
described in clause (iv) above be provided by each partner and (y) the
partnership provide certain information, including its taxpayer identification
number. A look-through rule will apply in the case of tiered partnerships.
Sale, Exchange or Retirement of Notes. Any gain realized by a Non-U.S.
Holder on the sale, exchange or retirement of the Notes, will generally not be
subject to U.S. federal income tax or withholding unless (i) the Non-U.S. Holder
is an individual who was present in the U.S. for 183 days or more in the taxable
year of the disposition and meets certain other requirements; or (ii) the
Non-U.S. Holder is subject to tax pursuant to certain provisions of the Code
applicable to certain individuals who renounce their U.S. citizenship or
terminate long-term U.S. residency. If a Non-U.S. Holder falls under (ii) above,
the holder will be taxed on the net gain derived from the sale under the
graduated U.S. federal income tax rates that are applicable to U.S. citizens and
resident aliens, and may be subject to withholding under certain circumstances.
If a Non-U.S. Holder falls under (i) above, the holder generally will be subject
to U.S. federal income tax at a rate of 30% on the gain derived from the sale
(or reduced treaty rate) and may be subject to withholding in certain
circumstances.
U.S. Information Reporting and Backup Withholding Tax. Back-up withholding
generally will not apply to a Note issued in registered form that is
beneficially owned by a Non-U.S. Holder if the certification of Non-U.S. Holder
status is provided to the Company or its agent as described above in "Certain
Federal Income Tax Consequences to Non-U.S. Holders Interest," provided that the
payor does not have actual knowledge that the holder is a U.S. person. The
Company may be required to report annually to the IRS and to each Non-U.S.
Holder the amount of interest paid to, and the tax withheld, if any, with
respect to each Non-U.S. Holder.
If payments of principal and interest are made to the beneficial owner of a
Note by or through the foreign office of a custodian, nominee or other agent of
such beneficial owner, or if the proceeds of the sale of Notes are paid to the
beneficial owner of a Note through a foreign office of a "broker" (as defined in
the pertinent Regulations), the proceeds will not be subject to backup
withholding (absent actual knowledge that the payee is a U.S. person).
Information reporting (but not backup withholding) will apply, however, to a
payment by a foreign office of a custodian, nominee, agent or broker that is (i)
a U.S. person, (ii) a controlled foreign corporation for U.S. federal income tax
purposes, or (iii) a foreign person that derives 50% or more of its gross income
from the conduct of a U.S. trade or business for a specified three-year period
or, effective after December 31, 1998, by a foreign office of certain other
persons, unless the broker has in its records documentary evidence that the
holder is a Non-U.S. Holder and certain conditions are met (including that the
broker has no actual knowledge that the holder is a U.S. Holder) or the holder
otherwise establishes an exemption. Payment through the U.S. office of a
custodian, nominee, agent or broker is subject to both backup withholding at a
rate of 31% and information reporting, unless the holder certifies that it is a
Non-U.S. Holder under penalties of perjury or otherwise establishes an
exemption.
Any amount withheld under the backup withholding rules from a payment to a
Non-U.S. Holder will be allowed as a credit against, or refund of, such holder's
U.S. federal income tax liability, provided that certain information is provided
by the holder to the IRS.
EXISTING NOTES REGISTRATION RIGHTS
The Company and the Initial Purchasers entered into the Registration Rights
Agreement on the Issue Date, pursuant to which the Company agreed, for the
benefit of the holders of the Existing Notes, at the expense of the Company, to
(i) file on or prior to the 60th calendar day following the Closing Date a
registration statement on Form S-4 if the use of such form is then available
(the "Exchange Offer Registration Statement") with the Commission with respect
to a registered offer to exchange the Existing Notes for a new issue of debt
securities of the Company (the "Exchange Notes") to be issued under the
Indenture in the same aggregate principal amount as and with terms that will be
identical in all respects to the Existing Notes (except that the Exchange Notes
will not contain the interest rate step-up provision described below or the
transfer restrictions described herein), (ii) use its best efforts to cause the
Exchange Offer Registration
83
<PAGE> 88
Statement to be declared effective under the Securities Act on or prior to the
180th calendar day following the Closing Date and (iii) use its best efforts to
consummate the Exchange Offer on or prior to the 210th calendar day following
the Closing Date. Promptly after the Exchange Offer Registration Statement is
declared effective, the Company will offer the Exchange Notes in exchange for
surrender of the Existing Notes (the "Exchange Offer"). The Company will keep
the Exchange Offer open for not less than 30 days (or longer if required by
applicable law) after the date notice of the Exchange Offer is mailed to the
holders of the Existing Notes. For each Existing Note tendered to the Company
pursuant to the Exchange Offer and not validly withdrawn by the holder thereof,
the holder of such Existing Note will receive an Exchange Note having a
principal amount equal to the principal amount of such surrendered Existing
Note.
Under existing Commission interpretations, the Exchange Notes would in
general be freely transferable after the Exchange Offer without further
registration under the Securities Act; provided, that in the case of
broker-dealers, a prospectus meeting the requirements of the Securities Act be
delivered as required. The Company has agreed for a period of 180 days after
consummation of the Exchange Offer to make available a prospectus meeting the
requirements of the Securities Act to any broker-dealer for use in connection
with any resale of any such Exchange Notes acquired as described below. A
broker-dealer that delivers such a prospectus to purchasers in connection with
such resales will be subject to certain of the civil liability provisions under
the Securities Act and will be bound by the provisions of the Registration
Rights Agreement (including certain indemnification rights and obligations).
Each holder of the Existing Notes who wishes to exchange such Notes for
Exchange Notes in the Exchange Offer will be required to make certain
representations, including representations that (i) any Exchange Notes to be
received by it will be acquired in the ordinary course of its business; (ii) it
has no arrangement with any person to participate in the distribution (within
the meaning of the Securities Act) of the Exchange Notes and (iii) it is not an
"affiliate", as defined in Rule 405 of the Securities Act, of the Company, or if
it is an affiliate, it will comply with the registration and prospectus delivery
requirements of the Securities Act to the extent applicable.
In the event that applicable interpretations of the staff of the Commission
do not permit the Company to effect the Exchange Offer, or if for any reason the
Exchange Offer is not consummated within 210 days of the Closing Date or upon
written request to the Company within 90 days of the consummation of the
Exchange Offer if any holder of the Existing Notes (other than the Initial
Purchasers) is not eligible to participate in the Exchange Offer, or upon
request of either Initial Purchaser under certain circumstances, the Company
will, at its expense, (i) as promptly as practicable, and in any event on or
prior to 60 days after such filing obligation arises, file with the Commission a
shelf registration statement (the "Shelf Registration Statement") covering
resales of the Existing Notes, (ii) use its best efforts to cause the Shelf
Registration Statement to be declared effective under the Securities Act on or
prior to 45 days after such filing occurs and (iii) keep effective the Shelf
Registration Statement until two years after the Closing Date (or such shorter
period that will terminate when all the Notes covered thereby have been sold
pursuant thereto or in certain other circumstances). The Company will, in the
event of the filing of a Shelf Registration Statement, provide to each holder of
the Existing Notes covered by the Shelf Registration Statement copies of the
prospectus that is a part of the Shelf Registration Statement, notify each such
holder when the Shelf Registration Statement has become effective and take
certain other actions as are required to permit unrestricted resales of the
Existing Notes. A holder of Existing Notes that sells such Notes pursuant to the
Shelf Registration Statement generally will be required to be named as a selling
securityholder in the related prospectus and to deliver a prospectus to the
purchaser, will be subject to certain of the civil liability provisions under
the Securities Act in connection with such sales and will be bound by the
provisions of the Registration Rights Agreement that are applicable to such
holder (including certain indemnification obligations). In addition, each holder
of the Existing Notes will be required to deliver certain information to be used
in connection with the Shelf Registration Statement in order to have its Notes
included in the Shelf Registration Statement.
Although the Company intends to file one of the registration statements
described above, there can be no assurance that either registration statement
will be filed or, if filed, that it will become effective. If the Company fails
to comply with the above provisions or if such registration statement fails to
become effective,
84
<PAGE> 89
then, as liquidated damages, additional interest will become payable in respect
of the Existing Notes as follows:
If (i) an Exchange Offer Registration Statement is not filed with the
Commission on or prior to the 60th calendar day following the Closing Date;
or
(ii) the Exchange Offer Registration Statement is not declared
effective on or prior to the 180th calendar day following the Closing Date;
or
(iii) the Exchange Offer is not consummated or a Shelf Registration
Statement is not declared effective on or prior to the 210th calendar day
after the Closing Date; or
(iv) either (A) the Exchange Offer Registration Statement ceases to be
effective at any time prior to the time that the Exchange Offer is
consummated or (B) if applicable, subject to certain exceptions, the Shelf
Registration Statement has been declared effective and such Shelf
Registration Statement ceases to be effective at any time prior to the
second anniversary of its effective date,
(each such event referred to in clause (i) through (iv) above, a "Registration
Default"), then the per annum interest rate on the Notes will increase by 25
basis points following the 60-day period referred to in clause (i) above,
following the 180-day period referred to in clause (ii) above, following the
210-day period referred to in clause (iii) above or in the case of clause (iv)
above, immediately following such Registration Default; and the per annum
interest rate will increase by an additional 25 basis points at the beginning of
each subsequent 30-day period in the case of clause (i), (ii) or (iii) above, or
90-day period in the case of clause (iv) above; provided, however, that in no
event will the per annum interest rate borne by the Notes be increased by more
than 150 basis points. Upon the filing of the Exchange Offer Registration
Statement, the consummation of the Exchange Offer or the effectiveness of the
Shelf Registration Statement, as the case may be, the interest borne by the
Notes from the date of such filing, consummation or effectiveness, as the case
may be, will be reduced to the original interest rate set forth on the cover of
this Exchange Offer Prospectus; provided, however, that, if after any such
reduction in interest rate, a different Registration Default occurs, the
interest rate may again be increased pursuant to the foregoing provisions.
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is qualified in its entirety by
reference to the Registration Rights Agreement, a copy of which is available as
set forth under "Additional Information".
BOOK-ENTRY; DELIVERY AND FORM
Except as set forth in below, the Exchange Notes will be initially issued
in the form of one or more registered Notes in global form without coupons (each
a "Global Note"). Each Global Note will be deposited with, or on behalf of, the
Trustee as custodian for The Depository Trust Company (the "Depositary") and
registered in the name of Cede & Co., as nominee of the Depositary (such nominee
being referred to herein as the "Global Note Holder").
The Depositary is a limited-purpose trust company that was created to hold
securities for its participating organizations (collectively, the "Participants"
or the "Depositary's Participants") and to facilitate the clearance and
settlement of transactions in such securities between Participants through
electronic book-entry changes in accounts of its Participants. The Depositary's
Participants include securities brokers and dealers (including the Initial
Purchasers), banks and trust companies, clearing corporations and certain other
organizations. Access to the Depositary's system is also available to other
entities such as banks, brokers, dealers and trust companies (collectively, the
"Indirect Participants" or the "Depositary's Indirect Participants") that clear
through or maintain a custodial relationship with a Participant, either directly
or indirectly. Persons who are not Participants may beneficially own securities
held by or on behalf of the Depositary only through the Depositary's
Participants or the Depositary's Indirect Participants.
The Company expects that pursuant to procedures established by the
Depositary (i) upon deposit of the Global Note, the Depositary will credit the
accounts of Participants designated by the Initial Purchasers with portions of
the principal amount of the Global Note and (ii) ownership of the Notes
evidenced by the Global
85
<PAGE> 90
Note will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by the Depositary (with respect to the
interests of the Depositary's Participants), the Depositary's Participants and
the Depositary's Indirect Participants. Prospective purchasers are advised that
the laws of some states require that certain persons take physical delivery in
definitive form of securities that they own. Consequently, the ability to own,
transfer or pledge Exchange Notes evidenced by the Global Note will be limited
to such extent.
So long as the Global Note Holder is the registered owner of any Exchange
Notes, the Global Note Holder will be considered the sole holder under the
Indenture of any Exchange Notes evidenced by the Global Note. Beneficial owners
of Exchange Notes evidenced by the Global Note will not be considered the owners
or holders thereof under the Indenture for any purpose, including with respect
to the giving of any directions, instructions or approvals to the Trustee
thereunder. Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records of the Depositary or for maintaining,
supervising or reviewing any records of the Depositary relating to the Exchange
Notes.
Payments in respect of the principal of and premium, if any, and interest
on any Notes registered in the name of the Global Note Holder on the applicable
record date will be payable by the Trustee to or at the direction of the Global
Note Holder in its capacity as the registered Holder under the Indenture. Under
the terms of the Indenture, the Company and the Trustee may treat the persons in
whose names Notes, including the Global Note, are registered as the owners
thereof for the purpose of receiving such payments. Consequently, neither the
Company nor the Trustee has or will have any responsibility or liability for the
payment of such amounts to beneficial owners of Notes. The Company believes,
however, that it is currently the policy of the Depositary to immediately credit
the accounts of the relevant Participants with such payments, in amounts
proportionate to their respective holdings of beneficial interests in the
relevant security as shown on the records of the Depositary. Payments by the
Depositary's Participants and the Depositary's Indirect Participants to the
beneficial owners of Notes will be governed by standing instructions and
customary practice and will be the responsibility of the Depositary's
Participants or the Depositary's Indirect Participants.
Certificated Notes
If (i) the Company notifies the Trustee in writing that the Depositary is
no longer willing or able to act as a depositary or the Depositary ceases to be
registered as a clearing agency under the Exchange Act and the Company is unable
to locate a qualified successor within 90 days or (ii) the Company, at its
option, notifies the Trustee in writing that it elects to change the issuance of
Notes in the form of Certificated Securities under the Indenture then, upon
surrender by the Global Note Holder of its Global Note, Certificated Notes will
be issued to each person that the Global Note Holder and the Depositary identify
as being the beneficial owner of the related Notes. Upon any such issuance, the
Depositary is required to register such Certificated Securities in the name of
such person or persons (or the nominees of any thereof), and cause the same to
be delivered thereto.
Neither the Company nor the Trustee will be liable for any delay by the
Global Note Holder or the Depositary in identifying the beneficial owners of
Notes and the Company and the Trustee may conclusively rely on, and will be
protected in relying on, instructions from the Global Note Holder or the
Depositary for all purposes.
86
<PAGE> 91
PLAN OF DISTRIBUTION
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Company believes that Exchange Notes issued pursuant to
the Exchange Offer in exchange for Existing Notes may be offered for resale,
resold or otherwise transferred by holders thereof (other than any holder which
is (i) an "Affiliate," (ii) a broker-dealer who acquired Existing Notes directly
from the Company or (iii) broker-dealers who acquired Existing Notes as a result
of market-making or other trading activities) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such Exchange Notes are acquired in the ordinary course of such holders'
business and such holders have no arrangement with any person to participate in
a distribution of such Exchange Notes; provided that broker-dealers receiving
Exchange Notes in the Exchange Offer will be subject to a prospectus delivery
requirement with respect to resales of such Exchange Notes.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Existing Notes where Existing Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 90 days after the Expiration Date, it will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale. In addition, all dealers affecting
transactions in the Exchange Notes may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
broker-dealer or the purchasers of any such Exchange Notes. Any broker-dealer
that resells Exchange Notes that were received by it for its own account
pursuant to the Exchange Offer and any broker or dealer that participates in a
distribution of such Exchange Notes may be deemed to be an "underwriter" within
the meaning of the Securities Act, and any profit on any such resale of Exchange
Notes and any commissions or concessions received by any such persons may be
deemed to be underwriting compensation under the Securities Act. The Letter of
Transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Securities Act.
For a period of 90 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer (including the expenses of one counsel for the
holders of the Notes) other than commissions or concessions of any brokers or
dealers and will indemnify such holders (including any broker-dealers) against
certain liabilities, including liabilities under the Securities Act.
PSI, FCCM and their affiliates also provide or have provided banking,
advisory and other financial services to the Company in the ordinary course of
their businesses. On March 2, 1998, Prudential Securities Credit Corp. ("PSCC"),
an affiliate of PSI, and First Chicago Capital Corporation ("FCCC"), an
affiliate of FCCM, purchased $8.5 million and $1.5 million, respectively, of
Bridge Notes from Holdings, the proceeds of which were loaned to the Company and
used to help finance the Unisign acquisition. In addition, First Chicago, also
an affiliate of FCCM, acted as the agent and a bank under the Company's 1994
credit facility, as well as the Original Credit Facility and the Senior Credit
Facility, the proceeds of which were used to help finance acquisitions,
including the TSS and Unisign acquisitions. The Company used a portion of the
proceeds of the Initial Offering to repay in full the Senior Credit Facility and
the intercompany loan, at which time Holdings repaid the Bridge Notes. PSI,
PSCC, FCCC, First Chicago and FCCM have received customary compensation in
connection with these transactions.
87
<PAGE> 92
LEGAL MATTERS
Certain legal matters with respect to the legality of the Exchange Notes
offered hereby will be passed upon for the Company by St. John & Wayne, L.L.C.,
Newark, New Jersey. In rendering its opinion on the validity of the Notes,
counsel for the Company will express no opinion as to federal or state laws
relating to fraudulent transfers.
EXPERTS
The financial statements of the Company as of and for the year ended
December 31, 1997 included in this Prospectus and Registration Statement have
been audited by McGladrey & Pullen, LLP, independent auditors, as stated in
their report appearing herein and are included in reliance upon such report and
upon the authority of such firm as experts in accounting and auditing.
The financial statements of the Company as of and for the years ended
December 31, 1995 and 1996 included in this Prospectus and Registration
Statement have been audited by McGrail Merkel Quinn & Associates, independent
auditors, as stated in their report appearing herein and are included in
reliance upon such report and upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Unisign Corporation, Inc. -- Outdoor
Advertising Division as of and for the years ended December 31, 1996 and 1997
included in this Prospectus and Registration Statement have been audited by
McGrail Merkel Quinn & Associates, independent auditors, as stated in their
report appearing herein and are included in reliance upon such report and upon
the authority of such firm as experts in accounting and auditing.
The financial statements of Tri-State Systems, Inc. as of and for the
period October 1, 1996 through June 11, 1997 and as of and for the years ended
September 30, 1995 and 1996 included in this Prospectus and Registration
Statement have been audited by Smith & Radigan, independent auditors, as stated
in their report appearing herein and are included in reliance upon such report
and upon the authority of such firm as experts in accounting and auditing.
88
<PAGE> 93
CHANGE IN ACCOUNTANTS
On March 12, 1998, the Company engaged McGladrey & Pullen, LLP as the
independent auditors for the Company. Prior to the engagement of McGladrey &
Pullen, LLP, McGrail Merkel Quinn & Associates served as the principal
independent auditors for the Company. The Company engaged McGladrey & Pullen,
LLP and dismissed McGrail Merkel Quinn & Associates in anticipation of the
Initial Offering because of the Company's desire to have a national firm. The
change to McGladrey & Pullen, LLP was approved by the Board of Directors of the
Company. The reports on the Company's financial statements prepared by McGrail
Merkel Quinn & Associates for the years ended December 31, 1995 and December 31,
1996 contained no adverse opinion or disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope or accounting principles.
In connection with the audits for the years ended December 31, 1995 and December
31, 1996, there were no disagreements with McGrail Merkel Quinn & Associates on
any matter of accounting principles or practices, financial statement disclosure
or auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of McGrail Merkel Quinn & Associates, would have caused McGrail
Merkel Quinn & Associates to make reference to the subject matter of the
disagreements in its reports.
AVAILABLE INFORMATION
The Company intends to file reports and other information with the
Commission pursuant to the informational requirements of the Exchange Act.
The Company has filed with the Commission a Registration Statement (which
term shall include all amendments thereto) on Form S-4 under the Securities Act
with respect to the Exchange Notes offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, does not contain all of the
information set forth in the Registration Statement and reference is made to the
Registration Statement and the exhibits thereto for further information with
respect to the Company. Such reports, the Registration Statement and the
exhibits thereto may be inspected, without charge, at the offices of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at its regional
offices at Seven World Trade Center, New York, New York 10048, and 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such materials
may be obtained from the public reference section of the Commission at its
Washington address upon payment of the prescribed fee. Such reports and other
information can also be reviewed through the Commission's Web site
(http://www.sec.gov).
89
<PAGE> 94
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
FINANCIAL STATEMENTS, TRI-STATE OUTDOOR MEDIA GROUP, INC.
Unaudited balance sheet................................... F-2
Unaudited statements of operations........................ F-3
Unaudited statements of cash flows........................ F-4
Notes to unaudited financial statements................... F-5
Independent Auditors' Reports............................. F-6
Balance sheets............................................ F-8
Statements of operations.................................. F-9
Statements of accumulated deficit......................... F-10
Statements of cash flows.................................. F-11
Notes to financial statements............................. F-12
FINANCIAL STATEMENTS, UNISIGN CORPORATION, INC.
Independent Auditor's Report.............................. F-21
Balance sheets............................................ F-22
Statements of income...................................... F-23
Statements of changes in divisional equity................ F-24
Statements of cash flows.................................. F-25
Notes to financial statements............................. F-26
FINANCIAL STATEMENTS, TRI-STATE SYSTEMS, INC.
Independent Auditors' Reports............................. F-31
Balance sheet............................................. F-32
Statement of operations................................... F-33
Statement of retained earnings (deficit).................. F-34
Statement of cash flows................................... F-35
Notes to financial statements............................. F-36
Independent Auditors' Reports............................. F-41
Balance sheets............................................ F-42
Statements of operations.................................. F-43
Statements of retained earnings (deficit)................. F-44
Statements of cash flows.................................. F-45
Notes to financial statements............................. F-46
</TABLE>
F-1
<PAGE> 95
TRI-STATE OUTDOOR MEDIA GROUP, INC.
BALANCE SHEET
MARCH 31, 1998
(IN THOUSANDS, EXCEPT SHARE OR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<S> <C>
ASSETS
Current Assets
Cash...................................................... $ 108
Accounts receivable, net of allowance for doubtful
accounts of $379....................................... 1,848
Supplies and prepaid production costs..................... 889
Prepaid site leases....................................... 1,208
Prepaid commissions, current portion...................... 245
Other current assets...................................... 270
-------
Total current assets.............................. 4,568
-------
Property and Equipment, net................................. 43,510
-------
Other Assets
Intangible assets, net.................................... 27,502
Prepaid commissions, long-term portion.................... 299
Deferred taxes............................................ 3,022
Other..................................................... 102
-------
30,925
-------
$79,003
=======
LIABILITIES AND STOCKHOLDER'S (DEFICIENCY)
Current Liabilities
Note payable to SGH Holdings, Inc. ....................... $10,000
Accounts payable.......................................... 777
Accrued interest.......................................... 656
Accrued expenses.......................................... 36
Deferred revenue.......................................... 213
Due to SGH Holdings, Inc. ................................ 125
-------
Total current liabilities......................... 11,807
-------
Long-Term Debt
Long-term debt............................................ 72,814
-------
Total liabilities................................. 84,621
Commitments and Contingencies
Stockholder's (Deficiency)
Common stock, par value, $10 per share; authorized 10,000
shares; issued and outstanding, 200 shares............. 2
Paid-in capital........................................... 25
Accumulated deficit....................................... (5,645)
-------
(5,618)
-------
$79,003
=======
</TABLE>
See Note to Financial Statements.
F-2
<PAGE> 96
TRI-STATE OUTDOOR MEDIA GROUP, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997, AND 1998
(IN THOUSANDS, EXCEPT SHARE OR PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
------ -------
<S> <C> <C>
Net revenues................................................ $1,971 $ 4,242
------ -------
Operating expenses:
Direct operating expenses................................. 572 1,291
General and administrative................................ 498 720
Depreciation and amortization............................. 612 1,781
------ -------
1,682 3,792
------ -------
Operating income.................................. 289 450
------ -------
Other income (expense):
Interest expense.......................................... (481) (1,673)
------ -------
Total other income (expense)...................... (481) (1,673)
------ -------
Loss before income tax benefit.................... (192) (1,223)
Income tax benefit.......................................... 77 489
------ -------
Net loss.......................................... $ (115) $ (734)
====== =======
Basic (loss) per common share............................... $ (575) $(3,670)
====== =======
Weighted common shares outstanding.......................... 200 200
====== =======
</TABLE>
See Note to Financial Statements.
F-3
<PAGE> 97
TRI-STATE OUTDOOR MEDIA GROUP, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1997 AND 1998
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
1997 1998
----- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss.................................................. $(115) $ (734)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 612 1,781
Deferred income tax benefit............................ (77) (489)
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable............................... (62) (235)
Supplies and prepaid production costs............. 2 (141)
Prepaid site leases............................... (118) (160)
Prepaid commissions............................... (37) (109)
Other assets...................................... (42) (59)
Increase (decrease) in:
Accounts payable..................................... 85 331
Accrued interest..................................... (5) 152
Accrued expenses..................................... 3 18
Deferred revenue..................................... (3) 114
----- --------
Net cash provided by operating activities......... 243 469
----- --------
INVESTING ACTIVITIES
Purchase of property and equipment........................ (356) (960)
Acquisitions.............................................. -- (22,266)
Other..................................................... 18 --
----- --------
Net cash (used in) investing activities........... (338) (23,226)
----- --------
FINANCING ACTIVITIES
Loan proceeds............................................. -- 22,889
Net increase in revolver savings.......................... 13 1,200
Principal payments on debt................................ (47) --
Debt issuance costs....................................... -- (1,356)
----- --------
Net cash provided by (used in) financing activities.... (34) 22,733
----- --------
Net (decrease) in cash................................. (129) (24)
CASH:
Beginning................................................. 133 132
----- --------
Ending.................................................... $ 4 $ 108
===== ========
</TABLE>
F-4
<PAGE> 98
TRI-STATE OUTDOOR MEDIA GROUP, INC.
NOTE TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
The interim financial statements should be read in conjunction with the
financial statements and notes thereto of Tri-State Outdoor Media Group, Inc.
(the "Company") for the year ended December 31, 1997 as included in the
Prospectus. The interim information reflects all adjustments, consisting only of
normal recurring accruals, which are, in the opinion of management, necessary
for a fair presentation of the results for the interim period. Results for the
interim period are not necessarily indicative of results to be expected for the
full year.
F-5
<PAGE> 99
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Tri-State Outdoor Media Group, Inc.
Tifton, Georgia
We have audited the accompanying balance sheet of Tri-State Outdoor Media
Group, Inc. as of December 31, 1997, and the related statements of operations,
accumulated 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 financial statements referred to above present fairly,
in all material respects, the financial position of Tri-State Outdoor Media
Group, Inc. as of December 31, 1997, and the results of its operations and its
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
MCGLADREY & PULLEN, LLP
West Palm Beach, FL
March 27, 1998
F-6
<PAGE> 100
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors of
Tri-State Outdoor Media Group, Inc.
Joplin, Missouri
We have audited the accompanying balance sheet of Tri-State Outdoor Media
Group, Inc. as of December 31, 1996 and the related statements of operations,
accumulated deficit and cash flows for each of the years in the two year period
ended December 31, 1996. 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 Tri-State Outdoor Media
Group, Inc. as of December 31, 1996, and the results of its operations and cash
flows for each of the years in the two year period ended December 31, 1996, in
conformity with generally accepted accounting principles.
MCGRAIL, MERKEL, QUINN & ASSOCIATES
Scranton, PA
March 13, 1997
F-7
<PAGE> 101
TRI-STATE OUTDOOR MEDIA GROUP, INC.
BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
(IN THOUSANDS,
EXCEPT SHARE OR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
ASSETS
Current Assets (Note 5)
Cash...................................................... $ 133 $ 132
Accounts receivable, net of allowance for doubtful
accounts 1996 $71; 1997 $186........................... 815 1,429
Supplies and prepaid production costs..................... 258 748
Prepaid site leases....................................... 444 1,012
Prepaid commissions, current portion...................... 146 193
Other current assets...................................... 80 211
------- -------
Total current assets.............................. 1,876 3,725
------- -------
Property and Equipment, net (Note 2)........................ 11,326 33,083
------- -------
Other Assets
Intangible assets, net (Note 3)........................... 2,553 14,421
Prepaid commissions, long-term portion.................... 197 242
Deferred taxes (Note 8)................................... 1,109 2,533
Other..................................................... 67 102
------- -------
3,926 17,298
------- -------
$17,128 $54,106
======= =======
LIABILITIES AND STOCKHOLDER'S EQUITY (DEFICIENCY)
Current Liabilities
Current portion of long-term debt (Note 5)................ $ 1,554 $ --
Accounts payable.......................................... 320 246
Accrued interest.......................................... 119 504
Accrued expenses.......................................... 27 18
Deferred revenue.......................................... 51 99
Due to SGH Holdings, Inc.................................. -- 125
------- -------
Total current liabilities......................... 2,071 992
Long-Term Debt (Note 5)
Long-term debt, net of current portion.................... 17,920 57,998
------- -------
Total liabilities................................. 19,991 58,990
------- -------
Commitments and Contingencies (Note 9)
Stockholder's Equity (Deficiency)
Common stock, par value, $10 per share; authorized 10,000
shares; issued and outstanding 1997 and 1996; 200
shares................................................. 2 2
Paid-in capital........................................... 25 25
Accumulated deficit....................................... (2,890) (4,911)
------- -------
(2,863) (4,884)
------- -------
$17,128 $54,106
======= =======
</TABLE>
See Notes to Financial Statements.
F-8
<PAGE> 102
TRI-STATE OUTDOOR MEDIA GROUP, INC.
STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS, EXCEPT SHARE OR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Net revenues................................................ $ 7,892 $ 8,021 $ 11,831
------- ------- --------
Operating expenses:
Direct operating expenses................................. 2,315 2,427 3,817
General and administrative................................ 1,934 2,345 2,417
Depreciation and amortization............................. 2,713 2,648 4,699
------- ------- --------
6,962 7,420 10,933
------- ------- --------
Operating income.................................. 930 601 898
------- ------- --------
Other income (expense):
Gain (loss) on sale of assets............................. 1,334 443 (143)
Interest expense.......................................... (2,094) (1,941) (4,200)
Other income (expense).................................... (153) 2 --
------- ------- --------
Total other income (expense)...................... (913) (1,496) (4,343)
------- ------- --------
Income (loss) before income tax benefit........... 17 (895) (3,445)
Income tax benefit (Note 8)................................. 8 324 1,424
------- ------- --------
Net income (loss)................................. $ 25 $ (571) $ (2,021)
======= ======= ========
Basic earnings (loss) per common share...................... $ 125 $(2,855) $(10,105)
======= ======= ========
Weighted common shares outstanding.......................... 200 200 200
======= ======= ========
</TABLE>
See Notes to Financial Statements.
F-9
<PAGE> 103
TRI-STATE OUTDOOR MEDIA GROUP, INC.
STATEMENTS OF ACCUMULATED DEFICIT
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<S> <C>
Deficit, January 1, 1995.................................... $(2,344)
Net income................................................ 25
-------
Deficit, December 31, 1995.................................. (2,319)
Net loss.................................................. (571)
-------
Deficit, December 31, 1996.................................. (2,890)
Net loss.................................................. (2,021)
-------
Deficit, December 31, 1997.................................. $(4,911)
=======
</TABLE>
See Notes to Financial Statements.
F-10
<PAGE> 104
TRI-STATE OUTDOOR MEDIA GROUP, INC.
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1996 AND 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss)......................................... $ 25 $ (571) $(2,021)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 2,713 2,648 4,699
Deferred income tax benefit............................ (8) (324) (1,424)
(Gain) loss on sale of assets.......................... (1,334) (443) 143
Accrued interest added to principal.................... 588 549 1,265
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable.................................. (215) 67 (461)
Supplies and prepaid production costs................ (149) 25 29
Prepaid site leases.................................. (112) (16) (568)
Prepaid commissions.................................. (73) (97) (20)
Other assets......................................... 37 (1) 219
Increase (decrease) in:
Accounts payable..................................... (68) (84) (154)
Accrued expenses..................................... (133) (293) 366
Deferred revenue..................................... (28) 18 (263)
Deposit.............................................. 2 (2) --
------- ------- -------
Net cash provided by operating activities......... 1,245 1,476 1,810
------- ------- -------
INVESTING ACTIVITIES
Purchase of property and equipment........................ (1,083) (1,655) (2,334)
Acquisitions (Note 4)..................................... (3,003) (286) (34,835)
Proceeds from sale of assets.............................. 2,000 3,100 --
Other acquisition costs................................... (202) (75) (101)
Other..................................................... (55) 81 (35)
------- ------- -------
Net cash provided by (used in) investing
activities...................................... (2,343) 1,165 (37,305)
------- ------- -------
FINANCING ACTIVITIES
Loan proceeds............................................. 2,500 200 35,925
Net increase in revolver borrowings....................... 1,714 1,273 1,962
Principal payments on debt................................ (3,014) (4,055) (881)
Increase in due to SGH Holdings, Inc...................... 17 -- 125
Debt issuance costs....................................... (85) -- (1,637)
------- ------- -------
Net cash provided by (used in) financing
activities...................................... 1,132 (2,582) 35,494
------- ------- -------
Net increase (decrease) in cash................... 34 59 (1)
CASH:
Beginning................................................. 40 74 133
------- ------- -------
Ending.................................................... $ 74 $ 133 $ 132
======= ======= =======
SUPPLEMENTAL CASH FLOW INFORMATION
Cash payments for interest................................ $ 1,464 $ 1,663 $ 3,815
======= ======= =======
</TABLE>
See Notes to Financial Statements.
F-11
<PAGE> 105
TRI-STATE OUTDOOR MEDIA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES
Nature of business: The Company is an outdoor advertising company,
operating advertising displays in the eastern and central regions of the United
States. Most of the Company's advertising displays are located along interstate
highways and primary and secondary roads outside of urban areas. The Company
offers a full line of outdoor advertising services to its customers, including
creative design, production, installation and maintenance of the displays. The
Company primarily provides services to advertisers who wish to alert motorists
to the advertiser's place of business and to provide directions to that
business.
The Company is a 100%-owned subsidiary of SGH Holdings, Inc. ("Holdings").
Significant accounting policies:
Accounting estimates: 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.
Cash and concentration of credit risk: The Company maintains cash with
various financial institutions in accounts which, at times, may be in excess of
the FDIC insurance limits. The Company has not experienced any losses in such
accounts. The Company believes it is not exposed to any significant credit risk
on cash.
Supplies and prepaid production costs: Supplies and prepaid production
costs consist primarily of material used in the construction of signs, artwork
and other production costs.
Prepaid expenses: The Company prepays certain costs for land leases and
sales commissions at the inception of the advertising contracts. These costs are
deferred and amortized on a straight-line basis over the period that coincides
with the recognition of income. The portion of these costs associated with
advertising revenue to be earned beyond one year of the balance sheet date has
been classified as long-term assets.
Property and equipment: Property and equipment is recorded at cost and
depreciated on a straight-line basis over the estimated useful lives of the
respective assets. The estimated useful lives of assets are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Building and improvements............................ 15-30
Advertising structures............................... 20
Advertising display faces............................ 3
Vehicles and equipment............................... 5
</TABLE>
Depreciation expense for the years ended December 31, 1995, 1996 and 1997,
amounted to $1,410,000 $1,574,000 and $2,343,000, respectively.
Intangible assets and deferred costs: Intangible assets result from
several acquisitions and include noncompete agreements, goodwill and future
contract revenues. Intangible assets are being amortized on a straight-line
basis over the following lives:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Goodwill.............................................. 15
Value of purchased contracts.......................... 1-3
Noncompete agreements................................. 5
</TABLE>
F-12
<PAGE> 106
TRI-STATE OUTDOOR MEDIA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Costs incurred by the Company in securing financing agreements have been
deferred and are being amortized over the term of the agreements using the
effective interest method.
Amortization expense for the years ended December 31, 1995, 1996 and 1997,
amounted to $1,304,000, $1,074,000 and $2,356,000 respectively.
Financial instruments: The Company utilizes derivative financial
instruments to change the fixed/ variable interest rate mix of the debt
portfolio to reduce the Company's aggregate risk to movements in interest rates.
The derivative instruments consist of interest rate swap agreements with banks.
Gains and losses relating to qualified hedges are deferred and included in the
measurement of the related transaction, when the hedged transaction occurs. The
Company's policy is not to hold or issue derivative financial instruments for
trading purposes.
Net revenues: Revenues from outdoor advertising contracts are recognized
on a straight-line basis over the term of the contract and are net of agency
commissions. Bulletin contracts are primarily 36-month terms whereas poster
contracts are primarily 12 months or less.
Impairment of long-lived assets: The Company continually evaluates whether
events and circumstances have occurred that indicate the remaining estimated
useful life of long-lived assets may warrant revision or the remaining balance
of long-lived assets may not be recoverable. In accordance with FASB Statement
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, the Company records impairment losses on long-lived
assets used in operations when events and circumstances indicate that the assets
might be impaired and the undiscounted cash flows estimated to be generated by
those assets are less than the carrying amounts of those assets.
Loss per common share: Loss per common share amounts are computed using
the weighted average number of common shares outstanding.
Income taxes: Deferred income taxes are provided on a liability method
whereby deferred tax assets are recognized for deductible temporary differences
and operating loss and tax credit carryforwards and deferred tax liabilities are
recognized for taxable temporary differences. Temporary differences are the
differences between the reported amounts of assets and liabilities and their tax
bases. Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion or all of
the deferred tax assets will not be realized. Deferred tax assets and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.
The Company files a consolidated income tax return with Holdings. The
consolidated group uses the separate return method for allocating the
consolidated amount of current and deferred tax expense (benefit) to members of
the group.
NOTE 2. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31, 1996 and
1997 (in thousands):
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Land........................................................ $ 98 $ 173
Buildings and improvements.................................. 317 648
Structures and faces........................................ 16,420 39,887
Vehicles and equipment...................................... 891 1,109
------- -------
17,726 41,817
Less accumulated depreciation............................... 6,400 8,734
------- -------
$11,326 $33,083
======= =======
</TABLE>
F-13
<PAGE> 107
TRI-STATE OUTDOOR MEDIA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 3. INTANGIBLE ASSETS
Intangible assets consist of the following at December 31, 1996 and 1997
(in thousands):
<TABLE>
<CAPTION>
1996 1997
------ -------
<S> <C> <C>
Goodwill.................................................... $1,729 $11,732
Debt issuance costs......................................... 698 2,335
Value of purchased contracts................................ 2,276 4,838
Noncompete agreements....................................... 364 414
------ -------
5,067 19,319
Less accumulated amortization............................... 2,514 4,898
------ -------
$2,553 $14,421
====== =======
</TABLE>
NOTE 4. ACQUISITIONS
1997:
The Tri-State Systems Acquisition: In June 1997, the Company acquired
substantially all the assets of Tri-State Systems, Inc. ("TSS") for a total
acquisition cost of $32.0 million. As a result of the acquisition of TSS, the
Company acquired display faces in Georgia, Alabama, Florida, Kentucky,
Mississippi, South Carolina and Tennessee. Through this acquisition, the Company
also acquired the bench advertising business of TSS, which involves the sale of
advertising copy on benches located at bus stops and other locations. The bench
advertising business of the Company is operated primarily in Georgia and
Alabama, as well as Florida, Kentucky, Mississippi, South Carolina and
Tennessee. Subsequent to the acquisition of TSS by the Company, the Company's
Chief Financial Officer received $161,000 for his ownership interest in TSS.
Sunbelt Outdoor Systems, Inc.: In September 1997, the Company acquired
substantially all of the assets of Sunbelt Outdoor Systems, Inc. for a total
acquisition cost of approximately $2.8 million.
Others: The Company acquired assets from Supreme Outdoor, Inc. and
Mid-American Advertising Company for a total acquisition cost of $333,000 and
$400,000, respectively, during 1997.
The assets acquired and liabilities assumed during 1997 in conjunction with
the above acquisitions were as follows (in thousands):
<TABLE>
<CAPTION>
TSS SUNBELT OTHERS
------- ------- ------
<S> <C> <C> <C>
Current assets........................................... $ 1,060 $ 21 $ 13
Property and equipment................................... 19,562 1,734 613
Intangible assets........................................ 11,342 1,026 117
Assumed liabilities...................................... (616) (27) (10)
------- ------ ----
$31,348 $2,754 $733
======= ====== ====
</TABLE>
The acquisitions were financed by borrowings under the Company's bank
credit facilities.
Prior years:
During 1996, the Company acquired certain assets of three small outdoor
companies for the aggregate purchase price of $286,000.
On November 30, 1995, the Company acquired substantially all of the assets
of a division of an outdoor advertising company located in and around Watertown,
New York for $2,664,000. Such operations were not material to the financial
statements during 1995.
F-14
<PAGE> 108
TRI-STATE OUTDOOR MEDIA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
During 1995, the Company also acquired two small outdoor companies for the
aggregate purchase price of $340,000. Such operations were not material to the
financial statements during 1995.
All of the foregoing acquisitions were accounted for as purchases, and the
operations are included in the accompanying financial statements subsequent to
the acquisitions.
Unaudited pro forma results of operations for the years ended December 31
as though these businesses had been acquired as of January 1, 1996, follows (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Revenue.................................................. $14,783 $15,072
Net loss................................................. (3,242) (3,211)
Loss per common share.................................... (16,210) (16,055)
</TABLE>
Subsequent to December 31, 1997:
The Unisign Acquisition: Effective March 2, 1998, the Company acquired
substantially all the outdoor advertising assets of Unisign Corporation, Inc.
("Unisign") for a total acquisition cost of approximately $22.0 million,
including the assumption of certain capital leases aggregating approximately
$727,000. Cash consideration paid was $21.1 million. As a result of this
acquisition, the Company acquired display faces in Kentucky, West Virginia and
Ohio. This acquisition was a new market acquisition.
The assets acquired and liabilities assumed subsequent to year end and
related acquisition costs incurred in conjunction with this acquisition were as
follows (in thousands):
<TABLE>
<S> <C>
Current assets.............................................. $ 220
Property and equipment...................................... 9,105
Intangible assets........................................... 12,675
Assumed liabilities......................................... (727)
Acquisition costs........................................... (200)
-------
$21,073
=======
</TABLE>
The Company entered into a purchase commitment with Unisign on March 2,
1998 for the construction of outdoor advertising structures for $1,250,000. At
that time, the Company also provided a standby letter of credit agreement in the
amount of $1,250,000 with Unisign expiring April 6, 2000. The Company does not
believe it is practical to estimate the fair value of the letter of credit and
does not believe exposure to loss is likely.
In addition, the Company acquired certain assets from two outdoor
advertising companies subsequent to year end for an aggregate purchase price of
$1,193,000. The Company has also signed a letter of intent to purchase certain
assets of an outdoor advertising company for approximately $1,000,000.
F-15
<PAGE> 109
TRI-STATE OUTDOOR MEDIA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5. LONG-TERM DEBT
Long-term debt at December 31, 1996 and 1997 consists of the following (in
thousands):
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Senior Debt:
The First National Bank of Chicago
Senior term loan (Facility A) payable in 25 unequal
quarterly principal installments maturing June 30, 2004;
interest payable quarterly as defined by the agreement
(A)....................................................... $11,450 $30,000
Senior term loan (Facility B) payable in 26 unequal
quarterly principal installments maturing December 31,
2004; interest payable quarterly as defined by the
agreement (A)............................................. -- 7,500
Revolving note (Facility C) provides for borrowing up to
$7,500,000 until the facility termination date of June 30,
2004. Interest is payable quarterly on the outstanding
balance. Aggregate revolving note will be reduced in
unequal quarterly principal installments commencing June
30, 2000 (A).............................................. 2,987 4,950
Subordinated Debt:
Promissory note payable to Holdings dated June 12, 1997.
Interest accrues at a rate of 15% per annum through June
12, 2000 and 14% per annum thereafter compounded quarterly
(including capitalized accrued interest of $765,000 at
December 31, 1997). Principal and accrued interest is due
and payable on January 31, 2005........................... -- 9,765
Promissory note payable to Holdings dated October 3, 1994.
Interest accrues at a rate of 12% per annum (including
capitalized accrued interest of $1,137,000 and $1,637,000
at December 31, 1996 and 1997, respectively). The
principal and accrued interest is due and payable on
October 4, 2003 (1)....................................... 5,037 5,537
Other long-term debt (secured).............................. -- 246
------- -------
19,474 57,998
Less current portion of long-term debt...................... 1,554 --
------- -------
Long-term debt, less current portion........................ $17,920 $57,998
======= =======
</TABLE>
- ---------------
(A) Senior Debt Facilities were amended as of February 27, 1998; see below for
amended terms and maturities.
Senior Debt:
To finance certain business acquisitions, the Company entered into a second
amendment to the original credit agreement (the "Senior Credit Facility") with
The First National Bank of Chicago originally dated October 3, 1994 and a
syndicate consisting of various other financial institutions (collectively
called the "Bank") on the close of business on February 27, 1998. The Senior
Credit Facility consists of a Term Loan A Facility for $37,500,000, Term Loan B
Facility for $12,500,000 (the "Term Loans"), and a Revolving Loan Commitment
(the "Revolver") of $12,500,000 (collectively the "Borrowings"). The Term Loans
mature on September 30, 2005 and March 31, 2006, respectively, and the
Revolver's termination date is September 30, 2005.
The borrowings under the Senior Credit Facility are collateralized by
substantially all of the Company's assets, including all leases, permits and
other intangible assets, and other collateral, as well as by a pledge from
Holdings of its stock in the Company. In addition, the Company must maintain
keyman life insurance on the
F-16
<PAGE> 110
TRI-STATE OUTDOOR MEDIA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
president of the Company in the aggregate amount of $2,500,000. The insurance
policies are assigned to The First National Bank of Chicago.
The Senior Credit Facility enables the Company to borrow funds at a rate
equal to the alternate base rate, as defined by the Senior Credit Facility,
calculated on the number of days elapsed on the basis of a 360-day year. The
Company also has the option of paying interest on loan advances at the
Eurodollar Rate, as defined. The Senior Credit Facility also enables the Company
to realize a lower interest rate if its leverage ratio meets certain levels as
stipulated in the Senior Credit Facility. At December 31, 1997, the effective
interest rate was 8.813% and 10.500% for the A Facility and B Facility,
respectively. At December 31, 1996, the effective interest rate was 9.125% for
the aggregate facility loan. Accrued interest is payable in quarterly
installments on March 31, June 30, September 30 and December 31. The Senior
Credit Facility also requires payment of a commitment fee of either (a) if the
Total Leverage Ratio as of the last day of the most recently ended fiscal
quarter is equal to or greater than 3.5 to 1, .50% per annum, or (b) if the
Total Leverage Ratio as of the last day of such fiscal quarter is less than 3.0
to 1, .375% per annum. In either case, the fee is computed on the average daily
unborrowed portion of the Aggregate Total Commitment from the Effective Date to
and including the Facility C Termination Date, payable in arrears on each
payment date hereafter and on the Facility C termination date. Related to this,
the Company incurred $1,000 and $14,000 in 1996 and 1997, respectively, in
commitment fee expense.
Available borrowings under the Revolver are permanently reduced on the last
day of each fiscal quarter beginning December 31, 2001 by $625,000, thereby
reducing the availability to zero on September 30, 2005.
The Senior Credit Facility contains certain affirmative covenants that must
be complied with on a continuing basis. In addition, the Senior 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
Senior Credit Facility. The Senior Credit Facility also requires the Company to
maintain certain financial ratios. In addition, the agreement requires the
Company to enter into a rate hedging obligation (see Interest Rate Swaps,
below).
The Company has the right to prepay the borrowings in whole or in part,
without premium or penalty, as stipulated in the Senior Credit Facility.
Subordinated Debt:
(1) Interest accrues at a rate of 12% per annum and is payable quarterly
commencing December 31, 1994. However, all quarterly interest due on or prior to
September 30, 1996 was deferred. For all quarterly payment dates subsequent to
September 30, 1996, the Company is permitted to defer the payment of interest.
If deferred, interest accrues at a rate of 15% per annum.
Interest capitalized pursuant to the subordinated debt agreement amounted
to $549,000 during 1996 and $300,000 during 1997.
F-17
<PAGE> 111
TRI-STATE OUTDOOR MEDIA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Maturities of long-term debt based on the Senior Credit Facility dated
February 27, 1998, as of December 31, 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNT
- ---- -------
<S> <C>
1998............................................... $ --
1999............................................... 1,896
2000............................................... 4,300
2001............................................... 7,800
2002............................................... 8,300
Thereafter......................................... 35,702
-------
$57,998
=======
</TABLE>
Subsequent to year end, in conjunction with the Unisign acquisition, the
Company borrowed $10 million from Holdings. This borrowing is subordinate to the
Company's senior debt and bears interest at LIBOR plus 4.75%, 10.4% at March 2,
1998. The note is due on demand.
Interest Swaps Agreements:
The Company uses interest rate swap agreements to change the fixed/variable
interest rate mix of the debt portfolio to reduce the Company's aggregate risk
to movements in interest rates. Amounts paid or received under interest rate
swap agreements are accrued as interest rates change and are recognized over the
life of the swap agreements as an adjustment to interest expense. The related
amounts payable to, or receivable from, the counterparties are included in
accrued interest expense. The fair value of the swap agreements noted below were
not recognized in the financial statements since they are accounted for as a
hedge. The criteria required to be met for hedge accounting is that, first, the
item to be hedged exposes the Company to interest rate risk and, second, the
interest rate swap reduces that exposure and is designated as a hedge as
follows:
The first interest rate swap has a notional amount of $15,000,000, matures
May 17, 1999 (with an additional one year option at the Bank's discretion) and
has a fixed rate of 9.13%. During 1997, the Company incurred $56,000 related to
this agreement and increased interest expense accordingly.
The second interest rate swap has a notional amount of $15,000,000, matures
May 16, 2000 and has a fixed rate of 9.13%. During 1997, the Company incurred of
$56,000 related to this agreement and increased interest expense accordingly.
Prior to June 1997, the Company had an interest rate swap with a notional
amount of $12,000,000, a term of two years commencing November 20, 1995 and a
fixed rate of 8.995%. Also, the swaps had an interest rate collar with a
notional amount of $10,000,000, a term of one year commencing November 20, 1997
and would have provided a cap of 10.625% and a floor of 8.975%.
NOTE 6. SALE OF ASSETS
On January 25, 1996, the Company sold substantially all of its operating
assets in and around Watertown, New York for $3,100,000. Assets sold, in
addition to the outdoor advertising structures, included the site leases, sales
and advertising contracts and permits.
On June 30, 1995, the Company sold billboards located in and around Erie,
Pennsylvania for $2,000,000. Assets sold, in addition to the billboards,
included the site leases, sales contracts and permits.
F-18
<PAGE> 112
TRI-STATE OUTDOOR MEDIA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 7. RELATED PARTY TRANSACTIONS
The Company leased its corporate headquarters in Joplin, Missouri from the
President, Chief Financial Officer and a Vice President of the Company, who
jointly owned the building. The Company moved its headquarters to Tifton,
Georgia in 1997 and no longer leases the building in Missouri. The Company also
leases other assets from the President and Chief Financial Officer. The rent
expense paid to related parties for the years ended December 31, 1995, 1996 and
1997 in the aggregate was not material to the financial statements. See also
Note 5 for a description of subordinated promissory notes payable to Holdings.
NOTE 8. INCOME TAXES
The income tax benefit consists of the following for the years ended
December 31, 1995, 1996 and 1997 (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ------
<S> <C> <C> <C>
Currently payable:
Federal................................................... $-- $ -- $ --
State..................................................... -- -- --
Deferred benefit:
Federal................................................... 6 269 1,218
State..................................................... 2 55 206
-- ---- ------
$8 $324 $1,424
== ==== ======
</TABLE>
A reconciliation of income tax benefit at statutory rates to the income tax
benefit reported in the statements of operations is as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ------
<S> <C> <C> <C>
Tax benefit at statutory rate............................... $ 6 $304 $1,171
State tax benefit, net of federal taxes..................... 2 55 206
Nondeductible expenses...................................... 2 (21) 11
Other....................................................... (2) (14) 36
--- ---- ------
Income tax benefit.......................................... $ 8 $324 $1,424
=== ==== ======
</TABLE>
At December 31, 1997, the Company has net operating loss carryforwards of
approximately $6,010,000 for federal and state income tax purposes, which expire
in varying amounts during the year ending 2009 through 2012.
Although realization is not assured, the Company believes, based on its
expectations for the future, that the taxable income of the Company will more
likely than not be sufficient to utilize all of the $6,010,000 net operating
loss carryforwards prior to their ultimate expiration in the year 2012. 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.
Temporary differences between the financial statement carrying amounts and
tax bases of assets that give rise to significant portions of the deferred tax
assets relate to the following as of December 31, 1996 and 1997 (in thousands):
<TABLE>
<CAPTION>
1996 1997
------ ------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards.......................... $ 374 $2,344
Amortization.............................................. 9 15
Allowance for uncollectible accounts...................... 28 73
Property and equipment.................................... 698 101
------ ------
$1,109 $2,533
====== ======
</TABLE>
F-19
<PAGE> 113
TRI-STATE OUTDOOR MEDIA GROUP, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 9. COMMITMENTS
Operating leases: Noncancelable operating leases for display sites expire
in various years through 2009. These leases generally contain renewal options
for a period of years equal to the initial term of the leases. Thereafter, the
leases generally are renewable on a year to year basis unless terminated by
either party at least 30 days prior to the anniversary date.
Rental expenses for all site leases were $859,000, $1,008,000 and
$1,632,000 for the years ended December 31, 1995, 1996 and 1997, respectively.
Future minimum rentals for site leases at December 31, 1997 are as follows
(in thousands):
<TABLE>
<CAPTION>
YEAR AMOUNTS
- ---- -------
<S> <C>
1998................................................ $ 933
1999................................................ 788
2000................................................ 669
2001................................................ 538
2002................................................ 357
Thereafter.......................................... 1,952
------
Total minimum lease payments required............... $5,237
======
</TABLE>
In addition, the Company acquired $1,250,000 in future lease commitments in
the acquisition of Unisign (Note 4).
Zoning regulations: In some of the localities in which the Company
operates, outdoor advertising is subject to restrictive and, in some cases,
prohibitive, zoning regulations. Management expects federal, state, and local
regulations to continue to be a significant factor in the operation of the
Company's business. It is not possible to predict the extent to which such
regulations could affect future operations.
NOTE 10. 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:
The carrying amounts approximate fair values as of December 31, 1996 and
1997 for cash, accounts receivable and accounts payable because of the
short-term maturities of those instruments.
The fair value of the interest rate instruments are the estimated amounts
that the Company would receive or pay to terminate the agreements at the
reporting date, taking into account current interest rates and the current
creditworthiness of the counterparties. At December 31, 1997, the Company
estimates it would have paid $400,000.
The Company does not believe it is practical to estimate the fair value of
the letter of credit (Note 4) and does not believe exposure to loss is likely.
The carrying amount of variable rate long-term debt instruments is
estimated to approximate fair values as the underlying agreements have been
recently negotiated and rates are tied to short-term indices. Other fixed rate
long-term debt instruments are estimated to approximate fair values as actual
rates are consistent with rates estimated to be currently available for debt of
similar terms and remaining maturities.
The fair value of the swap agreements were not recognized in the financial
statements since they are accounted for as a hedge.
F-20
<PAGE> 114
INDEPENDENT AUDITOR'S REPORT
Unisign Corporation, Inc.
Outdoor Advertising Division
P.O. Box 76
Ivel, Kentucky 41642-0076
We have audited the accompanying balance sheets of the Outdoor Advertising
Division of Unisign Corporation, Inc. as of December 31, 1996 and 1997, and the
related statements of income, divisional equity 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.
The accompanying financial statements present solely the Outdoor
Advertising Division of Unisign Corporation, Inc. They are not meant to present
the financial position of Unisign Corporation, Inc. as of December 31, 1996 and
1997, or its results of operations, changes in stockholders' equity and cash
flows for the years then ended.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Outdoor Advertising
Division of Unisign Corporation, Inc. as of December 31, 1996 and 1997, and the
results of its operations, changes in divisional equity and cash flows for the
years then ended in conformity with generally accepted accounting principles.
MCGRAIL MERKEL QUINN & ASSOCIATES
Scranton, PA
March 2, 1998
F-21
<PAGE> 115
UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION
BALANCE SHEETS
DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets
Due from other division................................... $ 769,602 $ 813,582
Accounts receivable, net of allowance for doubtful
accounts of $56,500 in 1996 and $50,000 in 1997........ 237,447 348,353
Prepaid land rents........................................ 45,553 48,387
Other current assets...................................... 16,104 45,100
---------- ----------
Total current assets.............................. 1,068,706 1,255,422
---------- ----------
Property and equipment
Advertising structures.................................... 4,105,609 5,172,631
Vehicles and equipment.................................... 398,331 455,277
---------- ----------
4,503,940 5,627,908
Less: Accumulated depreciation............................ 1,117,965 1,442,108
---------- ----------
Net property and equipment................................ 3,385,975 4,185,800
---------- ----------
Other assets
Deposits.................................................. 32,215 32,215
Goodwill, net............................................. 483,998 580,674
---------- ----------
Total other assets................................ 516,213 612,889
---------- ----------
Total assets...................................... $4,970,894 $6,054,111
========== ==========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities
Current portion of long-term debt......................... $ 55,289 $ 65,461
Obligations under capital leases.......................... 305,495 337,424
Accounts payable.......................................... 249,844 303,665
Accrued expenses.......................................... 37,768 45,631
---------- ----------
Total current liabilities......................... 648,396 752,181
---------- ----------
Long-term debt
Long-term debt, net of current portion.................... 144,633 105,318
Obligations under capital leases.......................... 1,290,294 952,866
---------- ----------
Total long-term debt.............................. 1,434,927 1,058,184
---------- ----------
Total liabilities................................. 2,083,323 1,810,365
---------- ----------
Divisional equity........................................... 2,887,571 4,243,746
---------- ----------
Total liabilities and divisional equity........... $4,970,894 $6,054,111
========== ==========
</TABLE>
The accompanying Notes are an integral part of these Financial Statements.
F-22
<PAGE> 116
UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Revenues, net
Paints.................................................... $2,702,546 $3,138,340
Posters................................................... 439,949 520,690
Other..................................................... -- 15,522
---------- ----------
Total revenues, net............................... 3,142,495 3,674,552
---------- ----------
Costs and expenses
Production................................................ 636,978 609,632
Lease expense............................................. 229,359 312,051
Sales and marketing....................................... 143,852 212,942
General and administrative................................ 575,990 659,646
Depreciation and amortization............................. 278,381 390,676
---------- ----------
1,864,560 2,184,947
---------- ----------
Income from operations............................ 1,277,935 1,489,605
---------- ----------
Other income (expense)
Interest income........................................... 3,098 900
Interest expense.......................................... (114,849) (94,451)
Other expense............................................. (10,438) (26,565)
Loss on disposal of assets................................ -- (13,314)
---------- ----------
Total other income (expense)...................... (122,189) (133,430)
---------- ----------
Net income........................................ $1,155,746 $1,356,175
========== ==========
</TABLE>
The accompanying Notes are an integral part of these Financial Statements.
F-23
<PAGE> 117
UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION
STATEMENTS OF CHANGES IN DIVISIONAL EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<S> <C>
Balance, at December 31, 1995............................... $1,731,825
Net income, 1996............................................ 1,155,746
----------
Balance, at December 31, 1996............................... 2,887,571
Net income, 1997............................................ 1,356,175
----------
Balance, at December 31, 1997............................... $4,243,746
==========
</TABLE>
The accompanying Notes are an integral part of these Financial Statements.
F-24
<PAGE> 118
UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
<TABLE>
<CAPTION>
1996 1997
----------- -----------
<S> <C> <C>
Operating activities
Net income................................................ $ 1,155,746 $ 1,356,175
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.......................... 278,381 390,676
Loss on disposal of assets............................. -- 13,314
Bad debt expense....................................... 26,603 29,649
(Increase) decrease in:
Accounts receivable.................................. (106,476) (140,555)
Prepaid land rents................................... (5,553) (2,834)
Other current assets................................. (11,104) (28,996)
Deposits............................................. (26,782) --
Increase (decrease) in:
Accounts payable..................................... (99,722) 53,821
Accrued expenses..................................... (11,373) 7,863
----------- -----------
Net cash provided by operating activities......... 1,199,720 1,679,113
----------- -----------
Investing activities
Purchase of property and equipment........................ (1,354,811) (1,165,951)
Purchase of intangibles................................... (500,688) (134,540)
----------- -----------
Net cash used by investing activities............. (1,855,499) (1,300,491)
----------- -----------
Financing activities
Increase in due from other division....................... (769,602) (43,980)
Loan proceeds............................................. 103,547 30,786
Lease proceeds............................................ 1,521,269 --
Payments of principal..................................... (27,569) (59,929)
Payments on capital leases................................ (171,866) (305,499)
----------- -----------
Net cash (used) provided by financing
activities..................................... 655,779 (378,622)
----------- -----------
Net (decrease) increase in cash................... -- --
Cash balance, beginning of year............................. -- --
----------- -----------
Cash balance, end of year................................... $ -- $ --
=========== ===========
</TABLE>
The accompanying Notes are an integral part of these Financial Statements.
F-25
<PAGE> 119
UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION
NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Unisign Corporation, Inc. ("Unisign") is primarily engaged in the outdoor
advertising business. Its principal corporate offices are located in Ivel,
Kentucky. Advertising structures are located in Kentucky, southern West Virginia
and southern Ohio on leased sites.
The accompanying financial statements present solely the financial position
and results of operations, changes in divisional equity and cash flows of the
Outdoor Advertising Division (the "Division") of Unisign.
Another division of Unisign owns residential and commercial real estate
located in West Virginia and Kentucky and operates an on-premises illuminated
sign company.
Use of Estimates
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.
Allowance for Doubtful Accounts
The allowance for doubtful accounts is the amount that, in management's
judgment, is sufficient to absorb any anticipated losses related to the accounts
receivable.
Prepaid Land Rents
Most of the Division's outdoor advertising structures are located on leased
land. Land rents are typically paid in advance for periods ranging from one to
twelve months. Prepaid land rents are expensed ratably over the related rental
term.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
straight-line and accelerated methods over the estimated useful lives of the
assets. Expenditures for maintenance and repairs are charged to operations as
incurred; major improvements are capitalized. The estimated useful lives of the
various classes of assets are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Advertising structures...................................... 15
Vehicles and equipment...................................... 2-7
</TABLE>
Depreciation expense for the years ended December 31, 1996 and 1997,
amounted to $261,691 and $352,812, respectively.
Goodwill
Goodwill represents the excess of the cost of assets purchased during 1996
and 1997 from Holmes Outdoor Advertising over the fair value of the net
identifiable assets acquired. Goodwill is being amortized over 15 years on a
straight-line basis.
F-26
<PAGE> 120
UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Revenue Recognition
The Division's revenues are generated from contracts with advertisers
generally covering periods of one to 36 months. The Division recognizes revenues
ratably over the contract term.
Barter Transactions
The Division enters into agreements to provide outdoor advertising services
in exchange for various goods and services of their customers. Revenue
recognized from these transactions approximated $103,935 and $166,660 in 1996
and 1997, respectively.
Income Taxes
Effective January 1, 1994, Unisign elected "S" Corporation status for both
Federal and State income tax purposes. Accordingly, no accrual has been made for
federal and state taxes at the corporate level, but instead the items of income,
deductions, loss and credit pass through to the stockholders.
Earnings Per Share
An earnings per share calculation has not been presented because the
Division is a component of Unisign which is a closely held company and
accordingly, earnings per share is not required or meaningful.
Cash Flow Disclosures
The Division paid interest amounting to $114,849 during the year ended
December 31, 1996 and $94,451 during the year ended December 31, 1997.
Long-Lived Assets
In accordance with Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting For the Impairment of Long-Lived Assets and For Long-Lived
Assets to be Disposed Of," the Division records impairment losses 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. SFAS No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. Based on current
estimates, management does not believe impairment of long-lived assets is
present.
NOTE 2 -- GOODWILL
Goodwill acquired as a result of the Holmes acquisition consisted of the
following at December 31:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Goodwill............................................. $500,688 $635,228
Less: Accumulated amortization....................... 16,690 54,554
-------- --------
$483,998 $580,674
======== ========
</TABLE>
For the years ended December 31, 1996 and 1997, amortization expense
amounted to $16,690 and $37,864, respectively.
NOTE 3 -- LINES OF CREDIT
Unisign has an available company-wide line of credit with Trans Financial
Bank, N.A., in the amount of $1,003,640, with interest at prime plus 0.5% (9.0%
at December 31, 1997), and expiring March 16, 1998. The Division accessed the
line of credit on an as needed basis during the years ended December 31, 1996
and 1997.
F-27
<PAGE> 121
UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The line is secured by equipment, accounts receivable, contract rights and all
other assets of Unisign excluding real estate. At December 31, 1997, $1,003,485
had been drawn down.
At December 31, 1996, Unisign had drawn down $317,300 from various lines of
credit with Trans Financial Bank, N.A. These lines of credit were repaid during
1997.
NOTE 4. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt of the Division consisted of the following
as of December 31,:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
COMMUNITY TRUST BANK
Term note dated December 1995 and maturing December 1999;
interest is at WSJP + .25% (8.75% at December 31, 1997);
monthly principal and interest payments of $3,078; secured
by equipment. ............................................ $ 99,088 $ 67,155
Term note dated November 1996 and maturing November 2000;
interest is at WSJP + .25% (8.75% at December 31, 1997);
monthly principal and interest payments of $2,224; secured
by equipment. ............................................ 90,000 68,783
Term note to finance equipment to mature in 1999 at market
interest rate; monthly principal and interest payment of
$428...................................................... 10,834 6,455
FORD MOTOR CREDIT COMPANY
Term notes to finance vehicles, beginning to mature in 1999
at market interest rates; monthly principal and interest
payments of $780.......................................... -- 28,386
-------- --------
199,922 170,779
Less: current portion....................................... 55,289 65,461
-------- --------
Long-term debt, net of current portion...................... $144,633 $105,318
======== ========
</TABLE>
Based on the current amortization schedules, the long-term debt matures as
follows:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, AMOUNT
------------ --------
<S> <C>
1998...................................................... $ 65,461
1999...................................................... 67,561
2000...................................................... 32,112
2001...................................................... 5,645
--------
Total........................................... $170,779
========
</TABLE>
NOTE 5. OBLIGATIONS UNDER CAPITAL LEASES
The Division acquired certain advertising structures under the provisions
of long-term leases. For financial reporting purposes, minimum lease payments
have been capitalized. The leases expire in 2001. The aggregate purchase option
price for the leases is $306,970. The leased property under capital lease as of
December 31, 1997 had a cost of $1,771,270, accumulated amortization of $193,794
and a net book value of $1,577,476. Amortization of the leased property is
included in depreciation expense.
F-28
<PAGE> 122
UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The minimum future lease payments and the present value of the net minimum
lease payments are:
<TABLE>
<CAPTION>
DUE IN YEAR
ENDED DECEMBER 31, AMOUNT
------------------ ----------
<S> <C>
1998........................................................ $ 451,778
1999........................................................ 451,778
2000........................................................ 446,345
2001........................................................ 176,438
----------
Total minimum lease payment................................. 1,526,339
Less: Imputed interest...................................... 236,049
----------
Present value of net minimum lease payments................. 1,290,290
Less: Current portion of net minimum lease payments......... 337,424
----------
Obligations under capital leases, long-term................. $ 952,866
==========
</TABLE>
NOTE 6. LEASE COMMITMENTS
Land rent expense totalled $229,359 and $312,051 in 1996 and 1997,
respectively. Minimum annual rentals under the terms of non-cancelable land
lease operating leases in effect at December 31, 1997, are payable as follows:
<TABLE>
<CAPTION>
YEAR AMOUNT
---- ----------
<S> <C>
1998..................................................... $ 233,559
1999..................................................... 181,000
2000..................................................... 167,440
2001..................................................... 159,040
2002..................................................... 148,840
Thereafter............................................... 460,211
----------
$1,350,090
==========
</TABLE>
NOTE 7. CONTINGENCIES
The Division is subject to various legal claims, suits and complaints in
the normal course of business. Such litigation includes claims by municipalities
that certain outdoor advertising structures must be removed. While the ultimate
outcome of current and future litigation cannot be predicted with certainty,
management believes, based on the advice of the Company's counsel, the final
outcome of such litigation will not have a material adverse effect on the
Company's financial position.
NOTE 8. ALLOCATION OF SHARED EXPENSES
As discussed in Note 1, the Division operated as a business unit of
Unisign. As a result, Unisign incurred and paid certain expenses on the
Division's behalf. All costs applicable to the Division have been included in
the accompanying statements of income. Certain common expenses, and expenses
incremental and proportional to the Division's operations, such as rent,
insurance, advertising, clerical and other administrative support as well as
certain managerial costs, have been allocated to the Division and included in
the accompanying statements of income. The allocations to the Division are based
on various factors, including percentage of revenue and expenses and number of
employees, which, in the judgment of management who control both Unisign and the
Division, are reasonable.
F-29
<PAGE> 123
UNISIGN CORPORATION, INC.
OUTDOOR ADVERTISING DIVISION
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Common costs allocated to the Division for the years ended December 31,
1996 and 1997 are as follows (in thousands):
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Production.................................................. $ 51,654 $ 54,730
Sales and marketing......................................... 33,992 32,678
General and administrative.................................. 501,066 505,378
-------- --------
$586,712 $592,786
======== ========
</TABLE>
Management believes the costs that would have been incurred had the
Division existed on a stand alone basis would not have been materially different
than the costs reflected in the accompanying statements of income.
NOTE 9. EVENT SUBSEQUENT TO BALANCE SHEET DATE
On March 2, 1998, Unisign sold substantially all of the assets of Division
for the total consideration of approximately $21.8 million. Unisign continues to
operate its commercial sign and real estate division.
F-30
<PAGE> 124
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Tri-State Systems, Inc.
We have audited the accompanying balance sheet of Tri-State Systems, Inc.
as of June 11, 1997, and the related statements of operations, retained earnings
(deficit) and cash flows for the period October 1, 1996 through June 11, 1997
(date of ownership transfer). 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 financial statements referred to above present fairly,
in all material respects, the financial position of Tri-State Systems, Inc. as
of June 11, 1997 and the results of its operations and its cash flows for the
period October 1, 1996 through June 11, 1997 (date of ownership transfer), in
conformity with generally accepted accounting principles.
SMITH & RADIGAN
Atlanta, Georgia
February 28, 1998
F-31
<PAGE> 125
TRI-STATE SYSTEMS, INC.
BALANCE SHEET
JUNE 11, 1997
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash...................................................... $ 14,599
Trade accounts receivable, less allowance for doubtful
accounts of $87,703..................................... 504,934
Other accounts receivable................................. 15,491
Inventories............................................... 107,217
Prepaid expenses:
Land rent............................................... 407,967
Other................................................... 472,044
-----------
TOTAL CURRENT ASSETS................................ 1,522,252
-----------
PROPERTY AND EQUIPMENT, at cost
Land...................................................... 75,000
Building.................................................. 613,952
Machinery and equipment................................... 137,462
Furniture and fixtures.................................... 76,863
Vehicles.................................................. 101,163
Construction in progress -- advertising structures........ 129,682
Advertising structures.................................... 18,049,450
-----------
19,183,572
Less accumulated depreciation............................. (8,393,013)
-----------
10,790,559
-----------
OTHER ASSETS
Loan and legal costs, net of amortization................. 262,199
-----------
$12,575,010
===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable.......................................... $ 41,034
Accrued expenses.......................................... 64,227
Unearned income........................................... 319,590
Accrued interest.......................................... 43,756
Current portion of long-term debt......................... 1,080,083
-----------
TOTAL CURRENT LIABILITIES........................... 1,548,690
-----------
LONG-TERM DEBT
Notes payable............................................. 14,436,731
Less current maturities................................. 1,080,083
-----------
13,356,648
-----------
TOTAL LIABILITIES................................... 14,905,338
-----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock
Series A -- 15% cumulative, par value $1 per share:
Authorized, issued and outstanding -- 3,000,000
shares............................................... 3,000,000
Series B, par value $1 per share:
Authorized, issued and outstanding -- 1,500,000
shares............................................... 478,202
-----------
3,478,202
-----------
Common stock, no par value, non-voting:
Authorized -- 1,174,888 shares
Issued and outstanding -- 1,116,143 shares.............. 1,756,096
Common stock, no par value:
Authorized -- 632,632 shares
Issued and outstanding -- 631,050 shares................ 223,798
-----------
1,979,894
-----------
Retained earnings (deficit)............................... (7,757,879)
-----------
(2,299,783)
Less cost of treasury stock:
Preferred stock, Series B -- 31,198 shares and Common
stock -- 12,500 shares................................. (30,545)
-----------
Total stockholders' equity (deficiency)................... (2,330,328)
-----------
$12,575,010
===========
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
F-32
<PAGE> 126
TRI-STATE SYSTEMS, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD OCTOBER 1, 1996 THROUGH JUNE 11, 1997
<TABLE>
<S> <C>
Net revenues
Lease income, billboards.................................. $3,974,087
Lease income, benches..................................... 92,855
Commercial sales and production charges................... 128,740
----------
4,195,682
Cost of sales (excluding depreciation shown below).......... 1,335,705
----------
Gross profit................................................ 2,859,977
----------
Operating expenses
General and administrative................................ 552,138
Selling................................................... 385,041
Depreciation.............................................. 863,265
Amortization.............................................. 67,427
----------
1,867,871
----------
Income from operations...................................... 992,106
----------
Other expense (income)
Interest expense.......................................... 1,046,797
Gain on disposal of property and equipment................ (11,912)
Other income.............................................. (24,903)
----------
1,009,982
----------
Net loss.................................................... $ (17,876)
==========
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
F-33
<PAGE> 127
TRI-STATE SYSTEMS, INC.
STATEMENT OF RETAINED EARNINGS (DEFICIT)
FOR THE PERIOD ENDED OCTOBER 1, 1996 THROUGH JUNE 11, 1997
<TABLE>
<S> <C>
Retained earnings (deficit) at October 1, 1996.............. $(7,740,003)
Net loss for the period ended June 11, 1997................. (17,876)
-----------
Retained earnings (deficit) at June 11, 1997................ $(7,757,879)
===========
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
F-34
<PAGE> 128
TRI-STATE SYSTEMS, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED OCTOBER 1, 1996 THROUGH JUNE 11, 1997
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.................................................. $ (17,876)
----------
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization.......................... 930,692
Gain on disposal of property and equipment............. (11,912)
Decrease (increase) in:
Accounts receivable.................................... (175,060)
Inventories............................................ 25,305
Prepaid expenses....................................... (38,764)
Deposits............................................... 27,476
Increase (decrease) in:
Accounts payable and accrued expenses.................. (150,182)
Unearned income........................................ 292,995
Accrued interest....................................... (74,956)
----------
Total adjustments................................. 825,594
----------
Net cash provided by operating activities......... 807,718
----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets.............................. 67,772
Purchase and refurbishing of advertising
structures -- net...................................... (700,268)
Decrease in construction-in-progress -- advertising
structures............................................. 58,669
----------
Net cash used by investing activities............. (573,827)
----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt............................... (323,905)
Proceeds from line of credit.............................. 221,494
Repayment of capital lease obligation..................... (31,429)
Payments for loan and closing costs....................... (92,587)
----------
Net cash used by financing activities............. (226,427)
----------
NET INCREASE IN CASH........................................ 7,464
CASH BALANCE AT BEGINNING OF PERIOD......................... 7,135
----------
CASH BALANCE AT END OF PERIOD............................... $ 14,599
==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid............................................. $1,121,753
==========
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
F-35
<PAGE> 129
TRI-STATE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 11, 1997
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Tri-State Systems, Inc. (the "Company") was incorporated in 1989 in the
state of Georgia. The Company was formed to purchase and operate an outdoor
advertising business located in Tifton, Georgia. The Company sells commercial
signs and leases billboard and bench advertising space to customers located
primarily in the Southeast. Billboard and bench leases generally have terms of
eighteen and twenty-four months, respectively.
Inventories
Inventory is valued at the lower of cost or market using the first-in,
first-out method. Inventory consists of materials and supplies used to construct
billboards and benches.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Expenditures for
maintenance and repairs are charged to expense as incurred, while expenditures
for renewals or betterments are capitalized. Depreciation is computed using the
straight-line method over the useful lives of the assets which range from nine
to thirty years for advertising structures, and are twenty-five years for
buildings, ten years for machinery, equipment and furniture and five years for
vehicles.
Fair Value of Financial Instruments
The Company estimates that the aggregate fair value of all financial
instruments at June 11, 1997 does not differ materially from the aggregate
carrying values of its financial instruments recorded in the balance sheet. The
estimated fair value amounts of cash and cash equivalents, receivables,
short-term investments, accounts payable and accrued liabilities approximate
fair value due to their short-term nature. The estimated fair values of
long-term debt are based on discounted cash flows using interest rates currently
available to the Company for financial instruments with similar characteristics
and maturities. Considerable judgment is necessarily required in interpreting
market data to develop the estimates of fair value, and accordingly, the
estimates are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.
Use of Estimates
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.
F-36
<PAGE> 130
TRI-STATE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Amortization
The Company is amortizing deferred loan and legal costs using the
straight-line method as follows:
<TABLE>
<S> <C>
ASSET
Cost at October 1, 1996................................... $1,742,250
Additions................................................. 92,587
----------
Cost at June 11, 1997..................................... $1,834,837
----------
AMORTIZATION
Amortization period....................................... 5 years
Accumulated amortization at October 1, 1996............... $1,505,211
Amortization for 1997..................................... 67,427
----------
Accumulated amortization at June 11, 1997................. $1,572,638
----------
Net book value at June 11, 1997........................... $ 262,199
==========
</TABLE>
Prepaid Expenses
The Company records as prepaid expense certain costs for land leases, sales
commissions, repainting of structures, and corporate art department charges at
the inception of the advertising contracts.
The Company defers these costs and expenses them on a straight-line basis
over the period that coincides with the recognition of income. This period is
generally twelve months for land leases and eighteen months for sales
commissions, repainting and corporate art charges.
Income Taxes
Deferred income tax assets and liabilities are recorded for temporary
differences between the financial reporting and income tax bases of assets and
liabilities that will result in future taxable or deductible amounts. A
valuation allowance is established when necessary to reduce deferred tax assets
to the amount expected to be realized.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and all highly liquid
investments with an original maturity of three months or less.
F-37
<PAGE> 131
TRI-STATE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B -- LONG-TERM DEBT
The Company amended and restated its loan agreement with Heller Financial,
Inc. ("Heller") effective June 30, 1993 and September 13, 1996. A summary of
notes payable is as follows:
<TABLE>
<S> <C>
Notes payable to Heller Financial, Inc. Revolving note
payable. Interest is payable monthly at the prime rate
(8.5% at June 11, 1997) plus 1.5%. The maximum borrowing
under this agreement is $1,000,000. ...................... $ 819,496
</TABLE>
Senior term loan payable. Interest is payable monthly at the prime rate plus
1.5%.
Principal is payable quarterly as follows:
<TABLE>
<CAPTION>
AMOUNT OF
PRINCIPAL PAYABLE
PAYABLE THE LAST DAY OF THE QUARTER ENDING EACH QUARTER
------------------------------------------ -----------------
<S> <C> <C>
December 1997 & March, June & September 1998............ $ 244,250
December 1998 & March & June 1999....................... 297,750
September 1999.......................................... 8,884,933 11,408,277
Capital expenditure note payable. Interest is payable
monthly at the prime rate plus 1.5%. ................. 500,000
Senior subordinated note payable. Interest accrues at
the prime rate plus 2.5% and is payable monthly. ..... 1,447,714
Capital lease obligation payable to leasing company in
monthly increments of $4,122, including principal and
interest imputed at 14.8% through July 1999 and a
balloon payment of $60,000 in August 1999. ........... 127,304
Capital lease obligation payable to leasing company in
monthly increments of $3,189, including principal and
interest imputed at 16.43% through May 2001 and a
balloon payment of $45,995 in June 2001. ............. 133,940
-----------
Total long -- term debt....................... $14,436,731
===========
</TABLE>
Future maturities of long-term debt, assuming held to maturity, are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING JUNE 11 AMOUNT
------------------- -----------
<S> <C>
1998........................................................ $ 1,080,083
1999........................................................ 13,211,848
2000........................................................ 77,186
2001........................................................ 67,614
-----------
$14,436,731
===========
</TABLE>
The notes payable to Heller are secured by a first security interest in the
Company's assets and substantially all of the Company's capital stock. The 1993
amended and restated loan agreement with Heller provides that any interest
payment resulting from a prime rate in excess of 6% will be applied to principal
subject to a maximum amount of 50% of the respective quarterly principal
amortization. Additionally, the agreement provides that adjusted cash flow, as
defined, will be paid to Heller annually as a reduction of principal. The
unamortized principal was due October 31, 1997; however, the Company could
extend the due date of the unamortized principal until September 30, 1998
provided certain cash flow criteria are maintained and principal installments
are continued. The Company could extend the due date of the unamortized
F-38
<PAGE> 132
TRI-STATE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
principal until September 30, 1999 provided certain cash flow criteria are
maintained, principal installments are current and a plan of refinancing is
diligently pursued.
The loan agreement limits the Company's outside borrowings, investments,
capital expenditures and divestitures, lease commitments and dividends. In
addition, the lender requires the Company to maintain a certain level of cash
flow, as defined in the agreement.
NOTE C -- PREFERRED STOCK AND COMMON STOCK
Concurrent with the 1993 debt restructuring (Note B), the Company amended
and restated the articles of incorporation to authorize the following classes of
stock:
<TABLE>
<S> <C>
Series A preferred stock, par value $1 per share:
Authorized -- 3,000,000 shares
Series B preferred stock, par value $1 per share:
Authorized -- 1,500,000 shares
Common stock, no par value: non-voting,
Authorized -- 1,174,888 shares
Common stock, no par value: voting,
Authorized -- 632,632 shares
</TABLE>
The separate classes of capital stock establish a priority of payment among
the various stockholders. The $3,000,000 of Series A preferred stock and the
$1,756,096 of non-voting common stock were issued to junior subordinated
noteholders in exchange for the cancellation of junior subordinated notes
payable totaling $2,250,000 plus the related accrued interest ($2,256,096 at
June 30, 1993) and the shares of the Company's common stock ($250,000 at June
30, 1993) owned at that time by such noteholders. The Series B preferred stock
was issued by the Company as a dividend to remaining common stockholders of the
Company. The result of this transaction was to convert long-term debt to
stockholders' equity.
The Series A preferred stock accrues dividends on an accumulated, but not
compounded, basis at a rate of fifteen percent (15%) per annum on the original
issue price of $1 per share. The Series A preferred stock dividends accrue on a
daily basis from the date of original issuance of such shares until paid. The
ultimate payment of dividends is subordinated to the repayment of senior
indebtedness to Heller.
On September 13, 1996, two existing stockholders of the Company purchased
the Series A preferred stock and the non-voting common stock from those
stockholders.
NOTE D -- INCOME TAXES
The Company has temporary differences and carryforwards which give rise to
deferred tax assets at June 11, 1997. The net deferred tax asset in the amount
of approximately $3,600,000 results primarily from a net operating loss
carryforward. The net deferred tax asset has been completely offset by a
valuation allowance.
The Company has net operating loss carryforwards for federal income tax
purposes in the amount of approximately $10,600,000 at June 11, 1997. These net
operating losses can be carried forward and applied against future taxable
income, if any, and expire at various dates through 2010.
NOTE E -- PROFIT SHARING
The Company's profit sharing (401(k)) plan covers all full-time employees
over age 21 who have completed twelve months continuous service and have worked
1,000 hours. The Company may make an annual matching contribution. No
contributions to the plan have been made by the Company.
F-39
<PAGE> 133
TRI-STATE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE F -- SUBSEQUENT EVENT
Subsequent to June 11, 1997, the stock of the Company was sold to a
corporation, and for income tax purposes, the operations are consolidated with
the acquiring corporation. Accordingly, a tax return was filed by the Company
for the period ended June 11, 1997.
Also, in connection with the sale, all debt to Heller was repaid. Fees were
paid to employees, brokers and professionals. No costs associated with the sale
of the stock were recorded as of June 11, 1997.
F-40
<PAGE> 134
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Tri-State Systems, Inc.
We have audited the accompanying balance sheets of Tri-State Systems, Inc.
as of September 30, 1995 and 1996, and the related statements of operations,
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 Tri-State Systems, Inc. as
of September 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.
SMITH & RADIGAN
Atlanta, Georgia
January 15, 1997
F-41
<PAGE> 135
TRI-STATE SYSTEMS, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash...................................................... $ 5,167 $ 7,135
Trade accounts receivable, less allowance for doubtful
accounts of $80,000 in 1995 and $90,000 in 1996......... 318,232 305,500
Other accounts receivable................................. 4,729 39,865
Inventories............................................... 144,518 132,522
Prepaid expenses:
Land rent............................................... 298,704 351,450
Other................................................... 554,110 489,797
Deposits.................................................. 27,253 27,476
----------- -----------
TOTAL CURRENT ASSETS................................ 1,352,713 1,353,745
----------- -----------
PROPERTY AND EQUIPMENT, AT COST
Land...................................................... 75,000 75,000
Building.................................................. 581,313 598,106
Machinery and equipment................................... 124,600 138,175
Furniture and fixtures.................................... 69,509 74,144
Vehicles.................................................. 109,761 131,263
Construction in progress -- advertising structures........ -0- 188,351
Advertising structures.................................... 17,068,671 17,435,821
----------- -----------
18,028,854 18,640,860
Less accumulated depreciation............................. 6,520,162 7,572,775
----------- -----------
11,508,692 11,068,085
----------- -----------
OTHER ASSETS
Loan and legal costs, net of amortization................. 385,362 237,039
----------- -----------
$13,246,767 $12,658,869
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES
Accounts payable.......................................... $ 241,512 $ 238,078
Accrued expenses.......................................... 52,626 17,365
Unearned income........................................... 1,413 26,595
Accrued interest.......................................... 130,217 118,712
Current portion of long-term debt......................... 1,172,323 1,021,865
----------- -----------
TOTAL CURRENT LIABILITIES........................... 1,598,091 1,422,615
LONG-TERM DEBT
Notes payable............................................. 15,154,474 14,570,571
Less current maturities................................. (1,172,323) (1,021,865)
----------- -----------
13,982,151 13,548,706
----------- -----------
Total Liabilities................................... 15,580,242 14,971,321
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIENCY)
Preferred stock
Series A -- 15% cumulative, par value $1 per share:
Authorized, issued and outstanding -- 3,000,000
shares............................................... 3,000,000 3,000,000
Series B, par value $1 per share:
Authorized, issued and outstanding -- 1,500,000
shares............................................... 478,202 478,202
----------- -----------
3,478,202 3,478,202
----------- -----------
Common stock, no par value, non-voting:
Authorized -- 1,174,888 shares
Issued and outstanding -- 1,116,143 shares.............. 1,756,096 1,756,096
Common stock, no par value:
Authorized -- 632,632 shares
Issued and outstanding -- 631,050 shares................ 223,798 223,798
----------- -----------
1,979,894 1,979,894
----------- -----------
Retained earnings (deficit)............................... (7,791,571) (7,740,003)
----------- -----------
(2,333,475) (2,281,907)
Less cost of treasury stock:
Preferred stock, Series B -- 31,198 shares and Common
stock -- 12,500 shares................................. -0- (30,545)
----------- -----------
Total stockholders' equity (deficiency)............. (2,333,475) (2,312,452)
----------- -----------
$13,246,767 $12,658,869
=========== ===========
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
F-42
<PAGE> 136
TRI-STATE SYSTEMS, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
Net revenues
Lease income, billboards.................................. $5,345,218 $5,601,912
Lease income, benches..................................... 172,936 154,759
Commercial sales and production charges................... 236,759 217,329
---------- ----------
5,754,913 5,974,000
Cost of sales (excluding depreciation shown below).......... 1,747,059 1,805,774
---------- ----------
Gross profit................................................ 4,007,854 4,168,226
---------- ----------
Operating expenses
General and administrative................................ 704,433 657,546
Selling................................................... 479,041 512,834
Depreciation.............................................. 1,133,668 1,185,574
Amortization.............................................. 170,398 152,271
---------- ----------
2,487,540 2,508,225
---------- ----------
Income from operations...................................... 1,520,314 1,660,001
Non-recurring expenses
Georgia tree trimming charges............................. 41,862 --
---------- ----------
Income before other expense (income)...................... 1,478,452 1,660,001
---------- ----------
Other expense (income)
Interest expense.......................................... 1,643,635 1,541,257
Loss on disposal of property and equipment................ 64,161 99,415
Other income.............................................. (19,157) (32,239)
---------- ----------
1,688,639 1,608,433
---------- ----------
Net income (loss)........................................... $ (210,187) $ 51,568
========== ==========
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
F-43
<PAGE> 137
TRI-STATE SYSTEMS, INC.
STATEMENTS OF RETAINED EARNINGS (DEFICIT)
<TABLE>
<S> <C>
Balance at October 1, 1994, as originally reported.......... $(7,566,479)
Prior period adjustment -- Note G........................... (14,905)
-----------
Balance at October 1, 1994, as restated..................... (7,581,384)
Net loss for the year ended September 30, 1995, as
restated.................................................. (210,187)
-----------
Balance at September 30, 1995, as restated.................. (7,791,571)
Net income for the year ended September 30, 1996............ 51,568
-----------
Balance at September 30, 1996............................... $(7,740,003)
===========
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
F-44
<PAGE> 138
TRI-STATE SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
------------------------
1995 1996
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ (210,187) $ 51,568
---------- ----------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization.......................... 1,304,066 1,337,855
Loss on disposal of property and equipment............. 64,161 99,415
Decrease (increase) in:
Accounts receivable.................................... (29,550) (22,404)
Inventories............................................ 32,082 11,996
Prepaid expenses....................................... (91,435) 11,568
Deposits............................................... (230) (223)
Increase (decrease) in:
Accounts payable, accrued expenses and unearned
income................................................ 49,364 (13,513)
Accrued interest....................................... 7,535 (11,505)
---------- ----------
Total adjustments................................. 1,335,993 1,413,189
---------- ----------
Net cash provided by operating activities......... 1,125,806 1,464,757
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets.............................. 122,482 92,988
Purchase and refurbishing of advertising
structures -- net...................................... (612,996) (749,029)
Increase in construction in progress -- advertising
structures............................................. -0- (188,351)
---------- ----------
Net cash used by investing activities............. (490,514) (844,392)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt............................... (591,543) (699,452)
Proceeds from capital lease transaction................... -0- 149,975
Repayment of capital lease obligation..................... (21,210) (34,427)
Payments for loan and closing costs....................... (21,250) (3,948)
Payments to acquire treasury stock........................ -0- (30,545)
---------- ----------
Net cash used by financing activities............. (634,003) (618,397)
---------- ----------
NET INCREASE IN CASH........................................ 1,289 1,968
CASH BALANCE AT BEGINNING OF YEAR........................... 3,878 5,167
---------- ----------
CASH BALANCE AT END OF YEAR................................. $ 5,167 $ 7,135
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid............................................. $1,636,100 $1,552,762
========== ==========
</TABLE>
The Notes to Financial Statements are an integral part of these Statements.
F-45
<PAGE> 139
TRI-STATE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Tri-State Systems, Inc. (the Company) was incorporated in 1989 in the state
of Georgia. The Company was formed to purchase and operate an outdoor
advertising business located in Tifton, Georgia. The Company sells commercial
signs and leases billboard and bench advertising space to customers located
primarily in the Southeast. Billboard and bench leases generally have terms of
eighteen and twenty-four months, respectively.
Inventories
Inventory is valued at the lower of cost or market using the first-in,
first-out method. Inventory consists of materials and supplies used to construct
billboards and benches.
Property, Plant and Equipment
Property, plant and equipment are stated at cost. Expenditures for
maintenance and repairs are charged to expense as incurred, while expenditures
for renewals or betterments are capitalized. Depreciation is computed using the
straight-line method over the useful lives of the assets which range from nine
to thirty years for advertising structures, and are twenty-five years for
buildings, ten years for machinery, equipment and furniture and five years for
vehicles.
Fair Value of Financial Instruments
The Company estimates that the aggregate fair value of all financial
instruments at September 30, 1996 does not differ materially from the aggregate
carrying values of its financial instruments recorded in the balance sheet. The
estimated fair value amounts of cash and cash equivalents, receivables,
short-term investments, accounts payable and accrued liabilities approximate
fair value due to their short-term nature. The estimated fair values of
long-term debt are based on discounted cash flows using interest rates currently
available to the Company for financial instruments with similar characteristics
and maturities. Considerable judgment is necessarily required in interpreting
market data to develop the estimates of fair value, and accordingly, the
estimates are not necessarily indicative of the amounts that the Company could
realize in a current market exchange.
Use of Estimates
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.
F-46
<PAGE> 140
TRI-STATE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Amortization
The Company is amortizing deferred loan and legal costs using the
straight-line method:
<TABLE>
<S> <C>
ASSET
Cost at September 30, 1995................................ $1,738,302
Additions................................................. 3,948
----------
Cost at September 30, 1996................................ $1,742,250
----------
AMORTIZATION
Amortization period....................................... 5 years
Accumulated amortization at September 30, 1995............ $1,352,940
Amortization for 1996..................................... 152,271
----------
Accumulated amortization at September 30, 1996............ $1,505,211
----------
Net book value at September 30, 1996...................... $ 237,039
==========
</TABLE>
Prepaid Expenses
The Company records as prepaid expense certain costs for land leases, sales
commissions, repainting of structures, and corporate art department charges at
the inception of the advertising contracts.
The Company defers these costs and expenses them on a straight-line basis
over the period that coincides with the recognition of income. This period is
generally twelve months for land leases and eighteen months for sales
commissions, repainting and corporate art charges.
Income Taxes
Deferred income tax assets and liabilities are recorded for temporary
differences between the financial reporting and income tax bases of assets and
liabilities that will result in future taxable or deductible amounts. A
valuation allowance is established when necessary to reduce deferred tax assets
to the amount expected to be realized.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and all highly liquid
investments with an original maturity of three months or less.
F-47
<PAGE> 141
TRI-STATE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B -- LONG-TERM DEBT
The Company amended and restated its loan agreement with Heller Financial,
Inc. (Heller) effective June 30, 1993 and September 13, 1996. A summary of notes
payable is as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------
1995 1996
----------- -----------
<S> <C> <C>
Notes payable to Heller
Revolving note payable. Interest is payable monthly at the
prime rate (8.25% at September 30, 1996) plus 1.5%. The
maximum borrowing under this agreement is $1,000,000... $ 510,912 $ 598,003
Senior term loan payable. Interest is payable monthly at the
prime rate plus 1.5%. Principal is payable quarterly as
follows:
</TABLE>
<TABLE>
<CAPTION>
AMOUNT OF
PRINCIPAL PAYABLE
PAYABLE THE LAST DAY OF THE QUARTER ENDING EACH QUARTER
------------------------------------------ -----------------
<S> <C> <C> <C>
December 1996 & March, June & September 1997.. $ 244,250
December 1997 & March, June & September 1998.. $ 244,250
December 1998 & March & June 1999............. $ 297,750
September 1999................................ $8,884,933 12,518,725 11,732,183
</TABLE>
<TABLE>
<S> <C> <C>
Capital expenditure note payable. Interest is payable
monthly at the prime rate plus 1.5%. ..................... 500,000 500,000
Senior subordinated note payable. Interest accrues at the
prime rate plus 2.5% and is payable monthly............... 1,447,714 1,447,714
Capital lease obligation payable to leasing company in
monthly increments of $4,122, including principal and
interest imputed at 14.8% through July 1999 and a balloon
payment of $60,000 in August 1999......................... 177,123 152,499
Capital lease obligation payable to leasing company in
monthly increments of $3,189, including principal and
interest imputed at 16.43% through May 2001 and a balloon
payment of $45,995 in June 2001........................... -0- 140,172
----------- -----------
Total long-term debt.............................. $15,154,474 $14,570,571
=========== ===========
</TABLE>
Future maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEAR ENDING
SEPTEMBER 30, AMOUNT
------------- -----------
<S> <C>
1997.................................................... $ 1,021,865
1998.................................................... 1,029,119
1999.................................................... 12,437,026
2000.................................................... 26,379
2001.................................................... 56,182
-----------
$14,570,571
===========
</TABLE>
The notes payable to Heller are secured by a first security interest in the
Company's assets and substantially all of the Company's capital stock. The 1993
amended and restated loan agreement with Heller provides that any interest
payment resulting from a prime rate in excess of six percent (6.0%) will be
applied to principal subject to a maximum amount of fifty percent of the
respective quarterly principal amortization.
F-48
<PAGE> 142
TRI-STATE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Additionally, the agreement provides that adjusted cash flow, as defined, will
be paid to Heller Financial, Inc. annually as a reduction of principal. The
unamortized principal is due October 31, 1997; however, the Company may extend
the due date of the unamortized principal until September 30, 1998 provided
certain cash flow criteria are maintained and principal installments are
continued. The Company may extend the due date of the unamortized principal
until September 30, 1999 provided certain cash flow criteria are maintained,
principal installments are current and a plan of refinancing is diligently
pursued.
The loan agreement limits the Company's outside borrowings, investments,
capital expenditures and divestitures, lease commitments and dividends. In
addition, the lender requires the Company to maintain a certain level of cash
flow, as defined in the agreement. For the year ended September 30, 1996, the
Company was in default on its loan covenants dealing with capital expenditures
and outside borrowings. The lender has acknowledged that a waiver of these
covenants will be issued upon the receipt of certain documentation and payment
of a fee.
NOTE C -- PREFERRED STOCK AND COMMON STOCK
Concurrent with the debt restructuring (Note B), the Company amended and
restated the articles of incorporation to authorize the following classes of
stock:
Series A preferred stock, par value $1 per share:
Authorized -- 3,000,000 shares
Series B preferred stock, par value $1 per share:
Authorized -- 1,500,000 shares
Common stock, no par value: non-voting, Authorized -- 1,174,888 shares
Common stock, no par value: voting, Authorized -- 632,632 shares
The separate classes of capital stock establish a priority of payment among
the various stockholders. The $3,000,000 of Series A preferred stock and the
$1,756,096 of non-voting common stock were issued to junior subordinated
noteholders in exchange for the cancellation of junior subordinated notes
payable totaling $2,250,000 plus the related accrued interest ($2,256,096 at
June 30, 1993) and the shares of the Company's common stock ($250,000 at June
30, 1993) owned at that time by such noteholders. The Series B preferred stock
was issued by the Company as a dividend to remaining common stockholders of the
Company. The result of this transaction was to convert long-term debt to
stockholders' equity.
The Series A preferred stock accrues dividends on an accumulated, but not
compounded, basis at a rate of fifteen percent (15%) per annum on the original
issue price of $1 per share. The Series A preferred stock dividends accrue on a
daily basis from the date of original issuance of such shares until paid. The
ultimate payment of dividends is subordinated to the repayment of senior
indebtedness to Heller Financial, Inc.
On September 13, 1996, two existing stockholders of the Company purchased
the Series A preferred stock and the non-voting common stock from those
stockholders.
NOTE D -- INCOME TAXES
The Company has temporary differences and carryforwards which give rise to
deferred tax assets at September 30, 1996. The net deferred tax asset in the
amount of approximately $3,570,000 results primarily from a net operating loss
carryforward. The net deferred tax asset has been completely offset by a
valuation allowance.
The Company has net operating loss carryforwards for federal income tax
purposes in the amount of approximately $10,500,000 at September 30, 1996. These
net operating losses can be carried forward and applied against future taxable
income, if any, and expire at various dates through 2010.
F-49
<PAGE> 143
TRI-STATE SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
NOTE E -- PROFIT SHARING AND STOCK BONUS PLAN
The Company's profit sharing (401(k)) plan covers all full-time employees
over age 21 who have completed twelve months continuous service and have worked
1,000 hours. The Company may make an annual matching contribution. No
contributions to the plan have been made by the Company.
Effective July 1, 1993, the Company established an employee stock bonus
plan for senior management. Under this plan, the Company issued 30,050 shares of
the voting common stock of the Company to two senior managers of the Company.
The agreement provides that the stock will be forfeited if employment is
terminated within three years of issue or certain cash flow projections are not
met.
NOTE F -- FUTURE COMMITMENT
As of September 30, 1996, the Company has committed to incur approximately
$26,000 for renovation of the Company's home office. All renovation work is
expected to be completed during November 1996.
NOTE G -- PRIOR PERIOD ADJUSTMENTS
Subsequent to September 30, 1994, the Company became aware that an accrual
for compensated absences was not recorded. Accordingly, accrued expenses was
increased by $14,905 and retained earnings were decreased by $14,905 at October
1, 1994. The loss for the year ended September 30, 1995 has also been restated
to reflect an increase in accrued expenses of $3,675 and a decrease in net
income of $3,675.
F-50
<PAGE> 144
- ------------------------------------------------------------
- ------------------------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
COVERED BY THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES IN ANY JURISDICTION WHERE,
OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS NOT BEEN A CHANGE IN
THE FACTS SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................ 1
Risk Factors.............................. 10
Use of Proceeds........................... 14
Capitalization............................ 15
Unaudited Pro Forma Financial Statements.. 16
Selected Historical Financial and Other
Data.................................... 23
Management's Discussion and Analysis...... 25
Business.................................. 32
Management................................ 44
Executive Compensation.................... 45
Principal Stockholders.................... 46
Certain Relationships and Related
Transactions............................ 48
Description of the Notes.................. 49
The Exchange Offer........................ 72
Certain U.S. Federal Income Tax
Consequences............................ 81
Existing Notes Registration Rights........ 83
Book Entry; Delivery and Form............. 85
Plan of Distribution...................... 87
Legal Matters............................. 88
Experts................................... 88
Change in Accountants..................... 89
Available Information..................... 89
Index to Financial Statements............. F-1
</TABLE>
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
- ------------------------------------------------------------
$100,000,000
Tri-State
TRI-STATE OUTDOOR
MEDIA GROUP, INC.
11% Senior Notes
due 2008
----------------
PROSPECTUS
----------------
, 1998
- ------------------------------------------------------------
- ------------------------------------------------------------
<PAGE> 145
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 17-6305 of the General Corporation Code of Kansas grants the
Company the power to indemnify each person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative by
reason of the fact that he is or was a director, officer, employee or agent of
the Company, or is or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with any such action, suit or proceeding if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the Company, and with to any criminal action or proceeding,
had no reasonable cause to believe his conduct was unlawful, provided, however,
no indemnification shall be made in connection with any proceeding brought by or
in the right of the Company where the person involved is adjudged to be liable
to the Company except to the extent approved by a court.
The Company's By-laws provide that any person who is made a party to any
action or proceeding because such person is or was a director or officer of the
Company will be indemnified and held harmless against all claims, liabilities
and expenses, including those expenses incurred in defending a claim and amounts
paid or agreed to be paid in connection with reasonable settlements made before
final adjudication with the approval of the Board of Directors, if such person
has acted, or in the judgment of the shareholders or directors of the Company
has acted, in good faith. The indemnification provided for in the Company's
By-laws is expressly not exclusive of any other rights to which those seeking
indemnification may be entitled as a matter of law.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
See Exhibit Index immediately following signature pages.
(b) Financial Statement Schedules.
Not applicable.
ITEM 22. UNDERTAKINGS
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers, and controlling persons of
the Registrant pursuant to the provisions described under Item 20 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 payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in this Registration Statement when it became effective.
II-1
<PAGE> 146
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Tifton, State of Georgia, on July 15,
1998.
TRI-STATE OUTDOOR MEDIA GROUP, INC.
/s/ SHELDON G. HURST
--------------------------------------
Sheldon G. Hurst
President and Chief Executive Officer
POWER OF ATTORNEY
We, the undersigned officers and directors of Tri-State Outdoor Media
Group, Inc., hereby severally constitute and appoint Sheldon G. Hurst, our true
and lawful attorney, with full power to him in any and all capacitates, to sign
any amendments to this Registration Statement on Form S-4 (including Pre- and
Post-Effective Amendments), and any related Rule 462(b) registration statement
or amendment thereto, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact may do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ SHELDON G. HURST Director and Principal Executive Officer
- -----------------------------------------------------
Sheldon G. Hurst
/s/ WILLIAM G. MCLENDON Director, Principal Financial and Accounting
- ----------------------------------------------------- Officer and Secretary
William G. McLendon
/s/ A. WAYNE LAMM Director
- -----------------------------------------------------
A. Wayne Lamm
/s/ ANTHONY LAMARCA Director
- -----------------------------------------------------
Anthony LaMarca
/s/ WILLIAM P. SUTTER, JR. Director
- -----------------------------------------------------
William P. Sutter, Jr.
</TABLE>
II-2
<PAGE> 147
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ------- ----------------------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of the Company
certified by the Secretary State of State of Kansas.........
3.2 By-laws of the Company......................................
4.1 Indenture dated as of May 15, 1998 relating to the Company's
11% Senior Notes due 2008 and the 11% Senior Series B Notes
due 2008. ..................................................
4.2 Form of Global Note.........................................
5.1 Opinion of St. John & Wayne, L.L.C., General Counsel of the
Company. Filed herewith. ...................................
10.1 Asset Purchase Agreement, dated as of May 6, 1997, between
the Company and Tri-State Systems, Inc. ....................
10.2 Asset Purchase Agreement, dated as of February 13, 1998,
between the Company and Unisign Corporation, Inc. ..........
10.3 Registration Rights Agreement dated as of May 13, 1998
relating to the Company's 11% Senior Notes due 2008. .......
10.4 Pledge Agreement dated as of May 15, 1998 relating to the
Company's 11% Senior Notes due 2008. .......................
10.5 Tax Sharing Agreement dated as of May 20, 1998 relating to
SGH Holdings, Inc. and the Company. ........................
10.6 Second Amended and Restated Stockholders Agreement, dated as
of February 27, 1998. ......................................
10.7 Anti-Dilution Agreement, dated as of February 29, 1998. ....
10.8 Credit Agreement dated as of May 20, 1998 between the
Company and The First National Bank of Chicago. ............
23.1 Consent of McGladrey & Pullen, LLP, independent accountants
of the Company. Filed herewith. ............................
23.2 Consent of McGrail Merkel Quinn & Associates, independent
accountants of the Company. Filed herewith. ................
23.3 Consent of McGrail Merkel Quinn & Associates, independent
accountants of the Company. Filed herewith. ................
23.4 Consent of SR Business Services, Inc., independent
accountants of Tri-State Systems, Inc. Filed herewith. .....
23.5 Consent of St. John & Wayne, L.L.C. (included in Exhibit
5.1). ......................................................
24.1 Powers of Attorney (included on the Signature Page
hereto). ...................................................
25.1 Statement of Eligibility of Trustee on Form T-1 of IBJ
Schroder Bank & Trust Company. Filed herewith. .............
25.2 Form of Letter of Transmittal. Filed herewith. .............
25.3 Form of Notice of Guaranteed Delivery. Filed herewith. .....
25.4 Form of Exchange Agency Agreement between the Company and
IBJ Schroder Bank & Trust Company, as exchange agent. Filed
herewith. ..................................................
</TABLE>
<PAGE> 1
Exhibit 3.1
STATE OF KANSAS [SEAL OF THE
STATE OF KANSAS]
OFFICE OF
SECRETARY OF STATE
RON THORNBURGH
================================================================================
To all to whom these presents shall come, Greetings:
I, RON THORNBURGH, Secretary of State of the State of Kansas, do hereby certify
that the attached is a true and correct copy of an original on file and of
record in this office.
IN TESTIMONY WHEREOF:
I hereto set my hand and cause to
be affixed my official seal. Done
at the City of Topeka, this day,
February 13, 1998
[SEAL OF THE SECRETARY OF STATE
OF THE STATE OF KANSAS]
/s/ RON THORNBURGH
RON THORNBURGH
SECRETARY OF STATE
13 pages are attached to this certification.
================================================================================
<PAGE> 2
'88 DEC 12 PM 3:16
FILED
SECRETARY OF STATE
KANSAS
ARTICLES OF INCORPORATION
OF
TRI-STATE OUTDOOR MEDIA GROUP, INC.
I.
The name of this corporation shall be Tri-State Outdoor Media Group, Inc.
II.
The location of its registered office in this state shall be Suite 300,
200 North Broadway, Wichita, Sedgwick County, Kansas 67202.
III.
The name of its registered agent shall be Windell G. Snow and the address
of the resident agent is Suite 300, 200 North Broadway, Wichita, Sedgwick
County, Kansas 67202.
IV.
The name and place of resident of the Incorporator is as follows:
Sheldon G. Hurst
301 Colfax Street
Jamestown, New York 14701
This corporation is organized FOR PROFIT, and the nature of its business
or purposes to be conducted or promoted is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Code of the State of Kansas, including but in no way limited to the business of
outdoor advertising structures, and to engage in all other activities, render
all other services and handle and deal in all materials, supplies and products
incidental or related to or connected with any and every phase of the outdoor
advertising business.
<PAGE> 3
V.
The total amount of authorized capital of this corporation shall be One
Hundred Thousand ($100,000.00) Dollars. The Corporation is authorized to issue
10,000 shares of Ten ($10.00) Dollar par value common stock. Stock may be paid
for wholly or partly in cash, by personal property (other than stock or
securities), or by real property or lease thereof; and the stock so issued shall
be declared and taken to be fully paid stock and not liable to any further call,
nor shall the holder thereof be liable for any further payments. Each share of
said common stock shall entitle the holder thereof to one (1) vote.
VI.
The number of directors of this corporation shall be not less than one
(1), but may be varied from time to time by action of a majority vote in
ownership of the holders of voting common stock. This corporation shall begin
business with one (1) director, whose name and address is as follows:
Sheldon G. Burst
301 Colfax Street
Jamestown, New York 14701
This corporation and all existing holders of stock of the corporation
shall have a prior right to purchase and acquire the stock of a stockholder
desiring to sell or otherwise dispose of the same before the sale or other
disposition of such stock to a nonstockholder upon such terms and conditions as
shall be set forth in the Bylaws.
VIII.
The adoption, alternative and repeal of the Bylaws shall be by a majority
vote of the Directors of this Corporation by a majority vote of the common stock
of the Corporation.
IX.
Whenever a compromise or arrangement is proposed between this corporation
and its creditors at any class of them or between
-2-
<PAGE> 4
this corporation and its stockholders or any class of them, any court of
competent jurisdiction within the State of Kansas, on the application in a
summary way of this corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for this corporation
under the provisions of K.S.A. 17-6901 or on the application of trustees in
dissolution or of any receiver or receivers appointed for this corporation under
the provisions of K.S.A. 17-6808, may order a meeting of the creditors or class
of creditors, or of the stockholders or class of stockholders of this
corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three-fourths in value of the
creditors or class of creditors, or of the stockholders or class of stockholders
of this corporation, as the case may be, agree to any compromise or arrangement
and to any reorganization of this corporation as consequence of such compromise
or arrangement of the said reorganization, if sanctioned by the court to which
the said application has been made, shall be binding on all the creditors or
class of creditors, or on all the stockholders or class of stockholders, of this
corporation, as the case may be, and also on this corporation.
IN TESTIMONY WHEREOF, I, the original incorporator of Tri-State Outdoor
Media Group, Inc., have subscribed my name this 2ND day of DECEMBER 1988.
/s/ Sheldon G. Hurst
----------------------------
SHELDON G. HURST
STATE OF New York )
) ss:
Chautauqua COUNTY )
BE IT REMEMBERED, that on this 2ND day of DECEMBER, 1988, before me, the
undersigned, a Notary Public in and for the County and State aforesaid, came
Sheldon G. Hurst who is personally known to me to be the same person who
executed the within instrument of writing and such person duly acknowledged the
execution of the same.
/s/ Michael C. Foley
----------------------------
Notary Public
My Appointment Expires:
MARCH 30, 1989
- ------------------------------------------
Michael C. Foley
Notary Public, State of New York
Qualified in Chautauqua County
My Commission Expires March 30, 1989
-3-
<PAGE> 5
CERTIFICATE
OF
CHANGE OF REGISTERED AGENT
AND
CHANGE OF REGISTERED OFFICE
OF
TRI-STATE OUTDOOR MEDIA GROUP, INC.
1. The name of this corporation is TRI-STATE OUTDOOR MEDIA GROUP, INC., a
corporation organized and incorporated under the laws of the State of Kansas.
2. The articles of incorporation of this corporation were filed with the
Secretary of State of the State of Kansas on December 22, 1988, and with the
Register of Deeds of Sedgwick County, Kansas on December 14, 1988.
3. The new location of the registered office of this corporation in the
State of Kansas shall be 140-146 East Tenth Avenue, Baxter Springs, Cherokee
County, Kansas 65713.
4. The name of new registered agent of this corporation shall be Sheldon
G. Hurst, and the address of the registered agent 140-146 East Tenth Avenue,
Baxter Springs, Cherokee County, Kansas 66713.
IN TESTIMONY WHEREOF, the undersigned have executed this Certificate and
affixed the corporate seal hereto as of the 6th day of January, 1989.
ATTEST: TRI-STATE OUTDOOR
MEDIA GROUP, INC.
/s/ Sharon Hurst /s/ Sheldon G. Hurst
- ---------------------------------- ----------------------------------
Sharon Hurst, Sheldon G. Hurst,
Assistant Secretary President
[CORPORATE SEAL]
'89 JAN 19 AM 8:12
FILED
SECRETARY OF STATE
KANSAS
<PAGE> 6
STATE OF KANSAS )
) ss:
CHEROKEE COUNTY )
BE IT REMEMBERED THAT, on this 6th day of January, 1989, before me, the
subscriber named below, personally appeared Sheldon G. Hurst, who, being by me
duly sworn on his oath, deposed and made proof to my satisfaction that he is the
President of Tri-State Outdoor Media Group, Inc., the corporation named in, and
the person who signed the within Certificate; and I having first made known to
him the contents thereof, he did acknowledge that he signed, sealed, and
delivered the same as such officer on behalf of the corporation as its
voluntary act and deed, made by virtue of the authority of its board of
directors, for the uses and purposes therein expressed.
/s/ Marilyn L. Taber
-------------------------------
Notary Pubic
My Appointment Expires:
JULY 29, 1989
- -----------------------------
-2-
<PAGE> 7
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, dated this 31st day of October, 1994, pursuant
to the General Corporation Code of the State of Kansas, between TRI-STATE
OUTDOOR MEDIA GROUP, INC., a Kansas corporation ("Tri-State") and HURST OUTDOOR
ADVERTISING, INC., a Kansas Corporation ("Hurst").
WITNESSETH:
WHEREAS, Tri-State and Hurst desire to effectuate a merger as described
herein with Tri-State as the surviving corporation; and
WHEREAS, TRI-STATE, by its Articles of Incorporation which were filed in
the office of the Kansas Secretary of State on December 12, 1988, has authorized
capital stock consisting of Ten Thousand (10,000) shares of Ten Dollar ($10.00)
par value common stock of which One Hundred Ninety-Six (196) shares are now
issued and outstanding and such shares shall remain issued and outstanding; and
WHEREAS, Hurst, by its Articles of incorporation which were filed in the
office of the Kansas Secretary of State on September 12, 1994, has authorized
capital stock consisting Ten-Thousand (10,000) shares of Ten Dollar ($10.00) par
value common stock of which Two Hundred (200) shares are now issued and
outstanding; and
WHEREAS, the registered office of Tri-State and Hurst in the State of
Kansas is located in the City of Baxter Springs, County of Cherokee, and the
name of the registered agent of each corporation is Sheldon G. Hunt.
NOW, THEREFORE, the corporations, parties to this Agreement of Merger in
consideration of the mutual covenants, agreements and provisions hereinafter
contained do hereby prescribe the terms and conditions of said merger and mode
of carrying the same into effect as follows:
<PAGE> 8
FIRST: Hurst shall be and hereby is merged into Tri-State which shall be
the surviving corporation.
SECOND: The Articles of Incorporation of Tri-State as amended and as in
effect on the date of the merger as provided in this Agreement of Merger shall
continue in full force and effect.
THIRD: Alter the effective date of this Agreement of Merger each holder of
an outstanding certificate representing shares of common stock of the merged
corporation shall surrender the same to the surviving corporation and the sole
holder thereof shall be entitled upon such surrender to receive One Dollar
($1.00) in exchange therefor.
FOURTH: The terms and conditions of the merger are as follows:
(a) The bylaws of the surviving corporation as they shall exist on
the effective date of this Agreement of Merger shall be and remain the
bylaws of the surviving corporation until the same shall be altered,
amended or repealed as therein provided.
(b) The directors and officers of the surviving corporation shall
continue in office until the next annual meeting of stockholders or until
their successors shall have been elected and qualified.
(c) This merger shall become effective upon filing this Agreement of
Merger with the Secretary of State of Kansas.
(d) Upon the merger becoming effective, all the property, rights,
privileges, franchises, patents, trademarks, licenses, registrations and
other assets of every kind and description of the merged corporation shall
be transferred to, vested in and devolve upon the surviving corporation
without further act or deed and all property, rights, and every other
interest of the surviving corporation and the merged corporation shall be
as
2
<PAGE> 9
effectively the property of the surviving corporation as they were of the
surviving corporation and the merged corporation respectively. The merged
corporation hereby agrees from time to time, as and when requested by the
surviving corporation or by its successors or assigns, to execute and
deliver or cause to be executed and delivered all such deeds and
instruments and to take or cause to be taken such further or other action
as the surviving corporation may deem necessary or desirable in order to
vest in and confirm to the surviving corporation title to and possession
of any property of the merged corporation acquired or to be acquired by
reason of or as a result of the merger herein provided for and otherwise
to carry out the intent and purposes hereof and the proper officers and
directors of the merged corporation and the proper officers and directors
of the surviving corporation are fully authorized in the name of the
merged corporation or otherwise to take any and all such action.
IN WITNESS WHEREOF, the parties to this Agreement of Merger, pursuant to
the approval and authority duly given by resolutions adopted by their respective
boards of directors have caused these presents to be executed by the President
and attested by the Assistant Secretary of each party hereto.
TRI-STATE OUTDOOR MEDIA GROUP, INC.
By /s/ Sheldon G. Hurst
-----------------------------------
Sheldon G. Hurst, President
ATTEST:
By /s/ Sharon Hurst
-----------------------------------
Sharon Hurst, Assistant Secretary
(CORPORATE SEAL)
3
<PAGE> 10
HURST OUTDOOR ADVERTISING, INC.
By /s/ Sheldon G. Hurst
-----------------------------------
Sheldon G. Hurst, President
ATTEST:
By /s/ Sharon Hurst
-----------------------------------
Sharon Hurst, Assistant Secretary
(CORPORATE SEAL)
4
<PAGE> 11
STATE OF KANSAS
) SS.
COUNTY OF CHEROKEE
This instrument was acknowledged and executed before me on this 31st day
of October, 1994 by Sheldon G. Hurst as President of Tri-State Outdoor Media
Group, Inc.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day
and year aforesaid.
/s/ Marilyn L. Taber
----------------------------
(Signature of Notary)
(SEAL)
My commission expires: July 29, 1997
---------------------
STATE OF KANSAS
) SS.
COUNTY OF CHEROKEE
This instrument was attested to by Sharon Hurst as Assistant Secretary of
Tri-State Outdoor Media Group, Inc.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day
and year aforesaid.
/s/ Marilyn L. Taber
----------------------------
(Signature of Notary)
(SEAL)
My commission expires: July 29, 1997
---------------------
5
<PAGE> 12
STATE OF KANSAS
) SS.
COUNTY OF CHEROKEE
This instrument was acknowledged and executed before me on this 31st day
of October, 1994 by Sheldon G. Hurst as President of Hurst Outdoor Advertising,
Inc.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day
and year aforesaid.
/s/ Marilyn L. Taber
----------------------------
(Signature of Notary)
(SEAL)
My commission expires: July 29, 1997
---------------------
STATE OF KANSAS
) SS.
COUNTY OF CHEROKEE
This instrument was attested to by Sharon Hurst as Assistant Secretary of
Hurst Outdoor Advertising, Inc.
IN WITNESS WHEREOF, I have hereunto set my hand and seal of office the day
and year aforesaid.
/s/ Marilyn L. Taber
----------------------------
(Signature of Notary)
(SEAL)
My commission expires: July 29, 1997
---------------------
6
<PAGE> 13
CERTIFICATE OF ASSISTANT SECRETARY OF HURST OUTDOOR ADVERTISING, INC.
I, Sharon Hunt, Assistant Secretary of Hurst Outdoor Advertising, Inc., a
corporation organized and existing under the laws of the State of Kansas, hereby
certify, as such Assistant Secretary, that the Agreement of Merger to which this
certificate is attached, was duly submitted to the stockholders of Hurst Outdoor
Advertising, Inc. and approved and adopted by the stockholders by written
consent in accordance with K.S.A. 17-6518 and is the duly adopted agreement and
act of the corporation.
Witness my hand on this 31st day of October 1994.
/s/ Sharon Hurst
-------------------------------------
Sharon Hurst, Assistant Secretary
7
<PAGE> 14
CERTIFICATE OF ASSISTANT SECRETARY OF TRI-STATE
OUTDOOR MEDIA GROUP, INC.
I, Sharon Hurst, Assistant Secretary of Tri-State Outdoor Media Group,
Inc., a corporation organized and existing under the laws of the State of
Kansas, hereby certify, as such Assistant Secretary, that the Agreement of
Merger to which this certificate is attached, was duly adopted pursuant to
K.S.A. 17-6701(f), without any vote of the stockholders of the surviving
corporation; and that the Agreement of Merger does not amend in any respect the
Articles of Incorporation of the surviving corporation, and each share of stock
of Tri-State Outdoor Media Group, Inc. outstanding immediately prior to the
effective date of the merger is to be an identical outstanding or treasury share
of the surviving corporation after the effective date of the merger, and that no
shares of common stock of the surviving corporation and no shares, securities or
obligations convertible into such stock are to be issued or delivered under the
plan of merger and that the Agreement of Merger was adopted by action of the
Board of Directors of Tri-State Outdoor Media Group, Inc. and is the duly
adopted agreement and act of the corporation.
WITNESS my hand on this 31st day of October, 1994.
/s/ Sharon Hurst
----------------------------------------
Sharon Hurst, Assistant Secretary
8
<PAGE> 1
Exhibit 3.2
BYLAWS OF
TRI-STATE OUTDOOR MEDIA GROUP, INC.
ARTICLE I
CORPORATE NAME, PRINCIPAL PLACE OF BUSINESS
AND TERM OF EXISTENCE
Section 1. Corporate Name. The name of this corporation shall be
"Tri-State Outdoor Media Group, Inc."
Section 2. Principal Office. The principal office for the transaction of
the business of the corporation is hereby located at 601 West Eighth St,
Jamestown, NY 14701.
Section 3. Term of Existence. The term of existence for this corporation
shall be perpetual.
Section 4. Definitions. As used in these Bylaws the following definitions
shall be applicable:
(a) The term "corporation" shall mean "Tri-State Outdoor Media Group,
Inc."
(b) The term "state" shall mean the State of Kansas.
ARTICLE II
SEAL
Section 1. Inscription of Seal. The corporate seal of this corporation
shall be circular in form and around the outside shall be the words, "TRI-STATE
OUTDOOR MEDIA GROUP, INC." and in the center shall be the words "Corporate
Seal." An impression of the corporate seal shall be impressed on this page.
<PAGE> 2
ARTICLE III
REGISTERED OFFICE AND REGISTERED AGENT
Section 1. Registered Office. The corporation shall maintain a registered
office in the state, and the same may, but is not required to be, at its
principal place of business as provided in ARTICLE I, Section 2, of these
Bylaws.
Section 2. Registered Agent. The corporation shall have and continuously
maintain in the state a registered agent on whom service of summons may be had
and whose business address is identical with the registered office of the
corporation. The Board of Directors shall have authority to appoint or change,
from time to time, the registered agent of this corporation.
ARTICLE IV
DIRECTORS
Section 1. Number. The number of directors of this corporation shall be
not less than one (1) nor more than eighteen (18). All directors of this
corporation must be legally competent to enter into contracts; however,
directors need not also be stockholders of the corporation. The authorized
number of directors of the corporation may be changed by Bylaws duly adopted by
the stockholders.
Section 2. Election and Terms. The directors named in the Articles of
Incorporation of this corporation shall hold office until the next annual
meeting of the stockholders and until his successor is elected either at an
annual meeting or at a special
-2-
<PAGE> 3
meeting of the stockholders. Subject to the foregoing and Sections 5, 6 and 7
hereof, the directors shall be elected annually at an annual or special meeting
of the stockholders. Their terms of office shall begin immediately upon election
and shall continue for one (1) year and until their successors are elected and
qualified. At all elections of directors, there must be present in person or by
proxy the holders of a majority of the stock entitled to vote and every person
acting therein in person or by proxy or representative must be a bona fide
stockholder having stock in his own name on the stock books of the corporation.
Section 3. Quorum. Except as herein otherwise specifically provided, a
majority of the authorized number of directors shall constitute a quorum of the
Board of Directors for the transaction of business. Every act or decision done
or made by a majority of the directors present at a meeting duly held at which a
quorum is present shall be regarded as the act of the Board of Directors;
provided however, a majority of the Board of Directors present at any meeting,
in the absence of a quorum, may adjourn any meeting of the Board of Directors
from day to day, but may not transact any business except the filling of
vacancies on the Board of Directors as in the Bylaws hereinafter provided.
Section 4. Compensation. Directors as such shall only receive compensation
for their services when duly authorized by the Board of Directors; provided
however, nothing herein contained shall be construed to preclude any director
from serving the corporation in any other capacity and receiving compensation
therefor.
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<PAGE> 4
Section 5. Vacancies. Any vacancy or vacancies on the Board of Directors
may be filled by a majority of the remaining directors, although less than a
quorum, or by a sole remaining director, and each director so chosen shall hold
office until his successor is elected at an annual or regular or special meeting
of the stockholders. A vacancy or vacancies in the Board of Directors shall be
deemed to exist in case of death, resignation, removal, mental disability, or
legal disqualification to serve of any directors, or if the stockholders fail at
any annual, regular or special meeting of stockholders to elect the full
authorized number of directors to be voted for at the meeting.
Section 6. Removal. The entire Board of Directors or any individual
director may be removed from office, with or without cause, by a vote at any
annual or special meeting of stockholders. In case the Board or any one (1) or
more directors be so removed, new directors may be elected at the same meeting.
The Board of Directors shall declare vacant the office of a director if he be
declared of unsound mind by an order of court, or convicted of a felony, or upon
legal disqualification to serve as a director, or may do so if within sixty (60)
days after notice of his election, he does not either accept such office in
writing or attend a meeting of the Board of Directors and fulfill such other
requirements of qualification as these Bylaws specify.
Section 7. Resignation. Any director of the corporation may resign upon
filing written resignation with the Secretary of the
<PAGE> 5
corporation, and such resignation shall become effective when so filed unless
some other effective date is set forth in the resignation.
Section 8. Powers and Duties. Subject to express limitations of the
Articles of Incorporation and pertinent restrictions of the General Corporation
Code of the state, all corporate powers shall be exercised by or under the
authority of, and the business and affairs of the corporation shall be
controlled by the Board of Directors. Without prejudice to such general powers,
but subject to the limitations herein set forth, the Board of Directors shall
have the following powers, to wit:
First: To conduct, manage, and control the affairs and business of the
corporation, and to make such rules and regulations therefore, not inconsistent
with law and these Bylaws, as they may deem best.
Second: To appoint an executive committee and any other committees which
may seem to them advisable, and to delegate to the executive committee, or any
such other committee subject to control of the Board of Directors, any of the
powers and authority of the Board, except the power to declare dividends and to
adopt, amend or repeal these Bylaws; provided however, that any such executive
committee shall be composed of two (2) or more Directors and shall act only in
the interval between meetings of the Board and shall be subject at all times to
control and direction of the Board.
Third: To elect and remove at pleasure all the officers, agents and
employees of the corporation, prescribe such duties for
-5-
<PAGE> 6
them as may not be inconsistent With law and these Bylaws, fix the terms of
their offices and their compensation and in the Board's discretion, require from
such officers, agents and employees security for faithful service.
Fourth: Subject to the provisions of Section 2 of ARTICLE I of these
Bylaws, to designate, from time to time, the office of the corporation, and to
designate from time to time any place or places where meetings of the
stockholders and/or directors of this corporation may be held; to adopt, name
and use a corporate seal, and to prescribe the forms of certificates of stock,
and to alter the forms of such seal and such certificates, from time to time, as
in their judgment may seem best.
Fifth: Subject to the power of the stockholders to adopt, amend or repeal
these Bylaws, the Board of Directors shall have the power to adopt, amend or
repeal these Bylaws other than a Bylaw or amendment thereof changing the
authorized number, qualifications, classification or term of office of
directors.
Sixth: The Board of Directors may fix a time, in the future not exceeding
thirty (30) days preceding the date of any meeting of the stockholders, and not
exceeding thirty (30) days preceding the date fixed for the payment of any
dividend or distribution, or for the allotment of rights, or when any change of
conversion or exchange of stock shall go into effect, as a record date for the
determination of the stockholders entitled to notice of and to vote at such
meeting, or entitled to receive any such dividend or distribution, or any such
allotment or rights, or to exercise the
-6-
<PAGE> 7
rights in respect to any change, conversion or exchange of stock, and in such
case only stockholders of record on the date so fixed shall be entitled to
notice of and to vote at such meetings, or to receive such dividend,
distribution or allotment of rights, or to exercise such rights, as the case may
be, notwithstanding any transfer of any stock on the books of the corporation
after any record date fixed as aforesaid. The Board of Directors may close the
books of the corporation against transfers of stock during the whole or any part
of such period.
Seventh: Subject to express limitations and restrictions contained in the
Articles of Incorporation, the Board of Directors may authorize the issue of
stock of the corporation from time to time, upon such terms as may be approved
by appropriate public authority, on consideration of money paid, labor done or
services actually rendered, debts or securities cancelled, or tangible or
intangible property actually received, or in the case of stock issued as a
dividend, against amounts transferred from surplus to stated capital. Provided
however, any shares of stock of the corporation which the Board of Directors may
authorize to be issued pursuant to a plan adopted by the Board of Directors for
the issuance of common stock as provided in Section 1244 of the Internal Revenue
Code of 1954, as amended, shall be issued only in consideration of money
actually paid to the corporation and/or other property (other than stock and
securities) actually transferred to the corporation.
-7-
<PAGE> 8
Eighth: To appoint such advisory directors which may seem to them to be
advisable to consult with the Board of Directors, any committee established
thereby, or the officers of the corporation which advisory directors shall not
be entitled to vote or to bind the corporation in any fashion.
Ninth: Generally to do and perform every act and thing whatsoever that may
pertain to the office of a director or to a Board of Directors.
ARTICLE V
MEETINGS OF DIRECTORS
Section 1. Place of Meetings. Any meeting (whether regular, annual,
special or adjourned) of the Board of Directors of the corporation, may be held
at any place within or without the state which has been heretofore designated
for that purpose by resolution of the Board of Directors or by written consent
of all members of the Board. In the absence of such designation, all meetings
shall be held at the principal office of the corporation.
Section 2. Annual Meetings. Annual meetings of the Board of Directors, of
which no notice need be given, shall be held immediately after the adjournment
of each annual meeting of the stockholders.
Section 3. Regular Meetings. In its discretion, regular meetings of the
Board of Directors may be held monthly without notice, at such time and place as
shall be determined by the Board.
-8-
<PAGE> 9
Section 4. Special Meetings. Special meetings of the Board of Directors
may be called at any time by order of the President or of any Vice President or
of two (2) or more of the directors; provided however, in the event not more
than two (2) directors are then serving, such special meeting may be called by
order of any one (1) director.
Section 5. Notice of Special Meetings. Notice of the time and place of all
special meetings of the Board of Directors shall be given to each director by
personal delivery or by mail of a written or printed notice, or by cable,
telegraph, radio-telegraph, telephone or radio-telephone at least one (1) week
before the time fixed for holding said meeting. Each director shall register his
address with the Secretary of the corporation and notice of meetings sent or
given by mail, cable, telegraph, radio-telegraph, telephone or radio-telephone,
as herein provided, to such address shall be valid notice of such meeting.
Section 6. Waiver and Consent. The transactions of any meeting of the
Board of Directors, however called and noticed and wherever held, shall be valid
as though had at a meeting duly held after regular call and waiver of notice, if
a quorum be present, and if either before or after the meeting, each of the
directors not present signs a written waiver of notice, or a consent to holding
such meeting, or an approval of the minutes thereof.
-9-
<PAGE> 10
Section 7. Business at a Special or Adjourned Meeting. Any business which
might be done at a regular or annual meeting of the Board of Directors may be
done at a special or at an adjourned meeting of the Board, and no notice
whatsoever need be given at any such adjourned meeting if the time and place of
such meeting be fixed at the meeting adjourned.
Section 8. No Meeting. Any action which might be taken at a meeting of the
Board of Directors may be taken without a meeting if a record or memorandum
thereof be made in writing and signed by all of the members of the Board of
Directors.
Section 9. Order of Business. The order of business at any regular or
special meeting of the Board of Directors, unless otherwise prescribed for any
meeting at such meeting, shall be as follows:
1. Reading and approval of minutes of last meeting of directors
2. Reports of officers and committees
3. Unfinished business
4. New business
5. Election of officers
6. Adjournment
ARTICLE VI
OFFICERS
Section 1. Election and Qualifications. The officers of this corporation
shall consist of a President and a Secretary-Treasurer or any combination
allowed by Kansas State Law. Officers shall be elected by the Board of Directors
and the President must be elected from the directors.
-10-
<PAGE> 11
The same qualified person may be chosen for and hold any of the two (2) or
more offices of the corporation. No officer shall execute, acknowledge or verify
any instrument in more than one (1) capacity if such instrument be required by
law or these Bylaws to be executed, acknowledged or verified, as the case may
be, by any two or more officers, except where there is only one officer of the
corporation. The Board of Directors, if it deems advisable, may elect, as
additional officer of this corporation, at any time one or more Vice Presidents,
one (1) or more Assistant Secretaries and/or one (1) or more Assistant
Treasurers, with such powers as the Board shall from time to time prescribe. The
Board of Directors may require any officer or agent to give bond or other
security for the faithful performance of his/her duties.
Section 2. Terms and Compensation. The term of office and the salary of
each of said officers, and the manner and time of the payment of such salaries
shall be fixed and determined by the Board of Directors and may be altered by
said Board from time to time, and at any time at its pleasure.
Section 3. Removal. All officers and all agents of the corporation may be
removed for such causes, upon such conditions, and in such manner as may be
determined by the officer making the appointment or by the Board of Directors,
whenever such removal is believed by such officer or the Board to be for the
best interest of the corporation.
-11-
<PAGE> 12
ARTICLE VII
PRESIDENT
Section 1. Powers and Duties. The powers and duties of the President shall
be:
First: To preside at all meetings of the stockholders and the Board of
Directors.
Second: To call meetings of the stockholders and all meetings of the Board
of Directors, to be held at such time and places as provided by these Bylaws.
Third: To affix the signature of the corporation to all deeds,
conveyances, mortgages, leases, obligations, bonds, certificates and other
papers and instruments in writing that may require the same, to sign
certificates of stock of the corporation, and to supervise and control, subject
to the direction of the Board of Directors, all officers, agents and employees
of the corporation.
ARTICLE VIII
VICE PRESIDENTS
Section 1. Powers and Duties. In case of the absence, disability or death
of the President, the Executive Vice President or in his absence the Vice
President senior in point of time of election shall take his place and perform
his duties. Vice Presidents of this corporation shall have such other powers and
perform such other duties as may be granted or prescribed by the Board of
Directors.
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<PAGE> 13
ARTICLE IX
SECRETARY
Section 1. Powers and Duties. The powers and duties of the Secretary shall
be:
First: To keep full and complete records of the proceedings of the Board
of Directors and of the meetings of the stockholders and to furnish the same to
the Board of Directors.
Second: To keep the seal of the corporation and to affix the same to all
instruments which may so require.
Third: To countersign all certificates of stock of the corporation.
Fourth: To make service and publication of all notices that may be
necessary or proper, and without command or direction from anyone. In case of
absence, inability, refusal, or neglect of the Secretary to make service or
publication of any notice, then such notice may be served or published by the
President or Vice President, or by any person thereunto authorized by either of
them, by the Board of Directors or by the holders of a majority of the shares of
outstanding capital stock of the corporation.
Fifth: To supervise and control the keeping of the accounts and books of
the corporation.
Sixth: To transfer upon the books of the corporation any and all shares of
its stock; provided, however, that no certificate of stock shall be issued or
delivered, or if issued or delivered, shall have any validity whatsoever, until
and unless it has been signed by the President or a Vice President of the
corporation.
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<PAGE> 14
Seventh: In the case of the absence, disability or death of the President
and at a time in which there is no Vice President of the corporation or Vice
President of the corporation eligible and qualified to assume the duties of
President as provided in ARTICLE VIII hereof, the Secretary or
Secretary-Treasurer, as the case may be, shall have the power and duty to call a
special meeting of the Board of Directors in accordance with these Bylaws for
the purpose of electing a new President.
Eighth: On or before the due date of the corporation's annual Kansas
income tax return, the Secretary shall file with the Secretary of State the
corporation's annual report, and pay, at that time, the franchise tax due
thereon. The annual report shall be made on such form as shall be prescribed and
furnished by the Secretary of State and shall be signed by the President, Vice
President, or Secretary and acknowledged and sworn to before a notary public by
all persons executing the same.
Ninth: Generally to do and perform all such duties as pertain to his
office and as may be required by the Board of Directors.
ARTICLE X
TREASURER
Section 1. Powers and Duties. The Treasurer shall receive all monies
belonging to or paid unto the corporation and give receipts therefor, and shall
deposit such monies, as he shall be
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<PAGE> 15
directed by the Board of Directors, with one (1) or more solvent and reputable
bank or bankers to be designated by the Board of Directors, and shall keep full
and complete records of the funds received and disbursements thereof. He shall
render to the stockholders at the regular meeting thereof, and also to the Board
of Directors at any meeting thereof, or from time to time whenever the Board of
Directors or the President may require, an account of all financial transactions
as Treasurer and of the financial condition of the corporation, and shall
perform such other duties as may from time to time be prescribed by the Board of
Directors. He shall exhibit or cause to be exhibited the books of the
corporation to the Board of Directors, or to any committee appointed by the
Board, or to any director on application during business hours, or to any other
person entitled to inspect such books pursuant to pertinent provisions of the
General Corporation Code.
ARTICLE XI
MEETINGS OF STOCKHOLDERS
Section 1. Place of Meetings. Notwithstanding anything to the contrary in
these Bylaws provided, any meeting (whether annual, special or adjourned) of the
stockholders of this corporation may be held at any place within or without the
state which has been designated therefor by the Board of Directors.
Section 2. Annual Meetings. Subject to the foregoing provision, the annual
meeting of the stockholders shall be held at the principal or registered office
of the corporation at the hour of
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<PAGE> 16
10:00 o'clock in the forenoon on the second Monday of the second month of the
corporation's fiscal year, if not a legal holiday. If such second Monday is a
legal holiday, said meeting shall be held on the next succeeding day which is
not a legal holiday. At the annual meeting, directors of the corporation shall
be elected, reports of affairs of the corporation shall be considered, and any
other business may be transacted which is within the powers of the stockholders
to transact.
No notice need be given of the annual meeting of the stockholders except
that at least ten (10) days' written notice of the general nature of the
business or proposal shall be given as in the case of a special meeting of the
stockholders before action may be taken at such meeting upon any of the
following proposals:
(a) To sell, lease, convey, exchange, transfer or otherwise dispose
of all or substantially all of the property and assets of the corporation;
(b) To amend the Bylaws;
(c) To change the stated capital of the corporation;
(d) To amend the Articles of Incorporation, except to extend the
term of corporate existence;
(e) To merge or consolidate with another corporation, domestic or
foreign;
(f) To windup and dissolve the corporation; or
(g) To adopt a plan of distribution of stock, securities, or any
consideration other than money in the process of winding up.
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<PAGE> 17
In the event the annual meeting is not timely held, or the directors are
not elected at such annual meeting, the directors may be elected at all special
meetings held for that purpose, and it shall be the duty of the President, Vice
President (if any), or Secretary upon the demand of any stockholder entitled to
vote at such meeting, to call such special meeting.
Section 3. Special Meetings. Special meetings of the stockholders may be
called at any time by order of the President or by the Board of Directors, or by
one (1) or more stockholders holding not less than thirty percent (30%) of the
then outstanding stock of the corporation entitled to vote at any meeting of the
corporation, or by and two (2) or more members of the Board of Directors.
Section 4. Notice of Special Meetings. Notice of special meetings of
stockholders shall be given by written notice personally served on each
stockholder, or deposited in the United States mail, postage prepaid, and
addressed to him at his address appearing on the books of the corporation or
supplied by him to the corporation for the purpose of notice at least ten (10)
days before the time fixed for holding said meeting; provided however, that if
the stockholder has supplied no address or if the place of business or residence
of the stockholder is not known to the Secretary, then notice shall be deemed to
have been given to him if mailed within such ten (10) day period to him, general
delivery, at his last known address, or published at least once in some
newspaper of general circulation in the county in which the principal place of
business of the corporation is located.
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<PAGE> 18
Upon a request being made by written notice to the President, a Vice
President, or the Secretary by any person or persons empowered to call such
meeting, such officer shall give notice to the stockholders that such meeting
has been called for the purpose or purposes stated in such request and is to be
held at a specified time, which time as fixed by such officer shall not be less
than ten (10) days after receipt of such request. If notice of such meeting is
not given to the shareholders by such officer within seven (7) days after
receipt of such request, such person or persons making the request may fix the
time of the meeting and give notice thereof in the manner provided by these
Bylaws.
Section 6. Consent and Waiver of Notice. Any transactions of the
stockholders at any meeting thereof, regardless of how and whether call was made
or notice given, shall be as valid as though transacted at a meeting duly held
after regular call and notice, if a quorum is present, either in person or by
proxy, and if, either before or after the meeting, each of the stockholders
entitled to vote and not present in person or by proxy signs a written waiver of
notice, or a consent to holding of such meeting, or an approval of the minutes
thereof. All such waivers, consents or approvals shall be filed with the
Secretary or made a part of the minutes of the meeting.
Whenever any notice whatsoever is required to be given under the
provisions of these Bylaws, a waiver thereof in writing signed by the person or
persons entitled to such notice, whether before or after the time stated
therein, shall be deemed equivalent to the actual giving of such notice.
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<PAGE> 19
Any action, which under any provisions of these Bylaws might be taken at a
meeting of the stockholders, may be taken without a meeting if a record or
memorandum thereof be made in writing and signed by all of the holders of stock
who would be entitled to vote at a meeting for such purpose and such record or
memorandum be filed with the Secretary and made a part of the corporate records.
Section 6. Quorum, Voting and Proxies. At all meetings of the stockholders
(whether annual, special or adjourned), the presence in person or by proxy in
writing of the holders of a majority of the stock then outstanding and entitled
to vote at such meeting shall constitute a quorum for the transaction of
business. Each share of stock shall entitle the duly qualified and registered
holder thereof to one (1) vote. All proxies shall be in writing subscribed by
the party entitled to vote the number of shares represented thereby, or by his
duly authorized attorney, and no such proxy shall be valid or confer any right
or authority to vote or act thereunder unless such proxy has been offered for
filing to and left with the Secretary of the corporation prior to the meeting at
which the same is to be used; provided that in case any meeting of stockholders
whatsoever (whether annual, special or adjourned) shall have been for any cause
adjourned, proxies shall be valid and may be used at such adjourned meeting,
which has been offered for filing to and left with the Secretary of the
corporation prior to the date upon which said adjourned meeting shall in fact be
held. No proxy shall be valid after the expiration of eleven (11) months from
the date of its execution, unless the stockholder executing it specified therein
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<PAGE> 20
the length of time for which such proxy is to continue in force, which in no
case, shall exceed two (2) years from the date of its execution. All elections
of Directors, and the vote upon any other question, except as otherwise provided
by law, or unless otherwise provided by Resolution by the Board of Directors,
may be had by ballot, viva voce, or by showing of hands, unless a stockholder at
least five (5) days prior to the date of any meeting, or the election of
directors, request in writing a vote by ballot, and then the election of
directors shall be by ballot. All elections shall be had and, except as
otherwise provided herein, all questions shall be decided by a plurality vote.
Section 7. Voting List. The Secretary shall, before each stockholders'
meeting, and as of forty-eight (48) hours prior to the convening of such
meeting, make a list of all persons entitled to represent stock at such meeting,
arranging the names alphabetically, with the number of shares of stock entitled
to be voted by each set opposite the respective names. The Secretary shall also
produce the stock ledger, or a duplicate thereof, together with such list and
keep the same open at the place of such meeting during the business hours of at
least one (1) full day immediately preceding the convening thereof and until the
close of such meeting, and the same shall be subject to inspection at any time
during such period by any stockholder or person then present representing shares
of stock of the corporation.
Section 8. Records. Every stockholder shall have the right to examine in
person, or by agent or attorney, at any reason-
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<PAGE> 21
able time, for any reasonable purposes, the Bylaws, stock register, books of
account and records of the proceedings of the stockholders and directors, and to
make copies of, or extracts of the same, and at their sole expense.
Section 9. Order of Business. The order of business at the annual meeting,
and so far as possible at all other meetings of stockholders, shall be:
1. Calling of the roll
2. Due proof of notice of meeting
3. Reading and disposal of unapproved minutes
4. Report of officers
5. Election of directors
6. Unfinished business
7. New business
8. Adjournment
Section 10. Adjournments. Any business which might be transacted at an
annual meeting of the stockholders may be done at a special or at an adjourned
meeting. If no quorum be present at any meeting of the stockholders (whether
annual, special or adjourned), such meeting may be adjourned by those present
from day to day, or from time to time, until such quorum be obtained, such
adjournment and the reasons therefor being recorded in the journal or minutes of
proceedings of the stockholders, and no notice whatsoever need be given of any
such adjourned meeting if the time and place of such meeting be fixed at the
meeting adjourned.
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<PAGE> 22
ARTICLE XII
CAPITAL STOCK
Section 1. Class. The capital stock of this corporation shall consist of
one class of stock: Common stock with full voting privileges. The President
shall cause certificates of the capital stock of this corporation to be issued
to each stockholder, under the seal of the corporation and signed by the
President (or Vice President) and by the Secretary, certifying the number of
shares of capital stock owned by each respective stockholder. Such certificate
shall be numbered and shall be entered in the records of the corporation in
numerical order.
Section 2. Transfers. Title to a certificate of stock of this corporation
and to the stock represented thereby can be transferred only:
First: By delivery of the certificate endorsed, either in blank or to a
specified person, by the person appearing by the certificate to the owner of the
stock represented thereby;
Second: By delivery of the certificate and a separate document containing
a written assignment of the certificate, or a power of attorney to sell, assign,
or transfer the same, or the stock represented thereby, signed by the person
appearing by the certificate to be the owner of the stock represented thereby.
Such assignment or power of attorney may be either in blank or to a specified
person; or
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<PAGE> 23
Third: By operation of law, judicial sale, or by judgment of a court of
competent jurisdiction.
Incident to the transfer of stock of the corporation, the certificate
representing the stock being so transferred shall be surrendered to the
corporation by delivery thereof to the person in charge of the transfer ledger,
or to such other persons as the directors may designate, by whom such
certificate shall be cancelled and a new certificate, or certificates, issued to
the transferee.
The provisions of this Section 2 of ARTICLE XII are hereby expressly made
subject to the provisions of paragraph Sixth of ARTICLE IX relating to the
powers and duties of the corporate Secretary.
Section 3. Registered Stockholders. The corporation shall be entitled to
treat the record holder of any share of stock as holder thereof in fact, and
accordingly shall not be bound to recognize any equitable or other claim to, or
interest in, such share or shares of stock on the part of any other person,
whether or not it shall have express or other notice thereof, except as
expressly provided by the laws of the state.
Section 4. Lost Certificates. Any person claiming a stock certificate to
be lost or destroyed shall make an affidavit or an affirmation of the fact and
shall advertise the same in such manner as the Board of Directors may determine
and, if the directors require, shall give the corporation a bond of indemnity in
form and with sureties satisfactory to the Board, in at least double the amount
of the book value of the shares of stock represented by said
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<PAGE> 24
certificate, whereupon, a new certificate may be issued of the same tenor and
for the same number of shares of stock as the certificate alleged to be lost or
destroyed.
Section 5. Lien on Stock. The corporation shall have a first and paramount
lien on the shares of stock of each stockholder and upon all dividends due them
for any indebtedness by such stockholder to the corporation, either on account
of the subscription of its stock, or for money loaned by the corporation to the
stockholder or for any other indebtedness due from the stockholder to the
corporation.
Section 6. Assessment. All stock issued by this corporation shall be
non-assessable.
Section 7. Sale. No stockholder may sell or otherwise dispose of his stock
in this corporation or a portion of his stock, first offering the stock to all
other stockholders upon the same terms and conditions that the selling
stockholders desire to se11 the stock. The selling stockholder shall give
written notice to all other stockholders, which notice shall describe the terms
and conditions of the sale. Within thirty (30) days of receipt of such written
notice the remaining stockholders can elect to purchase the selling
stockholders' shares by giving written notice of the election to purchase to the
selling stockholders. If more than one stockholder elects to purchase the
shares, the purchasing stockholders shall purchase the shares on a pro-rata
basis equal to their respective percentage ownership of shares owned between
those stockholders so electing to purchase. If no stockholders elect to
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<PAGE> 25
claim, action, suit or proceedings (whether actual or threatened, brought by or
in the right of the corporation or otherwise, civil, criminal administrative or
investigative, including appeals), to which he may be or is made a party by
reason of his being or having been a director, employee, agent or office of the
corporation, or at its request of any other corporation.
Section 2. Unlawful Conduct. There shall be no indemnification (i)
as to amounts paid in settlement or other disposition of any threatened or
pending action by or in the right of the corporation or such other corporation,
or (ii) as to matters in respect of which it shall be determined by judgment or
otherwise that such director, employee, agent or officer was derelict in the
performance of his duties to the corporation or such other corporation and, in
the case of any criminal action or proceeding, that he had reasonable cause to
believe that his conduct was unlawful.
Section 3. Good Faith. Any such person shall be entitled to
indemnification as of right (i) if he has been wholly successful, on the merits
or otherwise, with respect to any claim, action, suit or proceeding or, (ii)
except as hereinabove provided, in respect of matters as to which a court or
independent legal counsel shall have determined that he acted in good faith for
a purpose which he reasonably believed to be in the best interests of the
corporation or such other corporation, and in addition, in the case of any
criminal action or proceeding, that he had reasonable cause to believe that his
conduct was unlawful. Such court or independent counsel shall have the power to
determine that such director, employee,
-26-
<PAGE> 26
agent or officer is entitled to indemnification as to some matters even though
he is not so entitled as to others. The termination of any claim, action, suit
or proceeding by judgment, settlement, conviction or upon a plea of nolo
contendere or its equivalent, shall not in itself create a presumption that any
such director, employee, agent or officer did not act in good faith for a
purpose which he reasonably believed to be in the best interests of the
corporation and, in the case of any criminal action or proceeding, that he had
reasonable cause to believe that his conduct was unlawful.
Section 4. Amounts. Amounts paid in indemnification shall include, but
shall not be limited to counsel and other fees and disbursements and judgments,
fines or penalties against, and amounts paid in settlement by, such director,
employee, agent or officer. The corporation may advance expenses undertaken to
repay or to reimburse such expenses if it should be ultimately determined that
he is not entitled to indemnification under this Article.
Section 5. Time. The provisions of this article shall be applicable to
claims, actions, suits or proceedings made or commenced after the adoption
hereof, whether arising from acts or omissions to act occurring before or after
the adoption hereof. The rights of indemnification provided in this article
shall not be exclusive of any rights to which any such director of officer may
otherwise be entitled by contract or as a matter of law.
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<PAGE> 27
ARTICLE XV
MISCELLANEOUS PROVISIONS
Section 1. Instruments in Writing. All checks, drafts, demands for money
and notes of the corporation, and all written contracts of the corporation shall
be signed by such officer or officers, agent or agents, as the Board of
Directors may from time to time by resolution designate. No officer, agent, or
employee of the corporation shall have power to bind the corporation by contract
or otherwise unless authorized to do so by the Board of Directors.
Section 2. Annual Report. The Board of Directors of the corporation shall
not be required to prepare an annual report for the stockholders, except upon
request in writing of the stockholders of record owning a majority number of the
shares of capital stock of the corporation then outstanding and entitled to
vote.
Section 3. Fiscal Year. The fiscal year of this corporation shall be fixed
by proper resolution of the Board of Directors.
KNOW ALL MEN BY THESE PRESENTS: That the undersigned, being all of the
Directors of the above named corporation, incorporated, organized and existing
under and by virtue of the laws of the state, do hereby certify that the
foregoing Bylaws, consisting of fifteen Articles, were duly adopted as the
Bylaws of said corporation on this 23rd day of December, 1988.
DIRECTOR:
/s/ Sheldon G. Hurst
-----------------------------------
Sheldon G. Hurst
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<PAGE> 28
KNOW ALL MEN BY THESE PRESENTS: That I, the undersigned, Secretary of the
corporation, incorporated, organized and existing under the laws of the state,
hereby certify that the foregoing Bylaws, consisting of fifteen Articles, were
duly adopted as the Bylaws of said corporation on this 23rd day of December,
1988.
/s/ Sheldon G. Hurst
-----------------------------------
Secretary
KNOW ALL MEN BY THESE PRESENTS: That I, the undersigned, being the holders
of more than a majority of the share of stock of said corporation, do hereby
assent to the foregoing Bylaws of said corporation and do hereby adopt the same
as the Bylaws of said corporation.
IN WITNESS WHEREOF, we have assented and subscribed our names this 23rd
day of December, 1988.
Shareholders No. of Shares
------------ -------------
TRI-STATE OUTDOOR MEDIA GROUP, INC.
By: /s/ Sheldon G. Hurst 200 shares
---------------------------------
Sheldon G. Hurst
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<PAGE> 1
EXHIBIT 4.1
TRI-STATE OUTDOOR MEDIA GROUP, INC.,
Issuer,
and
IBJ SCHRODER BANK & TRUST COMPANY,
Trustee
--------------------
INDENTURE
Dated as of May 15, 1998
---------------------
$100,000,000
11% Senior Notes due 2008
<PAGE> 2
TRI-STATE OUTDOOR MEDIA GROUP, INC.
RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT
OF 1939 AND INDENTURE, DATED AS OF MAY 15, 1998
TRUST INDENTURE
ACT SECTION INDENTURE SECTION
Section 310(a)(1) .................................... 607
(a)(2) .................................... 607
(b) .................................... 608
Section 312(c) .................................... 701
Section 314(a) .................................... 703
(a)(4) .................................... 1008(a)
(c)(1) .................................... 102
(c)(2) .................................... 102
(e) .................................... 102
Section 315(b) .................................... 601
Section 316(a)(last
sentence) .................................... 101 ("Outstanding")
(a)(1)(A) .................................... 502, 512
(a)(1)(B) .................................... 513
(b) .................................... 508
(c) .................................... 105(d)
Section 317(a)(1) .................................... 503
(a)(2) .................................... 504
(b) .................................... 1003
Section 318(a) .................................... 111
<PAGE> 3
TABLE OF CONTENTS
Page
PARTIES..................................................................... 1
RECITALS OF THE COMPANY..................................................... 1
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions................................................... 2
Acquired Debt......................................................... 2
Act................................................................... 2
Additional Securities................................................. 2
Affiliate............................................................. 2
Asset Sale............................................................ 3
Asset Sale Offer...................................................... 3
Asset Sale Purchase Date.............................................. 3
Authenticating Agent.................................................. 3
Board of Directors.................................................... 3
Board Resolution...................................................... 3
Business Day.......................................................... 3
Capital Stock......................................................... 3
Capital Lease Obligation.............................................. 4
cash equivalents...................................................... 4
Change of Control..................................................... 4
Change of Control Offer............................................... 4
Change of Control Purchase Date....................................... 4
Closing Date.......................................................... 5
Commission............................................................ 5
Company............................................................... 5
Company Request" or "Company Order.................................... 5
Consolidated Adjusted Net Income...................................... 5
Consolidated EBITDA................................................... 6
Consolidated Fixed Charges............................................ 6
Consolidated Leverage Ratio........................................... 6
Consolidated Net Worth................................................ 6
Corporate Trust Office................................................ 7
Debt.................................................................. 7
- ----------
Note: This table of contents shall not, for any purpose, be deemed to be a part
of the Indenture.
<PAGE> 4
ii
PAGE
Default............................................................... 7
Defaulted Interest.................................................... 7
Depositary............................................................ 7
Disinterested Director................................................ 8
Disqualified Stock.................................................... 8
Equity Offering....................................................... 8
Escrow Account........................................................ 8
Event of Default...................................................... 8
Exchange Act.......................................................... 8
Exchange Offer........................................................ 8
Exchange Offer Registration Statement................................. 9
Exchange Securities................................................... 9
Fair market value..................................................... 9
Federal Bankruptcy Code............................................... 9
Generally Accepted Accounting Principles" or "GAAP.................... 9
Global Security....................................................... 9
guarantee............................................................. 9
Hedging Obligations................................................... 9
Holder................................................................ 9
Indenture............................................................. 10
Indenture Obligations................................................. 10
Initial Securities.................................................... 10
Interest Payment Date................................................. 10
Investment............................................................ 10
Lien.................................................................. 10
Maturity.............................................................. 10
Mesirow............................................................... 10
Moody's............................................................... 11
Net Cash Proceeds..................................................... 11
Non-U.S. Person....................................................... 11
Offering.............................................................. 11
Officers' Certificate................................................. 11
Offshore Global Security.............................................. 11
Offshore Physical Security............................................ 11
Opinion of Counsel.................................................... 11
Outstanding........................................................... 11
Pari Passu Debt....................................................... 12
Paying Agent.......................................................... 12
Permitted Investment.................................................. 13
<PAGE> 5
iii
PAGE
Person................................................................ 13
Pledge Agreement...................................................... 14
Pledged Securities.................................................... 14
Predecessor Security.................................................. 14
Preferred Stock....................................................... 14
QIB................................................................... 14
Qualified Equity Interest............................................. 14
Qualified Stock....................................................... 14
Redemption Date....................................................... 14
Redemption Price...................................................... 14
Registrar............................................................. 14
Registration Rights Agreement......................................... 14
Registration Statement................................................ 15
Regular Record Date................................................... 15
Regulation S.......................................................... 15
Restricted Payments................................................... 15
Restricted Subsidiary................................................. 15
Rule 144A............................................................. 15
S&P................................................................... 15
Securities............................................................ 15
Securities Act........................................................ 15
Security Register..................................................... 15
Shelf Registration Statement.......................................... 15
Significant Subsidiary................................................ 15
Special Record Date................................................... 16
Stated Maturity....................................................... 16
Subordinated Debt..................................................... 16
Subsidiary............................................................ 16
Subsidiary Guarantee.................................................. 16
Subsidiary Guarantor.................................................. 16
Tax Sharing Agreement................................................. 16
Tri-State Securities Intermediary..................................... 16
Trust Indenture Act" or "TIA.......................................... 16
Trustee............................................................... 16
Unrestricted Subsidiary............................................... 17
U.S. Global Security.................................................. 17
U.S. Government Obligations........................................... 17
U.S. Physical Security................................................ 17
Voting Stock.......................................................... 17
<PAGE> 6
iv
PAGE
Weighted Average Life................................................. 17
Wholly Owned Restricted Subsidiary.................................... 17
SECTION 102. Compliance Certificates and Opinions.................... 17
SECTION 103. Form of Documents Delivered to Trustee.................. 18
SECTION 104. Acts of Holders......................................... 19
SECTION 105. Notices, Etc., to Trustee, Company...................... 20
SECTION 106. Notice to Holders; Waiver............................... 20
SECTION 107. Conflict of Any Provision of Indenture with Trust
Indenture Act........................................... 21
SECTION 108. Effect of Headings and Table of Contents................ 21
SECTION 109. Successors and Assigns.................................. 21
SECTION 110. Separability Clause..................................... 21
SECTION 111. Benefits of Indenture................................... 22
SECTION 112. Governing Law........................................... 22
SECTION 113. Legal Holidays.......................................... 22
SECTION 114. Consent to Jurisdiction and Service of Process.......... 22
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally......................................... 23
SECTION 202. Restrictive Legends..................................... 24
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms......................................... 26
SECTION 302. Denominations........................................... 27
SECTION 303. Execution, Authentication, Delivery and Dating.......... 27
SECTION 304. Temporary Securities.................................... 29
SECTION 305. Registration, Registration of Transfer and Exchange..... 30
SECTION 306. Book-Entry Provisions for Global Securities............. 31
SECTION 307. Special Transfer Provisions............................. 33
SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities........ 35
SECTION 309. Payment of Interest; Interest Rights Preserved.......... 36
SECTION 310. Persons Deemed Owners................................... 38
SECTION 311. Cancellation............................................ 38
SECTION 312. Issuance of Additional Securities....................... 39
<PAGE> 7
v
PAGE
SECTION 313. CUSIP and CINS Numbers.................................. 39
SECTION 314. Computation of Interest................................. 39
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture................. 39
SECTION 402. Application of Trust Money.............................. 40
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default....................................... 41
SECTION 502. Acceleration of Maturity; Rescission and Annulment...... 42
SECTION 503. Collection of Debt and Suits for Enforcement by Trustee. 44
SECTION 504. Trustee May File Proofs of Claim........................ 45
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities.............................................. 45
SECTION 506. Application of Money Collected.......................... 46
SECTION 507. Limitation on Suits..................................... 46
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.................................... 47
SECTION 509. Restoration of Rights and Remedies...................... 47
SECTION 510. Rights and Remedies Cumulative.......................... 47
SECTION 511. Delay or Omission Not Waiver............................ 48
SECTION 512. Control by Holders...................................... 48
SECTION 513. Waiver of Past Defaults................................. 48
SECTION 514. Waiver of Stay or Extension Laws........................ 49
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults...................................... 50
SECTION 602. Certain Rights of Trustee............................... 50
SECTION 603. Trustee Not Responsible for Recitals or Issuance of
Securities.............................................. 51
<PAGE> 8
vi
PAGE
SECTION 604. May Hold Securities..................................... 52
SECTION 605. Money Held in Trust..................................... 52
SECTION 606. Compensation and Reimbursement.......................... 52
SECTION 607. Corporate Trustee Required; Eligibility................. 53
SECTION 608. Resignation and Removal; Appointment of Successor....... 53
SECTION 609. Acceptance of Appointment by Successor.................. 55
SECTION 610. Merger, Conversion, Consolidation or Succession to
Business................................................ 55
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders............ 56
SECTION 702. Reports by Trustee...................................... 56
SECTION 703. Reports by Company...................................... 56
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.... 57
SECTION 802. Successor Substituted................................... 59
ARTICLE NINE
SUPPLEMENTS AND AMENDMENTS TO INDENTURE
AND SUBSIDIARY GUARANTEES
SECTION 901. Without Consent of Holders.............................. 59
SECTION 902. With Consent of Holders................................. 60
SECTION 903. Execution of Supplemental Indentures.................... 61
SECTION 904. Effect of Supplemental Indentures....................... 62
SECTION 905. Conformity with Trust Indenture Act..................... 62
SECTION 906. Reference in Securities to Supplemental Indentures...... 62
SECTION 907. Notice of Supplemental Indentures....................... 62
<PAGE> 9
vii
PAGE
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if Any, and Interest.... 63
SECTION 1002. Maintenance of Office or Agency........................ 63
SECTION 1003. Money for Security Payments to Be Held in Trust........ 63
SECTION 1004. Corporate Existence.................................... 65
SECTION 1005. Payment of Taxes and Other Claims...................... 65
SECTION 1006. Maintenance of Properties.............................. 65
SECTION 1007. Insurance.............................................. 66
SECTION 1008. Statement by Officers as to Default.................... 66
SECTION 1009. Provision of Reports and Financial Statements.......... 67
SECTION 1010. Limitation on Debt..................................... 67
SECTION 1011. Limitation on Restricted Payments...................... 69
SECTION 1012. Purchase of Securities upon a Change of Control........ 74
SECTION 1013. Limitation on Certain Asset Sales...................... 75
SECTION 1014. Limitation on Transactions with Affiliates............. 77
SECTION 1015. Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries...................... 77
SECTION 1016. Limitation on Issuances and Sales of Capital Stock of
Restricted Subsidiaries................................ 78
SECTION 1017. Limitation on Liens.................................... 79
SECTION 1018. Unrestricted Subsidiaries.............................. 81
SECTION 1019. Limitation on Guarantees of Debt by Restricted
Subsidiaries........................................... 81
SECTION 1020. Waiver of Certain Covenants............................ 82
SECTION 1021. Payment for Consent.................................... 82
ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Right of Redemption.................................... 83
SECTION 1102. Applicability of Article............................... 83
SECTION 1103. Election to Redeem; Notice to Trustee.................. 83
SECTION 1104. Selection by Trustee of Securities to Be Redeemed...... 83
SECTION 1105. Notice of Redemption................................... 84
SECTION 1106. Deposit of Redemption Price............................ 85
SECTION 1107. Securities Payable on Redemption Date.................. 85
<PAGE> 10
viii
PAGE
SECTION 1108. Securities Redeemed in Part............................ 86
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
ARTICLE THIRTEEN
SUBSIDIARY GUARANTEES
SECTION 1301. Subsidiary Guarantees.................................. 90
SECTION 1302. Guaranty Absolute...................................... 91
SECTION 1303. Waivers................................................ 93
SECTION 1304. Subrogation............................................ 94
SECTION 1305. No Waiver; Remedies.................................... 94
SECTION 1306. Continuing Guaranty; No Right of Set-Off; Independent
Obligation............................................. 94
SECTION 1307. Subsidiary Guarantors May Consolidate, Etc., on Certain
Terms.................................................. 95
SECTION 1308. Additional Subsidiary Guarantors....................... 95
SECTION 1309. Releases............................................... 96
SECTION 1310. Benefits Acknowledged.................................. 96
SECTION 1311. Severability........................................... 97
ARTICLE FOURTEEN
SECURITY
SECTION 1401. Security............................................... 97
<PAGE> 11
ix
PAGE
EXHIBITS
Exhibit A - Form of Security
Exhibit B - Form of Certificate to Be Delivered upon Termination of Restricted
Period
Exhibit C - Form of Certificate to Be Delivered in Connection with Transfers to
Non-QIB Institutional Accredited Investors
Exhibit D - Form of Certificate to Be Delivered in Connection with Transfers
Pursuant to Regulation S
<PAGE> 12
INDENTURE, dated as of May 15, 1998 between Tri-State Outdoor Media
Group, Inc., a corporation duly organized and existing under the laws of the
State of Kansas (herein called the "Company"), and IBJ Schroder Bank & Trust
Company, a banking corporation duly organized and existing under the laws of New
York, trustee (herein called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation and issue of 11% Senior
Notes due 2008 (herein called the "Initial Securities"), and 11% Senior Series B
Notes due 2008 (the "Exchange Securities" and, together with the Initial
Securities, the "Securities") of substantially the tenor and amount hereinafter
set forth, and to provide therefor the Company has duly authorized the execution
and delivery of this Indenture.
Upon the issuance of the Exchange Securities, if any, or the
effectiveness of the Exchange Offer Registration Statement (as defined herein)
or, under certain circumstances, the effectiveness of the Shelf Registration
Statement (as defined herein), this Indenture shall be subject to the provisions
of the Trust Indenture Act of 1939, as amended, that are required to be part of
this Indenture and shall, to the extent applicable, be governed by such
provisions.
All things necessary have been done to make the Securities, when
executed by the Company and authenticated and delivered hereunder and duly
issued by the Company, the valid obligations of the Company and to make this
Indenture a valid agreement of the Company, each in accordance with their
respective terms.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of the
Securities by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Securities, as follows:
<PAGE> 13
2
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS
OF GENERAL APPLICATION
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise expressly
provided or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article, and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act, either directly or by reference therein, have the meanings
assigned to them therein, and the terms "cash transaction" and
"self-liquidating paper", as used in TIA Section 311, shall have the
meanings assigned to them in the rules of the Commission adopted under the
Trust Indenture Act;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles; and
(d) the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Indenture as a whole and not to any
particular Article, Section or other subdivision.
Certain terms, used principally in Article Two, Eight, Ten and
Twelve are defined in that Article.
"Acquired Debt" means Debt of a Person (a) existing at the time such
Person is merged with or into the Company or becomes a Restricted Subsidiary or
(b) assumed in connection with the acquisition of assets from such Person.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Additional Securities" has the meaning set forth in Section 312.
"Affiliate" means, with respect to any specified Person, any other
Person directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of this
definition, "control", when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly
<PAGE> 14
3
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Asset Sale" means any sale, issuance, conveyance, transfer, lease
or other disposition (including, without limitation, by way of merger,
consolidation or sale and leaseback transaction) (collectively, a "transfer") by
the Company or a Restricted Subsidiary, directly or indirectly, in one or a
series of related transactions, of (a) any Capital Stock of any Restricted
Subsidiary, (b) all or substantially all of the properties and assets of the
Company and its Restricted Subsidiaries representing a division or line of
business or (c) any other properties or assets of the Company or any Restricted
Subsidiary, other than in the ordinary course of business. For the purposes of
this definition, the term "Asset Sale" shall not include any transfer of
properties or assets (i) governed by the provisions of Article Eight of this
Indenture, (ii) between or among the Company and its Restricted Subsidiaries
pursuant to transactions that shall not violate any other provision of this
Indenture, (iii) constituting a Restricted Payment that is permitted to be made,
and is made, under the first paragraph (a) under Section 1011, (iv) that is
permitted to be made, and is made, pursuant to the definition of "Permitted
Investments", (v) representing obsolete or permanently retired equipment and
facilities or (vi) the gross proceeds of which (exclusive of indemnities) shall
not exceed $100,000 for any particular item or $500,000 in the aggregate for any
fiscal year.
"Asset Sale Offer" has the meaning set forth in Section 1013.
"Asset Sale Purchase Date" has the meaning set forth in Section
1013.
"Authenticating Agent" has the meaning set forth in Section 303.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in New York are
authorized or obligated by law or executive order to close.
"Capital Stock" of any Person means any and all shares, interests,
partnership interests, participations, rights in or other equivalents of, or
interest in, the equity of such Person, but excluding any debt securities
convertible into such equity.
<PAGE> 15
4
"Capital Lease Obligation" means, at any time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"cash equivalents" means (i) any evidence of Debt with a maturity of
180 days or less issued or directly and fully guaranteed or insured by the
United States of America or any agency or instrumentality thereof (provided that
the full faith and credit of the United States of America is pledged in support
thereof); (ii) certificates of deposit or acceptances with a maturity of 180
days or less of any financial institution that is a member of the Federal
Reserve System having combined capital and surplus and undivided profits of not
less than $500,000,000; and (iii) commercial paper with a maturity of 180 days
or less issued by a corporation that is not an Affiliate of the Company and is
organized under the laws of any state of the United States or the District of
Columbia and rated at least A-1 by S&P or at least P-1 by Moody's.
"Change of Control" means the occurrence of any of the following
events:
(a) Any Person or "group" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act), other than (i) Sheldon G. Hurst or Hurst
Enterprises, L.P., William G. McLendon, A. Wayne Lamm, Anthony La Marca or
any trust existing solely for the benefit of any of the above individuals
and the estate or any executor, administrator, conservator or other legal
representative of any of the above individuals and (ii) Mesirow or its
affiliated entities, is or becomes the "beneficial owner" (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), directly or indirectly, of
more than a majority of the voting power of all classes of Voting Stock of
the Company.
(b) During any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board of
Directors, or whose nomination for election by the stockholders of the
Company, was approved by a vote of 66 2/3% of the directors 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.
(c) The Company is liquidated or dissolved or adopts a plan of
liquidation or dissolution, other than a transaction that complies with
the provisions under Article Eight.
"Change of Control Offer" has the meaning set forth in Section 1012.
"Change of Control Purchase Date" has the meaning set forth in
Section 1012.
<PAGE> 16
5
"Closing Date" means the date on which the Initial Securities are
originally issued under this Indenture.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Exchange Act, or, if at any time
after the execution of this Indenture such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Company" means the Person named as the "Company" in the first
paragraph of this Indenture, until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its Chairman, Chief Executive
Officer, President, any Vice President, Chief Financial Officer, Treasurer or an
Assistant Treasurer, and delivered to the Trustee.
"Consolidated Adjusted Net Income" means, for any period, the net
income (or net loss) of the Company and its Restricted Subsidiaries for such
period as determined on a consolidated basis in accordance with GAAP, adjusted
to the extent included in calculating such net income or loss by excluding (a)
any net after-tax extraordinary gains or losses (less all fees and expenses
relating thereto), (b) any net after-tax gains or losses (less all fees and
expenses relating thereto) attributable to Asset Sales, (c) the portion of net
income (but not the net loss) of any Person (other than the Company or a
Restricted Subsidiary), including Unrestricted Subsidiaries, in which the
Company or any Restricted Subsidiary has an equity interest, except to the
extent of the amount of dividends or other distributions actually paid to the
Company or any Restricted Subsidiary in cash during such period by such Person,
(d) the net income (or loss) of any Person acquired by the Company or any
Restricted Subsidiary in a "pooling of interests" transaction attributable to
any period prior to the date of such acquisition and (e) the net income (but not
the net loss) of any Restricted Subsidiary to the extent that the declaration or
payment of dividends or similar distributions by such Restricted Subsidiary is
at the date of determination restricted, directly or indirectly, except to the
extent that such net income could be paid to the Company or a Restricted
Subsidiary thereof by loans, advances, intercompany transfers, principal
repayments or otherwise; provided that, if any Restricted Subsidiary is not a
Wholly Owned Restricted Subsidiary, Consolidated Adjusted Net Income shall be
reduced (to the extent not otherwise reduced in accordance with GAAP) by an
amount equal to (A) the amount of the Consolidated Adjusted Net Income otherwise
attributable to such Restricted Subsidiary multiplied by (B) the quotient of (1)
the number of shares of outstanding common stock of such Restricted Subsidiary
not owned on the last day of such period by the Company or any of its Restricted
Subsidiaries divided by (2) the total number of shares of outstanding stock of
such Restricted Subsidiary on the last day of such period.
<PAGE> 17
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"Consolidated EBITDA" means, for any period, the sum of, without
duplication, Consolidated Adjusted Net Income for such period, plus (or, in the
case of clause (d) below, plus or minus) the following items to the extent
included in computing Consolidated Adjusted Net Income for such period (a)
Consolidated Fixed Charges for such period, plus (b) the federal, state, local
and foreign income tax expense of the Company and its Restricted Subsidiaries
for such period, plus (c) the aggregate depreciation and amortization expense of
the Company and its Restricted Subsidiaries for such period, plus (d) any other
non-cash charges for such period, and minus non-cash credits for such period,
other than non-cash charges or credits resulting from changes in prepaid assets
or accrued liabilities in the ordinary course of business; provided that income
tax expense, depreciation and amortization expense and non-cash charges and
credits of a Restricted Subsidiary shall be included in Consolidated EBITDA only
to the extent (and in the same proportion) that the net income of such
Restricted Subsidiary was included in calculating Consolidated Adjusted Net
Income for such period.
"Consolidated Fixed Charges" means, for any period, without
duplication, the sum of (a) the amount that, in conformity with GAAP, would be
set forth opposite the caption "interest expense" (or any like caption) on a
consolidated statement of operations of the Company and its Restricted
Subsidiaries for such period, including, without limitation, (i) amortization of
debt discount, (ii) the net cost of interest rate contracts (including
amortization of discounts), (iii) the interest portion of any deferred payment
obligation, (iv) amortization of debt issuance costs and (v) the interest
component of Capitalized Lease Obligations, plus (b) cash dividends paid on
Preferred Stock and Disqualified Stock by the Company and any Restricted
Subsidiary (to any Person other than the Company and its Restricted Subsidiary),
plus (c) all interest on any Debt of any Person guaranteed by the Company or any
of its Restricted Subsidiaries; provided, however, that Consolidated Fixed
Charges shall not include (i) any gain or loss from extinguishment of debt,
including the write-off of debt issuance costs and (ii) the fixed charges of a
Restricted Subsidiary to the extent (and in the same proportion) that the net
income of such Subsidiary was excluded in calculating Consolidated Adjusted Net
Income pursuant to clause (e) of the definition thereof for such period.
"Consolidated Leverage Ratio" means, on any date of determination,
the ratio of (i) the aggregate amount of Debt of the Company and its Restricted
Subsidiaries on a consolidated basis as on such date of determination to (ii)
the aggregate amount of Consolidated EBITDA for the immediately preceding four
full fiscal quarters for which internal financial statements are available.
"Consolidated Net Worth" means, at any date of determination,
stockholders' equity of the Company and its Restricted Subsidiaries as set forth
on the most recently available quarterly or annual consolidated balance sheet of
the Company and its Restricted Subsidiaries, less any amounts attributable to
Disqualified Stock or any equity security convertible into or exchangeable for
Debt, the cost of treasury stock and the principal amount of any promissory
notes receivable from the sale of the Capital Stock of the Company or any of its
Restricted
<PAGE> 18
7
Subsidiaries and less, to the extent included in calculating such stockholders'
equity of the Company and its Restricted Subsidiaries, the stockholders' equity
attributable to Unrestricted Subsidiaries, each item to be determined in
conformity with GAAP (excluding the effects of foreign currency adjustments
under Financial Accounting Standards Board Statement of Financial Accounting
Standards No. 52).
"Corporate Trust Office" means the principal corporate trust office
of the Trustee, at which at any particular time its corporate trust business
shall be administered, which office at the date of execution of this Indenture
is located at One State Street, New York, N.Y. 10004, except that with respect
to presentation of Securities for payment or for registration of transfer or
exchange, such term shall mean the office or agency of the Trustee at which, at
any particular time, its corporate trust and agency business shall be conducted.
"Debt" means (without duplication), with respect to any Person,
whether recourse is to all or a portion of the assets of such Person and whether
or not contingent, (a) every obligation of such Person for money borrowed, (b)
every obligation of such Person evidenced by bonds, debentures, notes or other
similar instruments, (c) every reimbursement obligation of such Person with
respect to letters of credit, bankers' acceptances or similar facilities issued
for the account of such Person, (d) every obligation of such Person issued or
assumed as the deferred purchase price of property or services, (e) the amount
of every Capitalized Lease Obligation of such Person, (f) all Disqualified Stock
of such Person valued at its maximum fixed repurchase price, plus accrued and
unpaid dividends, (g) all obligations of such Person under or in respect of
Hedging Obligations if and to the extent such Hedging Obligations would appear
as liability upon a balance sheet of such Person in accordance with GAAP and (h)
every obligation of the type referred to in clauses (a) through (g) of another
Person and all dividends of another Person the payment of which, in either case,
such Person has guaranteed. For purposes of this definition, the "maximum fixed
repurchase price" of any Disqualified Stock that does not have a fixed
repurchase price shall be calculated in accordance with the terms of such
Disqualified Stock as if such Disqualified Stock were repurchased on any date on
which Debt is required to be determined pursuant to this Indenture, and if such
price is based upon, or measured by, the fair market value of such Disqualified
Stock, such fair market value shall be determined in good faith by the board of
directors of the issuer of such Disqualified Stock. Notwithstanding the
foregoing, trade accounts payable and accrued liabilities arising in the
ordinary course of business and any liability for federal, state or local taxes
or other taxes owed by such Person shall not be considered Debt for purposes of
this definition.
"Default" means any event that is, or after notice or passage of
time or both would be, an Event of Default.
"Defaulted Interest" has the meaning specified in Section 309.
"Depositary" means The Depository Trust Company, its nominees and
successors.
<PAGE> 19
8
"Disinterested Director" means, with respect to any transaction or
series of transactions in respect of which the Board of Directors is required to
deliver a resolution of the Board of Directors under this Indenture, a member of
the Board of Directors who does not have any material direct or indirect
financial interest in or with respect to such transaction or series of
transactions (other than as a holder of Voting Stock of the Company).
"Disqualified Stock" means any class or series of Capital Stock
that, either by its terms, or by the terms of any security into which it is
convertible or exchangeable or by contract or otherwise (a) is, or upon the
happening of an event or passage of time would be, required to be redeemed prior
to one year after the final Stated Maturity of the Securities, (b) is redeemable
at the option of the holder thereof at any time prior to one year after such
final Stated Maturity or (c) at the option of the holder thereof, is convertible
into or exchangeable for debt securities at any time prior to one year after
such final Stated Maturity; provided that any Capital Stock that would not
constitute Disqualified Stock but for provisions therein giving holders thereof
the right to cause the issuer thereof to repurchase or redeem such Capital Stock
upon the occurrence of an "asset sale" or "change of control" occurring prior to
the Stated Maturity of the Securities shall not constitute Disqualified Stock if
the "asset sale" or "change of control" provisions applicable to such Capital
Stock are no more favorable to the holders of such Capital Stock than the
provisions contained in Sections 1012 and 1013 and such Capital Stock
specifically provides that the issuer shall not repurchase or redeem any of such
stock pursuant to such provision prior to the Company's repurchase of such of
the Securities as are required to be repurchased pursuant to Sections 1012 and
1013.
"Equity Offering" means an offer and sale by the Company of its
common stock (which is Qualified Stock) to one or more Persons other than a
Subsidiary.
"Escrow Account" means the account established by the Trustee with
the Tri-State Securities Intermediary in the name of IBJ Schroder Bank & Trust
Company, as Trustee, for its benefit and the benefit of the Holders of the
Securities pursuant to the terms of the Pledge Agreement for the deposit of the
Pledged Securities purchased by the Company with a portion of the net proceeds
from the offering of the initial offer and sale by the Company of the Initial
Securities.
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, and the rules and regulations thereunder.
"Exchange Offer" means the exchange offer that may be effected
pursuant to the Registration Rights Agreement.
<PAGE> 20
9
"Exchange Offer Registration Statement" means the Exchange Offer
Registration Statement as defined in the Registration Rights Agreement.
"Exchange Securities" has the meaning stated in the first recital of
this Indenture and refers to any Exchange Securities containing terms
substantially identical to the Initial Securities (except that such Exchange
Securities shall not contain terms with respect to the interest rate step-up
provisions in Section 309 and the transfer restrictions in Section 307) that are
issued and exchanged for the Initial Securities or any Additional Securities
pursuant to the Registration Rights Agreement and this Indenture.
"Fair market value" means, with respect to any asset, the price
which could be negotiated in an arm's-length free market transaction, for cash,
between an informed and willing seller and an informed and willing buyer,
neither of which is under pressure or compulsion to complete the transaction.
"Federal Bankruptcy Code" means the Bankruptcy Act of Title 11 of
the United States Code, as amended from time to time.
"Generally Accepted Accounting Principles" or "GAAP" means generally
accepted accounting principles in the United States, as applied from time to
time by the Company in the preparation of its consolidated financial statements.
"Global Security" has the meaning set forth in Section 201.
"guarantee" means, as applied to any obligation, (a) a guarantee
(other than by endorsement of negotiable instruments for collection in the
ordinary course of business), direct or indirect, in any manner, of all or any
part of such obligation and (b) 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 limitation, the payment of
amounts drawn down under letters of credit.
"Hedging Obligations" means the obligations of any Person under (i)
interest rate swap agreements, interest rate cap agreements and interest rate
collar agreements and (ii) other agreements or arrangements designed to protect
such Person against fluctuations in interest rates or the value of foreign
currencies.
"Holder" means the Person in whose name a Security is, at the time
of determination, registered on the Security Register.
"Holdings" means SGH Holdings, Inc., the parent of the Company.
<PAGE> 21
10
"Indenture" means this instrument as originally executed and as it
may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof.
"Indenture Obligations" means the obligations of the Company and any
other obligor hereunder or under the Securities to pay principal of (and
premium, if any) and interest on the Securities when due and payable at
Maturity, and all other amounts due or to become due under or in connection with
this Indenture, the Securities and the performance of all other obligations to
the Trustee (including all amounts due to the Trustee under Section 606 hereof)
and the Holders under this Indenture and the Securities, according to the terms
hereof and thereof.
"Initial Securities" has the meaning stated in the first recital of
this Indenture.
"Interest Payment Date" means the Stated Maturity of an installment
of interest on the Securities.
"Investment" in any Person means, (a) directly or indirectly, any
advance, loan or other extension of credit (including, without limitation, by
way of guarantee or similar arrangement) or capital contribution to any Person,
the purchase or other acquisition of any stock, bonds, notes, debentures or
other securities issued by such Person, the acquisition (by purchase or
otherwise) of all or substantially all of the business or assets of such Person,
or the making of any investment in such Person, (b) the designation of any
Restricted Subsidiary as an Unrestricted Subsidiary, (c) the transfer of any
assets or properties from the Company or a Restricted Subsidiary to an
Unrestricted Subsidiary, other than the transfer of assets or properties made in
the ordinary course of business and (d) the fair market value of the Capital
Stock (or any other Investment), held by the Company or any of its Restricted
Subsidiaries, of (or in) any Person that has ceased to be a Restricted
Subsidiary, including, without limitation, by reason of any transaction
permitted by clause (d) of Section 1016. "Investments" exclude extensions of
trade credit on commercially reasonable terms in accordance with normal trade
practices.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement, capital lease or other lease in the nature thereof).
"Maturity", when used with respect to any Security, means the date
on which the principal of such Security or an installment of principal becomes
due and payable as therein or herein provided, whether at the Stated Maturity or
by declaration of acceleration, notice of redemption or otherwise.
"Mesirow" means Mesirow Capital Partners VI and Mesirow Capital
Partners VII.
<PAGE> 22
11
"Moody's" means Moody's Investors Service, Inc. and its successors.
"Net Cash Proceeds" means, with respect to any Asset Sale, the
proceeds thereof in the form of cash or cash equivalents, including payments in
respect of deferred payment obligations as and when received in the form of, or
stock or other assets when disposed of for, cash or cash equivalents (except to
the extent that such obligations are financed or sold with recourse to the
Company or any Restricted Subsidiary), net of (a) brokerage commissions and
other fees and expenses (including fees and expenses of legal counsel,
accountants and investment banks) related to such Asset Sale, (b) provisions for
all taxes payable as a result of such Asset Sale, (c) payments made to retire
Debt where payment of such Debt is secured by a Lien on the assets that are the
subject of such Asset Sale, (d) amounts required to be paid to any Person (other
than the Company or any Restricted Subsidiary) owning a beneficial interest in
the assets that are subject to the Asset Sale and (e) appropriate amounts to be
provided by the Company or any Restricted Subsidiary, as the case may be, as a
reserve required in accordance with GAAP against any liabilities associated with
such Asset Sale and retained by the seller after such Asset Sale, including
pension and other post-employment benefit liabilities, liabilities related to
environmental matters and liabilities under any indemnification obligations
associated with such Asset Sale.
"Non-U.S. Person" means a Person that is not a "U.S. Person" as
defined in Regulation S.
"Offering" means the offering of 11% Senior Notes due 2008 by the
Company.
"Officers' Certificate" means a certificate signed by the Chairman,
Chief Executive Officer, the President, the Chief Financial Officer or any Vice
President, and by an Assistant Treasurer, the Secretary or an Assistant
Secretary of the Company, and delivered to the Trustee.
"Offshore Global Security" has the meaning set forth in Section 201.
"Offshore Physical Security" has the meaning set forth in Section
201.
"Opinion of Counsel" means a written opinion of counsel, who may be
counsel for the Company, including an employee of the Company, and who shall be
reasonably satisfactory to the Trustee.
"Outstanding", when used with respect to Securities, means, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(a) Securities theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
<PAGE> 23
12
(b) Securities, or portions thereof, for whose payment, redemption
or purchase money in the necessary amount has been theretofore deposited
with the Trustee or any Paying Agent (other than the Company) in trust or
set aside and segregated in trust by the Company (if the Company shall act
as its own Paying Agent) for the Holders of such Securities; provided
that, if such Securities are to be redeemed, notice of such redemption has
been duly given pursuant to this Indenture or provision therefor
satisfactory to the Trustee has been made;
(c) Securities, except to the extent provided in Sections 1202 and
1203, with respect to which the Company has effected defeasance and/or
covenant defeasance as provided in Article Twelve; and
(d) Securities which have been paid pursuant to Section 308 or in
exchange for or in lieu of which other Securities have been authenticated
and delivered pursuant to this Indenture, other than any such Securities
in respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Securities are held by a bona fide purchaser
in whose hands the Securities are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of Outstanding Securities have given any request, demand,
authorization, direction, consent, notice or waiver hereunder, and for the
purpose of making the calculations required by TIA Section 313, Securities owned
by the Company or any other obligor upon the Securities or any Affiliate of the
Company or such other obligor shall be disregarded and deemed not to be
Outstanding, except that, in determining whether the Trustee shall be protected
in making such calculation or in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which the
Trustee knows to be so owned shall be so disregarded. Securities so owned which
have been pledged in good faith may be regarded as Outstanding if the pledgee
establishes to the satisfaction of the Trustee the pledgee's right so to act
with respect to such Securities and that the pledgee is not the Company or any
other obligor upon the Securities or any Affiliate of the Company or such other
obligor.
"Pari Passu Debt" means any Debt of the Company or any Subsidiary
Guarantor, whether outstanding on the Closing Date or incurred thereafter, that
ranks pari passu in right of payment with the Securities or any Subsidiary
Guarantee, as the case may be.
"Paying Agent" means IBJ Schroder Bank & Trust Company and any
successor (including the Company acting as Paying Agent) authorized by the
Company to pay the principal of (and premium, if any) or interest on any
Securities on behalf of the Company.
<PAGE> 24
13
"Permitted Investment" means any of the following:
(a) Investments in (i) securities with a maturity of 180 days or
less issued or directly and fully guaranteed or insured by the United
States or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof); (ii)
certificates of deposit or acceptances with a maturity of 180 days or less
of any financial institution that is a member of the Federal Reserve
System having combined capital and surplus of not less than $500,000,000;
and (iii) commercial paper with a maturity of 180 days or less issued by a
corporation that is not an Affiliate of the Company and is organized under
the laws of any state of the United States or the District of Columbia and
having the highest rating obtainable from Moody's or S&P.
(b) Investments by the Company in another Person, if as a result of
such Investment such other Person (i) becomes a Subsidiary Guarantor or
(ii) is merged or consolidated with or into, or transfers or conveys all
or substantially all of its assets to, the Company or a Subsidiary
Guarantor.
(c) Investments by the Company or any of the Subsidiary Guarantors
in any one of the other of them.
(d) Investments in existence on the Closing Date.
(e) Promissory notes received as a result of Asset Sales permitted
under Section 1013.
(f) Direct or indirect loans to officers, directors or employees, or
to a trustee for the benefit of such employees, of the Company or any
Restricted Subsidiary in an aggregate amount outstanding at any time not
exceeding $250,000, plus the amount of direct or indirect loans to
employees for relocation assistance.
(g) Investments in assets owned or used in the ordinary course of
business.
(h) Investments in any Person in the form of a capital contribution
of the Company's common stock.
"Person" means any individual, corporation, limited or general
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
<PAGE> 25
14
"Pledge Agreement" means the Pledge Agreement dated as of the date
hereof, by and between the Trustee, the Tri-State Securities Intermediary and
the Company, governing the disbursement of funds from the Escrow Account.
"Pledged Securities" means the securities purchased by the Company
with a portion of the net proceeds from the initial offer and sale by the
Company of the Initial Securities, which shall consist of U.S. Government
Securities, to be deposited in the Escrow Account.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 308 in exchange for a
mutilated security or in lieu of a lost, destroyed or stolen Security shall be
deemed to evidence the same debt as the mutilated, lost, destroyed or stolen
Security.
"Preferred Stock" means, with respect to any Person, any and all
shares, interests, participations or other equivalents (however designated) of
such Person's preferred or preference stock, whether now outstanding or issued
after the Closing Date, and including, without limitation, all classes and
series of preferred or preference stock of such Person.
"QIB" means a "Qualified Institutional Buyer" under Rule 144A.
"Qualified Equity Interest" means any Qualified Stock and all
warrants, options or other rights to acquire Qualified Stock but excluding any
debt security that is convertible into or exchangeable for Capital Stock.
"Qualified Stock" of any Person means any and all Capital Stock of
such Person, other than Disqualified Stock.
"Redemption Date", when used with respect to any Security to be
redeemed, in whole or in part, means the date fixed for such redemption by or
pursuant to this Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registrar" means IBJ Schroder Bank & Trust Company and any
successor authorized by the Company to act as Registrar.
"Registration Rights Agreement" means the Registration Rights
Agreement between the Company and the Initial Purchasers named therein, dated as
of May 15, 1998, relating to the Securities.
<PAGE> 26
15
"Registration Statement" means the Registration Statement as defined
in the Registration Rights Agreement.
"Regular Record Date" for the interest payable on any Interest
Payment Date means the May 1 or November 1(whether or not a Business Day), as
the case may be, next preceding such Interest Payment Date.
"Regulation S" means Regulation S under the Securities Act.
"Restricted Payments" has the meaning set forth in Section 1011.
"Restricted Subsidiary" means any Subsidiary other than an
Unrestricted Subsidiary.
"Rule 144A" means Rule 144A under the Securities Act.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw Hill Companies, and its successors.
"Securities" has the meaning stated in the first recital of this
Indenture and more particularly means any Securities authenticated and delivered
under this Indenture. For all purposes of this Indenture, the term "Securities"
shall include the Initial Securities and any Exchange Securities to be issued
and exchanged for any Initial Securities in accordance with the Exchange Offer
as provided for in the Registration Rights Agreement and this Indenture. From
and after the issuance of any Additional Securities pursuant to Section 312
(but, not for purposes of determining whether such issuance is permitted
hereunder), "Securities" shall include such Additional Securities for purposes
of this Indenture, and all Initial Securities, Exchange Securities and
Additional Securities shall vote together as one series of Securities under this
Indenture.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, and the rules and regulations thereunder.
"Security Register" has the meaning set forth in Section 305.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Restricted Subsidiary of the
Company that together with its Subsidiaries, (a) for the most recent fiscal year
of the Company, accounted for more than 10% of the consolidated net sales of the
Company and its Restricted Subsidiaries or (b) as of the end of such fiscal
year, was the owner of more than 10% of the consolidated assets of the Company
and its Restricted Subsidiaries, in the case of either (a) or (b), as set forth
on the
<PAGE> 27
16
most recently available consolidated financial statements of the Company for
such fiscal year or (c) was organized or acquired after the beginning of such
fiscal year and would have been a Significant Subsidiary if it had been owned
during the entire fiscal year.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Trustee pursuant to Section 309.
"Stated Maturity" means, when used with respect to any Security or
any installment of interest thereon, the date specified in such Security as the
fixed date on which the principal of such Security or such installment of
interest is due and payable and, when used with respect to any other Debt, means
the date specified in the instrument governing such Debt as the fixed date on
which the principal of such Debt or any installment of interest thereon is due
and payable.
"Subordinated Debt" means Debt of the Company that is subordinated
in right of payment to the Securities.
"Subsidiary" means any Person a majority of the equity ownership or
Voting Stock of which is at the time owned, directly or indirectly, by the
Company and/or one or more Subsidiaries of the Company.
"Subsidiary Guarantee" means the guarantee of the Company's
obligations under the Securities and this Indenture by a Restricted Subsidiary
as set forth in Article 13 hereof.
"Subsidiary Guarantor" means any Restricted Subsidiary that issues
or has issued a Subsidiary Guarantee pursuant to or as required by the
provisions of this Indenture.
"Tax Sharing Agreement" means the Tax Sharing Agreement dated as of
May 20, 1998 between the Company and Holdings, as in effect on the Closing Date.
"Tri-State Securities Intermediary" means IBJ Schroder Bank & Trust
Company in its capacity as securities intermediary under the Pledge Agreement.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of
1939, as amended, as in force at the date as of which this Indenture was
executed, except as provided in Section 905.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this Indenture until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
<PAGE> 28
17
"Unrestricted Subsidiary" means (a) any Subsidiary that is
designated by the Board of Directors as an Unrestricted Subsidiary in accordance
with Section 1018 and (b) any Subsidiary of an Unrestricted Subsidiary.
"U.S. Global Security" has the meaning set forth in Section 201.
"U.S. Government Obligations" has the meaning set forth in Section
1204.
"U.S. Physical Security" has the meaning set forth in Section 201.
"Voting Stock" means any class or classes of Capital Stock pursuant
to which the holders thereof have the general voting power under ordinary
circumstances to elect at least a majority of the board of directors, managers
or trustees of any Person (irrespective of whether or not, at the time, stock of
any other class or classes has, or might have, voting power by reason of the
happening of any contingency).
"Weighted Average Life" means, as of the date of determination with
respect to any Debt or Disqualified Stock, the quotient obtained by dividing (a)
the sum of the products of (i) the number of years from the date of
determination to the date or dates of each successive scheduled principal or
liquidation value payment of such Debt or Disqualified Stock, respectively,
multiplied by (ii) the amount of each such principal or liquidation value
payment, by (b) the sum of all such principal or liquidation value payments.
"Wholly Owned Restricted Subsidiary" means any Restricted
Subsidiary, all of the outstanding voting securities (other than directors'
qualifying shares or shares of foreign Restricted Subsidiaries required to be
owned by foreign nationals pursuant to applicable law) of which are owned,
directly or indirectly, by the Company.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company shall furnish
to the Trustee an Officers' Certificate stating that all conditions precedent,
if any, provided for in this Indenture (including any covenant compliance with
which constitutes a condition precedent) relating to the proposed action have
been complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than pursuant to
Section 1008(a)) shall include:
<PAGE> 29
18
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, 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, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company that the information
with respect to such factual matters is in the possession of the Company, unless
such counsel knows, or in the exercise of reasonable care should know, that the
certificate or opinion or representations with respect to such matters are
erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
<PAGE> 30
19
SECTION 104. Acts of Holders.
(a) Any request, demand, authorization, direction, notice, consent,
waiver or other action provided by this Indenture to be given or taken by
Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agents duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and conclusive in favor of the Trustee and the Company if made in the
manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where such
execution is by a signer acting in a capacity other than his individual
capacity, such certificate or affidavit shall also constitute sufficient proof
of authority. The fact and date of the execution of any such instrument or
writing, or the authority of the Person executing the same, may also be proved
in any other manner that the Trustee deems sufficient.
(c) The principal amount and serial numbers of Securities held by
any Person, and the date of holding the same shall be proved by the Security
Register.
(d) If the Company shall solicit from the Holders of Securities any
request, demand, authorization, direction, notice, consent, waiver or other Act,
the Company may, at its option, by or pursuant to a Board Resolution, fix in
advance a record date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. Notwithstanding TIA Section
316(c), such record date shall be the record date specified in or pursuant to
such Board Resolution, which shall be a date not earlier than the date 30 days
prior to the first solicitation of Holders generally in connection therewith and
not later than the date such solicitation is completed. If such a record date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such record date, but only the Holders
of record at the close of business on such record date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of Outstanding Securities have authorized or agreed or consented to
such request, demand, authorization, direction, notice, consent, waiver or other
Act, and for that purpose the Outstanding Securities shall be computed as of
such record date; provided that no such authorization, agreement or consent by
the Holders
<PAGE> 31
20
on such record date shall be deemed effective unless it shall become effective
pursuant to the provisions of this Indenture not later than eleven months after
the record date.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other Act of the Holder of any Security shall bind every future Holder
of the same Security and the Holder of every Security issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Security.
(f) For all purposes of this Indenture, all Initial Securities and
Exchange Securities shall vote together as one series of Securities under this
Indenture.
SECTION 105. Notices, Etc., to Trustee, Company.
Any request, demand, authorization, direction, notice, consent,
waiver or Act of Holders or other document provided or permitted by this
Indenture to be made upon, given or furnished to, or filed with,
(a) the Trustee by any Holder or by the Company or any Subsidiary
Guarantor shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing or mailed, first-class postage prepaid, to
or with the Trustee at its Corporate Trust Office, Attention: Corporate
Finance Department, or sent by facsimile to the Trustee at (212) 858-2952
(with receipt confirmed by telephone at (212) 858-2657); or
(b) the Company or any Subsidiary Guarantor by the Trustee or by any
Holder shall be sufficient for every purpose hereunder (unless otherwise
herein expressly provided) if in writing and mailed, first-class postage
prepaid, to the Company addressed to it at 3416 Highway 41 South, Tifton,
Georgia, Attention: President, or sent by facsimile to the Company at
(912) 386-0203 (with receipt confirmed by telephone at (800) 732-8261), or
at any other address or facsimile number previously furnished in writing
to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice of any event to Holders by
the Company or the Trustee, such notice shall be sufficiently given (unless
otherwise herein expressly provided) if in writing and mailed, first-class
postage prepaid, to each Holder affected by such event, at his address as it
appears in the Security Register, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. In any
case where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Any
<PAGE> 32
21
notice mailed to a Holder in the manner herein prescribed shall be conclusively
deemed to have been received by such Holder, whether or not such Holder actually
receives such notice. Where this Indenture provides for notice in any manner,
such notice may be waived in writing by the Person entitled to receive such
notice, either before or after the event, and such waiver shall be the
equivalent of such notice. Waivers of notice by Holders shall be filed with the
Trustee, but such filing shall not be a condition precedent to the validity of
any action taken in reliance upon such waiver.
In case by reason of the suspension of or irregularities in regular
mail service or by reason of any other cause, it shall be impracticable to mail
notice of any event to Holders when such notice is required to be given pursuant
to any provision of this Indenture, then any manner of giving such notice as
shall be satisfactory to the Trustee shall be deemed to be a sufficient giving
of such notice for every purpose hereunder.
SECTION 107. Conflict of Any Provision of Indenture with Trust
Indenture Act.
If and to the extent that any provision of this Indenture limits,
qualifies or conflicts with the duties imposed by Sections 310 to 318,
inclusive, of the Trust Indenture Act, or conflicts with any provision (an
"incorporated provision") required by or deemed to be included in this Indenture
by operation of such Trust Indenture Act sections, such imposed duties or
incorporated provision shall control.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company and
any Subsidiary Guarantor shall bind its respective successors and assigns,
whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Securities 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.
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22
SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Securities, express or implied,
shall give to any Person, other than the parties hereto, the Tri-State
Securities Intermediary, any Paying Agent, any Securities Registrar and their
successors hereunder, and the Holders, any benefit or any legal or equitable
right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK. Upon the issuance of the
Exchange Securities, if any, or the effectiveness of the Exchange Offer
Registration Statement (as defined herein) or, under certain circumstances, the
effectiveness of the Shelf Registration Statement (as defined herein), this
Indenture shall be subject to the provisions of the Trust Indenture Act of 1939,
as amended, that are required to be part of this Indenture and shall, to the
extent applicable, be governed by such provisions.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, date
established for payment of Defaulted Interest pursuant to Section 309, Stated
Maturity or Maturity, Change of Control Purchase Date or Asset Sale Purchase
Date with respect to any Security or other date on which principal, premium or
interest in respect or the Securities is due, shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Securities)
payment of principal (or premium, if any) or interest need not be made on such
date, but may be made on the next succeeding Business Day with the same force
and effect as if made on the Interest Payment Date, Redemption Date, date
established for payment of Defaulted Interest pursuant to Section 309, Stated
Maturity or Maturity, Change of Control Purchase Date, Asset Sale Purchase Date
or such other date; provided that no interest shall accrue for the period from
and after such Interest Payment Date or other such day, Redemption Date, date
established for payment of Defaulted Interest pursuant to Section 309, Stated
Maturity or Maturity, Change in Control Purchase Date, Asset Sale Purchase Date
or such other date, as the case may be, to the next succeeding Business Day.
SECTION 114. Consent to Jurisdiction and Service of Process.
The Company agrees that any legal suit, action or proceeding
brought by any party to enforce any rights under or with respect to this
Indenture or the Securities may be instituted in any state or federal court in
New York City and waives to the fullest extent permitted by law any objection
which it may now or hereafter have to the laying of venue of any such suit,
action or proceeding and irrevocably submits to the non-exclusive jurisdiction
of any such court in any such suit, action or proceeding. The Company hereby
irrevocably
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23
designates and appoints CT Corporation System as the Company's authorized agent
to receive and forward on its behalf service of any and all process which may be
served in any such suit, action or proceeding in any such court and agrees that
service of process upon CT Corporation System at its office at 1633 Broadway,
New York, New York 10019, (or such other address in the State of New York as the
Company may designate by written notice to the Trustee) and written notice of
such service to the Company marked or delivered to CT Corporation System at its
address set forth herein shall be deemed in every respect effective service of
process upon the Company in any such suit, action or proceeding and shall be
taken and held to be valid personal service upon the Company. Nothing in this
Section 114 shall affect the right of any party hereto to serve process in any
manner permitted by law or limit the right of any party hereto to bring
proceedings against the Company in the courts of any jurisdiction or
jurisdictions. The Company further agrees to take any and all action, including
the execution and filing of any and all such documents and instruments as may be
necessary to continue such designation and appointment of CT Corporation System
in full force and effect so long as this Indenture or any of the Securities
shall be outstanding. To the extent that the Company has or hereafter may
acquire any immunity from jurisdiction of any court or from any legal process
(whether through service of notice, attachment prior to judgment, attachment in
aid of execution, executor or otherwise) with respect to itself or its property,
the Company hereby irrevocably waives such immunity in respect of its
obligations under this Indenture and the Securities, to the extent permitted by
law.
ARTICLE TWO
SECURITY FORMS
SECTION 201. Forms Generally.
The Securities and the Trustee's certificate of authentication shall
be in substantially the form annexed hereto as Exhibit A, with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture, and may have such letters, numbers or other marks
of identification and such legends or endorsements placed thereon as may be
required to comply with the rules of any securities exchange or as may,
consistently herewith, be determined by the officers executing such Securities,
as evidenced by their execution of the Securities. Any portion of the text of
any Security may be set forth on the reverse thereof, with an appropriate
reference thereto on the face of the Security.
The definitive Securities shall be printed, lithographed or engraved
on steel-engraved borders or may be produced in any other manner, all as
determined by the officers of the Company executing such Securities, as
evidenced by their execution of such Securities.
<PAGE> 35
24
The terms and provisions contained in the form of the Securities
annexed hereto as Exhibit A shall constitute, and are hereby expressly made, a
part of this Indenture. To the extent applicable, the Company and the Trustee,
by their execution and delivery of this Indenture, expressly agree to such terms
and provisions and to be bound thereby.
Securities offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Securities in registered
form substantially in the form set forth in Exhibit A (the "U.S. Global
Security"), registered in the name of the nominee of the Depositary, deposited
with the Trustee, as custodian for the Depositary, duly executed by the Company
and authenticated by the Trustee as hereinafter provided. The aggregate
principal amount of the U.S. Global Security may from time to time be increased
or decreased by adjustments made on the records of the Trustee, as custodian for
the Depositary or its nominee, as hereinafter provided.
Securities offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of one or more permanent
global Securities in registered form substantially in the form set forth in
Exhibit A (the "Offshore Global Security"), registered in the name of the
nominee of the Depositary, deposited with the Trustee, as custodian for the
Depositary, duly executed by the Company and authenticated by the Trustee as
hereinafter provided. The aggregate principal amount of the Offshore Global
Security may from time to time be increased or decreased by adjustments made on
the records of the Trustee, as custodian for the Depositary or its nominee, as
hereinafter provided.
Securities offered and sold in reliance on Regulation D under the
Securities Act shall be issued in the form of permanent certificated Securities
in registered form in substantially the form set forth in Exhibit A (the "U.S.
Physical Securities"). Securities offered and sold pursuant to Section 306 in
exchange for interests in the Offshore Global Security shall be in the form of
permanent certificated Securities in registered form substantially in the form
set forth in Exhibit A (the "Offshore Physical Securities").
The Offshore Physical Securities and the U.S. Physical Securities
are sometimes collectively herein referred to as the "Physical Securities." The
U.S. Global Security and the Offshore Global Security are sometimes referred to
herein as the "Global Securities."
SECTION 202. Restrictive Legends.
Unless and until an Initial Security is sold under an effective
Shelf Registration Statement or an Initial Security is exchanged for an Exchange
Security in connection with an effective Exchange Offer Registration Statement,
in each case pursuant to the Registration Rights Agreement, (i) the U.S. Global
Security and the U.S. Physical Securities shall bear the legend, set forth below
on the face thereof (the "Private Placement Legend") and (ii) the Offshore
Global Security and the Offshore Physical Security shall bear the Private
Placement Legend until at least
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the 41st day after the Closing Date and receipt by the Company and the Trustee
of a certificate substantially in the form of Exhibit B hereto:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER THIS
SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE OFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL,
PLEDGE OR OTHERWISE TRANSFER THIS SECURITY, PRIOR TO THE DATE WHICH IS TWO
YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE
ON WHICH TRI-STATE OUTDOOR MEDIA GROUP, INC. (THE "COMPANY") OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY
PREDECESSOR OF THIS SECURITY) (THE "RESALE RESTRICTION TERMINATION DATE")
ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT ("RULE 144A"), TO A PERSON IT REASONABLY BELIEVES IS A
"QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES
ACT, OR (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S AND THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO
CLAUSE (D) ABOVE PRIOR TO THE END OF THE 40-DAY RESTRICTED PERIOD WITHIN
THE MEANING OF REGULATION S UNDER THE SECURITIES ACT OR PURSUANT TO CLAUSE
(E) ABOVE TO REQUIRE THE DELIVERY OF AN OPINION (IN FORM AND SUBSTANCE
SATISFACTORY TO THE COMPANY) OF COUNSEL SATISFACTORY TO THE COMPANY, AND
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND
(II) IN
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EACH OF THE FOREGOING CASES, TO REQUIRE THAT A CERTIFICATE OF TRANSFER IN
THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE TRUSTEE. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF A HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
Each U.S. Global Security, whether or not an Initial Security, shall
also bear the following legend on the face thereof:
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION
OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER,
PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR
SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET
FORTH IN SECTIONS 306 AND 307 OF THE INDENTURE.
ARTICLE THREE
THE SECURITIES
SECTION 301. Title and Terms.
The Initial Securities shall be known and designated as the "11%
Senior Notes due 2008" and the Exchange Securities shall be known and designated
as the "11% Series B Senior Notes due 2008." Their Stated Maturity shall be May
15, 2008, and they shall bear interest at the rate of 11% per annum from May 20,
1998, or from the most recent Interest Payment Date to which interest has been
paid or duly provided for, payable semiannually on May
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27
15 and November 15 in each year, commencing November 15, 1998, until the
principal thereof is paid or duly provided for, to the Person in whose name the
Security (or any predecessor Security) is registered at the close of business on
the May 1 or November 1 next preceding such Interest Payment Date.
The principal of (and premium, if any), and interest on the
Securities shall be payable, and the Securities shall be exchangeable and
transferable, at the office or agency of the Company in The City of New York
maintained for such purposes, (which initially shall be the office of the
Trustee located at One State Street, New York, NY 10004) or, at the option of
the Company, interest may be paid by check mailed to the address of the Person
entitled thereto as such address shall appear on the Security Register; provided
that all payments with respect to the U.S. Global Securities, as well as
Physical Securities the Holders of which have given wire transfer instructions
to the Trustee (or other Paying Agent) by the Regular Record Date for such
payment, shall be required to be made by wire transfer of immediately available
funds to the accounts specified by the Holders thereof.
Securities that remain outstanding after the consummation of the
Exchange Offer and Exchange Securities issued in connection with the Exchange
Offer will be treated as a single class of securities under this Indenture.
The Securities shall be redeemable as provided in Article Eleven.
SECTION 302. Denominations.
The Securities shall be issuable only in registered form without
coupons and only in denominations of $1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
Subject to Article Ten hereof, the aggregate principal amount of
Securities which may be authenticated and delivered under this Indenture is
unlimited. The Securities shall be executed on behalf of the Company by its
Chairman, Chief Executive Officer, President, Chief Financial Officer or any
Vice President. The signature of any of these officers on the Securities may be
manual or facsimile signatures of the present or any future such authorized
officer and may be imprinted or otherwise reproduced on the Securities.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
<PAGE> 39
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On the date hereof, after the execution and delivery of this
Indenture, the Company shall deliver Initial Securities in the aggregate
principal amount of $100,000,000 executed by the Company to the Trustee for
authentication, together with a Company Order for the authentication and
delivery of such Initial Securities directing the Trustee to authenticate the
Initial Securities and certifying that all conditions precedent to the issuance
of Securities contained herein have been fully complied with, and the Trustee in
accordance with such Company Order shall authenticate and deliver such Initial
Securities. At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Additional Securities executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Additional Securities directing the Trustee
to authenticate the Additional Securities and certifying that the issuance of
such Additional Securities is in compliance with Article Ten hereof and that all
other conditions precedent to the issuance of Securities contained herein have
been fully complied with, and the Trustee in accordance with such Company Order
shall authenticate and deliver such Additional Securities. On Company Order, the
Trustee shall authenticate for original issue Exchange Securities in an
aggregate principal amount not to exceed $100,000,000 plus the aggregate
principal amount of any Additional Securities issued; provided that such
Exchange Securities shall be issuable only upon the valid surrender for
cancellation of Initial Securities and Additional Securities of a like aggregate
principal amount in accordance with an Exchange Offer pursuant to the
Registration Rights Agreement and a Company Order for the authentication and
delivery of such Exchange Securities and certifying that all conditions
precedent to the issuance of such Securities have been complied with (including
the effectiveness of the Registration Statement related thereto). In each case,
the Trustee shall be entitled to receive an Officers' Certificate and an Opinion
of Counsel of the Company that it may reasonably request in connection with such
authentication of Securities. Each Company Order shall specify the amount of
Securities to be authenticated and the date on which the original issue of
Securities is to be authenticated.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of authentication substantially in the form provided for in Exhibit
A duly executed by the Trustee by manual signature of an authorized officer, and
such certificate upon any Security shall be conclusive evidence, and the only
evidence, that such Security has been duly authenticated and delivered hereunder
and is entitled to the benefits of this Indenture.
In case the Company, pursuant to Article Eight, shall be
consolidated or merged with or into any other Person or shall convey, transfer,
lease or otherwise dispose of its properties and assets substantially as an
entirety to any Person, and the successor Person resulting from such
consolidation, or surviving such merger, or into which the Company shall have
been merged, or the Person which shall have received a conveyance, transfer,
lease or other disposition as aforesaid, shall have executed an indenture
supplemental hereto with the Trustee pursuant to
<PAGE> 40
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Article Eight, any of the Securities authenticated or delivered prior to such
consolidation, merger, conveyance, transfer, lease or other disposition may,
from time to time, at the request of the successor Person, be exchanged for
other Securities executed in the name of the successor Person with such changes
in phraseology and form as may be appropriate, but otherwise in substance of
like tenor as the Securities surrendered for such exchange and of like principal
amount; and the Trustee, upon Company Request of the successor Person, shall
authenticate and deliver Securities as specified in such request for the purpose
of such exchange. If Securities shall at any time be authenticated and delivered
in any new name of a successor Person pursuant to this Section in exchange or
substitution for or upon registration of transfer of any Securities, such
successor Person, at the option of the Holders but without expense to them,
shall provide for the exchange of all Securities at the time Outstanding for
Securities authenticated and delivered in such new name.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate the Securities (an "Authenticating
Agent"). 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. An Authenticating Agent has the same rights as any Registrar, Paying
Agent or agent for service of notices and demands.
SECTION 304. Temporary Securities.
Pending the preparation of definitive Securities, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Securities which are printed, lithographed, typewritten, mimeographed
or otherwise produced, in any authorized denomination, substantially of the
tenor of the definitive Securities in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as
the officers executing such Securities may determine, as conclusively evidenced
by their execution of such Securities.
If temporary Securities are issued, the Company shall cause
definitive Securities to be prepared without unreasonable delay. After the
preparation of definitive Securities, the temporary Securities shall be
exchangeable for definitive Securities upon surrender of the temporary
Securities at the office or agency of the Company designated for such purpose
pursuant to Section 1002, without charge to the Holder. Upon surrender for
cancellation of any one or more temporary Securities, the Company shall execute
and the Trustee shall authenticate and deliver in exchange therefor a like
principal amount of definitive Securities of authorized denominations. Until so
exchanged, the temporary Securities shall in all respects be entitled to the
same benefits under this Indenture as definitive Securities.
<PAGE> 41
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SECTION 305. Registration, Registration of Transfer and Exchange.
The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency designated pursuant to Section 1002 being herein sometimes
referred to as the "Security Register") in which, subject to such reasonable
regulations as it may prescribe, the Company shall provide for the registration
of Securities and of transfers of Securities. The Security Register shall be in
written form or any other form capable of being converted into written form
within a reasonable time. At all reasonable times, the Security Register shall
be open to inspection by the Trustee. The Trustee is hereby initially appointed
as "Registrar" for the purpose of registering Securities and transfers of
Securities as herein provided.
Upon surrender for registration of transfer of any Security at the
office or agency of the Company designated pursuant to Section 1002, the Company
shall execute, and the Trustee shall authenticate and deliver, in the name of
the designated transferee or transferees, one or more new Securities of any
authorized denomination or denominations of a like aggregate principal amount.
At the option of the Holder, Securities may be exchanged for other
Securities of any authorized denomination and of a like aggregate principal
amount, upon surrender of the Securities to be exchanged at such office or
agency. Whenever any Securities are so surrendered for exchange (including an
exchange of Initial Securities for Exchange Securities), the Company shall
execute, and the Trustee shall authenticate and deliver, the Securities which
the Holder making the exchange is entitled to receive; provided that no exchange
of Initial Securities for Exchange Securities shall occur until an Exchange
Offer Registration Statement shall have been declared effective by the
Commission, the Trustee shall have received an Officer's Certificate confirming
that the Exchange Offer Registration Statement has been declared effective by
the Commission and the Initial Securities to be exchanged for the Exchange
Securities shall be canceled by the Trustee.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or for exchange shall (if so required by the Company or the Registrar) 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 attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Securities, but the Company may require payment of a
sum sufficient to cover any
<PAGE> 42
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tax or other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than exchanges
pursuant to Section 304, 906, 1012, 1013 or 1108 not involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of or exchange any Security during a period beginning at the opening of
business 15 days before the selection of Securities to be redeemed under Section
1104 and ending at the close of business on the day of such mailing of the
relevant notice of redemption, or (ii) to register the transfer of or exchange
any Security so selected for redemption in whole or in part, except the
unredeemed portion of any Security being redeemed in part.
Notwithstanding anything to the contrary contained herein, the
Trustee shall have no duty whatsoever to monitor compliance with Federal or
State securities laws other than to collect the certificates required herein.
SECTION 306. Book-Entry Provisions for Global Securities.
(a) The U.S. Global Security and the Offshore Global Security
initially shall (i) be registered in the name of the Depositary or the nominee
of the Depositary, (ii) be deposited with, or on behalf of, the Depositary or
with the Trustee, as custodian for such Depositary, and (iii) bear legends as
set forth in Section 202.
Members of, or participants in, the Depositary ("Agent Members")
shall have no rights under this Indenture with respect to any Global Security
held on their behalf by the Depositary, or the Trustee as its custodian, or
under the Global Security, and the Depositary may be treated by the Company, the
Trustee and any agent of the Company or the Trustee as the absolute owner of
such Global Security for all purposes whatsoever. Notwithstanding the foregoing,
nothing herein shall prevent the Company, the Trustee or any agent of the
Company or the Trustee from giving effect to any written certification, proxy or
other authorization furnished by the Depositary or shall impair, as between the
Depositary and its Agent Members, the operation of customary practices governing
the exercise of the rights of a holder of any Security.
(b) Transfers of a Global Security shall be limited to transfers of
such Global Security in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in a
Global Security may be transferred in accordance with the rules and procedures
of the Depositary and the provisions of Section 307. In addition, U.S. Physical
Securities and Offshore Physical Securities shall be transferred to all
beneficial owners in exchange for their beneficial interests in the U.S. Global
Security or the Offshore Global Security, respectively, if (i) the Depositary
notifies the Company that it is unwilling or unable to continue as Depositary
for the U.S. Global Securities or the Offshore Global Securities, as the case
may be and a successor depositary is not appointed by the Company within 90 days
of such notice, (ii) an Event of Default has occurred and is continuing and the
Registrar has received a request from the
<PAGE> 43
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Depositary or (iii) in accordance with the rules and procedures of the
Depositary and the provisions of Section 307.
(c) Any beneficial interest in one of the Global Securities that is
transferred to a person who takes delivery in the form of an interest in the
other Global Security shall, upon transfer, cease to be an interest in such
Global Security and become an interest in the other Global Security and,
accordingly, shall thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interest in such other Global
Security for as long as it remains such an interest.
(d) In connection with any transfer of a portion of the beneficial
interests in a U.S. Global Security or Offshore Global Security to beneficial
owners pursuant to subsection (b) of this Section, the Registrar shall reflect
on its books and records the date and a decrease in the principal amount of the
U.S. Global Security or Offshore Global Security in an amount equal to the
principal amount of the beneficial interest in such Global Security to be
transferred, and the Company shall execute, and the Trustee shall authenticate
and deliver, one or more U.S. Physical Securities or Offshore Physical
Securities of like tenor and amount.
(e) In connection with the transfer of the entire U.S. Global
Security or Offshore Global Security to beneficial owners pursuant to subsection
(b) of this Section, the U.S. Global Security or the Offshore Global Security,
as the case may be, shall be deemed to be surrendered to the Trustee for
cancellation, and the Company shall execute, and the Trustee shall authenticate
and deliver, to each beneficial owner identified by the Depositary in exchange
for its beneficial interest in the U.S. Global Security or Offshore Global
Security, as the case may be, an equal aggregate principal amount of U.S.
Physical Securities or Offshore Physical Securities, as the case may be, of
authorized denominations.
(f) Any U.S. Physical Security delivered in exchange for an interest
in the U.S. Global Security pursuant to subsection (b), (d) or (e) of this
Section shall, except as otherwise provided by paragraph (f) of Section 307,
bear the applicable legend regarding transfer restrictions applicable to the
U.S. Physical Security set forth in Section 202.
(g) Any Offshore Physical Security delivered in exchange for an
interest in the Offshore Global Security pursuant to subsection (b), (d) or (e)
of this Section shall, except as otherwise provided by paragraph (e) of Section
307, bear the applicable legend regarding transfer restrictions applicable to
the Offshore Physical Security set forth in Section 202.
(h) The registered Holder of a Global Security may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Indenture or the Securities.
<PAGE> 44
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SECTION 307. Special Transfer Provisions.
The Trustee is entitled to rely upon the certificates delivered
pursuant to this Section 307 and is irrevocably authorized to produce such
certificates or copies thereof to any interested party in any administrative or
legal proceeding or official inquiry with respect to the matters covered
thereby.
Unless and until (i) an Initial Security is sold under an effective
Shelf Registration Statement or (ii) an Initial Security is exchanged for an
Exchange Security in connection with an effective Registration Statement, in
each case pursuant to the Exchange Offer Registration Rights Agreement, the
following provisions shall apply:
(a) Transfers to Non-QIB Institutional Accredited Investors. The
following provisions shall apply with respect to the registration of any
proposed transfer of a Security to any institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the Securities
Act) which is not a QIB (excluding Non-U.S. Persons):
(i) The Registrar shall register the transfer of any Security,
whether or not such Security bears the Private Placement Legend, if (x)
the requested transfer is after the time period referred to in Rule 144(k)
under the Securities Act as in effect with respect to such transfer or (y)
the proposed transferee has delivered to the Registrar (A) a certificate
substantially in the form of Exhibit C hereto and (B) if the aggregate
principal amount of the Securities being transferred is less than $100,000
at the time of such transfer, an opinion of counsel acceptable to the
Company that such transfer is in compliance with the Securities Act.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i), and (y)
instructions given in accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its books and records
the date and a decrease in the principal amount of the U.S. Global
Security in an amount equal to the principal amount of the beneficial
interest in the U.S. Global Security to be transferred, and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
U.S. Physical Securities of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a U.S. Physical
Security, an interest in a U.S. Global Security or an interest in an Offshore
Global Security to a QIB (excluding Non-U.S. Persons):
(i) If the Security to be transferred consists of (x) either (A) an
interest in an Offshore Global Security prior to the removal of the
Private Placement Legend or (B) U.S. Physical Securities, the Registrar
shall register the transfer if such transfer is being
<PAGE> 45
34
made by a proposed transferor who has checked the box provided for on the
form of Initial Security stating, or has otherwise advised the Company and
the Registrar in writing, that the sale has been made in compliance with
the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Initial Security stating, or has
otherwise advised the Company and the Registrar in writing, that it is
purchasing the Initial Security for its own account or an account with
respect to which it exercises sole investment discretion and that it, or
the Person on whose behalf it is acting with respect to any such account,
is a QIB within the meaning of Rule 144A, and is aware that the sale to it
is being made in reliance on Rule 144A and acknowledges that it has
received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information
and that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration provided
by Rule 144A or (y) an interest in a U.S. Global Security, the transfer of
such interest may be effected only through the book-entry system
maintained by the Depositary.
(ii) If the proposed transferee is an Agent Member, and the Initial
Security to be transferred consists of U.S. Physical Securities, upon
receipt by the Registrar of the documents referred to in clause (i) and
instructions given in accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its books and records
the date and an increase in the principal amount of the U.S. Global
Security in an amount equal to the principal amount of the U.S. Physical
Securities to be transferred, and the Trustee shall cancel the U.S.
Physical Security so transferred.
(c) Transfers of Interests in the Offshore Global Security or
Offshore Physical Securities. The following provisions shall apply with respect
to any transfer of interests in the Offshore Global Security or Offshore
Physical Securities:
(i) prior to the removal of the Private Placement Legend from an
Offshore Global Security or an Offshore Physical Security pursuant to
Section 2.02, the Registrar shall refuse to register such transfer unless
such transfer complies with Section 307(b) or Section 307(d), as the case
may be; and
(ii) after such removal, the Registrar shall register the transfer
of any such Security without requiring any additional certification.
(d) Transfers to Non-U.S. Persons at Any Time. The following
provisions shall apply with respect to any transfer of an Initial Security to a
Non-U.S. Person:
(i) The Registrar shall register any proposed transfer of an Initial
Security to a Non-U.S. Person if the Security to be transferred is a U.S.
Physical Security or an interest
<PAGE> 46
35
in the U.S. Global Security only upon receipt of a certificate
substantially in the form of Exhibit D hereto from the proposed
transferor.
(ii) (A) If the proposed transferor is an Agent Member holding a
beneficial interest in the U.S. Global Security, upon receipt by the
Registrar of (x) the documents, if any, required by paragraph (i), and (y)
instructions in accordance with the Depositary's and the Registrar's
procedures therefor, the Registrar shall reflect on its books and records
the date and a decrease in the principal amount of the U.S. Global
Security in an amount equal to the principal amount of the beneficial
interest in the U.S. Global Security to be transferred and the Company
shall execute, and the Trustee shall authenticate and deliver, one or more
Offshore Physical Securities in a like principal amount or (B) if the
proposed transferee is an Agent Member, upon receipt by the Registrar of
instructions given in accordance with the Depositary's and the Registrar's
Procedures, the Registrar shall reflect on its books and records the date
and an increase in the principal amount of the Offshore Global Security in
an amount equal to the principal amount of the U.S. Physical Securities or
the U.S. Global Security, as the case may be, to be transferred and the
Trustee shall cancel the U.S. Physical Security, if any, so transferred or
decrease the amount of the U.S. Global Security.
(e) Private Placement Legend. Upon the transfer, exchange or
replacement of Securities not bearing the Private Placement Legend, the
Registrar shall deliver Securities that do not bear the Private Placement
Legend. Upon the transfer, exchange or replacement of Securities bearing the
Private Placement Legend, the Registrar shall deliver only Securities that bear
the Private Placement Legend unless either (i) the circumstances contemplated by
paragraph (a)(i)(x), or (c)(ii) of this Section 307 exist and the Company
directs the Trustee pursuant to an Officers' Certificate to remove such legend
or (ii) there is delivered to the Registrar an Opinion of Counsel reasonably
satisfactory to the Company and the Trustee to the effect that neither such
legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
(f) General. By its acceptance of any Security bearing the Private
Placement Legend, each Holder of such a Security acknowledges the restrictions
on transfer of such Security set forth in this Indenture and in the Private
Placement Legend and agrees that it will transfer such Security only as provided
in this Indenture.
The Registrar shall retain as required by law copies of all letters,
notices and other written communications received pursuant to Section 306 or
this Section 307. The Company shall have the right to inspect and make copies of
all such letters, notices or other written communications at any reasonable time
upon the giving of reasonable written notice to the Registrar.
SECTION 308. Mutilated, Destroyed, Lost and Stolen Securities.
<PAGE> 47
36
If (i) any mutilated Security is surrendered to the Trustee or the
Registrar, or (ii) the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Security, and there is
delivered to the Company and the Trustee such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Company or the Trustee that such Security has been acquired by a bona
fide purchaser, the Company shall execute and upon Company Order the Trustee
shall authenticate and deliver, in exchange for any such mutilated Security or
in lieu of any such destroyed, lost or stolen Security, a new Security of like
tenor and principal amount, bearing a number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Security, pay such Security.
Upon the issuance of any new Security under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Security shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Security shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Indenture equally and
proportionately with any and all other Securities duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 309. Payment of Interest; Interest Rights Preserved.
Interest on any Security which is payable, and is punctually paid or
duly provided for, on any Interest Payment Date shall be paid to the Person in
whose name such Security (or one or more Predecessor Securities) is registered
at the close of business on the Regular Record Date for such interest at the
office or agency of the Company in The City of New York maintained for such
purposes (which initially shall be the office of the Trustee located at One
State Street, New York, NY 10004) pursuant to Section 1002 or, at the option of
the Company, interest may be paid by check mailed to the address of the Person
entitled thereto pursuant to 310 as such address appears in the Security
Register; provided that all payments with respect to Global Securities and
Physical Securities the Holders of which have given wire transfer instructions
to the Trustee (or other Paying Agent) by the Regular Record Date shall be
required
<PAGE> 48
37
to be made by wire transfer of immediately available funds to the accounts
specified by the holders thereof.
Any interest on the Securities shall be considered punctually paid
or duly provided for if the Paying Agent holds immediately available funds no
later than 11:00 A.M. New York City time on the applicable Interest Payment
Date. Any interest on any Security which is payable, but is not punctually paid
or duly provided for, on any Interest Payment Date shall forthwith cease to be
payable to the Holder on the Regular Record Date by virtue of having been such
Holder, and such defaulted interest and (to the extent lawful) interest on such
defaulted interest at the rate borne by the Securities (such defaulted interest
and interest thereon herein collectively called "Defaulted Interest") may be
paid by the Company, at its election in each case, as provided in clause (a) or
(b) below:
(a) The Company may elect to make payment of any Defaulted Interest
to the Persons in whose names the Securities (or their respective
Predecessor Securities) are registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest, which
shall be fixed in the following manner. The Company shall notify the
Trustee in writing of the amount of Defaulted Interest proposed to be paid
on each Security and the date of the proposed payment, and at the same
time the Company shall deposit with the Trustee an amount of money equal
to the aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for such
deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled to
such Defaulted Interest as in this clause provided. Thereupon the Trustee
shall fix a Special Record Date for the payment of such Defaulted Interest
which shall be not more than 15 days and not less than 10 days prior to
the date of the proposed payment and not less than 10 days after the
receipt by the Trustee of the notice of the proposed payment. The Trustee
shall promptly notify the Company of such Special Record Date, and in the
name and at the expense of the Company, shall cause notice of the proposed
payment of such Defaulted Interest and the Special Record Date therefor to
be given in the manner provided for in Section 106, not less than 10 days
prior to such Special Record Date. Notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor having been so
given, such Defaulted Interest shall be paid to the Persons in whose names
the Securities (or their respective Predecessor Securities) are registered
at the close of business on such Special Record Date and shall no longer
be payable pursuant to the following clause (b).
(b) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this clause,
such manner of payment shall be deemed practicable by the Trustee.
<PAGE> 49
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Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
If the Company shall be required to pay any additional interest
pursuant to the terms of the Registration Rights Agreement, it shall deliver an
Officers' Certificate to the Trustee setting forth the new interest rate and the
period for which such rate is applicable.
SECTION 310. Persons Deemed Owners.
Prior to the due presentment of a Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Security is registered as the owner of
such Security for the purpose of receiving payment of principal of (and premium,
if any) and (subject to Sections 305 and 309) interest on such Security and for
all other purposes whatsoever, whether or not such Security be overdue, and none
of the Company, any Subsidiary Guarantor or the Trustee or any agent of the
Company, any Subsidiary Guarantor or the Trustee shall be affected by notice to
the contrary.
SECTION 311. Cancellation.
All Securities surrendered for payment, redemption, registration of
transfer or exchange shall, if surrendered to any Person other than the Trustee,
be delivered to the Trustee and shall be promptly canceled by it. The Company
may at any time deliver to the Trustee for cancellation any Securities
previously authenticated and delivered hereunder which the Company may have
acquired in any manner whatsoever, and may deliver to the Trustee (or to any
other Person for delivery to the Trustee) for cancellation any Securities
previously authenticated hereunder which the Company has not issued and sold,
and all Securities so delivered shall be promptly canceled by the Trustee. If
the Company shall so acquire any of the Securities, however, such acquisition
shall not operate as a redemption or satisfaction of the indebtedness
represented by such Securities unless and until the same are surrendered to the
Trustee for cancellation. No Securities shall be authenticated in lieu of or in
exchange for any Securities canceled as provided in this Section, except as
expressly permitted by this Indenture. All canceled Securities held by the
Trustee shall be disposed of by the Trustee in accordance with its customary
procedures and certification of their disposal delivered to the Company unless
by Company Order the Company shall direct that canceled Securities be returned
to it.
SECTION 312. Issuance of Additional Securities.
The Company may, subject to Article Ten of this Indenture, issue
additional Securities having identical terms and conditions to the Securities
offered hereby (the "Additional Securities"). The Initial Securities issued on
the closing date and any Additional Securities
<PAGE> 50
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subsequently issued (and any Exchange Securities issued in exchange therefore)
shall be treated as a single class for all purposes under this Indenture.
SECTION 313. CUSIP and CINS Numbers.
The Company in issuing the Securities may use "CUSIP" and "CINS"
numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" and
"CINS" numbers in notices of redemption as a convenience to Holders; provided
that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Securities or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Securities, and any such redemption shall
not be affected by any defect in or omission of such numbers.
SECTION 314. Computation of Interest.
Interest on the Securities shall be computed on the basis of a
360-day year of twelve 30-day months.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall upon Company Request cease to be of further
effect (except as to surviving rights of registration of transfer or exchange of
the Securities, as expressly provided for herein or pursuant hereto) and the
Trustee, at the expense of the Company, shall execute proper instruments
acknowledging satisfaction and discharge of this Indenture when
(a) either
(i) all the Securities theretofore authenticated and delivered
(other than mutilated, destroyed, lost or stolen Securities that
have been replaced or paid as provided in Section 308 and Securities
that have been subject to defeasance under Article Twelve) have been
delivered to the Trustee for cancellation; or
(ii) all Securities not theretofore delivered to the Trustee
for cancellation
(A) have become due and payable,
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(B) shall become due and payable at Stated Maturity
within one year, or
(C) 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 or any Subsidiary Guarantor, as the case may be, in
the case of (A), (B) or (C) above, has irrevocably deposited or
caused to be deposited with the Trustee funds in trust for the
purpose in an amount sufficient to pay and discharge the entire Debt
on such Securities not theretofore delivered to the Trustee for
cancellation, for principal (and premium, if any, on) and interest
on the Securities to the date of such deposit (in the case of
Securities that have become due and payable) or to the Stated
Maturity or Redemption Date, as the case may be;
(b) the Company or any Subsidiary Guarantor, as the case may be, has
paid or caused to be paid all sums payable hereunder by the Company; and
(c) the Company or any Subsidiary Guarantor, as the case may be, has
delivered to the Trustee an Officers' Certificate and an Opinion of
Counsel, each stating that all conditions precedent herein provided for
relating to the satisfaction and discharge of this Indenture have been
complied with.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 606 and, if money
shall have been deposited with the Trustee pursuant to subclause (ii) of clause
(a) of this Section, the obligations of the Trustee under Section 402 and the
last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section 1003, all
money deposited with the Trustee pursuant to Section 401 shall be held in trust
and applied by it, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee; but such money need not be segregated from other funds except to the
extent required by law.
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ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body):
(1) Default in the payment of any interest on any Security when it
becomes due and payable, and continuance of such default for a period of
30 days or more (provided that such 30-day grace period shall not be
applicable to the first two interest payments on the Securities).
(2) Default in the payment of the principal of (or premium, if any,
on) any Security when due (whether at its Stated Maturity, upon
acceleration, optional redemption, required purchase or otherwise).
(3) Failure to perform or comply with Section 801 hereof.
(4) Default in the performance, or breach, of any covenant or
agreement of the Company contained in this Indenture or the Pledge
Agreement (other than a default in the performance, or breach, of a
covenant or agreement that is specifically dealt with elsewhere herein),
and continuance of such default or breach for a period of 60 days after
written notice has been given to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in aggregate
principal amount of the Securities then outstanding.
(5) (i) An event of default has occurred under any mortgage, bond,
indenture, loan agreement or other document evidencing an issue of Debt of
the Company or any Restricted Subsidiary, which issue has an aggregate
outstanding principal amount of not less than $1,000,000, and such default
has resulted in such Debt becoming, whether by declaration or otherwise,
due and payable prior to the date on which it would otherwise become due
and payable or (ii) a default in any payment when due at final maturity of
any such Debt.
(6) Failure by the Company or any of its Restricted Subsidiaries to
pay one or more final judgments the uninsured portion of which exceeds in
the aggregate $1,000,000, which judgment or judgments are not paid,
discharged or stayed for a period of 60 days.
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(7) Any Subsidiary Guarantee issued by a Significant Subsidiary
ceases to be in full force and effect or is declared null and void, or any
Subsidiary Guarantor denies that it has any further liability under any
Subsidiary Guarantee, or gives notice to such effect (other than by reason
of the termination of this Indenture or the release of any such Subsidiary
Guarantee in accordance with this Indenture), and such condition has
continued for a period of 30 days after written notice of such failure
requiring the Subsidiary Guarantor and the Company to remedy the same has
been given (x) to the Company by the Trustee or (y) to the Company and the
Trustee by the Holders of 25% in aggregate principal amount of the
Securities then outstanding.
(8) Entry of a decree or order by a court having jurisdiction in the
premises adjudging the Company or any Significant Subsidiary a bankrupt or
insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustments or composition of or in respect
of the Company or any Significant Subsidiary under the Federal Bankruptcy
Code or any other applicable federal or state law, or appointing a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or any Significant Subsidiary or of any
substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order unstayed and in effect for a period of 90 consecutive days.
(9) The institution by the Company or any Significant Subsidiary of
proceedings to be adjudicated a bankrupt or insolvent, or the consent by
it to the institution of bankruptcy or insolvency proceedings against it,
or the filing by it of a petition or answer or consent seeking
reorganization or relief under the Federal Bankruptcy Code or any other
applicable federal or state law, or the consent by it to the filing of any
such petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Company or any
Significant Subsidiary or of any substantial part of its property, or the
making by it of an assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than as specified in clauses (8) or
(9) of Section 501) occurs and is continuing, the Trustee or the Holders of not
less than 25% in aggregate principal amount of the Securities then outstanding
may, and the Trustee at the request of such Holders shall, declare the principal
of all of the outstanding Securities immediately due and payable and, upon any
such declaration, such principal shall become due and payable immediately. If an
Event of Default specified in clauses (8) or (9) of Section 501 occurs and is
continuing, then the principal of all of the outstanding Securities 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.
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At any time after a declaration of acceleration under this
Indenture, 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 and its consequences if
(i) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Securities,
(B) all unpaid principal of (and premium, if any, on) any
outstanding Securities that has become due otherwise than by such
declaration of acceleration and interest thereon at the rate borne
by the Securities,
(C) to the extent that payment of such interest is lawful,
interest upon overdue interest and overdue principal at the rate
borne by the Securities, and
(D) 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; and
(ii) all Events of Default, other than the non-payment of amounts of
principal of (or premium, if any, on) or interest on the Securities that
have become due solely by such declaration of acceleration, have been
cured or waived.
No such rescission shall affect any subsequent default or impair any
right consequent thereon.
Notwithstanding the preceding paragraph, in the event of a
declaration of acceleration in respect of the Securities because of an Event of
Default specified in Section 501(5) shall have occurred and be continuing, such
declaration of acceleration shall be automatically annulled if the Debt that is
the subject of such Event of Default has been discharged or the holders thereof
have rescinded their declaration of acceleration in respect of such Debt, and
written notice of such discharge or rescission, as the case may be, shall have
been given to the Trustee by the Company and countersigned by the holders of the
requisite percentage of such Debt or a trustee, fiduciary or agent for such
holders, within 30 days after such declaration of acceleration in respect of the
Securities, and no other Event of Default has occurred during such 30-day period
which has not been cured or waived during such period.
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SECTION 503. Collection of Debt and Suits for Enforcement by
Trustee.
The Company and each Subsidiary Guarantor covenant that if
(a) default is made in the payment of any installment of interest on
any Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or premium,
if any, on) any Security at the Maturity thereof,
the Company and each Subsidiary Guarantor shall, upon demand of the Trustee, pay
to the Trustee for the benefit of the Holders of such Securities, the whole
amount then due and payable on such Securities for principal (and premium, if
any) and interest, and interest on any overdue principal (and premium, if any)
and, to the extent that payment of such interest shall be legally enforceable,
upon any overdue installment of interest, at the rate borne by the Securities,
and, in addition thereto, 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.
If the Company or any Subsidiary Guarantor, as the case may be,
fails to pay such amounts forthwith upon such demand, the Trustee, in its own
name as trustee of an express trust, may institute a judicial proceeding for the
collection of the sums so due and unpaid, may prosecute such proceeding to
judgment or final decree and may enforce the same against the Company, any such
Subsidiary Guarantor or any other obligor upon the Securities and collect the
moneys adjudged or decreed to be payable in the manner provided by law out of
the property of the Company, any such Subsidiary Guarantor or any other obligor
upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights of the
Holders by such appropriate judicial proceedings as the Trustee shall deem most
effectual to protect and enforce any such rights, whether for the specific
enforcement of any covenant or agreement in this Indenture or in aid of the
exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or
other judicial proceeding relative to the Company or any other obligor upon the
Securities (including any Subsidiary Guarantor) or the property of the Company
or of such other obligor or their creditors, the
<PAGE> 56
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Trustee (irrespective of whether the principal of the Securities shall then be
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of overdue principal, premium, if any, or interest) shall be
entitled and empowered, by intervention in such proceeding or otherwise,
(a) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the
Securities and to file such 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 of the Holders
allowed in such judicial proceeding, and
(b) to collect and receive any moneys or other securities or
property payable or deliverable upon the conversion or exchange of such
securities or upon any such claims and to distribute the same;
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by each
Holder 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 Holders, to pay the
Trustee any amount due it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 606.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder 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 Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of
Securities.
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the possession
of any of the Securities or the production thereof in any proceeding relating
thereto, and any such proceeding instituted by the Trustee shall be brought in
its own name and as trustee of an express trust, and any recovery of judgment
shall, after provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Securities in respect of which such
judgment has been recovered.
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SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article shall
be applied in the following order, at the date or dates fixed by the Trustee
and, in case of the distribution of such money on account of principal (or
premium, if any) or interest, upon presentation of the Securities and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
606;
SECOND: To the payment of the amounts then due and unpaid for
principal of (and premium, if any) and interest on the Securities in
respect of which or for the benefit of which such money has been
collected, ratably, without preference or priority of any kind, according
to the amounts due and payable on such Securities for principal (and
premium, if any) and interest, respectively; and
THIRD: The balance, if any, to the Company or as a court of
competent jurisdiction may direct.
SECTION 507. Limitation on Suits.
No Holder of any Securities shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee
of a continuing Event of Default;
(b) the Holders of not less than 25% in principal amount of the
Outstanding Securities shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default in its own name
as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities (including fees and
expenses of its agents and counsel) to be incurred in compliance with such
request;
(d) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
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(e) no direction inconsistent with such written request has been
given to the Trustee during such 60-day period by the Holders of a
majority or more in principal amount of the Outstanding Securities;
it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal,
Premium and Interest.
Notwithstanding any other provision in this Indenture, the Holder of
any Security shall have the right, which is absolute and unconditional, to
receive payment, as provided herein (including, if applicable, Article Twelve)
and in such Security of the principal of (and premium, if any) and (subject to
Section 309) interest on such Security on the respective Stated Maturities
expressed in such Security (or, in the case of redemption, on the Redemption
Date) and to institute suit for the enforcement of any such payment, and such
rights shall not be impaired without the consent of such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, each Subsidiary Guarantor, the
Trustee and the Holders shall be restored severally and respectively to their
former positions hereunder and thereafter all rights and remedies of the Trustee
and the Holders shall continue as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last paragraph
of Section 308, no right or remedy herein conferred upon or reserved to the
Trustee or to the Holders is intended to be exclusive of any other right or
remedy, and every right and remedy shall, to the extent permitted by law, be
cumulative and in addition to every other right and remedy given hereunder or
now or hereafter existing at law or in equity or otherwise. The assertion or
employment of any right or remedy hereunder, or otherwise, shall not prevent the
concurrent assertion or employment of any other appropriate right or remedy.
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SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any Security
to exercise any right or remedy accruing upon any Event of Default shall impair
any such right or remedy or constitute a waiver of any such Event of Default or
an acquiescence therein. Every right and remedy given by this Article or by law
to the Trustee or to the Holders may be exercised from time to time, and as
often as may be deemed expedient, by the Trustee or by the Holders, as the case
may be.
SECTION 512. Control by Holders.
The Holders of not less than a majority in principal amount of the
Outstanding Securities shall have the right to 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 the Trustee, provided that
(a) such direction shall not be in conflict with any rule of law or
with this Indenture,
(b) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction, and
(c) the Trustee need not take any action which might involve it in
personal liability or be unjustly prejudicial to the Holders not
consenting.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in principal amount of the
Outstanding Securities may, on behalf of the Holders of all of the Securities,
waive any past defaults hereunder, except a default
(a) in the payment of the principal of (or premium, if any) or
interest on any Security, or
(b) in respect of a covenant or provision hereof which under Article
Nine cannot be modified or amended without the consent of the Holder of
each Security Outstanding.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured, for every
purpose of this
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Indenture; but no such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon.
SECTION 514. Waiver of Stay or Extension Laws.
The Company and each Subsidiary Guarantor covenant (to the extent
that it may lawfully do so) that it shall not at any time insist upon, or plead,
or in any manner whatsoever claim or take the benefit or advantage of, any stay
or extension law wherever enacted, now or at any time hereafter in force, which
may affect the covenants or the performance of this Indenture; and the Company
and each Subsidiary Guarantor (to the extent that they may lawfully do so)
hereby expressly waive all benefit or advantage of any such law and covenants
that it shall not hinder, delay or impede the execution of any power herein
granted to the Trustee, but shall suffer and permit the execution of every such
power as though no such law had been enacted.
SECTION 515. Undertaking for Costs.
All parties to this Indenture agree, and each Holder of any Security
by his acceptance thereof shall be deemed to have agreed, that any court may in
its discretion require, 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,
suffered or omitted by it as Trustee, the filing by any party litigant in such
suit of an undertaking to pay the costs of such suit, and that such court may in
its discretion assess reasonable costs, including reasonable attorney's fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section shall not apply to any suit instituted by the
Trustee, to any suit instituted by any Holder, or group of Holders, holding in
the aggregate more than 10% in principal amount of the Outstanding Securities,
or to any suit instituted by any Holder for the enforcement of the payment of
the principal (or premium, if any ) or interest on any Security on or after the
respective Stated Maturities expressed in such Security (or, in the case of
redemption, on or after the Redemption Date).
ARTICLE SIX
THE TRUSTEE
SECTION 601. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and is
known to the Trustee, the Trustee shall mail to each Holder of the Securities in
the manner and to the extent provided in TIA Section 313(c) notice of the
Default or Event of Default within 90 days after
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the occurrence thereof; provided, however, that, except in the case of a Default
or an Event of Default in the payment of principal of (and premium, if any, on)
or interest on any Securities, the Trustee may withhold the notice to the
Holders of the Securities if a committee of its trust officers in good faith
determines that withholding such notice is in the interests of the Holders of
the Securities.
SECTION 602. Certain Rights of Trustee.
Subject to the provisions of TIA Sections 315(a) through 315(d):
(a) the Trustee may conclusively rely and shall be protected in
acting or refraining from acting, pursuant to the terms of this Indenture
or otherwise, upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed or presented by the
proper Person or Persons;
(b) any request or direction of the Company mentioned herein shall
be sufficiently evidenced by a Company Request or Company Order with
sufficient detail as may be requested by the Trustee and any resolution of
the Board of Directors may be sufficiently evidenced by a Board
Resolution;
(c) whenever in the administration of this Indenture the Trustee
shall deem it desirable that a matter be proved or established prior to
taking, suffering or omitting any action hereunder, the Trustee (unless
other evidence be herein specifically prescribed) may, in the absence of
bad faith on its part, rely upon an Officers' Certificate or an Opinion of
Counsel;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) 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 of the Holders pursuant to this Indenture, unless such
Holders shall have offered to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities (including fees and expenses
of its agents and counsel) which might be incurred by it in compliance
with such request or direction;
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(f) the Trustee shall not be bound to make any investigation into,
and may conclusively rely upon, 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 to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder;
(h) the Trustee shall not be liable for any action taken, suffered
or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture; and
(i) the Trustee need perform only those duties as are specifically
set forth in this Indenture.
The Trustee shall not be required to expend or risk its own funds or
otherwise incur any 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.
SECTION 603. Trustee Not Responsible for Recitals or Issuance of
Securities.
The recitals contained herein and in the Securities, except for the
Trustee's certificates of authentication, shall be taken as the statements of
the Company and the Trustee assumes no responsibility for their correctness. The
Trustee makes no representations as to the validity or sufficiency of this
Indenture, the Pledge Agreement, the Pledged Securities, any Subsidiary
Guarantee or the Securities except that the Trustee represents that it is duly
authorized to execute and deliver this Indenture, authenticate the Securities
and perform its obligations hereunder and, upon the effectiveness of the
Registration Statement, that the statements made by it in a Statement of
Eligibility on Form T-1 supplied to the Company are true and accurate, subject
to the qualifications set forth therein. The Trustee shall not be accountable
for the use or application by the Company of Securities or the proceeds thereof
or any money paid to the Company or upon the Company's direction under any
provision of this
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Indenture. The Trustee shall not be responsible for the use or application of
any money received by any Paying Agent other than the Trustee.
SECTION 604. May Hold Securities.
The Trustee, any Paying Agent, any Registrar or any other agent of
the Company or of the Trustee, in its individual or any other capacity, may
become the owner or pledgee of Securities and, subject to TIA Sections 310(b)
and 311, may otherwise deal with the Company with the same rights it would have
if it were not Trustee, Paying Agent, Registrar or such other agent.
SECTION 605. 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 with the Company.
SECTION 606. Compensation and Reimbursement.
The Company agrees:
(a) (i) to pay to the Trustee (in its capacity as Trustee, Paying
Agent and Registrar) from time to time reasonable compensation for all
services rendered by it hereunder and under the Pledge Agreement (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust);
(ii) to pay the Tri-State Securities Intermediary from time to time
reasonable compensation for all services rendered by it under the Pledge
Agreement;
(b) except as otherwise expressly provided herein, to reimburse the
Trustee promptly upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance
with any provision of this Indenture and the Pledge Agreement (including
the reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance as
may be attributable to its negligence or bad faith; and
(c) to indemnify the Trustee for, and to hold it harmless against,
any loss, liability or expense incurred without negligence or bad faith on
its part, arising out of or in connection with the acceptance or
administration of this trust and the Pledge Agreement, including the costs
and expenses (including the reasonable expenses and disbursements of
counsel) of enforcing this Indenture and the Pledge Agreement against
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the Company or any Subsidiary Guarantor (including this Section 606) and
of defending itself against any claim (whether asserted by any Holder or
the Company or any other Person) or liability in connection with the
exercise or performance of any of its powers or duties hereunder and under
the Pledge Agreement.
The obligations of the Company under this Section to compensate the
Trustee, to pay or reimburse the Trustee for expenses, disbursements and
advances and to indemnify and hold harmless the Trustee shall constitute
additional indebtedness hereunder and shall survive the satisfaction and
discharge of this Indenture and any termination under any bankruptcy law. As
security for the performance of such obligations of the Company, the Trustee
shall have a lien prior to the Securities upon all property and funds held or
collected by the Trustee as such, except funds held in trust for the payment of
principal of (and premium, if any) or interest on particular Securities.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 501(8) or (9), the expenses
(including the reasonable charges and expenses of its counsel) of and the
compensation for such services are intended to constitute expenses of
administration under any applicable bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the termination of this
Indenture.
SECTION 607. Corporate Trustee Required; Eligibility.
There shall be at all times a Trustee hereunder which shall be
eligible to act as Trustee under TIA Section 310(a)(1) and shall have a combined
capital and surplus of at least $50,000,000. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of Federal, State, territorial or District of Columbia supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published. If at
any time the Trustee shall cease to be eligible in accordance with the
provisions of this Section, it shall resign immediately in the manner and with
the effect hereinafter specified in this Article.
SECTION 608. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no appointment of a
successor Trustee pursuant to this Article shall become effective until the
acceptance of appointment by the successor Trustee in accordance with the
applicable requirements of Section 609.
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(b) The Trustee may resign at any time by giving written notice
thereof to the Company. If the instrument of acceptance by a successor Trustee
required by Section 609 shall not have been delivered to the Trustee within 30
days after the giving of such notice of resignation, the resigning Trustee may
petition any court of competent jurisdiction for the appointment of a successor
Trustee.
(c) The Trustee may be removed at any time by Act of the Holders of
not less than a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with the provisions of TIA
Section 310(b) after written request therefor by the Company or by any
Holder who has been a bona fide Holder of a Security for at least six
months, except when the Trustee's duty to resign is stayed in accordance
with the provisions of TIA Section 310(b), or
(2) the Trustee shall cease to be eligible under Section 607 and
shall fail to resign after written request therefor by the Company or by
any Holder who has been a bona fide Holder of a Security for at least six
months, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company, by a Board Resolution, may remove the
Trustee, or (ii) subject to TIA Section 315(e), any Holder who has been a bona
fide Holder of a Security for at least six months may, on behalf of himself and
all others similarly situated, petition any court of competent jurisdiction for
the removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become incapable of
acting, or if a vacancy shall occur in the office of Trustee for any cause, the
Company, by a Board Resolution, shall promptly appoint a successor Trustee. If,
within one year after such resignation, removal or incapability, or the
occurrence of such vacancy, a successor Trustee shall be appointed by Act of the
Holders of a majority in principal amount of the Outstanding Securities
delivered to the Company and the retiring Trustee, the successor Trustee so
appointed shall, forthwith upon its acceptance of such appointment, become the
successor Trustee and supersede the successor Trustee appointed by the Company.
If no successor Trustee shall have been so appointed by the Company or the
Holders and accepted appointment
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in the manner hereinafter provided subject to TIA Section 315(e), any Holder who
has been a bona fide Holder of a Security for at least six months may, on behalf
of himself and all others similarly situated, petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to the
Holders of Securities in the manner provided for in Section 106. Each notice
shall include the name of the successor Trustee and the address of its Corporate
Trust Office.
SECTION 609. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder subject to the retiring Trustee's rights
as provided under the last sentence of Section 606. Upon request of any such
successor Trustee, the Company shall execute any and all instruments for more
fully and certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts.
No successor Trustee shall accept its appointment unless at the time
of such acceptance such successor Trustee shall be qualified and eligible under
this Article.
SECTION 610. Merger, Conversion, Consolidation or Succession to
Business.
Any corporation into which the Trustee may be merged or converted or
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities. In
case at that time any of the Securities shall not have been authenticated, any
successor Trustee
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may authenticate such Securities either in the name of any predecessor hereunder
or in the name of the successor Trustee. In all such cases such certificates
shall have the full force and effect which this Indenture provides that the
certificate of authentication of the Trustee shall have; provided, however, that
the right to adopt the certificate of authentication of any predecessor Trustee
or to authenticate Securities in the name of any predecessor Trustee shall apply
only to its successor or successors by merger, conversion or consolidation.
ARTICLE SEVEN
HOLDERS' LISTS AND REPORTS BY TRUSTEE
SECTION 701. Disclosure of Names and Addresses of Holders.
Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that none of the Company or the Trustee
or any agent of either of them shall be held accountable by reason of the
disclosure of any such information as to the names and addresses of the Holders
in accordance with TIA Section 312, regardless of the source from which such
information was derived, and that the Trustee shall not be held accountable by
reason of mailing any material pursuant to a request made under TIA Section
312(b).
SECTION 702. Reports by Trustee.
Within 60 days after May 15 of each year commencing with the first
May 15 after the first issuance of Securities, the Trustee shall transmit to the
Holders, in the manner and to the extent provided in TIA Section 313(c), a brief
report dated as of such May 15 if required by TIA Section 313(a).
SECTION 703. Reports by Company.
The Company shall:
(a) file with the Trustee, within 15 days after the Company is
required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of
such portions of any of the foregoing as the Commission may from time to
time by rules and regulations prescribe) which the Company may be required
to file with the Commission pursuant to Section 13 or Section 15(d) of the
Exchange Act of 1934; or, if the Company is not required to file
information, documents or reports pursuant to either of said Sections,
then it shall file with the Trustee and the Commission, in accordance with
rules and regulations
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prescribed from time to time by the Commission, such of the supplementary
and periodic information, documents and reports which may be required
pursuant to Section 13 of the Exchange Act of 1934 in respect of a
security listed and registered on a national securities exchange as may be
prescribed from time to time in such rules and regulations;
(b) file with the Trustee and the Commission, in accordance with the
rules and regulations prescribed from time to time by the Commission, such
additional information, documents and reports with respect to compliance
by the Company with the conditions and covenants of this Indenture as may
be required from time to time by such rules and regulations;
(c) transmit by mail to all Holders, in the manner and to the extent
provided in TIA Section 313(c), within 30 days after the filing thereof
with the Trustee, such summaries of any information, documents and reports
required to be filed by the Company pursuant to paragraphs (a) and (b) of
this Section as may be required by rules and regulations prescribed from
time to time by the Commission.
Delivery of such reports, information and documents to the Trustee
is for informational purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE,
TRANSFER OR LEASE
SECTION 801. Company May Consolidate, Etc., Only on Certain Terms.
The Company shall not consolidate with or merge with or into any
other Person or, directly or indirectly, convey, sell, assign, transfer, lease
or otherwise dispose of its properties and assets substantially as an entirety
to any other Person (in one transaction or a series of related transactions),
unless each of the following conditions is satisfied:
(a) Either (i) the Company is the surviving corporation or (ii) the
Person (if other than the Company) formed by such consolidation or into
which the Company is merged or the Person that acquires by conveyance,
sale, assignment, transfer, lease or other disposition the properties and
assets of the Company substantially as an entirety
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(the "Surviving Entity") (A) is a corporation, partnership or trust
organized and validly existing under the laws of the United States, any
state thereof or the District of Columbia and (B) expressly assumes, by a
supplemental indenture in form satisfactory to the Trustee, all of the
Company's obligations under this Indenture and the Securities.
(b) Immediately after giving effect to such transaction and treating
any obligation of the Company in connection with or as a result of such
transaction as having been incurred as of the time of such transaction, no
Default or Event of Default has occurred and is continuing.
(c) Immediately after giving effect to such transaction on a pro
forma basis, the Consolidated Net Worth of the Company (or of the
Surviving Entity if the Company is not the continuing obligor under this
Indenture) is equal to or greater than the Consolidated Net Worth of the
Company immediately prior to such transaction.
(d) Immediately after giving effect to such transaction on a pro
forma basis (on the assumption that the transaction occurred at the
beginning of the most recently ended four full fiscal quarter period for
which internal financial statements are available), the Company (or the
Surviving Entity if the Company is not the continuing obligor under this
Indenture) could incur at least $1.00 of additional Debt (other than
Permitted Debt) pursuant to the first paragraph of Section 1010).
(e) If the Company is not the continuing obligor under this
Indenture, each Subsidiary Guarantor, unless it is the other party to the
transaction described above, has by supplemental indenture confirmed that
its Subsidiary Guarantee applies to the Surviving Entity's obligations
under this Indenture and the Securities.
(f) If any of the property or assets of the Company or any of its
Restricted Subsidiaries would thereupon become subject to any Lien, the
provisions of Section 1017 are complied with.
(g) The Company delivers, or causes 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 transaction
complies with the requirements of this Indenture.
For purposes of the foregoing, the transfer (by lease, assignment,
sale or otherwise, in a single transaction or series of transactions) of all or
substantially all of the properties or assets of one or more Restricted
Subsidiaries that constitutes all or substantially all of the properties and
assets of the Company on a consolidated basis, shall be deemed to be the
transfer of all or substantially all of the properties and assets of the
Company.
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SECTION 802. Successor Substituted.
In the event of any transaction described in and complying with the
conditions listed in Section 801 in which the Company is not the continuing
obligor under this Indenture, the Surviving Entity shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such Surviving Entity had been named
as the Company herein, and thereafter the Company shall, except in the case of a
lease, be discharged of all its obligations and covenants under this Indenture
and the Securities.
ARTICLE NINE
SUPPLEMENTS AND AMENDMENTS TO INDENTURE
AND SUBSIDIARY GUARANTEES
SECTION 901. Without Consent of Holders.
Without the consent of any Holders, the Company and any affected
Subsidiary Guarantor, when authorized by a Board Resolution, and the Trustee, at
any time and from time to time, may enter into one or more indentures
supplemental hereto, for any of the following purposes:
(a) to evidence the succession of another Person to the Company or
any other obligor on the Securities (including any Subsidiary Guarantor)
and the assumption by any such successor of the covenants of the Company
or such obligor contained in this Indenture, the Pledge Agreement and the
Securities; or
(b) to add to the covenants of the Company or any other obligor on
the Securities (including any Subsidiary Guarantor) for the benefit of the
Holders or to surrender any right or power herein or in the Securities
conferred upon the Company or any other obligor on the Securities; or
(c) to add any additional Events of Default; or
(d) to provide for uncertificated Securities in addition to or in
place of the certificated Securities;
(e) to evidence and provide for the acceptance of appointment
hereunder by a successor Trustee pursuant to the requirements of Section
609; or
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(f) to secure the Securities or any Subsidiary Guarantee;
(g) to cure any ambiguity or mistake, to correct or supplement any
provision herein which may be defective or inconsistent with any other
provision in this Indenture or the Pledge Agreement, or to make any other
provisions with respect to matters or questions arising under this
Indenture or the Pledge Agreement; provided that such action shall not
adversely affect the interests of the Holders in any material respect; or
(h) to qualify, or maintain the qualification of, this Indenture
under the Trust Indenture Act;
(i) to secure the Securities pursuant to a Subsidiary Guarantee and
add a Subsidiary Guarantor as a party to this Indenture pursuant to
Section 1308;
(j) to make any other change that does not adversely affect the
rights of any Holder.
Upon the request of the Company accompanied by a Board Resolution
authorizing the execution of any such amended or supplemental Indenture or any
amendment to the Pledge Agreement, and upon receipt by the Trustee of the
documents described in Section 602 hereof, the Trustee shall join with the
Company in the execution of any amended or supplemental Indenture or any
amendment to the Pledge Agreement, authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations that
may be therein contained, but the Trustee shall not be obligated to enter into
such amended or supplemental Indenture or any such amendment to the Pledge
Agreement that affects its own rights, duties or immunities under this Indenture
or otherwise.
SECTION 902. With Consent of Holders.
With the consent of the Holders of not less than a majority in
aggregate principal amount of the Outstanding Securities, by Act of said Holders
delivered to the Company, and upon the filing with the Trustee of evidence of
consent of the Holders as aforesaid, the Company, when authorized by a Board
Resolution, each Subsidiary Guarantor and the Trustee may amend or supplement in
any manner this Indenture or modify in any manner the rights of the Holders
under this Indenture; provided, however, that no such supplement, amendment or
modification may, without the consent of the Holder of each Outstanding Security
affected thereby:
(a) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable upon the
redemption thereof, or change the place of
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payment where, or the coin or currency in which any Security or any
premium or the interest thereon is payable, or impair the right to
institute suit for the enforcement of any such payment after the Stated
Maturity thereof (or, in the case of redemption, on or after the
Redemption Date), or
(b) reduce the percentage in principal amount of the Outstanding
Securities, the consent of whose Holders is required for any waiver of
compliance with certain provisions of, or certain defaults and their
consequences provided for under, this Indenture, or
(c) waive a default in the payment of principal of, or premium, if
any, or interest on the Securities or reduce the percentage or aggregate
principal amount of Outstanding Securities the Consent of whose Holders is
necessary for waiver of compliance with certain provisions of this
Indenture or for waiver of certain defaults, or
(d) modify any of the provisions of this Indenture relating to the
subordination of the Securities or the Subsidiary Guarantees in a manner
materially adverse to the Holders.
It shall not be necessary for any Act of Holders under this Section
to approve the particular form of any proposed supplemental indenture, but it
shall be sufficient if such Act shall approve the substance thereof.
Without the consent of the holders of at least 75% in principal
amount of the Securities then Outstanding (including consents obtained in
connection with a tender offer or exchange offer for such Securities), no waiver
or amendment to the Indenture may make any change in the provisions of Section
1012 after the mailing of an offer with respect to a Change of Control Offer
that adversely affects the rights of any Holder of Securities.
SECTION 903. Execution of Supplemental Indentures.
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications thereby of
the trusts created by this Indenture, the Trustee shall be entitled to receive,
and shall be fully protected in relying upon, an Officer's Certificate and
Opinion of Counsel stating that the execution of such supplemental indenture is
authorized or permitted by this Indenture and that such supplemental indenture
constitutes the legal, valid and binding obligation of the Company and each
Subsidiary Guarantor subject to the customary exceptions and such other matters
as the Trustee may reasonably request. The Trustee may, but shall not be
obligated to, enter into any such
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supplemental indenture which affects the Trustees own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this Article,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes; and every Holder
of Securities theretofore or thereafter authenticated and delivered hereunder
shall be bound thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article shall
conform to the requirements of the Trust Indenture Act as then in effect.
SECTION 906. Reference in Securities to Supplemental Indentures.
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Securities so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 907. Notice of Supplemental Indentures.
Promptly after the execution by the Company, each Subsidiary
Guarantor and the Trustee of any supplemental indenture pursuant to the
provisions of Section 902, the Company shall give notice thereof to the Holders
of each Outstanding Security affected, in the manner provided for in Section
106, setting forth in general terms the substance of such supplemental
indenture.
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ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if Any, and Interest.
The Company covenants and agrees for the benefit of the Holders that
it will duly and punctually pay the principal of (and premium, if any) and
interest on the Securities in accordance with the terms of the Securities and
this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company shall maintain in The City of New York, an office or
agency where Securities may be presented or surrendered for payment, where
Securities may be surrendered for registration of transfer or exchange and where
notices and demands to or upon the Company in respect of the Securities and this
Indenture may be served. The Corporate Trust Office located at One State Street,
New York, NY 10004 of the Trustee shall be such office or agency of the Company,
unless the Company shall designate and maintain some other office or agency for
one or more of such purposes. The Company shall give prompt written notice to
the Trustee of any change in the location of any 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
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more other
offices or agencies (in or outside of The City of New York) where the Securities
may be presented or surrendered for any or all such purposes and may from time
to time rescind any such designation; provided, however, that no such
designation or rescission shall in any manner relieve the Company of its
obligation to maintain an office or agency in The City of New York for such
purposes. The Company shall give prompt written notice to the Trustee of any
such designation or rescission and any change in the location of any such other
office or agency.
SECTION 1003. Money for Security Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent, it
will, on or before each due date of the principal of (or premium, if any) or
interest on any of the Securities, segregate and hold in trust for the benefit
of the Persons entitled thereto a sum sufficient to pay the principal of (or
premium, if any) or interest so becoming due until such
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sums shall be paid to such Persons or otherwise disposed of as herein provided
and shall promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents for the
Securities, it shall, on or before each due date of the principal of (or
premium, if any) or interest on any Securities, deposit with a Paying Agent a
sum sufficient to pay the principal (and premium, if any) or interest so
becoming due, such sum to be held in trust for the benefit of the Persons
entitled to such principal, premium or interest, and (unless such Paying Agent
is the Trustee) the Company shall promptly notify the Trustee of such action or
any failure so to act.
The Company shall cause each Paying Agent (other than the Trustee)
to execute and deliver to the Trustee an instrument in which such Paying Agent
shall agree with the Trustee, subject to the provisions of this Section, that
such Paying Agent shall:
(a) hold all sums held by it for the payment of the principal of
(and premium, if any) or interest on Securities in trust for the benefit
of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities) in the making of any payment of
principal (and premium, if any) or interest; and
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such sums.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of (or premium,
if any) or interest on any Security and remaining unclaimed for two years after
such principal (and premium, if any) or interest has become due and payable
shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such
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Security shall thereafter, as an unsecured general creditor, look only to the
Company for payment thereof, and all liability of the Trustee or such Paying
Agent with respect to such trust money, and all liability of the Company as
trustee thereof, shall thereupon cease; provided, however, that the Trustee or
such Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once, in a newspaper published in
the English language, customarily published on each Business Day and of general
circulation in the Borough of Manhattan, The City of New York, notice that such
money remains unclaimed and that, after a date specified therein, which shall
not be less than 30 days from the date of such publication, any unclaimed
balance of such money then remaining shall be repaid to the Company.
SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect its existence
and the existence of each of its Restricted Subsidiaries in accordance with the
respective organizational documents of the Company and each such Subsidiary and
the rights (whether pursuant to charter, partnership certificate, agreement,
statute or otherwise), material licenses and franchises of the Company and each
such Subsidiary; provided, however, that the Company shall not be required to
preserve any such right, license or franchise or the existence of any Restricted
Subsidiary, if the Board of Directors shall determine that the maintenance or
preservation thereof is no longer desirable in the conduct of the business of
the Company and its Restricted Subsidiaries taken as a whole and that the loss
thereof is not disadvantageous in any material respect to the Holders.
SECTION 1005. 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 the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary and (b)
all material lawful claims for labor, materials and supplies, which, if unpaid,
might by law become a lien upon the property of the Company or any Subsidiary;
provided, however, 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 proceedings.
SECTION 1006. Maintenance of Properties.
The Company shall cause all properties owned by the Company or any
Subsidiary or used or held for use in the conduct of its business or the
business of any Subsidiary to be maintained and kept in good condition, repair
and working order and supplied
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with all necessary equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times,
except, in every case, as and to the extent that the Company may be prevented by
fire, strikes, lockouts, acts of God, inability to obtain labor or materials,
governmental restrictions, enemy action, civil commotion or unavoidable casualty
or similar causes beyond the control of the Company; provided, however, that
nothing in this Section shall prevent the Company from discontinuing the
maintenance of any of such properties if such discontinuance is, in the judgment
of the Company, desirable in the conduct of its business or the business of any
Subsidiary and not disadvantageous in any material respect to the Holders.
SECTION 1007. Insurance.
The Company shall at all times keep all of its and its Subsidiaries'
properties which are of an insurable nature insured with insurers, believed by
the Company to be responsible, against loss or damage to the extent that
property of similar character is usually so insured by corporations similarly
situated and owning like properties.
SECTION 1008. Statement by Officers as to Default.
(a) The Company shall deliver to the Trustee, within 60 days after
the end of each fiscal year, an Officer's Certificate signed by either the
principal executive officer, principal financial officer or principal accounting
officer as to his or her knowledge of compliance by the Company and the
Restricted Subsidiaries with all conditions and covenants under this Indenture.
For purposes of this Section 1008(a), such compliance shall be determined
without regard to any period of grace or requirement of notice under this
Indenture.
(b) When any Default has occurred and is continuing under this
Indenture, the Company shall deliver to the Trustee by registered or certified
mail or by telegram, telex or facsimile transmission an officers certificate
specifying such event, notice or other action within five Business Days of its
occurrence.
(C) When any Registration Default (as defined in the Registration
Rights Agreement) occurs, the Company shall deliver to the Trustee by registered
or certified mail or by facsimile transmission an Officers' Certificate
specifying the nature of such Registration Default within 10 days of its
occurrence. In addition, the Company shall deliver to the Trustee on each
Interest Payment Date during the continuance of a Registration Default and on
the Interest Payment Date following the cure of a Registration Default, an
Officers' Certificate
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specifying the amount of additional interest which has accrued and which is then
owing under the Registration Rights Agreement.
SECTION 1009. Provision of Reports and Financial Statements.
At all times from and after the earlier of (i) the date of the
commencement of an Exchange Offer or the effectiveness of the Shelf Registration
Statement (the "Registration") and (ii) the date that is six months after the
Closing Date, in either case, whether or not the Company is required to file
reports with the Commission, the Company shall file on a timely basis with the
Commission, to the extent such filings are accepted by the Commission, the
annual reports, quarterly reports and other documents that the Company would be
required to file if it were subject to Section 13(a) or 15(d) of the Exchange
Act. The Company shall also be required (a) to supply to the Trustee and each
Holder, or supply to the Trustee for forwarding to each such Holder, without
cost to such Holder, copies of such reports and documents within 15 days after
the date on which the Company files such reports and documents with the
Commission or the date on which the Company would be required to file such
reports and documents if the Company were so required and (b) if filing such
reports and documents with the Commission is not accepted by the Commission or
is prohibited under the Exchange Act, to supply at the Company's cost copies of
such reports and documents to any prospective Holder of Securities promptly upon
written request. In addition, at all times prior to the earlier of the date of
the Registration and the date six months after the Closing Date, the Company
shall, at its cost, deliver to each Holder quarterly and annual reports
substantially equivalent to those that would be required by the Exchange Act and
shall supply copies of such reports and documents, at the Company's cost, to any
prospective Holder of the Securities designated by a Holder upon written
request. In addition, at all times prior to the Registration, upon request of
any Holder or any prospective purchaser of the Securities designated by a
Holder, the Company shall supply to such Holder or such prospective purchaser
the information required under Rule 144A under the Securities Act.
SECTION 1010. Limitation on Debt.
The Company shall not, and shall not permit any Restricted
Subsidiary to, create, issue, assume, guarantee or in any manner become directly
or indirectly liable for the payment of, or otherwise incur (collectively,
"incur"), any Debt (including Acquired Debt and the issuance of Disqualified
Stock), except that the Company or a Restricted Subsidiary may incur Debt or
issue Disqualified Stock if, at the time of such event, the Consolidated
Leverage Ratio would have been (i) less than 6.50 to 1 through May 15, 2001,
(ii) less than 6.25 to 1 from May 15, 2001 through May 15, 2003 and (iii) less
than 6.0 to 1 thereafter.
In making the foregoing calculation, pro forma effect shall be given
to: (i) the incurrence of such Debt and (if applicable) the application of the
net proceeds therefrom,
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including to refinance other Debt, as if such Debt was incurred and the
application of such proceeds occurred at the beginning of the four-quarter
period ending on the last day of the immediately preceding fiscal quarter of the
Company for which internal financial statements are available, (ii) the
incurrence, repayment or retirement of any other Debt by the Company or its
Restricted Subsidiaries since the first day of such four-quarter period as if
such Debt was incurred, repaid or retired at the beginning of such four-quarter
period, (iii) the acquisition (whether by purchase, merger or otherwise) or
disposition (whether by sale, merger or otherwise) of any company, entity or
business acquired or disposed of by the Company or its Restricted Subsidiaries,
as the case may be, since the first day of such four-quarter period, as if such
acquisition or disposition occurred at the beginning of such four-quarter
period. In making a computation under the foregoing clause (i) or (ii), (A)
interest on Debt bearing a floating interest rate shall be computed as if the
rate in effect on the date of computation had been the applicable rate for the
entire period, (B) if such Debt bears, at the option of the Company, a fixed or
floating rate of interest, interest thereon shall be computed by applying, at
the option of the Company, either the fixed or floating rate and (C) the amount
of Debt under a revolving credit facility shall be computed based upon the
average daily balance of such Debt during such four-quarter period and (iv) if
such four-quarter period ends before September 30, 1998, the TSS acquisition
and, if such four-quarter period ends before March 31, 1999, the Unisign
acquisition, in each case as if such acquisitions occurred at the beginning of
such four-quarter period.
Notwithstanding the foregoing, the Company may, and may, to the
extent expressly permitted below, permit its Restricted Subsidiaries to, incur
any of the following Debt ("Permitted Debt"):
(i) Debt of the Company or any Restricted Subsidiary under one or
more credit facilities in an aggregate principal amount at any one time
outstanding not to exceed $20,000,000 less any amounts applied to the
permanent reduction of such credit facilities pursuant to Section 1013
covenant (and any guarantees of such Debt by a Restricted Subsidiary).
(ii) Debt of the Company or any Restricted Subsidiary outstanding on
the Closing Date, other than Debt described under clause (i) above, and
obligations under Hedging Obligations in effect on the Closing Date.
(iii) Debt owed by the Company to any Restricted Subsidiary or owed
by any Restricted Subsidiary to the Company or any other Restricted
Subsidiary (provided that such Debt is held by the Company or such
Restricted Subsidiary).
(iv) Debt represented by the Securities (other than any Additional
Securities) and any Subsidiary Guarantee.
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(v) (A) Capitalized Lease Obligations of the Company or any
Restricted Subsidiary, and (B) Debt of the Company or any Restricted
Subsidiary under purchase money mortgages or secured by purchase money
security interests so long as (x) such Debt is not secured by any property
or assets of the Company or any Restricted Subsidiary other than the
property and assets so acquired and (y) such Debt is created prior to, at
the time of or within six months after the later of the acquisition, the
completion of construction or the commencement of full operation of the
related property; provided that the aggregate amount of Debt under (A) and
(B) does not exceed $5.0 million at any one time outstanding.
(vi) Debt of the Company or any Restricted Subsidiary consisting of
guarantees, indemnities or obligations in respect of purchase price
adjustments in connection with the acquisition or disposition of assets,
including, without limitation, shares of Capital Stock.
(vii) Guarantees by any Restricted Subsidiary made in accordance
with the provisions of Section 1019.
(viii) Any renewals, extensions, substitutions, refinancings or
replacements (each, for purposes of this clause, a "refinancing") of any
outstanding Debt, other than Debt incurred pursuant to clause (i), (iii),
(v), (vi) or (vii), of this definition, including any successive
refinancings thereof, so long as (A) any such new Debt is in a principal
amount that does not exceed the principal amount so refinanced, plus the
amount of any premium required to be paid in connection with such
refinancing pursuant to the terms of the Debt refinanced or the amount of
any premium reasonably determined by the Company as necessary to
accomplish such refinancing, plus the amount of the expenses of the
Company reasonably estimated to be incurred in connection with such
refinancing, (B) in the case of any refinancing of Subordinated Debt, such
new Debt is made subordinate to the Securities at least to the same extent
as the Debt being refinanced and (C) such refinancing Debt does not have a
Weighted Average Life less than the Weighted Average Life of the Debt
being refinanced and does not have a final scheduled maturity earlier than
the final scheduled maturity, or permit redemption at the option of the
holder earlier than the earliest date of redemption at the option of the
holder, of the Debt being refinanced.
SECTION 1011. Limitation on Restricted Payments.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, take any of the following actions:
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(a) declare or pay any dividend on, or make any distribution to
holders of, any shares of the Capital Stock of the Company or any
Restricted Subsidiary, other than (i) dividends or distributions payable
solely in Qualified Equity Interests, (ii) dividends or distributions by a
Restricted Subsidiary payable to the Company or another Restricted
Subsidiary or (iii) pro rata dividends or distributions on common stock of
a Restricted Subsidiary held by minority stockholders, provided that such
dividends do not in the aggregate exceed the minority stockholders' pro
rata share of such Restricted Subsidiary's net income from the first day
of the Company's fiscal quarter during which the Closing Date occurs;
(b) purchase, redeem or otherwise acquire or retire for value,
directly or indirectly, any shares of Capital Stock (or any options,
warrants or other rights to acquire shares of Capital Stock) of (i) the
Company, Holdings or any Unrestricted Subsidiary or (ii) any Restricted
Subsidiary held by any Affiliate of the Company (other than, in either
case, any such Capital Stock owned by the Company or any of its Restricted
Subsidiaries);
(c) make any principal payment on, or repurchase, redeem, defease or
otherwise acquire or retire for value, prior to any scheduled principal
payment, sinking fund payment or maturity, any Subordinated Debt; or
(d) make any Investment (other than a Permitted Investment) in any
Person
(such payments or other actions described in (but not excluded from) clauses (a)
through (d) being referred to as "Restricted Payments"), unless at the time of,
and immediately after giving effect to, the proposed Restricted Payment:
(i) no Default or Event of Default has occurred and is continuing,
(ii) the Company could incur at least $1.00 of additional Debt
(other than Permitted Debt) pursuant to the first paragraph of Section
1010, and
(iii) the aggregate amount of all Restricted Payments declared or
made after the Closing Date does not exceed the sum of:
(A) the remainder of (x) 100% of the aggregate cumulative
Consolidated EBITDA for the period beginning on the first day of the
Company's fiscal quarter during which the Closing Date occurs and
ending on the last day of the Company's most recent fiscal quarter
for which internal financial statements are available ending prior
to the date of such proposed Restricted Payment (the "Computation
Period") minus (y) the product of 1.4
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times the aggregate cumulative Consolidated Fixed Charges for the
Computation Period, plus
(B) the aggregate net proceeds, including the fair market
value of property other than cash (as determined by the Board of
Directors, whose good faith determination will be conclusive), after
the Closing Date from the issuance or sale (other than to a
Subsidiary) of debt securities or Disqualified Stock that have been
converted into or exchanged for Qualified Stock of the Company,
together with the aggregate net cash proceeds received by the
Company at the time of such conversion or exchange, plus received by
the Company after the Closing Date from the issuance or sale (other
than to a Subsidiary) of Qualified Equity Interests of the Company
(excluding from this computation proceeds of an Equity Offering
received by the Company that are used by it to redeem Securities as
discussed above), plus
(C) the aggregate net proceeds, including the fair market
value of property other than cash (as determined by the Board of
Directors, whose good faith determination shall be conclusive),
after the Closing Date from the issuance or sale (other than to a
Subsidiary) of debt securities or Disqualified Stock that have been
converted into or exchanged for Qualified Stock of the Company,
together with the aggregate net cash proceeds received by the
Company at the time of such conversion or exchange, plus received by
the Company after the Closing Date from the issuance or sale (other
than to a Subsidiary) of debt securities or Disqualified Stock that
have been converted into or exchanged for Qualified Stock of the
Company, together with the aggregate net proceeds received by the
Company at the time of such conversion or exchange, plus
(D) $5.0 million.
Notwithstanding the foregoing, the Company and its Restricted
Subsidiaries may take any of the following actions, so long as (with respect to
clauses (e) and (f) below) no Default or Event of Default has occurred and is
continuing or would occur:
(a) The payment of any dividend within 60 days after the date of
declaration thereof, if at the declaration date such payment would not
have been prohibited by the foregoing provision.
(b) The repurchase, redemption or other acquisition or retirement
for value of any shares of Capital Stock of the Company, in exchange for,
or out of the net cash
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proceeds of a substantially concurrent issuance and sale (other than to a
Subsidiary) of, Qualified Equity Interests of the Company.
(c) The purchase, redemption, defeasance or other acquisition or
retirement for value of any Subordinated Debt in exchange for, or out of
the net cash proceeds of a substantially concurrent issuance and sale
(other than to a Subsidiary) of, Qualified Equity Interests of the
Company.
(d) The purchase, redemption, defeasance or other acquisition or
retirement for value of Subordinated Debt in exchange for, or out of the
net cash proceeds of a substantially concurrent issuance or sale (other
than to a Subsidiary) of, Subordinated Debt, so long as the Company or a
Restricted Subsidiary would be permitted to refinance such original
Subordinated Debt with such new Subordinated Debt pursuant to clause
(viii) of the definition of Permitted Debt.
(e) The repurchase of any Subordinated Debt at a purchase price not
greater than 101% of the principal amount of such Subordinated Debt in the
event of a "change of control" in accordance with provisions similar to
Section 1012; provided that, prior to or simultaneously with such
repurchase, the Company has made the Change of Control Offer as provided
in such Section with respect to the Securities and has repurchased all
Securities validly tendered for payment in connection with such Change of
Control Offer.
(f) The purchase, redemption, acquisition, cancellation or other
retirement for value of shares of Capital Stock of the Company or
Holdings, options on any such shares or related stock appreciation rights
or similar securities held by officers or employees or former officers or
employees (or their estates or beneficiaries under their estates) or by
any employee benefit plan, upon death, disability, retirement or
termination of employment or pursuant to the terms of any employee benefit
plan or any other agreement under which such shares of stock or related
rights were issued; provided that the aggregate cash consideration paid
for such purchase, redemption, acquisition, cancellation or other
retirement of such shares of Capital Stock after the Closing Date does not
exceed in any fiscal year the sum of (i) $1.0 million and (ii) any
proceeds received by the Company under a related key man or other life
insurance policy.
(g) Make payments to Holdings pursuant to the Tax Sharing Agreement
as in effect on the Closing Date; and reimburse Holdings for out-of-pocket
administrative expenses incurred by Holdings, provided such reimbursement
may not exceed $50,000 in any fiscal year.
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The payments described in clauses (b), (c), (e) and (f) of this paragraph shall
be Restricted Payments that shall be permitted to be taken in accordance with
this paragraph but shall reduce the amount that would otherwise be available for
Restricted Payments under the foregoing clause (iii) of the first paragraph of
this Section 1011 and the payments described in clauses (a), (d) and (g) of this
paragraph shall be Restricted Payments that shall be permitted to be taken in
accordance with this paragraph and shall not reduce the amount that would
otherwise be available for Restricted Payments under the foregoing clause (iii)
of the first paragraph of this Section 1011.
For the purpose of making any calculations under this Indenture (i)
if a Restricted Subsidiary is designated an Unrestricted Subsidiary, the Company
shall be deemed to have made an Investment in amount equal to the fair market
value of the net assets of such Restricted Subsidiary at the time of such
designation as determined by the Board of Directors of the Company, whose good
faith determination shall be conclusive, (ii) any property transferred to or
from an Unrestricted Subsidiary shall be valued at fair market value at the time
of such transfer, as determined by the Board of Directors of the Company, whose
good faith determination shall be conclusive, and (iii) subject to the
foregoing, the amount of any Restricted Payment, if other than cash, shall be
determined by the Board of Directors of the Company, whose good faith
determination shall be conclusive.
If the aggregate amount of all Restricted Payments calculated under
the foregoing provisions includes an Investment in an Unrestricted Subsidiary or
other Person that thereafter becomes a Restricted Subsidiary, the aggregate
amount of all Restricted Payments calculated under the foregoing provisions
shall be reduced by the lesser of (x) the net asset value of such Subsidiary at
the time it becomes a Restricted Subsidiary and (y) the initial amount of such
Investment.
If an Investment resulted in the making of a Restricted Payment, the
aggregate amount of all Restricted Payments calculated under the foregoing
provision shall be reduced by the amount of any net reduction in such Investment
(resulting from the payment of interest or dividends, loan repayment, transfer
of assets or otherwise), to the extent such net reduction is not included in the
Company's Consolidated Adjusted Net Income; provided that the total amount by
which the aggregate amount of all Restricted Payments may be reduced may not
exceed the lesser of (x) the cash proceeds received by the Company and its
Restricted Subsidiaries in connection with such net reduction and (y) the
initial amount of such Investment.
In computing Consolidated Adjusted Net Income of the Company for
purposes of the foregoing clause (iii)(A), (i) the Company may use audited
financial statements for the portions of the relevant period for which audited
financial statements are available on the date of determination and unaudited
financial statements and other current financial data based on
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the books and records of the Company for the remaining portion of such period
and (ii) the Company shall be permitted to rely in good faith on the financial
statements and other financial data derived from the books and records of the
Company that are available on the date of determination. If the Company makes a
Restricted Payment that, at the time of the making of such Restricted Payment,
would in the good faith determination of the Company be permitted under the
requirements of this Indenture, such Restricted Payment shall be deemed to have
been made in compliance with this Indenture notwithstanding any subsequent
adjustments made in good faith to the Company's financial statements affecting
Consolidated Adjusted Net Income of the Company for any period.
SECTION 1012. Purchase of Securities upon a Change of Control.
If a Change of Control occurs at any time, then each Holder shall
have the right to require that the Company purchase such Holder's Securities, in
whole or in part in integral multiples of $1,000, at a purchase price in cash
equal to 101% of the principal amount of such Securities, plus accrued and
unpaid interest, if any, to the date of purchase, pursuant to the offer
described below (the "Change of Control Offer") and the other procedures set
forth in this Indenture.
Within 30 days following any Change of Control, the Company shall
notify the Trustee thereof and give written notice of such Change of Control to
each Holder by first-class mail, postage prepaid, at its address appearing in
the security register, stating, among other things, (i) the purchase price and
the purchase date, which shall be a Business Day no earlier than 30 days nor
later than 60 days from the date such notice is mailed or such later date as is
necessary to comply with requirements under the Exchange Act; (ii) that any
Security not tendered shall continue to accrue interest; (iii) that, unless the
Company defaults in the payment of the purchase price, any Securities accepted
for payment pursuant to the Change of Control Offer shall cease to accrue
interest after the purchase date (the "Change of Control Purchase Date"); (iv)
that Holders electing to have any Securities purchased pursuant to a Change of
Control Offer shall be required to surrender the Securities, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Securities
completed, to the Paying Agent at the address specified in the notice prior to
the close of business on the third Business Day preceding the Change of Control
Purchase Date; (v) that Holders shall be entitled to withdraw their election if
the Paying Agent receives, not later than the close of business on the second
Business Day preceding the Change of Control Purchase Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder, the
principal amount of Securities delivered for purchase, and a statement that such
Holder is withdrawing his election to have such Securities purchased; (vi) that
Holders whose Securities are being purchased only in part shall be issued new
Securities equal in principal amount to the unpurchased portion of the
Securities surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof; (vii) the instructions that
the Holders of Securities must
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follow in order to tender their Securities; and (viii) the circumstances and
relevant facts regarding such Change of Control.
The Company shall comply with the applicable tender offer rules
including Rule 14e-1 under the Exchange Act, and any other applicable securities
laws and regulations in connection with a Change of Control Offer.
SECTION 1013. Limitation on Certain Asset Sales.
(a) The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any Asset Sale unless (i) the consideration received by
the Company or such Restricted Subsidiary for such Asset Sale is not less than
the fair market value of the assets sold (as determined by the Board of
Directors of the Company, whose good faith determination will be conclusive) and
(ii) the consideration received by the Company or the relevant Restricted
Subsidiary in respect of such Asset Sale consists of at least 85% (A) cash or
cash equivalents or (B) the assumption by the transferee of Debt of the Company
or a Restricted Subsidiary ranked pari passu with the Securities and release of
the Company or such Restricted Subsidiary from all liability on such Debt, or a
combination of the foregoing.
(b) If the Company or any Restricted Subsidiary engages in an Asset
Sale, the Company may, at its option, within 270 days after such Asset Sale, (i)
apply all or a portion of the Net Cash Proceeds to the permanent reduction of
the amounts outstanding under the Revolving Credit Facility or other credit
facility referred to in clause (i) of the definition of Permitted Debt or to the
repayment of other senior Debt of the Company or a Restricted Subsidiary or (ii)
invest (or enter into a legally binding agreement to invest) all or a portion of
such Net Cash Proceeds in properties and assets to replace the properties and
assets that were the subject of the Asset Sale or in properties and assets that
shall be used in businesses of the Company or its Restricted Subsidiaries, as
the case may be, existing on the Closing Date. If any such legally binding
agreement to invest such Net Cash Proceeds is terminated, the Company may,
within 90 days of such termination or within 270 days of such Asset Sale,
whichever is later, invest such Net Cash Proceeds as provided in clause (b)(i)
or (b)(ii) (without regard to the parenthetical contained in such clause
(b)(ii)) above. The amount of such Net Cash Proceeds not so used as set forth
above in this paragraph (b) constitutes "Excess Proceeds".
(c) When the aggregate amount of Excess Proceeds $5,000,000, the
Company shall, within 30 days thereafter, make an offer to purchase (an "Asset
Sale Offer") from all Holders and from the holders of any Pari Passu Debt, to
the extent required by the terms thereof, on a pro rata basis, in accordance
with the procedures set forth in this Indenture or the agreements governing any
such Pari Passu Debt, the maximum principal amount (expressed as a multiple of
$1,000) of the Securities and any such Pari Passu Debt that may be
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purchased with the Excess Proceeds. The offer price as to each Note and any such
Pari Passu Debt shall be payable in cash in an amount equal to (solely in the
case of the Securities) 100% of the principal amount of such Security and
(solely in the case of Pari Passu Debt) no greater than 100% of the principal
amount (or accreted value, as applicable) of such Pari Passu Debt, plus in each
case accrued interest, if any, to the date of repurchase. To the extent that the
aggregate principal amount of Securities and any such Pari Passu Debt tendered
pursuant to an exceeds proceeds offer is less than the Excess Proceeds, the
Company may use the portion of the Excess Proceeds not required to be used to
repurchase the Securities and such Pari Passu Debt for general corporate
purposes. If the aggregate principal amount of Securities and any such Pari
Passu Debt validly tendered and not withdrawn by holders thereof exceeds the
Excess Proceeds, the Securities and any such Pari Passu Debt to be purchased
shall be selected on a pro rata basis (based upon the principal amount of
Securities and the principal amount or accreted value of such Pari Passu Debt
tendered by each holder). Upon completion of such offer to purchase, the amount
of Excess Proceeds shall be reset to zero.
(d) Within the time period described in (c) above for making an
Asset Sale Offer, the Company shall mail a notice to each Holder in the manner
provided in Section 106 stating: (1) that the Asset Sale Offer is being made
pursuant to the provisions of Section 1013 of this Indenture and that all
Securities duly and timely tendered shall be accepted for payment (except, as
provided above, if the aggregate principal amount as the case may be, of the
Securities and any Pari Passu Debt surrendered exceeds the amount of Excess
Proceeds); (2) the purchase price and the purchase date (the "Asset Sale
Purchase Date"), which date shall be no earlier than 30 days nor later than 60
days from the date such notice is mailed; (3) that any Securities not tendered
shall continue to accrue interest; (4) that, unless the Company defaults in the
payment of the purchase price, all Securities accepted for payment pursuant to
the Asset Sale Offer shall cease to accrue interest after the Asset Sale
Purchase Date; (5) that Holders electing to have any Securities purchased
pursuant to an Asset Sale Offer shall be required to surrender the Securities,
with the form entitled "Option of Holder to Elect Purchase" on the reverse of
the Securities completed, to the Paying Agent at the address specified in the
notice prior to the close of business on the third Business Day preceding the
Asset Sale Purchase Date; (6) that Holders shall be entitled to withdraw their
election if the Paying Agent receives, not later than the close of business on
the second Business Day preceding the Asset Sale Purchase Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the Holder,
the principal amount of Securities delivered for purchase, and a statement that
such Holder is withdrawing his election to have such Securities purchased; (7)
that Holders whose Securities are being purchased only in part shall be issued
new Securities equal in principal amount to the unpurchased portion of the
Securities surrendered, which unpurchased portion must be equal to $1,000 in
principal amount or an integral multiple thereof; (8) any other procedures that
the Holders of Securities must follow in order to tender their Securities; and
(9) the circumstances and relevant facts regarding such Asset Sale.
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SECTION 1014. Limitation on Transactions with Affiliates.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, enter into or suffer to exist any
transaction with, or for the benefit of, any Affiliate of the Company unless (a)
such transaction is on terms that are no less favorable to the Company or such
Restricted Subsidiary, as the case may be, than those that could have been
obtained in an arm's length transaction with third parties who are not
Affiliates and (b) either (i) with respect to any transaction or series of
related transactions involving aggregate payments in excess of $250,000 but less
than $2,500,000, the Company delivers an officers' certificate to the Trustee
certifying that such transaction or transactions comply with clause (a) above or
(ii) with respect to a transaction or series of related transactions involving
aggregate payments equal or greater than $2,500,000, such transaction or
transactions have been approved by the Board of Directors (including a majority
of the Disinterested Directors) of the Company or the Company has obtained a
written opinion from a nationally recognized investment banking firm to the
effect that such transaction or transactions are fair to the Company or such
Restricted Subsidiary from a financial point of view.
The foregoing covenant shall not restrict any of the following:
(A) Transactions among the Company and/or its Restricted
Subsidiaries.
(B) The Company from paying reasonably and customary regular
compensation and fees to directors of the Company or any Restricted
Subsidiary who are not employees of the Company or any Restricted
Subsidiary.
(C) Transactions permitted by the provisions of Section 1011.
SECTION 1015. Limitation on Dividends and Other Payment Restrictions
Affecting Restricted Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary 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 Restricted Subsidiary to (a) pay dividends, in cash or
otherwise, or make any other distributions on or in respect of its Capital
Stock, (b) pay any Debt owed to the Company or any other Restricted Subsidiary,
(c) make loans or advances to the Company or any other Restricted Subsidiary or
(d) transfer any of its properties or assets to the Company or any other
Restricted Subsidiary, except for such encumbrances or restrictions existing
under or by reason of any of the following:
(i) Any agreement or instrument in effect on the Closing Date.
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(ii) Customary non-assignment provisions of any lease governing a
leasehold interest of the Company or any Restricted Subsidiary.
(iii) Any agreement or instrument of a Person acquired by the
Company or any Restricted Subsidiary in existence at the time of such
acquisition (but not created in contemplation thereof), which encumbrance
or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of
the Person, so acquired.
(iv) The refinancing or successive refinancings of Debt incurred
under agreements or instruments referred to in the foregoing clause (i) or
(iii), so long as the encumbrances or restrictions contained therein are
no less favorable to the Company or any Restricted Subsidiary than those
contained in such original agreement or instrument.
(v) Any agreement providing for the incurrence of Debt by a
Restricted Subsidiary in compliance with the provisions of Section 1010,
provided that such Restricted Subsidiary is or becomes a Subsidiary
Guarantor.
(vi) Contained in any agreement pursuant to which Debt was issued if
(A) the encumbrance or restriction applies only in the event of a payment
default or a default with respect to a financial covenant contained in
such Debt, (B) the encumbrance or restriction is not materially more
disadvantageous to the holders of the Securities than is customary in
comparable financings (as determined by the Company) and (C) the Company
determines that any such encumbrance or restriction shall not materially
affect the Company's ability to make principal or interest payments on the
Securities.
SECTION 1016. Limitation on Issuances and Sales of Capital Stock of
Restricted Subsidiaries.
The Company shall not sell, and shall not permit any Restricted
Subsidiary, directly or indirectly, to issue or sell, any shares of Capital
Stock of a Restricted Subsidiary (including options, warrants or other rights to
purchase shares of such Capital Stock) except (a) to the Company or a Wholly
Owned Restricted Subsidiary, (b) issuances or sales to foreign nationals of
shares of Capital Stock of foreign Restricted Subsidiaries, to the extent
required by applicable law, or issuances or sales to directors of directors'
qualifying shares, (c) if, immediately after giving effect to such issuance or
sale, neither the Company nor any of its Subsidiaries own any shares of Capital
Stock of such Restricted Subsidiary (including options, warrants or other rights
to purchase shares of such Capital Stock) or (d) if, immediately after giving
effect to such issuance or sale, such Restricted Subsidiary would no longer
constitute a
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Restricted Subsidiary and any remaining Investment in such Person would have
been permitted to be made under the provisions of Section 1011 if made on the
date of such issuance or sale.
SECTION 1017. Limitation on Liens.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create, incur, assume or suffer to exist
any Lien of any kind on or with respect to any of its property or assets,
including any shares of stock or debt of any Restricted Subsidiary, whether
owned at the Closing Date or thereafter acquired, or any income, profits or
proceeds therefrom, or assign or otherwise convey any right to receive income
thereon, unless (a) in the case of any Lien securing Subordinated Debt, the
Securities are secured by a Lien on such property, assets or proceeds that is
senior in priority to such Lien and (b) in the case of any other Lien, the
Securities are equally and ratably secured with the obligation or liability
secured by such Lien.
Notwithstanding the foregoing, the Company may, and may permit any
Restricted Subsidiary to, incur any of the following Liens ("Permitted Liens"):
(i) Liens existing as of the Closing Date.
(ii) Liens on property or assets of the Company or any Restricted
Subsidiary securing Debt under one or more credit facilities in a
principal amount not to exceed the principal amount of the outstanding
Debt permitted by clause (i) of the definition of "Permitted Debt".
(iii) Liens on any property or assets of a Restricted Subsidiary
granted in favor of the Company or any Restricted Subsidiary.
(iv) Liens securing the Securities or any Subsidiary Guarantee.
(v) Liens representing the interest or title of lessors under
Capitalized Lease Obligations or Liens securing purchase money mortgages
or purchase money security interests, so long as the aggregate amount
secured by such Liens does not exceed the respective amounts permitted by
clause (v) of the definition of "Permitted Debt".
(vi) Liens securing Acquired Debt created prior to (and not in
connection with or in contemplation of) the incurrence of such Debt by the
Company or any Restricted Subsidiary; provided that such Lien does not
extend to any property or assets of the Company or any Restricted
Subsidiary other the property and assets acquired in connection with the
incurrence of such Acquired Debt.
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(vii) Liens securing Hedging Obligations incurred in the ordinary
course of business.
(viii) Statutory Liens or landlords', carriers', warehouseman's,
mechanics', suppliers', materialmen's, repairmen's or other like Liens
arising in the ordinary course of business and with respect to amounts not
yet delinquent or being contested in good faith by appropriate
proceedings.
(ix) Liens for taxes, assessments, government charges or claims that
are being contested in good faith by appropriate proceedings promptly
instituted and diligently conducted.
(x) Liens incurred or deposits made to secure the performance of
tenders, bids, leases, statutory obligations, surety and appeal bonds,
government contracts, performance bonds and other obligations of a like
nature incurred in the ordinary course of business (other than contracts
for the payment of money).
(xi) Easements, rights-of-way, restrictions and other similar
charges or encumbrances not interfering in any material respect with the
business of the Company or any Restricted Subsidiary incurred in the
ordinary course of business.
(xii) Liens arising by reason of any judgment, decree or order of
any court, so long as such Lien is adequately bonded and any appropriate
legal proceedings that may have been duly initiated for the review of such
judgment, decree or order have not been finally terminated or the period
within which such proceedings may be initiated has not expired.
(xiii) Liens securing reimbursement obligations with respect to
letters of credit that encumber documents and other property relating to
such letters of credit and the products and proceeds thereof.
(xiv) Liens upon specific items of inventory or other goods and
proceeds of the Company or any Restricted Subsidiary securing its
obligations in respect of bankers' acceptances issued or created for the
account of any Person to facilitate the purchase, shipment or storage of
such inventory or other goods.
(xv) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods.
(xvi) Any extension, renewal or replacement, in whole or in part, of
any Lien described in the foregoing clauses (i) through (xv); provided
that any such extension,
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renewal or replacement is no more restrictive in any material respect than
the Lien so extended, renewed or replaced and does not extend to any
additional property or assets.
SECTION 1018. Unrestricted Subsidiaries.
(a) The Board of Directors of the Company may designate any
Subsidiary (including any newly acquired or newly formed Subsidiary) to be an
Unrestricted Subsidiary so long as (i) neither the Company nor any Restricted
Subsidiary is directly or indirectly liable for any Debt of such Subsidiary,
(ii) no default with respect to any Debt of such Subsidiary would permit (upon
notice, lapse of time or otherwise) any holder of any Debt of the Company or any
Restricted Subsidiary to declare a default on such other Debt or cause the
payment thereof to be accelerated or payable prior to its stated maturity, (iii)
any Investment in such Subsidiary made as a result of designating such
Subsidiary an Unrestricted Subsidiary shall not violate the provisions of
Section 1011, (iv) neither the Company nor any Restricted Subsidiary has a
contract, agreement, arrangement, understanding or obligation of any kind,
whether written or oral, with such Subsidiary other than those that might be
obtained at the time from Persons who are not Affiliates of the Company and (v)
neither the Company nor any Restricted Subsidiary has any obligation to
subscribe for additional shares of Capital Stock or other equity interest in
such Subsidiary, or to maintain or preserve such Subsidiary's financial
condition or to cause such Subsidiary to achieve certain levels of operating
results.
(b) The Board of Directors of the Company may designate any
Unrestricted Subsidiary as a Restricted Subsidiary; provided that (i) no Default
or Event of Default has occurred and is continuing following such designation
and (ii) the Company could incur at least $1.00 of additional Debt (other than
Permitted Debt) pursuant to the first paragraph of Section 1010 (treating any
Debt of such Unrestricted Subsidiary as the incurrence of Debt by a Restricted
Subsidiary).
SECTION 1019. Limitation on Guarantees of Debt by Restricted
Subsidiaries.
All of the Company's future Restricted Subsidiaries shall be
Subsidiary Guarantors.
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, to guarantee, assume or in any other manner become liable for the
payment of any Debt of the Company or any Debt of any other Restricted
Subsidiary, unless (a) such Restricted Subsidiary simultaneously executes and
delivers a Subsidiary Guarantee and (b) with respect to any guarantee of
Subordinated Debt by a Restricted Subsidiary, any such guarantee is subordinated
to such Restricted Subsidiary's guarantee with respect to the Securities at
least to the same extent as such Subordinated Debt is subordinated to the
Securities.
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Any Subsidiary Guarantee may provide by its terms that it shall be
automatically and unconditionally released and discharged upon (i) any sale,
exchange or transfer to any Person not an Affiliate of the Company of all of the
Company's and the Restricted Subsidiaries' Capital Stock in, or all or
substantially all of the assets of, such Restricted Subsidiary (which sale,
exchange or transfer is not prohibited by this Indenture), (ii) if applicable,
the release or discharge of the guarantee that resulted in the creation of such
guarantee of the Securities, except a discharge or release by or as a result of
payment under such guarantee or (iii) the designation of such Restricted
Subsidiary as an Unrestricted Subsidiary in accordance with the terms of this
Indenture.
SECTION 1020. Waiver of Certain Covenants.
The Company or any Restricted Subsidiary may omit in any particular
instance to comply with any term, provision or condition set forth in Sections
1006 through 1019, inclusive, if before or after the time for such compliance
the Holders of at least a majority in principal amount of the Outstanding
Securities, by Act of such Holders, waive such compliance in such instance with
such term, provision or condition, but no such waiver shall extend to or affect
such term, provision or condition except to the extent so expressly waived, and,
until such waiver shall become effective, the obligations of the Company and the
duties of the Trustee in respect of any such term, provision or condition shall
remain in full force and effect.
SECTION 1021. Payment for Consent.
Neither the Company nor any of its Restricted Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Securities unless such consideration is offered to be paid or is paid to
all Holders that consent, waive or agree to amend in the time frame set forth in
the solicitation documents relating to such consent, waiver or agreement.
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ARTICLE ELEVEN
REDEMPTION OF SECURITIES
SECTION 1101. Right of Redemption.
(a) The Securities may be redeemed at the option of the Company, as
a whole or from time to time in part, at any time on or after May 15, 2003,
subject to the conditions and at the Redemption Prices specified in the form of
Security attached hereto as Exhibit A, together with accrued interest to the
Redemption Date.
(b) In addition, at any time or from time to time prior to May 15,
2001, the Company may at its option redeem Securities with the net proceeds of
one or more Equity Offerings at a redemption price equal to 111% of the
principal amount thereof, together with accrued interest, if any, to the date of
redemption (subject to the rights of Holders of record on the relevant record
date to receive interest due on an Interest Payment Date); provided that,
immediately after giving effect to any such redemption, at least 75% of the
aggregate principal amount of the Securities issued under this Indenture remains
outstanding. Any such redemption must be made within 90 days of the related
Equity Offering.
SECTION 1102. Applicability of Article.
Redemption of Securities at the election of the Company or
otherwise, as permitted or required by any provision of this Indenture, shall be
made in accordance with such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Securities pursuant to
Section 1101 shall be evidenced by a Board Resolution. In case of any redemption
at the election of the Company, the Company shall, at least 60 days prior to the
Redemption Date fixed by the Company (unless a shorter notice shall be
satisfactory to the Trustee), notify the Trustee of such Redemption Date and of
the principal amount of Securities to be redeemed and shall deliver to the
Trustee such documentation and records as shall enable the Trustee to select the
Securities to be redeemed pursuant to Section 1104.
SECTION 1104. Selection by Trustee of Securities to Be Redeemed.
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Securities not previously
called for redemption, by lot or such method as
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the Trustee shall deem fair and appropriate and which may provide for the
selection for redemption of portions of the principal of Securities; provided,
however, that no such partial redemption shall reduce the portion of the
principal amount of a Security not redeemed to less than $1,000.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Securities selected
for partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to redemption of Securities shall relate, in
the case of any Security redeemed or to be redeemed only in part, to the portion
of the principal amount of such Security which has been or is to be redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given in the manner provided for in
Section 106 not less than 30 nor more than 60 days prior to the Redemption Date,
to each Holder of Securities to be redeemed.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price and the amount of accrued interest to the
Redemption Date payable as provided in Section 1107, if any,
(3) if less than all Outstanding Securities are to be redeemed, the
identification (and, in the case of a partial redemption, the principal
amounts) of the particular Securities to be redeemed,
(4) in case any Security is to be redeemed in part only, the notice
which relates to such Security shall state that on and after the
Redemption Date, upon surrender of such Security, the holder shall
receive, without charge, a new Security or Securities of authorized
denominations for the principal amount thereof remaining unredeemed,
(5) that on the Redemption Date the Redemption Price (and accrued
interest, if any, to the Redemption Date payable as provided in Section
1107) shall become due and payable upon each such Security, or the portion
thereof, to be redeemed, and that interest thereon shall cease to accrue
on and after said date,
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(6) the place or places where such Securities are to be surrendered
for payment of the Redemption Price and accrued interest, if any,
(7) the CUSIP or CINS number, as the case may be, and
(8) the Section of the Securities or this Indenture pursuant to
which the Securities are being redeemed.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
On or prior to 10:00 a.m. (New York City time) on any Redemption
Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if
the Company is acting as its own Paying Agent, segregate and hold in trust as
provided in Section 1003) an amount of money in U.S. dollars sufficient to pay
the Redemption Price of, and accrued interest on, all the Securities which are
to be redeemed on that date.
SECTION 1107. Securities Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Securities
so to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified (together with accrued interest, if any, to
the Redemption Date), and from and after such date (unless the Company shall
default in the payment of the Redemption Price and accrued interest) such
Securities shall cease to bear interest. Upon surrender of any such Security for
redemption in accordance with said notice, such Security shall be paid by the
Company at the Redemption Price, together with accrued interest, if any, to the
Redemption Date; provided, however, that installments of interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Securities, or one or more Predecessor Securities, registered as such at
the close of business on the relevant Record Dates according to their terms and
the provisions of Section 309.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal (and premium, if any) shall,
until paid, bear interest from the Redemption Date at the rate borne by the
Securities.
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SECTION 1108. Securities Redeemed in Part.
Any Security which is to be redeemed only in part shall be
surrendered at the office or agency of the Company maintained for such purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or such Holder's
attorney duly authorized in writing), and the Company shall execute, and the
Trustee shall authenticate and deliver to the Holder of such Security without
service charge, a new Security or Securities, of any authorized denomination as
requested by such Holder, in aggregate principal amount equal to and in exchange
for the unredeemed portion of the principal of the Security so surrendered.
ARTICLE TWELVE
DEFEASANCE AND COVENANT DEFEASANCE
SECTION 1201. Company Option to Effect Defeasance or Covenant
Defeasance.
The Company may, at its option by Board Resolution at any time, with
respect to the Securities, elect to have either Section 1202 or Section 1203 be
applied to all Outstanding Securities upon compliance with the conditions set
forth below in this Article Twelve.
SECTION 1202. Defeasance and Discharge.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1202, the Company and the Subsidiary Guarantors shall
be deemed to have been discharged from their obligations with respect to all
Outstanding Securities on the date the conditions set forth in Section 1204 are
satisfied (hereinafter, "defeasance"). For this purpose, such defeasance means
that the Company shall be deemed to have paid and discharged the entire Debt
represented by the Outstanding Securities, which shall thereafter be deemed to
be "Outstanding" only for the purposes of Section 1205 and the other Sections of
this Indenture referred to in (A) and (B) below, and to have satisfied all its
other obligations under such Securities and this Indenture insofar as such
Securities are concerned (and the Trustee, at the expense of the Company, shall
execute proper instruments acknowledging the same), except for the following
which shall survive until otherwise terminated or discharged hereunder: (A) the
rights of Holders of Outstanding Securities to receive payments in respect of
the principal of (and premium, if any, on) and interest on such Securities when
such payments are due, (B) the Company's obligations with respect to such
Securities under Sections 304, 305,
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308, 1002 and 1003, (C) the rights, powers, trusts, duties and immunities of the
Trustee hereunder and (D) this Article Twelve. Subject to compliance with this
Article Twelve, the Company may exercise its option under this Section 1202
notwithstanding the prior exercise of its option under Section 1203 with respect
to the Securities.
SECTION 1203. Covenant Defeasance.
Upon the Company's exercise under Section 1201 of the option
applicable to this Section 1203, each of the Company and the Subsidiary
Guarantors shall be released from its obligations under any covenant contained
in clauses (b), (c), (d) and (f) of Section 801 and in Sections 1007 through
1021 with respect to the Outstanding Securities on and after the date the
conditions set forth below are satisfied (hereinafter, "covenant defeasance"),
and the Securities shall thereafter be deemed not to be "Outstanding" for the
purposes 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 Subsidiary Guarantor 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 501(3), 501(4), 501(5), 501(6), 501(7) and 501(10) but, except as
specified above, the remainder of this Indenture and such Securities shall be
unaffected thereby.
SECTION 1204. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either
Section 1202 or Section 1203 to the Outstanding Securities:
(1) The Company shall irrevocably have deposited or caused to be
deposited with the Trustee (or another trustee satisfying the requirements
of Section 607 who shall agree to comply with the provisions of this
Article Twelve applicable to it) as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Securities, (A) money in an amount, or (B) U.S. Government
Obligations (as defined herein) that through the scheduled payment of
principal and interest thereon shall provide money in an amount, or (C) a
combination thereof, sufficient, in the opinion of a nationally recognized
firm of independent public accountants, to pay and discharge the principal
of (and premium, if any, on) and interest on the Outstanding Securities on
the Stated Maturity (or upon Redemption Date, if applicable) of such
principal (and premium, if any) or installment of interest;
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provided that the Trustee shall have been irrevocably instructed to apply
such money or the proceeds of such U.S. Government Obligations to said
payments with respect to the Securities. Before such a deposit, the
Company may give to the Trustee, in accordance with Section 1103 hereof, a
notice of its election to redeem all of the Outstanding Securities at a
future date in accordance with Article Eleven hereof, which notice shall
be irrevocable. Such irrevocable redemption notice, if given, shall be
given effect in applying the foregoing. For this purpose, "U.S. Government
Obligations" means securities that are (x) direct obligations of the
United States of America for the timely payment of which its full faith
and credit is pledged or (y) obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of the United
States of America the timely payment of which is unconditionally
guaranteed as a full faith and credit obligation by the United States of
America, which, in either case, are not callable or redeemable at the
option of the issuer thereof, and shall also include a depository receipt
issued by a bank (as defined in Section 3(a)(2) of the Securities Act), as
custodian with respect to any such U.S. Government Obligation or a
specific payment of principal of or interest on any such U.S. Government
Obligation held by such custodian for the account of the holder of such
depository receipt, provided that (except as required by law) such
custodian is not authorized to make any deduction from the amount payable
to the holder of such depository receipt from any amount received by the
custodian in respect of the U.S. Government Obligation or the specific
payment of principal of or interest on the U.S. Government Obligation
evidenced by such depository receipt.
(2) No Default or Event of Default with respect to the Securities
shall have occurred and be continuing on the date of such deposit or,
insofar as paragraphs (8) and (9) of Section 501 hereof are concerned, at
any time during the period ending on the 91st day after the date of such
deposit (it being understood that this condition shall not be deemed
satisfied until the expiration of such period).
(3) Such defeasance or covenant defeasance shall not result in a
breach or violation of, or constitute a default under, this Indenture or
any other material agreement or instrument to which the Company or any
Subsidiary Guarantor is a party or by which it is bound.
(4) In the case of an election under Section 1202, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (x) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (y) since the Closing Date, there has been a
change in the applicable federal income tax law, in either case to the
effect that, and based thereon such opinion shall confirm that, the
Holders of the Outstanding Securities shall not recognize income, gain or
loss for federal income tax purposes as a result of such defeasance and
shall be subject to
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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 had not occurred.
(5) In the case of an election under Section 1203, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Holders of the Securities Outstanding shall not recognize income, gain or
loss for federal income tax purposes as a result of such covenant
defeasance and shall 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 covenant defeasance had not occurred.
(6) The Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for relating to either the defeasance under Section
1202 or the covenant defeasance under Section 1203, as the case may be,
have been complied with.
SECTION 1205. Deposited Money and U.S. Government Obligations to Be
Held in Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section 1003, all
money and U.S. Government Obligations (including the proceeds thereof) deposited
with the Trustee (or other qualifying trustee, collectively for purposes of this
Section 1205, the "Trustee") pursuant to Section 1204 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 (including the Company
acting as its own 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 premium, if any) 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. Governmental Obligations
deposited pursuant to Section 1204 or the principal and interest received in
respect thereof other than any such tax, fee or other charge which by law is for
the account of the Holders of the Outstanding Securities.
Anything in this Article Twelve to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon Company
Request any money or U.S. Government Obligations held by it as provided in
Section 1204 which, 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 which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance, as applicable, in accordance with this Article.
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SECTION 1206. Reinstatement.
If the Trustee or any Paying Agent is unable to apply any money in
accordance with Section 1205 by reason of any order or judgment of any court or
governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company obligations under this Indenture and the
Securities shall be revived and reinstated as though no deposit had occurred
pursuant to Section 1202 or 1203, as the case may be, until such time as the
Trustee or Paying Agent is permitted to apply all such money in accordance with
Section 1205; provided, however, that if the Company makes any payment of
principal of (or premium, if any) or interest on any Security following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Securities to receive such payment from the money held by
the Trustee or Paying Agent.
ARTICLE THIRTEEN
SUBSIDIARY GUARANTEES
SECTION 1301. Subsidiary Guarantees.
As of the date of this Indenture the Company does not have any
Subsidiaries; however, the Company will cause each Person that becomes a
Restricted Subsidiary to become a Subsidiary Guarantor as provided in Section
1308.
(a) Subject to clause (b) of this Section 1301, each Subsidiary
Guarantor hereby, jointly and severally, fully, absolutely, unconditionally and
irrevocably guarantees to each Holder of a Security authenticated and delivered
by the Trustee, and to the Trustee on behalf of each Holder, the punctual
payment when due of all Indenture Obligations which, for purposes of its
Subsidiary Guarantee, shall also be deemed to include all commissions, fees,
charges, costs and other expenses (including reasonable legal fees and
disbursements of counsel) arising out of or incurred by the Trustee or the
Holders in connection with the enforcement of any Subsidiary Guarantee. Without
limiting the generality of the foregoing, each Subsidiary Guarantor's liability
shall extend to all amounts that constitute part of the Indenture Obligations
and would be owed by the Company to such Holder or the Trustee under the
Securities or this Indenture but for the fact that they are unenforceable,
reduced, limited, suspended or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving the Company.
(b) Each Subsidiary Guarantor and by its acceptance hereof each
Holder hereby confirms that it is the intention of all such parties that the
Guarantee by such Subsidiary Guarantor pursuant to its Subsidiary Guarantee not
constitute a fraudulent transfer or
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conveyance for purposes of the Federal Bankruptcy Code, the Uniform Fraudulent
Conveyance Act, the Uniform Fraudulent Transfer Act of any similar federal or
state law or the provisions of its local law relating to fraudulent transfer or
conveyance. To effectuate the foregoing intention, the Holders and each
Subsidiary Guarantor hereby irrevocably agree that the obligations of such
Subsidiary Guarantor under its Subsidiary Guarantee shall be limited to the
maximum amount as shall, after giving effect to all other contingent and fixed
liabilities of such Subsidiary Guarantor and after giving effect to any
collections from or payments made by or on behalf of any other Subsidiary
Guarantor in respect of the obligations of such other Subsidiary Guarantor under
its Subsidiary Guarantee or pursuant to paragraph (c) of this Section 1301,
result in the obligations of such Subsidiary Guarantor under its Subsidiary
Guarantee not constituting a fraudulent conveyance or fraudulent transfer under
federal or state law.
(c) In order to provide for just and equitable contribution among
the Subsidiary Guarantors, the Subsidiary Guarantors agree, inter se, that in
the event any payment or distribution is made by any Subsidiary Guarantor (a
"Funding Guarantor") under its Subsidiary Guarantee, such Funding Guarantor
shall be entitled to a contribution from each other Subsidiary Guarantor in a
pro rata amount based on the Adjusted Net Assets of each Subsidiary Guarantor
(including the Funding Guarantor) for all payments, damages and expenses
incurred by the Funding Guarantor in discharging the Indenture Obligations of
the Company or any other Subsidiary Guarantor's obligations with respect to its
Subsidiary Guarantee. "Adjusted Net Assets" of such Subsidiary Guarantor at any
date shall mean the lesser of (x) the amount by which the fair value of the
property of such Subsidiary Guarantor 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 the Subsidiary Guarantee of such Subsidiary
Guarantor at such date and (y) the amount by which the present fair salable
value of the assets of such Subsidiary Guarantor at such date exceeds the amount
that shall be required to pay the probable liability of such Subsidiary
Guarantor 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
Subsidiary Guarantee, as they become absolute and matured.
SECTION 1302. Guaranty Absolute.
Subject to the limitations in Section 1301, each Subsidiary
Guarantor guarantees that the Securities shall be paid or performed strictly in
accordance with the terms of the Securities and this Indenture, regardless of
any law, regulation or order now or hereafter in effect in any jurisdiction
affecting any of such terms or the rights of any Holder with respect thereto.
The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee are
independent of the obligations of the Company under the Securities and this
Indenture, and a separate action or actions may be brought and prosecuted
against such Subsidiary Guarantor to
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enforce its Subsidiary Guarantee, irrespective of whether any action is brought
against the Company or any other Subsidiary Guarantor or whether the Company or
any other Subsidiary Guarantor is joined in any such action or actions. The
liability of each Subsidiary Guarantor under its Subsidiary Guarantee shall be
absolute and unconditional and the liability and obligations of such Subsidiary
Guarantor hereunder shall not be released, discharged, mitigated, waived,
impaired or affected in whole or in part by:
(a) any lack of validity or enforceability of this Indenture or the
Securities with respect to the Company or any Subsidiary Guarantor or any
agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Indenture Obligations, or any other
amendment or waiver of or any consent to departure from this Indenture,
including any increase in the Indenture Obligations resulting from the
extension of additional credit to the Company or otherwise;
(c) the failure to give notice to the Subsidiary Guarantor of the
occurrence of a Default under the provisions of this Indenture or the
Securities;
(d) any taking, release or amendment or waiver of or consent to
departure from any other guarantee, for all or any of the Indenture
Obligations;
(e) any failure, omission, delay by or inability on the part of the
Trustee or the Holders to assert or exercise any right, power or remedy
conferred on the Trustee or the Holders in this Indenture or the
Securities;
(f) any change in the corporate structure, or termination,
dissolution, consolidation or merger of the Company or any Subsidiary
Guarantor with or into any other Person, the voluntary or involuntary
liquidation, dissolution, sale or other disposition of all or
substantially all the assets of the Company or any Subsidiary Guarantor,
the marshalling of the assets and liabilities of the Company or any
Subsidiary Guarantor, the receivership, insolvency, bankruptcy, assignment
for the benefit of creditors, reorganization, arrangement, composition
with the creditors, or readjustment of, or other similar proceedings
affecting the Company or any Subsidiary Guarantor, or any of the assets of
any of them;
(g) the assignment of any right, title or interest of the Trustee or
any Holder in this Indenture or the Securities to any other Person; or
<PAGE> 104
93
(h) any other event or circumstance (including any statute of
limitations), whether foreseen or unforeseen and whether similar or
dissimilar to any of the foregoing, that might otherwise constitute a
defense available to, or a discharge of, the Company or a Subsidiary
Guarantor, other than payment in full of the Indenture Obligations; it
being the intent of each Subsidiary Guarantor that its obligations
hereunder shall not be discharged except by payment of all amounts owing
pursuant to this Indenture or the Securities.
The Subsidiary Guarantee of each Subsidiary Guarantor shall continue to be
effective or be reinstated, as the case may be, if at any time any payment of
any of the Indenture Obligations is rescinded or must otherwise be returned by
any Holder or the Trustee upon the insolvency, bankruptcy or reorganization of
the Company or otherwise, all as though such payment had not been made. Each
Subsidiary Guarantor further agrees, to the fullest extent that it may lawfully
do so, that, as between such Subsidiary Guarantor, on the one hand, and the
Holders and the Trustee, on the other hand, (i) the maturity of the obligations
guaranteed hereby may be accelerated as provided in Article Five of this
Indenture for the purposes of this Subsidiary Guarantee, notwithstanding any
stay, injunction or other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (ii) in the event of any acceleration of
such obligations as provided in Article Five of this Indenture, such obligations
(whether or not due and payable) shall forthwith become due and payable by the
Subsidiary Guarantor for the purpose of this Subsidiary Guarantee.
SECTION 1303. Waivers.
(a) Each Subsidiary Guarantor hereby expressly waives (to the extent
permitted by law) notice of the acceptance of its Subsidiary Guarantee and
notice of the existence, renewal, extension or the non-performance, non-payment,
or non-observance on the part of the Company of any of the terms, covenants,
conditions and provisions of this Indenture or the Securities or any other
notice whatsoever to or upon the Company or such Subsidiary Guarantor with
respect to the Indenture Obligations. Each Subsidiary Guarantor hereby
acknowledges communication to it of the terms of this Indenture and the
Securities and all of the provisions herein contained and consents to and
approves the same. Each Subsidiary Guarantor hereby expressly waives (to the
extent permitted by law) diligence, presentment and protest.
(b) Without prejudice to any of the rights or recourse which the
Trustee or the Holders may have against the Company, each Subsidiary Guarantor
hereby expressly waives (to the extent permitted by law) any right to require
the Trustee or the Holders to:
(1) initiate or exhaust any rights, remedies or recourse against the
Company, any Subsidiary Guarantor or any other Person;
<PAGE> 105
94
(2) value, realize upon, or dispose of any security of the Company
or any other Person held by the Trustee or the Holders; or
(3) initiate or exhaust any other remedy which the Trustee or the
Holders may have in law or equity;
before requiring, becoming entitled to or demanding payment from such Subsidiary
Guarantor under this Subsidiary Guarantee.
SECTION 1304. Subrogation.
Each Subsidiary Guarantor shall not exercise any rights that it may
acquire by way of subrogation under this Subsidiary Guarantee, by any payment
made hereunder or otherwise, until all the Indenture Obligations shall have been
paid in full. If any amount shall be paid to any Subsidiary Guarantor on account
of any such subrogation rights at any time when all the Indenture Obligations
shall not have been paid in full, such amount shall be held in trust for the
benefit of the Holders and the Trustees and shall forthwith be paid to the
Trustee, on behalf of the Holders, to be credited and applied to the Indenture
Obligations, whether matured or unmatured.
SECTION 1305. No Waiver; Remedies.
No failure on the part of any Holder or the Trustee to exercise, and
no delay in exercising, any right hereunder shall operate as a waiver thereof;
nor shall any single or partial exercise of any right hereunder preclude any
other or further exercise thereof or the exercise of any other right. The
remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
SECTION 1306. Continuing Guaranty; No Right of Set-Off; Independent
Obligation.
(a) This Subsidiary Guarantee is a continuing guarantee of the
payment of all Indenture Obligations and shall remain in full force and effect
until the payment in full (subject to Section 1301) of all of the Indenture
Obligations and all other amounts payable under this Subsidiary Guarantee and
shall apply to and secure any ultimate balance due or remaining unpaid to the
Trustee or the Holders under this Indenture or the Securities; and this
Subsidiary Guarantee shall not be considered as wholly or partially satisfied by
the payment or liquidation at any time or from time to time of any sum of money
for the time being due or remaining unpaid to the Trustee or the Holders.
<PAGE> 106
95
(b) Subject to Section 1301, each Subsidiary Guarantor hereby
guarantees that the Indenture Obligations shall be paid to the Trustee without
set-off or counterclaim or other reduction whatsoever (whether for taxes,
withholding or otherwise) in lawful currency of the United States of America.
(c) Subject to Section 1301, each Subsidiary Guarantor guarantees
that the Indenture Obligations shall be paid strictly in accordance with their
terms regardless of any lack of validity or enforceability of any of such terms
or the rights of the Holders with respect thereto.
(d) Each Subsidiary Guarantor's liability to pay or perform or cause
the performance of the Indenture Obligations under this Subsidiary Guarantee
shall arise forthwith after demand for payment by the Trustee has been given to
such Subsidiary Guarantor in the manner prescribed in this Indenture.
SECTION 1307. Subsidiary Guarantors May Consolidate, Etc., on
Certain Terms.
(a) Nothing contained in this Indenture or in any of the Securities
shall prevent any consolidation or merger of a Subsidiary Guarantor with or into
the Company or another Subsidiary Guarantor or shall prevent any sale or
conveyance of the property of a Subsidiary Guarantor as an entirety or
substantially as an entirety to the Company or another Subsidiary Guarantor,
which consolidation, merger, sale or conveyance is otherwise in accordance with
the terms of this Indenture.
(b) Other than as set forth in paragraph (a) of this Section, no
Subsidiary Guarantor may consolidate with or merge with or into (whether or not
such Subsidiary Guarantor is the surviving Person) another Person whether or not
affiliated with such Subsidiary Guarantor unless: (i) subject to the provisions
of Section 1309, the Person formed by or surviving such consolidation or merger
(if other than such Subsidiary Guarantor) assumes all of the obligations of such
Subsidiary Guarantor under this Indenture and its Subsidiary Guarantee, pursuant
to a supplemental indenture in form and substance satisfactory to the Trustee,
and (b) immediately after giving effect to such transaction, no Default or Event
of Default shall have occurred and be continuing.
SECTION 1308. Additional Subsidiary Guarantors.
The Company will cause each Person that becomes a Restricted
Subsidiary after the date of this Indenture to become a Subsidiary Guarantor
with respect to the Indenture Obligations by executing and delivering a
supplemental indenture to this Indenture providing for a Subsidiary Guarantee by
such Subsidiary under this Article Thirteen (or under a separate
<PAGE> 107
96
guarantee agreement consistent in all material respects with this Article
Thirteen). The Company shall deliver to the Trustee, together with the
supplemental indenture referred to above, an Opinion of Counsel that such
Subsidiary Guarantee is a legal, valid, binding and enforceable obligation of
such Subsidiary Guarantor, subject to customary local law exceptions and
customary exceptions for bankruptcy and equitable principles.
SECTION 1309. Releases.
(a) In the event of (i) the conveyance, sale, assignment, transfer
or other disposition (by way of merger, consolidation or otherwise) of all of
the Capital Stock of a Subsidiary Guarantor to a Person that is not an Affiliate
of the Company in compliance with this Section 1309 and the terms of this
Indenture or (ii) a conveyance, sale, assignment, transfer or other disposition
of all or substantially all of the assets of a Subsidiary Guarantor (by way of
merger, consolidation or otherwise) to a Person that is not an Affiliate of the
Company in compliance with this Section 1309 and the terms of this Indenture,
then such Subsidiary Guarantor (or Person acquiring such assets in the event of
a sale or other disposition of all of the assets of such Subsidiary Guarantor)
shall be deemed automatically and unconditionally released from and discharged
from all of its obligations under this Article Thirteen and its Subsidiary
Guarantee without any further action required on the part of the Trustee or any
Holder; provided that, in the event such transaction constitutes an Asset Sale,
the Net Proceeds of such sale, transfer or other disposition are applied in
accordance with Section 1013 hereof.
(b) Any Subsidiary Guarantor that is designated by the Board of
Directors of the Company as an Unrestricted Subsidiary, or such Subsidiary
Guarantor ceases to be a Subsidiary of the Company, in accordance with the terms
of this Indenture may, at such time, at the option of the Board of Directors, be
released and relieved of its obligations under its Subsidiary Guarantee.
(c) Concurrently with the defeasance of the Securities under Section
1202 hereof, or the covenant defeasance of the Securities under Section 1203
hereof, the Subsidiary Guarantors shall be released from all their obligations
under their Subsidiary Guarantees under this Article Thirteen.
(d) The Trustee shall deliver an appropriate instrument evidencing
such release upon receipt of a Company Request accompanied by an Officers'
Certificate certifying as to the compliance with this Section 1309. Any
Subsidiary Guarantor not so released shall remain liable for the full amount of
principal of and interest on the Securities as provided in its Subsidiary
Guarantee.
SECTION 1310. Benefits Acknowledged.
<PAGE> 108
97
Each Subsidiary Guarantor acknowledges that it will receive direct
and indirect benefits from the financing arrangements contemplated by this
Indenture and that its guarantee and waivers pursuant to its Subsidiary
Guarantee are knowingly made in contemplation of such benefits.
SECTION 1311. Severability.
In case any provision of this Subsidiary 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.
ARTICLE FOURTEEN
SECURITY
SECTION 1401. Security.
(a) On the Closing Date, the Company shall purchase, and at all
times, subject to the Pledge Agreement, pledge to the Trustee the Pledged
Securities as security for the benefit of the Holders. The Pledged Securities
must be in such amount as will be sufficient upon receipt of scheduled interest
on and principal payments of such Pledged Securities, in the opinion of a
nationally recognized firm of independent public accountants selected by the
Company, to provide for payment in full of the first two scheduled interest
payments due on the Outstanding Securities. The Pledged Securities shall be
pledged by the Company to the Trustee for its benefit and the benefit of the
Holders pursuant to the Pledge Agreement and shall be held in the Escrow Account
pending disposition pursuant to the Pledge Agreement.
(b) Each Holder, by its acceptance of a Security, consents and
agrees to the terms of the Pledge Agreement (including, without limitation, the
provisions providing for foreclosure and release of the Pledged Securities) as
the same may be in effect or may be amended from time to time in accordance with
its terms, and authorizes and directs the Trustee to enter into the Pledge
Agreement and to perform its respective obligations and exercise its respective
rights thereunder in accordance therewith. The Company shall do or cause to be
done all such acts and things as may be reasonably necessary or proper, or as
may be required by the provisions of the Pledge Agreement, to assure and confirm
to the Trustee the security interest in the Pledged Securities contemplated
hereby, by the Pledge Agreement or any part thereof, as from time to time
constituted, so as to render the same available for the security and benefit of
this Indenture and of the Securities secured hereby, according to the intent and
purposes herein expressed. The Company shall take, or shall cause to be taken,
any and all
<PAGE> 109
98
actions reasonably required (and any action reasonably requested by the Trustee)
to cause the Pledge Agreement to create and maintain, as security for the
obligations of the Company under this Indenture and the Securities, valid and
enforceable first priority liens in and on all the Pledged Securities, in favor
of the Trustee, superior to and prior to the rights of third Persons and subject
to no other Liens.
(c) The release of any Pledged Securities pursuant to the Pledge
Agreement will not be deemed to impair the security under this Indenture in
contravention of the provisions hereof if and to the extent the Pledged
Securities are released pursuant to this Indenture and the Pledge Agreement. To
the extent applicable, the Company shall cause TIA Section 314(d), relating to
the release of property or securities from the Lien and security interest of the
Pledge Agreement and relating to the substitution therefor of any property or
securities to be subjected to the Lien and security interest of the Pledge
Agreement, to be complied with. Any certificate or opinion required by TIA
Section 314(d) may be made by an officer of the Company, except in cases where
TIA Section 314(d) requires that such certificate or opinion be made by an
independent Person, which Person shall be an independent appraiser or other
expert selected or approved by the Company in the exercise of reasonable care.
(d) The Company shall cause TIA Section 314(b), relating to opinions
of counsel regarding the Lien under the Pledge Agreement, to be complied with.
The Trustee may, to the extent permitted by Section 602 hereof, accept as
conclusive evidence of compliance with the foregoing provisions the appropriate
statements contained in such instruments.
(e) The Trustee, in its sole discretion and without the consent of
the Holders, may, and at the request of the Holders of at least 25% in aggregate
principal amount of Securities then Outstanding shall, on behalf of the Holders,
take all actions it deems necessary or appropriate in order to (i) enforce any
of the terms of the Pledge Agreement and (ii) collect and receive any an all
amounts payable in respect of the obligations of the Company thereunder. The
Trustee shall have power to institute and to maintain such suits and proceedings
as the Trustee may deem expedient to preserve or protect its interests and the
interests of the Holders in the Pledged Securities (including power to institute
and maintain suits or proceedings to restrain the enforcement of or compliance
with any legislative or other governmental enactment, rule or order that may be
unconstitutional or otherwise invalid if the enforcement of, or compliance with,
such enactment, rule or order would impair the security interest hereunder or be
prejudicial to the interest of the Holders or of the Trustee).
<PAGE> 110
99
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
TRI-STATE OUTDOOR MEDIA GROUP, INC.
By /s/ Sheldon G. Hurst
__________________________________
Name: Sheldon G. Hurst
Title: President
Chief Executive Officer
IBJ SCHRODER BANK & TRUST COMPANY
By /s/ Terence Rawlins
__________________________________
Name: Terence Rawlins
Title: Assistant Vice President
<PAGE> 111
Exhibit A
[FACE OF SECURITY]
TRI-STATE OUTDOOR MEDIA GROUP, INC.
11% [Series B]* Senior Note due 2008
[CINS] [CUSIP] ______________
No. _______ $_________________
TRI-STATE OUTDOOR MEDIA GROUP, INC., a Kansas corporation (the
"Company", which term includes any successor under the Indenture hereinafter
referred to), for value received, promises to pay to ___________, or its
registered assigns, the principal sum of ____________________________________
($___________), on May 15, 2008.
Interest Payment Dates: May 15 and November 15 of each year
commencing November 15, 1998.
Regular Record Dates: May 1 and November 1 of each year.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all purposes
have the same effect as if set forth at this place.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officer.
Date: ______________ TRI-STATE OUTDOOR MEDIA GROUP, INC
By _____________________________________
Name:
Title:
________
* Include only for Exchange Securities.
<PAGE> 112
A-2
(Form of Trustee's Certificate of Authentication)
This is one of the 11% [Series B]* Senior Notes due 2008 described in the
within-mentioned Indenture.
IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By: ___________________________________
Authorized Signatory
________
* Include only for Exchange Securities.
<PAGE> 113
A-3
[REVERSE SIDE OF SECURITY]
TRI-STATE OUTDOOR MEDIA GROUP, INC.
11% [Series B] Senior Note due 2008
1. Principal and Interest.
The Company will pay the principal of this Security on May 15, 2008.
The Company promises to pay interest on the principal amount of this
Security on each Interest Payment Date, as set forth below, at the rate per
annum shown above.
Interest will be payable semiannually (to the holders of record of
the Securities at the close of business on the May 1 or November 1 immediately
preceding the Interest Payment Date) on each Interest Payment Date, commencing
November 15, 1998.
[The Holder of this Security is entitled to the benefits of the
Registration Rights Agreement, dated as of May 15, 1998, among the Company and
the Initial Purchasers named therein (the "Registration Rights Agreement"). In
the event that either (a) the Exchange Offer Registration Statement (as defined
in the Registration Rights Agreement) is not filed with the Securities and
Exchange Commission on or prior to the 60th calendar day following the date of
original issue of the Securities (the "Closing Date"), or (b) the Exchange Offer
Registration Statement is not declared effective on or prior to the 180th
calendar day following the Closing Date, or (c) the Exchange Offer (as defined
in the Registration Rights Agreement) is not consummated or a Shelf Registration
Statement (as defined in the Registration Rights Agreement) is not declared
effective on or prior to the 210th calendar day following the Closing Date, or
(d) either (A) the Exchange Offer Registration Statement ceases to be effective
at any time prior to the time that the Exchange Offer is consummated or (B) if
applicable, subject to certain exceptions, the Shelf Registration Statement has
been declared effective and such Shelf Registration Statement ceases to be
effective at any time prior to the second anniversary of its effective date
(each such event referred to in clause (a) through (d), a "Registration
Default"), then the per annum interest rate borne by this Security shall be
increased by 0.25% following the 60-day period referred to in clause (a) above,
following the 180-day period referred to in clause (b) above, following the
210-day period referred to in clause (c) above, or in the case of clause (d)
above, immediately following such Registration Default. Such per annum interest
rate will increase by an additional 0.25% at the beginning of each subsequent
30-day period in the case of clause (a), (b) or (c) above, or 90-day period in
<PAGE> 114
A-4
the case of clause (d) above; provided, however, that in no event will the per
annum interest rate borne by the Notes be increased by more than 1.5%. Upon the
filing of the Exchange Offer Registration Statement, the effectiveness of the
Exchange Offer Registration Statement, the consummation of the Exchange Offer or
the effectiveness of a Shelf Registration Statement, as the case may be, the
interest rate borne by this Security from the date of such filing, consummation
or effectiveness, as the case may be, will be reduced to the original interest
rate set forth above; provided, however, that, if after such reduction in
interest rate, a different event specified in clause (a), (b), (c) or (d) above
occurs, the interest rate may again be increased pursuant to the foregoing
provisions.]*
Interest on this Security will accrue from the most recent date to
which interest has been paid on this Security [or the Security surrendered in
exchange herefor]** or, if no interest has been paid, from May 15, 1998;
provided that, if there is no existing default in the payment of interest and if
this Security is authenticated between a Regular Record Date referred to on the
face hereof and the next succeeding Interest Payment Date, interest shall accrue
from such Interest Payment Date. Interest will be computed on the basis of a
360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and premium, if
any, and interest on overdue installments of interest, to the extent lawful, at
the rate borne by the Securities.
2. Method of Payment.
The Company will pay interest (except defaulted interest) on the
principal amount of the Securities on each May 15 and November 15 to the Persons
who are Holders (as reflected in the Security Register at the close of business
on the May 1 and November 1 (each a "Regular Record Date") immediately preceding
the Interest Payment Date), in each case, even if the Security is canceled on
registration of transfer or registration of exchange, redemption or repurchase
after such record date; provided that, with respect to the payment of principal,
the Company will make payment to the Holder that surrenders this Security to any
Paying Agent on or after May 15, 2008.
The Company will pay principal, premium, if any, and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. At the option of the Company, interest may
be paid by check mailed to the address of the Holder entitled thereto as such
address appears in the Security Register; provided that all
- --------
* Include only for Initial Securities.
** Include only for Exchange Securities
<PAGE> 115
A-5
payments to the Holders who have given wire transfer instructions to the Trustee
(or other Paying Agent) by the Regular Record Date immediately preceding such
Interest Payment Date shall be required to be made by wire transfer of
immediately available funds to the accounts specified by such Holders. If a
payment date is a date other than a Business Day at a place of payment, payment
may be made on the next succeeding day that is a Business Day and no interest
shall accrue for the intervening period.
3. Paying Agent and Registrar.
Initially, the Trustee will act as Authenticating Agent, Paying
Agent and Registrar. The Company may change any Authenticating Agent, Paying
Agent or Registrar upon written notice. The Company, any Subsidiary or any
Affiliate of any of them may act as Paying Agent, Registrar or co-registrar.
4. Indenture; Limitations.
The Company issued the Securities under an Indenture dated as of May
15, 1998 (the "Indenture"), between the Company and IBJ Schroder Bank & Trust
Company, trustee (the "Trustee"). Capitalized terms herein are used as defined
in the Indenture unless otherwise indicated. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act. The Securities are subject to all such terms, and
Holders are referred to the Indenture and the Trust Indenture Act for a
statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Security and the terms of
the Indenture, the terms of the Indenture shall control.
The Securities are general obligations of the Company.
5. Redemption.
Optional Redemption. The Securities may be redeemed at the option of
the Company, in whole or in part, at any time and from time to time, on or after
May 15, 2003, at the following Redemption Prices (expressed in percentages of
principal amount), plus accrued and unpaid interest, if any, to the Redemption
Date (subject to the right of Holders of record on the relevant Regular Record
Date to receive interest due on an Interest Payment Date that is on or prior to
the Redemption Date), if redeemed during the 12-month period beginning May 15 of
each of the years set forth below:
<PAGE> 116
A-6
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----
<S> <C>
2003.................................... 105.500%
2004.................................... 103.667%
2005 ................................... 101.833%
2006 and thereafter .................... 100.000%
</TABLE>
In addition, at any time or from time to time prior to May 15, 2001,
the Company may at its option redeem Securities with the net proceeds of one or
more Equity Offerings at a redemption price equal to 111% of the principal
amount thereof, plus accrued interest, if any, to the Redemption Date (subject
to the right of Holders of record on the relevant Record Date to receive
interest due on the relevant Interest Payment Date); provided that, immediately
after giving effect to such redemption, at least 75% of the aggregate principal
amount of the Securities (including any Additional Securities) remains
outstanding; provided further that any such redemption occurs within 90 days of
the date of closing of the related Equity Offering.
Notice of a 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 at such Holder's last address as it appears in the Security Register.
Securities in original denominations larger than $1,000 may be redeemed in part
in integral multiples of $1,000. On and after the Redemption Date, interest
ceases to accrue on Securities or portions of Securities called for redemption,
unless the Company defaults in the payment of the Redemption Price.
6. Repurchase upon a Change in Control and Asset Sales.
(a) Upon the occurrence of a Change of Control, the Company is
obligated to make an offer to purchase all outstanding Securities at a
redemption price of 101% of the principal amount thereof, plus accrued interest,
if any, to the date of purchase and (b) upon Asset Sales, the Company may be
obligated to make offers to purchase Securities with a portion of the Net Cash
Proceeds of such Asset Sales at a redemption price of 100% of the principal
amount thereof plus accrued interest, if any, to the date of purchase.
7. Denominations; Transfer; Exchange.
The Securities are in registered form without coupons, in
denominations of $1,000 and multiples of $1,000 in excess thereof. A Holder may
register the transfer or exchange of Securities in accordance with the
Indenture. The Registrar may require a Holder, among other things, to furnish
appropriate endorsements and transfer documents and to pay
<PAGE> 117
A-7
any taxes and fees required by law or permitted by the Indenture. The Registrar
need not register the transfer or exchange of any Securities selected for
redemption (except the unredeemed portion of any Security being redeemed in
part). Also, it need not register the transfer or exchange of any Securities for
a period of 15 days before a selection of Securities to be redeemed is made.
8. Persons Deemed Owners.
A Holder may be treated as the owner of a Security for all purposes.
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or interest
remains unclaimed for two years, the Trustee and the Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to the
money must look to the Company for payment, unless an abandoned property law
designates another Person, and all liability of the Trustee and such Paying
Agent with respect to such money shall cease.
10. Discharge Prior to Redemption or Maturity.
If the Company irrevocably deposits, or causes to be deposited, with
the Trustee money or U.S. Government Obligations sufficient to pay the then
outstanding principal of, premium, if any, and accrued interest on the
Securities to redemption or maturity, the Company will be discharged from the
Indenture and the Securities, except in certain circumstances for certain
sections thereof.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities may
be amended or supplemented with the consent of the Holders of at least a
majority in aggregate principal amount of the Securities then Outstanding, and
any existing default or compliance with any provision may be waived with the
consent of the Holders of a majority in aggregate principal amount of the
Securities then Outstanding. Without notice to or the consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Securities to,
among other things, cure any ambiguity, defect or inconsistency and make any
change that does not materially adversely affect the rights of any Holder.
12. Restrictive Covenants.
The Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i) additional
Debt; (ii) Restricted Payments;
<PAGE> 118
A-8
(iii) certain Asset Sales; (iv) transactions with Affiliates; (v) restrictions
on dividends and other payments affecting Restricted Subsidiaries; (vi)
issuances and sale of Capital Stock of Restricted Subsidiaries; (vii)
designation of Unrestricted Subsidiaries; (viii) limitations on Liens; and (ix)
merger, consolidation and certain transfers of assets. Within 60 days after the
end of each fiscal year, the Company must report to the Trustee on compliance
with such limitations.
13. Successor Persons.
When a successor Person or other entity assumes all the obligations
of its predecessor under the Securities and the Indenture, the predecessor
Person will be released from those obligations.
14. Remedies for Events of Default.
If an Event of Default, as defined in the Indenture, occurs and is
continuing, the Trustee or the Holders of not less than 25% in principal amount
of the Securities then Outstanding may declare all the Securities to be
immediately due and payable. If a bankruptcy or insolvency default with respect
to the Company or any of its Significant Subsidiaries occurs and is continuing,
the Securities automatically become immediately due and payable. Holders may not
enforce the Indenture or the Securities except as provided in the Indenture. The
Trustee may require indemnity satisfactory to it before it enforces the
Indenture or the Securities. Subject to certain limitations, Holders of at least
a majority in principal amount of the Securities then Outstanding may direct the
Trustee in its exercise of any trust or power.
15. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any other
capacity, may become the owner or pledgee of Securities and may make loans to,
accept deposits from, perform services for, and otherwise deal with, the Company
and its Affiliates as if it were not the Trustee.
16. Authentication.
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
17. Abbreviations.
Customary abbreviations may be used in the name of a Holder or an
assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN
<PAGE> 119
A-9
(= joint tenants with right of survivorship and not as tenants in common), CUST
(= Custodian) and U/G/M/A (= Uniform Gifts to Minors Act).
18. Governing Law.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture. Requests may be made to Tri-State
Outdoor Media Group, Inc., 3416 Highway 41 South, Tifton, Georgia, Attention:
President.
<PAGE> 120
A-10
[FORM OF TRANSFER NOTICE]
Tri-State Outdoor Media Group, Inc.
11% Senior Notes due 2008
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
(Please print or typewrite name and address including zip code of assignee)
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
attorney to transfer such Security on the books of the Company with full power
of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED
ON ALL SECURITIES OTHER THAN EXCHANGE SECURITIES,
UNLEGENDED OFFSHORE GLOBAL SECURITIES AND
UNLEGENDED OFFSHORE PHYSICAL SECURITIES]
In connection with any transfer of this Security occurring prior to
the date which is the earlier of (i) the date the Shelf Registration Statement
is declared effective or (ii) the end of the period referred to in Rule 144(k)
under the Securities Act, the undersigned confirms that without utilizing any
general solicitation or general advertising that:
[Check One]
[ ] (a) this Security is being transferred in compliance with the
exemption from registration under the Securities Act of 1933, as
amended, provided by Rule 144A thereunder.
or
[ ] (b) this Security is being transferred other than in accordance
with (a) above and documents are being furnished which comply with
the conditions of transfer set forth in this Security and the
Indenture.
<PAGE> 121
A-11
If none of the foregoing boxes is checked, the Trustee or other Registrar shall
not be obligated to register this Security in the name of any Person other than
the Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 307 of the Indenture shall have
been satisfied.
Date: ____________________ _________________________
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
within-mentioned instrument in every
particular, without alteration or any
change whatsoever.
Signature Guarantee:
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Security for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated: ___________________________________
NOTICE: To be executed by an executive
officer, general partner, trustee or similar
representative.
<PAGE> 122
A-12
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company pursuant
to Section 1012 or Section 1013 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Security purchased by the
Company pursuant to Section 1012 or Section 1013 of the Indenture, state the
amount (in original principal amount) below:
$_____________________.
Date:
Your Signature: ________________________________
(Sign exactly as your name appears on the other side of this
Security)
Signature Guarantee: ____________________________
(Signature must be guaranteed by a member of the New York
Stock Exchange or a commercial bank or trust company)
<PAGE> 123
Exhibit B
Form of Certificate
to Be Delivered upon
Termination of Restricted Period
On or after July 1, 1998
Tri-State Outdoor Media Group, Inc.
3416 Highway 41 South
Tifton, Georgia
c/o
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Corporate Trust Office,
Corporate Finance Department
Re: Tri-State Outdoor Media Group, Inc. (the "Company") 11% Senior
Notes due 2008 (the "Notes")
Ladies and Gentlemen:
This letter relates to $________ principal amount of Notes
represented by the temporary global note certificate (the "Temporary
Certificate"). Pursuant to Section 201 of the Indenture dated as of May 15, 1998
relating to the Notes (the "Indenture"), we hereby certify that (1) we are the
beneficial owner of such principal amount of Notes represented by the Temporary
Certificate and (2) we are a person outside the United States to whom the Notes
could be transferred in accordance with Rule 904 of Regulation S promulgated
under the U.S. Securities Act of 1933, as amended. Accordingly, the Company and
the Trustee are hereby requested to issue a Certificated Note representing the
undersigned's interest in the principal amount of Notes represented by the
Temporary Certificate, all in the manner provided by the Indenture.
<PAGE> 124
B-2
The Trustee and the Company are entitled to rely upon this letter
and are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby.
Very truly yours,
[Name of Holder]
By:____________________________________
Authorized Signature
<PAGE> 125
Exhibit C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Institutional Accredited Investors
-------------------, ----
Tri-State Outdoor Media Group, Inc.
3416 Highway 41 South
Tifton, Georgia
c/o
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Corporate Trust Office,
Corporate Finance Department
Re: Tri-State Outdoor Media Group, Inc. (the "Company") 11% Senior
Notes due 2008 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed purchase of $------------ aggregate
principal amount of the Notes:
1. We hereby confirm that:
(i) we are an "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as
amended (the "Securities Act"), or an entity in which all of the
equity owners are accredited investors within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act (an
"Institutional Accredited Investor");
(ii) any purchase of the Notes by us will be for our own
account or for the account of one or more other Institutional
Accredited Investors;
<PAGE> 126
C-2
(iii) in the event that we purchase any of the Notes, we will
acquire Notes having a minimum purchase price of not less than
$100,000 for our own account or for any separate account for which
we are acting;
(iv) we have such knowledge and experience in financial and
business matters that we are capable of evaluating the merits and
risks of purchasing the Notes;
(v) we are not acquiring the Notes with a view to any
distribution thereof in a transaction that would violate the
Securities Act or the securities laws of any State of the United
States or any other applicable jurisdictions, provided that the
disposition of our property and the property of any accounts for
which we are acting as fiduciary shall remain at all times within
our control; and
(vi) we have had access to such financial and other
information, and have been afforded the opportunity to ask such
questions of representatives of the Company and receive answers
thereto, as we deem necessary in connection with our decision to
purchase the Notes.
2. We understand that the Notes are being offered in a transaction
not involving any public offering within the meaning of the Securities Act
and that the Notes have not been registered under the Securities Act, and
we agree, on our own behalf and on behalf of each account for which we
acquire any Notes, that such Notes may be offered, resold, pledged or
otherwise transferred only (i) to a person whom we reasonably believe to
be a qualified institutional buyer (as defined in Rule 144A under the
Securities Act) in a transaction meeting the requirements of Rule 144A, in
a transaction meeting the requirements of Rule 144 under the Securities
Act or in accordance with another exemption from the registration
requirements of the Securities Act (and based upon an opinion of counsel
if the Company so requests), (ii) to the Company or (iii) pursuant to an
effective registration statement under the Securities Act, and, in each
case, in accordance with any applicable securities laws of any State of
the United States or any other applicable jurisdiction. We understand that
the registrar and transfer agent will not be required to accept for
registration of transfer any Notes, except upon presentation of evidence
satisfactory to the Company as applicable, that the foregoing restrictions
on transfer have been complied with. We further understand that the Notes
will be in the form of definitive physical certificates and that any such
certificates will bear a legend reflecting the substance of this
paragraph.
<PAGE> 127
C-3
3. The Trustee and the Company are entitled to rely upon this letter
and the Trustee and the Company are irrevocably authorized to produce this
letter or a copy hereof to any interested party in any administrative or
legal proceeding or official inquiry with respect to the matters covered
hereby.
Very truly yours,
By:
(NAME OF PURCHASER)
Date:
Upon transfer, the Notes should be registered in the name of the new
beneficial owner as follows:
Name:
Address:
Taxpayer ID Number:
<PAGE> 128
Exhibit D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
-----------------, ---
Tri-State Outdoor Media Group, Inc.
3416 Highway 41 South
Tifton, Georgia
c/o
IBJ Schroder Bank & Trust Company
One State Street
New York, NY 10004
Attention: Corporate Trust Office,
Corporate Finance Department
Re: Tri-State Outdoor Media Group, Inc. (the "Company") 11% Senior
Notes due 2008 (the "Notes")
Ladies and Gentlemen:
In connection with our proposed sale of $------------ aggregate
principal amount of the Notes, we confirm that such sale has been effected
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended, and, accordingly, we represent that:
(1) the offer of the Notes was not made to a person in the United
States;
(2) either (a) at the time the buy order was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
prearranged with a buyer in the United States;
<PAGE> 129
D-2
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation
S, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the U.S. Securities Act of 1933, as amended.
In addition, if the sale is made during a restricted period and the
provisions of Rule 903(c)(2) or Rule 904(c)(1) of Regulation S are applicable
thereto, we confirm that such sale has been made in accordance with the
applicable provisions of Rule 903(c)(2) or Rule 904(c)(1), as the case may be.
The Trustee and the Company are entitled to rely upon this letter
and are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate have
the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:_________________________________
Authorized Signature
<PAGE> 1
Exhibit 4.2
GLOBAL NOTE
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE
TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF CEDE & CO. OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
SECTIONS 306 AND 307 OF THE INDENTURE.
IN WITNESS WHEREOF, the Company has caused this Security to be
signed manually or by facsimile by its duly authorized officer.
Date: May 20, 1998 TRI-STATE OUTDOOR MEDIA GROUP, INC
By
-----------------------------------
Name:
Title:
Trustee's Certificate of Authentication
This is one of the 11% Senior Notes due 2008 described in the within-mentioned
Indenture.
Date: May 20, 1998 IBJ SCHRODER BANK & TRUST
COMPANY, as Trustee
By:
-------------------------------------
Authorized Signatory
<PAGE> 2
TRI-STATE OUTDOOR MEDIA GROUP, INC.
11% Senior Note due 2008
CUSIP
No. $
TRI-STATE OUTDOOR MEDIA GROUP, INC., a Kansas corporation (the
"Company", which term includes any successor under the Indenture hereinafter
referred to), for value received, promises to pay to CEDE & Co., or its
registered assigns, the principal sum of Ninety-Nine Million, Eight Hundred
Sixty Thousand United States Dollars ($99,860,000), on May 15, 2008.
Interest Payment Dates: May 15 and November 15 of each year
commencing November 15, 1998.
Regular Record Dates: May 1 and November 1 of each year.
Reference is hereby made to the further provisions of this
Security set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
<PAGE> 3
5
TRI-STATE OUTDOOR MEDIA GROUP, INC.
11% Senior Note due 2008
1. Principal and Interest.
The Company will pay the principal of this Security on May 15,
2008.
The Company promises to pay interest on the principal amount
of this Security on each Interest Payment Date, as set forth below, at the rate
per annum shown above.
Interest will be payable semiannually (to the holders of
record of the Securities at the close of business on the May 1 or November 1
immediately preceding the Interest Payment Date) on each Interest Payment Date,
commencing November 15, 1998.
The Holder of this Security is entitled to the benefits of the
Registration Rights Agreement, dated as of May 15, 1998, among the Company and
the Initial Purchasers named therein (the "Registration Rights Agreement"). In
the event that either (a) the Exchange Offer Registration Statement (as defined
in the Registration Rights Agreement) is not filed with the Securities and
Exchange Commission on or prior to the 60th calendar day following the date of
original issue of the Securities (the "Closing Date"), or (b) the Exchange Offer
Registration Statement is not declared effective on or prior to the 180th
calendar day following the Closing Date, or (c) the Exchange Offer (as defined
in the Registration Rights Agreement) is not consummated or a Shelf Registration
Statement (as defined in the Registration Rights Agreement) is not declared
effective on or prior to the 210th calendar day following the Closing Date, or
(d) either (A) the Exchange Offer Registration Statement ceases to be effective
at any time prior to the time that the Exchange Offer is consummated or (B) if
applicable, subject to certain exceptions, the Shelf Registration Statement has
been declared effective and such Shelf Registration Statement ceases to be
effective at any time prior to the second anniversary of the Closing Date (each
such event referred to in clause (a) through (d), a "Registration Default"),
then the per annum interest rate borne by this Security shall be increased by
0.25% following the 60-day period referred to in clause (a) above, following the
180-day period referred to in clause (b) above, following the 210-day period
referred to in clause (c) above, or in the case of clause (d) above, immediately
following such Registration Default. Such per annum interest rate will increase
by an additional 0.25% at the beginning of each subsequent 30-day period in the
case of clause (a), (b) or (c) above, or 90-day period in the case of clause (d)
above; provided, however, that in no event will the per annum interest rate
borne by the Notes be increased by more than 1.5%. Upon the filing of the
Exchange Offer Registration Statement, the effectiveness of the Exchange Offer
Registration Statement, the consummation of the Exchange Offer or the
<PAGE> 4
6
effectiveness of a Shelf Registration Statement, as the case may be, the
interest rate borne by this Security from the date of such filing, consummation
or effectiveness, as the case may be, will be reduced to the original interest
rate set forth above; provided, however, that, if after such reduction in
interest rate, a different event specified in clause (a), (b), (c) or (d) above
occurs, the interest rate may again be increased pursuant to the foregoing
provisions.
Interest on this Security will accrue from the most recent
date to which interest has been paid on this Security or, if no interest has
been paid, from May 15, 1998; provided that, if there is no existing default in
the payment of interest and if this Security is authenticated between a Regular
Record Date referred to on the face hereof and the next succeeding Interest
Payment Date, interest shall accrue from such Interest Payment Date. Interest
will be computed on the basis of a 360-day year of twelve 30-day months.
The Company shall pay interest on overdue principal and
premium, if any, and interest on overdue installments of interest, to the extent
lawful, at the rate borne by the Securities.
2. Method of Payment.
The Company will pay interest (except defaulted interest) on
the principal amount of the Securities on each May 15 and November 15 to the
Persons who are Holders (as reflected in the Security Register at the close of
business on the May 1 and November 1 (each a "Regular Record Date") immediately
preceding the Interest Payment Date), in each case, even if the Security is
canceled on registration of transfer or registration of exchange, redemption or
repurchase after such record date; provided that, with respect to the payment of
principal, the Company will make payment to the Holder that surrenders this
Security to any Paying Agent on or after May 15, 2008.
The Company will pay principal, premium, if any, and interest
in money of the United States that at the time of payment is legal tender for
payment of public and private debts. At the option of the Company, interest may
be paid by check mailed to the address of the Holder entitled thereto as such
address appears in the Security Register; provided that all payments to the
Holders who have given wire transfer instructions to the Trustee (or other
Paying Agent) by the Regular Record Date immediately preceding such Interest
Payment Date shall be required to be made by wire transfer of immediately
available funds to the accounts specified by such Holders. If a payment date is
a date other than a Business Day at a place of payment, payment may be made on
the next succeeding day that is a Business Day and no interest shall accrue for
the intervening period.
<PAGE> 5
7
3. Paying Agent and Registrar.
Initially, the Trustee will act as Authenticating Agent,
Paying Agent and Registrar. The Company may change any Authenticating Agent,
Paying Agent or Registrar upon written notice. The Company, any Subsidiary or
any Affiliate of any of them may act as Paying Agent, Registrar or co-registrar.
4. Indenture; Limitations.
The Company issued the Securities under an Indenture dated as
of May 15, 1998 (the "Indenture"), between the Company and IBJ Schroder Bank &
Trust Company, trustee (the "Trustee"). Capitalized terms herein are used as
defined in the Indenture unless otherwise indicated. The terms of the Securities
include those stated in the Indenture and those made part of the Indenture by
reference to the Trust Indenture Act. The Securities are subject to all such
terms, and Holders are referred to the Indenture and the Trust Indenture Act for
a statement of all such terms. To the extent permitted by applicable law, in the
event of any inconsistency between the terms of this Security and the terms of
the Indenture, the terms of the Indenture shall control.
The Securities are general obligations of the Company.
5. Redemption.
Optional Redemption. The Securities may be redeemed at the
option of the Company, in whole or in part, at any time and from time to time,
on or after May 15, 2003, at the following Redemption Prices (expressed in
percentages of principal amount), plus accrued and unpaid interest, if any, to
the Redemption Date (subject to the right of Holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date that is
on or prior to the Redemption Date), if redeemed during the 12-month period
beginning May 15 of each of the years set forth below:
<TABLE>
<CAPTION>
Redemption
Year Price
---- -----
<S> <C> <C>
2003.......................................................105.500%
2004.......................................................103.667%
2005 ......................................................101.833%
2006 and thereafter .......................................100.000%
</TABLE>
In addition, at any time or from time to time prior to May 15,
2001, the Company may at its option redeem Securities with the net proceeds of
one or more Equity Offerings at a redemption price equal to 111% of the
principal amount thereof, plus accrued interest, if any, to
<PAGE> 6
8
the Redemption Date (subject to the right of Holders of record on the relevant
Record Date to receive interest due on the relevant Interest Payment Date);
provided that, immediately after giving effect to such redemption, at least 75%
of the aggregate principal amount of the Securities (including any Additional
Securities) remains outstanding; provided further that any such redemption
occurs within 90 days of the date of closing of the related Equity Offering.
Notice of a 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 at such Holder's last address as it appears in the Security Register.
Securities in original denominations larger than $1,000 may be redeemed in part
in integral multiples of $1,000. On and after the Redemption Date, interest
ceases to accrue on Securities or portions of Securities called for redemption,
unless the Company defaults in the payment of the Redemption Price.
6. Repurchase upon a Change in Control and Asset Sales.
(a) Upon the occurrence of a Change of Control, the Company is
obligated to make an offer to purchase all outstanding Securities at a
redemption price of 101% of the principal amount thereof, plus accrued interest,
if any, to the date of purchase and (b) upon Asset Sales, the Company may be
obligated to make offers to purchase Securities with a portion of the Net Cash
Proceeds of such Asset Sales at a redemption price of 100% of the principal
amount thereof plus accrued interest, if any, to the date of purchase.
7. Denominations; Transfer; Exchange.
The Securities are in registered form without coupons, in
denominations of $1,000 and multiples of $1,000 in excess thereof. A Holder may
register the transfer or exchange of Securities in accordance with the
Indenture. The Registrar 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 Indenture. The Registrar need not register
the transfer or exchange of any Securities selected for redemption (except the
unredeemed portion of any Security being redeemed in part). Also, it need not
register the transfer or exchange of any Securities for a period of 15 days
before a selection of Securities to be redeemed is made.
8. Persons Deemed Owners.
A Holder may be treated as the owner of a Security for all
purposes.
9. Unclaimed Money.
If money for the payment of principal, premium, if any, or
interest remains unclaimed for two years, the Trustee and the Paying Agent will
pay the money back to the Company at its request. After that, Holders entitled
to the money must look to the Company for
<PAGE> 7
9
payment, unless an abandoned property law designates another Person, and all
liability of the Trustee and such Paying Agent with respect to such money shall
cease.
10. Discharge Prior to Redemption or Maturity.
If the Company irrevocably deposits, or causes to be
deposited, with the Trustee money or U.S. Government Obligations sufficient to
pay the then outstanding principal of, premium, if any, and accrued interest on
the Securities to redemption or maturity, the Company will be discharged from
the Indenture and the Securities, except in certain circumstances for certain
sections thereof.
11. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture or the Securities
may be amended or supplemented with the consent of the Holders of at least a
majority in aggregate principal amount of the Securities then Outstanding, and
any existing default or compliance with any provision may be waived with the
consent of the Holders of a majority in aggregate principal amount of the
Securities then Outstanding. Without notice to or the consent of any Holder, the
parties thereto may amend or supplement the Indenture or the Securities to,
among other things, cure any ambiguity, defect or inconsistency and make any
change that does not materially adversely affect the rights of any Holder.
12. Restrictive Covenants.
The Indenture contains certain covenants, including, without
limitation, covenants with respect to the following matters: (i) additional
Debt; (ii) Restricted Payments; (iii) certain Asset Sales; (iv) transactions
with Affiliates; (v) restrictions on dividends and other payments affecting
Restricted Subsidiaries; (vi) issuances and sale of Capital Stock of Restricted
Subsidiaries; (vii) designation of Unrestricted Subsidiaries; (viii) limitations
on Liens; and (ix) merger, consolidation and certain transfers of assets. Within
60 days after the end of each fiscal year, the Company must report to the
Trustee on compliance with such limitations.
13. Successor Persons.
When a successor Person or other entity assumes all the
obligations of its predecessor under the Securities and the Indenture, the
predecessor Person will be released from those obligations.
14. Remedies for Events of Default.
If an Event of Default, as defined in the Indenture, occurs
and is continuing, the Trustee or the Holders of not less than 25% in principal
amount of the Securities then
<PAGE> 8
10
Outstanding may declare all the Securities to be immediately due and payable. If
a bankruptcy or insolvency default with respect to the Company or any of its
Significant Subsidiaries occurs and is continuing, the Securities automatically
become immediately due and payable. Holders may not enforce the Indenture or the
Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the Securities.
Subject to certain limitations, Holders of at least a majority in principal
amount of the Securities then Outstanding may direct the Trustee in its exercise
of any trust or power.
15. Trustee Dealings with Company.
The Trustee under the Indenture, in its individual or any
other capacity, may become the owner or pledgee of Securities and may make loans
to, accept deposits from, perform services for, and otherwise deal with, the
Company and its Affiliates as if it were not the Trustee.
16. Authentication.
This Security shall not be valid until the Trustee signs the
certificate of authentication on the other side of this Security.
17. Abbreviations.
Customary abbreviations may be used in the name of a Holder or
an assignee, such as: TEN COM (= tenants in common), TEN ENT (= tenants by the
entireties), JT TEN (= joint tenants with right of survivorship and not as
tenants in common), CUST (= Custodian) and U/G/M/A (= Uniform Gifts to Minors
Act).
18. Governing Law.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK.
The Company will furnish to any Holder upon written request
and without charge a copy of the Indenture. Requests may be made to Tri-State
Outdoor Media Group, Inc., 3416 Highway 41 South, Tifton, Georgia, Attention:
President.
<PAGE> 9
[FORM OF TRANSFER NOTICE]
Tri-State Outdoor Media Group, Inc.
11% Senior Notes due 2008
FOR VALUE RECEIVED the undersigned registered holder hereby
sell(s), assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
(Please print or typewrite name and address including zip code of assignee)
the within Security and all rights thereunder, hereby irrevocably constituting
and appointing
attorney to transfer such Security on the books of the Company with full power
of substitution in the premises.
<PAGE> 10
OPTION OF HOLDER TO ELECT PURCHASE
If you wish to have this Security purchased by the Company
pursuant to Section 1012 or Section 1013 of the Indenture, check the Box: [ ].
If you wish to have a portion of this Security purchased by
the Company pursuant to Section 1012 or Section 1013 of the Indenture, state the
amount (in original principal amount) below:
$_____________________.
Date:
Your Signature: ________________________________
(Sign exactly as your name appears on the other side of this
Security)
Signature Guarantee: ____________________________
(Signature must be guaranteed by a member of the New
York Stock Exchange or a commercial bank or trust
company)
<PAGE> 1
EXHIBIT 5.1
ST. JOHN & WAYNE, L.L.C.
July 15, 1998
Tri-State Outdoor Media Group, Inc.
3416 Highway 41 South
Tifton, Georgia 31793
We are furnishing this opinion in connection with the Registration
Statement on Form S-4 (the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act") filed on July 15, 1998 by Tri-State
Outdoor Media Group, Inc. (the "Company") relating to the offer to exchange
$100,000,000 aggregate principal amount of 11% Senior Notes due 2008 (the
"Exchange Notes") for the outstanding $100,000,000 aggregate principal amount of
11% Senior Notes due 2008 (the "Existing Notes" and, together with the Exchange
Notes, the "Notes"). The Existing Notes were, and the Exchange Notes will be,
issued by the Company pursuant to an Indenture dated as of May 15, 1998 (the
"Indenture") between the Company and IBJ Schroder Bank & Trust Company, as
trustee (the "Trustee") which is filed herewith. The exchange will be made
pursuant to an exchange offer contemplated by the Registration Statement.
We have acted as your counsel in connection with the Registration Statement
and are familiar with the proceedings taken by the Company in connection with
the authorization, issuance, sale and exchange of the Notes. We have made such
examination as we consider necessary to render this opinion.
This opinion is limited to the federal laws of the United States and the
laws of the State of New York and the General Corporation Code of Kansas. We
note that the Indenture and Notes are governed by the laws of the State of New
York and, therefore, in rendering this opinion, we have relied, as to the
opinions set forth in paragraph 1 below, upon the opinion of McDowell, Rice,
Smith & Garr with respect to matters of Kansas law and with respect to matters
relating to the due incorporation and good standing of the Company.
Based upon the foregoing, we are of the opinion that:
1. The Indenture has been duly authorized, executed and delivered by the
Company and the Trustee and, upon the due execution, authentication and delivery
of the Exchange Notes and exchange thereof for Existing Notes in accordance with
the Indenture and in the manner described in the Registration Statement, the
Exchange Notes will be valid and legally binding obligations of the Company,
subject to bankruptcy, insolvency, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors' rights and to
general equity principles.
In rendering the foregoing opinions, we express no opinion as to federal or
state laws relating to fraudulent transfers.
We hereby consent to the filing of this opinion as a part of the
Registration Statement and to the reference to our firm under the caption "Legal
Matters" in the Prospectus filed as part thereof.
Very truly yours,
/s/ ST. JOHN & WAYNE, L.L.C.
<PAGE> 1
Exhibit 10.1
EXECUTION COPY
ASSET PURCHASE AGREEMENT
dated as of May 6, 1997
by and between
TRI-STATE SYSTEMS, INC.
and
TRI-STATE OUTDOOR MEDIA GROUP, INC.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
1. DEFINITIONS.......................................................... 1
2. PURCHASE AND SALE OF THE ASSETS...................................... 1
2.1 Agreement to Purchase and Sell................................. 1
2.2 Purchased Assets............................................... 1
2.3 Excluded Assets................................................ 3
2.4 Agreement to Assume Certain Liabilities........................ 3
2.5 Excluded Liabilities........................................... 4
2.6 Closing........................................................ 5
2.7 Purchase Price................................................. 5
2.8 Transactions at the Closing.................................... 5
3. REPRESENTATIONS AND WARRANTIES OF SELLER............................. 6
3.1 Organization and Good Standing................................. 6
3.2 Authority of Seller and the Stockholders; No Conflict.......... 6
3.3 Solvency....................................................... 7
3.4 Books and Records.............................................. 7
3.5 Structures..................................................... 7
3.6 Permits........................................................ 7
3.7 Site Leases.................................................... 7
3.8 Owned Real Property............................................ 8
3.9 Title, Encumbrances............................................ 8
3.10 Financial Statements........................................... 8
3.11 Taxes.......................................................... 9
3.12 Compliance with Legal Requirements............................. 10
3.13 Legal Proceedings; Orders...................................... 10
3.14 Other Contracts................................................ 10
3.15 Insurance...................................................... 10
3.16 [Intentionally Omitted]........................................ 10
3.17 Intangible Property............................................ 10
3.18 Relationships with Affiliates.................................. 10
3.19 Brokers or Finders............................................. 10
3.20 Employee Benefit Matters....................................... 11
3.21 Employees: Labor Matters....................................... 11
3.22 No Undisclosed Liabilities..................................... 11
3.23 Absence of Certain Changes..................................... 12
3.24 Accounts Receivable............................................ 12
3.25 Certain Contracts.............................................. 12
3.26 WARN ACT LIABILITIES........................................... 13
3.27 NON-DISCLOSURE AGREEMENTS...................................... 13
3.28 INDEBTEDNESS AND SECURITY INTEREST............................. 13
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
3.29 Disclosure..................................................... 13
4. REPRESENTATIONS AND WARRANTIES OF BUYER.............................. 13
4.1 Organization and Good Standing................................. 13
4.2 Authority; No Conflict......................................... 13
4.3 Certain Proceedings............................................ 14
4.4 Brokers or Finders............................................. 14
4.5 HSR............................................................ 14
5. COVENANTS OF SELLER.................................................. 14
5.1 Access and Investigation....................................... 14
5.2 Operation of the Purchased Assets.............................. 14
5.3 Best Efforts................................................... 16
5.4 Required Approvals............................................. 16
5.5 Notification................................................... 16
5.6 No Negotiation................................................. 16
5.7 Cooperation; Books and Records................................. 16
5.8 Tax Clearance.................................................. 16
6. COVENANTS OF BUYER................................................... 17
6.1 Required Approvals............................................. 17
6.2 Best Efforts................................................... 17
6.3 Notification................................................... 17
6.4 COBRA Continuation Coverage.................................... 17
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE.................. 17
7.1 Accuracy of Representations.................................... 18
7.2 Seller's Performance........................................... 18
7.3 Consents....................................................... 18
7.4 Additional Documents........................................... 18
7.5 No Proceedings................................................. 18
7.6 No Prohibition................................................. 18
7.7 No Material Adverse Change..................................... 18
7.8 Satisfaction of Indebtedness................................... 18
7.9 Non-Solicitation Agreements.................................... 19
7.10 Billboard Income............................................... 19
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE................. 19
8.1 Accuracy of Representations.................................... 19
8.2 Buyer's Performance............................................ 19
8.3 Additional Documents........................................... 19
8.4 No Proceedings................................................. 19
8.5 No Prohibition................................................. 20
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
9. TERMINATION.......................................................... 20
9.1 Termination Events............................................. 20
9.2 Effect of Termination.......................................... 20
10. INDEMNIFICATION; REMEDIES............................................ 21
10.1 Indemnification and Payment of Damages by the
Indemnifying Stockholders...................................... 21
10.2 Indemnification and Payment of Damages by Buyer................ 21
10.3 Procedure for Indemnification -- Third Party Claims............ 22
10.4 Procedure for Indemnification -- Other Claims.................. 22
10.5 Survival/Limitations........................................... 23
11. GENERAL PROVISIONS................................................... 23
11.1 Expenses....................................................... 23
11.2 Public Announcements........................................... 23
11.3 [Intentionally Omitted]........................................ 24
11.4 Notices........................................................ 24
11.5 Further Assurances............................................. 25
11.6 Waiver......................................................... 25
11.7 Entire Agreement and Modification.............................. 25
11.8 Assignments, Successors, and No Third-Party Rights............. 25
11.9 Accounts Receivable............................................ 26
11.10 Severability................................................... 26
11.11 Risk of Loss................................................... 26
11.12 Post-Closing Access............................................ 26
11.13 Headings; Construction......................................... 26
11.14 Applicable Law................................................. 26
11.15 Incorporation of Exhibits and Schedules........................ 27
11.16 Counterparts................................................... 27
11.17 Jurisdiction and Consent to Service............................ 27
</TABLE>
EXHIBITS
Exhibit A - Definitions
Exhibit B - Assignment of Contracts
Exhibit C - Bill of Sale, Assignment and Assumption Agreement
Exhibit D - Affirmation
Exhibit E - Pro Rata Indemnification
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<PAGE> 5
SCHEDULES
Schedule 2.2(a) - Structures; Permits
Schedule 2.2(c) - Owned Real Property
Schedule 2.2(d) - Site Leases
Schedule 2.2(f) - Tangible Personal Property
Schedule 2.2(h) - Advertising Contracts
Schedule 2.7 - Addition to Purchase Price
Schedule A.1 - Exclusions From Accounts Payable
DISCLOSURE SCHEDULE
Part 3.2 Part 3.9(a) Part 3.18
Part 3.5 Part 3.9(b) Part 3.20
Part 3.6 Part 3.11 Part 3.21
Part 3.7 Part 3.13 Part 3.22
Part 3.8(b) Part 3.14 Part 3.25
Part 3.15 Part 3.28
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<PAGE> 6
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is entered into as of May 6,
1997 by and between TRI-STATE SYSTEMS, INC., a Georgia corporation ("Seller"),
TRI-STATE OUTDOOR MEDIA GROUP, INC., a Kansas corporation ("Buyer") and all of
the Indemnifying Stockholders (as defined below) of Seller. (Buyer, Seller and
the Indemnifying Stockholders are sometimes herein referred to individually as a
"Party" and collectively as the "Parties.")
RECITALS
Seller is engaged in the business of owning and operating outdoor signs,
billboards and benches and otherwise providing outdoor advertising services (the
"Business"). Seller desires to sell and assign all assets necessary and/or used
in connection with the Business (except the Excluded Assets, as hereinafter
defined) (the "Purchased Assets") to Buyer, and Buyer desires to purchase such
assets and to assume certain liabilities associated with such assets, pursuant
to the terms, conditions, limitations and exclusions contained in this
Agreement.
AGREEMENT
The Parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the terms listed on Exhibit A attached
hereto have the meanings specified or referred to in Exhibit A.
2. PURCHASE AND SALE OF THE ASSETS
2.1 AGREEMENT TO PURCHASE AND SELL. Subject to the terms and conditions of
this Agreement, Seller hereby agrees to grant, sell, assign, transfer, convey
and deliver all right, title and interest in and to the Purchased Assets, free
and clear of any liens, title claims, Encumbrances or Security Interests (except
as otherwise specifically permitted pursuant to the provisions of this
Agreement), and Buyer hereby agrees to buy and acquire the Purchased Assets from
Seller, and to assume the Assumed Liabilities upon the terms and conditions set
forth in this Agreement.
<PAGE> 7
2.2 PURCHASED ASSETS. The Purchased Assets include, without limitation,
the following:
(a) all of the billboard displays, benches and other out-of-home
advertising structures, together with all components, fixtures, parts,
appurtenances, and equipment attached to or made a part thereof that are
existing, under construction or for which Seller has any rights (collectively,
the "Structures"), including, without limitation, all of the Structures listed
on Schedule 2.2(a);
(b) all state and local licenses or permits/tags which Seller has
with respect to the Business and all other Governmental Authorizations that are
required for the operation of the Business (collectively, the "Permits"),
including, without limitation, all of the Permits listed on Schedule 2.2(a);
(c) all of the real property owned in fee by Seller and any rights
therein, including, without limitation, all of the real property listed on
Schedule 2.2(c), and all buildings, facilities, structures, fixtures, leasehold
and other improvements located therein, and all rights under the J.G.A. Lease
(collectively, the "Owned Real Property");
(d) all leases, licenses, easements, other rights of ingress or
egress, and all other grants of the right to place, construct, own, operate or
maintain the Structures on land, buildings and other real property owned by
third parties, and all rights therein (collectively, the "Site Leases"),
including, without limitation, all of the Site Leases listed on Schedule 2.2(d);
(e) all Books and Records;
(f) all tangible personal property, including furniture, vehicles,
machinery, equipment, computer hardware and software, owned by Seller and used
in the operation of the Business (collectively, the "Tangible Personal
Property"), including, without limitation, all of the Tangible Personal Property
listed on Schedule 2.2(f);
(g) accounts receivable, prepaid items and expenses and other assets
of Seller used in the Business that would be reflected as current assets on a
balance sheet of Seller as of the Closing Date prepared in a manner consistent
with Section 3.10(a), but excluding cash and cash equivalents;
(h) all of the rights under existing and pending sales and
advertising contracts associated with the Business, all rights to the
advertising copy displayed on the Structures as of the Closing Date, all other
rights to collect and receive income from the use of the Structures and security
deposits, if any, with respect thereto (collectively, the "Advertising
Contracts") including, without limitation, all of the Advertising Contracts
listed on Schedule 2.2(h);
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<PAGE> 8
(i) all additional supplies used in connection with the Business,
including, without limitation, panels, moldings, steel components, sections,
parts, paint and painting supplies, appurtenances, equipment, electrical
connections, wiring and lighting components;
(j) the Intangible Property;
(k) the Other Contracts;
(l) the Current Proceedings;
(m) the Non-Solicitation Agreements; and
(n) all rights (including any benefits arising therefrom), causes of
action, claims and demands of whatever nature (whether or not liquidated) of
Seller relating to the Purchased Assets described in subparagraphs 2.2(a)-(m)
above, including, without limitation, condemnation rights and proceeds accruing
after the Closing, and all rights against suppliers under warranties covering
any of the same.
2.3 EXCLUDED ASSETS. Notwithstanding anything to the contrary herein
contained, the Purchased Assets shall not include the following assets, which
assets shall be retained by Seller ("Excluded Assets"):
(a) all cash and cash equivalents as of the Closing;
(b) the furniture and equipment located in Seller's Atlanta office
and/or in the apartment of Seller's president in Tifton, Georgia and the
automobile driven by Seller's President; and
(c) such Owned Real Property that Buyer elects not to purchase
pursuant to Section 2.8(a).
2.4 AGREEMENT TO ASSUME CERTAIN LIABILITIES. At the Closing, Buyer shall
assume and agree to discharge and perform all liabilities and obligations of
Seller, except Excluded Liabilities, incurred in the Ordinary Course of Business
of Seller before or after the Closing, including, without limitation:
(a) all current liabilities reflected on the December Balance Sheet
(but not including any Excluded Balance Sheet Liabilities) which remain unpaid
and undischarged on the Closing Date;
(b) all liabilities of Seller which are of the same kind and nature
as those assumed pursuant to Section 2.4(a) above to the extent arising in the
Ordinary Course of Business between December 31, 1996 and the Closing Date to
the extent the same remain unpaid and
-3-
<PAGE> 9
undischarged on the Closing Date, provided, however, that Excluded Trade
Payables and Excluded Sales Commissions shall not be assumed;
(c) all liabilities and obligations of Seller with respect to the
Structures, Site Leases, Permits, Advertising Contracts, Non-Solicitation
Agreements and Assumed Other Contracts to the extent arising in the Ordinary
Course of Business whether before or after the Closing;
(d) all liabilities and obligations of Seller under the Site Leases,
Advertising Contracts, Non-Solicitation Agreements and Assumed Other Contracts,
including all obligations under the Courtesy Leases, to the extent the same are
performable on or after the Closing and accrue on or after the Closing;
(e) liabilities and obligations in respect of the Current
Proceedings;
(f) COBRA Continuation Coverage for Seller's employees; and
(g) liabilities of the kind shown on Schedule A.1 arising on or
after the Closing and to the extent set forth on Schedule A.1 arising prior to
the Closing .
The liabilities described in this Section 2.4 are collectively referred to as
"Assumed Liabilities." The assumption by Buyer of any Assumed Liabilities shall
not be deemed to modify or amend Seller's representations and warranties
contained herein or in any way impair Buyer's right to rely upon such
representations and warranties or to obtain indemnification pursuant to Article
10 hereof for any breach of such representations and warranties.
2.5 EXCLUDED LIABILITIES. All claims against and liabilities and
obligations of Seller not specifically assumed by Buyer pursuant to Section 2.4,
including, without limitation, the following claims against and liabilities of
Seller, are excluded, and shall not be assumed or discharged by Buyer, and shall
be discharged in full when due by Seller:
(a) any liabilities (other than those with respect to the on-site
location itself, which the Parties agree are neither Assumed Liabilities nor
Excluded Liabilities hereunder) under the Environmental Laws to third parties to
the extent arising from Seller (its agent, employees or contractors) removing to
an offsite location, or disposing of Hazardous Materials before the Closing from
any location used in the Business and personal injury claims arising from the
same;
(b) any liabilities to the extent not attributable to the Purchased
Assets arising before or after the Closing;
(c) any liability attributable to the Purchased Assets before the
Closing that did not arise in the Ordinary Course of Business of Seller;
-4-
<PAGE> 10
(d) any liability of Seller for Income Taxes or payroll Taxes
arising prior to or from the sale of the Purchased Assets under this Agreement;
(e) any liabilities for or related to indebtedness of Seller to
Heller, other long-term bank debt and/or other secured indebtedness;
(f) any liabilities of Seller for or with respect to any employees
of Seller, except COBRA Continuation Coverage, including, without limitation,
payroll Taxes, any liabilities pursuant to any compensation (excepting,
specifically, the Assumed Sales Commissions), collective bargaining, pension,
retirement, severance, termination, or other benefit plan (excepting any such
liabilities created by Buyer after the Closing or before the Closing pursuant to
the authority granted in Section 3.21).
(g) the Excluded Trade Payables and the Excluded Sales Commissions.
The liabilities described in this Section 2.5 are collectively referred to as
"Excluded Liabilities."
2.6 CLOSING. The purchase and sale of the Purchased Assets (the "Closing")
provided for in this Agreement will take place at the offices of Buyer's lender,
on or before June 12, 1997, or such other time and place as the Parties may
agree (the "Closing Date"). The effective time of the Closing shall be 12:01
a.m., Eastern Standard Time, on the Closing Date.
2.7 PURCHASE PRICE. In consideration for the Purchased Assets, Buyer shall
assume the Assumed Liabilities, and pay an amount equal to the sum of Thirty-One
Million Dollars ($31,000,000). The Purchase Price shall be increased by the
amounts listed on Schedule 2.7 and any additional items hereafter added to this
Schedule and initialled by both Buyer and Seller. The Parties agree to cooperate
with each other in determining and reaching an agreement in writing on the
allocation of the Purchase Price among the Purchased Assets on or prior to
Closing in accordance with the provisions of Section 1060 of the IRC. Buyer and
Seller also each agree to file IRS form 8594 consistently with the foregoing and
in accordance with Section 1060 of the IRC. Buyer and Seller each agree not to
file any document with any Governmental Body that conflicts in any way with the
agreed-upon allocation of the Purchase Price.
2.8 TRANSACTIONS AT THE CLOSING. The following transactions shall take
place at the Closing:
(a) Seller shall deliver to Buyer (i) the Bill of Sale, (ii) the
Assignment of Contracts, (iii) the Deeds and all applicable documentary stamp or
real estate transfer taxes payable in connection with the conveyance of Owned
Real Property, and (iv) other instruments of transfer, evidence of consent and
all other related documents as may be necessary to evidence or perfect the sale,
assignment, transfer, and conveyance of good title to all of the Purchased
Assets as provided for herein; provided, however, that Buyer, by written notice
to Seller, may elect not to acquire all or any of the Owned Real Property.
-5-
<PAGE> 11
(b) Buyer shall deliver to Seller the Purchase Price by wire
transfer of immediately available funds, and such assumption agreements,
instruments and other documents as may be necessary to evidence the assumption
by Buyer of the Assumed Liabilities.
(c) The Parties shall also deliver to each other the agreements,
instruments, opinions, certificates, and other documents referred to in this
Agreement.
2.9 FURTHER ASSURANCES. Seller from time to time after the Closing at the
request of Buyer and without further consideration shall execute and deliver
further instruments of transfer and assignment and take such other action as
Buyer may reasonably require to effectively transfer and assign to, and vest in,
Buyer each of the Purchased Assets.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
The Seller represents and warrants to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING. The Seller is a corporation duly
organized, validly existing and in good standing under the laws of its
incorporation, with full power and authority to conduct the Business as it is
now being conducted, to own or use the Purchased Assets, and to perform all its
obligations. The Seller will deliver to Buyer prior to Closing true and complete
copies of its Organizational Documents, as currently in effect, and Seller is
not in violation of any of the provisions thereof. Seller is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased or operated by it or the nature of the business conducted
by it makes such qualification necessary. Seller has no subsidiaries. Seller
does not own any securities issued by any other business, organization or
governmental authority, except U.S. Government securities, bank certificates of
deposit or money market accounts acquired as short-term investments in the
ordinary course of its business.
3.2 AUTHORITY OF SELLER AND THE STOCKHOLDERS; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of the Seller, enforceable against Seller in accordance with its
terms. Upon the execution and delivery by the Seller of any Closing Documents to
be executed at Closing pursuant to this Agreement, such Closing Documents will
constitute the legal, valid, and binding obligations of the Seller, enforceable
against Seller in accordance with their respective terms. The Seller has the
absolute and unrestricted right, power and authority to execute and deliver this
Agreement and the Closing Documents to which it is a Party and to perform its
obligations thereunder. The execution, delivery and performance of this
Agreement has been duly authorized by the Seller's Board of Directors and the
Stockholders. The Stockholders own beneficially and of record all of the
outstanding capital stock of Seller (the "Shares"). Except as set forth in Part
3.2(a) of the Disclosure Schedule, there are no voting agreements, trusts,
proxies or other agreements, instruments or undertakings with respect to the
voting of any of Seller's Shares to which Seller or any of the Indemnifying
Stockholders is a party.
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<PAGE> 12
(b) Except as set forth in Part 3.2(b) of the Disclosure Schedule,
neither the execution and delivery by the Seller or the Indemnifying
Stockholders of this Agreement nor the consummation or performance by the Seller
or the Indemnifying Stockholders of any of the Contemplated Transactions will:
(i) conflict with, violate or result in a breach of (A) any
provision of the Organizational Documents of the Seller; (B) any Legal
Requirement or any Order to which the Seller or any of the Purchased
Assets may be subject; or (C) any Governmental Authorization held by the
Seller or that otherwise relates to the Purchased Assets; or
(ii) contravene, conflict with, or result in a violation or
breach of any provision of, or give any Person the right to declare a
default or exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify any Contract to which
the Seller is a Party or by which the Seller may be bound, or any interest
or rights of Seller in or to the Purchased Assets; or result in the
imposition or creation of any Encumbrance upon or with respect to any of
the Purchased Assets.
(c) Except as set forth in Part 3.2(c) of the Disclosure Schedule,
the Seller is not and will not be required to give any notice to or obtain any
Consent from any Person in connection with the execution and delivery of this
Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.3 SOLVENCY. By consummating the transactions contemplated hereby, Seller
does not intend to hinder, delay or defraud any of Seller's present or future
creditors. Before giving effect to the transactions contemplated hereby, Seller
has been paying its debts and discharging its liabilities and obligations in the
Ordinary Course of Business and, after giving effect to the transactions
contemplated hereby, Seller intends to pay or discharge all of its respective
debts (or make adequate provision for the payment thereof), including, without
limitation, the Excluded Liabilities.
3.4 BOOKS AND RECORDS. The books of account, and other Books and Records
of Seller maintained in connection with the Purchased Assets are complete and
correct in all material respects and have been maintained in accordance with
sound business practices.
3.5 STRUCTURES. Except as set forth in Part 3.5 of the Disclosure
Schedule, (i) Seller owns all of the Structures, (ii) each Structure (a) is
located entirely on property covered by a Site Lease or is located entirely on
the Owned Site, and (b) complies in all material respects with the terms of the
Permits pertaining to it, and (iii) Seller maintains in full force and effect
all required Permits with respect to each of the Structures for which there is a
Legal Requirement of a Permit or Permits.
3.6 PERMITS. Except as set forth in Part 3.6 of the Disclosure Schedule,
(a) the Permits constitute all material licenses, permits, registrations and
approvals necessary to operate the
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<PAGE> 13
Business, (b) Seller is in material compliance with the terms of the Permits,
and (c) Seller is not in violation of any Permit, and Seller has not received
written notice that any Governmental Body issuing any Permit intends to cancel,
terminate, modify or amend any Permit.
3.7 SITE LEASES. The Site Leases listed on Schedule 2.2(d) are all of the
executed Site Leases to which Seller is a party or by which Seller or any of the
Purchased Assets are bound and Seller will deliver on or prior to Closing the
original Site Leases. The Site Leases are in full force and effect, and are
binding upon the Parties thereto. Except as set forth in Part 3.7 of the
Disclosure Schedule, (a) no default by Seller or any other Party has occurred
under the Site Leases, (b) no event, occurrence or condition exists which (with
or without notice or lapse of time or the happening of any further event or
condition) would become a default by Seller thereunder or would entitle any
other Party to terminate a Site Lease, to make a claim or set-off against Seller
or otherwise to amend such Site Lease or prevent such Site Lease from being
renewed in accordance with its terms, and (c) Seller has not received any notice
of default, termination or non-renewal under any Site Lease and none has been
Threatened.
3.8 OWNED REAL PROPERTY.
(a) Seller has good and marketable record fee title to the Owned
Real Property, such title being a fee interest in the Owned Real Property.
Seller has not received any notice of pending or Threatened claims, Proceedings,
planned public improvements, annexations, special assessments, rezonings or
other adverse claims affecting the Owned Real Property.
(b) Except as set forth in Part 3.8(b) of the Disclosure Schedule,
any buildings and related improvements located on or constituting a part of the
Owned Real Property are in good operating condition and repair, normal wear and
tear excepted. Except as set forth in Part 3.8(b) of the Disclosure Schedule,
none of the Owned Real Property is subject to special flood or mudslide hazards
or is within the 100 year flood plain. All water, sewer, gas, electric,
telephone, drainage and other utilities necessary for the current operation of
the Owned Real Property have been connected pursuant to valid permits and are
sufficient to service the Owned Real Property. All improvements constituting
part of the Owned Real Property have been completed and are now in compliance in
all material respects with all applicable Legal Requirements and Government
Authorizations. Seller has not received a notice of any pending or threatened
real estate tax deficiency or reassessment or condemnation of all or any portion
of any of the Owned Real Property. The J.G.A. Lease is in full force and effect,
is binding upon the Parties thereto, and no default by Seller or any other Party
thereto has occurred thereunder.
3.9 TITLE, ENCUMBRANCES.
(a) Except as set forth on Part 3.9(a) of the Disclosure Schedule,
Seller owns or has good title to all of the Purchased Assets, and there are no
existing agreements, options, commitments or rights with, of or to any Person to
acquire any of the Purchased Assets or any interest therein. All of the
Purchased Assets, including the Owned Real Property, are owned free and clear of
all Encumbrances except for Permitted Liens.
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(b) Except as set forth in Part 3.9(b) of the Disclosure Schedule,
none of the Structures or the Owned Real Property are or will be, subject to
zoning, use, or building code restrictions that will prohibit the continued
effective ownership, leasing or other use of such assets as currently owned and
used by Seller.
3.10 FINANCIAL STATEMENTS.
(a) Seller has delivered to Buyer the following financial
statements:
(i) the audited balance sheets of Seller for the fiscal years
ending on September 30, 1994, September 30, 1995 and September 30,
1996 (the "Base Balance Sheet") and statements of income, retained
earnings and cash flows for the three years then ended, including
the notes thereto, certified by Smith & Radigan P.C., independent
public accountants; and
(ii) the unaudited balance sheets of Seller for the quarter
ending December 31, 1996 and income statements for the period then
ended, certified by Seller's chief financial officer.
The Financial Statements have been prepared using generally accepted
accounting principles consistently applied during the periods covered
thereby and are (i) complete and correct in all material respects, and
(ii) present fairly in all material respects the financial condition of
Seller at the dates of said statements and the results of Seller's
operations and cash flows for the periods covered thereby (subject in the
case of the unaudited Financial Statements to normal year-end adjustments
and the absence of footnotes). There has been no Material Adverse Change
in the financial condition of the Business or Purchased Assets since the
date of the Base Balance Sheet.
(b) As of the date hereof and as of the Closing Date, Seller had and
will have no liabilities (which liabilities, when taken individually or in
the aggregate are material) of any nature, whether accrued, absolute,
contingent or otherwise, asserted or unasserted, known or unknown
(including, without limitation, liabilities as guarantor or otherwise with
respect to obligations of others, or liabilities for taxes due or then
accrued or to become due or contingent or potential liabilities relating
to activities of Seller or the conduct of the Business of Seller prior to
the date hereof or the Closing, as the case may be, regardless of whether
claims in respect thereof had been asserted as of such date), except (i)
liabilities reflected in the Financial Statements or the notes thereto,
(ii) liabilities reflected in the Disclosure Schedule furnished to Buyer
hereunder, or (iii) liabilities incurred in the Ordinary Course of
Business since December 31, 1996.
3.11 TAXES. Seller has filed all Tax Returns that it was required to file.
All such Tax Returns were complete and accurate in all material respects. All
Taxes owed by Seller for periods, or portions of periods, ending on or before
the Closing Date have been paid. Seller is not the
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beneficiary of any current extension of time within which to file any such Tax
Returns. Except as set forth in Part 3.11 of the Disclosure Schedule, no claim
has been made by any authority that any Taxes have not been paid by Seller and
no authority is examining Seller with respect to Taxes. Seller is not subject to
taxation in any jurisdiction other than those in which Seller has filed Tax
Returns. No claim is being made by an authority in a jurisdiction where Seller
does not file Tax Returns that it is or may be subject to a taxation by that
jurisdiction. There are no security interests or liens on any of the assets of
any of Seller that arose in connection with any failure (or alleged failure) to
pay any Tax. Seller has not filed, or ever been required to file, a consolidated
federal income tax return or any combined, consolidated or unitary Tax Return.
Seller is not a party to any tax sharing agreements or similar agreements.
Seller is not liable for the Taxes of any other person. The deficiencies
assessed against Seller by the State of Florida Department of Revenue in respect
of sales and use Taxes have been resolved and paid in full. Seller will be
solely responsible for and pay any and all Taxes that may be owed by Seller up
to and through the Closing Date.
3.12 COMPLIANCE WITH LEGAL REQUIREMENTS. Seller is in material compliance
with all Legal Requirements applicable to Seller's ownership or use of the
Purchased Assets.
3.13 LEGAL PROCEEDINGS; ORDERS. Except as set forth in Part 3.13 of the
Disclosure Schedule, there is no Proceeding pending or Threatened by or against
the Seller or affecting any of the Purchased Assets, and there is no Order to
which the Seller or the Purchased Assets is subject.
3.14 OTHER CONTRACTS. The Seller is not a Party to or bound by any Other
Contract obligating the Seller for more than Two Thousand Five Hundred Dollars
($2,500), except as disclosed in Part 3.14 of the Disclosure Schedule.
3.15 INSURANCE. Seller maintains (and will through and including the
Closing Date maintain) in full force and effect policies of fire and other
casualty, liability, title and other forms of insurance covering the Purchased
Assets and the Business, and the operation thereof, of the types and with the
amounts of coverage as are consistent with industry standards for outdoor
advertising businesses comparable to the Business. A list of all insurance
policies and arrangements of Seller is set forth in Part 3.15 of the Disclosure
Schedule. Seller has not received any notice of cancellation with respect to any
such insurance.
3.16 [INTENTIONALLY OMITTED].
3.17 INTANGIBLE PROPERTY. Seller uses no Intangible Property in connection
with the operation of the Business or the Purchased Assets except for the
Permits, the Books and Records, the trade names "Tri-State Systems," and "Public
Service Displays" and licenses for commonly available software programs under
which Seller is the licensee.
3.18 RELATIONSHIPS WITH AFFILIATES. Except as set forth on Part 3.18 of
the Disclosure Schedule, Seller has not, in the three (3) years immediately
preceding the date hereof, entered into any agreement with or engaged in any
transaction with any Affiliates of (a) Seller or (b) any stockholder, officer,
director, employee or consultant of Seller for (i) the provision of any
services,
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or (ii) the purchase, sale or other transfer of any assets, other than
compensation arrangements with Seller's employees and consultants entered into
in the Ordinary Course of Business.
3.19 BROKERS OR FINDERS. Neither Seller nor any Representative of Seller
has employed or retained any broker, agent, finder or other party, or incurred
any obligation for brokerage fees, finder's fees or commissions with respect to
the transactions contemplated by this Agreement, or otherwise dealt with anyone
purporting to act in the capacity of a finder or broker with respect thereto,
other than to Brush Kunz & Daven, LLC, whereby Seller or Buyer may be obligated
to pay a fee or a commission. Seller shall pay a fee to Brush Kunz & Daven, LLC
pursuant to a separate agreement.
3.20 EMPLOYEE BENEFIT MATTERS. Except as disclosed on Part 3.20 of the
Disclosure Schedule, with respect to the Seller:
(a) Seller does not maintain and has never maintained an "employee
benefit pension plan," within the meaning of ERISA Section 3(2), that is or was
subject to Title IV of ERISA.
(b) Seller does not have and has not ever had any past, present or
future obligation or liability to contribute to any "multiemployer plan," as
defined in ERISA Section 3(37).
For purposes of this Section 3.20, the term Seller shall be deemed to include
any other corporation, trade, business or other entity, which would together
with the Seller, now or in the past constitute a single employer within the
meaning of Section 414 of the IRC.
3.21 EMPLOYEES: LABOR MATTERS. All employees of Seller are employees at
will. Seller has made no warranty, representation or agreement, either in
writing or orally, to any employee of Seller that Purchaser intends to employ
such employee on or after the Closing Date. Seller consents to Purchaser
communicating with the employees, consultants and independent contractors of
Seller on or before the Closing Date in order to allow Purchaser make such
communications to such Persons as Purchaser reasonably deems necessary, and
Seller shall reasonably cooperate and join with Purchaser in the making of any
such communications deemed necessary by Purchaser. Seller is not a party to any
collective bargaining agreement with respect to any of its employees nor are any
employees of Seller with respect to the Business covered by any collective
bargaining agreement. A list of all employees and consultants of Seller,
including the name and rate of salary and/or other compensation and amount of
accrued vacation, compensatory and other leave time of each such Person, is set
forth on Part 3.21 of the Disclosure Schedule. No labor organization or group of
employees has made a demand for recognition, has filed a petition seeking a
representation proceeding or given Seller notice of any intention to hold an
election of a collective bargaining organization. There are no known writs,
actions, claims or legal, administrative, arbitration or other proceedings or
governmental investigations pending or Threatened involving or alleging civil
rights violations, unfair labor practice claims, back pay orders or other
similar claims or proceedings. Seller is in material compliance with all
federal, state and local laws respecting
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employment and employment practices, terms and conditions of employment and
wages and hours, and is not engaged in any unfair labor practice; there is no
unfair labor practice complaint against Seller pending before the National Labor
Relations Board; there is no labor strike, dispute, slowdown, stoppage pending
or threatened against or involving the employees of Seller; no grievance or any
arbitration proceeding is pending or threatened against Seller and no claim
therefor exists. Seller has not experienced any material labor stoppage,
concerted activity or other material labor difficulty during the last five (5)
years.
3.22 NO UNDISCLOSED LIABILITIES. Except as disclosed on Part 3.22 of the
Disclosure Schedule and except to the extent set forth in or provided for in the
Financial Statements, Seller has no liabilities, whether accrued, absolute,
contingent or otherwise, whether due or to become due and whether the amount
thereof is readily ascertainable or not, in each case insofar as pertaining to
the Business, which, individually or in the aggregate, would have a Material
Adverse Effect.
3.23 ABSENCE OF CERTAIN CHANGES. Subsequent to September 30, 1996, Seller
has not:
(a) incurred any liability or obligation with respect to the
Business under agreements or otherwise, except current liabilities entered into
or incurred in the Ordinary Course of Business consistent with past practice;
issued any notes or other debt securities or paid or discharged any outstanding
indebtedness with respect to the Business, except in the Ordinary Course of
Business consistent with past practice; or waived any of its rights with respect
to the Business;
(b) mortgaged, pledged or subjected to any Encumbrance any of the
Purchased Assets; entered into any lease of real property or buildings used in
the Business (other than Site Leases); or, except in the Ordinary Course of
Business consistent with past practice, entered into any lease of machinery or
equipment or sold or transferred any tangible or intangible asset or property
used in the Business;
(c) entered into any transaction with respect to the Business or the
Purchased Assets other than in the Ordinary Course of Business consistent with
past practice, except in connection with the execution and performance of this
Agreement and the transactions contemplated hereby; or
(d) suffered any material damage, destruction or loss to any of the
Purchased Assets (whether or not covered by insurance).
3.24 ACCOUNTS RECEIVABLE. To the knowledge of Seller, the accounts
receivable of Seller included in the Purchased Assets are fully collectible,
subject only to the allowance for doubtful accounts stated in the most recent
balance sheet included in the Financial Statements and relating to such
accounts.
3.25 CERTAIN CONTRACTS. The Advertising Contracts listed on Schedule 2(h)
are all of the executed Advertising Contracts to which Seller is a party or by
which Seller or any of the
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Purchased Assets is bound on the date hereof. Except as set forth in Part 3.25
of the Disclosure Schedule, (a) the Advertising Contracts and Other Contracts
are in full force and effect, and are binding upon the Parties thereto, (b) no
default by Seller or any other Party has occurred under the Advertising
Contracts and Other Contracts, (c) no event, occurrence or condition exists
which (with or without notice or lapse of time or the happening of any further
event or condition) would become a default by Seller thereunder or would entitle
any other Party to terminate an Advertising Contract or Other Contract, to make
a claim or set-off against Seller or otherwise to amend such Advertising
Contract or Other Contract, or prevent such Advertising Contract or Other
Contract from being renewed in accordance with its terms, and (d) Seller has not
received any notice of default, termination or non-renewal under any Advertising
Contract or Other Contract, and none has been Threatened.
3.26 WARN ACT LIABILITIES. Seller employs less than fifty (50) employees.
3.27 NON-DISCLOSURE AGREEMENTS. The Non-Disclosure Agreements are the
binding obligations of Seller, Danysh and Miles, respectively, enforceable
against each of Seller, Danysh and Miles in accordance with their respective
terms, except as may be limited by the laws of the State of Georgia. The
Non-Disclosure Agreements are in full force and effect and are freely assignable
by Seller without notice to or consent of Danysh and/or Miles. No default by
Seller or, to the Knowledge of Seller, any other Party to the Non-Disclosure
Agreements has occurred, and, to the knowledge of Seller, no event, occurrence
or condition exists which (with or without notice or lapse of time or the
happening of any further event or condition) would become a default by Seller
thereunder or would entitle any other Party to terminate any of the
Non-Disclosure Agreements, to make a claim against Seller thereunder or to amend
such Non-Disclosure Agreements. Seller has not received any notice of default,
termination or unenforceability under either of the Non-Disclosure Agreements,
and none has been Threatened.
3.28 INDEBTEDNESS AND SECURITY INTEREST. Set forth on Part 3.28 of the
Disclosure Schedule attached hereto is a list of all Security Interests
affecting the Purchased Assets (other than Permitted Liens). There is no
indebtedness for money borrowed of the Seller other than amounts owed to Heller,
which amounts are set forth on Schedule 3.28. The indebtedness to Heller and all
such Security Interests, other than Permitted Liens, shall be satisfied and
discharged at or before the Closing.
3.29 DISCLOSURE. No representation or warranty of Seller in this Agreement
and no statement in the Disclosure Schedule contains an untrue statement of
material fact or omits to state a material fact necessary to make the statements
herein or therein, in light of the circumstances in which they were made, not
misleading.
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4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING. Buyer is a corporation duly organized,
validly existing, and in good standing under the laws of the jurisdiction of its
organization.
4.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Closing Documents to which Buyer
is a party, such Closing Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Closing Documents and to
perform its obligations under this Agreement and the Closing Documents to which
Buyer is a party.
(b) Neither the execution and delivery of this Agreement by Buyer
nor the consummation or performance of any of the Contemplated Transactions by
Buyer will give any Person the right to prevent, delay, or otherwise interfere
with any of the Contemplated Transactions pursuant to (i) any provision of
Buyer's Organizational Documents; (ii) any resolution adopted by the board of
directors or the stockholders of Buyer; (iii) any Legal Requirement or Order to
which Buyer may be subject; or (iv) any material Contract to which Buyer is a
party or by which Buyer may be bound. Buyer is not and will not be required to
give any notice to or obtain any Consent from any Person in connection with the
execution and delivery of this Agreement or the consummation or performance of
any of the Contemplated Transactions.
4.3 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened in writing and no event has occurred or circumstance exist that may
give rise to or serve as a basis for the commencement of any Proceeding.
4.4 BROKERS OR FINDERS. Buyer has not incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement that will
not be paid by the Buyer.
4.5 HSR. Buyer is not a person (or included in a person) that has total
assets of $100 million or more or annual net sales of $100 million or more,
within the meaning of and as determined in accordance with the HSR Act. Buyer
has consulted with its legal counsel in determining and making such
representation.
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5. COVENANTS OF SELLER
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and the
Closing Date, Seller will, and will cause its Representatives to, afford Buyer
and its Representatives reasonable access during normal business hours to
Seller's personnel, properties, Books and Records, and all other documents and
data relating to the Purchased Assets and the Business, and make these available
to Buyer and its Representatives. Seller and the Indemnifying Stockholders agree
to (i) permit Buyer to include financial information concerning the Purchased
Assets and the Business in any document prepared by Buyer for the purpose of
obtaining financing, and (ii) use their reasonable efforts to obtain any
necessary consents to the publication of such financial information.
5.2 OPERATION OF THE PURCHASED ASSETS. Between the date of this Agreement
and the Closing Date, Seller will:
(a) operate the Purchased Assets and Business only in the Ordinary
Course of Business consistent with the past custom and practices of the normal
day-to-day operations of the Business (including with respect to quantity and
frequency);
(b) use it Best Efforts to maintain the Purchased Assets, and
maintain good relations and good will with advertisers, landlords and others
associated with the operation of the Business;
(c) confer with Buyer concerning any Structure which involves a
proposed investment in excess of $20,000;
(d) use its Best Efforts to prevent any change with respect to its
management and supervisory personnel;
(e) use its Best Efforts to keep intact its business organization,
to keep available its present officers and employees;
(f) have in effect and maintain at all times all insurance of the
kind, in the amount and with the insurers set forth in Part 3.15 of the
Disclosure Schedule hereto or equivalent insurance with any substitute insurers
approved in writing by Buyer;
(g) furnish Buyer with unaudited monthly balance sheets and
statements of income and retained earnings and cash flows of Seller within
fifteen (15) days after each month end for each month ending more than fifteen
(15) days before the Closing;
(h) make no purchase, sale or lease in respect of the Business or
any of the Purchased Assets, except in a manner consistent with prior practice,
including, without limitation, the payment of sales and leasing commissions;
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(i) maintain its Books and Records in accordance with good business
practices, on a basis consistent with prior practice;
(j) bill for services rendered and pay accounts payable in
connection with the Business, on a regular and timely basis consistent with past
practice;
(k) comply in all material respects with all Legal Requirements
applicable to it and to the conduct of the Business and perform all of its
obligations (including obligations imposed under this Agreement) without
default, consistent with past practice;
(l) not make any loans or advances of any of the Purchased Assets,
directly or indirectly, to any Person, nor further mortgage, pledge or subject
to Encumbrance any of the Purchased Assets;
(m) not make any change in the terms of any contract, license,
lease, mortgage or any other agreement to which it is a party, except in the
Ordinary Course of Business, consistent with past practice; and
(n) not waive, cancel, sell or otherwise dispose of for less than
the face value thereof any claim or right included in the Purchased Assets that
it has against others, except in the Ordinary Course of Business consistent with
past practice.
5.3 BEST EFFORTS. Between the date of this Agreement and the Closing Date,
Seller will use its Best Efforts to cause the conditions in Section 7 to be
satisfied.
5.4 REQUIRED APPROVALS AND CONSENTS. As promptly as practicable after the
date of this Agreement, Seller will make all filings required by Legal
Requirements and other third parties to be made by it in order to consummate the
Contemplated Transactions and will use Best Efforts to obtain the Consents
identified in Section 3.2 for the transfer of the Purchased Assets.
5.5 NOTIFICATION. Between the date of this Agreement and the Closing Date,
Seller will promptly notify Buyer in writing if Seller becomes aware of any fact
or condition that causes or constitutes a breach of any of Seller's
representations and warranties as of the date of this Agreement, or if Seller
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. Seller shall use its Best Efforts to remedy any such
breach. During the same period, Seller will promptly notify Buyer of the
occurrence of any breach of any covenant of Seller in this Section 5 or of the
occurrence of any event that may make the satisfaction of the conditions in
Section 7 impossible or unlikely.
5.6 NO NEGOTIATION. Until the earlier of the Closing or such time, if any,
as this Agreement is terminated pursuant to Section 9, neither Seller nor any
Affiliate will, nor will they
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permit their respective Representatives to, directly or indirectly solicit,
initiate, or encourage any inquiries or proposals from, discuss or negotiate
with, provide any non-public information to, or consider the merits of any
inquiries or proposals from, or make any offers or proposals to, any Person
(other than Buyer or its Representatives) relating to or affecting any
transaction involving the sale of the Purchased Assets.
5.7 COOPERATION; BOOKS AND RECORDS. Seller and the Indemnifying
Stockholders shall cooperate with all reasonable requests of Buyer and Buyer's
Representatives in connection with the consummation of the transactions
contemplated hereby. Seller shall maintain its Books and Records in accordance
with good business practices, on a basis consistent with past practices.
5.8 TAX CLEARANCE. If requested by Buyer, Seller shall promptly file with
the applicable taxing authorities of the States of Georgia, Florida, Alabama,
South Carolina, Tennessee, Kentucky and Mississippi, in accordance with the
respective tax laws of such states, any notification required with respect to
the Contemplated Transactions. Seller represents and warrants to Buyer that the
Business is not doing business in any jurisdiction other than States of Georgia,
Florida, Alabama, South Carolina, Tennessee, Kentucky, and Mississippi. In the
event that either Seller or Buyer shall receive either before or after the
Closing from any such authority notice that the applicable state has a possible
claim against Seller for any Taxes relating to the Purchased Assets or the
Business, but not including any sales, transfer or similar tax (other than the
transfer taxes in connection with the conveyance of the Owned Real Property) in
connection with the consummation of the Contemplated Transactions (which, if
any, shall be paid for by Buyer), Seller shall promptly satisfy such claim (it
being agreed and understood that notwithstanding the foregoing, tax clearances
shall not be a condition to the Closing.)
6. COVENANTS OF BUYER
6.1 REQUIRED APPROVALS. As promptly as practicable after the date of this
Agreement, Buyer will make all filings required by Legal Requirements to be made
by it to consummate the Contemplated Transactions.
6.2 BEST EFFORTS. Between the date of this Agreement and the Closing Date,
Buyer will use its Best Efforts to cause the conditions in Section 8 to be
satisfied; provided that this Agreement will not require Buyer to dispose of or
make any change in any portion of its business or to incur any other burden to
obtain a Governmental Authorization.
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6.3 NOTIFICATION. Between the date of this Agreement and the Closing Date,
Buyer will promptly notify Seller in writing if Buyer becomes aware of any fact
or condition that causes or constitutes a breach of any of Buyer's
representations and warranties as of the date of this Agreement, or if Buyer
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. During the same period, Buyer will promptly notify
Seller of the occurrence of any breach of any covenant of Buyer in this Section
6 or of the occurrence of any event that may make the satisfaction of the
conditions in Section 8 impossible or unlikely.
6.4 COBRA CONTINUATION COVERAGE. Buyer shall offer or make available
"continuation coverage," within the meaning of Section 4980B(f)(2) of the Code
from and after the Closing to former employees of the Seller who terminate
employment on or prior to the Closing in satisfaction of Seller's obligations to
make such coverage available, without regard to the termination of the Seller's
group health plan. The assumption of this obligation by Buyer does not, and
shall not be construed as creating, an employer-employee relationship between
Buyer and any former employee of Seller who is provided such coverage.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Purchased Assets and to take the other
actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in writing, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. Seller's representations and warranties
in this Agreement must have been accurate in all material respects as of the
date of this Agreement, and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date, and Buyer shall have received a
certificate of an executive officer of Seller, dated as of the Closing Date, as
to such accuracy.
7.2 SELLER'S PERFORMANCE. The covenants and obligations that Seller is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been performed and complied with in all material respects,
and Buyer shall have received a certificate of an executive officer of Seller,
dated as of the Closing Date, as to such compliance.
7.3 CONSENTS. Each of the Consents required pursuant to Section 5.4, the
failure of which to obtain will or may have, separately or in the aggregate, a
Material Adverse Effect, must have been obtained and must be in full force and
effect.
7.4 ADDITIONAL DOCUMENTS. Each of the following documents must have been
delivered to Buyer:
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(a) an opinion of Powell, Goldstein, Frazer & Murphy LLP dated the
Closing Date, in the form and substance reasonably satisfactory to Buyer;
(b) the deliveries required from Seller in Section 2.8; and
(c) such other documents as Buyer may reasonably request for the
purpose of (i) evidencing the satisfaction of any condition referred to in this
Section 7, or (ii) otherwise facilitating the consummation or performance of any
of the Contemplated Transactions.
7.5 NO PROCEEDINGS. Since the date of this Agreement, there must not have
been commenced and pending or Threatened any Proceeding (i) involving any
challenge to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, (ii) that prevents, makes illegal, or otherwise
materially interferes with any of the Contemplated Transactions or seeks to do
any of the foregoing, or (iii) that involves any material claim against Seller.
7.6 NO PROHIBITION. There must not be in effect any Legal Requirement or
any injunction or other Order that prohibits or restricts the consummation of
the Contemplated Transactions, including, without limitation, HSR Act
compliance.
7.7 NO MATERIAL ADVERSE CHANGE. There shall not have been a Material
Adverse Change in the Purchased Assets or the Business since the date hereof.
7.8 SATISFACTION OF INDEBTEDNESS. At or prior to the Closing, Seller shall
have repaid in full all outstanding indebtedness of Seller to Heller and shall
cause all Security Interests affecting the Purchased Assets (including, without
limitations those securing the indebtedness to Heller) other than Permitted
Liens to be extinguished.
7.9 NON-SOLICITATION AGREEMENTS. The Non-Solicitation Agreements shall
have been assigned to Buyer and each of Donald C. Danysh and Rick P. Miles shall
have executed and delivered to Buyer an affirmation of the same in the form of
Exhibit D.
7.10 BILLBOARD INCOME. The gross billboard lease income of the Business
for the calendar month preceding the Closing must be $490,000 or more.
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Purchased Assets and Seller's obligations
to take the other actions required to be taken by Seller at the Closing is
subject to the satisfaction, at or prior to the Closing, of each of the
following conditions (any of which may be waived by Seller in writing, in whole
or in part):
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8.1 ACCURACY OF REPRESENTATIONS. Buyer's representations and warranties in
this Agreement must have been accurate in all material respects as of the date
of this Agreement and must be accurate in all material respects as of the
Closing Date as if made on the Closing Date, and Seller shall have received a
certificate of an executive officer of Buyer, dated as of the Closing Date, as
to such accuracy.
8.2 BUYER'S PERFORMANCE. The covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been performed and complied with in all material respects,
and Seller shall have received a certificate of an executive officer of Buyer,
dated as of the Closing Date, as to such compliance.
8.3 ADDITIONAL DOCUMENTS. Buyer must have caused the following documents
to be delivered to Seller:
(a) an opinion of St. John & Wayne, L.L.C., dated the Closing Date,
in the form and substance reasonably satisfactory to Seller;
(b) the deliveries required from Buyer in Section 2.8; and
(c) such other documents as Seller may reasonably request for the
purpose of (i) evidencing the satisfaction of any condition referred to in this
Section 8, or (ii) otherwise facilitating the consummation of any of the
Contemplated Transactions.
8.4 NO PROCEEDINGS. Since the date of this Agreement, there must not have
been commenced and pending or Threatened any Proceeding (i) involving any
challenge to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (ii) that prevents, makes illegal, or otherwise
materially interferes with any of the Contemplated Transactions or seeks to do
any of the foregoing.
8.5 NO PROHIBITION. There must not be in effect any Legal Requirement or
any injunction or other Order that prohibits or restricts the consummation of
the Contemplated Transactions, including, without limitation, HSR Act
compliance.
9. TERMINATION
9.1 TERMINATION EVENTS. This Agreement may, by written notice given prior
to or at the Closing, be terminated:
(a) by mutual consent of Buyer and Seller;
(b) (i) by Buyer if any of the conditions in Section 7 has not been
satisfied as of the Closing Date or if satisfaction of such a condition is or
becomes impossible (other than through the failure of Buyer to comply with its
obligations under this Agreement), Buyer has not waived in
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writing such condition on or before the Closing Date, and Buyer is not in breach
of any of the provisions of this Agreement; or (ii) by Seller, if any of the
conditions in Section 8 has not been satisfied as of the Closing Date or if
satisfaction of such a condition is or becomes impossible (other than through
the failure of Seller to comply with its obligations under this Agreement),
Seller has not waived in writing such condition on or before the Closing Date,
and Seller is not in breach of any of the provisions of this Agreement; or
(c) by Buyer, on the one hand, or Seller, on the other hand, if the
Closing has not occurred (other than through the failure of the Party seeking to
terminate this Agreement to comply fully with its obligations under this
Agreement) on or before June 12, 1997.
9.2 EFFECT OF TERMINATION. Each Party's right of termination under Section
9.1 is in addition to any other rights it may have under this Agreement. If this
Agreement is terminated pursuant to Section 9.1, all further obligations of the
Parties under this Agreement will terminate, except that the obligations in
Section 11.1 will survive; provided, however:
(a) If Buyer shall default in its obligations under this Agreement
to consummate the Contemplated Transactions (other than as a result of Seller's
default under this Agreement), and Buyer shall fail to cure such default within
seven (7) days after receipt of written notice of default from Seller, then
Seller shall have the right to pursue any or all legal and equitable remedies,
separately or simultaneously (including specific performance) which will survive
the termination unimpaired; provided, that damages shall include, but not be
limited to: (i) the difference between $31 million and the lesser amount
received by Seller or Stockholders in any subsequent sale of all of the assets
or stock of Seller, and (ii) all fees, costs and expenses incurred by Seller or
Stockholders in connection with any such sale, which sale shall not be necessary
to prove damages (provided further, that any such sale must be arm's-length with
a bona fide purchaser).
(b) If Seller shall default in its obligations under this Agreement
to consummate the Contemplated Transactions (other than as a result of Buyer's
default under this Agreement), and Seller shall fail to cure such default within
seven (7) days after receipt of written notice of default from Buyer, then Buyer
shall have the right to pursue any or all legal and equitable remedies,
separately or simultaneously (including specific performance), which will
survive the termination unimpaired.
(c) The remedies set forth in this Section 9.2 apply only to the
failure of a Party to consummate the Contemplated Transactions, and not with
respect to any obligations specified herein that survive the Closing or
termination of this Agreement.
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10. INDEMNIFICATION; REMEDIES
10.1 INDEMNIFICATION AND PAYMENT OF DAMAGES BY THE INDEMNIFYING
STOCKHOLDERS. After the Closing, the Indemnifying Stockholders, severally and on
a pro rata basis in proportion to the percentages set forth in Exhibit E, will
indemnify and hold harmless Buyer, its stockholders, employees, controlling
Persons, and Affiliates (collectively, the "Seller Indemnified Persons") for,
and will pay to the Seller Indemnified Persons the amount of, any loss,
liability, claim, damage, expense (including reasonable costs of investigation,
defense and settlement and reasonable attorneys' fees), whether or not involving
a third-party claim (collectively, "Damages"), arising, directly or indirectly,
from or in connection with:
(a) any breach of any representation or warranty made by Seller in
this Agreement, the Disclosure Schedule, or any other certificate, schedule,
exhibit or document delivered by Seller pursuant to this Agreement;
(b) any breach by Seller of any covenant or obligation of Seller in
this Agreement or any certificate or document delivered by Seller pursuant to
this Agreement; and
(c) the failure of Seller and/or the Indemnifying Stockholders to
satisfy and discharge any Excluded Liabilities.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will indemnify
and hold harmless Seller, its stockholders, controlling Persons and Affiliates
(collectively, the "Buyer Indemnified Persons") for, and will pay to the Buyer
Indemnified Persons the amount of any Damages arising, directly or indirectly,
from or in connection with:
(a) any breach of any representation or warranty made by Buyer in
this Agreement or in any certificate or document delivered by Buyer pursuant to
this Agreement;
(b) any breach by Buyer of any covenant or obligation of Buyer in
this Agreement including, without limitation, any failure to pay Assumed
Liabilities after the Closing; and
(c) any liability arising from Buyer's operation of the Purchased
Assets.
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10.3 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an Indemnified Person under Section
10.1 or 10.2, of notice of any claim against it, such Indemnified Person will,
if a claim is to be made against an Indemnifying Party under such Section, give
written notice to the Indemnifying Party of the commencement of such claim, but
the failure to notify the Indemnifying Party will not relieve the Indemnifying
Party of any liability that it may have to any Indemnified Person, except to the
extent that the Indemnifying Party demonstrates that the defense of such action
is prejudiced by the Indemnified Party's failure to give such notice.
(b) If any claim referred to in Sections 10.1 or 10.2 is brought
against an Indemnified Person and it gives written notice to the Indemnifying
Party of such claim, the Indemnifying Party may, at its option, assume the
defense of such claim with counsel satisfactory to the Indemnified Person and,
after written notice from the Indemnifying Party to the Indemnified Person of
its election to assume the defense of such claim, the Indemnifying Party will
not, as long as it diligently conducts such defense, be liable to the
Indemnified Person under this Article 10 for any fees of other counsel or any
other expenses with respect to the defense of such claim, subsequently incurred
by the Indemnified Person in connection with the defense of such claim, other
than reasonable costs of investigation. If the Indemnifying Party assumes the
defense of a claim, (i) no compromise or settlement of such claims may be
effected by the Indemnifying Party without the Indemnified Person's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person, and (B) the sole
relief provided is monetary damages that are paid in full by the Indemnifying
Party; and (ii) the Indemnified Person will have no liability with respect to
any compromise or settlement of such claims effected without its consent.
Subject to Section 10.3(c), if notice is given to an Indemnifying Party of any
claim and the Indemnifying Party does not, within twenty days after the
Indemnified Person's notice is given, give notice to the Indemnified Person of
its election to assume the defense of such claim, the Indemnifying Party will be
bound by any determination made in such Proceeding or any compromise or
settlement effected by the Indemnified Person.
(c) Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a claim may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
Indemnified Person may, by notice to the Indemnifying Party, assume the
exclusive right to defend, compromise, or settle such claim, but the
Indemnifying Party will not be bound by any determination of a claim so defended
or any compromise or settlement effected without its consent (which may not be
unreasonably withheld).
10.4 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim shall be
asserted by written notice to the Indemnifying Party from whom indemnification
is sought.
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10.5 SURVIVAL/LIMITATIONS.
(a) The Parties hereto agree that (i) the covenants and agreements
contained in the Agreement (including, without limitation, Section 10.1(c)) and
any document delivered pursuant hereto and the representations and warranties
contained in Sections 3.1, 3.2(a), 3.3, 3.8(a), 3.9(a), 3.11, 3.12, 3.13, 3.19,
3.20, 3.21, 3.29, 4.1, 4.2(a) and 4.4 shall survive until ninety (90) days after
the expiration of all applicable statutes of limitation with respect to the
subject matter thereof, (ii) all other representations and warranties shall
survive until eighteen (18) months following the Closing Date, and (iii) any
indemnification claim for a breach of the foregoing must be made in writing in
accordance with the provision of this Article 10 within the applicable survival
period for the underlying representation, warranty or covenant. The expiration
of the applicable survival period will not extinguish an indemnification claim
properly made prior to such expiration in accordance with this Article 10.
(b) The Indemnifying Stockholders shall not be required to make any
payments to the Seller Indemnified Persons (i) pursuant to Section 10.1(a) or
Section 10.1(b) until the Damages, in the aggregate, exceed Five Hundred
Thousand Dollars ($500,000) and then only to the extent of Damages in excess of
such amount, and in no event shall the Indemnifying Stockholders' obligation to
indemnify the Seller Indemnified Persons for Damages pursuant to such sections
collectively exceed One Million Six Hundred Thousand Dollars ($1,600,000). The
Indemnifying Stockholders shall not be required to make any payments to the
Seller Indemnified Persons pursuant to Section 10.1(c) to the extent Damages, in
the aggregate, exceed the amount of the Purchase Price less the amount of all
Excluded Liabilities paid to third parties to the date of such claim.
(c) Notwithstanding the foregoing, any claims for Damages arising
from fraud by Seller or the Indemnifying Stockholders hereunder shall be without
limitation of any kind.
(d) Buyer's sole and exclusive remedy after the Closing has occurred
for any breach of this Agreement or for Damages shall be under this Section 10.
11. GENERAL PROVISIONS
11.1 EXPENSES. Except as otherwise expressly provided in this Agreement,
each Party to this Agreement will bear its respective expenses incurred in
connection with the preparation, execution, and performance of this Agreement
and the Contemplated Transactions, including all fees and expenses of agents,
representatives, brokers or finders, counsel, and accountants. In the event of
termination of this Agreement, the obligation of each Party to pay its own
expenses will be subject to any rights of such Party arising from a breach of
this Agreement by another Party.
11.2 PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Any public announcement or
similar publicity with respect to this Agreement or the Contemplated
Transactions will be issued, if at all,
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at such time and in such manner as Buyer and Seller agree in writing, provided
that the Parties shall reasonably cooperate in such announcements, and provided
further that nothing contained herein shall prevent any Party from at any time
furnishing information required by a Governmental Body. Unless consented to by
Buyer and Seller in advance or required by Legal Requirements, prior to the
Closing, each Party shall, and shall cause their respective Representatives to,
keep this Agreement strictly confidential and may not make any disclosure of
this Agreement to any Person, except that Buyer may disclose this Agreement to
financing sources.
11.3 [INTENTIONALLY OMITTED].
11.4 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by registered mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
Party may designate by notice to the other Parties):
If to Seller, to:
Tri-State Systems, Inc.
P.O. Box 1247
Highway 41 South
Tifton, Georgia 31793
Attention: Donald C. Danysh
President
Telephone No.: (912) 382-2980
Facsimile No.: (912) 386-0203
With a copy to:
Powell, Goldstein, Frazer & Murphy LLP
Sixteenth Floor
191 Peachtree Street, N.E.
Atlanta, Georgia 30303
Attention: William B. Shearer, Jr., Esq.
Telephone No.: (404) 572-6600
Facsimile No.: (404) 572-5958
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If to Buyer, to:
Tri-State Outdoor Media Group, Inc.
2608 South Main
Joplin, Missouri 64803
Attention: Sheldon G. Hurst
President
Telephone No.: (417) 782-9166
Facsimile No.: (417) 782-0958
With a copy to:
St. John & Wayne, L.L.C.
2 Penn Plaza East
Newark, New Jersey 07105
Attention: David C. Freinberg, Esq.
Telephone No.: (201) 491-3600
Facsimile No.: (201) 491-3555
11.5 FURTHER ASSURANCES. The Parties agree (a) to furnish upon request to
each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
Party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement, all at the sole cost
and expense of the requesting Party (unless the requesting Party is entitled to
indemnification therefor under Section 10).
11.6 WAIVER. Neither the failure nor any delay by any Party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege.
11.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the Parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the Parties with
respect to its subject matter. This Agreement may not be amended, nor may
compliance with any condition set forth herein be waived, except by a written
agreement executed by each Party hereto, or in the case of a waiver, the Party
waiving compliance.
11.8 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. Prior to the
Closing, Buyer's rights and obligations under this Agreement shall be assignable
by Buyer to a corporation or partnership or other legal entity controlling,
controlled by or under common control with Buyer upon written notice to Seller.
After the Closing, Buyer's rights and obligations hereunder shall be freely
assignable. This Agreement may not be assigned by Seller without the prior
written consent of Buyer. No assignment to or assumption by any assignee,
however made, will release the assigning Parties from their respective duties
and obligations under this Agreement. This
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Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the Parties, their successors, and their permitted assigns. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the Parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement.
11.9 ACCOUNTS RECEIVABLE. Seller agrees to forward to Buyer any payments
that Buyer may receive with respect to any accounts receivable included in the
Purchased Assets.
11.10 SEVERABILITY. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
11.11 RISK OF LOSS. Material risk of loss or damage to the Purchased
Assets from any casualty prior to the Closing shall be borne by Seller, and
after the Closing shall be borne by Buyer.
11.12 POST-CLOSING ACCESS. Buyer agrees that all Books and Records
delivered to Buyer by Seller pursuant to this Agreement shall be maintained open
for inspection by Seller at any time during regular business hours upon
reasonable notice for a period of six (6) years (or for such longer period as
may be required by applicable Legal Requirements) following the Closing and
that, during such period, Seller, at its expense, may make such copies thereof
as it may reasonably desire. Seller agrees that all books and records relating
to the Purchased Assets and retained by Seller shall be maintained open for
inspection by Buyer at any time during regular business hours for a period of
six (6) years (or for such longer period as may be required by applicable Legal
Requirements) following the Closing and that, during such period, Buyer, at its
expense, may make such copies thereof as it may reasonably desire. Nothing
contained in this Section 11.12 shall obligate any Party hereto to make
available any books and records if to do so would violate the terms of any
Contract or Legal Requirement to which it is a Party or to which it or its
assets are subject.
11.13 HEADINGS; CONSTRUCTION. The headings of Sections in this Agreement
are provided for convenience only and will not affect its construction or
interpretation. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
11.14 APPLICABLE LAW. This Agreement shall be governed and controlled as
to validity, enforcement, interpretations, construction, effect and in all other
respects by the internal laws of the State of Georgia applicable to contracts
made in that State excepting specifically for any matters pertaining to real
estate located in or permits issued by a Governmental Body in States other than
Georgia and all such matters shall be governed and controlled by the laws of the
applicable State.
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11.15 INCORPORATION OF EXHIBITS AND SCHEDULES. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
11.16 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
11.17 JURISDICTION AND CONSENT TO SERVICE. Each of Seller, Buyer and the
Indemnifying Stockholders (a) consent to the jurisdiction of any state or
federal court of Georgia in any suit, action or proceeding relating to or
arising out of this Agreement; (b) waive any objection which they may have to
the laying of venue in any such suit, action or proceeding in any such court,
and (c) agree that service of any court paper may be provided under applicable
laws or court rules governing service of process in such court.
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IN WITNESS WHEREOF, the Parties have executed, sealed and delivered this
Agreement as of the date first written above.
BUYER:
TRI-STATE OUTDOOR MEDIA GROUP, INC.
By: /s/ Sheldon G. Hurst
______________________________________
Sheldon G. Hurst
President
SELLER:
TRI-STATE SYSTEMS, INC.
By: /s/ William B. Shearer
______________________________________
William B. Shearer
Vice President
[Signatures continued on next page]
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INDEMNIFYING STOCKHOLDERS:
/s/ DCD
_________________________________________
Donald C. Danysh
/s/ Hubert L. Harris
_________________________________________
Hubert L. Harris, Jr.
Buckhead Investment Group:
By:______________________________________
Title:___________________________________
Donald C. Danysh Individual Retirement Account
By: /s/ DCD
_________________________________________
Lincoln Trust Company
Custodian
Shearer & Wells, P.C. Profit Sharing Plan
By: /s/ William B. Shearer
_________________________________________
William B. Shearer, Jr., Trustee
/s/ Dennis Brush
_________________________________________
Dennis W. Brush
/s/ William G. McLendon
_________________________________________
William G. McLendon
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/s/ Rick P. Miles
_________________________________________
Rick P. Miles
/s/ William B. Shearer
_________________________________________
William B. Shearer, Jr.
SouthTrust Asset Management Co. of Ga., NA,
Trustee for Hubert L. Harris, Jr., IRA
/s/ Hubert L. Harris
By:______________________________________
Title:___________________________________
SouthTrust Asset Management Co. of Ga., NA,
Custodian FBO Hubert L. Harris, Jr., IRA
/s/ Hubert L. Harris
By:______________________________________
Title:___________________________________
SouthTrust Asset Management Co. of Ga., NA,
Trustee for Hubert L. Harris, Jr., P/U
Invesco Money Purchase Pension Plan
/s/ Hubert L. Harris
By:______________________________________
Title:___________________________________
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EXHIBIT A
DEFINITIONS
"ADVERTISING CONTRACTS" -- as defined in Section 2.2(h).
"AFFILIATES" -- when used with reference to a specified Person, any other
Person that directly, or indirectly through one or more intermediaries, controls
or is controlled by or is under common control with the specified Person and any
spouse or immediate family member of such Person. For purposes of this
definition of Affiliate, "control" means the possession, directly or indirectly,
of the power to direct or to cause the direction of management and policies of
the Person in question, whether through the ownership of voting securities or by
contract or otherwise.
"ASSIGNMENT OF CONTRACTS" -- the Assignment and Assumption of Advertising
Contracts in the form of Exhibit B attached hereto.
"ASSUMED LIABILITIES" -- as defined in Section 2.4.
"ASSUMED OTHER CONTRACTS" -- all Other Contracts except any evidencing
Seller's indebtedness to Heller.
"ASSUMED SALES COMMISSIONS" -- sales and leasing commissions due and
payable to employees of Seller within thirty (30) days after the Closing Date up
to $26,477 in the aggregate and any sales and leasing commissions which become
due and payable to employees of Seller thereafter with respect to Advertising
Contracts or Site Leases transferred hereunder.
"BASE BALANCE SHEET" -- the balance sheet of Seller as of September 30,
1996 described in Section 3.10(a)(i).
"BEST EFFORTS" -- the efforts that a prudent Person desirous of achieving
a result would use in similar circumstances.
"BILL OF SALE" -- the Bill of Sale, Assignment and Assumption Agreement in
the form of Exhibit C attached hereto.
"BOOKS AND RECORDS" -- All copies of Seller's books and records relating
to the Purchased Assets, including, without limitation, Site Lease files, Permit
files, maintenance and other records relating to the Structures, logs,
advertiser, customer and supplier lists, computer files and databases.
"BUYER" -- as defined in the first paragraph of this Agreement.
"CLOSING" -- as defined in Section 2.6.
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"CLOSING DATE" -- as defined in Section 2.6.
"CLOSING DOCUMENTS" -- any documents to be executed at Closing pursuant to
this Agreement.
"COBRA CONTINUATION COVERAGE" -- that coverage described in Section 6.4
hereof.
"CODE" -- the Internal Revenue Code of 1986, as amended.
"CONFIDENTIAL INFORMATION" -- any information concerning the Businesses,
the Purchased Assets and the affairs of Seller that is not generally available
to the public.
"CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by
this Agreement, including: (a) the purchase of the Purchased Assets by Buyer
from Seller and assignment to and assumption by Buyer of the Assumed
Liabilities, and (b) the performance by Buyer and the Seller of their respective
covenants and obligations under this Agreement.
"CONTRACT" -- any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally
binding.
"COURTESY LEASES" -- those certain leases between Seller and Courtesy
Leasing dated August 26, 1994 (Nos. 4574, 4575, 4576, 4577 and 4578) and June 7,
1996 (Nos. 4814 and 4815).
"COURTESY LEASING" -- Courtesy Leasing, Inc., an Alabama corporation.
"CURRENT PROCEEDINGS" -- proceedings listed on Part 3.13 of the Disclosure
Schedule.
"DAMAGES" -- as defined in Section 10.1.
"DECEMBER BALANCE SHEET" -- the balance sheet of Seller as of December 31,
1996 described in Section 3.10(a)(ii).
"DEEDS" -- limited warranty deeds (or the statutory equivalent thereof
with covenants against grantor's acts only), in recordable form, with respect to
the Owned Real Property.
"DISCLOSURE SCHEDULE" -- the disclosure schedule, delivered by Seller to
Buyer concurrently with the execution and delivery of this Agreement.
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"ENCUMBRANCE" -- any charge, claim, condition, equitable interest, lien,
option, pledge, security interest, right of first refusal, or restriction of any
kind, including any restriction on use, transfer, receipt of income, or exercise
of any other attribute of ownership.
"ENVIRONMENT" -- soil, land surface or subsurface strata, surface waters,
groundwaters, drinking water supply, stream sediments, ambient air (including
indoor air), plant and animal life, and any other environmental medium or
natural resource.
"ENVIRONMENTAL LAW" -- any Legal Requirement pertaining to environmental
discharges, Release, emissions or spills or the manufacture, sale, processing,
handling, transportation, storage or disposal of any Hazardous Materials, or
relating to any environmental processes or condition, including, without
limitation, the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act ("RCRA"), the Endangered Species Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Hazardous Materials
Transportation Act, the Surface Mining Control and Reclamation Act, the
Emergency Planning and Community Right to Know Act, the Safe Drinking Water Act,
the Toxic Substances Control Act, the Coastal Zone Management Act, the National
Environmental Policy Act, the Noise Control Act. As used in this Agreement,
Environmental Laws shall mean any of such laws or regulations as the same exist
now or at the Closing Date.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"EXCLUDED BALANCE SHEET LIABILITIES" -- shall mean payroll and Income
Taxes, indebtedness to Heller, vacation and sick pay, audit fees, director's
fees, health insurance claims and premiums, and liabilities under the Courtesy
Leases to the extent accrued and payable prior to Closing.
"EXCLUDED LIABILITIES" -- as defined in Section 2.5.
"EXCLUDED SALES COMMISSIONS" -- sales and leasing commissions due and
payable to employees of Seller within thirty (30) days after the Closing in
excess of $26,477 in the aggregate.
"EXCLUDED TRADE PAYABLES" -- all trade payables of the Seller (not
including those items listed on Schedule A.1) as of the Closing Date that (i)
are more than forty-five (45) days past the invoice date, or (ii) are forty-five
(45) days or less past the invoice date but that exceed $60,000 in the
aggregate.
"FINANCIAL STATEMENTS" -- those financial statements of Seller described
in Sections 3.10(a)(i) and (ii).
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
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"GOVERNMENTAL BODY" -- any federal, state, local, municipal, foreign, or
other government; or governmental or quasi-governmental authority of any nature
(including any governmental agency, branch, department, official, or entity and
any court or other tribunal).
"HAZARDOUS MATERIALS" -- any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law, and specifically including petroleum and all derivatives
thereof or synthetic substitutes therefor and asbestos or asbestos-containing
materials.
"HELLER" -- Heller Financial, Inc.
"HSR ACT" -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and any regulations and rules promulgated thereunder.
"INCOME TAX" -- any federal, state, local, or foreign income tax or
capital gains tax, including any interest, penalty, or addition thereto, whether
disputed or not.
"INCOME TAX RETURN" -- any return, declaration, report, claim for refund,
or information return or statement relating to Income Taxes, including any
schedule or attachment thereto.
"INDEMNIFIED PERSON" -- any of the Seller Indemnified Persons or the Buyer
Indemnified Persons, as the context requires.
"INDEMNIFYING PARTY" -- the Buyer or the Seller, as the context requires.
"INDEMNIFYING STOCKHOLDERS" -- the partners of Tri-State Partners (other
than American Cancer Society, Georgia Institute of Technology Foundation, Holy
Spirit Church, William B. Shearer Charitable Remainder Unitrust and Hubert L.
Harris Charitable Remainder Unitrust) and the Stockholders (other than
Chattahoochee Leasing Corporation, Lawrence R. Knowles, W. Carter Bates III,
Jonathan V. Leaver, Buckhead Investment Group and Tri-State Partners).
"INTANGIBLE PROPERTY" -- All right, title and interest in and to the
goodwill and other intangible property (including Seller's trade names and trade
logos but excluding Seller's corporate name) used in connection with the
Purchased Assets, all licenses, permits and authorizations pertaining to the
Purchased Assets or the right to own and operate the Purchased Assets and all
right, title and interest in and to (i) any intellectual property used in
connection with the Purchased Assets, and (ii) all records and data relating to
the Purchased Assets.
"IRC" -- the Internal Revenue Code of 1986, as amended from time to time,
or any successor law, and regulations issued by the IRS pursuant to the Internal
Revenue Code or any successor law.
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<PAGE> 41
"IRS" -- the United States Internal Revenue Service and, to the extent
relevant, the United States Department of the Treasury.
"J.G.A. LEASE" -- that certain Lease dated January 15, 1996 between Seller
and J.G.A. Corp.
"KNOWLEDGE" -- a Person will be deemed to have "Knowledge" of a particular
fact or other matter only if such Person is actually aware of such fact or other
matter without making any independent inquiry or investigation. A Person (other
than an individual) will be deemed to have "Knowledge" of a particular fact or
other matter if any individual who is serving as a director, officer, partner,
executor, or trustee of such Person (or in any similar capacity) has Knowledge
of such fact or other matter.
"LEGAL REQUIREMENT" -- any federal, state, local, municipal, foreign,
international, multinational, or other administrative Order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"MATERIAL ADVERSE CHANGE" -- a change that, more likely than not, will
cause a Material Adverse Effect.
"MATERIAL ADVERSE EFFECT" -- a material adverse effect on the Purchased
Assets or the business prospects, operations or conditions (financial or
otherwise) relating thereto, taken as a whole.
"NON-SOLICITATION AGREEMENT" -- those Non-Disclosure and Non-Solicitation
Agreements dated July 1, 1993 of the Seller with each of Donald C. Danysh and
Rick P. Miles.
"ORDER" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" -- a matter will be deemed in the "Ordinary
Course of Business" if it is a matter that is reasonably related to the
operation of the Business and is consistent with the custom and practices of
similarly situated businesses in the outdoor advertising industry.
"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) any charter or similar document adopted or filed in connection
with the creation, formation, or organization of a Person; and (e) any amendment
to any of the foregoing.
"OTHER CONTRACT" -- any Contract (other than an Advertising Contract, a
Site Lease or the Non-Solicitation Agreements) relating to or affecting the
Purchased Assets (i) under which Seller
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<PAGE> 42
has or may acquire any rights, (ii) under which Seller has or may become subject
to any obligation or liability, or (iii) by which Seller or any of the Purchased
Assets is or may become bound.
"OWNED REAL PROPERTY" -- as defined in Section 2.2(c).
"PARTY" -- as defined in the first paragraph of this Agreement.
"PARTIES" -- as defined in the first paragraph of this Agreement.
"PERMITS" -- as defined in Section 2.2(b).
"PERMITTED LIENS" -- liens for Taxes (other than Income Taxes) not yet
delinquent, interests of lessors, liens securing liabilities which are Assumed
Liabilities, or for other liens (not securing any indebtedness or which are not
otherwise dischargeable by the payment of a sum certain) which are immaterial in
character and do not prohibit and would not prohibit the use of the Purchased
Assets for their intended purpose.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PROCEEDING" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced or brought by any Person relating to the Purchased Assets,
the Business, this Agreement or any of the transactions contemplated by this
Agreement.
"PURCHASE PRICE" -- as defined in Section 2.7.
"PURCHASED ASSETS" -- as defined in Section 2.2.
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" -- with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITY INTEREST" -- any mortgage, pledge, lien, encumbrance, charge or
other security interest or option or right of any third party with respect
thereto.
"SELLER" -- as defined in the first paragraph of this Agreement.
"SITE LEASES" -- as defined in Section 2.2(d).
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<PAGE> 43
"STOCKHOLDERS" -- all of the stockholders of Seller.
"STRUCTURES" -- as defined in Section 2.2(a).
"TAX OR TAXES" -- shall mean all tax (including income tax, capital gains
tax, value added tax, sales tax, property tax, transfer tax or intangibles tax),
levy assessment, tariff, duty, deficiency or other fee and any related charge or
amount (including fine, penalty and interest) imposed, assessed or collected by
or under the authority of any Governmental Body.
"TAX RETURN" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"THREATENED" -- a claim, Proceeding or dispute will be deemed to have been
"THREATENED" if any demand or statement has been made or any notice has been
given that would lead a prudent Person to conclude that such a claim, Proceeding
or dispute is likely to be asserted, commenced, taken, or otherwise pursued in
the future.
"TRI-STATE PARTNERS" -- Tri-State Partners, a Georgia general partnership.
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<PAGE> 44
EXHIBIT B
ASSIGNMENT OF CONTRACTS
THIS ASSIGNMENT, made and entered into this ____ day of ___________, 1997,
by and between TRI-STATE SYSTEMS, INC., a Georgia corporation ("Assignor") and
TRI-STATE OUTDOOR MEDIA GROUP, INC., a Kansas corporation ("Assignee").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Asset Purchase Agreement dated
_______________, 1997 by and between Assignor and Assignee (the "Purchase
Agreement"), Assignor agreed to sell to Assignee and Assignee agreed to purchase
from Assignor, for the consideration and upon the terms and conditions set forth
in the Purchase Agreement, the Purchased Assets (as defined in the Purchase
Agreement), including, but not limited to, Assignor's rights in and to the Site
Leases, the Advertising Contracts, the Non-Solicitation Agreements and the
Assumed Other Contracts.
NOW, THEREFORE, for good and valuable consideration, the premises, and the
mutual covenants herein contained, the receipt and sufficiency of which are
hereby acknowledged by the parties hereto, the parties agree as follows:
1. Assignor hereby transfers and assigns to Assignee all of Assignor's
right, title and interest in and to the Site Leases, the Advertising Contracts,
the Non-Solicitation Agreements and the Assumed Other Contracts.
2. Assignee, by its acceptance hereof, does hereby assume and agree to
perform to the extent required by the terms of the Purchase Agreement any and
all obligations and duties of Assignor as a party under the Site Leases, the
Advertising Contracts, the Non-Solicitation Agreements and the Assumed Other
Contracts.
3. Assignor hereby covenants to execute and deliver to Assignee, upon
Assignee's reasonable request therefore, such further reasonable instruments of
assignment and transfer as may be necessary or desirable to (a) transfer to
Assignee all of such Assignor's right, title and interest in and to the Site
Leases, the Advertising Contracts, the Non-Solicitation Agreements and the
Assumed Other Contracts, or (b) evidence such assignment or transfer to
Assignee.
4. This Assignment of Contracts shall inure to the benefit of, and be
binding upon, the respective legal representatives, successors and permitted
assigns of the Parties hereto.
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B-1
<PAGE> 45
5. Nothing in this Agreement supersedes or extinguishes any of the
obligations, agreements, covenants or warranties of Seller or Buyer contained in
the Purchase Agreement. If any conflict exists between this Agreement and the
Purchase Agreement, then the terms of the Purchase Agreement shall govern and
control.
IN WITNESS WHEREOF, Assignor and Assignee have caused this Agreement to be
executed and delivered as of the date first above written.
ASSIGNOR:
TRI-STATE SYSTEMS, INC.
By:___________________________________
Donald C. Danysh
President
ASSIGNEE:
TRI-STATE OUTDOOR MEDIA GROUP, INC.
By:___________________________________
Title:________________________________
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B-2
<PAGE> 46
EXHIBIT C
BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT
This Bill of Sale, Assignment and Assumption Agreement (the "Agreement")
is executed and delivered effective as of ___________, 1997, by TRI-STATE
SYSTEMS, INC., a Georgia corporation ("Seller"), and TRI-STATE MEDIA GROUP,
INC., a Kansas corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Asset Purchase Agreement dated
_______________, 1997 by and between Seller and Buyer (the "Purchase
Agreement"), Seller desires to sell to Buyer and Buyer wishes to purchase from
Seller, for the consideration and upon the terms and conditions set forth in the
Purchase Agreement, the Purchased Assets (as defined in the Purchase Agreement),
subject to the assumption by Buyer of the Assumed Liabilities (as defined in the
Purchase Agreement);
NOW, THEREFORE, in consideration of the premises, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed that:
1. Conveyance of Assets. Seller does hereby contribute, grant, convey,
assign, transfer and deliver to Buyer all right, title and interest of Seller in
and to all of the Purchased Assets, subject to the Assumed Liabilities.
2. Assumption of Liabilities. Buyer does hereby assume and agree to pay,
discharge and perform, as appropriate, the Assumed Liabilities in accordance
with and to the extent required by the terms of the Purchase Agreement.
3. Power of Attorney. Seller hereby constitutes and appoints Buyer its
true and lawful attorney-in-fact, with full power of substitution of Buyer in
the name or stead of Seller (a) to demand, collect, and receive for the account
of Seller or Buyer any or all of the Purchased Assets hereby sold, conveyed,
transferred, assigned, and delivered to Buyer or intended so to be; (b) from
time to time to institute or prosecute, in the name of Seller or otherwise, all
proceedings that Buyer, in its sole discretion, may deem necessary or convenient
in order to realize upon, affirm, or obtain title to or possession of, or to
collect, assert, or enforce any claim, right or title of any kind in or to the
Purchased Assets; (c) to endorse the name of Seller on any and all checks,
notes, drafts or other instruments of commercial paper that may be payable or
endorsed to the order or orders of Seller and that constitute or represent all
or any part of the Purchased Assets; (d) to defend and compromise any and all
actions, suits or proceedings in respect of any of the Purchased Assets; and
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C-1
<PAGE> 47
(e) to do all such other acts and things in relation to the Purchased Assets as
Buyer, in its sole discretion, deems desirable. Seller agrees that the foregoing
powers are coupled with an interest and shall not be revocable by Seller for any
reason whatsoever.
4. Execution and Delivery of Instruments. Seller shall duly execute and
deliver or cause to be executed and delivered all instruments of sale,
conveyance, transfer and assignment, and all notices, releases, acquittances and
other documents that may be necessary more fully to grant, convey, transfer,
assign, and deliver to and vest in Buyer the Purchased Assets hereby granted,
conveyed, transferred, assigned, and delivered or intended so to be.
5. Governing Law. This Agreement shall be governed by the laws of the
state of Georgia.
6. Conflict. Nothing in this Agreement supersedes or extinguishes any of
the obligations, agreements, covenants or warranties of Seller or Buyer
contained in the Purchase Agreement. If any conflict exists between this
Agreement and the Purchase Agreement, then the terms of the Purchase Agreement
shall govern and control.
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
executed and delivered as of the date first above written.
SELLER:
TRI-STATE SYSTEMS, INC.
By:_____________________________________
Title:__________________________________
BUYER:
TRI-STATE OUTDOOR MEDIA GROUP INC.
By:_____________________________________
Title:__________________________________
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C-2
<PAGE> 48
SCHEDULE 3.2(a)
Pursuant to an Agreement for Sale of Stock dated as of April 14, 1997 by and
among North American Acquisitions, Inc., a Wyoming corporation ("NAA"),
Tri-State Partners, the partners of Tri-State Partners, the Seller, and the
stockholders of Seller, the Seller and Indemnifying Stockholders are a party to
an Agreement regarding the voting of the stock of Seller by NAA after the sale
of the stock to NAA.
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<PAGE> 49
SCHEDULE 3.2(b)
All agreements of Seller with Heller.
The Courtesy Leases.
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<PAGE> 50
SCHEDULE 3.2(c)
The consent of Heller is required under the agreements of Seller with Heller.
All indebtedness of Seller to Heller will be satisfied at Closing and such
agreements terminated.
The Courtesy Leases require consent to assignment, as well as the ground leases
requiring notification or consent on the attached lists.
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<PAGE> 51
SCHEDULE A.1
MONTHLY PAYMENTS NOT INCLUDED IN ACCOUNTS PAYABLE ON BALANCE SHEET
1. Henry Arrington $ 75.00 (illum. exp.)
2. Adrian Maxwell 75.00 (illum. exp.)
3. College Park Storage 53.00 (PSD Mat & Supply)
4. Colonial Mini Storage 64.00 (PSD Mat & Supply)
5. Expense reports--Payment period: within one week after presentment.
6. Contract painters--Payment period: the later of 7 days after work performed
or bill presented for payment.
7. Light bills--Payment period: on or before the due date.
8. Land rent--Payment period: within 5 days after the last day of month in which
the rent is due and owing.
9. Phone bills (if due date is before accounts payable run)--Payment period: on
or before the due date.
The payment periods for each of the items in 1 through 4 is the first day of
each month.
Payables arising prior to the Closing and outstanding at Closing with respect to
items 1 through 9 above shall be included in the definition of Assumed
Liabilities provided that in each case such payables are not older than the
applicable payment periods described above.
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<PAGE> 1
EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
dated as of February 13, 1998
by and between
TRI-STATE OUTDOOR MEDIA GROUP, INC.
and
UNISIGN CORPORATION, INC.
<PAGE> 2
INDEX
<TABLE>
<S> <C>
1. DEFINITIONS.................................................................................... 1
2. PURCHASE AND SALE OF THE ASSETS; CLOSING....................................................... 1
2.1 Agreement to Purchase and Sell........................................................ 1
2.2 Purchased Assets...................................................................... 1
2.3 Agreement to Assume Certain Liabilities............................................... 3
2.4 Excluded Liabilities.................................................................. 3
2.5 Closing............................................................................... 4
2.6 Purchase Price........................................................................ 4
2.7 Transactions at the Closing........................................................... 4
2.8 Third Party Consents.................................................................. 5
3. REPRESENTATIONS AND WARRANTIES OF SELLER....................................................... 6
3.1 Organization and Good Standing........................................................ 6
3.2 Authority; No Conflict................................................................ 6
3.3 Solvency.............................................................................. 7
3.4 Books and Records..................................................................... 7
3.5 Structures............................................................................ 7
3.6 Permits............................................................................... 7
3.7 Site Leases and Advertising Contracts................................................. 7
3.8 Real Property......................................................................... 8
3.9 Title, Encumbrances................................................................... 8
3.10 Financial Statements.................................................................. 8
3.11 Taxes................................................................................. 9
3.12 Compliance with Legal Requirements.................................................... 10
3.13 Legal Proceedings; Orders............................................................. 10
3.14 Other Contracts....................................................................... 10
3.15 Insurance............................................................................. 10
3.16 Environmental Matters................................................................. 10
3.17 Intangible Property................................................................... 10
3.18 Relationships with Affiliates......................................................... 11
3.19 Brokers or Finders.................................................................... 11
3.20 Employee Benefits Matters............................................................. 11
3.21 Bulk Sales............................................................................ 11
3.22 Employees; Labor Matters.............................................................. 11
3.23 Indebtedness, Encumbrances and Security Interests..................................... 12
3.24 HSR................................................................................... 12
3.25 Disclosure............................................................................ 12
4. REPRESENTATIONS AND WARRANTIES OF BUYER........................................................ 12
4.1 Organization and Good Standing........................................................ 12
4.2 Authority; No Conflict................................................................ 13
4.3 Certain Proceedings................................................................... 13
4.4 Brokers or Finders.................................................................... 13
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
5. COVENANTS OF SELLER............................................................................ 13
5.1 Access and Investigation.............................................................. 13
5.2 Omitted............................................................................... 13
5.3 Operation of the Purchased Assets..................................................... 14
5.4 Best Efforts.......................................................................... 14
5.5 Negative Covenant..................................................................... 14
5.6 Required Approvals and Consents....................................................... 14
5.7 Notification.......................................................................... 14
5.8 No Negotiation........................................................................ 14
5.9 Tax Clearance......................................................................... 15
6. COVENANTS OF BUYER............................................................................. 15
6.1 Required Approvals.................................................................... 15
6.2 Best Efforts.......................................................................... 15
6.3 Notification.......................................................................... 15
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE............................................ 15
7.1 Accuracy of Representations........................................................... 15
7.2 Seller's Performance.................................................................. 16
7.3 Consents.............................................................................. 16
7.4 Additional Documents.................................................................. 16
7.5 No Proceedings........................................................................ 16
7.6 No Prohibition........................................................................ 16
7.7 No Material Adverse Change............................................................ 16
7.8 Omitted............................................................................... 16
7.9 Satisfaction of Indebtedness.......................................................... 16
7.10 Billboard Income...................................................................... 17
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE........................................... 17
8.1 Accuracy of Representations........................................................... 17
8.2 Buyer's Performance................................................................... 17
8.3 Additional Documents.................................................................. 17
8.4 No Proceedings........................................................................ 17
8.5 No Prohibition........................................................................ 18
9. TERMINATION.................................................................................... 18
9.1 Termination Events.................................................................... 18
9.2 Effect of Termination................................................................. 18
10. INDEMNIFICATION; REMEDIES...................................................................... 19
10.1 Indemnification and Payment of Damages
by Seller and the Indemnifying Stockholders.......................................... 19
10.2 Indemnification and Payment of Damages by Buyer....................................... 19
10.3 Procedure for Indemnification -- Third Party Claims................................... 20
10.4 Procedure for Indemnification -- Other Claim.......................................... 20
10.5 Survival/Limitations.................................................................. 21
</TABLE>
<PAGE> 4
<TABLE>
<S> <C>
11. NON-COMPETITION AND NON-SOLICITATION........................................................... 21
11.1 Non-Competition....................................................................... 21
11.2 Non-Solicitation...................................................................... 22
11.3 Enforcement........................................................................... 22
11.4 Non-Solicitation by Buyer............................................................. 22
11.5 Survival.............................................................................. 22
12. POST-CLOSING ESCROW FUND....................................................................... 23
12.1 Escrow Amount......................................................................... 23
12.2 Claims................................................................................ 23
12.3 Payment Date.......................................................................... 23
12.4 Escrow Agent Held Harmless............................................................ 24
12.5 Reliance on Notices................................................................... 24
12.6 Disputes.............................................................................. 24
12.7 No Limitation of Rights or Obligations................................................ 24
12.8 Survival.............................................................................. 24
13. GENERAL PROVISIONS............................................................................. 24
13.1 Expenses.............................................................................. 24
13.2 Headings; Construction................................................................ 25
13.3 Public Announcements; Confidentiality................................................. 25
13.4 Availability of Equitable Remedies.................................................... 25
13.5 Notices............................................................................... 25
13.6 Further Assurances.................................................................... 26
13.7 Waiver................................................................................ 27
13.8 Entire Agreement and Modification..................................................... 27
13.9 Assignments, Successors, and No Third-Party Rights.................................... 27
13.10 Severability.......................................................................... 27
13.11 Risk of Loss.......................................................................... 27
13.12 Post-Closing Access................................................................... 27
13.13 Applicable Law and Venue.............................................................. 28
13.14 Counterparts.......................................................................... 28
13.15 Proceedings........................................................................... 28
14. INTERSTATE 75 UNITS............................................................................ 29
14.1 Letter of Credit...................................................................... 29
14.2 Construction of Units................................................................. 30
14.3 Payment............................................................................... 30
14.4 Disputes.............................................................................. 31
14.5 Escrow Agent Held Harmless............................................................ 31
14.6 Reliance on Notices................................................................... 31
14.7 Survival.............................................................................. 31
15. ARBITRATION.................................................................................... 31
15.1 Appointment........................................................................... 31
15.2 Arbitration Procedure................................................................. 32
15.3 Jurisdiction.......................................................................... 32
15.4 Expenses.............................................................................. 32
15.5 Reference............................................................................. 32
15.6 Survival.............................................................................. 32
</TABLE>
<PAGE> 5
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement ("Agreement") is entered into as of
February __, 1998, by and between TRI-STATE OUTDOOR MEDIA GROUP, INC., a Kansas
corporation ("Buyer"), and UNISIGN CORPORATION, INC., a Kentucky corporation
("Seller") (Buyer and Seller are sometimes herein referred to individually as a
"Party" and collectively as the "Parties").
RECITALS
Seller is engaged in the business of owning and operating outdoor signs
and billboards and otherwise providing outdoor advertising services in the
states of Kentucky, West Virginia and Ohio (the "Business"), among other
business endeavors. Seller desires to sell and assign certain outdoor
advertising assets to Buyer, and Buyer desires to purchase such assets and to
assume certain liabilities associated with such assets, pursuant to the terms,
conditions, limitations and exclusions contained in this Agreement.
AGREEMENT
The Parties, intending to be legally bound, agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the terms listed on Exhibit A attached
hereto have the meanings specified or referred to in Exhibit A .
2. PURCHASE AND SALE OF THE ASSETS; CLOSING
2.1 AGREEMENT TO PURCHASE AND SELL. Subject to the terms and conditions
of this Agreement, Seller hereby agrees to grant, sell, assign, transfer, convey
and deliver all right, title and interest in and to the Purchased Assets, free
and clear of any Encumbrances or Security Interests, and Buyer hereby agrees to
buy and acquire the Purchased Assets from Seller, and to assume the Assumed
Liabilities upon the terms and conditions set forth in this Agreement.
2.2 PURCHASED ASSETS. The Purchased Assets are those assets of Seller
used in the Business listed below:
(a) all of the billboard displays and other out-of-home
advertising structures, together with all components, fixtures, parts,
appurtenances, and equipment attached to or made a part thereof that are
existing, under construction or for which Seller has any rights (including at
least 448 structures and 1,391 sign faces or places on structures for sign
faces) (collectively, the "Structures"), including, without limitation, all of
the Structures listed on Schedule 2.2(a);
<PAGE> 6
(b) all leases, licenses, easements, other rights of ingress
or egress, and all other grants of the right to place, construct, own, operate
or maintain billboard displays and other out-of-home advertising structures
(including, without limitation, the Structures) on land, buildings and other
real property owned by third parties, and all rights therein (collectively, the
"Site Leases"), including, without limitation, those Site Leases listed on
Schedule 2.2(b);
(c) all of the rights under existing and pending sales and
advertising contracts associated with the Business, all rights to the
advertising copy displayed on the Structures as of the Closing Date, all other
rights to collect and receive income from the use of the Structures and security
deposits, if any, with respect thereto (collectively, the "Advertising
Contracts"), including, without limitation, all of the Advertising Contracts
listed on Schedule 2.2(c);
(d) all state and local licenses or permits/tags which Seller
has or has an interest in with respect to the Business and all other
Governmental Authorizations that are required for the operation of the Business
(collectively, the "Permits"), including, without limitation, all of the Permits
listed on Schedule 2.2(d);
(e) the real property owned in fee by Seller and used in the
Business and any rights therein, and all buildings, fixtures, structures and
other improvements located thereon, listed on Schedule 2.2(e) ("Included Real
Property");
(f) all accounts receivable, prepaid items and other assets of
Seller as of the Closing Date used in the Business that would be reflected as
current assets on a balance sheet of Seller as of the Closing Date prepared in a
manner consistent with Section 3.10(a), but excluding cash and cash equivalents
(including certificates of deposit);
(g) all pertinent Books and Records;
(h) all tangible personal property owned by Seller and used in
the operation of the Business (collectively, the "Tangible Personal Property"),
including, without limitation, all of the Tangible Personal Property listed on
Schedule 2.2(h);
(i) all supplies used in connection with the Business,
including, without limitation, panels, moldings, steel components, sections,
parts, paint and painting supplies, appurtenances, equipment, electrical
connections, wiring and lighting components, as set forth on Schedule 2.2(i);
(j) the Intangible Property (it being understood that as to
Seller's trade name "Unisign", Buyer shall be entitled to use such name in
connection with its operation of the Purchased Assets and Seller shall be
entitled to retain the use of this name as its corporate name and in connection
with the operation by Seller of those businesses conducted by it which does not
constitute part of the Business); and
2
<PAGE> 7
(k) all rights (including any benefits arising therefrom),
causes of action, claims and demands of whatever nature (whether or not
liquidated) of Seller relating to the Purchased Assets, including, without
limitation, condemnation rights and proceeds, and all rights against suppliers
under warranties covering any of the Purchased Assets.
Notwithstanding the foregoing, the Purchased Assets shall not
include the following assets owned by Seller (the "Excluded Assets"):
(1) The land and improvements (including the office building)
located at Highway U.S. 23, Ivel, Kentucky (the "Office Property");
(2) Those parcels of real estate listed on Schedule 2.2(2)
annexed hereto (the "Excluded Real Property");
(3) Those assets used exclusively in Seller's commercial sign
construction business;
(4) Those assets used exclusively in Seller's commercial real
estate business (but not including the Included Real Property); or
(5) Seller's cash accounts (including certificates of
deposit).
Seller warrants and represents to Buyer that the Purchased Assets,
together with the Excluded Assets, constitute all the assets of the Business.
2.3 AGREEMENT TO ASSUME CERTAIN LIABILITIES. At the Closing, Buyer
shall assume and agree to discharge and perform only those liabilities and
obligations that are set forth on Schedule 2.3 or arise or are attributable to
events occurring on or after the Closing Date pursuant to the Site Leases and
the Advertising Contracts listed on Schedules 2.2(b) and 2.2(c), respectively
(the "Assumed Liabilities"), but to the extent and only to the extent that:
(a) Such obligations are performable on or after the Closing
Date; and
(b) Such obligations are attributable to periods arising on or
after the Closing Date.
The assumption by Buyer of any Assumed Liabilities shall not
be deemed to modify or amend Seller's representations and warranties contained
herein or in any way impair Buyer's right to rely upon such representations and
warranties or to obtain indemnification pursuant to Article 10 hereof for any
breach of such representations and warranties.
2.4 EXCLUDED LIABILITIES. All claims against and liabilities and
obligations of Seller not specifically assumed by Buyer pursuant to Section 2.3,
including, without limitation, the following
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claims against and liabilities of Seller (the "Excluded Liabilities"), are
excluded, and shall not be assumed or discharged by Buyer, and shall be
discharged in full when due by Seller:
(a) Any liabilities to the extent not attributable to the
Purchased Assets;
(b) Any liability for Taxes arising prior to or as a result of
the sale of the Purchased Assets under this Agreement;
(c) Any liabilities for or related to indebtedness of Seller
to banks, financial institutions, or other Persons;
(d) Any liabilities of Seller for or with respect to any
employees of Seller, including, without limitation, any liabilities pursuant to
any compensation, collective bargaining, pension, retirement, severance,
termination, or other benefit plan, agreement or arrangement;
(e) Any liabilities of Seller with respect to its commercial
sign construction business and commercial real estate business; and
(f) Any other liabilities of Seller, whether absolute or
contingent, that are attributable to or arise from facts, events, or conditions
that occurred or came into existence prior to the Closing (except to the extent
that Buyer shall assume the Assumed Liabilities as set forth in Section 2.3),
whether or not such liabilities are asserted or claimed prior to the Closing or
thereafter.
2.5 CLOSING. The purchase and sale of the Purchased Assets (the
"Closing") provided for in this Agreement will take place at the offices of
Buyer or its lender on February 27, 1998 or such earlier or later time and place
as the Parties may agree in writing. The effective time of the Closing shall be
12.01 a.m., Eastern Standard Time, on the Closing Date.
2.6 PURCHASE PRICE. In consideration for the Purchased Assets, Buyer
shall assume the Assumed Liabilities, and pay an amount (the "Purchase Price")
equal to Twenty-Two Million Dollars ($22,000,000.00). The Parties agree to
cooperate with each other in determining and reaching an agreement in writing on
the allocation of the Purchase Price among the Purchased Assets on or prior to
Closing.
2.7 TRANSACTIONS AT THE CLOSING. The following transactions shall take
place at the Closing:
(a) Seller shall enter into (as applicable) and/or deliver to
Buyer: (i) the Bill of Sale, Assignment and Assumption Agreement; (ii) the Deeds
and all applicable documentary stamps or real estate transfer taxes payable in
connection with the conveyance of the Included Real Property; (iii) a lease
covering the Office Property in the form of Exhibit D annexed hereto (the
"Office Lease"); (iv) a lease or leases covering the Excluded Real Property in
the form(s) of Exhibit E annexed hereto (the "Parcel Lease"); (v) Required
Consents; (vi) satisfactory evidence of the release of any
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Encumbrances or Security Interests on the Purchased Assets; (vii) all applicable
Tax Clearances; and (viii) other instruments of transfer, and all other related
documents as may be necessary to effect the sale and assignment of the Purchased
Assets in accordance with the terms hereof; provided, however, that Buyer, by
written notice to Seller, may elect not to acquire any one (1) or more of the
parcels of Included Real Property (in which case Buyer, at its sole option, may
elect to deem any one (1) or more of such parcels as Excluded Real Property and
lease the same pursuant to the Parcel Lease on the terms applicable to each
other individual parcel of Excluded Real Property as set forth in the Parcel
Lease). Seller shall also deliver to Buyer all Books and Records with respect to
the Purchased Assets, including the originals of the Advertising Contracts, Site
Leases and Permits.
(b) Prior to the execution of this Agreement, Buyer delivered
to the Escrow Agent the sum of $250,000.00 (the "Deposit") as a deposit against
the Purchase Price, which amount is being held by the Escrow Agent pursuant to
the terms of that certain Escrow Agreement dated January 9, 1998 between Buyer,
Seller and the Escrow Agent, a copy of which is annexed hereto as Schedule
2.7(b) (the "Deposit Escrow Agreement") and incorporated herein by reference
(and in the event of any conflict between this Agreement and the Deposit Escrow
Agreement, the terms of this Agreement shall control). If the Closing shall
occur, the Escrow Agent shall deliver the Deposit to Seller at the Closing.
Buyer shall deliver the balance of the Purchase Price ($21,750,000.00) at the
Closing, as follows:
(i) $21,500,000.00 (subject to any required
adjustments) shall be delivered to an account or accounts
designated by Seller by wire transfer of immediately available
funds; and
(ii) the $250,000.00 Escrow Amount (as described in
Section 12.1) shall be delivered to the Escrow Agent by wire
transfer of immediately available funds to be held in
accordance with the provisions of Section 12 of this
Agreement.
(c) Buyer shall enter into (as applicable) and deliver to
Seller: (i) the Bill of Sale, Assignment and Assumption Agreement, (ii) the
Office Lease, (iii) the Parcel Lease, and (iv) other assumption agreements,
instruments and other documents as may be reasonably necessary to evidence the
assumption by Buyer of the Assumed Liabilities.
(d) The Parties shall also deliver to each other the
agreements, instruments, opinions, certificates, and other documents referred to
in this Agreement.
2.8 THIRD PARTY CONSENTS. To the extent that Seller's rights under any
Advertising Contract, Site Lease, Permit or other interest in the Purchased
Assets may not be assigned without the consent of a third party and such consent
has not been obtained, this Agreement shall not constitute an agreement to
assign the same if an attempted assignment would constitute a breach thereof or
be unlawful, and Seller and Buyer, to the maximum extent permitted by law and
any terms of or limitations relating to such asset, shall use their Best Efforts
to obtain for Buyer the benefits thereunder, and shall cooperate to the maximum
extent permitted by law and any terms of or
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limitations relating to such asset in any reasonable arrangement designed to
provide such benefits to Buyer, including any sublease or subcontract or similar
arrangement, and if Buyer has obtained such benefits, Buyer shall discharge
Seller's obligations thereunder arising from and after the Closing Date, except
for those obligations arising because of Seller's breach.
3. REPRESENTATIONS AND WARRANTIES OF SELLER
Seller represents and warrants to Buyer as follows:
3.1 ORGANIZATION AND GOOD STANDING. Seller is a corporation duly
organized, validly existing and in good standing under the laws of Kentucky,
with full power and authority to conduct the Business as it is now being
conducted, to own or use the Purchased Assets, and to perform all its
obligations. Seller has delivered to Buyer true and complete copies of its
Organizational Documents, as currently in effect. Seller is duly qualified to do
business and in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of the business conducted by it makes
such qualification necessary, except where such failure to be qualified would
not have a Material Adverse Effect on Seller or the Business. The Business is
operating only in the Commonwealth of Kentucky and in the states of Ohio and
West Virginia. Seller has no subsidiaries.
3.2 AUTHORITY; NO CONFLICT.
(a) This Agreement constitutes the legal, valid, and binding
obligation of Seller, enforceable against it in accordance with its terms. Upon
the execution and delivery by Seller of any documents to be executed at Closing
pursuant to this Agreement (collectively, the "Closing Documents"), such Closing
Documents will constitute the legal, valid, and binding obligations of Seller,
as applicable, enforceable against it in accordance with its terms. Seller has
the absolute and unrestricted right, power and authority to execute and deliver
this Agreement and the Closing Documents to which it is a party and to perform
its obligations thereunder. The Indemnifying Stockholders are all the
shareholders, beneficially and of record, of Seller. The execution, delivery and
performance of this Agreement has been specifically authorized by all the
shareholders and directors of Seller.
(b) Except as set forth in Part 3.2(b) of the Disclosure
Schedule, neither the execution and delivery by Seller of this Agreement nor the
consummation or performance by Seller of any of the Contemplated Transactions
will:
(i) conflict with, violate or result in a breach of
(A) any provision of the Organizational Documents of Seller; (B) any
Order or Legal Requirement to which Seller, the Business or any of the
Purchased Assets may be subject; or (C) any Governmental Authorization
held by Seller or that otherwise relates to the Business or the
Purchased Assets; or
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(ii) (A) contravene, conflict with, or result in a
violation or breach of any provision of, or give any Person the right
to declare a default or exercise any remedy under, or to accelerate the
maturity or performance of, or to cancel, terminate, or modify, any
material Contract to which Seller is a party or any material interest
or rights of Seller in or to the Purchased Assets; or (B) result in the
imposition or creation of any Encumbrance upon or with respect to any
of the Purchased Assets.
(c) Except as set forth in Part 3.2(c) of the Disclosure
Schedule, Seller is not and will not be required to give any notice to or obtain
any Consent from any Person in connection with the execution and delivery of
this Agreement or the consummation or performance of any of the Contemplated
Transactions.
3.3 SOLVENCY. By consummating the transactions contemplated hereby,
Seller does not intend to hinder, delay or defraud any of Seller's present or
future creditors. Before giving effect to the transactions contemplated hereby,
Seller has been paying its debts as they become due in the Ordinary Course of
Business and, after giving effect to the transactions contemplated hereby,
Seller will have paid or discharged all of its debts (or made adequate provision
for the payment thereof) with respect to the Purchased Assets.
3.4 BOOKS AND RECORDS. The books of account, and other Books and
Records of Seller maintained in connection with the Purchased Assets, are
complete and correct in all material respects and have been maintained in
accordance with sound business practices. Buyer shall have full access to the
Books and Records (and the right to make copies of same) prior to, at and after
the Closing, and this provision shall survive the Closing.
3.5 STRUCTURES. Seller owns all of the Structures. Except as set forth
in Part 3.5 of the Disclosure Schedule, each Structure (a) has a written Site
Lease and is located entirely on property covered by a Site Lease or is located
entirely on the Real Property, (b) complies in all material respects with the
terms of the Permits and applicable Legal Requirements pertaining to it, (c) is
in condition to accept faces and in adequate condition and repair for its
current use, and (d) is not currently the subject of any dispute with any
lessor, any lessee or owner of adjacent property or any other Person.
3.6 PERMITS. Except as set forth in Part 3.6 of the Disclosure
Schedule, (a) the Permits constitute all necessary licenses, permits,
registrations and approvals necessary pursuant to all applicable Legal
Requirements to install, operate and maintain the Structures for off-premises
advertising, (b) Seller is in material compliance with the terms of the Permits;
(c) each Permit is in full force and effect and Seller is not aware of any fact
or event which constitutes a material violation of any Permit, and (d) Seller
has not received written notice that any Governmental Body issuing any Permit
intends to cancel, terminate, modify or amend any Permit.
3.7 SITE LEASES AND ADVERTISING CONTRACTS. Seller has delivered to
Buyer true and complete copies of all Advertising Contracts and the Site Leases
to which Seller is a party or by
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which Seller or any of the Purchased Assets is bound, and all Site Leases and
Advertising Contracts are listed on Schedules 2.2(b) and 2.2(c), respectively.
Except as set forth on Part 3.7 of the Disclosure Schedule, all sales made to
advertisers in connection with the Structures have been made pursuant to
Advertising Contracts. The Site Leases and the Advertising Contracts are in full
force and effect, and are binding upon the parties thereto. Except as set forth
in Part 3.7 of the Disclosure Schedule, (x) to the Knowledge of Seller, no
default by Seller or any other Person has occurred under the Site Leases or
Advertising Contracts and (y) to the Knowledge of Seller, no event, occurrence
or condition exists which (with or without notice or lapse of time or the
happening of any further event or condition) would become a default by Seller
thereunder or would entitle any other party to terminate a Site Lease or
Advertising Contract to make a claim or set-off against Seller or otherwise to
amend such Site Lease or Advertising Contract or prevent such Site Lease or
Advertising Contract from being renewed in accordance with its terms. Except as
set forth in Part 3.7 of the Disclosure Schedule, Seller has not received any
written notice of default, termination or non-renewal under any Site Lease or
Advertising Contract. On the Closing Date all Site Lease rents and other charges
and all liabilities with respect to the Purchased Assets obligations shall be
paid in full through the calendar month in which the Closing occurs.
3.8 REAL PROPERTY. Seller has good and marketable record title to the
surface of the Real Property, such title being a fee interest as to the surface
of the Real Property. Seller has not granted or agreed to grant to any Person
any option, agreement or other right to purchase, sell, lease or occupy any of
the Real Property.
3.9 TITLE, ENCUMBRANCES.
(a) Seller has good title to all of the Purchased Assets.
There are no existing agreements, options, commitments or rights with, of or to
any Person to acquire any of the Purchased Assets or any interest therein. All
of the Purchased Assets are owned by Seller free and clear of all Encumbrances
and Security Interests. With respect to the Site Leases, Seller makes no
representations as to the ownership interests of the lessors under such Site
Leases (however Seller is not aware that any such lessors do not own the real
property which is the subject of a Site Lease to which it is a party).
(b) Except as set forth in Part 3.9(b) of the Disclosure
Schedule, none of the Structures, Site Leases or the Real Property are or, to
the Knowledge of Seller, will be, subject to zoning, use, or building code
restrictions that will prohibit the continued effective ownership, leasing or
other use of such assets as currently owned and used by Seller. Seller has not
received any notice of pending or Threatened claims, Proceedings, planned public
improvements, annexations, special assessments, reasonings or other adverse
claims affecting the Site Leases or the Real Property.
3.10 FINANCIAL STATEMENTS.
(a) Seller has delivered to Buyer the following financial
statements (copies of which are annexed hereto as Schedule 3.10):
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(i) the unaudited balance sheets of Seller at
December 31, 1997 (the "Base Balance Sheet") and statements of income,
retained earnings and cash flows for the one (1) year then ended,
including the notes thereto, certified by Darrell Madden, independent
certified public accountant;
(ii) the unaudited balance sheets of Seller at
December 31, 1997, and an income statement for the twelve (12) month
period then ended; and
(iii) the unaudited operating statement of Seller for
the twelve (12) months ended December 31, 1997.
The Financial Statements have been prepared using generally accepted accounting
principles consistently applied during the periods covered thereby and are (i)
complete and correct in all material respects, and (ii) present fairly in all
material respects the financial condition of Seller at the dates of said
statements and the results of Seller's operations and cash flows for the periods
covered thereby (subject in the case of the unaudited Financial Statements to
normal year-end adjustments and the absence of footnotes). There has been no
Material Adverse Change in the financial condition of the Business or Purchased
Assets since the date of the Base Balance Sheet.
(b) As of the date hereof and as of the Closing Date, Seller
had and will have no liabilities with respect to the Business or the Purchased
Assets (which liabilities, when taken individually or in the aggregate are
material) of any nature, whether accrued, absolute, contingent or otherwise,
asserted or unasserted, known or unknown (including, without limitation,
liabilities as guarantor or otherwise with respect to obligations of others, or
liabilities for Taxes due or then accrued or to become due or contingent or
potential liabilities relating to activities of Seller with respect to the
Business prior to the date hereof or the Closing, as the case may be, regardless
of whether claims in respect thereof had been asserted as of such date), except
(i) liabilities reflected in the Financial Statements or the notes thereto, or
(ii) liabilities incurred in the Ordinary Course of Business since December 31,
1997.
(c) At Closing Seller shall deliver to Buyer an unaudited
balance sheet as at the date immediately preceding the Closing Date and an
income statement for the partial fiscal year then ended, certified by Seller's
chief financial officer.
3.11 TAXES. With respect to the Purchased Assets and the Business:
(a) Seller has filed or caused to be filed all Tax Returns
that are or were required to be filed by Seller, pursuant to applicable Legal
Requirements. Seller has paid, or made provision for the payment of, all Taxes
that have or may have become due pursuant to those Tax Returns or otherwise, or
pursuant to any assessment received by Seller.
(b) No unpaid Taxes create an Encumbrance on the Purchased
Assets.
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(c) Buyer shall not be liable for any Taxes of Seller as a
result of the Contemplated Transactions.
3.12 COMPLIANCE WITH LEGAL REQUIREMENTS. Except as set forth in Part
3.12 of the Disclosure Schedule, (a) Seller has complied with all Legal
Requirements applicable to Seller's ownership or use of the Purchased Assets and
operation of the Business, and (b) Seller has not received any notice (written
or oral) of any violation or failure to comply with any Legal Requirements
relating to the Business, the Purchased Assets or their use or operation which
violation or failure has not been cured.
3.13 LEGAL PROCEEDINGS; ORDERS. Except as set forth in Part 3.13 of the
Disclosure Schedule, there is no Proceeding pending or, to the Knowledge of
Seller, Threatened against Seller or affecting any of the Purchased Assets and
there is no Order to which Seller or the Purchased Assets is subject.
3.14 OTHER CONTRACTS. Seller is not a party to or bound by any Other
Contract, except as disclosed in Part 3.14 of the Disclosure Schedule.
3.15 INSURANCE. Seller maintains (and shall through and including the
Closing Date maintain) in full force and effect policies of fire and other
casualty, liability, title and other forms of insurance covering the Purchased
Assets and the Business, and the operation thereof, of the types and with the
amounts of coverage as are consistent with industry standards for outdoor
advertising businesses comparable to the Business.
3.16 ENVIRONMENTAL MATTERS. Except as set forth in Part 3.16 of the
Disclosure Schedule with respect to the Purchased Assets and the Real Property
and the use or operation thereof: (a) Seller is, and has been, in compliance
with all Environmental Laws; (b) Seller has timely filed all reports, obtained
all required approvals and permits relating to the Business, and generated and
maintained all data, documentation and records under any applicable
Environmental Laws; (c) to the Knowledge of Seller, there has not been any
Release of Hazardous Materials at or in the vicinity of the Business (including
the Real Property and any real property covered by a Site Lease or on which a
Structure is located) or in areas for which Seller would have responsibility
under Environmental Laws; (d) Seller has not received any written notice from
any Governmental Body or private or public entity advising it that it is or may
be responsible for response costs with respect to a Release, a threatened
Release or clean up of Hazardous Materials produced by, or resulting from, its
Business, operations or processes; and (e) Seller has delivered to Buyer true
and complete copies and results of any reports, studies, analyses, tests, or
monitoring possessed or accessible by Seller pertaining to Hazardous Materials
in, on, or under the properties included in the Purchased Assets.
3.17 INTANGIBLE PROPERTY. Seller uses no Intangible Property in
connection with the operation of the Purchased Assets except for the Permits,
the Books and Records, the trade name "Unisign" and licenses for commonly
available software programs under which Seller is the licensee.
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3.18 RELATIONSHIPS WITH AFFILIATES. Except as set forth on Part 3.18 of
the Disclosure Schedule, Seller is not a party to any contract with a Related
Person of Seller relating to the Purchased Assets or the Business associated
therewith. Neither Seller nor any Related Persons of Seller is the owner (of
record or as a beneficial owner) of an equity interest or any other financial or
profit interest in, a Person (other than Seller) that has business dealings or a
material financial interest in any transaction with Seller involving the
Purchased Assets or the Business associated therewith. Seller has not, in the
three (3) years immediately preceding the date hereof, entered into any
agreement with or engaged in any transaction with Affiliates of Seller or a
Related Person of Seller for the provision of any services or the purchase, sale
or other transfer of assets.
3.19 BROKERS OR FINDERS. Seller and its shareholders, directors, and
Representatives have not incurred any obligation or liability, contingent or
otherwise, for brokerage or finders' fees or agents' commissions or other
similar payment in connection with this Agreement, other than to Johnsen, Fretty
& Co., L.L.C. (which shall be paid a fee by Seller pursuant to a separate
agreement).
3.20 EMPLOYEE BENEFITS MATTERS Except as disclosed on Part 3.20 of the
Disclosure Schedule, with respect to Seller:
(a) Seller does not maintain and has never maintained an
"employee benefit pension plan" within the meaning of ERISA Section 3(2), that
is or was subject to Title IV of ERISA.
(b) Seller does not have and has not ever had, any past,
present or future obligation or liability to contribute any "multiemployer
plan," as defined in ERISA Section 3(37).
(c) Seller does not have any written or oral employee benefit
plans, contracts, agreements, incentives or arrangements, including without
limitation, pension and profit sharing plans, savings plans, incentive
compensation, medical, life, dental or disability plans or severance agreements.
For purposes of this Section 3.20, the term "Seller" shall be deemed to include
any other corporation, trade, business or other entity, other than Seller, which
would, together with Seller, now or in the past constitute a single employer
within the meaning of Section 414 of the IRC.
3.21 BULK SALES. Neither the sale by Seller to Buyer of the Purchased
Assets nor the transfer by Seller to Buyer of the Assumed Liabilities as
contemplated in this Agreement constitutes a "bulk sale" (as that term is
defined by the Uniform Commercial Code), and the completion of the transactions
contemplated in this Agreement shall not subject Buyer to any (i) claims
relating to or liabilities resulting from the operations or obligations of
Seller, or (ii) liabilities or obligations with respect to state or local sales,
transfer or similar taxes, all of which liabilities and obligations shall be the
sole responsibility of Seller.
3.22 EMPLOYEES; LABOR MATTERS. All employees of Seller are employees at
will. Except as disclosed on Part 3.22 of the Disclosure Schedule, no employee,
agent or consultant of
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Seller is a party to any agreement governing such employee's agent's or
consultant's employment or engagement, as the case may be, with Seller. As of
the date hereof Seller employs (and as of the Closing Date Seller shall employ)
less than fifty (50) employees. Seller has made no warranty, representation or
agreement, either in writing or orally, to any employee of Seller that Buyer
intends to employ such employee on or after the Closing Date. Seller consents to
Buyer communicating with the employees, consultants and independent contractors
of Seller on or prior to the Closing Date, and Seller shall cooperate in
connection therewith. Seller is not a party to any collective bargaining
agreement with respect to any of its employees nor are any employees of Seller
covered by any collective bargaining agreement. No labor organization or group
of employees has made a demand for recognition, has filed a petition seeking a
representation proceeding or given Seller notice of any intention to hold an
election of a collective bargaining organization. There are no known writs,
actions, claims or legal, administrative, arbitration or other proceedings or
governmental investigations pending or Threatened or involving or alleging civil
rights violations, unfair labor investigations practice claims, back pay orders
or other similar claims or proceedings. Seller is in material compliance with
all federal, state and local laws respecting employment and employment
practices, terms and conditions of employment and wages and hours, and is not
engaged in any unfair labor practice; there is no unfair labor practice
complaint against Seller pending before the National Labor Relations Board;
there is no labor strike, dispute, slowdown, or stoppage pending or threatened
against or involving the employees of Seller; no grievance or any arbitration
proceeding is pending or threatened against Seller and no claim therefor exists.
3.23 INDEBTEDNESS, ENCUMBRANCES AND SECURITY INTERESTS. Set forth on
Schedule 3.23 attached hereto is a list of all Encumbrances, Security Interests
and all indebtedness of the Seller, including the respective names and addresses
of the obligors and obligees, amount of the indebtedness and security for the
indebtedness, and the secured parties, debtor and collateral with respect to any
Security Interests, as applicable, if any. All such Encumbrances, Security
Interests and indebtedness shall be satisfied and discharged at or before the
Closing.
3.24 HSR. The Contemplated Transactions are not subject to the
reporting requirements under the HSR Act.
3.25 DISCLOSURE. No representation or warranty of Seller in this
Agreement and no statement in the Disclosure Schedule contains an untrue
statement of material fact or omits to state a material fact necessary to make
the statements herein or therein, in light of the circumstances in which they
were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Seller as follows:
4.1 ORGANIZATION AND GOOD STANDING Buyer is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Kansas.
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4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding
obligation of Buyer, enforceable against Buyer in accordance with its terms.
Upon the execution and delivery by Buyer of the Closing Documents to which Buyer
is a party, such Closing Documents will constitute the legal, valid, and binding
obligations of Buyer, enforceable against Buyer in accordance with their
respective terms. Buyer has the absolute and unrestricted right, power, and
authority to execute and deliver this Agreement and the Closing Documents and to
perform its obligations under this Agreement and the Closing Documents to which
Buyer is a party.
(b) Neither the execution and delivery of this Agreement by
Buyer nor the consummation or performance of any of the Contemplated
Transactions by Buyer will give any Person the right to prevent, delay, or
otherwise interfere with any of the Contemplated Transactions pursuant to (i)
any provision of Buyer's Organizational Documents; (ii) any resolution adopted
by the board of directors or the stockholders of Buyer; (iii) any Legal
Requirement or Order to which Buyer may be subject; or (iv) any material
Contract to which Buyer is a party or by which Buyer may be bound.
4.3 CERTAIN PROCEEDINGS. There is no pending Proceeding that has been
commenced against Buyer and that challenges, or may have the effect of
preventing, making illegal, or otherwise interfering with, any of the
Contemplated Transactions. To Buyer's Knowledge, no such Proceeding has been
Threatened and no event has occurred or circumstance exists that may give rise
to or serve as a basis for the commencement of any Proceeding.
4.4 BROKERS OR FINDERS. Buyer has not incurred any obligation or
liability, contingent or otherwise, for brokerage or finders' fees or agents'
commissions or other similar payment in connection with this Agreement.
5. COVENANTS OF SELLER
5.1 ACCESS AND INVESTIGATION. Between the date of this Agreement and
the Closing Date, Seller will, and will cause its Representatives to, afford
Buyer and its Representatives reasonable access during normal business hours to
Seller's personnel, properties, Books and Records, and other documents and data
relating to the Purchased Assets and the Business, and furnish Buyer and its
Representatives with copies of the same. In addition to the foregoing, Seller
(without additional consideration therefor to be paid to Seller, but with any
reasonable out-of-pocket expenses payable to non-Affiliates incurred by Seller
to be paid by Buyer), shall, at all reasonable times before the Closing if
called upon by Buyer, use reasonable efforts to cooperate with and assist Buyer
in the preparation of financial statements by Buyer which may include the
operation of the Business prior to the Closing Date.
5.2 OMITTED.
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5.3 OPERATION OF THE PURCHASED ASSETS. Between the date of this
Agreement and the Closing Date, Seller will:
(a) operate the Business only in the Ordinary Course of
Business;
(b) use its Best Efforts to maintain the Purchased Assets, and
maintain the relations and good will with advertisers, landlords and others
associated with the operation of the associated Business;
(c) not enter into any new Advertising Contract or Site Lease
not in the Ordinary Course of Business; and
(d) not bill any party for payments (or accept any payments)
under any Advertising Contract for any period after the end of the calendar
month in which the Closing Date occurs, and if Seller receives any such payments
it shall promptly pay the same to Buyer.
5.4 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Seller will use its Best Efforts to cause the conditions in Section 7 to
be satisfied.
5.5 NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, Seller will
operate the Business consistent in all material respects with past practice,
except as otherwise provided in this Agreement.
5.6 REQUIRED APPROVALS AND CONSENTS. As promptly as practicable after
the date of this Agreement, Seller will make all filings required by Legal
Requirements to be made by it in order to consummate the Contemplated
Transactions and use its Best Efforts to obtain such of the Consents identified
in Section 3.2(c) for the transfer of the Purchased Assets.
5.7 NOTIFICATION. Between the date of this Agreement and the Closing
Date, Seller will promptly notify Buyer in writing if Seller become aware of any
fact or condition that causes or constitutes a breach of any of Seller's
representations and warranties as of the date of this Agreement, or if Seller
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. During the same period, Seller will promptly notify
Buyer of the occurrence of any breach of any covenant of Seller in this Section
5 or of the occurrence of any event that may make the satisfaction of the
condition in Section 7 impossible or unlikely.
5.8 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 9, neither Seller nor any Affiliate will, nor
will it permit its Representatives to, directly or indirectly solicit, initiate,
or encourage any inquiries or proposals from, discuss or negotiate with, provide
any non-public information to, or consider the merits of any unsolicited
inquiries or proposals
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from, any Person (other than Buyer or its Representatives) relating to or
affecting any transaction involving the sale of the Purchased Assets.
5.9 TAX CLEARANCE. Seller shall obtain certificates of clearances for
Taxes ("Tax Clearances") from the States of Kentucky, West Virginia and Ohio,
and applicable local jurisdictions (if any), certifying as to the payment by or
on behalf of Seller of all Taxes due on or prior to the Closing Date (including,
without limitation, in connection with the Contemplated Transactions).
6. COVENANTS OF BUYER
6.1 REQUIRED APPROVALS As promptly as practicable after the date of
this Agreement, Buyer will make all filings required by Legal Requirements to be
made by it to consummate the Contemplated Transactions.
6.2 BEST EFFORTS. Between the date of this Agreement and the Closing
Date, Buyer will use its Best Efforts to cause the conditions in Section 8 to be
satisfied, provided that this Agreement will not require Buyer to dispose of or
make any change in any portion of its business or to incur any other burden to
obtain a Governmental Authorization.
6.3 NOTIFICATION. Between the date of this Agreement and the Closing
Date, Buyer will promptly notify Seller in writing if Buyer becomes aware of any
fact or condition that causes or constitutes a breach of any of Buyer's
representations and warranties as of the date of this Agreement, or if Buyer
becomes aware of the occurrence after the date of this Agreement of any fact or
condition that would (except as expressly contemplated by this Agreement) cause
or constitute a breach of any such representation or warranty had such
representation or warranty been made as of the time of occurrence or discovery
of such fact or condition. During the same period, Buyer will promptly notify
Seller of the occurrence of any breach of any covenant of Buyer in this Section
6 or of the occurrence of any event that may make the satisfaction of the
conditions in Section 8 impossible or unlikely.
7. CONDITIONS PRECEDENT TO BUYER'S OBLIGATION TO CLOSE
Buyer's obligation to purchase the Purchased Assets and to take the
other actions required to be taken by Buyer at the Closing is subject to the
satisfaction, at or prior to the Closing, of each of the following conditions
(any of which may be waived by Buyer, in whole or in part):
7.1 ACCURACY OF REPRESENTATIONS. Seller's representations and
warranties in this Agreement must have been accurate in all material respects as
of the date of this Agreement, and must be accurate in all material respects as
of the Closing Date as if made on the Closing Date, and Buyer shall have
received a certificate of an executive officer of Seller in the form of Exhibit
F annexed hereto, dated as of the Closing Date, as to such accuracy.
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7.2 SELLER'S PERFORMANCE. The covenants and obligations that Seller is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been performed and complied with in all material respects,
and Buyer shall have received a certificate of an executive officer of Seller in
the form of Exhibit F annexed hereto, dated as of the Closing Date, as to such
compliance.
7.3 CONSENTS. Each of the Consents required pursuant to Section 3.2(c)
shall have been obtained and shall be in full force and effect.
7.4 ADDITIONAL DOCUMENTS. Each of the following documents must have
been delivered to Buyer:
(a) an opinion of Marrs Allen May, Esq. dated the Closing Date
in the form of Exhibit G annexed hereto,
(b) the deliveries required from Seller in Section 2.7;
(c) resolutions of all the shareholders and directors of
Seller confirming the authorization of the execution and delivery of this
Agreement and the Contemplated Transactions; and
(d) such other documents as Buyer may reasonably request for
the purpose of (i) evidencing the satisfaction of any condition referred to in
this Section 7, or (ii) otherwise facilitating the consummation or performance
of any of the Contemplated Transactions.
7.5 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced and pending or Threatened by any Person any Proceeding (i)
involving any challenge to, or seeking damages or other relief in connection
with, any of the Contemplated Transactions, (ii) that prevents, makes illegal,
or otherwise materially interferes with any of the Contemplated Transactions or
seeks to do any of the foregoing, or (iii) that involves any material claim
against Seller.
7.6 NO PROHIBITION. There must not be in effect any Legal Requirement
or any injunction or other Order that prohibits or restricts the consummation of
the Contemplated Transactions.
7.7 NO MATERIAL ADVERSE CHANGE. There shall not have been a Material
Adverse Change since the date hereof.
7.8 OMITTED.
7.9 SATISFACTION OF INDEBTEDNESS. At or prior to the Closing, Seller
shall have repaid in full all outstanding indebtedness of Seller to the extent
affecting the Purchased Assets and shall cause all Security Interests affecting
the Purchased Assets to be extinguished.
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7.10 BILLBOARD INCOME. (i) For the calendar month in which the Closing
occurs the paint revenues for the Business must be $280,000.00 or more and the
poster revenues for the Business must be $35,000.00 or more, and (ii) there
shall be no Material Adverse Change in the financial condition of the Business
for the twelve (12) month period ended December 31, 1997 as shown on the
financial statement to be prepared by Buyer's independent accountant, as
compared to the financial statement described in Section 3.10(a)(iii).
8. CONDITIONS PRECEDENT TO SELLER'S OBLIGATION TO CLOSE
Seller's obligation to sell the Purchased Assets and Seller's
obligation to take the other actions required to be taken by Seller at the
Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by Seller, in whole or in
part):
8.1 ACCURACY OF REPRESENTATIONS. Buyer's representations and warranties
in this Agreement must have been accurate in all material respects as of the
date of this Agreement and must be accurate in all material respects in all
respects as of the Closing Date as if made on the Closing Date, and Seller shall
have received a certificate of an executive officer of Buyer in the form of
Exhibit H annexed hereto, dated as of the Closing Date, as to such accuracy.
8.2 BUYER'S PERFORMANCE. The covenants and obligations that Buyer is
required to perform or to comply with pursuant to this Agreement at or prior to
the Closing must have been performed and complied with in all material respects,
and Seller shall have received a certificate of an executive officer of Buyer in
the form of Exhibit H annexed hereto, dated as of the Closing Date, as to such
compliance.
8.3 ADDITIONAL DOCUMENTS. Buyer must have caused the following
documents to be delivered to Seller:
(a) an opinion of St. John & Wayne, L.L.C., dated the Closing
Date in the form of Exhibit I annexed hereto;
(b) the deliveries required from Buyer in Section 2.7;
(c) resolutions of all the directors of Buyer confirming the
authorization of the execution and delivery of this Agreement and the
Contemplated Transactions; and
(d) such other documents as Seller may reasonably request for
the purpose of (i) evidencing the satisfaction of any condition referred to in
this Section 8, or (ii) otherwise facilitating the consummation of any of the
Contemplated Transactions.
8.4 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced and pending or Threatened any Proceeding (i) involving any
challenge to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (ii) that
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prevents, makes illegal, or otherwise materially interferes with any of the
Contemplated Transactions or seeks to do any of the foregoing.
8.5 NO PROHIBITION. There must not be in effect any Legal Requirement
or any injunction or other Order that prohibits or restricts the consummation of
the Contemplated Transactions.
9. TERMINATION
9.1 TERMINATION EVENTS. This Agreement may, by notice given prior to or
at the Closing, be terminated:
(a) by mutual written consent of Buyer and Seller;
(b) (i) by Buyer if any of the conditions in Section 7 has not
been satisfied as of the Closing Date or if satisfaction of such a condition is
or becomes impossible (other than through the failure of Buyer to comply with
its obligations under this Agreement) and Buyer has not waived in writing such
condition on or before the Closing Date (in which case the Deposit shall be
immediately returned to Buyer); or (ii) by Seller if any of the conditions in
Section 8 has not been satisfied as of the Closing Date or if satisfaction of
such a condition is or becomes impossible (other than through the failure of
Seller to comply with its obligations under this Agreement) and Seller has not
waived in writing such condition on or before the Closing Date; or
(c) by Buyer, on the one hand, or Seller, on the other hand,
if the Closing has not occurred (other than through the failure of the other
Party seeking to terminate this Agreement to comply fully with its obligations
under this Agreement) on or before April 1, 1998, or such later date as the
Parties may agree upon.
9.2 EFFECT OF TERMINATION. Each Party's right of termination under
Section 9.1 is in addition to any other rights it may have under this Agreement.
If this Agreement is terminated pursuant to Section 9.1, all further obligations
of the Parties under this Agreement will terminate and the Deposit shall be
immediately returned to Buyer, except that the obligations in Sections 13.1 and
13.3 will survive; provided, however, if (a) Seller shall default in its
obligations under this Agreement to consummate the Contemplated Transactions
(other than as a result of Buyer's default under this Agreement), and Seller
shall fail to cure such default within fourteen (14) days after receipt of
written notice of default from Buyer, then Buyer shall have the right to pursue
any or all legal and equitable remedies, separately or simultaneously
(including, without limitation, (1) the right to terminate this Agreement and
receive the return of the Deposit, or (2) specific performance), which will
survive the termination unimpaired, and the obligations in Sections 13.1 and
13.3 will survive; and (b) Buyer shall default in its obligations under this
Agreement to consummate the Contemplated Transactions (other than as a result of
Seller's default under this Agreement), and Buyer shall fail to cure such
default within fourteen (14) days after receipt of written notice of default
from Seller, then Seller, as Seller's sole remedy (in lieu of any and all
remedies), shall be entitled to receive the Deposit as agreed and liquidated
damages for such termination and/or failure to close by Buyer, and the
obligations in
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Sections 13.1 and 13.3 will survive. The remedies set forth in this Section 9.2
apply only to the failure of Buyer or Seller to consummate the Contemplated
Transactions, and not with respect to any obligations specified herein that
survive the Closing or termination of this Agreement.
10. INDEMNIFICATION; REMEDIES
10.1 INDEMNIFICATION AND PAYMENT OF DAMAGES BY SELLER AND THE
INDEMNIFYING STOCKHOLDERS. Seller and the Indemnifying Stockholders will,
jointly and severally, indemnify and hold harmless Buyer and its stockholders,
controlling Persons and Affiliates (collectively, the "Seller Indemnified
Persons") for, and will pay to the Seller Indemnified Persons the amount of, any
loss, liability (whether absolute or contingent), claim, damage, expense
(including reasonable costs of investigation and defense and reasonable
attorneys' fees), whether or not involving a third-party claim (collectively,
"Damages"), arising, directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by
Seller in this Agreement, the Disclosure Schedule, or any other certificate or
document delivered by Seller pursuant to this Agreement;
(b) any breach by Seller of any covenant or obligation of
Seller in this Agreement or an certificate or document delivered by Seller
pursuant to this Agreement;
(c) the failure of Seller to satisfy and discharge any
Excluded Liabilities;
(d) any default by Seller under any Site Lease, Advertising
Contract or Permit which occurred or accrued prior to the Closing;
(e) the failure of Seller to comply with bulk sales or other
similar laws in any applicable jurisdiction; and
(f) facts, events or conditions that occurred or came into
existence prior to the Closing (except to the extent that Buyer shall have
assumed the same as set forth in Section 2.3), whether or not such Damages are
asserted or claimed prior to the Closing or thereafter.
10.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER. Buyer will
indemnify and hold harmless Seller and its stockholders, controlling Persons and
Affiliates (collectively, the "Buyer Indemnified Persons") for, and will pay to
the Buyer Indemnified Persons the amount of, any Damages arising, directly or
indirectly, from or in connection with:
(a) any breach of any representation or warranty made by Buyer
in this Agreement or in any certificate or document delivered by Buyer pursuant
to this Agreement; and
(b) the failure to pay Assumed Liabilities after the Closing.
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10.3 PROCEDURE FOR INDEMNIFICATION -- THIRD PARTY CLAIMS.
(a) Promptly after receipt by an Indemnified Person under
Section 10.1 or 10.2 of notice of any claim against it, such Indemnified Person
will, if a claim is to be made against an Indemnifying Party under such Section,
give notice to the Indemnifying Party of the commencement of such claim, but the
failure to notify the Indemnifying Party will not relieve the Indemnifying Party
of any liability that it may have to any Indemnified Person, except to the
extent that the Indemnifying Party demonstrates that the defense of such action
is prejudiced by the Indemnifying Party's failure to give such notice.
(b) If any claim referred to in Section 10.3(a) is brought
against an Indemnified Person and it gives written notice to the Indemnifying
Party of such claim, the Indemnifying Party may, at its option, assume the
defense of such claim with counsel satisfactory to the Indemnified Person and,
after written notice from the Indemnifying Party to the Indemnified Person of
its election to assume the defense of such claim, the Indemnifying Party will
not, as long as it diligently conducts such defense, be liable to the
Indemnified Person under this Article 10 for any fees of other counsel or any
other expenses with respect to the defense of such claim subsequently incurred
by the Indemnified Person in connection with the defense of such claim, other
than reasonable costs of investigation. If the Indemnifying Party assumes the
defense of a claim, (i) no compromise or settlement of such claim may be
effected by the Indemnifying Party without the Indemnified Person's consent
unless (A) there is no finding or admission of any violation of Legal
Requirements or any violation of the rights of any Person, and (B) the sole
relief provided is monetary damages that are paid in full by the Indemnifying
Party; and (ii) the Indemnified Person will have no liability with respect to
any compromise or settlement of such claims effected without its consent.
Subject to Section 10.3(c), if notice is given to an Indemnifying Party of any
claim and the Indemnifying Party does not, within ten (10) days after the
Indemnified Person's notice is given, give notice to the Indemnified Person of
its election to assume the defense of such claim, the Indemnifying Party will be
bound by any determination made in such Proceeding or any compromise or
settlement effected by the Indemnified Person.
(c) Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a claim may
adversely affect it or its Affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
Indemnified Person may, by notice to the Indemnifying Party, assume the
exclusive right to defend, compromise, or settle such claim, but the
Indemnifying Party will not be bound by any determination of a claim so defended
or any compromise or settlement effected without its consent (which may not be
unreasonably withheld or delayed).
10.4 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIM. A claim for
indemnification for any matter not involving a third-party claim shall be
asserted by written notice to the Indemnifying Party from whom indemnification
is sought.
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10.5 SURVIVAL/LIMITATIONS.
(a) The Parties hereto agree that (i) the covenants and
agreements contained in this Agreement (including, without limitation, Section
10.1(c)) and any document delivered pursuant hereto and the representations and
warranties contained in Sections 3.1, 3.2(a), 3.3, 3.11, 3.16, 3.18, 4.1,
4.2(a), 4.3 and 4.4 shall survive until ninety (90) days after the expiration of
all applicable statutes of limitation with respect to the subject matter
thereof, (ii) the representations and warranties contained in Sections 3.2(b),
3.2(c), 3.10, 3.12, 3.13, 3.14, 3.19, 3.20, 3.22, 3.23 and 4.2(b) shall survive
until five (5) years following the Closing Date, (iii) all other representations
and warranties shall survive until eighteen (18) months following the Closing
Date (however to the extent that an indemnification claim for a breach of any of
such other representations and warranties is based on a claim of fraud on the
part of Seller and/or the Indemnifying Stockholders, such representations and
warranties shall be deemed to survive for a period of five (5) years following
the Closing Date), and (iv) any indemnification claim for a breach of the
foregoing must be made in writing in accordance with the provisions of this
Article 10 within the applicable survival period for the underlying
representation, warranty or covenant. The expiration of the applicable survival
period will not extinguish an indemnification claim properly made prior to such
expiration in accordance with this Article 10.
(b) Notwithstanding anything to the contrary set forth in this
Article 10, in no event shall Seller's and the Indemnifying Stockholders'
obligation to indemnify the Seller Indemnified Persons pursuant to a claim or
claims for Damages pursuant to Section 10.1(a) (but not including any of the
representations and warranties in Section 3.11, 3.16 or 3.18) made after the
date which is thirty (30) months after the Closing Date exceed $3,000,000.00 in
the aggregate.
(c) Omitted.
(d) Except with respect to any claim, Proceeding or dispute in
connection with an actual or suspected Release of Hazardous Substances or other
actual or suspected violation of an Environmental Law, Buyer's sole and
exclusive remedy after the Closing has occurred for any breach of this Agreement
or for Damages shall be under this Section 10.
11. NON-COMPETITION AND NON-SOLICITATION.
11.1 NON-COMPETITION. Seller and the Indemnifying Stockholders each
hereby agrees that for a period of five (5) years after the Closing Date, such
Person will not, without the prior written consent of Buyer, directly or
indirectly, engage or participate in, be employed by or assist in any manner or
in any capacity, or have any interest in or make any loan to any person, firm,
corporation or business which engages in outdoor advertising activities
(including the ownership and/or operation of outdoor signs and billboards) in
those areas cross-hatched on Exhibit C annexed hereto; provided, however, the
foregoing shall not prevent any such entity or person from owning beneficially
or of record up to one percent (1%) of the outstanding securities of a
publicly-held corporation which engages in competitive activities.
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11.2 NON-SOLICITATION. For a period of five (5) years after the Closing
Date, Seller and the Indemnifying Stockholders each agree that he or it will (i)
not solicit, recruit or hire, or attempt to solicit, recruit or hire, directly
or indirectly, any of the employees of Buyer or its Affiliates; (ii) refrain
from soliciting, or attempting to solicit, directly or indirectly, any business
from any customer of Buyer, or actively pursue prospective customers, with whom
Buyer had material contact at any time during the previous five (5) years for
purposes of providing outdoor (including, without limitation, out-of-home
advertising) products or services of the type offered or provided by Buyer
(Buyer's customers to include customers of Seller); and (iii) refrain from
soliciting, or attempting to solicit, directly or indirectly, any real estate
location used by Buyer from any land owner (or its successor or assigns) who
leases to Buyer (including without limitation land owners under the Site
Leases), or actively pursue prospective land owners with whom Buyer or Seller
had material contact during the previous five (5) years.
11.3 ENFORCEMENT. Seller and the Indemnifying Stockholders acknowledge
that a breach of the covenants in this Section 11 would cause irreparable harm
to Buyer and its Affiliates for which there is not adequate remedy at law.
Seller and the Indemnifying Stockholders consent to the issuance of an
injunction in favor of Buyer and its Affiliates enjoining the breach of this
provision. Notwithstanding the foregoing, in addition to any equitable remedies
available to Buyer, Buyer shall be entitled to any and all remedies at law,
including, without limitation, injunctive relief, monetary damages, an
accounting for profits and/or the imposition of a constructive trust. In the
event that any court of competent jurisdiction should construe any geographical
limitation, the scope, or the time period contained in this restrictive covenant
to be too broad, so as to be unenforceable, it is the intention of the parties
that the court should modify the covenant(s) to provide that the restrictions as
herein contained shall apply and be enforceable to the maximum extent permitted
by law for such restrictions, and further upon such determination, to enforce
the covenant as so modified.
11.4 NON-SOLICITATION BY BUYER. In the event of the termination of this
Agreement, Buyer agrees that for a period of five (5) years after the effective
date of termination it shall refrain from soliciting, or attempting to solicit,
directly or indirectly, any real estate location which is the subject of a Site
Lease as of the date hereof. Buyer acknowledges that a breach of the covenant in
this Section 11.4 would cause irreparable harm to Seller for which there is not
adequate remedy at law. Buyer consents to the issuance of an injunction in favor
of Seller enjoining the breach of this provision. Notwithstanding the foregoing,
in addition to any equitable remedies available to Seller, Seller shall be
entitled to any and all remedies at law, including, without limitation,
injunctive relief, monetary damages, an accounting for profits and/or the
imposition of a constructive trust. In the event that any court of competent
jurisdiction should construe the scope or the time period contained in this
restrictive covenant to be too broad, so as to be unenforceable, it is the
intention of the parties that the court should modify the covenant to provide
that the restriction as herein contained shall apply and be enforceable to the
maximum extent permitted by law for such restrictions, and further upon such
determination, to enforce the covenant as so modified.
11.5 SURVIVAL. This provision shall survive the Closing.
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12. POST-CLOSING ESCROW FUND.
12.1 ESCROW AMOUNT. At the Closing hereof, the sum of Two Hundred Fifty
Thousand Dollars ($250,000.00) (the "Escrow Amount") shall be deposited in an
interest bearing escrow account reasonably acceptable to Buyer and Seller (the
"Escrow Fund") with the Escrow Agent. The Escrow Fund shall be held by the
Escrow Agent for a period not to exceed one (1) year from the Closing Date (the
"Escrow Period"), subject to the terms hereof.
12.2 CLAIMS. In the event that, at any time during the Escrow Period,
Buyer shall claim that Seller has breached any of its representations,
warranties or covenants hereunder, or any claim is made against Buyer by a
creditor of Seller with respect to a liability of Seller or the Business
accruing prior to the Closing Date or if Buyer shall incur any Damages, it shall
provide notice thereof to Seller, with a copy to the Escrow Agent, such notice
to set forth with particularity the specifics of any such claim, and Seller
shall have the right to cure same, or to dispute or contest any such claim. In
the event that Seller does not dispute or contest any such claim or fails to
cure same within thirty (30) days after receipt of Buyer's notice (or such
longer period not to exceed one hundred eighty (180) days in the case of a
Damage which cannot with due diligence be cured within thirty (30) days and the
continuance of which for the period required for cure will not subject any of
the Seller Indemnified Persons to the risk of civil or criminal liability or the
imposition of any Encumbrance on the Purchased Assets, provided Seller commences
the cure within such initial thirty (30) day period and thereafter diligently
prosecutes the cure), Buyer may thereafter furnish to the Escrow Agent a duly
executed and notarized affidavit setting forth the specifics of any such claim,
including, without limitation, the amount thereof and basis therefor, the date
of the notice thereof to Seller and a certification that Seller has not disputed
or contested same or has failed to cure same within the time provided for
herein. Unless Seller has paid to Buyer the amount of such claim within ten (10)
days after receipt by Escrow Agent of the certification of Buyer, the Escrow
Agent shall on the tenth (10th) day after receipt promptly deliver to Buyer from
the Escrow Fund, a check in the amount of any such claim. In the event, however,
that Seller shall elect to dispute or contest any such claim, it shall be
required, within thirty (30) days of Buyer's initial notice hereunder, to
provide notice thereof to Buyer, with a copy to the Escrow Agent, which notice
shall set forth with particularity the specifics of any such dispute or contest
as between the parties hereto or their successors or representatives. In the
event of any such dispute or contest, Buyer and Seller hereby agree that any
such dispute or contest shall be settled by arbitration in accordance with the
provisions of Article 15 of this Agreement. The Escrow Agent shall retain the
portion of the Escrow Fund covered by any such dispute until its receipt of a
certified copy of any such arbitration decision or award in favor of Buyer, at
which time it shall promptly deliver to Buyer from the Escrow Fund a check in
the amount of any such judgment or award.
12.3 PAYMENT DATE. On the one (1) year anniversary of the Closing Date
(the "Payment Date"), the Escrow Agent shall pay to Seller the balance of the
Escrow Fund (plus accrued interest) reduced by any amounts due to Buyer pursuant
to the terms of this Agreement and any amounts which are the subject of an
Unresolved Claim (as hereinafter defined). The term "Unresolved Claim" shall
mean any claim which may be made against the Escrow Fund in accordance with this
Section 12, until such time as such claim has been paid in full or otherwise
fully settled, compromised or adjusted by the parties and the Escrow Agent.
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12.4 ESCROW AGENT HELD HARMLESS. The parties to this Agreement
acknowledge and agree that the Escrow Agent shall not be liable for any error or
judgment or for any mistake of fact, law or for anything which it may do or
refrain from doing in connection herewith, except its own gross negligence or
willful misconduct. Seller and Buyer agree to indemnify, hold harmless and
defend the Escrow Agent from any loss, damage, claim, liability, judgment,
expense (including attorneys' fees and disbursements) or other charge incurred
or sustained by it by reason of any act or omission performed or omitted
hereunder, but this indemnity shall not be applicable to any loss, liability,
damage, claim, judgment, expense or other charge resulting from the gross
negligence or willful misconduct of the Escrow Agent.
12.5 RELIANCE ON NOTICES. The Escrow Agent shall have the right to rely
conclusively upon the notices delivered hereunder, and shall be under no
obligation to ascertain the authenticity of such notices, nor to determine the
factual accuracy thereof.
12.6 DISPUTES. The Escrow Agent is acting as a stakeholder only with
respect to the Escrow Fund. If there is any dispute as to whether the Escrow
Agent is obligated to deliver the Escrow Fund (or any portion thereof) and/or to
whom it should be delivered, the Escrow Agent shall not make any delivery, but
in such event the Escrow Agent shall hold the Escrow Fund until receipt by the
Escrow Agent of an authorization in writing signed by all parties having an
interest in such dispute, directing the disposition of same, or in the absence
of such authorization the Escrow Agent shall hold the Escrow Fund until the
final determination of the rights of the parties in an appropriate proceeding.
If such written authorization is not given, or proceedings for such
determination are not begun within a reasonable period of time and diligently
continued, the Escrow Agent shall have the right, at any time thereafter, to
commence an action or proceeding, at the sole cost and expense of Seller and
Buyer, in the nature of interpleader in any court having jurisdiction thereof,
and to deposit the Escrow Fund with such court, and thereupon, be discharged
from any and all further liability hereunder.
12.7 NO LIMITATION OF RIGHTS OR OBLIGATIONS. The provisions of this
Section 12 (including the amount of the Escrow Fund) shall not limit Buyer's
rights nor Seller's obligations under this Agreement (including, without
limitation, Section 10).
12.8 SURVIVAL. The provisions of this Section 12 shall survive the
Closing.
13. GENERAL PROVISIONS
13.1 EXPENSES. Except as otherwise expressly provided in this
Agreement, each Party to this Agreement will bear its respective expenses
incurred in connection with the preparation, execution, and performance of this
Agreement and the Contemplated Transactions, including all fees and expenses of
agents, representatives, brokers or finders, counsel, and accountants. In the
event of termination of this Agreement, the obligation of each Party to pay its
own expenses will be subject to any rights of such Party arising from a breach
of this Agreement by another Party. Each Party hereto shall indemnify the other
for its failure to pay any brokerage or finders' fees or agents'
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commission or similar payment incurred by such Party or its Representatives in
connection with this Agreement.
13.2 HEADINGS; CONSTRUCTION. The headings of Sections in this Agreement
are provided for convenience only and will not affect its construction or
interpretation. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the word "including" does not limit the preceding words or terms.
13.3 PUBLIC ANNOUNCEMENTS; CONFIDENTIALITY. Any public announcement or
similar publicity with respect to this Agreement or the Contemplated
Transactions will be issued, if at all, at such time and in such manner as Buyer
and Seller agree in writing, provided that the parties shall reasonably
cooperate in such announcements, and provided further that nothing contained
herein shall prevent any party from at any time furnishing information required
by a Governmental Body. Unless consented to by Buyer and Seller in advance or
required by Legal Requirements, prior to the Closing, each Party shall, and
shall cause their respective Representatives to, keep this Agreement strictly
confidential and may not make any disclosure of this Agreement to any Person.
All confidential information and documents made available to the Buyer by Seller
or its Representatives with respect to the Business shall be kept in strict
confidence, and not made available to any third party other than absolutely
necessary for the purposes of concluding the Contemplated Transactions. In the
event the Contemplated Transactions for any reason are not concluded, all
documents or documents compiled from information supplied or obtained hereunder,
and copies thereof, shall be returned to Seller and the Confidential Information
obtained shall in no way be used by the Buyer or communicated to any third
party, except as required by law or court order. This representation shall
survive the termination of this Agreement.
13.4 AVAILABILITY OF EQUITABLE REMEDIES. The Parties acknowledge and
agree that (i) a breach of the provisions of this Agreement could not adequately
be compensated by money damages, and (ii) any Party shall (except as otherwise
expressly provided in this Agreement) be entitled, either before or after the
Closing, in addition to any other right or remedy available to it, to an
injunction restraining such breach and to specific performance of this
Agreement, and no bond or other security shall be required in connection
therewith.
13.5 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), provided that a copy
is mailed by certified mail, return receipt requested, or (c) when received by
the addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
Party may designate by notice to the other Parties):
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<PAGE> 30
If to Seller:
Unisign Corporation
P.O. Box 76
U.S. Highway 23
Ivel, Kentucky 41642
Attention: Jerry Flannery
Telephone No.: (606) 489-8008
Facsimile No.: (606) 874-9663
With a copy to:
Marrs Allen May, Esq.
P.O. Box 1465
234 Second Street
Pikeville, Kentucky 41502
Telephone No.: (606) 432-1300
Facsimile No.: (606) 433-9033
If to Buyer, to:
Tri-State Outdoor Media Group, Inc.
P.O. Box 1247
3416 Highway 41 South
Tifton, Georgia 31793
Attention: Sheldon G. Hurst, President
Telephone No.: (912) 382-2980
Facsimile No.: (912) 386-0203
With a copy to:
St. John & Wayne, L.L.C.
Two Penn Plaza East
Newark, New Jersey 07105
Attention: David C. Freinberg, Esq.
Telephone No.: (973) 491-3600
Facsimile No.: (973) 491-3555
Notices given by an attorney for a Party shall be deemed to be a notice given by
such Party.
13.6 FURTHER ASSURANCES. The Parties agree (i) to furnish upon request
to each other such further information, (ii) to execute and deliver to each
other such other documents, and (iii) to do
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such other acts and things, all as the other Party may reasonably request for
the purpose of carrying out the intent of this Agreement and the documents
referred to in this Agreement.
13.7 WAIVER. Neither the failure nor any delay by any Party in
exercising any right, power, or privilege under this Agreement or the documents
referred to in this Agreement will operate as a waiver of such right, power, or
privilege, and no single or partial exercise of any such right, power, or
privilege will preclude any other or further exercise of such right, power, or
privilege or the exercise of any other right, power, or privilege.
13.8 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the Parties with respect to its subject matter
(including, without limitation, a certain letter of intent signed by Buyer on
December 29, 1997 and by Seller on December 30, 1997 and amendments thereto
signed by Buyer and Seller on January 9, 1998, January 29, 1998 and February 6,
1998) and constitutes (along with the documents referred to in this Agreement) a
complete and exclusive statement of the terms of the agreement between the
Parties with respect to its subject matter. This Agreement may not be amended
except by a written agreement executed by the Party to be charged with the
amendment.
13.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS. No Party may
assign any of its rights under this Agreement without the prior consent of the
other Parties except that Buyer may assign any of its rights under this
Agreement to any Affiliate of Buyer (provided that Buyer shall remain liable for
the obligations of such assignee under this Agreement). This Agreement will
apply to, be binding in all respects upon, and inure to the benefit of the
Parties, and their successors, by liquidation or otherwise, and their permitted
assigns. Nothing expressed or referred to in this Agreement will be construed to
give any Person other than the Parties to this Agreement any legal or equitable
right, remedy, or claim under or with respect to this Agreement or any provision
of this Agreement.
13.10 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
13.11 RISK OF LOSS. Except as otherwise expressly provided in this
Agreement, material risk of loss or damage to the Purchased Assets from any
cause whatsoever prior to the Closing shall be borne by Seller, and after the
Closing shall be borne by Buyer.
13.12 POST-CLOSING ACCESS. Buyer agrees that all Books and Records
delivered to Buyer by Seller pursuant to this Agreement shall be maintained open
for inspection by Seller at any time during regular business hours upon
reasonable notice for a period of six (6) years (or for such longer period as
may be required by applicable Legal Requirements) following the Closing and
that, during such period, Seller, at its expense, may make such copies thereof
as it may reasonably desire. Seller agrees that all books and records relating
to the Purchased Assets and retained by Seller shall be
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maintained open for inspection by Buyer at any time during regular business
hours for a period of six (6) years (or for such longer period as may be
required by applicable Legal Requirements) following the Closing and that,
during such period, Buyer, at its expense, may make such copies thereof as it
may reasonably desire. In addition to the foregoing, Seller (without additional
consideration therefor to be paid to Seller, but with any reasonable
out-of-pocket expenses payable to non-Affiliates incurred by Seller to be paid
by Buyer), shall, at all reasonable times after the Closing if called upon by
Buyer, use reasonable efforts to cooperate with and assist Buyer in the
preparation of financial statements by Buyer which may include the operation of
the Business prior to the Closing Date. Nothing contained in this Section 13.12
shall obligate any Party hereto to make available any books and records if to do
so would violate the terms of any Contract or Legal Requirement to which it is a
party or to which it or its assets are subject. This provision shall survive the
Closing.
13.13 APPLICABLE LAW AND VENUE. Any dispute that relates to any real
property included in the Purchased Assets shall be resolved according to the law
of the state in which such real property is located. In all other respects, this
Agreement is made in and shall be governed by and construed and enforced in
accordance with the laws of the State of Kentucky. Venue shall be proper in the
state where the real property is located concerning disputes that relate to any
real property included in the Purchased Assets. For all other matters venue
shall be proper in the State of Kentucky. Seller and Buyer hereby consent to the
personal jurisdiction of such courts for all matters relating to or arising from
this Agreement.
13.14 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
13.15 PROCEEDINGS. (a) If, on or before the date which is eighteen (18)
months after the Closing Date, there shall be entered, issued, made or rendered
any Order in any of the Proceedings listed in Part 3.13 of the Disclosure
Schedule requiring the removal of a Structure or Structures, Seller at its sole
expense and as soon as practicable shall (i) remove said Structure(s), and (ii)
replace the removed Structure(s) with new Structures of like construction and
size (so that the same is ready for the painting of advertising copy thereon)
and which shall be covered by valid Site Leases and such Permits (all in the
name of Buyer, or assignable to Buyer, and otherwise in form and substance and
on terms reasonably acceptable to Buyer) as are required for the ongoing
operation and maintenance of such new Structures by Buyer for outdoor
advertising purposes, and the locations of which new Structures shall be
substantially similar to the locations for the applicable removed Structures and
otherwise reasonably acceptable to Buyer.
(b) Prior to the Closing, Seller at its expense shall use its
Best Efforts to defend the subject Proceedings listed in Part 3.13 of the
Disclosure Schedule so as to avoid any Material Adverse Effect. After the
Closing, the parties agree that such Proceedings shall be defended as follows:
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(i) As to the Proceedings listed in Paragraphs 1-13,
15, 16 and 18, Buyer shall maintain the defense thereof.
(ii) As to the Proceedings listed in Paragraphs 14,
17, 19 and 20, Seller shall maintain the defense thereof.
The parties shall cooperate and regularly communicate with
each other in the defense of these matters.
(c) Buyer shall not, with respect to the Proceedings listed in
Part 3.13 of the Disclosure Schedule, have any claim against Seller under
Sections 10.1(d) or (f) of this Agreement (except to the extent that in any such
Proceeding there shall be entered, made, issued, rendered or agreed to any
monetary fine, judgment, penalty, imposition or other cost [for which Seller
shall be responsible], in which case and to such extent the foregoing limitation
shall not apply).
(d) Notwithstanding the foregoing provisions of this Section
13.15, the provisions of Section 13.15(a)(ii) shall not apply to the matters
described in Paragraphs 19 or 20 in Part 3.13 of the Disclosure Schedule, which
matters shall be governed by the provisions of Article 14 of this Agreement
(Seller hereby warranting and representing to Buyer that such matters relate
solely to the Permits required with respect to the East Units).
14. INTERSTATE 75 UNITS
14.1 LETTER OF CREDIT. At the Closing hereof, a standby letter of
credit in the amount of $1,250,000.00 having an expiration date of twenty-five
(25) months of the Closing Date and payable to the Escrow Agent (the "Letter of
Credit") shall be delivered by Buyer to the Escrow Agent to be held in
accordance with the terms of this Section 14. The Letter of Credit shall be
drawable solely by the Escrow Agent, and solely upon a circumstance which would
entitle Seller to receive all or a portion of the proceeds of the Letter of
Credit as set forth in this Section 14. The Letter of Credit shall not in any
event be drawn upon without at least five (5) business days' prior written
notice to Buyer within which period Buyer in its sole discretion shall be
entitled to deposit with the Escrow Agent an amount of cash in lieu of the
Escrow Agent's drawing upon the Letter of Credit. If there shall be any dispute
as to whether Seller is entitled to all or any portion of the proceeds of the
Letter of Credit, or whether Buyer is entitled to the return of the Letter of
Credit or any part thereof, the Escrow Agent shall not make any delivery, but in
such event the Escrow Agent shall hold the Letter of Credit (or the cash
proceeds thereof) until receipt by the Escrow Agent of an authorization in
writing signed by all parties having an interest in such dispute, directing the
disposition of same, or in the absence of such authorization the Escrow Agent
shall hold the Letter of Credit until the final determination of the rights of
the parties in an appropriate proceeding. If such written authorization is not
given, or proceedings for such determination are not begun within a reasonable
period of time and diligently continued, the Escrow Agent shall have the right,
at any time thereafter, to commence an action or proceeding, at the sole cost
and expense of Buyer and Seller, in the nature of an interpleader in any court
having jurisdiction thereof, and to deposit the Letter of Credit (or the
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proceeds thereof) with such court, and thereupon be discharged from any and all
further liability hereunder. Notwithstanding the foregoing if there shall be a
dispute as to the disposition of the Letter of Credit and the Letter of Credit
by its terms is subject to expire within five (5) business days, then and only
then the Escrow Agent shall be entitled to draw upon the Letter of Credit
(provided the Escrow Agent shall have given to Buyer at least five (5) business
days' prior written notice thereof, within which period Buyer in its sole
discretion shall be entitled to deposit with the Escrow Agent an amount of cash
in lieu of the Escrow Agent's drawing upon the Letter of Credit, or a substitute
letter of credit expiring not less than six (6) months after the then current
expiration date of the Letter of Credit). At Buyer's election at any time, and
from time to time, Buyer shall be entitled to deposit with the Escrow Agent an
amount of cash equal to the then balance of the Letter of Credit, and
vice-versa. If and to the extent that the Escrow Agent is holding cash in lieu
of the Letter of Credit as hereinbefore provided, such cash deposit shall be
placed in an interest bearing account with the Escrow Agent reasonably
acceptable to Buyer and Seller, and interest shall accrue for the benefit of
Buyer.
14.2 CONSTRUCTION OF UNITS.
(a) Promptly after the Closing, Seller, at its sole expense,
shall commence and thereafter diligently prosecute the Completion of eight (8)
outdoor advertising structures adjacent to Interstate 75 in Georgetown, Kentucky
(the "Units"), four (4) of which shall be located on the east side of Interstate
75 (the "East Units") and four (4) of which shall be located on the west side of
Interstate 75 (the "West Units"). The location of the Units, and the plans and
specifications therefor, are set forth on Exhibit J annexed hereto (the
"Specifications"). A Unit shall be deemed completed upon its construction in
accordance with the Specifications (so that the same is ready for the painting
of advertising copy thereon), and shall be covered by a valid Site Lease and
such Permits (all in the name of Buyer, or assignable to Buyer, and otherwise in
form and substance and on terms reasonably acceptable to Buyer) as are required
for the ongoing operation and maintenance by Buyer of a Unit for outdoor
advertising purposes ("Completion").
(b) When Seller is of the opinion that the Completion of the
East Units or the West Units, as the case may be, has occurred, Seller shall
send written notice thereof to Buyer. Buyer agrees that upon receipt of such
written notice, Buyer will promptly (and not later than ten (10) business days
after receipt of Seller's said notice) inspect the East Units or West Units, as
the case may be, and furnish to Seller a written statement either (i) confirming
that the Completion has occurred, or (ii) that the Completion has not occurred
and specifying those items to be completed in order for the Completion to occur
(the "Punch List"). Seller, at its sole expense, shall promptly complete any
Punch List items. Seller shall execute all documents reasonably required by
Buyer to convey all right, title and interest in and to the Units, all Site
Leases, Permits and Advertising Contracts with respect to such Units, and all
development rights with respect to the locations covered thereby, to Buyer.
14.3 PAYMENT. Upon Completion (by written agreement of the parties or
by determination pursuant to the provisions of Article 15 of this Agreement) of
either the East Units or West Units,
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as the case may be, Seller shall be entitled to receive the sum of $625,000.00;
in which case the Escrow Agent shall draw upon the Letter of Credit up to
$625,000.00 (provided that it shall give Buyer at least five (5) business days'
prior written notice of its intention to draw upon such Letter of Credit during
which period of time Buyer may elect to replace the Letter of Credit, in whole
or in part, with cash). Notwithstanding anything to the contrary herein
contained, if, within two (2) years after the Closing Date the Completion of the
(a) East Units shall not have occurred, Seller shall no longer be entitled to,
and shall forfeit, the $625,000.00 payable in respect of the Completion of the
East Units, and (b) West Units shall not have occurred, Seller shall no longer
be entitled to, and shall forfeit, the $625,000.00 payable in respect of the
Completion of the West Units (and Buyer shall have no further remedies against
Seller for such failure [including under Article 10 or Section 13.15], except
that Buyer shall be entitled to all future development rights with respect to
such locations and all improvements thereon [including, without limitation, the
Units, to the extent constructed], and all rights with respect to all Site
Leases, Advertising Contracts and Permits covering such Units, and Seller shall
execute all documents reasonably required by Buyer to convey and assign such
rights).
14.4 DISPUTES. In the event of any dispute as to the nature or
existence of any Punch List item or as to whether the Completion of the East
Units or West Units, as the case may be, has occurred, such disputes shall be
settled by arbitration in accordance with the provisions of Section 15 of this
Agreement.
14.5 ESCROW AGENT HELD HARMLESS. The parties to this Agreement
acknowledge and agree that the Escrow Agent shall not be liable for any error or
judgment or for any mistake of fact, law or for anything which it may do or
refrain from doing in connection herewith, except its own gross negligence or
willful misconduct. Seller and Buyer agree to indemnify, hold harmless and
defend the Escrow Agent from any loss, damage, claim, liability, judgment,
expense (including attorneys' fees and disbursements) or other charge incurred
or sustained by it by reason of any act or omission performed or omitted
hereunder, but this indemnity shall not be applicable to any loss, liability,
damage, claim, judgment, expense or other charge resulting from the gross
negligence or willful misconduct of the Escrow Agent.
14.6 RELIANCE ON NOTICES. The Escrow Agent shall have the right to rely
conclusively upon the notices delivered hereunder, and shall be under no
obligation to ascertain the authenticity of such notices, nor to determine the
factual accuracy thereof.
14.7 SURVIVAL. The provisions of this Section 14 shall survive the
Closing.
15. ARBITRATION
15.1 APPOINTMENT. In the event that any contest or dispute set forth in
Article 12 or 14 of this Agreement is to be settled by arbitration, the Party
invoking the arbitration procedure (the "First Party") shall give a notice
("Arbitration Notice") to the other Party, and shall in such Arbitration Notice
appoint an arbitrator on its behalf. Within fifteen (15) days after its receipt
of such Arbitration Notice, the other Party by notice to the First Party shall
appoint an arbitrator on its behalf;
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and if the second arbitrator shall not be so appointed within such fifteen (15)
days, the First Party shall appoint the second arbitrator. The two arbitrators
appointed pursuant to the above shall try to appoint the third arbitrator. If,
within twenty (20) days after the appointment of the second arbitrator, they
have not agreed upon the appointment of a third arbitrator, then either Party
may apply to the presiding judge of appropriate jurisdiction in Floyd County,
Kentucky (the "Court") for the appointment of such third arbitrator and the
other Party shall not raise any question as to the Court's full power and
jurisdiction to entertain the application and make the appointment. Each
arbitrator shall have at least ten (10) years' experience in a calling
pertaining to the matter in dispute. The third arbitrator is herein called the
"Umpire", and the date on which the Umpire is appointed is referred to as the
"Appointment Date".
15.2 ARBITRATION PROCEDURE. As soon as practicable after the
Appointment Date, the matter in dispute shall be arbitrated by the Parties in
accordance with the commercial rules then in force of the American Arbitration
Association ("AAA"). The resolution of the dispute shall be determined by the
decision of majority of the three (3) arbitrators, shall constitute an "award"
within the meaning in the applicable rules of the AAA and applicable law, and
judgment may be entered thereon in any court of competent jurisdiction.
15.3 JURISDICTION. Buyer and Seller hereby submit to the in personam
jurisdiction of the AAA in the State of Kentucky and agree that any process in
any arbitration proceeding hereunder may be personally served upon Buyer or
Seller within or outside of the State of Kentucky. The arbitration shall be
conducted at a location in Lexington, Kentucky mutually acceptable to Buyer and
Seller.
15.4 EXPENSES. Each Party shall pay its own fees and expenses relating
to the arbitration (including, without limitation, the fees and expense of its
counsel, its arbitrator and any experts or witnesses retained by it). Each Party
shall pay one-half (1/2) of its fees and expenses of the Umpire and of the AAA.
15.5 REFERENCE. For purposes of this Section 15, all references to
Seller shall be deemed to include, collectively, Seller and the Indemnifying
Stockholders.
15.6 SURVIVAL. The provisions of this Section 15 shall survive the
Closing.
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IN WITNESS WHEREOF, the Parties have executed, seated and delivered
this Agreement as of the date first written above.
BUYER:
TRI-STATE OUTDOOR MEDIA GROUP, INC.
By: /s/ Sheldon G. Hurst
-------------------------------------
Title: President
----------------------------------
SELLER:
UNISIGN CORPORATION, INC.
By: /s/ Jerry Flannery
-------------------------------------
Title: President
----------------------------------
INDEMNIFYING STOCKHOLDERS:
(As to Articles 10, 11, 12 and 15 only)
/s/ Jerry Flannery
----------------------------------------
Jerry Flannery
/s/ Richard Nunemaker
----------------------------------------
Richard Nunemaker
ESCROW AGENT:
TRANSFINANCIAL BANK
(As to Sections 2.7(b), 12 and 14 only)
By: /s/ Michael B. McCoy
-------------------------------------
Title: Corporate Regional Manager
----------------------------------
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EXHIBITS
Exhibit A - Definitions
Exhibit B - Bill of Sale, Assignment and Assumption Agreement
Exhibit C - Areas of Non-Competition
Exhibit D - Office Lease
Exhibit E - Parcel Lease
Exhibit F - Seller's Compliance Certificate
Exhibit G - Opinion of Seller's Counsel
Exhibit H - Buyer's Compliance Certificate
Exhibit I - Opinion of Buyer's Counsel
Exhibit J - Interstate 75 Units
SCHEDULES
Schedule 2.2(a) - Structures
Schedule 2.2(b) - Site Leases
Schedule 2.2(c) - Advertising Contracts
Schedule 2.2(d) - Permits
Schedule 2.2(e) - Included Real Property
Schedule 2.2(h) - Tangible Personal Property
Schedule 2.2(i) - Supplies
Schedule 2.2(2) - Excluded Real Property
Schedule 2.3 - Certain Liabilities
Schedule 2.7(b) - Deposit Escrow Agreement
Schedule 3.10 - Financial Statements
Schedule 3.23 - Indebtedness
DISCLOSURE SCHEDULE
Part 3.2(b)
Part 3.2(c)
Part 3.5
Part 3.6
Part 3.7
Part 3.9(b)
Part 3.12
Part 3.13
Part 3.14
Part 3.16
Part 3.20
Part 3.22
<PAGE> 39
EXHIBIT A
DEFINITIONS
"AAA" -- as defined in Section 15.2.
"Advertising Contracts" -- as defined in Section 2.2(c).
"Affiliates" -- when used with reference to a specified Person, any
other Person that directly, or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with the Specified
Person. For purposes of this definition of Affiliate, "control" means the
possession, directly or indirectly, of the power to direct or to cause the
direction of management and policies of the Person in question, whether through
the ownership of voting securities or by contract or otherwise.
"Appointment Date" -- as defined in Section 15.1.
"Arbitration Notice" -- as defined in Section 15.1.
"Assumed Liabilities" -- as defined in Section 2.3.
"Base Balance Sheet" -- as defined in Section 3.10(a)(i).
"Best Efforts" -- the efforts that a prudent Person desirous of
achieving a result would use in similar circumstances.
"Bill of Sale" -- the Bill of Sale, Assignment and Assumption Agreement
in the form of Exhibit B attached hereto.
"Books and Records" -- All of Seller's books and records relating to
the Purchased Assets, including, without limitation, all Site Lease files,
Advertising Contract files, Permit files, maintenance and other records for the
Structures, logs, advertiser, customer and supplier lists.
"Business" -- as defined in the Recitals of this Agreement.
"Buyer" -- as defined in the first paragraph of this Agreement.
"Closing" -- as defined in Section 2.5.
"Closing Date" -- the date and time as of which the Closing actually
takes place.
"Closing Documents" -- as defined in Section 3.2(a).
A - 1
<PAGE> 40
"Completion" -- as defined in Section 14.2(a).
"Confidential Information" -- any information concerning the businesses
and affairs of Seller that is not generally available to the public.
"Consent" -- any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"Contemplated Transactions" -- all of the transactions contemplated by
this Agreement, including: (a) the purchase of the Purchased Assets by Buyer
from Seller and assignment to and assumption by Buyer of the Assumed
Liabilities, and (b) the performance by Buyer and Seller of their respective
covenants and obligations under this Agreement.
"Contract" -- any agreement, contract, obligation, promise, or
undertaking (whether written or oral and whether express or implied) that is
legally binding.
"Court" -- as defined in Section 15.1.
"Damages" -- as defined in Section 10.1.
"Deeds" -- warranty deeds (or the statutory equivalent thereof), in
recordable form, with respect to the Real Property.
"Deposit" -- as defined in Section 2.7(b).
"Deposit Escrow Agreement" -- as defined in Section 2.7(b).
"Disclosure Schedule" -- the disclosure schedule, delivered by Seller
to Buyer concurrently with the execution and delivery of this Agreement.
"East Units" -- as defined in Section 14.2(a).
"Encumbrance" -- any charge, claim, condition, equitable interest,
lien, option, pledge, security interest, right of first refusal, or restriction
of any kind, including any restriction on use, transfer, receipt of income, or
exercise of any other attribute of ownership affecting the Purchased Assets.
"Environment" -- soil, land surface or subsurface strata, surface
waters, groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"Environmental Law" -- any Legal Requirement pertaining to
environmental discharges, Release, emissions or spills or the manufacture, sale,
processing, handling, transportation, storage or disposal of Hazardous
Materials, or relating to any environmental processes or condition, including,
A - 2
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without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act ("CERCLA"), the Clean Air Act, the Clean Water Act, the Resource
Conservation and Recovery Act ("RCRA"), the Endangered Species Act, the Federal
Insecticide, Fungicide and Rodenticide Act, the Hazardous Materials
Transportation Act, the Surface Mining Control and Reclamation Act, The
Emergency Planning and Community Right to Know Act, the Safe Drinking Water Act,
the Toxic Substances Control Act, the Coastal Zone Management Act, the National
Environmental Policy Act, the Noise Control Act. As used in this Agreement,
Environmental Laws shall mean any of such laws or regulations as the same exist
now or at the Closing Date.
"ERISA" -- the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"Escrow Agent" -- Transfinancial Bank, having an address of 111 Main
Street, Pikeville, Kentucky 41501.
"Escrow Amount" -- as defined in Section 12.1.
"Escrow Fund" -- as defined in Section 12.1.
"Escrow Period" -- as defined in Section 12.1.
"Excluded Assets" -- as defined in Section 2.2.
"Excluded Liabilities" -- as defined in Section 2.4.
"Excluded Real Property" -- as defined in Section 2.2(2).
"Financial Statements" -- those financial statements of Seller
described in Sections 3.10(a)(i), (ii) and (iii).
"First Party" -- as defined in Section 15.1.
"Governmental Authorization" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body, or pursuant to any
Legal Requirement.
"Governmental Body" -- any federal, state, local, municipal, foreign,
or other government; or governmental or quasi-governmental authority of any
nature (including any governmental agency, branch, department, official, or
entity and any court or other tribunal).
"Hazardous Materials" -- any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a
A - 3
<PAGE> 42
contaminant under or pursuant to any Environmental Law, and specifically
including petroleum and all derivatives thereof or synthetic substitutes
therefor and asbestos or asbestos-containing materials.
"HSR Act" -- the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and any regulations and rules promulgated thereunder.
"Included Real Property" -- as defined in Section 2.2(e).
"Indemnified Person" -- any of the Seller Indemnified Persons or the
Buyer Indemnified Persons, as the context requires.
"Indemnifying Party" -- the Buyer, or the Seller and the Indemnifying
Stockholders, as the context requires.
"Indemnifying Stockholders" -- Jerry Flannery and Richard Nunemaker.
"Intangible Property" -- All right, title and interest in and to the
goodwill and other intangible property (except for Seller's corporate name) (but
including Seller's trade names) used in connection with the Purchased Assets,
all licenses, permits and authorizations pertaining to the Purchased Assets or
the right to own and operate the Purchased Assets and all right, title and
interest in and to (i) any intellectual property used in connection with the
Purchased Assets, and (ii) all records and data relating specifically to the
Purchased Assets.
"IRC" -- the Internal Revenue Code of 1986, as amended from time to
time, or any successor law, and regulations issued by the IRS pursuant to the
Internal Revenue Code or any successor law.
"IRS" -- the United States Internal Revenue Service and, to the extent
relevant, the United States Department of the Treasury.
"Knowledge" -- a Person will be deemed to have "Knowledge" of a
particular fact or other matter only if such Person is actually aware of such
fact or other matter without making any independent inquiry or investigation. A
Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving as a director,
officer, partner, member, executor, or trustee of such Person (or in any similar
capacity) has Knowledge of such fact or other matter.
"Legal Requirement" -- any federal, state, local, municipal, foreign,
international, multinational, or other administrative Order, constitution, law,
ordinance, principle of common law, regulation, statute, or treaty.
"Letter of Credit" -- as defined in Section 14.1.
"Material Adverse Change" -- a change that will probably cause a
Material Adverse Effect.
A - 4
<PAGE> 43
"Material Adverse Effect" -- a material adverse effect on the Purchased
Assets, the associated Business or operations or conditions (financial or
otherwise) relating thereto, taken as a whole.
"Office Property" -- as defined in Section 2.2(1).
"Office Lease" -- as defined in Section 2.7(a)(iii).
"Order" -- any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator,
"Ordinary Course of Business" -- an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" if such action is
consistent with the past custom and practices of such Person and is taken in the
ordinary course of the normal day-to-day operations of such Person (including
with respect to quantity and frequency).
"Organizational Documents" -- (a) the articles or certificate of
incorporation and the bylaws of a corporation; (b) the partnership agreement and
any statement of partnership of a general partnership; (c) the limited
partnership agreement and the certificate of limited partnership of a limited
partnership; (d) the articles or certificate of organization and the operating
agreement of any limited liability company; (e) any charter or similar document
adopted or filed in connection with the creation, formation, or organization of
a Person; and (f) any amendment to any of the foregoing.
"Other Contract" -- any Contract (other than a Site Lease or
Advertising Contract) relating to or affecting the Purchased Assets, the
Business or the operation thereof (i) under which Seller has or may acquire, any
rights, (ii) under which Seller has or may become subject to any obligation or
liability, or (iii) by which Seller or any of the Purchased Assets is or may
become bound.
"Parcel Lease" -- as defined in Section 2.7(a)(iv).
"Party" -- as defined in the first paragraph of this Agreement.
"Payment Date" -- as defined in Section 12.3.
"Permits" -- as defined in Section 2.2(d).
"Person" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, limited
liability partnership, joint venture, estate, trust, association, organization,
labor union, or other entity or Governmental Body.
"Proceeding" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard, by or before, or otherwise
involving, any Governmental Body or arbitrator.
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<PAGE> 44
"Punch List" -- as defined in Section 14.2(b).
"Purchase Price" -- as defined in Section 2.6.
"Purchased Assets" -- as defined in Section 2.2.
"Real Property" -- collectively, the Included Real Property, the
Excluded Real Property and the Office Property.
"Related Person" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family.
(c) any Person in which such individual or members of such
individual's Family hold (individually or in the aggregate) a
Material Interest; and
(d) any Person with respect to which such individual or one or
more members of such individual's Family serves as a director,
officer, partner, executor. or trustee (or in a similar
capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly
or indirectly controlled by, or is directly or indirectly
under common control with such specified Person;
(b) any Person that holds a Material Interest in such specified
Person;
(c) each Person that serves as a director, officer, partner,
manager, executor, or trustee of such specified Person (or in
a similar capacity);
(d) any Person in which such specified Person holds a Material
Interest;
(e) any Person with respect to which such specified Person serves
as a general partner or a trustee (or in a similar capacity);
and
any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse, (iii) any other natural person who
is related to the individual or the individual's spouse within the second
degree, and (iv) any other natural person who resides with such individual,
A - 6
<PAGE> 45
and (b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934) of voting
securities or other voting interests representing at least 5 % of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 5 % of the outstanding equity securities or
equity interests in a Person.
"Release" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"Representative" -- with respect to a particular Person, any director,
officer, partner, employee, agent, consultant, advisor, or other representative
of such Person, including legal counsel, accountants, and financial advisors
(including, in the case of Buyer, its lenders).
"Security Interest" -- any mortgage, pledge, lien, encumbrance, charge
or other security interest or option or right of any third party with respect
thereto.
"Seller" -- as defined in the first paragraph of this Agreement.
"Seller Indemnified Persons" -- as defined in Section 10.1.
"Site Leases" -- as defined in Section 2.2(b).
"Specifications" -- as defined in Section 14.2(a).
"Structures" -- as defined in Section 2.2(a).
"Tangible Personal Property" -- as defined in Section 2.2(h).
"Tax" -- shall mean any tax (including income tax, capital gains tax,
value added tax, sales tax, property tax, deed tax, transfer tax, real property
transfer tax or intangibles tax), levy assessment, tariff, duty, deficiency or
other fee and any related charge or amount (including fine, penalty and
interest) imposed, assessed or collected by or under the authority of any
Governmental Body.
"Tax Clearances" -- as defined in Section 5.9.
"Tax Return" -- any return (including any information return), report,
statement, schedule, notice, form or other document or information filed with or
submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"Threatened" -- a claim, Proceeding or dispute will be deemed to have
been "Threatened" if any demand or statement has been made or any notice has
been given that would lead a prudent Person
A - 7
<PAGE> 46
to conclude that such a claim, Proceeding or dispute is likely to be asserted,
commenced, taken, or otherwise pursued in the future.
"Units" -- as defined in Section 14.2(a).
"Umpire" -- as defined in Section 15.1.
"Unresolved Claim" -- as defined in Section 12.3.
"West Units" -- as defined in Section 14.2(a).
A - 8
<PAGE> 47
EXHIBIT B
BILL OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT
This Bill of Sale, Assignment and Assumption Agreement (this
"Agreement") is executed and delivered effective as of __________________, 1998,
by UNISIGN CORPORATION, INC., a Kentucky corporation ("Seller"), and TRI-STATE
OUTDOOR MEDIA GROUP, INC., a Kansas corporation ("Buyer").
W I T N E S S E T H:
WHEREAS, pursuant to that certain Asset Purchase Agreement dated
February ___, 1998 by and among Seller, Buyer and the Indemnifying Stockholders
named therein (the "Purchase Agreement"), Seller desires to sell to Buyer and
Buyer wishes to purchase from Seller, for the consideration and upon the terms
and conditions set forth in the Purchase Agreement, the Purchased Assets (as
defined in the Purchase Agreement), subject to the assumption by Buyer of the
Assumed Liabilities (as defined in the Purchase Agreement);
NOW, THEREFORE, in consideration of the premises, and for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed that:
1. Conveyance of Assets. Seller does hereby sell, grant, convey,
assign, transfer and deliver to Buyer all right, title and interest of Seller in
and to all of the Purchased Assets, subject to the Assumed Liabilities.
2. Assumption of Liabilities. Buyer does hereby assume and agree to
pay, discharge and perform, as appropriate, the Assumed Liabilities in
accordance with and to the extent required by the terms of the Purchase
Agreement.
3. Power of Attorney. Seller hereby constitutes and appoints Buyer its
true and lawful attorney-in-fact, with full power of substitution of Buyer in
the name or stead of Seller (a) to demand, collect, and receive for the account
of Seller or Buyer any or all of the Purchased Assets hereby sold, granted,
conveyed, transferred, assigned, and delivered to Buyer or intended so to be;
(b) from time to time to institute or prosecute, in the name of Seller or
otherwise, all proceedings that Buyer, in its sole discretion, may deem
necessary or convenient in order to realize upon, affirm, or obtain title to or
possession of, or to collect, assert, or enforce any claim, right or title of
any kind in or to the Purchased Assets; (c) to endorse the name of Seller on any
and all checks, notes, drafts or other instruments of commercial paper that may
be payable or endorsed to the order or orders of Seller and that constitute or
represent all or any part of the Purchased Assets; (d) to defend and compromise
any and all actions, suits or proceedings in respect of any of the Purchased
Assets; and (e) to do all such other acts and things in relation to the
Purchased Assets as Buyer, in its sole discretion, deems
B - 1
<PAGE> 48
desirable. Seller agrees that the foregoing powers are coupled with an interest
and shall not be revocable by Seller for any reason whatsoever.
4. Execution and Delivery of Instruments. Seller shall duly execute and
deliver or cause to be executed and delivered all instruments of sale,
conveyance, transfer and assignment, and all notices, releases, acquittances and
other documents that may be necessary more fully to grant, convey, transfer,
assign, and deliver to and vest in Buyer the Purchased Assets hereby granted,
conveyed, transferred, assigned, and delivered or intended so to be.
5. Governing Law. This Agreement shall be governed by the laws of the
State of Kentucky.
6. Conflict. Nothing in this Agreement supersedes or extinguishes any
of the obligations, agreements, covenants or warranties of Seller or Buyer
contained in the Purchase Agreement. If any conflict exists between this
Agreement and the Purchase Agreement, then the terms of the Purchase Agreement
shall govern and control.
IN WITNESS WHEREOF, Seller and Buyer have caused this Agreement to be
executed and delivered as of the date first above written.
SELLER:
UNISIGN CORPORATION, INC.
By: ____________________________________
Title:__________________________________
BUYER:
TRI-STATE OUTDOOR MEDIA GROUP, INC.
By: ____________________________________
Sheldon G. Hurst, President
B - 2
<PAGE> 49
EXHIBIT C
AREAS OF NON-COMPETITION
<PAGE> 50
EXHIBIT D
OFFICE LEASE
<PAGE> 51
EXHIBIT E
PARCEL LEASE
<PAGE> 52
EXHIBIT F
UNISIGN CORPORATION
COMPLIANCE CERTIFICATE
The undersigned hereby certifies as follows:
1. He is President of Unisign Corporation, Inc., a corporation duly
organized, validly existing and in good standing under the laws of the State of
Kentucky (the "Seller").
2. The representations and warranties of the Seller contained in
Section 3 of the Asset Purchase Agreement dated as of February __, 1998 (the
"Purchase Agreement") by and among Tri-State Outdoor Media Group, Inc., Seller,
and the Indemnifying Stockholders identified therein, are true and correct in
all material respects at and as of the date hereof with the same effect as
though all such representations and warranties were made at and as of the date
hereof.
3. The Seller has performed or complied, in all material respects, with
all of the covenants and obligations required by the Purchase Agreement to be
performed or complied with by the Seller at or prior to the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of this _____ day of February, 1998.
________________________________________
Name:
<PAGE> 53
EXHIBIT G
OPINION OF SELLER'S COUNSEL
<PAGE> 54
EXHIBIT H
TRI-STATE OUTDOOR MEDIA GROUP, INC.
COMPLIANCE CERTIFICATE
The undersigned hereby certifies as follows:
1. He is President of Tri-State Outdoor Media Group, Inc., a
corporation duly organized, validly existing and in good standing under the laws
of the State of Kansas (the "Buyer").
2. The representations and warranties of Buyer contained in Section 4
of the Asset Purchase Agreement dated as of February __, 1998 (the "Purchase
Agreement") by and among the Buyer, Unisign Corporation, Inc. and the
Indemnifying Stockholders identified therein, are true and correct in all
material respects at and as of the date hereof with the same effect as though
all such representations and warranties were made at and as of the date hereof.
3. Buyer has performed or complied, in all material respects, with all
of the covenants and obligations required by the Purchase Agreement to be
performed or complied with by Buyer at or prior to the date hereof.
IN WITNESS WHEREOF, the undersigned has executed this
Certificate as of this _____ day of February 1998.
________________________________________
Sheldon G. Hurst
President
<PAGE> 55
EXHIBIT I
OPINION OF BUYER'S COUNSEL
February __, 1998
Unisign Corporation
P.O. Box 76
U.S. Highway 23
Ivel, Kentucky 41642
Ladies and Gentlemen:
We have acted as counsel to Tri-State Outdoor Media Group, Inc., a
Kansas corporation (the "Company"), in connection with the Company's purchase of
certain assets of Unisign Corporation, Inc., a Kentucky corporation ("Seller")
and related transactions contemplated by the Asset Purchase Agreement (the
"Purchase Agreement") dated as of February __, 1998 among the Company, Seller
and the Indemnifying Stockholders. Capitalized terms used herein and not
otherwise defined shall have the respective meanings ascribed to such terms in
the Purchase Agreement. The Purchase Agreement, together with the Bill of Sale,
Assignment and Assumption Agreement and the other Closing Documents, are
sometimes collectively referred to herein as the "Agreements". This opinion is
being delivered to you pursuant to Section 8.3(a) of the Purchase Agreement.
We have acted as counsel to the Company in connection with the
Agreements and the transactions contemplated thereby. As such counsel, we have
made such examinations of laws and have examined certificates of officers and
representatives of the Company, originals or copies, certified or otherwise
authenticated to our satisfaction, of all such records, agreements and other
instruments, certificates and orders of public officials, and other documents
that we have deemed necessary to render the opinions hereinafter set forth
including, but not limited to:
(a) the Certificate of Incorporation and By-laws of the Company;
(b) resolutions of the Directors of the Company authorizing, among
other things, the Agreements and the transactions contemplated
thereby; and
(c) executed copies of the Agreements.
In such examination, we have assumed the genuineness of all signatures,
the authenticity of all documents submitted to us as originals, the conformity
to the originals thereof of all documents submitted to us as certified or
photostatic copies, and the authenticity of the originals of such latter
I - 1
<PAGE> 56
Unisign Corporation
February ___, 1998
Page -2-
documents. As to any fact relevant to any such opinion, we have relied, to the
extent that relevant facts are not independently established by us, and to the
extent we deem reliance proper, on certificates of public officials and
certificates, oaths and declarations of officers and other representatives of
the Company on which we believe that we and you are justified in relying. We
have not, except as specifically identified herein, been retained or engaged
for, nor have we performed, any independent review or investigation of any
statutes, orders, rules or regulations of any court or governmental agency
having jurisdiction over the Company. This letter and the opinions set forth
herein are given, and all statements herein "to our knowledge" are made, in the
context of the foregoing.
As used in this opinion letter, the phrase "to our knowledge" means the
actual knowledge (that is, the conscious, awareness of facts or other
information) of lawyers in the firm who have given substantive legal attention
to representing the Company in connection with the transactions contemplated by
the Agreements.
We are qualified to practice law only in the States of New York and New
Jersey and we do not purport to be experts on any laws other than the laws of
the States of New York and New Jersey and the Federal laws of the United States.
We express no opinion as to the laws of any jurisdiction other than the Federal
laws of the United States, and the laws of the State of New Jersey. For purposes
of this opinion we assume that Kansas and Kentucky law in all relevant aspects
are substantively identical to New Jersey law.
Based and relying upon the foregoing and subject to all of the
qualifications contained in this letter, we are of the opinion that as of the
date hereof:
(i) The Company is a corporation duly incorporated and validly existing
in good standing under the laws of the State of Kansas with full corporate power
and authority to conduct its business as it is currently conducted, to own or
use the Purchased Assets, and to perform its obligations under the Agreements.
(ii) The Company has the absolute and unrestricted right, power and
authority to execute and deliver each of the Agreements to which it is a party
and to perform each of its obligations thereunder. Each of the Agreements has
been duly authorized, executed and delivered by the Company. Each of the
Agreements is a valid, legal and binding agreement of the Company, enforceable
in accordance with its terms, subject to the qualification that the
enforceability thereunder may be limited by bankruptcy, fraudulent conveyance,
insolvency, reorganization, moratorium, and other laws relating to or affecting
creditors' rights generally and by general equitable principles.
I - 2
<PAGE> 57
Unisign Corporation
February ___, 1998
Page -3-
(iii) Neither the execution and delivery of the Agreements by the
Company nor the consummation or performance by the Company of any of the
transactions contemplated thereby does or will conflict with, violate or result
in a breach of:
(A) any provision of the Organizational Documents of the
Company; and
(B) the resolutions adopted by the board of directors of the
Company authorizing the Contemplated Transactions.
This opinion is being furnished solely to Seller and is solely for the
benefit of Seller and may not be relied upon for any other purpose, or furnished
to, quoted to or relied upon by any other person for any purpose without our
prior written consent.
Very truly yours,
St. John & Wayne, L.L.C.
I - 3
<PAGE> 58
EXHIBIT J
INTERSTATE 75 UNITS
Eight (8) single pole, back to back bulletin structures equal in size,
construction and type as currently erected on said property referred to as the
"Rock Quarry" owned by Mr. Al Drake, located north of Lexington, Kentucky
fronting both the west side and east side of I-75 North; in the city of
Georgetown, Kentucky and Scott County.
East Units: Four (4) 14' x 48' back to back, single face, North and South
read (i.e., two (2) faces on each structure), steel single
pole structures completely erected with lights and platform
constructed with clear visibility to I-75 traffic, constructed
on the East side of I-75 on the "Rock Quarry" property. Two of
the proposed structures have been constructed; a third
location has the base single pole erected in concrete, with
top construction including faces (14' x 48') and electrical
remaining; and a fourth site currently has the hole dug, steel
located on site to be assembled and erected.
West Units: Four (4) 14' x 48' back to back, single face, North and South
read (i.e., two (2) faces on each structure), steel single
pole structures completely erected with lights and platform
constructed with clear visibility to I-75 traffic, constructed
on the West side of I-75 on the "Rock Quarry" property.
<PAGE> 1
Exhibit 10.3
EXECUTION COPY
Registration Rights Agreement
Dated as of May 13, 1998
among
Tri-State Outdoor Media Group, Inc.
as Issuer,
and
Prudential Securities Incorporated
and
First Chicago Capital Markets, Inc.
<PAGE> 2
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of May 20, 1998, by and between Tri-State Outdoor Media Group,
Inc., a Kansas corporation (the "Company"), and Prudential Securities
Incorporated and First Chicago Capital Markets, Inc. (the "Initial Purchaser").
This Agreement is made pursuant to the Purchase Agreement dated May
13, 1998 among the Company and the Initial Purchaser (the "Purchase Agreement"),
which provides for the sale by the Company to the Initial Purchaser of $
100,000,000 aggregate principal amount of the Company's 11% Senior Notes due
2008 (the "Notes"). In order to induce the Initial Purchaser to enter into the
Purchase Agreement, the Company has agreed to provide to the Initial Purchaser
and its direct and indirect transferees and assigns the registration rights set
forth in this Agreement. The execution and delivery of this Agreement is a
condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from
time to time, and the rules and regulations of the SEC promulgated
thereunder.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the SEC
promulgated thereunder.
"Closing Time" shall mean the Closing Time as defined in the
Purchase Agreement.
"Company" shall have the meaning set forth in the preamble of this
Agreement and also includes the Company's successors.
"Depositary" shall mean The Depository Trust Company, or any other
depositary appointed by the Company, provided, however, that any such
depositary must have an address in the Borough of Manhattan, in the City
of New York.
"Exchange Notes" shall mean 11% Series B Senior Notes due 2008
issued by the Company under the Indenture containing terms identical to
the Notes (except that
<PAGE> 3
2
(i) interest thereon shall accrue from the last date on which interest was
paid on the Notes or, if no such interest has been paid, from May 20,
1998, (ii) the transfer restrictions thereon shall be eliminated and (iii)
certain provisions relating to an increase in the stated rate of interest
thereon shall be eliminated) to be offered to Holders of Notes in exchange
for Notes pursuant to the Exchange Offer.
"Exchange Offer" shall mean the exchange offer by the Company of
Registrable Notes for Exchange Notes pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the
1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another
appropriate form), and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Holders" shall mean the Initial Purchaser, for so long as it owns
any Registrable Notes, and each of its successors, assigns and direct and
indirect transferees who become registered owners of Registrable Notes
under the Indenture.
"Indenture" shall mean the Indenture relating to the Notes dated as
of May 15, 1998 among the Company and IBJ Schroder Bank & Trust Company, a
New York banking corporation and trust company, as trustee, as the same
may be amended from time to time in accordance with the terms thereof.
"Initial Purchaser" shall have the meaning set forth in the preamble
of this Agreement.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of outstanding Registrable Notes; provided that
whenever the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the
Company or any of its affiliates (as such term is defined in Rule 405
under the 1933 Act) (other than the Initial Purchaser or subsequent
holders of Registrable Notes if such subsequent holders are deemed to be
such affiliates solely by reason of their holding of such Registrable
Notes) shall be disregarded in determining whether such consent or
approval was given by the Holders of such required percentage or amount.
<PAGE> 4
3
"Person" shall mean an individual, partnership, limited liability
company, corporation, trust or unincorporated organization, or a
government or agency or political subdivision thereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus
as amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Notes covered by a Shelf Registration
Statement, and by all other amendments and supplements to a prospectus,
including post-effective amendments, and in each case including all
material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble of this Agreement.
"Registrable Notes" shall mean the Notes; provided, however, that
the Notes shall cease to be Registrable Notes when (i) a Registration
Statement with respect to such Notes shall have been declared effective
under the 1933 Act and such Notes shall have been disposed of pursuant to
such Registration Statement, (ii) such Notes shall have been sold to the
public pursuant to Rule 144 (or any similar provision then in force, but
not Rule 144A) under the 1933 Act, (iii) such Notes shall have ceased to
be outstanding or (iv) such Notes have been exchanged for Exchange Notes
upon consummation of the Exchange Offer.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. ("NASD") registration and filing fees, (ii) all
fees and expenses incurred in connection with compliance with state or
other securities or blue sky laws and compliance with the rules of the
NASD (including reasonable fees and disbursements of counsel for any
underwriters or Holders in connection with state or other securities or
blue sky qualification of any of the Exchange Notes or Registrable Notes),
(iii) all expenses of any Persons in preparing or assisting in preparing,
word processing, printing and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto, certificates
representing the Exchange Notes and other documents relating to the
performance of and compliance with this Agreement, (iv) all rating agency
fees, (v) all fees and expenses incurred in connection with the listing,
if any, of any of the Registrable Notes on any securities exchange or
exchanges, (vi) all fees and disbursements relating to the qualification
of the Indenture under applicable securities laws, (vii) the reasonable
fees and disbursements of counsel for the Company and, in the case of a
Shelf Registration Statement, the reasonable fees and
<PAGE> 5
4
disbursements (including the expenses of preparing and distributing any
underwriting or securities sales agreement) of one counsel (in addition to
appropriate local counsel) for the Holders (which counsel shall be
selected in writing by the Majority Holders), (viii) the fees and expenses
of the independent public accountants of the Company, including the
expenses of any special audits or "cold comfort" letters required by or
incident to such performance and compliance, (ix) the fees and expenses of
a "qualified independent underwriter" as defined by Conduct Rule 2720 of
the NASD (if required by the NASD rules) in connection with the offering
of the Registrable Securities, (x) the fees and expenses of the trustee,
including its counsel, and any escrow agent or custodian, and (xi) any
fees and disbursements of the underwriters customarily required to be paid
by issuers or sellers of securities and the reasonable fees and expenses
of any special experts retained by the Company in connection with any
Registration Statement, but excluding underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or
disposition of Registrable Notes by a Holder.
"Registration Statement" shall mean any registration statement of
the Company which covers any of the Exchange Notes or Registrable Notes
pursuant to the provisions of this Agreement, and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(b) of
this Agreement which covers all of the then Registrable Notes on an
appropriate form under Rule 415 under the 1933 Act, or any similar rule
that may be adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein.
"Trustee" shall mean the trustee with respect to the Notes under the
Indenture.
2. Registration Under the 1933 Act. (a) Exchange Offer Registration.
To the extent not prohibited by any applicable law or applicable interpretation
of the Staff of the SEC, the Company shall (A) file within 60 days after the
date hereof an Exchange Offer Registration Statement covering the offer by the
Company to the Holders to exchange all of
<PAGE> 6
5
the Registrable Notes for Exchange Notes, (B) use its best efforts to cause such
Exchange Offer Registration Statement to be declared effective by the SEC within
180 days after the date hereof, (C) use its best efforts to cause such Exchange
Offer Registration Statement to remain effective until the closing of the
Exchange Offer and (D) use its best efforts to consummate the Exchange Offer
within 30 days after the date on which the Exchange Offer Registration Statement
was declared effective by the SEC. The Exchange Notes will be issued under the
Indenture. Upon the effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Exchange Offer, it being the objective
of such Exchange Offer to enable each Holder (other than Participating
Broker-Dealers (as defined in Section 3(f)) eligible and electing to exchange
Registrable Notes for Exchange Notes (assuming that such Holder is not an
affiliate of the Company within the meaning of Rule 405 under the 1933 Act,
acquires the Exchange Notes in the ordinary course of such Holder's business and
has no arrangements or understandings with any person to participate in the
Exchange Offer for the purpose of distributing the Exchange Notes) to trade such
Exchange Notes from and after their receipt without any limitations or
restrictions under the 1933 Act and without material restrictions under the
securities laws of a substantial proportion of the several states of the United
States.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 30 days after
the date notice thereof is mailed to the Holders (or longer if required by
applicable law);
(iii) use the services of the Depositary for the Exchange Offer with
respect to Notes evidenced by global certificates;
(iv) permit Holders to withdraw tendered Registrable Notes at any
time prior to the close of business, New York City time, on the last
business day on which the Exchange Offer shall remain open, by sending to
the institution specified in the notice, a telegram, telex, facsimile
transmission or letter setting forth the name of such Holder, the
principal amount of Registrable Notes delivered for exchange, and a
statement that such Holder is withdrawing his election to have such Notes
exchanged; and
(v) otherwise comply in all respects with all applicable laws
relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer, the
Company shall:
<PAGE> 7
6
(i) accept for exchange Registrable Notes duly tendered and not
validly withdrawn pursuant to the Exchange Offer in accordance with the
terms of the Exchange Offer Registration Statement and the letter of
transmittal which is an exhibit thereto;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Notes so accepted for exchange by the
Company; and
(iii) cause the Trustee promptly to authenticate and deliver
Exchange Notes to each Holder of Registrable Notes equal in amount to the
Registrable Notes of such Holder so accepted for exchange.
Interest on each Exchange Note will accrue from the last date on
which interest was paid on the Registrable Notes surrendered in exchange
therefor or, if no interest has been paid on the Registrable Notes, from March
17, 1998. The Exchange Offer shall not be subject to any conditions, other than
that the Exchange Offer, or the making of any exchange by a Holder, does not
violate applicable law or any applicable interpretation of the Staff of the SEC.
Each Holder of Registrable Notes (other than Participating Broker-Dealers) who
wishes to exchange such Registrable Notes for Exchange Notes in the Exchange
Offer shall have represented that (i) any Exchange Notes to be received by it
were acquired in the ordinary course of business, (ii) at the time of the
commencement of the Exchange Offer it has no arrangement with any person to
participate in the distribution (within the meaning of the 1933 Act) of the
Exchange Notes, (iii) it is not an affiliate (as defined in Rule 405 under the
1933 Act) of the Company, or if it is an affiliate it will comply with the
registration and prospectus delivery requirements of the 1933 Act to the extent
applicable and (iv) it is not acting on behalf of any person who could not make
the representations in clauses (i) through (iii). The Company shall inform the
Initial Purchaser of the names and addresses of the Holders to whom the Exchange
Offer is made, and the Initial Purchaser shall have the right to contact such
Holders and otherwise facilitate the tender of Registrable Notes in the Exchange
Offer.
(b) Shelf Registration. (i) If, because of any change in law or
applicable interpretations thereof by the Staff of the SEC, the Company is not
permitted to effect the Exchange Offer as contemplated by Section 2(a) hereof,
or (ii) if for any other reason the Exchange Offer cannot be consummated within
150 days following the date hereof, or (iii) if any Holder (other than the
Initial Purchaser) is not eligible to participate in the Exchange Offer or (iv)
upon the request of the Initial Purchaser (with respect to any Registrable Notes
which it acquired directly from the Company) following the consummation of the
Exchange Offer if the Initial Purchaser shall hold Registrable Notes which it
acquired directly from the Company and if the Initial Purchaser is not
permitted, in the opinion of counsel to the Initial Purchaser, pursuant to
applicable law or applicable interpretation of the Staff of the SEC to
participate in the Exchange Offer, the Company shall, at its cost:
<PAGE> 8
7
(A) as promptly as practicable, and in any event within 30 days
after the date on which such filing obligation arises, file with the SEC a
Shelf Registration Statement relating to the offer and sale of the then
outstanding Registrable Notes by the Holders from time to time in
accordance with the methods of distribution elected by the Majority
Holders of such Registrable Notes and set forth in such Shelf Registration
Statement, and use their best efforts to cause such Shelf Registration
Statement to be declared effective by the SEC on or prior to 30 days after
the date on which such filing occurs (or promptly in the event of a
request by the Initial Purchaser pursuant to clause (iv) above). In the
event that the Company is required to file a Shelf Registration Statement
upon the request of any Holder (other than the Initial Purchaser) not
eligible to participate in the Exchange Offer pursuant to clause (iii)
above or upon the request of the Initial Purchaser pursuant to clause (iv)
above, the Company shall file and have declared effective by the SEC both
an Exchange Offer Registration Statement pursuant to Section 2(a) with
respect to all Registrable Notes and a Shelf Registration Statement (which
may be a combined Registration Statement with the Exchange Offer
Registration Statement) with respect to offers and sales of Registrable
Notes held by such Holder or the Initial Purchaser after completion of the
Exchange Offer;
(B) use its best efforts to keep the Shelf Registration Statement
continuously effective in order to permit the Prospectus forming part
thereof to be usable by Holders for a period of two years after its
effective date (or one year from the date the Shelf Registration Statement
is declared effective if such Shelf Registration Statement is filed upon
the request of the Initial Purchaser pursuant to clause (iv) above) or
such shorter period which will terminate when all of the Registrable Notes
covered by the Shelf Registration Statement have been sold pursuant to the
Shelf Registration Statement or all of the Registrable Notes become
eligible for resale pursuant to Rule 144 under the 1933 Act without volume
restrictions; and
(C) notwithstanding any other provisions hereof, use its best
efforts to ensure that (i) any Shelf Registration Statement and any
amendment thereto and any Prospectus forming a part thereof and any
supplement thereto complies in all material respects with the 1933 Act and
the rules and regulations thereunder, (ii) any Shelf Registration
Statement and any amendment thereto does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading and (iii) any Prospectus forming part of any Shelf
Registration Statement, and any supplement to such Prospectus (as amended
or supplemented from time to time), does not include an untrue statement
of a material fact or omit to state a material fact necessary in order to
make the statements made, in light of the circumstances under which they
were made, not misleading.
<PAGE> 9
8
The Company further agrees, if necessary, to supplement or amend the
Shelf Registration Statement if reasonably requested by the Majority Holders
with respect to information relating to the Holders and otherwise as required by
Section 3(b) below, to use all reasonable efforts to cause any such amendment to
become effective and such Shelf Registration to become usable as soon as
practicable thereafter and to furnish to the Holders of Registrable Notes copies
of any such supplement or amendment promptly after its being used or filed with
the SEC.
(c) Expenses. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) and 2(b). Each Holder
shall pay all expenses of its counsel other than as set forth in the preceding
sentence, underwriting discounts and commissions (prior to the reduction thereof
with respect to selling concessions, if any) and transfer taxes, if any,
relating to the sale or disposition of such Holder's Registrable Notes pursuant
to the Shelf Registration Statement.
(d) Effective Registration Statement. (i) The Company will be deemed
not to have used its best efforts to cause a Registration Statement to become,
or to remain, effective during the requisite period if the Company voluntarily
takes any action that would result in any such Registration Statement not being
declared effective or in the Holders of Registrable Notes covered thereby not
being able to exchange or offer and sell such Registrable Notes during that
period unless (A) such action is required by applicable law or (B) such action
is taken by the Company in good faith and for valid business reasons (but not
including avoidance of the Company's obligations hereunder), including a
material corporate transaction, so long as the Company promptly complies with
the requirements of Section 3(k) hereof, if applicable.
(ii) An Exchange Offer Registration Statement pursuant to Section
2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof
will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that if, after it has been declared
effective, the offering of Registrable Notes pursuant to a Registration
Statement is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have been effective during the
period of such interference, until the offering of Registrable Notes pursuant to
such Registration Statement may legally resume.
(e) Increase in Interest Rate. In the event that either (i) the
Exchange Offer Registration Statement is not filed with the Commission on or
prior to the 60th day following the date hereof, (ii) the Exchange Offer
Registration Statement is not declared effective on or prior to the 210th day
following the date hereof, (iii) the Exchange Offer is not consummated within 30
days after the date on which the Exchange Offer Registration Statement was
declared
<PAGE> 10
9
effective by the SEC or a Shelf Registration Statement with respect to the
Registrable Notes is not declared effective on or prior to the 210th day
following the date hereof, or (iv) either (A) the Exchange Offer Registration
Statement ceases to be effective at any time prior to the time that the Exchange
Offer is consummated or (B) if applicable, the Shelf Registration Statement has
been declared effective and such Shelf Registration Statement ceases to be
effective at any time prior to the second anniversary of its effective date, the
interest rate borne by the Notes shall be increased by one-quarter of one
percent per annum following such 60-day period in the case of clause (i) above,
following such 180-day period in the case of clause (ii) above, following
such 30-day or 80-day period in the case of clause (iii) above, as the case may
be, or immediately in the case of clause (iv) above, which rate will be
increased by an additional one-quarter of one percent per annum for each 30-day
period that any such additional interest continues to accrue in the case of
clauses (i), (ii) and (iii) above or for each 90-day period that any such
additional interest continues to accrue in the case of clause (iv) above,
provided that the aggregate increase in such interest rate will in no event
exceed one and one-half percent. Upon (w) the filing of the Exchange Offer
Registration Statement after the 60-day period described in clause (i) above,
(x) the effectiveness of the Exchange Offer Registration Statement after the
180-day period described in clause (ii) above, (y) consummation of the Exchange
Offer or the effectiveness of a Shelf Registration Statement, as the case may
be, after the 30-day or 180-day period described in clause (iii) above, as the
case may be, or (z) the effectiveness of the Exchange Offer Registration
Statement or the Shelf Registration Statement following an event described in
clause (iv) above, the interest rate borne by the Notes from the date of such
filing, effectiveness or consummation, as the case may be, will be reduced to
the original interest rate if the Company is otherwise in compliance with this
paragraph; provided, however, that, if after any such reduction in interest
rate, a different event specified in clauses (i), (ii), (iii) or (iv) above
occurs, the interest rate will again be increased and thereafter reduced
pursuant to the foregoing conditions. If the Company issues a notice that the
Shelf Registration Statement is unusable pending the announcement of a material
corporate transaction or otherwise pursuant to Section 3(k) hereof, or such a
notice is required under applicable securities laws to be issued by the Company,
and the aggregate number of days in any consecutive twelve-month period for
which all such notices are issued or required to be issued exceeds 30 days in
the aggregate, then the interest rate borne by the Notes will be increased by
one-quarter of one percent per annum following the date that such Shelf
Registration Statement ceases to be usable beyond the 30-day period permitted
above, which rate shall be increased by an additional one-quarter of one percent
per annum for each 90-day period that such additional interest continues to
accrue; provided that the aggregate increase in such annual interest rate may in
no event exceed one and one-half percent. Upon the Company declaring that the
Shelf Registration Statement is usable after the interest rate has been
increased pursuant to the preceding sentence, the interest rate borne by the
Notes will be reduced to the original interest rate if the Company is otherwise
in compliance with this paragraph; provided, however, that if after any such
reduction in interest rate the Shelf Registration Statement again ceases to be
usable beyond the period permitted above, the
<PAGE> 11
10
interest rate will again be increased and thereafter reduced pursuant to the
foregoing provisions.
(f) Specific Enforcement. Without limiting the remedies available to
the Initial Purchaser and the Holders, the Company acknowledges that any failure
by the Company to comply with its respective obligations under Sections 2(a) and
2(b) hereof may result in material irreparable injury to the Initial Purchaser
or the Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchaser or any Holder may obtain such relief
as may be required to specifically enforce the Company's obligations under
Sections 2(a) and 2(b) hereof.
3. Registration Procedures. In connection with the obligations of
the Company with respect to the Registration Statements pursuant to Sections
2(a) and 2(b) hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement, within
the time period specified in Section 2, on the appropriate form under the
1933 Act, which form (i) shall be selected by the Company, (ii) shall, in
the case of a Shelf Registration, be available for the sale of the
Registrable Notes by the selling Holders thereof and (iii) shall comply as
to form in all material respects with the requirements of the applicable
form and include or incorporate by reference all financial statements
required by the SEC to be filed therewith, and use its best efforts to
cause such Registration Statement to become effective and remain effective
in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to (i) the Exchange Offer Registration Statement as may be
necessary under applicable law to keep such Exchange Offer Registration
Statement effective for the period required to comply with Section 2(a)
(except to the extent the Company is unable to consummate the Exchange
Offer and the Company complies with Section 2(b), subject in all respects
to Section 3(f) hereof), and (ii) the Shelf Registration Statement as may
be necessary under applicable law to keep such Shelf Registration
Statement effective for the period required pursuant to Section 2(b)
hereof; cause each Prospectus to be supplemented by any required
prospectus supplement, and as so supplemented to be filed pursuant to Rule
424 under the 1933 Act; and comply with the provisions of the 1933 Act
with respect to the disposition of all securities covered by each
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the selling Holders thereof;
<PAGE> 12
11
(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Notes, at least ten days prior to filing, that a Shelf
Registration Statement with respect to the Registrable Notes is being
filed and advising such Holders that the distribution of Registrable Notes
will be made in accordance with the method elected by the Majority
Holders; and (ii) furnish to each Holder of Registrable Notes, to counsel
for the Initial Purchaser, to counsel for the Holders and to each
underwriter of an underwritten offering of Registrable Notes, if any,
without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and such
other documents as such Holder or underwriter may reasonably request,
including financial statements and schedules and, if the Holder so
requests, all exhibits (including those incorporated by reference) in
order to facilitate the public sale or other disposition of the
Registrable Notes; and (iii) subject to the last paragraph of Section 3,
hereby consent to the use of the Prospectus, including each preliminary
Prospectus, or any amendment or supplement thereto by each of the selling
Holders of Registrable Notes in connection with the offering and sale of
the Registrable Notes covered by the Prospectus or any amendment or
supplement thereto;
(d) use its best efforts to register or qualify the Registrable
Notes under all applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Notes covered by a Registration
Statement and each underwriter of an underwritten offering of Registrable
Notes shall reasonably request by the time the applicable Registration
Statement is declared effective by the SEC, to cooperate with the Holders
in connection with any filings required to be made with the NASD, keep
each such registration or qualification effective during the period such
Registration Statement is required to be effective and do any and all
other acts and things which may be reasonably necessary or advisable to
enable such Holder to consummate the disposition in each such jurisdiction
of such Registrable Notes owned by such Holder; provided, however, that
the Company shall not be required to (i) qualify as a foreign corporation
or as a dealer in securities in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3(d) or (ii) take
any action which would subject it to general service of process or
taxation in any such jurisdiction if it is not then so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Notes and counsel for such Holders promptly and, if requested
by such Holder or counsel, confirm such advice in writing promptly (i)
when a Registration Statement has become effective and when any
post-effective amendments and supplements thereto become effective, (ii)
of any request by the SEC or any state securities authority for
post-effective amendments and supplements to a Registration Statement and
Prospectus or for additional information after the Registration Statement
has become effective, (iii) of the issuance by the SEC or any state
securities authority of any stop order
<PAGE> 13
12
suspending the effectiveness of a Registration Statement or the initiation
of any proceedings for that purpose, (iv) if, between the effective date
of a Registration Statement and the closing of any sale of Registrable
Notes covered thereby, the representations and warranties of the Company
contained in any underwriting agreement, securities sales agreement or
other similar agreement, if any, relating to such offering cease to be
true and correct in all material respects, (v) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of the Registrable Notes for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, (vi) of the
happening of any event or the discovery of any facts during the period a
Shelf Registration Statement is effective which makes any statement made
in such Shelf Registration Statement or the related Prospectus untrue in
any material respect or which requires the making of any changes in such
Shelf Registration Statement or Prospectus in order to make the statements
therein not misleading and (vii) of any determination by the Company that
a post-effective amendment to a Registration Statement would be
appropriate;
(f) (A) in the case of the Exchange Offer, (i) include in the
Exchange Offer Registration Statement a "Plan of Distribution" section
covering the use of the Prospectus included in the Exchange Offer
Registration Statement by broker-dealers who have exchanged their
Registrable Notes for Exchange Notes for the resale of such Exchange
Notes, (ii) furnish to each broker-dealer who desires to participate in
the Exchange Offer, without charge, as many copies of each Prospectus
included in the Exchange Offer Registration Statement, including any
preliminary prospectus, and any amendment or supplement thereto, as such
broker-dealer may reasonably request, (iii) include in the Exchange Offer
Registration Statement a statement that any broker-dealer who holds
Registrable Notes acquired for its own account as a result of
market-making activities or other trading activities (a "Participating
Broker-Dealer"), and who receives Exchange Notes for Registrable Notes
pursuant to the Exchange Offer, may be a statutory underwriter and must
deliver a prospectus meeting the requirements of the 1933 Act in
connection with any resale of such Exchange Notes, (iv) subject to the
last paragraph of Section 3, hereby consent to the use of the Prospectus
forming part of the Exchange Offer Registration Statement or any amendment
or supplement thereto, by any broker-dealer in connection with the sale or
transfer of the Exchange Notes covered by the Prospectus or any amendment
or supplement thereto, and (v) include in the transmittal letter or
similar documentation to be executed by an exchange offeree in order to
participate in the Exchange Offer (x) the following provision:
"If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage
in, a distribution of Exchange Notes. If the undersigned is a
broker-dealer that will receive Exchange Notes for its own account
in exchange for Registrable Notes, it represents that the
<PAGE> 14
13
Registrable Notes to be exchanged for Exchange Notes were acquired
by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus
meeting the requirements of the 1933 Act in connection with any
resale of such Exchange Notes pursuant to the Exchange Offer;
however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter"
within the meaning of the 1933 Act"; and
(y) a statement to the effect that by a broker-dealer making the
acknowledgment described in subclause (x) and by delivering a Prospectus
in connection with the exchange of Registrable Securities, the
broker-dealer will not be deemed to admit that it is an underwriter within
the meaning of the 1933 Act; and
(B) to the extent any Participating Broker-Dealer participates in
the Exchange Offer, the Company shall use its best efforts to cause to be
delivered at the request of an entity representing the Participating
Broker-Dealers (which entity shall be the Initial Purchaser, unless it
elects not to act as such representative) only one, if any, "cold comfort"
letter with respect to the Prospectus in the form existing on the last
date for which exchanges are accepted pursuant to the Exchange Offer and
with respect to each subsequent amendment or supplement, if any, effected
during the period specified in clause (C) below; and
(C) to the extent any Participating Broker-Dealer participates in
the Exchange Offer, the Company shall use its best efforts to maintain the
effectiveness of the Exchange Offer Registration Statement for a period of
120 days following the closing of the Exchange Offer; and
(D) the Company shall not be required to amend or supplement the
Prospectus contained in the Exchange Offer Registration Statement as would
otherwise be contemplated by Section 3(b), or take any other action as a
result of this Section 3(f), for a period exceeding 120 days after the
last date for which exchanges are accepted pursuant to the Exchange Offer
(as such period may be extended by the Company) and Participating
Broker-Dealers shall not be authorized by the Company to, and shall not,
deliver such Prospectus after such period in connection with resales
contemplated by this Section 3.
(g) (A) in the case of an Exchange Offer, furnish counsel for the
Initial Purchaser and (B) in the case of a Shelf Registration, furnish
counsel for the Holders of Registrable Notes copies of any request by the
SEC or any state securities authority for amendments or supplements to a
Registration Statement and Prospectus or for additional information;
<PAGE> 15
14
(h) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement as soon as
practicable and provide immediate notice to each Holder of the withdrawal
of any such order;
(i) in the case of a Shelf Registration, furnish to each Holder of
Registrable Notes, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
requested);
(j) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Notes to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold and not
bearing any restrictive legends; and cause such Registrable Notes to be in
such denominations (consistent with the provisions of the Indenture) and
registered in such names as the selling Holders or the underwriters, if
any, may reasonably request at least one business day prior to the closing
of any sale of Registrable Notes;
(k) in the case of a Shelf Registration, upon the occurrence of any
event or the discovery of any facts, each as contemplated by Section
3(e)(vi) hereof, use its best efforts to prepare a supplement or
post-effective amendment to a Registration Statement or the related
Prospectus or any document incorporated therein by reference or file any
other required document so that, as thereafter delivered to the purchasers
of the Registrable Notes, such Prospectus will not contain at the time of
such delivery any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Company
agrees to notify each Holder to suspend use of the Prospectus as promptly
as practicable after the occurrence of such an event, and each Holder
hereby agrees to suspend use of the Prospectus until the Company has
amended or supplemented the Prospectus to correct such misstatement or
omission. At such time as such public disclosure is otherwise made or the
Company determines that such disclosure is not necessary, in each case to
correct any misstatement of a material fact or to include any omitted
material fact, the Company agrees promptly to notify each Holder of such
determination and to furnish each Holder such numbers of copies of the
Prospectus, as amended or supplemented, as such Holder may reasonably
request;
(l) obtain a CUSIP number for all Exchange Notes, or Registrable
Notes, as the case may be, not later than the effective date of a
Registration Statement, and provide the Trustee with printed certificates
for the Exchange Notes or the Registrable Notes, as the case may be, in a
form eligible for deposit with the Depositary;
<PAGE> 16
15
(m) (i) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the Exchange Notes, or Registrable Notes, as the case may
be, (ii) cooperate with the Trustee and the Holders to effect such changes
to the Indenture as may be required for the Indenture to be so qualified
in accordance with the terms of the TIA and (iii) execute, and use its
best efforts to cause the Trustee to execute, all documents as may be
required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable the Indenture to be so
qualified in a timely manner;
(n) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and
appropriate actions (including those reasonably requested by the Majority
Holders) in order to expedite or facilitate the disposition of such
Registrable Notes and in such connection whether or not an underwriting
agreement is entered into and whether or not the registration is an
underwritten registration:
(i) make such representations and warranties to the Holders of
such Registrable Notes and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to
underwriters in similar underwritten offerings as may be reasonably
requested by them;
(ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, if
any, and the holders of a majority in principal amount of the
Registrable Notes being sold) addressed to each selling Holder and
the underwriters, if any, covering the matters customarily covered
in opinions requested in sales of securities or underwritten
offerings;
(iii) obtain "cold comfort" letters and updates thereof from
the Company's independent certified public accountants addressed to
the underwriters, if any, and use best efforts to have such letters
addressed to the selling Holders of Registrable Notes, such letters
to be in customary form and covering matters of the type customarily
covered in "cold comfort" letters to underwriters in connection with
similar underwritten offerings;
(iv) enter into a securities sales agreement with the Holders
and an agent of the Holders providing for, among other things, the
appointment of such agent for the selling Holders for the purpose of
soliciting purchases of Registrable Notes, which agreement shall be
in form, substance and scope customary for similar offerings; and
<PAGE> 17
16
(v) deliver such documents and certificates as may be
reasonably requested and as are customarily delivered in similar
offerings.
The above shall be done at (i) the effectiveness of such Shelf
Registration Statement (and, if appropriate, each post-effective amendment
thereto) and (ii) each closing under any underwriting or similar agreement
as and to the extent required thereunder. In the case of any underwritten
offering, the Company shall provide written notice to the Holders of all
Registrable Notes of such underwritten offering at least 30 days prior to
the filing of a prospectus supplement for such underwritten offering. Such
notice shall (x) offer each such Holder the right to participate in such
underwritten offering, (y) specify a date, which shall be no earlier than
10 days following the date of such notice, by which such Holder must
inform the Company of its intent to participate in such underwritten
offering and (z) include the instructions such Holder must follow in order
to participate in such underwritten offering;
(o) in the case of a Shelf Registration, make available for
inspection by representatives of the Holders of the Registrable Notes and
any underwriters participating in any disposition pursuant to a Shelf
Registration Statement and any counsel or accountant retained by such
Holders or underwriters, at reasonable times and in a reasonable manner,
all financial and other records, pertinent corporate documents and
properties of the Company reasonably requested by any such persons, and
cause the respective officers, directors, employees, and any other agents
of the Company to supply all information reasonably requested by any such
representative, underwriter, special counsel or accountant in connection
with such Shelf Registration Statement, provided, however, that such
Persons shall first agree in writing with the Company that any information
that is reasonably and in good faith designated by the Company in writing
as confidential at the time of delivery of such information shall be kept
confidential by such Persons, unless (i) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (ii) disclosure of such information
is required by law (including any disclosure requirements pursuant to
Federal securities laws in connection with the filing of such Shelf
Registration Statement or the use of any Prospectus), (iii) such
information becomes generally available to the public other than as a
result of a disclosure or failure to safeguard such information by such
Person or (iv) such information becomes available to such Person from a
source other than the Company and its subsidiaries and such source is not
bound by a confidentiality agreement; provided, further, that the
foregoing investigation shall be coordinated on behalf of the Holders by
one representative designated by and on behalf of such Holders and any
such confidential information shall be available from such representative
to such Holders so long as any Holder agrees to be bound by such
confidentiality agreement;
<PAGE> 18
17
(p) (i) a reasonable time prior to the filing of any Exchange Offer
Registration Statement, any Prospectus forming a part thereof, any
amendment to an Exchange Offer Registration Statement or amendment or
supplement to a Prospectus, provide copies of such document to the Initial
Purchaser, and make such changes in any such document prior to the filing
thereof as the Initial Purchaser or its counsel may reasonably request;
(ii) in the case of a Shelf Registration, a reasonable time prior to
filing any Shelf Registration Statement, any Prospectus forming a part
thereof, any amendment to such Shelf Registration Statement or amendment
or supplement to such Prospectus, provide copies of such document to the
Holders of Registrable Notes, to the Initial Purchaser, to counsel on
behalf of the Holders and to the underwriter or underwriters of an
underwritten offering of Registrable Notes, if any, and make such changes
in any such document prior to the filing thereof as the Holders of
Registrable Notes, the Initial Purchaser on behalf of such Holders, their
counsel and any underwriter may reasonably request; and (iii) cause the
representatives of the Company to be available for discussion of such
document as shall be reasonably requested by the Holders of Registrable
Notes, the Initial Purchaser on behalf of such Holders or any underwriter
and shall not at any time make any filing of any such document of which
such Holders, the Initial Purchaser on behalf of such Holders, their
counsel or any underwriter shall not have previously been advised and
furnished a copy or to which such Holders, the Initial Purchaser on behalf
of such Holders, their counsel or any underwriter shall reasonably object,
each of which actions in this clause (iii) by the Holders shall be
coordinated by one representative for all the Holders at reasonable times
and in a reasonable manner;
(q) in the case of a Shelf Registration, use their best efforts to
cause all Registrable Securities to be listed on any securities exchange
on which similar debt securities issued by the Company are then listed if
requested by the Majority Holders or by the underwriter or underwriters of
an underwritten offering of Registrable Securities, if any;
(r) in the case of a Shelf Registration, unless the rating in effect
for the Notes applies to the Exchange Notes and the Notes to be sold
pursuant to a Shelf Registration, use its best efforts to cause the
Registrable Notes to be rated with the appropriate rating agencies, if so
requested by the Majority Holders or by the underwriter or underwriters of
an underwritten offering of Registrable Notes, if any, unless the
Registrable Notes are already so rated;
(s) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC and make available to its security
holders, as soon as reasonably practicable, an earnings statement covering
at least 12 months which shall satisfy the provisions of Section 11(a) of
the 1933 Act and Rule 158 thereunder; and
<PAGE> 19
18
(t) cooperate and assist in any filings required to be made with the
NASD.
In the case of a Shelf Registration Statement, the Company may (as a
condition to such Holder's participation in the Shelf Registration) require each
Holder of Registrable Notes to furnish to the Company such information regarding
such Holder and the proposed distribution by such Holder of such Registrable
Notes and make such representations, in each case, as the Company may from time
to time reasonably request in writing.
In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of the happening of any event
or the discovery of any facts, each of the kind described in Section
3(e)(ii)-(vi) hereof, such Holder will forthwith discontinue disposition of
Registrable Notes pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(k) hereof, and, if so directed by the Company, such Holder will
deliver to the Company (at its expense) all copies in its possession, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Notes current at the time of receipt of such notice.
If the Company shall give any such notice to suspend the disposition of
Registrable Notes pursuant to a Shelf Registration Statement as a result of the
happening of any event or the discovery of any facts, each of the kind described
in Section 3(e)(vi) hereof, the Company shall be deemed to have used its best
efforts to keep the Shelf Registration Statement effective during such period of
suspension provided that the Company shall use its best efforts to file and have
declared effective (if an amendment) as soon as practicable an amendment or
supplement to the Shelf Registration Statement and shall extend the period
during which the Registration Statement shall be maintained effective pursuant
to this Agreement by the number of days during the period from and including the
date of the giving of such notice to and including the date when the Holders
shall have received copies of the supplemented or amended Prospectus necessary
to resume such dispositions.
4. Underwritten Registrations. If any of the Registrable Notes
covered by any Shelf Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
manage the offering will be selected by the Majority Holders of such Registrable
Notes included in such offering and shall be reasonably acceptable to the
Company.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes on the basis provided in any underwriting arrangements
approved by the persons entitled hereunder to approve such arrangements and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents required under the terms of such
underwriting arrangements.
<PAGE> 20
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5. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Holder and each person, if any, who controls
any Holder within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act against any losses, claims, damages or liabilities, joint or several,
to which such Holder or such controlling person may become subject under the
1933 Act, the 1934 Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon:
(i) any untrue statement or alleged untrue statement made by the
Company in Section 1 of the Purchase Agreement,
(ii) any untrue statement or alleged untrue statement of any
material fact contained in (A) any Registration Statement of Prospectus or
any amendment or supplement thereto or (B) any application or other
document, or any amendment or supplement thereto, executed by the Company
or based upon written information furnished by or on behalf of the Company
filed in any jurisdiction in order to qualify the Securities under the
securities or blue sky laws thereof or filed with the Commission or any
securities association or securities exchange (each an "Application"),
(iii) the omission or alleged omission to state in any Registration
Statement or Prospectus or any amendment or supplement thereto, or any
Application a material fact required to be stated therein or necessary to
make the statements therein not misleading or
(iv) any untrue statement or alleged untrue statement of any
material fact contained in any audio or visual materials used in
connection with the marketing of the Securities, including without
limitation, slides, videos, films and tape recordings,
and will reimburse, as incurred, each Holder and each such controlling person
for any legal or other expenses reasonably incurred by such Holder or such
controlling person in connection with investigating, defending against or
appearing as a third-party witness in connection with any such loss, claim,
damage, liability or action; provided, however, that the Company will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any untrue statement or alleged untrue
statement or omission or alleged omission made in any Registration Statement or
Prospectus or any amendment or supplement thereto or any Application in reliance
upon and in conformity with written information relating to any Holder furnished
to the Company by such Holder specifically for use therein. This indemnity
agreement will be in addition to any liability which the Company may otherwise
have. The Company will not, without the prior written consent of each Holder,
settle or compromise or consent to the entry of any judgment in any pending or
threatened claim,
<PAGE> 21
20
action, suit or proceeding in respect of which indemnification may be sought
hereunder (whether or not any Holder or any person who controls any such Holder
within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act
is a party to such claim, action, suit or proceeding), unless such settlement,
compromise or consent includes an unconditional release of all of such Holder
and such controlling persons from all liability arising out of such claim,
action, suit or proceeding.
(b) Each Holder, severally and not jointly, agrees to indemnify and
hold harmless the Company, each of its directors, each of its executive officers
and each person, if any, who controls the Company within the meaning of Section
15 of the 1933 Act or Section 20 of the 1934 Act against any losses, claims,
damages or liabilities to which the Company, any such director, officer or
controlling person may become subject under the 1933 Act or otherwise, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon (i) any untrue statement or alleged untrue
statement of any material fact contained in any Registration Statement or
Prospectus or any amendment or supplement thereto or any Application or (ii) the
omission or alleged omission to state therein a material fact required to be
stated in any Registration Statement or Prospectus or any amendment or
supplement thereto, or any Application or necessary to make the statements
therein not misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with written information
relating to any Holder furnished to the Company by such Holder specifically for
use therein; and, subject to the limitation set forth immediately preceding this
clause, will reimburse, as incurred, any legal or other expenses reasonably
incurred by the Company or any such director, officer or controlling person in
connection with investigating or defending any such loss, claim, damage,
liability or any action in respect thereof. This indemnity agreement will be in
addition to any liability which such Holder may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 5, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 5. In case any such action is brought against any indemnified
party, and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel satisfactory to such indemnified
party; provided, however, that if the defendants in any such action include both
the indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be one or more legal defenses available
to it and/or other indemnified parties which are different from or additional
<PAGE> 22
21
to those available to the indemnifying party, the indemnifying party shall not
have the right to direct the defense of such action on behalf of such
indemnified party or parties and such indemnified party or parties shall have
the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election to assume the defense thereof and approval by
such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 5 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the next preceding sentence
(it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one action or separate
but substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, designated by such Holder in the case
of paragraph (a) of this Section 5, representing the indemnified parties under
such paragraph (a) who are parties to such action or actions) or (ii) the
indemnifying party does not promptly retain counsel satisfactory to the
indemnified party or (iii) the indemnifying party has authorized the employment
of counsel for the indemnified party at the expense of the indemnifying party.
After such notice from the indemnifying party to such indemnified party, the
indemnifying party will not be liable for the costs and expenses of any
settlement of such action effected by such indemnified party without the consent
of the indemnifying party.
(d) In circumstances in which the indemnity agreement provided for
in the preceding paragraphs of this Section 5 is unavailable or insufficient,
for any reason, to hold harmless an indemnified party in respect of any losses,
claims, damages or liabilities (or actions in respect thereof), each
indemnifying party, in order to provide for just and equitable contribution,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in respect
thereof) in such proportion as is appropriate to reflect (i) the relative
benefits received by the indemnifying party or parties on the one hand and the
indemnified party on the other from the offering of the Securities or (ii) if
the allocation provided by the foregoing clause (i) is not permitted by
applicable law, not only such relative benefits but also the relative fault of
the indemnifying party or parties on the one hand and the indemnified party on
the other in connection with the statements or omissions or alleged statements
or omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof), as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one hand
and such Holder on the other shall be deemed to be in the same proportion as the
total proceeds from the offering (before deducting expenses) received by the
Company bear to the total underwriting discounts and commissions received by
such Holder. The relative fault of the parties shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
<PAGE> 23
22
relates to information supplied by the Company or such Holder, the parties'
relative intents, knowledge, access to information and opportunity to correct or
prevent such statement or omission, and any other equitable considerations
appropriate in the circumstances. The Company and each Holder agree that it
would not be equitable if the amount of such contribution were determined by pro
rata or per capita allocation or by any other method of allocation that does not
take into account the equitable considerations referred to above in this
paragraph (d). Notwithstanding any other provision of this paragraph (d), no
Holder shall be obligated to make contributions hereunder that in the aggregate
exceed the total public offering price of the Securities purchased by such
Holder under this Agreement, less the aggregate amount of any damages that such
Holder has otherwise been required to pay in respect of the same or any
substantially similar claim, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (d), each person, if any, who
controls a Holder within the meaning of Section 15 of the 1933 Act or Section 20
of the Exchange Act shall have the same rights to contribution as such Holder,
and each director of the Company, each officer of the Company who signed the
Registration Statement and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the Exchange Act,
shall have the same rights to contribution as the Company.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions of this Agreement, including, without
limitation, the provisions of this Section 6, and are fully informed regarding
said provisions. They further acknowledge that the provisions of this Section 6
fairly allocate the risks in light of the ability of the parties to investigate
the Company and its business in order to assure that adequate disclosure is made
in the Offering Memorandum as required by the Act. The parties are advised that
federal or state policy, as interpreted by the courts in certain jurisdictions,
may be contrary to certain provisions of this Section 6, and the parties hereto
hereby expressly waive and relinquish any right or ability to assert such public
policy as a defense to a claim under this Section 6 and further agree not to
attempt to assert any such defense.
6. Miscellaneous. (a) Rule 144 and Rule 144A. For so long as the
Company is subject to the reporting requirements of Section 13 or 15 of the 1934
Act, the Company covenants that it will file the reports required to be filed by
it under Section 13(a) or 15(d) of the 1934 Act and the rules and regulations
adopted by the SEC thereunder, that if it ceases to be so required to file such
reports, it will upon the request of any Holder of Registrable Notes (i) make
publicly available such information as is necessary to permit sales pursuant to
Rule 144 under the 1933 Act, (ii) deliver such information to a prospective
purchaser as is necessary to permit sales pursuant to Rule 144A under the 1933
Act and it will take such further action as any Holder of Registrable Notes may
reasonably request, and (iii)
<PAGE> 24
23
take such further action that is reasonable in the circumstances, in each case,
to the extent required from time to time to enable such Holder to sell its
Registrable Notes without registration under the 1933 Act within the limitation
of the exemptions provided by (x) Rule 144 under the 1933 Act, as such Rule may
be amended from time to time, (y) Rule 144A under the 1933 Act, as such Rule may
be amended from time to time, or (z) any similar rules or regulations hereafter
adopted by the SEC. Upon the request of any Holder of Registrable Notes, the
Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
(b) No Inconsistent Agreements. The Company has not entered into nor
will the Company on or after the date of this Agreement enter into any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Notes in this Agreement or otherwise conflicts with the provisions hereof. The
rights granted to the Holders hereunder do not in any way conflict with and are
not inconsistent with the rights granted to the holders of the Company's other
issued and outstanding securities under any such agreements.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Notes affected by such amendment, modification, supplement, waiver
or departure; provided, however, that no amendment, modification, supplement or
waiver or consent to any departure from the provisions of Section 5 hereof shall
be effective as against any Holder of Registrable Notes unless consented to in
writing by such Holder.
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telecopier, or any courier guaranteeing overnight delivery (i)
if to a Holder (other than the Initial Purchaser), at the most current address
set forth on the records of the Registrar under the Indenture, (ii) if to the
Initial Purchaser, at the most current address given by the Initial Purchaser to
the Company by means of a notice given in accordance with the provisions of this
Section 6(d), which address initially is the address set forth in the Purchase
Agreement; and (iii) if to the Company, initially at the Company's address set
forth in the Purchase Agreement and thereafter at such other address, notice of
which is given in accordance with the provisions of this Section 6(d).
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged, if telecopied; and on the next business day if
timely delivered to an air courier guaranteeing overnight delivery.
<PAGE> 25
24
Copies of all such notices, demands, or other communications shall
be concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Securities in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Registrable Notes, in
any manner, whether by operation of law or otherwise, such Registrable Notes
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Notes, such Person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such Person shall be entitled to
receive the benefits hereof.
(f) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company on the one
hand, and the Initial Purchaser, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
<PAGE> 26
25
(k) Consent to Jurisdiction and Service of Process. By the execution
and delivery of this Agreement, the Company (i) acknowledges that it has, by
separate written instrument, irrevocably designated and appointed CT Corporation
System (or any successor) as its authorized agent upon which process may be
served in any suit or proceeding arising out of or relating to this Agreement or
the Securities that may be instituted in any federal or state court in the State
of New York, or brought under federal or state securities laws, and acknowledges
that CT Corporation System has accepted such designation, (ii) submits to the
non-exclusive jurisdiction of any such court in any such suit or proceeding, and
(iii) agrees that service of process upon CT Corporation System (or any
successor) and written notice of said service to the Company (mailed or
delivered to its Chief Financial Officer at its principal office) shall be
deemed in every respect effective service of process upon the Company, as the
case may be, in any such suit or proceeding. The Company further agrees to take
any and all action, including the execution and filing of any and all documents
and instruments, as may be necessary to continue such designation and
appointment of CT Corporation System (or any successor) in full force and effect
for six years from the Closing Time.
<PAGE> 27
26
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
TRI-STATE OUTDOOR MEDIA GROUP, INC.
By: /s/ Sheldon G. Hurst
____________________________
Name: Sheldon G. Hurst
Title: President
Chief Executive Officer
Confirmed and accepted as of the date first above written:
PRUDENTIAL SECURITIES INCORPORATED
By: /s/ Steven Benfield
____________________________
Name:
Title:
FIRST CHICAGO CAPITAL MARKETS, INCORPORATED
By: /s/ Robert J. Rischard
____________________________
Name: Robert J. Rischard
Title: Managing Director
<PAGE> 1
Exhibit 10.4
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Pledge Agreement") is made and entered
into as of May 15, 1998 by TRI-STATE OUTDOOR MEDIA GROUP, INC., a Kansas
corporation (the "Pledgor"), having its principal office at 3416 Highway 41
South, Tifton, Georgia 31794, IBJ SCHRODER BANK & TRUST COMPANY, a New York
banking corporation, having an office at One State Street, New York, New York,
10004, as trustee (the "Trustee") for the holders from time to time (the
"Holders") of the Notes (as defined herein) issued by the Pledgor under the
Indenture referred to below and IBJ SCHRODER BANK & TRUST COMPANY, as securities
intermediary (the "Tri-State Securities Intermediary").
W I T N E S S E T H
WHEREAS, the Pledgor and the Trustee have entered into that certain
indenture dated as of the date hereof (as amended, restated, supplemented or
otherwise modified from time to time, the "Indenture"), pursuant to which the
Pledgor is issuing on the date hereof $100,000,000 in aggregate principal amount
of 11% Senior Notes due 2008 (and along with such notes that may from time to
time be issued in substitution therefor, the "Notes"); and
WHEREAS, the Pledgor has agreed, pursuant to the Indenture, to (i)
purchase or cause the purchase of the Pledged Securities (as defined herein) in
an amount that will be sufficient upon receipt of scheduled interest and
principal payments in respect thereof to provide for the payment of the first
two scheduled interest payments due on the Notes and (ii) place such Pledged
Securities (or cause them to be placed) in an account maintained by the Trustee
with the Tri-State Securities Intermediary for the benefit of Holders of the
Notes; and
WHEREAS, to secure the obligations of the Pledgor under the
Indenture and the Notes to pay in full each of the first two scheduled interest
payments on the Notes and to secure repayment of the principal, premium (if any)
and interest on the Notes in the event that the Notes become due and payable
prior to such time as the first two scheduled interest payments thereon shall
have been paid in full (collectively, the "Obligations"), the Pledgor has agreed
(i) to purchase United States Treasury securities in an amount sufficient, in
the written opinion of a nationally recognized firm of independent public
accountants selected by the Pledgor and delivered to the Trustee, upon receipt
of scheduled interest and principal payments of such securities, to provide for
payment in full of each of the first two scheduled interest payments due on the
Notes (ii) to pledge to the Trustee for its benefit and the ratable benefit of
the Holders of the Notes, a security interest in the Pledged Securities (as
defined herein) and related collateral and (iii) to execute and deliver this
Pledge Agreement in order to secure the payment and performance by the Pledgor
of all the Obligations; and
<PAGE> 2
2
WHEREAS, the Trustee has opened an account (the "Escrow Account")
with the Tri-State Securities Intermediary, at its office at One State Street,
New York, New York 10004, Account No._______, in the name of IBJ Schroder Bank &
Trust Company, as Trustee, for its benefit and the benefit of the Holders of the
Notes (along with such notes that may from time to time be issued in
substitution therefor), with respect to which the Trustee is the sole
entitlement holder and which is under the sole dominion and control of the
Trustee but subject to the terms of this Pledge Agreement. Capitalized terms
used herein and not otherwise defined herein shall have the meanings given to
such terms in the Indenture. Unless otherwise defined herein or in the
Indenture, terms used in Articles 8 or 9 of the Uniform Commercial Code as in
effect in the State of New York (the "UCC") and as used in 31 CFR 357.2 are used
herein as therein defined.
NOW, THEREFORE, in consideration of the mutual promises herein
contained and in order to induce the Holders of the Notes to purchase the Notes,
the Pledgor hereby agrees with the Trustee, for the benefit of the Trustee and
for the ratable benefit of the Holders of the Notes, as follows:
SECTION 1. Pledge and Grant of Security Interest. As security for
the prompt and complete payment and performance when due of the Obligations
(whether at the stated maturity or otherwise), the Pledgor hereby pledges to the
Trustee for its benefit and for the ratable benefit of the Holders of the Notes,
and grants to the Trustee for its benefit and for the ratable benefit of the
Holders of the Notes, a continuing first priority security interest in and to
all of the Pledgor's right, title and interest in, to and under the following
(wherever located), whether investment property, financial assets, general
intangibles, other rights, interests, claims and remedies or proceeds or
otherwise (collectively, the "Pledged Collateral"): (a) the United States
Treasury securities identified by CUSIP Number in Exhibit A to this Pledge
Agreement (the "Pledged Securities"), (b) any and all applicable Security
Entitlements to the Pledged Securities, (c) the Escrow Account and all funds,
certificates, instruments, assets and investment property, if any, from time to
time carried therein or credited thereto or representing or evidencing the
Escrow Account (d) any and all related accounts in which Security Entitlements
to the Pledged Securities are carried and (e) all proceeds of any and all of the
Pledged Collateral (including, without limitation, proceeds that constitute
property of the types described in clauses (a) - (d) of this Section 1).
SECTION 2. Security for Obligation. This Pledge Agreement secures
the prompt and complete payment and performance when due (whether at stated
maturity, by acceleration or otherwise) of all the Obligations.
SECTION 3. Delivery of Pledged Securities; Escrow Account; Interest.
(a) The Pledged Securities shall be pledged and transferred to the Trustee and
the Trustee shall become the holder of a Security Entitlement to the Pledged
Securities through action by the
<PAGE> 3
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Tri-State Securities Intermediary, as confirmed (in writing or electronically or
otherwise in accordance with standard industry practice) to the Trustee by the
Tri-State Securities Intermediary (i) indicating by book-entry that the Pledged
Securities and all Security Entitlements thereto have been credited to the
Escrow Account in the name of the Trustee, or (ii) acquiring the Pledged
Securities or a Security Entitlement thereto for the Trustee and accepting the
same for credit to the Escrow Account.
(b) Prior to or concurrently with the execution and delivery hereof
and prior to the transfer to the Trustee of the Pledged Securities (or
acquisition by the Trustee of any Security Entitlement thereto) as provided in
subsection (a) of this Section 3, the Trustee shall establish with the Tri-State
Securities Intermediary the Escrow Account on the books of the Tri-State
Securities Intermediary as a Securities Account segregated from all other
custodial or collateral accounts, such Escrow Account to be maintained at the
offices of the Tri-State Securities Intermediary at One State Street, New York,
New York, 10004 and the Tri-State Securities Intermediary shall maintain a
Securities Account at the Federal Reserve Bank of New York ("FRBNY"). Upon
transfer of the Pledged Securities to the Tri-State Securities Intermediary (or
the Tri-State Securities Intermediary's acquisition of the Security Entitlements
thereto), as confirmed to the Tri-State Securities Intermediary by FRBNY or
another securities intermediary, the Tri-State Securities Intermediary shall
make appropriate book entries indicating that the Pledged Securities and/or such
Security Entitlements have been credited to the Escrow Account in the name of
the Trustee.
(c) The Trustee shall, in accordance with all applicable laws, have
sole dominion and control (including "control" as defined in UCC Section
9-115(1)(e)) over the Escrow Account and any investment property held therein or
credited thereto, and it shall be a term and condition of the Escrow Account and
the Pledgor irrevocably instructs the Trustee, notwithstanding any other term or
condition to the contrary herein or in any other agreement, that no Pledged
Collateral shall be released to or for the account of, or withdrawn by or for
the account of, the Pledgor or any other Person except as expressly provided in
this Pledge Agreement.
(d) The Trustee shall, in accordance with and subject to all
applicable laws, be the sole entitlement holder of, and have the sole power to
originate "Entitlement Orders" (as defined in UCC Section 8-102(a)(8)) with
respect to the Escrow Account and all Pledged Securities, Securities
Entitlements and other investment property held therein, and the Trustee shall
have the right to issue such Entitlement Orders with respect to the Escrow
Account and all assets and properties from time to time carried in the Escrow
Account, including such securities, Security Entitlements and other "Financial
Assets" (as defined in UCC Section 8- 102(a)(9)) without further consent of the
Pledgor or any other Person (except, to the extent required under the Indenture,
of the Holders), and no Pledged Collateral shall be released to or
<PAGE> 4
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for the account of, or withdrawn by or for the account of, the Pledgor or any
other Person except as expressly provided in this Pledge Agreement.
(e) All Pledged Collateral shall be retained in the Escrow Account
pending disbursement pursuant to the terms hereof.
(f) Concurrently with the execution and delivery of this Pledge
Agreement the Trustee and the Tri-State Securities Intermediary are delivering
to the Pledgor and to Prudential Securities Incorporated and First Chicago
Capital Markets, Inc., as the initial purchasers of the Notes, a duly executed
certificate, in the form of Exhibit A hereto, of an officer of the Trustee,
confirming the Trustee's establishment and maintenance of the Escrow Account and
its receipt and holding of the Pledged Securities or a Security Entitlement
thereto and the crediting of the Pledged Securities or such Security Entitlement
to the Escrow Account, all in accordance with this Pledge Agreement.
(g) Concurrently with the execution and delivery of this Pledge
Agreement, the Pledgor shall deliver to the Trustee financing statements, to be
filed under the UCC of the States of New York, Georgia and Kansas covering the
Pledged Collateral described in this Pledge Agreement.
(h) Concurrently with the execution and delivery of this Pledge
Agreement, the Pledgor shall deliver to the Trustee an opinion of a nationally
recognized firm of independent public accountants, selected by the Pledgor,
substantially in the form of Exhibit B hereto.
SECTION 4. Disbursements. (a) At least three Business Days prior to
the due date of any of the first two scheduled interest payments on the Notes,
the Pledgor may, pursuant to written instructions given by the Pledgor to the
Trustee (a "Company Order"), direct the Trustee to release from the Escrow
Account and pay to the Holders of the Notes on behalf of the Issuer proceeds
sufficient to provide for payment in full of such interest then due on the
Notes. Upon receipt of a Company Order, the Trustee will provide for the payment
of the interest on the Notes in accordance with the Company Order and the
payment provisions of the Indenture to the Holders of the Notes from (and to the
extent of) proceeds of the Pledged Securities in the Escrow Account. Nothing in
this Section 4 shall affect the Trustee's rights to apply the Pledged Collateral
to the payments of amounts due on the Notes upon acceleration thereof.
(b) (i) The Pledgor may, at is option, make any of the first two
scheduled interest payments on the Notes or a portion of any such interest
payments from a source of funds other than the Escrow Account ("Other Funds").
Any Other Funds to be used to make any interest payment shall be delivered to
the Trustee, in immediately available funds, prior to 10:00
<PAGE> 5
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a.m. (New York City time) on such interest payment date. In such case, at least
three Business Days prior to the due date of each of the first two scheduled
interest payments on the Notes, the Pledgor shall give the Trustee notice (by
Company Order) as to whether such interest payment will be made pursuant to
Section 4(b) and the respective amounts of interest that will be paid from the
Escrow Account and from Other Funds. If the Pledgor intends to pay a portion of
any of the first two scheduled interest payments, the Pledgor (by Company Order)
shall direct the Trustee to release from the Escrow Account and pay to the
Holders of the Notes proceeds, which together with the Other Funds, will be
sufficient to provide for payment in full of such interest then due on the
Notes. Upon receipt of such Company Order, the Trustee will release funds in an
amount which, together with the Other Funds, will be sufficient to provide for
the payment in full of the interest on the Notes in accordance with such Company
Order and the payment provisions of the Indenture to the Holders of the Notes
from (and to the extent of) proceeds of the Pledged Securities in the Escrow
Account
(ii) If the Pledgor makes any of the first two interest
payments or a portion of any such interest payments from Other Funds, the
Pledgor may, after payment in full of such interest payment, direct the Trustee
pursuant to a Company Order to release to the Pledgor or to another party at the
direction of the Pledgor (the "Pledgor's Designee") proceeds from the Escrow
Account in an amount less than or equal to the amount of Other Funds applied to
such interest payment. Upon receipt by the Trustee of such Company Order and
provided the Trustee has received such interest payment, if no Default or Event
of Default (as defined in the Indenture) shall have occurred and be continuing,
the Trustee shall pay over to the Pledgor or the Pledgor's Designee, as the case
may be, the requested amount from proceeds in the Escrow Account as soon as
practicable.
(c) If at any time the principal of and interest on the Pledged
Securities exceeds 100% of the amount sufficient, in the written opinion of a
nationally recognized firm of independent accountants selected by the Pledgor
and delivered to the Trustee, to provide for payment in full of the remaining
first two scheduled interest payments due on all of the outstanding Notes, the
Pledgor may direct the Trustee to release any such excess amount to the Pledgor
or to any Pledgor's Designee. Upon receipt of a Company Order (which shall
include a certificate from such nationally recognized firm of independent
accountants stating the amount by which the Pledged Securities exceed the amount
required to be held in the Escrow Account), and if no Default or Event of
Default (as defined in the Indenture) shall have occurred and be continuing, the
Trustee shall pay over to the Pledgor or the Pledgor's Designee, as the case may
be, any such excess amount.
(d) Upon payment in full of the first two scheduled interest
payments on the Notes, and provided that (i) no Default or Event of Default (as
defined in the Indenture) shall have occurred and be continuing, and (ii) the
Notes shall not have become due and payable prior to the payment in full of the
first two scheduled interest payments on the Notes (unless
<PAGE> 6
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thereupon all principal, interest and premium, if any, on the Notes have been
paid in full), then the security interest in the Pledged Collateral evidenced by
this Pledge Agreement will automatically terminate and be of no further force
and effect and the Pledged Collateral shall promptly be paid over and
transferred to the Pledgor. Furthermore, upon the release of any Pledged
Collateral from the Escrow Account in accordance with the terms of this Pledge
Agreement, whether upon release of Pledged Collateral to Holders as payment of
interest or otherwise, the security interest evidenced by this Pledge Agreement
in such released Pledged Collateral will automatically terminate and be of no
further force and effect.
(e) If a Company Order as described in either Section 4(a) or 4(b)
is not given at least three Business Days prior to either of the first two
scheduled interest payment dates on the Notes or if any Other Funds specified in
such notice have not been so delivered as required by Section 4(b), the Trustee
will act pursuant to Section 4(a) above with respect to such interest payment
date as if it had received a Company Order pursuant thereto for the payment in
full of the interest then due from the Escrow Account.
(f) The Trustee shall liquidate Pledged Collateral in the Escrow
Account (pursuant to written instructions from Pledgor or, if no written
instructions are provided, then the Trustee shall liquidate the Pledged
Securities or any other Pledged Collateral in the Escrow Account in the order of
their maturities, or by any other method the Trustee deems appropriate) in order
to make any scheduled payment of interest unless there are sufficient available
funds in the Escrow Account on such interest payment date.
(g) Nothing contained in Section 1, Section 3, this Section 4,
Section 11 or any other provision of this Pledge Agreement shall (i) afford the
Pledgor any right to issue Entitlement Orders with respect to any Security
Entitlement to the Pledged Securities, the Escrow Account or any Securities
Account in which any such Security Entitlement may be carried or (ii) except as
otherwise specified under this Agreement (or required by applicable law) give
rise to any other rights of the Pledgor with respect to the Pledged Securities,
any Security Entitlement thereto, the Escrow Account or any Securities Account
in which any such Security Entitlement may be carried (except as expressly
provided in Sections 4(a), (b) and (c) hereof).
SECTION 5. Representations and Warranties. The Pledgor hereby
represents and warrants that, as of the date hereof:
(a) The execution and delivery by the Pledgor of, and the
performance by the Pledgor of its obligations under, this Pledge Agreement
will not contravene any provision of applicable law or statute or the
organization documents of the Pledgor or any material agreement or other
material instrument binding upon the Pledgor or any of its subsidiaries or
any judgment, order or decree of any governmental body, agency or
<PAGE> 7
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court having jurisdiction over the Pledgor or any of its subsidiaries, or
result in the creation or imposition of any Lien on any assets of the
Pledgor, except for the security interests granted under this Pledge
Agreement; no consent, approval, authorization or order of, or
qualification with, or other action by, any governmental or regulatory
body or agency or any third party is required (i) for the execution,
delivery or performance by the Pledgor of this Pledge Agreement, (ii) for
the grant by the Pledgor of the security interest granted hereby or for
the pledge by the Pledgor of the Pledged Collateral pursuant to this
Pledge Agreement, (iii) for the perfection and maintenance of the pledge
and security interest created hereby (including the first-priority nature
of such pledge and security interest, assuming compliance by the Tri-State
Securities Intermediary with all obligations contained in this Pledge
Agreement) or (iv) except for any such consents, approvals, authorizations
or orders required to be obtained by the Trustee (or the Holders) for
reasons other than the consummation of this transaction, for the exercise
by the Trustee of the rights provided for in this Pledge Agreement or the
remedies in respect of the Pledged Collateral pursuant to this Pledge
Agreement.
(b) Immediately before depositing the Pledged Securities into the
Escrow Account, the Pledgor is the legal and beneficial owner of the
Pledged Collateral free and clear of any Lien or claims of any person or
entity (except for the security interests granted under this Pledge
Agreement). No financing statement or other instrument similar in effect
covering the Pledgor's interest in the Pledged Securities is on file in
any public office, other than any financing statements filed pursuant to
this Pledge Agreement.
(c) This Pledge Agreement has been duly authorized, validly executed
and delivered by the Pledgor and assuming the due authorization, execution
and delivery thereof by the Trustee, constitutes a valid and binding
agreement of the Pledgor, enforceable against the Pledgor in accordance
with its terms, except as (i) the enforceability hereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, preference, reorganization,
moratorium or similar laws now or hereafter in effect relating to or
affecting creditors' rights or remedies generally, (ii) the availability
of equitable remedies may be limited by equitable principles of general
applicability, (iii) the exculpation provisions and rights to
indemnification hereunder may be limited by U.S. federal and state
securities laws and public policy considerations and (iv) the waiver of
rights and defenses contained in Section 11(c), Section 15.11 and Section
15.15 hereof may be limited by applicable law.
(d) Upon the transfer to the Trustee of the Pledged Securities and
the acquisition by the Trustee of a Security Entitlement thereto in
accordance with Section 3, and the compliance by the Tri-State Securities
Intermediary with the provisions of this Pledge Agreement, the pledge of
and grant of a security interest in the Pledged
<PAGE> 8
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Collateral securing the payment of the Obligations for the benefit of the
Trustee and the Holders of the Notes will constitute a valid first
priority perfected security interest in such Pledged Collateral,
enforceable as such against all creditors of the Pledgor (and any persons
purporting to purchase any of the Pledged Collateral from the Pledgor) and
all filings and actions (other than the transfer to the Trustee of the
Pledged Securities) necessary or desirable to perfect and protect such
security interest have been duly taken.
(e) There are no legal or governmental proceedings pending or, to
the best of the Pledgor's knowledge, threatened to which the Pledgor is a
party or to which any of the properties of the Pledgor is subject that
would materially adversely affect the power or ability of the Pledgor to
perform its obligations under this Pledge Agreement or to consummate the
transactions contemplated hereby.
(f) The pledge of the Pledged Collateral pursuant to this Pledge
Agreement is not prohibited by law or governmental regulation (including,
without limitation, Regulations G, T, U and X of the Board of Governors of
the Federal Reserve System) applicable to the Pledgor.
(g) No Event of Default (as defined herein) exists.
SECTION 6. Further Assurances. The Pledgor will, promptly upon
request by the Trustee, execute and deliver or cause to be executed and
delivered, or use its reasonable best efforts to procure, all assignments,
instruments and other documents, all in form and substance reasonably
satisfactory to the Trustee, execute and deliver to the Trustee any instruments
requested by the Trustee and take any other actions that are necessary or
desirable, to perfect, continue the perfection of, or protect the first priority
of the Trustee's security interest in and to the Pledged Collateral, to protect
the Pledged Collateral against the rights, claims, or interests of third persons
(other than any such rights, claims or interests created by or arising through
the Trustee pursuant to this Pledge Agreement or the Indenture), to enable the
Trustee to enforce its rights and remedies hereunder, or to effect the purposes
of this Pledge Agreement. A photocopy or other reproduction of this Agreement or
any financing statement covering the Pledged Collateral or any part thereof
shall be sufficient as a financing statement where permitted by law. The Pledgor
will promptly pay all reasonable costs incurred in connection with any of the
foregoing. The Pledgor also agrees to take all actions that are reasonably
necessary to perfect or continue the perfection of, or to protect the first
priority of, the Trustee's security interest in and to the Pledged Collateral,
including the filing of all necessary financing and continuation statements, and
to protect the Pledged Collateral against the rights, claims or interests of
third persons (other than any such rights, claims or interests created by or
arising through the Trustee pursuant to this Pledge Agreement or the Indenture).
<PAGE> 9
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SECTION 7. Covenants. The Pledgor covenants and agrees with the
Trustee and the Holders of the Notes that from and after the date of this Pledge
Agreement until the payment in full in cash of the Obligations:
(a) that (i) it will not (and will not purport to) sell or otherwise
dispose of, or grant any option or warrant with respect to, any of the
Pledged Collateral or its beneficial interest therein, and (ii) it will
not create or permit to exist any Lien or other adverse interest in or
with respect to its beneficial interest in any of the Pledged Collateral
(except for the security interests granted under this Pledge Agreement)
and at all times will be the sole beneficial owner of the Pledged
Collateral; and
(b) that it will not (i) enter into any agreement or understanding
that restricts or inhibits or purports to restrict or inhibit the
Trustee's rights or remedies hereunder, including, without limitation, the
Trustee's right to sell or otherwise dispose of the Pledged Collateral or
(ii) fail to pay or discharge any tax, assessment or levy of any nature
with respect to its beneficial interest in the Pledged Collateral not
later than five days prior to the date of any proposed sale under any
judgment, writ or warrant of attachment with respect to such beneficial
interest.
SECTION 8. Power of Attorney. Upon the occurrence of an Event of
Default, in addition to all of the powers granted to the Trustee pursuant to the
Indenture, the Pledgor hereby appoints and constitutes the Trustee as the
Pledgor's attorney-in-fact, with full authority in the place and stead of the
Pledgor and in the name of the Pledgor or otherwise, from time to time in the
Trustee's discretion, to take any action and to execute any instrument that the
Trustee may deem necessary or advisable to accomplish the purposes of this
Pledge Agreement, including, without limitation, the following powers: (a)
collection of proceeds of any Pledged Collateral; (b) conveyance of any item of
Pledged Collateral to any purchaser thereof; (c) giving of any notices or
recording of any Liens under Section 6 hereof; and (d) paying or discharging
taxes or Liens levied or placed upon the Pledged Collateral, the legality or
validity thereof and the amounts necessary to discharge the same to be
determined by the Trustee in its sole reasonable discretion, such payments made
by the Trustee to become part of the Obligations of the Pledgor to the Trustee,
due and payable immediately upon demand. The Trustee's authority under this
Section 8 shall include, without limitation, the authority to endorse and
negotiate any checks or instruments representing proceeds of Pledged Collateral
in the name of the Pledgor, execute and give receipt for any certificate of
ownership or any document constituting Pledged Collateral, transfer title to any
item of Pledged Collateral, sign the Pledgor's name on all financing statements
(to the extent permitted by applicable law) or any other documents deemed
necessary or appropriate by the Trustee to preserve, protect or perfect the
security interest in the Pledged Collateral and to file the same, prepare, file
and sign the Pledgor's name on any notice of Lien, and to take any other actions
arising from or incident to the powers granted to the Trustee in this Pledge
Agreement. This power of
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attorney is coupled with an interest and is irrevocable by the Pledgor.
Notwithstanding anything to the contrary stated herein, the Trustee has no duty
or obligation to exercise any of the powers stated in this Section 8.
SECTION 9. No Assumption of Duties; Reasonable Care. The rights and
powers granted to the Trustee and the Tri-State Securities Intermediary
hereunder are being granted in order to preserve, perfect and protect the
security interest of the Trustee for its benefit and the ratable benefit of the
Holders of the Notes in and to the Pledged Collateral granted hereby and shall
not be interpreted to, and shall not impose any duties on the Trustee or the
Tri-State Securities Intermediary in connection therewith other than those
expressly provided herein or imposed under applicable law. Except as provided by
applicable law or by the Indenture, the Trustee shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if the Pledged Collateral is accorded treatment
substantially equal to that which the Trustee accords similar property held by
the Trustee for similar accounts, it being understood that the Trustee in its
capacity as such shall not have any responsibility for (a) ascertaining or
taking action with respect to calls, conversions, exchanges, maturities or other
matters relative to any Pledged Collateral, whether or not the Trustee has or is
deemed to have knowledge of such matters or (b) investing or reinvesting any of
the Pledged Collateral or any loss on any investment.
SECTION 10. Indemnity. The Pledgor shall indemnify, hold harmless
and defend the Trustee and the Tri-State Securities Intermediary and their
directors, officers, agents and employees from and against any and all claims,
actions, obligations, liabilities and expenses, including reasonable defense
costs, reasonable investigative fees and costs and reasonable legal fees and
expenses and damages arising from the Trustee's or the Tri-State Securities
Intermediary's performance under this Pledge Agreement, except to the extent
that such claim, action, obligation, liability or expense is directly
attributable to the gross negligence or wilful misconduct of such indemnified
person. Notwithstanding the foregoing, each of the Trustee and the Tri-State
Securities Intermediary shall have the right to defend itself with respect to
any action described in the immediately preceding sentence, and the Pledgor
shall pay their reasonable costs and expenses, including the costs and expenses
of their attorney, except to the extent that it is determined that such action
was attributable to the gross negligence or wilful misconduct of either the
Trustee or the Tri-State Securities Intermediary.
SECTION 11. Remedies Upon Event of Default. If any Event of Default
under the Indenture (any such Event of Default being referred to in this Pledge
Agreement as an "Event of Default") shall have occurred and be continuing:
(a) The Trustee and the Holders of the Notes shall have, in addition
to all other rights given by law or by this Pledge Agreement or the
Indenture, all of the rights and remedies with respect to the Pledged
Collateral of a secured party under the UCC.
<PAGE> 11
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In addition, with respect to any Pledged Collateral that shall then be in
or shall thereafter come into the possession or custody of the Trustee,
the Trustee may sell or cause the same to be sold at any broker's board or
at public or private sale, in one or more sales or lots, at such price or
prices as the Trustee may deem best, for cash or on credit or for future
delivery, without assumption of any credit risk. The purchaser of any or
all Pledged Collateral so sold shall thereafter hold the same absolutely,
free from any claim, encumbrance or right of any kind whatsoever created
by or through the Pledgor. Unless any of the Pledged Collateral threatens,
in the reasonable judgment of the Trustee, to decline speedily in value or
is or becomes of a type sold on a recognized market, the Trustee will give
the Pledgor reasonable notice of the time and place of any public sale
thereof, or of the time after which any private sale or other intended
disposition is to be made. To the extent permitted by applicable law, any
sale of the Pledged Collateral conducted in conformity with reasonable
commercial practices of banks, insurance companies, commercial finance
companies, or other financial institutions disposing of property similar
to the Pledged Collateral shall be deemed to be commercially reasonable.
Any requirements of reasonable notice shall be met if such notice is
mailed to the Pledgor as provided in Section 15.1 hereof at least 10 days
before the time of the sale or disposition. The Trustee or any Holder of
Notes may, in its own name or in the name of a designee or nominee, buy
any of the Pledged Collateral at any public sale and, if permitted by
applicable law, at any private sale. All expenses (including court costs
and reasonable attorneys' fees, expenses and disbursements) of, or
incident to, the enforcement of any of the provisions hereof shall be
recoverable from the proceeds of the sale or other disposition of the
Pledged Collateral.
(b) All cash proceeds received by the Trustee in respect of any sale
of, collection from, or other realization upon all or any part of the
Pledged Collateral may, in the discretion of the Trustee, be held by the
Trustee as collateral for, and/or then or at any time thereafter applied
(after payment of any amounts payable to the Trustee pursuant to Section
12) in whole or in part by the Trustee for the ratable benefit of the
Holders of the Notes, against all or any part of the Obligations, in such
order as the Trustee shall elect. Any surplus of such cash or cash
proceeds held by the Trustee and remaining after payment in full of all
the Obligations shall be paid over to the Pledgor or to whomsoever may be
lawfully entitled to receive such surplus.
(c) The Pledgor further agrees to use its reasonable best efforts to
do or cause to be done all such other acts as may be necessary to make
such sale or sales of all or any portion of the Pledged Collateral
pursuant to this Section 11 valid and binding and in compliance with any
and all other applicable requirements of law. The Pledgor further agrees
that a breach of any of the covenants contained in this Section 11 will
cause irreparable injury to the Trustee and the Holders of the Notes, that
the
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Trustee and the Holders of the Notes have no adequate remedy at law in
respect of such breach and, as a consequence, that each and every covenant
contained in this Section 11 shall be specifically enforceable against the
Pledgor, and the Pledgor hereby waives and agrees not to assert any
defenses against an action for specific performance of such covenants
except for a defense that no Event of Default has occurred.
(d) The Trustee may, without notice to the Pledgor except as
required by law and at any time or from time to time, charge, set-off and
otherwise apply all or any part of the Obligations against the Escrow
Account or any part thereof.
SECTION 12. Expenses. The Pledgor will upon demand pay to the
Trustee the amount of any and all reasonable expenses, including, without
limitation, the reasonable fees, expenses and disbursements of its counsel,
experts and agents retained by the Trustee that the Trustee may incur in
connection with (a) the review, negotiation and administration of this Pledge
Agreement, (b) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Pledged Collateral, (c) the exercise or
enforcement of any of the rights of the Trustee and the Holders of the Notes
hereunder or (d) the failure by the Pledgor to perform or observe any of the
provisions hereof.
SECTION 13. Security Interest Absolute. All rights of the Trustee
and the Holders of the Notes, the security interests hereunder, and all
obligations of the Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Indenture, the
Notes or any other agreement or instrument relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or
waiver of, or any consent to, any departure from the Indenture;
(c) any taking, exchange, surrender, release or non-perfection of
any other collateral; or any taking, release or amendment or waiver from
any guaranty for all or any of the Obligations;
(d) any change, restructuring or termination of the corporate
structure or the existence of the Pledgor; or
(e) to the extent permitted by applicable law, any other
circumstance which might otherwise constitute a defense available to, or a
discharge of, the Pledgor in respect of the Obligations or of this Pledge
Agreement.
<PAGE> 13
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SECTION 14. Tri-State Securities Intermediary's Representations,
Warranties and Covenants. The Tri-State Securities Intermediary represents and
warrants that it is as of the date hereof, and it agrees that for so long as it
maintains the Escrow Account and acts as securities intermediary pursuant to
this Pledge Agreement it shall be a "Securities Intermediary" (as defined in the
UCC and in 31 C.F.R. Section 357.2) and shall be eligible to maintain, and does
maintain, a Participant's Securities Account (as defined in 31 C.F.R.
Section 357.2) in the name of the Tri-State Securities Intermediary with the
FRBNY (a "FRBNY Member Securities Account"). In furtherance of the foregoing,
the Tri-State Securities Intermediary hereby:
(a) represents and warrants that it is a corporation that in the
ordinary course of its business maintains Securities Accounts for others
and is acting in that capacity hereunder and with respect to the Escrow
Account;
(b) represents and warrants that it maintains the FRBNY Member
Securities Account with the FRBNY and that the United Stated Treasury
securities constituting the Pledged Securities transferred to the
Tri-State Securities Intermediary pursuant to Section 3(b) have been
credited to the FRBNY Member Securities Account;
(c) agrees that the Escrow Account shall be an account to which
Financial Assets may be credited, and the Tri-State Securities
Intermediary undertakes to treat the Trustee as the sole person entitled
to exercise rights that comprise (and entitled to the benefits of) such
Financial Assets, and entitled to exercise the rights of an entitlement
holder and control in the manner contemplated by the UCC, and further
agrees to identify the Trustee in the records of the Tri-State Securities
Intermediary as the sole person having a Securities Entitlement against
the Tri-State Securities Intermediary with respect to the Escrow Account
and all Financial Assets credited thereto;
(d) hereby represents that it has not granted, and covenants that so
long as it acts as Tri-State Securities Intermediary hereunder it shall
not grant, control (including without limitation, "control" as defined in
UCC Section 9-115(1)(e)) over or with respect to any Pledged Collateral
credited to the Escrow Account from time to time to any other Person other
than the Trustee;
(e) covenants that in its capacity as Tri-State Securities
Intermediary hereunder and with respect to the Escrow Account, it shall
not take any action inconsistent with, and represents and covenants that
it is not and so long as this Pledge Agreement remains in effect will not
become party to any agreement, the terms of which are inconsistent with
the provisions of this Pledge Agreement;
<PAGE> 14
14
(f) agrees, with the other parties to this Pledge Agreement, that
any item of property credited to the Escrow Account shall be treated as a
Financial Asset;
(g) agrees, with the other parties to this Pledge Agreement, so long
as it serves as Tri-State Securities Intermediary pursuant to this Pledge
Agreement, to maintain the Escrow Account as a Securities Account and
maintain appropriate books and records in respect thereof in accordance
with its usual procedures applicable to its role as Securities
Intermediary;
(h) agrees, with the other parties to this Pledge Agreement, that
the Tri-State Securities Intermediary's jurisdiction, for purposes of UCC
Section 8-110(e) and 31 C.F.R. 357.11(b) as it pertains to this Pledge
Agreement, the Escrow Account and Security Entitlements relating thereto,
shall be the State of New York.
SECTION 15. Miscellaneous Provisions.
Section 15.1. Notices. Any notice or communication given hereunder
shall be sufficiently given if in writing and delivered in person or mailed by
first class mail, commercial courier service or telecopier communication,
addressed as follows:
if to the Pledgor:
Tri-State Outdoor Media Group, Inc.
3416 Highway 41 South
Tifton, Georgia 31794
Telecopier: (912) 386-0203
Attention: Chief Financial Officer
if to the Trustee:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 1004
Fax: 212-858-2952
Attention: Corporate Finance Department
<PAGE> 15
15
if to the Tri-State Securities Intermediary:
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 1004
Fax: 212-858-2952
Attention: Corporate Finance Department
Section 15.2. No Adverse Interpretation of Other Agreements. This
Pledge Agreement may not be used to interpret another pledge, security or debt
agreement of the Pledgor or any subsidiary thereof. No such pledge, security or
debt agreement (other than the Indenture) may be used to interpret this Pledge
Agreement.
Section 15.3. Severability. The provisions of this Pledge Agreement
are severable, and if any clause or provision shall be held invalid, illegal or
unenforceable in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Pledge Agreement in any jurisdiction.
Section 15.4. Headings. The headings in this Pledge Agreement have
been inserted for convenience of reference only, are not to be considered a part
hereof and shall in no way modify or restrict any of the terms or provisions
hereof.
Section 15.5. Counterpart Originals. This Pledge Agreement may be
signed in two or more counterparts, each of which shall be deemed an original,
but all of which shall together constitute one and the same agreement.
Section 15.6. Benefits of Pledge Agreement. Nothing in this Pledge
Agreement, express or implied, shall give to any person, other than the parties
hereto and their successors hereunder, and the Holders of the Notes, any benefit
or any legal or equitable right, remedy or claim under this Pledge Agreement.
Section 15.7. Amendments, Waivers and Consents. Any amendment or
waiver of any provision of this Pledge Agreement and any consent to any
departure by the Pledgor from any provision of this Pledge Agreement shall be
effective only if made or duly given in compliance with all of the terms and
provisions of the Indenture, and neither the Trustee nor any Holder of Notes
shall be deemed, by any act, delay, indulgence, omission or otherwise, to have
waived any right or remedy hereunder or to have acquiesced in any Default or
Event of Default (as defined herein) or in any breach of any of the terms and
conditions hereof. Consistent with the foregoing, this Pledge Agreement may be
amended, its provisions may be
<PAGE> 16
16
waived and departures from its provisions may be consented to by action of the
Pledgor and the Trustee, and (if applicable) the Holders of the Notes, as
provided in the Indenture, and no such amendment, waiver or consent shall
require any action or approval by the Initial Purchasers. Failure of the Trustee
or any Holder of Notes to exercise, or delay in exercising, any right, power or
privilege hereunder shall not preclude any other or further exercise thereof or
the exercise of any other right, power or privilege. A waiver by the Trustee or
any Holder of Notes of any right or remedy hereunder on any one occasion shall
not be construed as a bar to any right or remedy that the Trustee or such Holder
of Notes would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any rights or remedies provided by law.
Section 15.8. Interpretation of Agreement. All terms not defined
herein or in the Indenture shall have the meaning set forth in the UCC or 31
C.F.R. 357.2, except where the context otherwise requires. Acceptance of or
acquiescence in a course of performance rendered under this Pledge Agreement
shall not be relevant to determine the meaning of this Pledge Agreement even
though the accepting or acquiescing party had knowledge of the nature of the
performance and opportunity for objection.
Section 15.9. Continuing Security Interest; Termination. (a) This
Pledge Agreement shall create a continuing security interest in and to the
Pledged Collateral and shall, unless otherwise provided in this Pledge
Agreement, remain in full force and effect until the payment in full in cash of
the Obligations. This Pledge Agreement shall be binding upon the Pledgor, its
transferees, successors and assigns, and shall inure, together with the rights
and remedies of the Trustee hereunder, to the benefit of the Trustee, the
Holders of the Notes and their respective successors, transferees and assigns.
(b) This Pledge Agreement (other than the Pledgor's obligations
under Sections 10 and 12) shall terminate upon the payment in full in cash of
the Obligations or if the Company shall become obligated under the Indenture to
redeem all of the outstanding Notes and such Notes shall have been redeemed or
upon the release of the Pledged Collateral pursuant to the provisions of
paragraph 4(d). At such time, the Trustee shall, pursuant to a Company Order,
reassign and redeliver to the Pledgor all of the Pledged Collateral hereunder
that has not been sold, disposed of, retained or applied by the Trustee in
accordance with the terms of this Pledge Agreement and the Indenture and take
all actions that are necessary to release the security interest created by this
Pledge Agreement in and to the Pledged Collateral, including the execution and
delivery of all termination statements necessary to terminate any financing or
continuation statements filed with respect to the Pledged Collateral. Such
reassignment and redelivery shall be without warranty by or recourse to the
Trustee in its capacity as such, except as to the absence of any Liens on the
Pledged Collateral created by or arising through the Trustee, and shall be at
the reasonable expense of the Pledgor.
<PAGE> 17
17
Section 15.10. Survival of Representations and Covenants. All
representations, warranties and covenants of the Pledgor contained herein shall
survive the execution and delivery of this Pledge Agreement, and shall terminate
only upon the termination of this Pledge Agreement.
Section 15.11. Waivers. The Pledgor waives presentment and demand
for payment of any of the Obligations, protest and notice of dishonor or default
with respect to any of the Obligations, and all other notices to which the
Pledgor might otherwise be entitled, except as otherwise expressly provided
herein or in the Indenture.
Section 15.12. Authority of the Trustee and the Tri-State Securities
Intermediary. (a) The Trustee and the Tri-State Securities Intermediary shall
have the right to exercise all powers hereunder that are specifically granted to
the Trustee and the Tri-State Securities Intermediary, respectively, by the
terms hereof, together with such powers as are reasonably incident hereto. Each
of the Trustee and the Tri-State Securities Intermediary may perform any of its
duties hereunder or in connection with the Pledged Collateral by or through
agents or employees and shall be entitled to retain counsel and to act in
reliance upon the advice of counsel concerning all such matters. Except as
otherwise expressly provided in this Pledge Agreement or the Indenture, none of
the Trustee, the Tri-State Securities Intermediary or any director, officer,
employee, attorney or agent of the Trustee or the Tri-State Securities
Intermediary shall be liable to the Pledgor for any action taken or omitted to
be taken by the Trustee or the Tri-State Securities Intermediary, in its
capacity as Trustee or the Tri-State Securities Intermediary, hereunder, except
for its own gross negligence or willful misconduct, and neither the Trustee nor
the Tri-State Securities Intermediary shall be responsible for the validity,
effectiveness or sufficiency hereof or of any document or security furnished
pursuant hereto. Each of the Trustee and the Tri-State Securities Intermediary
and their directors, officers, employees, attorneys and agents may conclusively
rely on any communication, instrument or document believed by it or them to be
genuine and correct and to have been signed or sent by the proper person or
persons.
(b) The Pledgor acknowledges that the rights and responsibilities of
the Trustee under this Pledge Agreement with respect to any action taken by the
Trustee or the exercise or non-exercise by the Trustee of any option, right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Pledge Agreement shall, as between the Trustee and the
Holders of the Notes, be governed by the Indenture and by such other agreements
with respect thereto as may exist from time to time among them, but, as between
the Trustee and the Pledgor, the Trustee shall be conclusively presumed to be
acting as agent for the Holders of the Notes with full and valid authority so to
act or refrain from acting, and the Pledgor shall not be obligated or entitled
to make any inquiry respecting such authority.
<PAGE> 18
18
(c) The Trustee and the Tri-State Securities Intermediary undertake
to perform such duties and only such duties as are specifically set forth in
this Pledge Agreement, and no implied covenants or obligations shall be read
into this Pledge Agreement against the Trustee or the Tri-State Securities
Intermediary.
(d) No provision of this Pledge Agreement shall require the Trustee
or the Tri-State Securities Intermediary to expend or risk its own funds or
otherwise incur any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights and powers.
(e) The Trustee and the Tri-State Securities Intermediary may
consult with counsel of its selection and the advice of such counsel or any
Opinion of Counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in good faith
and in reliance thereon.
(f) The Trustee and the Tri-State Securities Intermediary may
execute any of the trusts or powers hereunder or perform any duties hereunder
either directly or by or through agents or attorneys and the Trustee and the
Tri-State Securities Intermediary shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.
Section 15.13. Final Expression. This Pledge Agreement, together
with the Indenture and any other agreement executed in connection herewith, is
intended by the parties as a final expression of this Pledge Agreement and is
intended as a complete and exclusive statement of the terms and conditions
thereof.
Section 15.14. Rights of Holders of the Notes. No Holder of Notes
shall have any independent rights hereunder other than those rights granted to
individual Holders of the Notes pursuant to Section 508 of the Indenture;
provided that nothing in this subsection shall limit any rights granted to the
Trustee under the Notes or the Indenture.
Section 15.15. GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL; WAIVER OF DAMAGES. (a) THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. ANY DISPUTE
ARISING OUT OF, CONNECTED WITH, RELATED TO, OR INCIDENTAL TO, THE RELATIONSHIP
ESTABLISHED BETWEEN THE PLEDGOR, THE TRUSTEE AND THE HOLDERS OF THE NOTES IN
CONNECTION WITH THIS PLEDGE AGREEMENT AND WHETHER ARISING IN CONTRACT, TORT,
EQUITY OR OTHERWISE, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. NOTWITHSTANDING THE FOREGOING, THE MATTERS
IDENTIFIED IN 31 C.F.R.
<PAGE> 19
19
PART 357, 61 FED. REG. 43626 (AUG. 23, 1996) SHALL BE GOVERNED SOLELY BY
THE LAWS SPECIFIED THEREIN.
(b) THE PLEDGOR HEREBY APPOINTS CT CORPORATION SYSTEM, 1633
BROADWAY, NEW YORK, NEW YORK 10019 AS ITS AGENT FOR SERVICE OF PROCESS IN ANY
SUIT, ACTION OR PROCEEDING WITH RESPECT TO THIS PLEDGE AGREEMENT AND FOR ACTIONS
BROUGHT UNDER U.S. FEDERAL OR STATE SECURITIES LAWS BROUGHT IN ANY FEDERAL OR
STATE COURT LOCATED IN THE CITY OF NEW YORK AND AGREES TO SUBMIT TO THE
JURISDICTION OF ANY SUCH COURT.
(c) THE PLEDGOR AGREES THAT THE TRUSTEE SHALL, IN ITS CAPACITY AS
TRUSTEE OR IN THE NAME AND ON BEHALF OF ANY HOLDER OF NOTES, HAVE THE RIGHT, TO
THE EXTENT PERMITTED BY APPLICABLE LAW, TO PROCEED AGAINST THE PLEDGOR OR THE
PLEDGED COLLATERAL IN A COURT IN ANY LOCATION REASONABLY SELECTED IN GOOD FAITH
(AND HAVING PERSONAL OR IN REM JURISDICTION OVER THE PLEDGOR OR THE PLEDGED
COLLATERAL, AS THE CASE MAY BE) TO ENABLE THE TRUSTEE TO REALIZE ON SUCH PLEDGED
COLLATERAL, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER ENTERED IN FAVOR OF
THE TRUSTEE. THE PLEDGOR AGREES THAT IT WILL NOT ASSERT ANY COUNTERCLAIMS, SET
OFFS OR CROSSCLAIMS IN ANY PROCEEDING BROUGHT BY THE TRUSTEE TO REALIZE ON SUCH
PROPERTY OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF THE TRUSTEE,
EXCEPT FOR SUCH COUNTERCLAIMS, SET OFFS OR CROSSCLAIMS WHICH, IF NOT ASSERTED IN
ANY SUCH PROCEEDING, COULD NOT OTHERWISE BE BROUGHT OR ASSERTED. THE PLEDGOR
WAIVES ANY OBJECTION THAT IT MAY HAVE TO THE LOCATION OF THE COURT IN THE CITY
OF NEW YORK ONCE THE TRUSTEE HAS COMMENCED A PROCEEDING DESCRIBED IN THIS
PARAGRAPH INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR
BASED ON THE GROUNDS OF FORUM NON CONVENIENS.
(d) THE PLEDGOR AGREES THAT NEITHER ANY HOLDER OF NOTES NOR (EXCEPT
AS OTHERWISE PROVIDED IN THIS PLEDGE AGREEMENT OR THE INDENTURE) THE TRUSTEE NOR
THE TRI-STATE SECURITIES INTERMEDIARY SHALL HAVE ANY LIABILITY TO THE PLEDGOR
(WHETHER ARISING IN TORT, CONTRACT OR OTHERWISE) FOR LOSSES SUFFERED BY THE
PLEDGOR IN CONNECTION WITH, ARISING OUT OF, OR IN ANY WAY RELATED TO, THE
TRANSACTIONS CONTEMPLATED AND THE RELATIONSHIP ESTABLISHED BY THIS PLEDGE
AGREEMENT, OR ANY ACT, OMISSION OR EVENT OCCURRING IN CONNECTION THEREWITH,
UNLESS IT IS DETERMINED
<PAGE> 20
20
BY A FINAL AND NONAPPEALABLE JUDGMENT OF A COURT THAT IS BINDING ON THE TRUSTEE,
THE TRI-STATE SECURITIES INTERMEDIARY OR SUCH HOLDER OF NOTES, AS THE CASE MAY
BE, THAT SUCH LOSSES WERE THE RESULT OF ACTS OR OMISSIONS ON THE PART OF THE
TRUSTEE, THE TRI-STATE SECURITIES INTERMEDIARY OR SUCH HOLDERS OF NOTES, AS THE
CASE MAY BE, CONSTITUTING BAD FAITH, GROSS NEGLIGENCE OR WILLFUL MISCONDUCT.
(e) TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PLEDGOR WAIVES
THE POSTING OF ANY BOND OTHERWISE REQUIRED OF THE TRUSTEE OR ANY HOLDER OF NOTES
IN CONNECTION WITH ANY JUDICIAL PROCESS OR PROCEEDING TO ENFORCE ANY JUDGMENT OR
OTHER COURT ORDER PERTAINING TO THIS PLEDGE AGREEMENT OR ANY RELATED AGREEMENT
OR DOCUMENT ENTERED IN FAVOR OF THE TRUSTEE OR ANY HOLDER OF NOTES, OR TO
ENFORCE BY SPECIFIC PERFORMANCE, TEMPORARY RESTRAINING ORDER OR PRELIMINARY OR
PERMANENT INJUNCTION, THIS PLEDGE AGREEMENT OR ANY RELATED AGREEMENT OR DOCUMENT
BETWEEN THE PLEDGOR ON THE ONE HAND AND THE TRUSTEE AND/OR THE HOLDERS OF THE
NOTES ON THE OTHER HAND.
[The remainder of this page left intentionally blank.]
<PAGE> 21
IN WITNESS WHEREOF, the Pledgor, the Trustee and the Tri-State
Securities Intermediary have each caused this Pledge Agreement to be duly
executed and delivered as of the date first above written.
Pledgor:
TRI-STATE OUTDOOR MEDIA GROUP, INC.
By: /s/ Sheldon G. Hurst
____________________________________
Name: Sheldon G. Hurst
Title: President
Chief Executive Officer
Trustee:
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Terence Rawlins
____________________________________
Name: Terence Rawlins
Title: Assistant Vice President
Tri-State Securities Intermediary:
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ Terence Rawlins
____________________________________
Name: Terence Rawlins
Title: Assistant Vice President
<PAGE> 22
OFFICERS' CERTIFICATE
Pursuant to Section 3(f) of the Pledge Agreement (the "Pledge
Agreement") dated as of May 15, 1998 between Tri-State Outdoor Media Group, Inc.
(the "Pledgor") and IBJ Schroder Bank & Trust Company, trustee (the "Trustee")
for the holders of the 11% Senior Notes due 2008 (the "Notes") of the Pledgor,
and IBJ Schroder Bank & Trust Company, as securities intermediary (the
"Tri-State Securities Intermediary"), the undersigned officer of the Trustee, on
behalf of the Trustee, and the undersigned officer of the Tri-State Securities
Intermediary, on behalf of the Tri-State Securities Intermediary, make the
following certifications to the Pledgor and the initial purchasers of the Notes.
Capitalized terms used and not defined in this Certificate have the meanings set
forth or referred to in the Pledge Agreement.
1. Substantially contemporaneously with the execution and delivery
of this Certificate, the Trustee has established with the Tri-State Securities
Intermediary, as Securities Intermediary, the Escrow Account in the name of the
Trustee and for the benefit of the Trustee and the Holders of the Notes. The
Tri-State Securities Intermediary has acquired a Security Entitlement to the
United States Treasury securities identified in Exhibit A to this Certificate
(the "Pledged Securities") from the FRBNY and holds a Security Entitlement
thereto in the FRBNY Member Security Account. The Tri-State Securities
Intermediary has made appropriate book entries in its records establishing that
the Pledged Securities and the Trustee's Securities Entitlement thereto have
been credited to and are held in the Escrow Account for the benefit of the
Trustee and the ratable benefit of the Holders of the Notes.
2. The Trustee has established and maintained and will maintain the
Escrow Account with the Tri-State Securities Intermediary and all Securities
Entitlements and other positions carried in the Escrow Account solely in its
capacity as Trustee, and the Trustee and the Tri-State Securities Intermediary
have not asserted and will not assert any claim to or interest in the Escrow
Account or any such Securities Entitlements or other positions except in such
capacity.
3. The Trustee and the Tri-State Securities Intermediary have
acquired their Security Entitlements to the Pledged Securities for value and
without notice of any adverse claim thereto. Without limiting the generality of
the foregoing, the Pledged Securities are not and the Tri-State Securities
Intermediary's and the Trustee's Security Entitlements to the Pledged Securities
are not, to their knowledge, subject to any Lien granted by either of them in
favor of any Securities Intermediary (including, without limitation, the FRBNY)
through which the Trustee derives its Security Entitlement to the Pledged
Securities.
<PAGE> 23
2
4. Neither the Tri-State Securities Intermediary nor the Trustee has
caused or permitted the Pledged Securities or any Security Entitlement thereto
to become subject to any Lien created by or arising through either of the
Trustee or the Tri-State Securities Intermediary.
IN WITNESS WHEREOF, the undersigned officers have executed this
Certificate on behalf of the Trustee and the Tri-State Securities Intermediary,
respectively, this 20th day of May, 1998.
IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee
By: /s/ Terence Rawlins
______________________________
Name: Terence Rawlins
Title: AVP
IBJ SCHRODER BANK & TRUST COMPANY,
as Tri-State Securities Intermediary
By: /s/ Terence Rawlins
______________________________
Name: Terence Rawlins
Title: AVP
<PAGE> 24
EXHIBIT A
PLEDGED SECURITIES
Schedule of U.S. Government Obligations
Pledged under the Pledge Agreement
<TABLE>
<CAPTION>
Principal
Security CUSIP No. Amount Maturity Cost at Closing
-------- --------- ---------- -------- ---------------
<S> <C> <C> <C> <C>
United States 912820AQ0C $5,348,000 November 15,1998 $5,209,647.24
Treasury Strip
Coupon
United States 912820AS6C $5,500,000 May 15, 1999 $5,210,150.00
Treasury Strip
Coupon
</TABLE>
<PAGE> 25
EXHIBIT B
ACCOUNTANT'S CERTIFICATE
<PAGE> 26
RIDER TO THE PLEDGE AGREEMENT
Schedule II
<TABLE>
<CAPTION>
PLEDGED SECURITIES YIELD MATURITY PURCHASE PRICE ACCRUED CASH FLOW TOTAL INTEREST NET
DATE INTEREST AVAILABLE PAYMENT CASH
(1) (2) (3) FLOW
(4)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
US Treasury Notes Strip 5.463% 11/15/98 $5,209,647.24 $138,352.76 $ 5,348,000.00 $5,348,000.00 $ 5,347,222.22 $777.78
Coupons
US Treasury Strip Coupons 5.642% 5/15/99 $5,210,150.00 $289,850.00 $ 5,500,000.00 $5,500,777.78 $ 5,500,000.00 $777.78
$10,848,000.00 $10,847,222.22
-------------- --------------
</TABLE>
(1) Coupon interest is calculated assuming a 180-day semi-annual period and a
360-day year.
(2) Total Available for each period is equal to the Cash Flow for the period
plus Net Cash Flow from the previous period.
(3) See Schedule I attached hereto
(4) Net Cash Flow for each period is equal to Total Available for the period
less the Interest Payment for each period.
<PAGE> 1
EXHIBIT 10.5
TAX SHARING AGREEMENT
AGREEMENT dated as of May 20, 1998, by and among SGH Holdings, Inc.
("Parent"), a Delaware corporation, and its subsidiary, Tri-State Outdoor Media
Group, Inc, a Kansas corporation (hereinafter referred to as the "Consolidated
Subsidiary" or as a "member"). This Agreement shall apply to taxable years
ending on or as of December 31, 1998.
W I T N E S S E T H:
WHEREAS, Parent has elected to file a consolidated Federal income tax
return under the provisions of the Internal Revenue Code of 1986, as amended
(the "Code"), and the applicable regulations thereunder (the "Regulations"); and
WHEREAS, under the provisions of the Code, the consolidated return
generally must include all corporations controlled by Parent within the meaning
of the Code and Regulations governing consolidated Federal income tax returns;
and
WHEREAS, Parent and its Consolidated Subsidiary (the "Group" or "Parent
Consolidated Group") desire to agree with respect to the allocation and payment
of taxes and the accounting therefor and the participation and cooperation by
members of the Group in coordinated tax planning and in other matters related to
the consolidated tax return of the Group; and
WHEREAS, it is the purpose and intention of the parties hereto that the
allocation of the consolidated United States income tax liability and certain
state tax liability, where combined or consolidated state tax returns are filed,
to each member of the Parent Consolidated Group shall fairly preserve the
economic privileges and rights which would have accrued to each of them from the
filing of separate returns.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements hereinafter contained, the parties hereto agree as follows:
1. Agreement to File Consolidated Returns. Parent agrees that each year
it will cause the Consolidated Subsidiary to join in a consolidated Federal
income tax return under the Code and agrees to file such a return. Any decisions
with respect to the timing, filing or content of such returns, including the
items of income, deduction or credit of the Consolidated Subsidiary included in
such return, or with respect to the resolution of any dispute concerning the
returns, or with respect to the computation of any payment or allocation with
respect to estimated tax payments or tax payments hereunder, shall be made by
both parties, subject to Section 8.9 of this Agreement. If the
<PAGE> 2
parties cannot resolve such dispute, they shall submit such dispute for
resolution to a mutually acceptable independent accounting firm of national
reputation or independent accounting firm of national reputation, which shall
determine and report to the parties upon such dispute and such report shall be
final, binding and conclusive on the parties.
2. Computation of a Member's Tax Liability. If a Consolidated U.S.
income tax return is filed by Parent as the common parent, the total U.S. tax
liability of each member shall be determined as follows:
2.1 Separate Return Basis. With respect to each member, an
amount equal to such member's U.S. tax liability for the year determined on a
separate return basis.
2.2 Tax Rates. Each member shall apply the corporate rate
imposed by Section 11(b) of the Code to its taxable income determined on a
separate return basis and the corporate rate imposed by Section 55 of the Code
in computing its tentative minimum tax, if any.
2.3 Tax Credits. Except as specifically provided herein, all
tax credits (including the investment tax credit, the research and development
tax credit, the foreign tax credit, the minimum tax credit and any other
available tax credits) shall be allowed to each member of the Group to the same
extent each such credit would be allowable on a separate return basis. In the
case of the investment tax credit, recapture shall be calculated on all
premature retirements of investment credit property on a separate company basis,
except that in the case of retirements of investment property acquired in years
for which the investment tax credit is carried forward in the computation of
separate tax liability, the recapture shall reduce the investment credit carried
forward. In the case of the foreign tax credit, with respect to taxes paid to
foreign countries or possessions of the United States, Parent shall have the
option to elect whether or not a foreign tax credit shall be claimed or whether
deductions shall be taken with respect to such taxes. Any such election made by
Parent for consolidated return years shall be binding on each member. If an
election is made to claim a foreign tax credit, foreign taxes deemed paid
pursuant to the applicable provisions of the Code shall be included in the
computation of taxes paid to foreign countries or possessions of the United
States.
2.4 Preference Income. The annual preference income exemption,
if any, shall be allocable to each member of the Group to the extent that it
would be allowable on a separate return basis.
2.5 Other Items. The allocation of any other item not
specifically addressed herein, including adjustments that would arise through
consolidation of group members for Federal tax purposes, which could affect the
computation of the separate tax liability of a member, shall be determined by
the President of Parent on a fair and equitable basis.
3.0 Computation of a Member's Income. A member's tax liability will be
based upon each member's taxable income, which will be determined in accordance
with the terms hereof as if such member had filed on a separate basis for the
period in question and for all prior periods.
2
<PAGE> 3
3.1 Dividends Received Deduction. In computing a member's
taxable income, dividends received from members of the Group will qualify for
the 100% dividends received deduction. The dividend received deduction
attributable to other sources shall be allowed consistent with the provisions of
the Code and the Regulations applicable to corporations filing separate returns.
3.2 Determination of Gains and Losses on Securities
Transactions. A determination of short-term or long-term capital gains and
ordinary or capital losses on securities transactions shall be made on a
separate company basis.
3.3 Allowances of Operating Losses and Carrybacks and
Carryovers of Other Tax Attributes. Separate tax attributes of a member will be
given effect in determining the member's separate income tax liability,
including the member's net operating losses for all years prior to this
Agreement.
3.4 Other Items. The treatment of any other item not
specifically addressed herein, including adjustments that would arise through
consolidation of group members for Federal tax purposes, which could affect the
computation of a member's income, shall be determined by the President of Parent
on a fair and equitable basis.
4. Payment of Taxes. Parent shall have the authority to make tax
payments due to the IRS, and to collect all refunds based on income of the Group
in a timely manner, including extensions of time to file.
4.1 Estimated Tax Payments. Each Consolidated Subsidiary shall
determine as of May 15, July 15, October 15 and January 15 (hereinafter referred
to as a "Determination Date") the estimated amount of tax required to avoid a
penalty under Section 6655 of the Code and payable to Parent on taxable income
for the year to date through the fiscal period ending nearest to the
Determination Date in accordance with the provisions of this Agreement and shall
pay over to Parent the amount so determined, less any prior estimated payments
made, within fifteen (15) days following such Determination Date.
4.2 Basis for Determination of Estimated Tax.. The estimated
tax shall be determined by applying the tax rate specified in Section 2 hereof
to the taxable income of each member of the Group for the period ending on the
Determination Date, which shall be computed in accordance with this Agreement.
The resulting estimated tax liability at the Determination Date shall be reduced
by any known tax credits to which the Consolidated Subsidiary is entitled on a
separate return basis. Each Consolidated Subsidiary shall make the determination
in accordance with the foregoing sentences of this subsection.
4.3 Underpayment or Overpayment of Estimated Tax. Upon the
filing of the consolidated tax return of the Group with the IRS for each year,
Parent shall compute on a separate return basis the underpayment or overpayment
of estimated taxes remitted by each Consolidated
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Subsidiary and shall, within fifteen (15) days after filing the return, refund
or otherwise pay any overpayment to the Consolidated Subsidiary. Any overpayment
refunded hereunder shall include interest received, if any, by the Parent with
respect to such overpayment. Any underpayment of estimated tax shall be due and
payable to Parent not later than fifteen (15) days after the Consolidated
Subsidiary has been billed for the same. Each Consolidated Subsidiary shall pay
interest and penalties to Parent at the annual rate then required by the Code or
Regulations for underpayment of estimated taxes from the date on which such
payment was originally due to the date of payment. All such payments made after
the underpayment becomes due and payable shall be applied first, to satisfy the
estimated tax liability currently payable, and second, to satisfy the
underpayment of any prior year's tax.
4.4 Limitation on Payment. Notwithstanding any other provision
of this Section 4, no Consolidated Subsidiary shall pay to the Parent on any
Determination Date or with respect to any taxable year more than its
proportionate share of actual consolidated Federal taxes paid by the Parent for
the period to which the Determination Date relates or such taxable year, as the
case may be. The proportionate share of consolidated Federal taxes for each
member shall be found in a fraction, the numerator of which is the separate
return liability of the member and the denominator of which is the sum of the
separate return liabilities of all such members. After giving effect to a tax
loss, if any, for any Consolidated Subsidiary included in the Group. Parent
shall allocate to any Consolidated Subsidiary having a tax loss in the period,
the tax benefit which fairly reflects the reduction in Parent's Consolidated
Federal taxes attributable to such Consolidated Subsidiary's tax loss. In
addition, if a new member is admitted to the Parent Consolidated Group under
subsection 8.4 hereof no original Consolidated Subsidiary shall pay to the
Parent on any Determination Date more than it would have paid had the new member
not been a part of the Parent Consolidated Group.
4.5 Indemnification. The Parent agrees to indemnify and hold
harmless the Consolidated Subsidiaries against and from any claims against the
Consolidated Subsidiaries of liability for income taxes, interest and penalties
arising therefrom with respect to any period and any taxing authority as to
which the Parent has filed a consolidated return including the Consolidated
Subsidiaries.
5. IRS Examinations.
5.1 Conduct of Examination. Each of the Consolidated
Subsidiaries agrees that Parent shall have the responsibility for conducting the
IRS Agents' examinations for the Parent Consolidated Group. All costs and
expenses of the examination, including the expense of defending any adjustments
or proposed adjustments, which are directly identifiable with a particular
Consolidated Subsidiary shall be billed to such subsidiary. All costs and
expenses not specifically identifiable with a particular Consolidated Subsidiary
or Subsidiaries shall be borne and paid by Parent.
5.2 Cooperation in Examination. Each Consolidated Subsidiary
agrees that it will inform Parent promptly of all questions raised by IRS Agents
in conducting an examination of tax
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returns at such subsidiary's office and shall cooperate with Parent's
accountants and tax advisors and counsel in working with the IRS Agents and in
responses to proposed IRS adjustments.
5.3 Agreements as to Settlement. Each Consolidated Subsidiary
agrees that any adjustment to its tax liability arising out of an examination by
the IRS shall be computed on the basis of agreements reached between Parent and
the IRS that are fair and equitable to the Parent and the Consolidated
Subsidiaries or on the basis of a decision of the Tax Court or other Court where
applicable.
5.4 Additional Tax Due. Upon final settlement, through
judicial or administrative determination, of adjustments to the consolidated
Federal income tax returns proposed by the IRS, the tax liabilities of each
Consolidated Subsidiary for the year or years under examination shall be
redetermined pursuant to Section 2 of this Agreement based upon adjustments made
by the IRS and agreed upon by Parent in the settlement agreement as if such
subsidiary had filed a separate tax return. If the adjustments result in
additional tax for such Consolidated Subsidiary, it shall pay to Parent interest
and any penalties from the date on which Parent received a final settlement from
the IRS for adjustment to the taxes. Interest and penalties for such period or
periods in question shall be computed at the rate used by the IRS. The liability
for interest and penalties shall be computed for such Consolidated Subsidiary
without regard to the liability for or refund of interest of the Consolidated
Group, provided, however, that the amount paid by the Consolidated Subsidiary
for penalties and interest cannot exceed the amount of penalties and interest
paid by Parent on account of such adjustment. Any additional liability for tax,
interest and penalties shall be due and payable to Parent not later than fifteen
(15) days after the Consolidated Subsidiary has been billed for the same.
5.5 Refunds of Tax. If the adjustments agreed upon with the
IRS result in a refund of taxes to a Consolidated Subsidiary, Parent shall pay
to such Subsidiary interest from the original due date of the return with
respect to which such refund relates to the date on which Parent received final
settlement from the IRS for the adjustment to taxes and shall be calculated at
the rates used for the period or periods in question by the IRS. The refund of
interest shall be computed for such Consolidated Subsidiary without regard to
the refund of or liability for interest of the Consolidated Group. Parent shall
refund any tax and interest due such Consolidated Subsidiary within fifteen (15)
days after receiving final settlement from the IRS.
6. Furnishing of Tax Information to Parent. Each Consolidated
Subsidiary shall deliver to the President of Parent on or before the 15th day of
February in each year (or such later date as is acceptable to the President of
Parent) such documents and other information as may be requested by the
President of Parent in order to prepare a Federal income tax return for the
Consolidated Subsidiary on a separate basis for the preceding fiscal year.
7. Adjustments for Tax Attributes as a Result of Deconsolidation. If a
Consolidated Subsidiary shall cease to be included in the Parent Consolidated
Group and thereafter shall earn a tax attribute which is carried back to a
consolidated return year, the Consolidated Subsidiary shall
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furnish to Parent any and all data relating to the tax attribute and which may
be necessary or helpful in connection with the preparation by Parent of a Parent
Consolidated Group refund claim with respect to such tax attribute. Parent shall
prepare such Parent Consolidated Group refund claim and shall file such Parent
Consolidated Group refund claim with the IRS on or before the expiration of the
statute of limitations with respect thereto. Each Consolidated Subsidiary hereby
authorizes Parent or its representatives to pursue such Parent Consolidated
Group refund claim either administratively with the IRS or by court action, and
Parent and its representatives shall have the exclusive right to make any and
all decisions to pursue, appeal or settle any such refund claim or any
administrative or court proceeding with respect thereto. Each Subsidiary agrees
to cooperate with Parent by furnishing all records and documents and making
available personnel for testimony necessary or helpful to the pursuit of such
Parent Consolidated Group refund claim. Upon the receipt by Parent of any refund
relating to such Parent Consolidated Group refund claim, Parent shall pay to
each Consolidated Subsidiary, if applicable, the lesser of the (i) the reduction
of the Parent Consolidated Group tax liability as result of the tax attribute
originating with such Consolidated Subsidiary or (ii) the amount of refund such
Consolidated Subsidiary would have received if it had filed a separate tax
returns for all consolidated return years (based upon the law and facts as
finally determined in connection with such Parent Consolidated Group refund
claim).
8. Miscellaneous Provisions.
8.1 State, Local and Foreign Income Taxes. In the event that
the Parent Consolidated Group (or any member thereof) is required or elects to
file unitary, combined, or consolidated state, local or foreign income tax
returns, all of the principles embodied in this Agreement shall apply in
connection with the determination and allocation of such tax liabilities among
the appropriate members of the Parent Consolidated Group.
8.2 Authority to Change Agreement . Each of the Consolidated
Subsidiaries hereby agrees that Parent, as the common parent, shall have the
authority to make any necessary alterations in this Agreement to comply with any
changes in the provisions of the Code or Regulations relating to consolidated
Federal income tax returns to the extent that failure to make any alteration
will result in a violation of such provisions.
8.3 Consent to Regulations. Each of the parties to this
Agreement which at any time during a taxable year has been a member of the
Parent Consolidated Group consents to all Regulations relating to the filing of
a consolidated tax return prescribed under Section 1502 of the Code.
8.4 New Members of Consolidated Group. Any Subsidiary of
Parent which becomes a controlled corporation required to join in the
consolidated tax return with Parent shall become a member of the Parent
Consolidated Group by signing a master copy of this Agreement which shall be
maintained by Parent.
8.5 Governing Law. This Agreement shall be governed by the
laws of the State
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of Delaware.
8.6 Term of Agreement. This Agreement shall remain in effect
so long as two or more of the parties hereto continue to qualify as members of
the Parent Consolidated Group, but shall apply to members only during the period
they are part of the Parent Consolidated Group for Federal income tax purposes.
8.7 Subsequent Alterations and Modifications. Subject to the
rights of Parent set forth in subsection 8.2 above to modify the provisions of
this Agreement for purposes of conforming with the applicable provisions of the
Code or Regulations relating to consolidated Federal income tax returns, all
alterations and modifications of this Agreement shall be in writing and signed
by all parties, provided, however, that no material alteration or modification
shall be effective unless IBJ Schroder Bank & Trust Company shall have received
an opinion of counsel that such alteration or modification shall not cause a
material adverse effect to the holders of the Consolidated Subsidiary's 11%
Senior Notes due 2008, issued under an Indenture dated as of May 15, 1998.
8.8 Elections. Any consolidated tax return elections required
to be made shall be made by Parent on behalf of all members of the Group. If a
member is required to separately consent to such election, such consent shall be
made on a timely basis by such member.
8.9 Equity. This Agreement is intended to provide for an
allocation of tax liability amongst the parties in an equitable manner and any
dispute resulting from a situation which is not specifically provided for herein
or because a paragraph is unclear or is in conflict with this principle shall be
resolved so as to achieve an equitable allocation of tax liability. Further, the
parties agreed to cooperate with each other and give each other full access to
books and records and other information as may be necessary to give proper
effect to this Agreement.
IN WITNESS WHEREOF, Parent and the Consolidated Subsidiary whose names
are subscribed hereto have entered into this Agreement as of the day and year
first above written.
PARENT
SGH HOLDINGS, INC.
By: /s/ Sheldon G. Hurst
------------------------------
CONSOLIDATED SUBSIDIARY
TRI-STATE OUTDOOR MEDIA GROUP, INC.
By: /s/ Sheldon G. Hurst
------------------------------
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Exhibit 10.6
EXECUTION COPY
SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
--------------------------------------------------
SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT dated as of February 27,
1998, between and among SGH Holdings, Inc., a Delaware corporation (the
"Company"), and each of the stockholders of the Company listed on the Schedule
of Stockholders attached to this Agreement (collectively, the "Stockholders,"
and each individually a "Stockholder.")
The Company and Mesirow Capital Partners VI, an Illinois limited
partnership ("Fund VI"), are parties to a Note and Warrant Purchase Agreement
dated as of October 3, 1994, as amended as of June 12, 1997 (the "Fund VI
Purchase Agreement"), pursuant to which Fund VI purchased certain Promissory
Notes (collectively, the "Fund VI Notes") and Stock Purchase Warrant (the "Fund
VI Warrant") issued by the Company. In connection with the transactions
contemplated by the Fund VI Purchase Agreement, the Company, Fund VI and the
other stockholders of the Company entered into a Stockholders Agreement dated as
of October 3, 1994.
The Company and Mesirow Capital Partners VII, an Illinois limited
partnership ("Fund VII"), are parties to a Note and Warrant Purchase Agreement
dated as of June 12, 1997 (the "Fund VII Purchase Agreement") pursuant to which
Fund VII purchased a Promissory Note (the "Fund VII Note") and a Stock Purchase
Warrant (the "Fund VII Warrant") issued by the Company. In connection with the
transactions contemplated by the Fund VII Purchase Agreement, the Company, Fund
VI, Fund VII and the other stockholders of the Company entered into an Amended
and Restated Stockholders Agreement dated as of June 12, 1997 (the "Existing
Stockholders Agreement").
The Company, Fund VI and Fund VII are parties to an Exchange Agreement
dated as of the date hereof (the "Exchange Agreement") pursuant to which Fund VI
and Fund VII have agreed to exchange the Fund VI Notes and Fund VII Note for
shares of the Company's Redeemable Preferred Stock, par value $.0001 per share.
In order to induce Fund VI and Fund VII to enter into the Exchange Agreement,
the Company has agreed to amend and restate the Existing Stockholders Agreement
in its entirety as set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the consummation of the transactions
contemplated under the Exchange Agreement.
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The Company and the Stockholders desire to enter into this Agreement for
the purposes, among others, of (i) establishing the size and composition of the
Company's Board of Directors (the "Board"), (ii) assuring continuity in the
management and ownership of the Company and (iii) limiting the manner and terms
by which the Company's stock may be transferred.
The parties hereto agree as follows:
Section 1. Definitions. For purposes of this Agreement, the following
terms have the meanings set forth below.
"Affiliate" of a particular Person means any other Person controlling,
controlled by or under common control with such Person, any partner of such
Person and any partner of a Person that is a partnership.
"Approved Sale" has the meaning set forth in Section 6.1.
"Available Shares" has the meaning set forth in Section 5.4.
"Board" has the meaning set forth in the Preamble to this Agreement.
"Bridge Facility Agreement" has the meaning set forth in the Exchange
Agreement.
"Certificate of Incorporation" means the Company's Certificate of
Incorporation, as amended in accordance with the provisions of the Exchange
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Common Stock" means the Common Stock, par value $.0001 per share, of the
Company.
"Company" means SGH Holdings, Inc., a Delaware corporation.
"Credit Agreement" has the meaning set forth in the Exchange Agreement.
"Default" has the meaning set forth in the Credit Agreement.
"Election Period" has the meaning set forth in Section 4.1.
"Event of Default" has the meaning set forth in the Certificate of
Incorporation.
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"Exchange Agreement" has the meaning set forth in the Preamble to this
Agreement.
"Exchange Notes" has the meaning set forth in the Exchange Agreement.
"Executives" means the executive employees of the Company and its
Subsidiaries whose names are set forth on the Schedule of Executives attached to
this Agreement.
"Executive Stock" means (a) all shares of Common Stock held by any
Executive as of the date of this Agreement, (b) all shares of Common Stock
hereinafter acquired by any Executive and (c) any equity securities issued or
issuable with respect to the securities referred to in clause (a) or (b) above
by way of a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization. For
purposes hereof, all shares of Common Stock and other equity securities held or
acquired by any Person controlled by any Executive (including Hurst Enterprises,
L.P.) will be deemed to be held or acquired by such Executive. Shares of Common
Stock deemed to be Executive Stock will continue to be Executive Stock in the
hands of any holder other than an Executive (except for the Company and the
Purchaser and except for transferees in a Public Sale), and, except as otherwise
provided herein, each such other holder of Executive Stock will succeed to all
rights and obligations attributable to the transferring Executive as a holder of
Executive Stock.
"Existing Stockholders Agreement" has the meaning set forth in the Preamble
to this Agreement.
"Fair Market Value" of each share of Executive Stock means the average of
the closing prices of the sales of the Company's Common Stock on all securities
exchanges on which the Common Stock may at the time be listed, or, if there have
been no sales on any such exchange on any day, the average of the highest bid
and lowest asked prices on all such exchanges at the end of such day, or, if on
any day the Common Stock is not so listed, the average of the representative bid
and asked prices quoted in the Nasdaq Stock Market, Inc. as of 4:00 P.M., New
York City time, or, if on any day the Common Stock is not quoted in the Nasdaq
Stock Market, Inc., the average of the highest bid and lowest asked prices on
such day in the domestic over-the-counter market as reported by the National
Quotation Bureau Incorporated, or any similar successor organization, in each
such case averaged over a period of 21 days consisting of the day as of which
the Fair Market Value is being determined and the 20 consecutive business days
prior to such day. If at any time the Common Stock is not listed on any
securities exchange or quoted in the Nasdaq Stock Market, Inc. or
over-the-counter market, the Fair Market Value will be the fair value of the
Common Stock determined in good faith by the Board.
"Family Group" means an Executive's spouse and descendants (whether natural
or adopted) and any trust, partnership or limited liability company (in each
case controlled by the Executive) for the benefit of the Executive or the
Executive's spouse or descendants.
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"Fund VI" means Mesirow Capital Partners VI, an Illinois limited
partnership.
"Fund VI Notes" has the meaning set forth in the Preamble to this
Agreement.
"Fund VI Purchase Agreement" has the meaning set forth in the Preamble to
this Agreement.
"Fund VI Underlying Common Stock" means (a) the Common Stock issued or
issuable upon the exercise of the Fund VI Warrant and (b) any Common Stock
issued or issuable with respect to the Common Stock referred to in clause (a) by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
"Fund VI Warrant" has the meaning set forth in the Preamble to this
Agreement.
"Fund VII" means Mesirow Capital Partners VII, an Illinois limited
partnership.
"Fund VII Note" has the meaning set forth in the Preamble to this
Agreement.
"Fund VII Purchase Agreement" has the meaning set forth in the Preamble to
this Agreement.
"Fund VII Underlying Common Stock" means (a) the Common Stock issued or
issuable upon the exercise of the Fund VII Warrant and (b) any Common Stock
issued or issuable with respect to the Common Stock referred to in clause (a) by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
"Fund VII Warrant" has the meaning set forth in the Preamble to this
Agreement.
"Independent Third Party" means any Person who, immediately prior to the
contemplated transaction, does not own in excess of 5% of the Company's voting
capital stock on a fully-diluted basis (a "5% Owner"), who is not controlling,
controlled by or under common control with any 5% Owner, and who is not the
spouse or descendent (by birth or adoption) of any 5% Owner.
"Notes" means, collectively, the Fund VI Notes and the Fund VII Note.
"Offer Notice" has the meaning set forth in Section 4.2.
"Option Notice" has the meaning set forth in Section 5.4.
"Other Executives" has the meaning set forth in Section 5.1.
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"Other Stockholders" has the meaning set forth in Section 4.2.
"Permitted Transfer" has the meaning set forth in Section 4.4.
"Person" means an individual, a partnership, a corporation, a limited
liability company, an association, a joint stock company, a trust, a joint
venture, an unincorporated organization and a governmental entity or any
department, agency or political subdivision thereof.
"Process Agent" has the meaning set forth in Section 8.14.
"Pro Rata Share" has the meaning set forth in Section 4.2.
"Proxy" has the meaning set forth in Section 3.1.
"Public Sale" means any sale of Stockholder Shares to the public pursuant
to an offering registered under the Securities Act or to the public pursuant to
the provisions of Rule 144 under the Securities Act (or any similar provision
then in force).
"Qualified Public Offering" means the sale in an underwritten public
offering registered under the Securities Act of shares of Common Stock having
an aggregate value, net of underwriting discounts and commissions, of at least
$10 million.
"Registration Agreement" means the Amended and Restated Registration
Agreement dated as of June 12, 1997 between the Company, Fund VI and Fund VII.
"Repurchase Notice" has the meaning set forth in Section 5.3.
"Repurchase Option" has the meaning set forth in Section 5.1.
"Sale of the Company" means the sale of the Company to an Independent
Third Party or affiliated group of Independent Third Parties pursuant to which
such party or parties acquire (a) capital stock of the Company possessing the
voting power to elect a majority of the Board (whether by merger, consolidation
or sale or transfer of the Company's capital stock) or (b) all or substantially
all of the Company's assets determined on a consolidated basis.
"Securities Act" means the Securities Act of 1933, as amended from time to
time.
"Special Committee" has the meaning set forth in Section 2.1(c).
"Stockholder" and "Stockholders" have the meanings set forth in the
Preamble to this Agreement.
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"Stockholder Shares" means (a) the Warrants, (b) any Common Stock held as
of the date of this Agreement by any Stockholder or hereafter purchased or
otherwise acquired by any Stockholder, including Common Stock acquired upon the
exercise of the Warrants, (c) any equity securities issued or issuable directly
or indirectly with respect to the securities referred to in clause (a) or (b)
above by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization, and (d) any other shares of any class or series of capital stock
of the Company held by a Stockholder. As to any particular shares constituting
Stockholder Shares, such shares will cease to be Stockholder Shares when they
have been disposed of in a Public Sale.
"Stock Option Plan" has the meaning set forth in the Fund VII Purchase
Agreement.
"Sub Board" has the meaning set forth in Section 2.1(d).
"Subsidiary" means, with respect to any Person, any corporation,
partnership, limited liability company, association or other business entity of
which (a) if a corporation, a majority of the total voting power of shares of
stock entitled (without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof, or (b) if a partnership,
limited liability company, association or other business entity, a majority of
the partnership or other similar ownership interests thereof are at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes of this
Agreement, a Person or Persons will be deemed to have a majority ownership
interest in a partnership, limited liability company, association or other
business entity if such Person or Persons are allocated a majority of
partnership, limited liability company, association or other business entity
gains or losses or control the managing director or member or general partner of
such partnership, limited liability company, association or other business
entity.
"Termination" has the meaning set forth in Section 6.1.
"Transfer" has the meaning set forth in Section 4.1.
"Transferring Stockholder" has the meaning set forth in Section 4.2.
"Triggering Event" means the first to occur of (a) the occurrence of an
Event of Default under Section 6.1(b) or Section 6.1(d) of the Certificate of
Incorporation or under Section 4.1(b) or Section 4.1(d) of the Exchange Notes,
(b) the occurrence and continuation for a period of four consecutive fiscal
quarters of an Event of Default arising under Section 6.1(a) of the Certificate
of Incorporation or under Section 4.1(a) of the Exchange Notes, (c) the
occurrence of any Event of Default arising under Section 6.1(c) of the
Certificate of Incorporation or under Section 4.1(c) of the Exchange Notes
resulting from any breach by the Company of the covenant contained in Section
4.6(n) of the Fund VI Purchase Agreement, Fund VII Purchase Agreement or
Exchange Agreement,
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(d) the failure of the Company or any of the Stockholders other than the holders
of the Underlying Common Stock to perform and comply with the covenants and
agreements set forth in Sections 2.1(a), (b)(i), (b)(ii), (e), (f), (g) or (h)
of this Agreement, (e) the occurrence and continuation for a period of at least
60 days after the expiration of any applicable grace period of any Default
arising under the Credit Agreement or any Event of Default arising under the
Certificate of Incorporation or under the Exchange Notes (other than an Event of
Default specified in clause (a), (b) or (c) above) if the event, transaction,
circumstance or occurrence giving rise to such Default or Event of Default has
had or is reasonably likely to have a material adverse effect on the financial
condition, operating results, assets, operations or business prospects of the
Company and its Subsidiaries taken as a whole, (f) the taking of any action by
the Lender to foreclose upon any collateral securing the Company's or any of its
Subsidiary's obligations under the Credit Agreement following delivery of notice
of the acceleration of such obligations, (g) the failure of the Company to pay
the Put Price in full in cash upon the Purchasers' exercise of the Put Right (as
such terms are defined in the Fund VI Purchase Agreement and the Fund VII
Purchase Agreement) or, in connection with any such exercise, to redeem all of
the shares of Preferred Stock then outstanding in accordance with the provisions
of Article 4, Section 4.3 of the Certificate of Incorporation (irrespective of
whether payment of the Put Price or the redemption of the Preferred Stock is
then permitted under the provisions of the Credit Agreement or the Bridge
Financing Agreement) or (h) January 31, 2005.
"Tri-State" means Tri-State Outdoor Media Group, Inc., a Kansas corporation
and a wholly-owned Subsidiary of the Company.
"Underlying Common Stock" means the Fund VI Underlying Common Stock or the
Fund VII Underlying Common Stock, where no distinction is required by the
context in which such term is used. For purposes of this Agreement, any Person
who holds any portion of either of the Warrants will be deemed to be the holder
of the Underlying Common Stock obtainable upon the exercise thereof regardless
of any restriction or limitation on the exercise of such Warrant. As to any
particular shares constituting Underlying Common Stock, such shares will cease
to be Underlying Common Stock when they have been disposed of in a Public Sale.
"Warrants" means, collectively, the Fund VI Warrant and the Fund VII
Warrant.
Unless otherwise stated, other capitalized terms contained herein have the
meanings set forth in the Fund VI Purchase Agreement, Fund VII Purchase
Agreement and Exchange Agreement.
SECTION 2. BOARD OF DIRECTORS AND STOCKHOLDER ACTION.
2.1 BOARD COMPOSITION AND STOCKHOLDER ACTION. From and after the date of
this Agreement and until the provisions of this Section 2 cease to be effective,
each Stockholder will vote all of such Stockholder's Stockholder Shares and any
other voting securities of the Company over which such Stockholder has voting
control and will take all other necessary or desirable actions within such
Stockholder's control (whether in such Stockholder's capacity as a stockholder,
director,
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member of a Board committee, officer of the Company or otherwise, and including
attendance at meetings in person or by proxy for purposes of obtaining a quorum
and execution of written consents in lieu of meetings), and the Company will
take all necessary and desirable actions within its control (including calling
special Board and stockholder meetings), so that:
(a) the authorized number of directors comprising the Board will be
established at seven;
(b) subject to Sections 2.1(c) and (d), the following individuals will be
elected to the Board:
(i) one representative designated by the holders of a majority of the
shares of Fund VI Underlying Common Stock;
(ii) two representatives designated by the holders of a majority of
the shares of Fund VII Underlying Common Stock; and
(iii) four representatives designated by the Executives owning a
majority of Stockholder Shares held by all Executives;
(c) notwithstanding Section 2.1(b), (i) immediately upon the occurrence of
any Triggering Event of the type described in clause (a), (b), (f), (g) or (h)
of the definition of such term and (ii) 30 days after the date written notice is
given by Fund VI or Fund VII to the Company stating that a Triggering Event of
the type described in clause (c), (d) or (e) of the definition of such term has
occurred and referring to the provisions of this Section 2.1(c) (provided that
the Default or Event of Default giving rise to such Triggering Event has not
been cured or waived prior to the expiration of such 30-day period), a special
committee of the Board (the "Special Committee") will be designated pursuant to
Section 141(c) of the General Corporation Laws of the State of Delaware,
consisting of one representative designated pursuant to each of Sections
2.1(b)(i), 2.1(b)(ii) and 2.1(b)(iii), to which will be delegated exclusive
authority to pursue, negotiate and recommend to the Board for its approval a
plan or proposal relating to the sale, refinancing or other reorganization of
the Company or one or more of its Subsidiaries (or any assets or properties
thereof);
(d) upon any failure by the Board to designate the Special Committee or to
approve, recommend to the stockholders of the Company or take any other
necessary corporate actions to permit the consummation of any plan or proposal
recommended to the Board by the Special Committee in accordance with Section
2.1(c), the following individuals to be elected to the Board:
(i) two representatives designated by the holders of a majority of
the shares of Fund VI Underlying Common Stock;
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<PAGE> 9
(ii) two representatives designated by the holders of a majority of
the shares of Fund VII Underlying Common Stock; and
(iii) one representative designated by the Executives owning a
majority of the Stockholder Shares held by all Executives;
provided that the provisions of this Section 2.1(d) are intended by the
parties to permit the holders of the Underlying Common Stock to cause the
designation of the Special Committee for the purpose of pursuing and
negotiating a sale, refinancing or other reorganization of the Company or one
or more of its Subsidiaries (or any assets or properties thereof), and to cause
the Board to recommend any plan or proposal relating to any such transaction to
the stockholders of the Company for their approval, and the provisions of this
Section 2.1(d) will cease to be effective, and the provisions of Section 2.1(b)
will again apply, after the Board elected pursuant to this Section 2.1(d) has
caused the Special Committee to be designated or voted on the plan or proposal
recommended to the Board by the Special Committee (subject to the renewal of
the rights provided under this Section 2.1(d) in the event the Board elected
pursuant to Section 2.1(b) takes any action to modify, amend, rescind or
otherwise interfere with or seek to prevent the consummation of any action
authorized or approved by the Board elected pursuant to Section 2.1(d) with
respect to the matters contained in this Section 2.1(d));
(e) the composition of the board of directors of each of the Company's
Subsidiaries (a "Sub Board") will be the same as that of the Board;
(f) except as otherwise provided in Section 2.1(c), the composition of
each committee, if any, of the Board or any Sub Board will be proportionately
equivalent to that of the Board and will include in all cases at least one
representative designated by the holders of a majority of the shares of
Underlying Common Stock;
(g) the removal from the Board or a Sub Board (with or without cause) of
any representative designated hereunder by the holders of the Underlying Common
Stock or by the Executives will be at such holders' or the Executives' written
request, respectively, but only upon such written request and under no other
circumstances;
(h) in the event that any representative designated hereunder by the
holders of the Underlying Common Stock or by the Executives for any reason
ceases to serve as a member of the Board or a Sub Board during his or her term
of office, the resulting vacancy on the Board or the Sub Board will be filled
by a representative designated by the holders of the Underlying Common Stock or
the Executives, respectively, as provided under this Agreement; and
(i) any plan or proposal approved by the Board pursuant to Sections 2.1(c)
and 2.1(d) with respect to any sale, refinancing or reorganization of the
Company or one or more of its
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<PAGE> 10
Subsidiaries (or any assets or properties thereof) will be approved or
ratified by all Stockholders.
2.2 Expenses. The Company will pay the reasonable out-of-pocket
expenses incurred by each director in connection with attending the meetings of
the Board, any Sub Board and any committee thereof.
2.3 Failure to Designate. If any party fails for a period of more
than 30 days after delivery of written notice to designate a representative to
fill a directorship pursuant to the terms of this Section 2, the election of
an individual to such directorship will be accomplished in accordance with the
Company's Bylaws and applicable law.
2.4 Termination. The provisions of this Section 2 will terminate
automatically and be of no further force and effect as of the date the sum of
the number of shares of Underlying Common Stock outstanding and the number of
shares acquirable pursuant to the exercise of the Warrants in full is less than
39 (as adjusted to reflect any stock split, stock dividend, combination of
shares, recapitalization or similar transaction).
Section 3. Irrevocable Proxy; Conflicting Agreements.
3.1 Irrevocable Proxy. In order to secure each Executive's
obligation to vote his or her Stockholder Shares and other voting securities
of the Company in accordance with the provisions of Section 2, each Executive
hereby appoints William P. Sutter, Jr., (the "Proxy") as his or her true and
lawful proxy and attorney-in-fact, with full power of substitution (which may
be exercised by Mr. Sutter, Fund VI or Fund VII), to vote all of his or her
Stockholder Shares and other voting securities of the Company for the election
and removal of directors and all such other matters as expressly provided for
in Section 2. The Proxy may exercise the irrevocable proxy granted to it
hereunder at any time any Executive fails to comply with the provisions of this
Agreement. The proxies and powers granted by each Executive pursuant to this
Section 3.1 are coupled with an interest and are given to secure the
performance of the Executive's obligations under this Agreement. Such proxies
and powers will be irrevocable for the term set forth in Section 2.4 and will
survive the death, incompetency and disability of such Executive and the
holders of his or her Stockholder Shares.
3.2 Conflicting Agreements. Each Stockholder represents that such
Stockholder has not granted and is not a party to any proxy, voting trust or
other agreement which is inconsistent with or conflicts with the provisions of
this Agreement, and no holder of Stockholder Shares will grant any proxy or
become party to any voting trust or other agreement which is inconsistent with
or conflicts with the provisions of this Agreement.
Section 4. Restrictions on Transfer of Stockholder Shares.
4.1 Transfer of Stockholder Shares. No Stockholder will sell,
transfer, assign,
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<PAGE> 11
pledge or otherwise dispose of (a "Transfer") any interest in any Stockholder
Shares except pursuant to the provisions of this Section 4. Each Stockholder
agrees not to consummate any Transfer (other than a Permitted Transfer) until
30 days after the delivery to the Company and the other Stockholders of such
Stockholder's Offer Notice unless the parties to the Transfer have been finally
determined pursuant to this Section 4 prior to the expiration of such 30-day
period (the "Election Period").
4.2 First Offer Right. At least 30 days prior to making any Transfer of
any Stockholder Shares (other than a Permitted Transfer), the transferring
Stockholder (the "Transferring Stockholder") will deliver a written notice (the
"Offer Notice") to the Company and the other Stockholders (collectively, the
"Other Stockholders"). The Offer Notice will disclose in reasonable detail the
identity of the proposed transferee, the number of Stockholder Shares proposed
to be transferred and the proposed terms and conditions of the Transfer. First,
the Company may elect to purchase all, but not less than all, of the
Stockholder Shares specified in the Offer Notice at the price and on the terms
specified therein by delivering written notice of such election to the
Transferring Stockholder and the Other Stockholders as soon as practical but in
any event within ten days after the delivery of the Offer Notice. If the
Company has not elected to purchase all of the Stockholder Shares within such
ten-day period, each Other Stockholder may elect to purchase all, but not less
than all, of such Stockholder's Pro Rata Share of the Stockholder Shares
specified in the Offer Notice at the price and on the terms specified therein
by delivering written notice of such election to the Transferring Stockholder
as soon as practical but in any event within 20 days after delivery of the
Offer Notice. Any Stockholder Shares not elected to be purchased by the end of
such 20-day period will be deemed to be reoffered for the ten-day period prior
to the expiration of the Election Period by the Transferring Stockholder on a
pro rata basis to the Other Stockholders who have elected to purchase their Pro
Rata Share. If the Company or any Other Stockholders have elected to purchase
Stockholder Shares from the Transferring Stockholder, the transfer of such
shares will be consummated as soon as practical after the delivery of the
election notices, but in any event within 15 days after the expiration of the
Election Period. To the extent that the Company and the Other Stockholders have
not elected to purchase all of the Stockholder Shares being offered, the
Transferring Stockholder may, within 90 days after the expiration of the
Election Period and subject to the provisions of Section 4.3, transfer such
Stockholder Shares to one or more third parties at a price no less than 95% of
the price per share specified in the Offer Notice and on other terms no more
favorable to the transferees than offered to the Company and the Other
Stockholders in the Offer Notice. The purchase price specified in any Offer
Notice will be payable solely in cash at the closing of the transaction or in
installments over time, and no Stockholder Shares may be pledged without the
prior written consent of the Purchaser, which consent may be withheld in the
Purchaser's sole discretion. Each Stockholder's "Pro Rata Share" will be based
upon such Stockholder's proportionate ownership of all Stockholder Shares on a
fully-diluted basis.
4.3 Participation Rights. In the event that the Company and the Other
Stockholders have not elected to purchase the Stockholder Shares specified in
the Offer Notice, the Other Stockholders may elect to participate in the
contemplated Transfer by delivering written notice to the Transferring
Stockholder within 30 days after delivery of the Offer Notice. If any Other
Stockholders have elected to participate in such Transfer, each of the
Transferring Stockholder and
<PAGE> 12
such Other Stockholders will be entitled to sell in the contemplated Transfer,
at the same price and on the same terms, a number of Stockholder Shares equal
to the product of (a) the quotient determined by dividing the percentage of
Stockholder Shares owned by such Stockholder by the aggregate percentage of
Stockholder Shares owned by the Transferring Stockholder and the Other
Stockholders participating in such sale and (b) the number of Stockholder
Shares to be sold in the contemplated Transfer. Each Transferring Stockholder
will use best efforts to obtain the agreement of the prospective transferee to
the participation of the Other Stockholders in any contemplated Transfer and to
the inclusion (in the case of the Purchaser) of a transfer of Warrant in the
contemplated Transfer, and each Stockholder will not transfer any of such
Stockholder's Stockholder Shares to the prospective transferee if the
prospective transferee declines to allow the participation of the Other
Stockholders or the inclusion of the Warrant.
4.4 Permitted Transfers. The restrictions contained in Sections 4.1
through 4.3 will not apply with respect to any Transfer of Stockholder Shares
by any Stockholder (a) pursuant to a Public Sale, (b) in the case of Fund VI,
among its Affiliates, or to one or more Persons in connection with any sale or
participation of not more than 49 percent of the then outstanding aggregate
principal amount of the Fund VI Notes, (c) in the case of Fund VII, among its
Affiliates, or to one or more Persons in connection with any sale or
participation of not more than 49 percent of the then outstanding aggregate
principal amount of the Fund VII Note, (d) in the case of an Executive,
pursuant to applicable laws of descent and distribution or among such
Executive's Family Group or (e) among the Stockholders; provided that the
restrictions contained in this Section 4 will continue to be applicable to the
Stockholder Shares after any Transfer described in clause (b), (c), (d) or (e)
above and provided further that the transferees of such Stockholder Shares will
agree in writing prior to any such Transfer to be bound by the provisions of
this Agreement affecting the Stockholder Shares so transferred. Transfers of
the type described in clauses (a) through (c) above are referred to herein as
"Permitted Transfers."
4.5 Additional Conditions to Transfer. In connection with the Transfer
of any Stockholder Shares (other than pursuant to a Public Sale or pursuant to
Rule 144A under the Securities Act (or any similar provisions then in force)),
the holder thereof will deliver written notice to the Company describing in
reasonable detail the Transfer or proposed Transfer, together with an opinion
of Jenner & Block or other counsel which to the Company's reasonable
satisfaction is knowledgeable in securities law matters to the effect that such
transfer of Stockholder Shares may be effected without registration of such
Stockholder Shares under the Securities Act. In addition, if the holder of the
Stockholder Shares delivers to the Company an opinion of Jenner & Block or such
other counsel that no subsequent transfer of such Stockholder Shares will
require registration under the Securities Act, the Company will promptly upon
such contemplated Transfer deliver new certificates for such Stockholder Shares
which do not bear the Securities Act legend set forth in Section 4.6. If the
Company is not required to deliver new certificates for such Stockholder Shares
not bearing such legend, the holder thereof will not Transfer the same until
the prospective transferee has confirmed to the Company in writing its
agreement to be bound by the conditions contained in this Section and Section
4.6.
<PAGE> 13
4.6 Legend. Each certificate for Stockholder Shares will be imprinted with
a legend in substantially the following form:
"The securities represented by this certificate were originally issued
on 199 , and have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and may
not be sold, assigned to otherwise disposed of in violation of the
provisions of the Securities Act. The transfer of the securities
represented by this certificate is subject to the conditions specified
in the Amended and Restated Stockholders Agreement dated as of June
12, 1997, between the issuer (the "Company") and certain of its
stockholders, and the Company reserves the right to refuse the
transfer of such securities until such conditions have been fulfilled
with respect to such transfer. A copy of such conditions will be
furnished by the Company to the holder hereof upon written request
and without charge."
4.7 Termination of Restrictions. The restrictions set forth in Sections
4.1 through 4.4 will continue with respect to each Stockholder Share until the
earlier of (a) the date on which such Stockholder Share has been transferred in
a Public Sale or (b) the consummation of a Qualified Public Offering. All other
restrictions set forth in this Section 4 will continue with respect to each
Stockholder Share until the date on which such Stockholder Share has been
transferred in a Public Sale.
4.8 Transfers in Violation of Agreement. Any Transfer or attempted
Transfer of any Stockholder Shares in violation of any provision of this
Agreement will be void, and the Company will not record such Transfer on its
books or treat any purported transferee of such Stockholder Shares as the owner
of such shares for any purpose.
Section 5. Repurchase Option.
5.1 Repurchase Option. In the event any Executive ceases to be employed by
the Company or its Subsidiaries for any reason (the "Termination"), such
Executive's Executive Stock (whether held by the Executive or one or more of
the Executive's transferees) will be subject to repurchase by the Company, Fund
VI, Fund VII and the other Executives (collectively, the "Other Executives")
pursuant to the terms and conditions set forth in this Section 5 (the
"Repurchase Option").
5.2 Purchase Price. The purchase price for each share of Executive Stock
will be the Fair Market Value.
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<PAGE> 14
5.3 Exercise of Repurchase Option. The Board may elect to purchase all or
any portion of the Executive Stock of the terminating Executive by delivering
written notice (the "Repurchase Notice") to the holder or holders of such
Executive Stock within 120 days after the Termination. The Repurchase Notice
will set forth the number of shares to be acquired from each holder, the
aggregate consideration to be paid for such shares and the time and place for
the closing of the transaction. The number of shares to be repurchased by the
Company will first be satisfied to the extent possible from the shares of
Executive Stock held by the Executive at the time of delivery of the Repurchase
Notice. If the number of shares of Executive Stock then held by the Executive
is less than the total number of shares of Executive Stock the Company has
elected to purchase, the Company will purchase the remaining shares elected to
be purchased from the other holders of Executive Stock, pro rata according to
the number of shares of Executive Stock held by such other holders at the time
of delivery of the Repurchase Notice (determined as nearly as practicable to
the nearest share).
5.4 Repurchase by Funds and the Other Executives. If for any reason the
Company does not elect to purchase all of the Executive Stock of the terminating
Executive pursuant to the Repurchase Option, Fund VI, Fund VII and the Other
Executives will be entitled to exercise the Repurchase Option for the shares of
Executive Stock the Company has not elected to purchase (the "Available
Shares"). As soon as practicable after the Company has determined that there
will be Available Shares, but in any event within 45 days after the
Termination, the Company will give written notice (the "Option Notice") to Fund
VI, Fund VII and the Other Executives setting forth the number of Available
Shares and the purchase price for the Available Shares. Fund VI, Fund VII and
each of the Other Executives may elect to purchase any or all of the Available
Shares by giving written notice to the Company within 30 days after the Option
Notice has been given by the Company. If Fund VI, Fund VII and the Other
Executives elect to purchase an aggregate number of shares greater than the
number of Available Shares, the Available Shares will be allocated among Fund
VI, Fund VII and the Other Executives based upon the number of shares of Common
Stock held by each such Person on a fully-diluted basis.
5.5 Closing. The closing of the purchase of the Executive Stock pursuant
to the Repurchase Option will take place on the date designated by the Company
in the Repurchase Notice, which date will not be more than 60 days nor less
than five days after the delivery of such notice. The Company, Fund VI, Fund
VII and the Other Executives, as applicable, will pay for the Executive Stock
to be purchased pursuant to the Repurchase Option by delivery of, in the case
of Fund VI, Fund VII and the Other Executives, a check or wire transfer of
funds and, in the case of the Company, (a) a check or wire transfer of funds,
(b) a subordinate note or notes payable in up to three equal annual
installments beginning on the first anniversary of the closing of such purchase
and bearing interest (payable quarterly) at a rate per annum equal to the prime
rate announced from time to time by The First National Bank of Chicago, N.A. or
(c) both (a) and (b), in the aggregate amount of the purchase price for such
shares. Any notes issued by the Company pursuant to this Section 5.5 will be
subject to any restrictive covenants to which the Company is subject at the
time of such purchase. In addition, the Company may pay the purchase price for
such shares by offsetting any bona fide debts owed by the terminating Executive
to the Company. The purchasers of
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<PAGE> 15
Executive Stock hereunder will be entitled to receive customary representations
and warranties from the sellers regarding such sale and to require all sellers'
signatures be guaranteed.
5.6 Repurchase Restricted. Notwithstanding anything to the contrary
contained in this Agreement, all repurchases of Executive Stock by the Company
will be subject to applicable restrictions contained in the Delaware General
Corporation Law and in the Company's and its Subsidiaries' debt and equity
financing agreements. If any such restrictions prohibit the repurchase of
Executive Stock hereunder which the Company is otherwise entitled to make, the
Company may make such repurchases as soon as it is permitted to do so under such
restrictions.
5.7 Repurchase of Certain Shares. Notwithstanding the provisions of
Sections 5.3 and 5.4, in the event of the exercise of the Repurchase Option (a)
with respect to any shares of Executive Stock held by William G. McLendon,
Anthony LaMarca, Allard W. Lamm or any of their respective transferees, Sheldon
G. Hurst will have the first right to exercise the Repurchase Option and Fund
VI, Fund VII and each of the Other Executives will then have the right to
repurchase in accordance with the provisions of Section 5.4 any shares not
repurchased by Sheldon G. Hurst and (b) with respect to any shares of Executive
Stock held by Sheldon G. Hurst or any of his transferees, the Other Executives
will have the first right to exercise the Repurchase Option and Fund VI and Fund
VII will then have the right to repurchase in accordance with the provisions of
Section 5.4 any shares not repurchased by the Other Executives.
5.8 Termination. The right of the Company, Fund VI, Fund VII and the
Other Executives to repurchase shares of Executive Stock pursuant to this
Section 5 will terminate upon the first to occur of the Sale of the Company or a
Qualified Public Offering.
Section 6. Sale of the Company.
6.1 Approved Sale. If the Board and the holders of a majority of the
Company's outstanding Common Stock approve a Sale of the Company (the "Approved
Sale"), the holders of Executive Stock will consent to and raise no objections
against the Approved Sale of the Company, and if the Approved Sale of the
Company is structured as a sale of stock, the holders of Executive Stock will
agree to sell their shares of Executive Stock on the terms and conditions
approved by the Board and the holders of a majority of the Company's Common
Stock. The holders of Executive Stock will take all necessary and desirable
actions in connection with the consummation of the Approved Sale of the Company.
6.2 Conditions. The obligations of the holders of Executive Stock with
respect to the Approved Sale of the Company are subject to the conditions that
(a) upon the consummation of the Approved Sale, all of the holders of Common
Stock will receive the same form and amount of consideration per share of Common
Stock, or if any holders of Common Stock are given an option as to the form and
amount of consideration to be received, all holders will be given the same
option, and (b) all holders of then currently exercisable rights to acquire
shares of Common Stock will be given an opportunity either to (i) exercise such
rights prior to the consummation of the Approved
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<PAGE> 16
Sale and participate in such sale as holders of Common Stock or (ii) upon the
consummation of the Approved Sale, receive in exchange for such rights
consideration equal to the amount determined by multiplying (A) the same amount
of consideration per share of Common Stock received by the holders of Common
Stock in connection with the Approved Sale less the exercise price per share of
Common Stock of such rights to acquire Common Stock by (B) the number of shares
of Common Stock represented by such rights.
6.3 Rule 506 Transactions. If the Company or the holders of the Company's
securities enter into any negotiation or transaction for which Rule 506 (or any
similar rule then in effect) under the Securities Act may be available with
respect to such negotiation or transaction (including a merger, consolidation or
other reorganization), the holders of Executive Stock will, at the request of
the Company, appoint a purchaser representative (as such term is defined in Rule
501 under the Securities Act) reasonably acceptable to the Company. If any
holder of Executive Stock appoints a purchaser representative designated by the
Company, the Company will pay the fees of such purchaser representative, but if
any holder of Executive Stock declines to appoint the purchaser representative
designated by the Company, such holder will appoint another purchaser
representative reasonably acceptable to the Company, and such holder will be
responsible for the fees of the purchaser representative so appointed.
6.4 Expenses. The Executives and the other holders of Stockholder Shares
will bear their pro-rata share (based upon the number of shares sold) of the
costs of any sale of Stockholder Shares pursuant to an Approved Sale to the
extent such costs are incurred for the benefit of all holders of Common Stock
and are not otherwise paid by the Company or the acquiring party. Costs
incurred by the Executives and the other holders of Executive Stock on their
own behalf will not be considered costs of the transaction hereunder.
6.5 Termination. The provisions of this Section 6 will terminate upon
the completion of a Qualified Public Offering.
Section 7. Tax Matters.
7.1 Allocation of Taxable Income. Pursuant to the Fund VI Purchase
Agreement, the Company and each of the Executives consented to the making of an
election by Tri-State pursuant to Section 1362(c)(3) of the Code to close its
taxable year as of the date of the Fund VI Purchase Agreement and to allocate
specifically to the period commencing January 1, 1994 and ending on the date of
the Fund VI Purchase Agreement all items of income, loss, deduction or credit
attributable to such period and further consented to the making by Tri-State of
any similar elections pursuant to applicable state, local or foreign law.
7.2 Tax Indemnity. In the event that it is determined by any tax
authority that Tri-State was for any reason not eligible to be treated as an S
corporation as defined in Section 1361(a) of the Code with respect to any
taxable period prior to the date of the Fund VI Purchase Agreement, then each
of the Executives, upon the request of the Company, Fund VI or Fund VII, will
promptly,
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<PAGE> 17
and in any event within 30 days after the date of such determination, file
amended federal, state and local income tax returns for each year for which such
amendments may be filed and for which a refund will be due to the Executive and
will at the Executive's expense use best efforts to obtain the maximum tax
refund to which the Executive may be entitled as a result of such
determination. Upon obtaining any such refund, each Executive will promptly,
and in any event within 10 days after the date of the Executive's receipt
thereof, contribute that portion of such refund that does not exceed the tax
owed by the Company for the redetermined years, or all of such refund if such
tax exceeds such refund, to the Company in the form of a capital contribution
with respect to such Executive's Stockholder Shares.
Section 8. Holdback Agreement. Each holder of Stockholder Shares agrees
not to effect any public sale or distribution (including sales pursuant to Rule
144 under the Securities Act) of equity securities of the Company, or any
securities convertible into or exchangeable or exercisable for such securities,
during the seven days prior to and the 180-day period beginning on the
effective date of any underwritten Demand Registration or any underwritten
Piggyback Registration (in each case as defined in the Registration Agreement)
in which Stockholder Shares are included (except as part of such underwritten
registration), unless the underwriters managing the registered public offering
otherwise agree.
Section 9. Miscellaneous.
9.1 Remedies. Each holder of Stockholder Shares will have all rights and
remedies set forth in this Agreement and the Company's Certificate of
Incorporation, all rights and remedies which such holders have been granted at
any time under any other agreement or contract and all of the rights which such
holders have under any law. Any Person having any rights under any provision of
this Agreement will be entitled to enforce such rights specifically, without
posting a bond or other security, to recover damages by reason of any breach of
any provision of this Agreement and to exercise all other rights granted by law.
9.2 Consent to Amendments. Except as otherwise provided herein, no
modification, amendment or waiver of any provision of this Agreement will be
effective against the Company or the Stockholders unless such modification,
amendment or waiver is approved in writing by the Company, the holders of a
majority of the Fund VI Underlying Common Stock, the holders of a majority of
the Fund VII Underlying Common Stock and the holders of a majority of the
Stockholders Shares, respectively. The failure of any party to enforce any of
the provisions of this Agreement will in no way be construed as a waiver of
such provisions and will not affect the right of such party thereafter to
enforce each and every provision of this Agreement in accordance with its terms.
9.3 Survival of Representations and Warranties. All representations and
warranties contained herein or made in writing by any party in connection
herewith will survive the execution and delivery of this Agreement, regardless
of any investigation made by any party.
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9.4 Successors and Assigns. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto will bind and inure to the benefit of the
respective successors and assigns of the parties hereto whether so expressed or
not. In addition, and whether or not any express assignment has been made, the
provisions of this Agreement which are for any Stockholder's benefit as a
purchaser or holder of Stockholder Shares are also for the benefit of, and
enforceable by, any subsequent holder of such Stockholders Shares.
9.5 Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision will be ineffective only to
the extent of such prohibition or invalidity, without invalidating the
remainder of this Agreement.
9.6 Counterparts. This Agreement may be executed simultaneously in two or
more counterparts, any one of which need not contain the signatures of more
than one party, but all such counterparts taken together will constitute one
and the same Agreement.
9.7 Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.
9.8 Notices. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Agreement will be in
writing and will be deemed to have been given when delivered personally to the
recipient, one business day after the date when sent to the recipient by
reputable express courier service (charges prepaid) or three business days
after the date when mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and other
communications will be sent to the Company and the Stockholders at the
addresses indicated below:
If to the Company:
SGH Holdings, Inc.
c/o Tri-State Outdoor Media Group, Inc.
3416 Highway 41 South
Tifton, Georgia 31793
Attention: Sheldon Hurst, President
With a copy (which will not constitute notice) to:
St. John & Wayne, L.L.C.
2 Penn Plaza East
Newark, New Jersey 07105
Attention: David C. Freinberg, Esq.
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If to a Stockholder:
To the addresses set forth on the Schedule of
Stockholders attached to this Agreement
or to such other address or to the attention of such other Person as the
recipient party has specified by prior written notice to the sending party.
9.9 No Third-Party Beneficiaries. This Agreement will not confer
any rights or remedies upon any Person than the Company and the Stockholders
and their respective successors and permitted assigns.
9.10 Entire Agreement. This Agreement (including the documents
referred to herein) constitutes the entire agreement among the parties and
supersedes any prior understandings, agreements (including the Existing
Stockholders Agreement) or representations by or among the parties, written or
oral, that may have related in any way to the subject matter hereof.
9.11 Construction. The language used in this Agreement will be
deemed to be the language chosen by the parties to express their mutual intent,
and no rule of strict construction will be applied against any party. Any
reference to any federal, state, local, or foreign statute or law will be deemed
also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The use of the word "including" in this Agreement
means "including without limitation" and is intended by the parties to be by way
of example rather than limitation.
9.12 Incorporation of Exhibits and Schedules. The Exhibits and
Schedules identified in this Agreement are incorporated herein by reference and
made a part hereof.
9.13 GOVERNING LAW. THE CORPORATE LAW OF THE STATE OF DELAWARE WILL
GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF THE COMPANY AND ITS
STOCKHOLDERS. ALL OTHER QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY AND
INTERPRETATION OF THIS AGREEMENT AND THE EXHIBITS AND SCHEDULES HERETO WILL BE
GOVERNED BY THE INTERNAL LAW, AND NOT THE LAW OF CONFLICTS, OF THE STATE OF
ILLINOIS.
9.14 Submission to Jurisdiction. Each of the parties to this
Agreement submits to the jurisdiction of any state or federal court sitting in
Chicago, Illinois, in any action or proceeding arising out of or relating to
this Agreement, agrees that all claims in respect of the action or proceeding
may be heard and determined in any such court, and agrees not to bring any
action or proceeding arising out of or relating to this Agreement in any other
court. Each of the parties to this Agreement waives any defense of inconvenient
forum to be maintenance of any action or proceeding so brought and waives any
bond, surety, or other security that might be required of any other party with
respect thereto. Each party to this Agreement appoints CT Corporation (the
"Process Agent") as its agent to receive on its behalf service of copies of the
summons and complaint and any other
-19-
<PAGE> 20
process that might be served in the action or proceeding. Any party to this
Agreement may make service on any other party by sending or delivering a copy of
the process (a) to the party to be served at the address and in the manner
provided for the giving of notices in Section 9.8 or (b) to the party to be
served in care of the Process Agent at the address and in the manner provided
for the giving of notices in Section 9.8. Nothing in this Section, however, will
affect the right of any party to serve legal process in any other manner
permitted by law. Each party agrees that a final judgment in any action or
proceeding so brought will be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law.
*****
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
on the day and year first above written.
SGH Holdings, Inc.
By: /s/ Sheldon G. Hurst
______________________________
Name: Sheldon G. Hurst
Title: President
MESIROW CAPITAL PARTNERS VI
By Mesirow Financial Services, Inc.
Its General Partner
By /s/ W. P. Sutter
_______________________________
Its Vice President
______________________________
MESIROW CAPITAL PARTNERS VII
By Mesirow Financial Services, Inc.
Its General Partner
By /s/ W. P. Sutter
______________________________
Its Vice President
______________________________
HURST ENTERPRISES, L.P.
/s/ Sheldon G. Hurst
_________________________________
Sheldon G. Hurst
General Partner
-20-
<PAGE> 21
/s/ Sharon Hurst
________________________________
Sharon Hurst
General Partner
/s/ Anthony LaMarca
________________________________
Anthony LaMarca
/s/ William G. McLendon
________________________________
William G. McLendon
/s/ Allard W. Lamm
________________________________
Allard W. Lamm
-21-
<PAGE> 22
SCHEDULE OF STOCKHOLDERS
Issued and Outstanding Shares*
------------------------------
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares Owned Percentage Ownership
- ------------------------ ---------------------- --------------------
<S> <C> <C>
Hurst Enterprises, L.P. 844.072 82.72%
- ------------------------------------------------------------------------------------------
William G. McLendon 110.028 10.78%
- ------------------------------------------------------------------------------------------
Allard W. Lamm 45.9 4.5%
- ------------------------------------------------------------------------------------------
Anthony LaMarca 20.4 2.0%
- ------------------------------------------------------------------------------------------
Total 1,020.4 100%
- ------------------------------------------------------------------------------------------
</TABLE>
- ----------
* Indicates issued and outstanding shares of Common Stock as of the date of
this Agreement without taking into account shares issuable upon the exercise
of the Warrants.
Fully Diluted Shares**
----------------------
<TABLE>
<CAPTION>
Name of Stockholder Number of Shares Owned Percentage Ownership
- ------------------------ ---------------------- --------------------
<S> <C> <C>
Hurst Enterprises, L.P. 722.3849 33.73%
- ------------------------------------------------------------------------------------------
William G. McLendon 180.9176 8.45%
- ------------------------------------------------------------------------------------------
Allard W. Lamm 96.3675 4.5%
- ------------------------------------------------------------------------------------------
Anthony LaMarca 42.83 2.0%
- ------------------------------------------------------------------------------------------
Mesirow Capital Partners VI
Mesirow Capital Partners VII 1.099 51.32%
- ------------------------------------------------------------------------------------------
Total 2,141.5 100%
- ------------------------------------------------------------------------------------------
</TABLE>
- ----------
** Indicates issued and outstanding shares of Common Stock after taking into
account the issuance of shares pursuant to the exercise of the Warrants
(assuming the issuance of maximum number of shares issuable pursuant to the
Warrants) and the consummation of share transfers among the Executives
provided for in certain agreements among the Executives.
-22-
<PAGE> 23
SCHEDULE OF EXECUTIVES
----------------------
Sheldon G. Hurst
William G. McLendon
Allard W. Lamm
Anthony LaMarca
-23-
<PAGE> 1
EXHIBIT 10.7
ANTI-DILUTION AGREEMENT
THIS ANTI-DILUTION AGREEMENT (this "Agreement") is dated as of February
27, 1998, by and among SGH Holdings, Inc., a Delaware corporation (the
"Corporation"), Hurst Enterprises, L.P., a Georgia limited partnership
("Hurst"), William G. McLendon, an individual ("McLendon"), Anthony LaMarca, an
individual ("LaMarca"), and Allard W. Lamm, an individual ("Lamm") (Hurst,
McLendon, LaMarca and Lamm, each a "Shareholder" and collectively, the
"Shareholders").
RECITALS
WHEREAS, the Shareholders are the owners of the common stock, par value
$.0001 per share ("Stock"), of Corporation; and
WHEREAS, the Shareholders have, from time to time, made agreements
providing for dilution protection in connection with the acquisition of shares
of stock owned by a Shareholder which protection has not been memorialized; and
WHEREAS, the Shareholders desire to memorialize the dilution protection
provisions agreed upon by, between and among the Shareholders; and
WHEREAS, the Shareholders agree that any such dilution protection
provisions shall cease, terminate and expire upon execution of this Agreement
except as expressly set forth herein; and
WHEREAS, the Corporation has previously issued the 1994 Warrant (as
defined herein) granting the holder thereof the right to purchase from the
Corporation up to 640 shares of Stock; and
WHEREAS, the Corporation has issued the 1997 Warrant (as defined
herein) granting the holders thereof the right to purchase from the Corporation
up to 459 shares of Stock; and
WHEREAS, the parties furthermore desire to memorialize the rights of
the parties as Shareholders if and to the extent that the 1994 Warrant is
exercised and/or the 1997 Warrant is exercised.
NOW, THEREFORE, and in consideration of the mutual covenants herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto mutually agree
as follows:
1. Confirmation of Issued and Outstanding Stock as of June 12, 1997.
Notwithstanding anything to the contrary contained in this Agreement, any other
agreement between the Corporation and its Shareholders and/or the Stock Ledger
and Minute Book of the Corporation, the parties hereto
<PAGE> 2
agree and confirm that as of June 12, 1997, the following Shareholders owned the
number of shares of Stock set forth opposite their names.
<TABLE>
<CAPTION>
Shareholders Number of Shares Percentage
------------ ---------------- ----------
<S> <C> <C>
Hurst 875 87.5%
McLendon 105 10.5%
LaMarca 20 2.0%
----- -----
Total 1,000 100.0%
</TABLE>
2. Confirmation of the Sale by the Company and Issuance to Lamm of
Shares of Stock from the Corporation. The parties hereto confirm that on and as
of September, 1997, the Corporation issued to Lamm 20.4 shares of Stock of the
Corporation representing at the time of the issuance a 2% interest in the Stock
of the Corporation owned by Lamm which Stock has been subscribed to and fully
paid for by Lamm.
3. Confirmation of Transfer from McLendon and Hurst to LaMarca.
Simultaneously with the sale and issuance by the Corporation of the Shares to
Lamm in Section 2 above, Hurst and McLendon, pursuant to an agreement with
LaMarca relating to dilution protection, confirm the transfer to LaMarca of .4
shares of Stock in order to preserve for LaMarca at such time of transfer, a 2%
interest in the Stock of the Corporation. Said .4 shares of Stock which were
transferred from Hurst and McLendon collectively were transferred individually
as follows:
<TABLE>
<S> <C>
Hurst .328
McLendon .072
----
Total .400
</TABLE>
Subsequent to the transfer by Hurst and McLendon of such .4 shares of
Stock to LaMarca the Shareholders owned the amount of stock set forth opposite
their names.
<TABLE>
<CAPTION>
Shareholders Number of Shares Percentage
------------ ---------------- ----------
<S> <C> <C>
Hurst 874.672 85.72%
McLendon 104.928 10.28%
LaMarca 20.4000 2.00%
Lamm 20.4000 2.00%
---------- ------
Total 1,020.4000 100.00%
</TABLE>
4. Confirmation of Transfer from Hurst to Lamm. Subsequent to the sale
and issuance by the Corporation of the shares of Stock to Lamm in Section 2
above, and the transfer by Hurst and McLendon to LaMarca of the shares of Stock
set forth in Section 3 above, Hurst hereby confirms
2
<PAGE> 3
the transfer and sale to Lamm of 25.5 Shares after which transfer Lamm owns 4.5%
of the issued and outstanding shares of Stock of the Corporation. Subsequent to
the transfer by Hurst of such 25.5 shares of Stock to Lamm, the Shareholders own
the amount of Stock set forth opposite their names.
<TABLE>
<CAPTION>
Shareholders Number of Shares Percentage
------------ ---------------- ----------
<S> <C> <C>
Hurst 849.172 83.22%
McLendon 104.928 10.28%
LaMarca 20.400 2.00%
Lamm 45.900 4.50%
-------- ------
Total 1,020.40 100.00%
</TABLE>
5. Confirmation of the Transfer from Hurst to McLendon. Subsequent to
the sale and issuance by the Corporation of the shares of Stock to Lamm
described in Section 2 above, the transfer by Hurst and McLendon to LaMarca of
the shares of Stock set forth in Section 3 above and the transfer by Hurst to
Lamm of the Shares set forth in Section 4 above, Hurst confirms the transfer and
sale to McLendon of 5.1 shares of Stock representing .5% of the issued and
outstanding Shares of the Corporation. Subsequent to the transfer by Hurst to
McLendon of such 5.1 shares of Stock (and as of the date hereof), the
Shareholders own the amount of Stock set forth opposite their names.
<TABLE>
<CAPTION>
Shareholders Number of Shares Percentage
------------ ---------------- ----------
<S> <C> <C>
Hurst 844.072 82.72%
McLendon 110.028 10.78%
LaMarca 20.400 2.00%
Lamm 45.900 4.50%
-------- ------
Total 1,020.40 100.00%
</TABLE>
6. Transfer From Hurst to McLendon and LaMarca Subsequent to the
Exercise of the 1994 Warrant. In the event that the holder of the 1994 Warrant
exercises its warrant to purchase 640 shares of Stock (the "94 Shares"), then
Hurst, pursuant to an agreement with McLendon and LaMarca relating to dilution
protection, shall transfer 67.2 shares of Stock to McLendon and 12.4 shares of
Stock of the Corporation to LaMarca. Subsequent to such exercise and transfer
the Shareholders shall own the amount of Stock set forth opposite their name.
<TABLE>
<CAPTION>
Shareholder Number of Shares Percentage
----------- ---------------- ----------
<S> <C> <C>
Hurst 764.4720 44.04%
McLendon 177.228 10.67%
LaMarca 32.800 1.97%
Lamm 45.900 2.76%
94 Shares 640.000 38.55%
--------- ------
</TABLE>
3
<PAGE> 4
<TABLE>
<S> <C> <C>
Total 1,660.400 100.00%
</TABLE>
6. Issuance by the Corporation of Shares of Stock to Lamm Upon Exercise
of the 1994 Warrant and Exercise of the 1997 Warrant. In the event that the
holder of the 1994 Warrant exercises its warrant to purchase the 94 Shares and
the holders of the 1997 Warrant exercise their warrants to purchase 459 shares
of Stock (the "97 Shares"), then the Corporation pursuant to an agreement with
Lamm shall issue to Lamm 22.1 shares of Stock in order to preserve for Lamm the
2% interest in the Stock purchased by him pursuant to the transaction set forth
in Section 2 of this Agreement. Subsequent to the issuance by the Corporation to
Lamm of such 22.1 shares of Stock and assuming the complete exercise and
issuance of the 94 Shares and the 97 Shares, the Shareholders shall own the
amount of Stock set forth opposite their respective names.
<TABLE>
<CAPTION>
Shareholder Number of Shares Percentage
----------- ---------------- ----------
<S> <C> <C>
94 Shares 640.0000 29.88%
97 Shares 459.0000 21.43%
Lamm 68.0000 3.17%
LaMarca 32.8000 1.53%
McLendon 177.2280 8.27%
Hurst 764.4720 35.69%
---------- ------
Total 2,141.5000 100.00%
</TABLE>
7. Transfer from Hurst to Lamm Subsequent to the Exercise of the 1994
Warrant and the 1997 Warrant. In the event that the holder of the 1994 Warrant
exercises its warrant to purchase the 94 Shares and the holders of the 1997
Warrant exercise their warrant to purchase the 97 Shares, then Hurst, pursuant
to an agreement with Lamm relating to dilution protection, shall transfer
28.3675 Shares of the Corporation to Lamm in order to preserve the 2.5 % in the
Stock previously transferred by Hurst to Lamm pursuant to the provisions of
Section 4 of this Agreement. Subsequent to the transfer by Hurst to Lamm of such
28.3675 shares of Stock, the Shareholders shall own the amount set forth
opposite their respective names.
<TABLE>
<CAPTION>
Shareholders Number of Shares Percentage
------------ ---------------- ----------
<S> <C> <C>
Hurst 736.1045 34.37%
McLendon 177.2280 8.27%
LaMarca 32.8000 1.53%
94 Shares 640.0000 29.88%
97 Shares 459.0000 21.43%
Lamm 96.3675 4.50%
---------- ------
Total 2,141.5000 100.00%
</TABLE>
4
<PAGE> 5
8. Transfer from Hurst to McLendon Subsequent to the Exercise of the
1994 Warrant and the 1997 Warrant. In the event that the holder of the 1994
Warrant exercises its warrant to purchase the 94 Shares and the holders of the
1997 Warrant exercise their warrants to purchase the 97 Shares then Hurst,
pursuant to an agreement with McLendon relating to dilution protection, shall
transfer 5.495 shares of Stock in the Corporation to McLendon in order to
preserve the .5% interest in the Stock sold by Hurst to McLendon pursuant to
Section 5 hereof. Subsequent to the transfer by Hurst to McLendon of such 5.495
shares of Stock, the Stockholders shall own the amount of Stock set forth
opposite their respective names.
<TABLE>
<CAPTION>
Shareholders Number of Shares Percentage
------------ ---------------- ----------
<S> <C> <C>
Hurst 730.6095 34.12%
McLendon 182.7230 8.53%
LaMarca 32.8000 1.53%
94 Shares 640.0000 29.89%
97 Shares 459.0000 21.43%
Lamm 96.3675 4.50%
---------- ------
Total 2,141.5000 100.00%
</TABLE>
9. Transfer from Hurst and McLendon to LaMarca Subsequent to the
Exercise of the 1994 Warrant and the 1997 Warrant. In the event that the holder
of the 1994 Warrant exercises its warrant to purchase the 94 Shares and the
holders of the 1997 Warrant exercise their warrants to purchase the 97 Shares,
then Hurst and McLendon, pursuant to an agreement with LaMarca relating to
dilution protection, shall transfer to LaMarca 10.03 shares of Stock. Said 10.03
shares of Stock shall be transferred from respective parties as follows: Hurst
shall transfer 8.2246 shares of Stock and McLendon shall transfer 1.8054 shares
of Stock.
Subsequent to the transfer by Hurst and McLendon of such 10.03 Shares
to LaMarca, the Shareholders shall own the amount of Stock set forth opposite
their respective names.
<TABLE>
<CAPTION>
Shareholders Number of Shares Percentage
------------ ---------------- ----------
<S> <C> <C>
Hurst 722.3849 33.73%
McLendon 180.9176 8.45%
LaMarca 42.8300 2.00%
94 Shares 640.0000 29.89%
97 Shares 459.0000 21.43%
Lamm 96.3675 4.50%
---------- ------
Total 2,141.5000 100.00%
</TABLE>
10. Additional Shares Purchased by Lamm from the Company. The
Corporation has granted to Lamm the option to purchase certain additional shares
of Stock (the "New Issue Shares") pursuant to an Incentive Stock Option
Agreement (the "Option Agreement") to Lamm which, upon
5
<PAGE> 6
issuance, will vest in Lamm up to an additional 2% of the shares of Stock. In
the event that the sale by the Corporation of such shares of Stock to Lamm
occurs, and if at such time the 1994 Warrant and/or 1997 Warrant has not been
exercised, then the Corporation, pursuant to an agreement with Lamm, shall issue
to Lamm additional shares of Stock (the "Additional Shares"), as set forth in
the Option Agreement.
11. Transfer from Hurst and McLendon to LaMarca Subsequent to the
Purchase of New Issue Shares by Lamm from the Corporation and the Issuance of
Additional Shares to Lamm by the Corporation. In the event that the Corporation
sells or issues additional shares of Stock of the Corporation to Lamm as New
Issue Shares and/or Additional Shares in accordance with the provisions of
Section 10, then in that event, Hurst and McLendon, pursuant to an agreement
with LaMarca relating to dilution protection, shall transfer to LaMarca so many
shares of Stock (the "LaMarca Shares") in order for LaMarca to maintain his 2%
interest in the Stock subsequent to the issuance by the Corporation of the New
Issue Shares and/or the Additional Shares. The number of LaMarca Shares required
to be transferred by Hurst to LaMarca shall be the product of the LaMarca Shares
multiplied by .82%. The number of LaMarca Shares required to be transferred by
McLendon to LaMarca shall be the product of the LaMarca Shares multiplied by
.18%.
Subsequent to the issuance by the Corporation of the New Issue Shares and the
Additional Shares and assuming the full exercise of 1994 Warrant and the 1997
Warrant and subsequent to the transfer obligation of all shares of Stock set
forth herein the Shareholders shall own the amount of Stock set apart their
respective names.
<TABLE>
<CAPTION>
Shareholders Number of Shares Percentage
------------ ---------------- ----------
<S> <C> <C>
Hurst 721.6339 32.99%
McLendon 180.7526 8.26%
LaMarca 43.7460 2.00%
94 Shares 640.0000 29.25%
97 Shares 459.0000 20.98%
Lamm 142.1675 6.50%
---------- ------
Total 2,187.3000 100.00%
</TABLE>
12. Partial Exercise. In the event of a partial exercise of the 1994
Warrant or the 1997 Warrant, any shares of Stock to be issued pursuant to any
section set forth herein upon the exercise of the respective Warrant in full
shall be reduced by multiplying the shares of Stock to be issued upon complete
exercise of the respective Warrant by a fraction, (a) the numerator of such, in
the case of the 1994 Warrant, will be the number of shares of Stock issued
pursuant to the exercise of the 1994 Warrant and the denominator of which shall
be 640; and (b) the numerator of such, in the case
6
<PAGE> 7
of the 1997 Warrant, will be the number of shares of Stock issued pursuant to
the exercise of the 1997 Warrant and the denominator of which shall be 459. It
is specifically the intent of the parties that after partial or full exercise of
the 1994 Warrant and/or the 1997 Warrant, the shares of Stock to be transferred
hereunder to Lamm by the Corporation are the amount necessary to preserve the 2%
interest purchased by Lamm from the Corporation as set forth in Section 2 hereof
after the issuance of the 94 Shares and/or 97 Shares; and the shares of Stock to
be transferred by Hurst to Lamm are the amount necessary to preserve the 2.5%
interest purchased by Lamm from Hurst as set forth in Section 4 hereof after the
issuance of the 94 Shares and/or 97 Shares; and the shares of Stock to be
transferred hereunder to Lamm by the Corporation are the amount necessary to
preserve the interest (up to 2%) purchased by Lamm from the Corporation as set
forth in Section 10 hereof after issuance of the 94 Shares and/or 97 Shares; and
the shares of Stock to be transferred by Hurst to McLendon are the amount
necessary to preserve the .5% interest purchased by McLendon from Hurst as set
forth in Section 5 hereof after the issuance of the 94 Shares and/or 97 Shares;
and the shares of Stock to be transferred hereunder by Hurst and McLendon to
preserve the 2% interest owned by LaMarca as set forth in Sections 3, 6, 9 and
11 hereof after the issuance of the 94 Shares and/or 97 Shares.
13. No Further Agreements. The parties hereto furthermore agree that no
party is entitled to, has bargained for and will receive any dilution protection
subsequent to the execution of this Agreement, except as expressly set forth
herein, including without limitation, any protection with regard to the issuance
of shares upon the exercise of any warrants granted in connection with certain
Bridge Notes and/or Exchange Notes or Warrants issued in connection with any
further equity or debt offerings.
14. Cancellation of Other Agreements. Any agreements relating to any of
the parties hereto in connection with to the issuance of stock, dilution
thereof, percentage maintenance agreements or any other rights relative to
issuance or entitlement to stock of the Corporation (including, without
limitation, that certain Restricted Stock Grant Agreement dated February, 1995
among the Corporation, Hurst and McLendon) are hereby rescinded in toto and this
Agreement sets forth the full understanding relative to the rights of the
Shareholders hereunder.
15. Definitions:
(a) 1994 Warrant means, the Stock Purchase Warrant dated as of
October 3, 1994 issued by the Corporation to Mesirow Capital Partners VI
pursuant to the Note and Warrant Purchase Agreement dated as of October 3, 1994
between the Corporation and Mesirow Capital Partners VI.
(b) 1997 Warrant means, the Stock Purchase Warrant dated June
12, 1997 issued by the Corporation to Mesirow Capital Partners VII (and
subsequent partially assigned to Mesirow Capital Partners VI) pursuant to the
Note and Warrant Purchase Agreement dated June 12, 1997 between the Corporation
and Mesirow Capital Partners VII, as amended (the "Warrant Purchase Agreement")
7
<PAGE> 8
(c) All other capitalized terms used herein, if not expressly
defined herein shall have the meanings ascribed to them in either the Warrant
Purchase Agreement or a certain Second Amended and Restated Stockholders
Agreement dated as of February 27, 1998 between and among the Corporation and
each of certain stockholders listed on the Schedule of Stockholders attached to
such Agreement as such Agreement has been amended from time to time.
16. Miscellaneous.
(a) Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto, their respective
successors, personal representatives, heirs and assigns.
(b) Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
(c) Descriptive Headings. The headings of the sections of this
Agreement are for convenience only and shall not constitute a part hereof.
(d) GOVERNING LAW - DELAWARE. IT IS THE INTENTION OF THE
PARTIES HERETO THAT THIS AGREEMENT AND THE RIGHTS, OBLIGATIONS AND REMEDIES OF
THE PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. WHENEVER POSSIBLE EACH
PROVISION OF THIS AGREEMENT SHALL BE INTERPRETED IN SUCH MANNER, AS TO BE
EFFECTIVE AND VALID UNDER DELAWARE LAW, BUT IF ANY PROVISION OF THIS AGREEMENT
SHALL BE PROHIBITED BY OR INVALID UNDER SUCH APPLICABLE LAW, SAID PROVISION
SHALL BE INEFFECTIVE TO THE EXTENT OF THE PROHIBITION OR INVALIDITY, WITHOUT
INVALIDATING THE REMAINDER OF THE PROVISION OR THE REMAINING PROVISIONS OF THIS
AGREEMENT.
8
<PAGE> 9
(e) Entire Agreement. This Agreement and other documents
specifically referred to herein which form a part hereof, contain the entire
understanding of the parties hereto in respect of the subject matter contained
herein. There are no restrictions, promises, warranties, covenants or
undertakings, other than those expressly set forth herein.
IN WITNESS WHEREOF, the parties have duly executed and
delivered this Agreement as of the 27th day of February, 1998.
SGH HOLDINGS, INC.
By: /s/ Sheldon G. Hurst
-----------------------------------
Sheldon G. Hurst, President
HURST ENTERPRISES, L.P.
By: /s/ Sheldon G. Hurst
-----------------------------------
Sheldon Hurst, General Partner
By: /s/ Sharon Hurst
-----------------------------------
Sharon Hurst, General Partner
/s/ William G. McLendon
--------------------------------------
William G. McLendon
/s/ Anthony LaMarca
--------------------------------------
Anthony LaMarca
/s/ Allard W. Lamm
--------------------------------------
Allard W. Lamm
9
<PAGE> 1
EXHIBIT 10.8
CREDIT AGREEMENT
This Credit Agreement (as it may be amended or modified and in effect
from time to time, the "Agreement"), dated as of May 20, 1998, is between
Tri-State Outdoor Media Group, Inc., a Kansas corporation (together with its
successors and assigns, the "Borrower"), and The First National Bank of Chicago
(together with its successors and assigns, the "Lender"). The parties hereto
agree as follows:
ARTICLE I -- DEFINITIONS
As used in this Agreement:
"Alternate Base Rate" means, for any day, a rate of interest per annum
equal to the higher of (i) the corporate base rate of interest announced by the
Lender from time to time, changing when and as said corporate base rate changes
and (ii) the sum of the federal funds effective rate (as published by the
Federal Reserve Bank of New York) for such day plus 1/2% per annum.
"Alternate Base Rate Loan" means a Loan that bears interest at the
Alternate Base Rate.
"Applications" is defined in Section 4.1.
"Borrowing Date" means a date on which a Loan is made hereunder.
"Borrowing Notice" is defined in Section 2.5.
"Business Day" means (i) with respect to any borrowing, payment or rate
selection of Eurodollar Loans, a day (other than a Saturday or Sunday) on which
banks generally are open in Chicago and New York for the conduct of
substantially all of their commercial lending activities and on which dealings
in United States dollars are carried on in the London interbank market and (ii)
for all other purposes, a day (other than a Saturday or Sunday) on which banks
generally are open in Chicago for the conduct of substantially all of their
commercial lending activities.
"Code" means the Internal Revenue Code of 1986, as amended, reformed or
otherwise modified from time to time.
"Commitment" means the obligation of the Lender to make Loans not
exceeding the amount set forth opposite its signature below or as set forth in
any notice of assignment relating to any assignment that has become effective
pursuant to Section 11.3, as such amount may be modified from time to time
pursuant to the terms hereof.
"Controlled Group" means all members of a controlled group of
corporations or other business entities and all trades or businesses (whether or
not incorporated) under common control which, together with the Borrower or any
of its Subsidiaries, are treated as a single employer under Section 414 of the
Code.
"Conversion/Continuation Notice" is defined in Section 2.6.
"Default" means an event described in Article VII.
<PAGE> 2
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any rule or regulation issued thereunder.
"Eurodollar Base Rate" means, with respect to a Eurodollar Loan for the
relevant Interest Period, the rate at which the Lender offers to place deposits
in U.S. dollars with first-class banks in the London interbank market at
approximately 11:00 a.m. (London time) two Business Days prior to the first day
of such Interest Period, in the approximate amount of the Lender's portion of
the relevant Eurodollar Loan and having a maturity approximately equal to such
Interest Period.
"Eurodollar Loan" means a Loan that bears interest at a Eurodollar
Rate.
"Eurodollar Rate" means, with respect to a Eurodollar Loan for the
relevant Interest Period, the sum of (i) the quotient of (a) the Eurodollar Base
Rate applicable to such Interest Period, divided by (b) one minus the Reserve
Requirement (expressed as a decimal) applicable to such Interest Period, plus
(ii) 3/8% per annum. The Eurodollar Rate shall be rounded to the next higher
multiple of 1/16 of 1% if the rate is not such a multiple.
"Existing Credit Agreement" means that certain Second Amended and
Restated Credit Agreement dated as of February 27, 1998, as amended, among the
Borrower, the lenders party thereto and The First National Bank of Chicago, as
Agent.
"Existing L/Cs" means, collectively, the Irrevocable Standby Letters of
Credit issued by the Lender for the account of the Borrower pursuant to the
Existing Credit Agreement and the Applications, which are more specifically
described in Annex I hereto, as the same may be amended, modified, renewed or
extended from time to time.
"Indebtedness" of a Person means such Person's (i) obligations for
borrowed money, (ii) obligations representing the deferred purchase price of
Property or services (other than accounts payable arising in the ordinary course
of such Person's business payable on terms customary in the trade), (iii)
obligations, whether or not assumed, secured by Liens or payable out of the
proceeds or production from property now or hereafter owned or acquired by such
Person, (iv) obligations that are evidenced by notes, acceptances, or other
instruments, (v) obligations of such Person to purchase securities or other
property arising out of or in connection with the sale of the same or
substantially similar securities or property, (vi) capitalized lease
obligations, (vii) net liabilities under interest rate swap, exchange or cap
agreements, (viii) contingent obligations and (ix) any other obligation for
borrowed money or other financial accommodation which in accordance with
generally accepted accounting principles would be shown as a liability on the
consolidated balance sheet of such Person.
"Interest Period" means, with respect to a Eurodollar Loan, a period of
one, two, three or six months commencing on a Business Day selected by the
Borrower pursuant to this Agreement. Such Interest Period shall end on the day
that corresponds numerically to such date one, two, three or six months
thereafter, provided, however, that if there is no such numerically
corresponding day in such next, second, third or sixth succeeding month, such
Interest Period shall end on the last Business Day of such next, second, third
or sixth succeeding month. If an Interest Period would otherwise end on a day
which is not a Business Day, such Interest Period shall end on the next
succeeding Business Day, provided, however, that if said next succeeding
Business Day falls in a new calendar month, such Interest Period shall end on
the immediately preceding Business Day.
"L/C Obligations" means, at any date of determination, the sum of (i)
the aggregate undrawn amount of all Existing L/Cs outstanding as at such date of
determination, (ii) all amounts paid and disbursed by the Lender
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under the Existing L/Cs (or either thereof) that have not been reimbursed (with
the proceeds of a Loan or otherwise) by the Borrower and (iii) all unpaid fees,
expenses, reimbursements, indemnities and other obligations of the Borrower to
the Lender arising under or in connection with the Existing L/Cs and the
Applications.
"Lending Installation" means any office, branch, subsidiary or
affiliate of the Lender.
"Lien" means any lien (statutory or other), mortgage, pledge,
hypothecation, assignment, deposit arrangement, encumbrance or preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever (including, without limitation, the interest of a vendor or
lessor under any conditional sale, capitalized lease or other title retention
agreement).
"Loan" means a borrowing hereunder (or a conversion or continuation
thereof).
"Loan Documents" means this Agreement, the Note, the Pledge Agreement
and the other documents and agreements contemplated hereby and executed by the
Borrower in favor of the Lender.
"Material Adverse Effect" means a material adverse effect on (i) the
business, Property, condition (financial or otherwise), results of operations,
or prospects of the Borrower and its Subsidiaries taken as a whole, (ii) the
ability of the Borrower to perform its obligations under the Loan Documents, or
(iii) the validity or enforceability of any of the Loan Documents or the rights
or remedies of the Lender thereunder.
"Note" is defined in Section 2.10.
"Obligations" means all unpaid principal of and accrued and unpaid
interest on the Loans, all accrued and unpaid fees and all expenses,
reimbursements, indemnities and other obligations of the Borrower to the Lender
or any indemnified party arising under the Loan Documents.
"Person" means any natural person, corporation, firm, joint venture,
partnership, association, limited liability company, enterprise, trust or other
entity or organization, or any government or political subdivision or any
agency, department or instrumentality thereof.
"Plan" means an employee pension benefit plan which is covered by Title
IV of ERISA or subject to the minimum funding standards under Section 412 of the
Code as to which the Borrower or any member of the Controlled Group may have any
liability.
"Pledge Agreement" means that certain Pledge Agreement dated of even
date herewith, in substantially the form of Annex II hereto, duly executed and
delivered to the Lender by the Borrower, as the same may be amended or modified
and in effect from time to time.
"Property" of a Person means any and all property, whether real,
personal, tangible, intangible, or mixed, of such Person, or other assets owned,
leased or operated by such Person.
"Reserve Requirement" means, with respect to an Interest Period, the
maximum aggregate reserve requirement (including all basic, supplemental,
marginal and other reserves) which is imposed under Regulation D of the Board of
Governors of the Federal Reserve System on Eurocurrency liabilities.
"Subsidiary" of a Person means (i) any corporation more than 50% of the
outstanding securities having
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ordinary voting power of which shall at the time be owned or controlled,
directly or indirectly, by such Person or by one or more of its Subsidiaries or
by such Person and one or more of its Subsidiaries, or (ii) any partnership,
limited liability company, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" shall mean a
Subsidiary of the Borrower.
"Termination Date" means May 20, 2000 or any earlier date on which the
Commitment is reduced to zero or otherwise terminated pursuant to the terms
hereof.
"Type" means, with respect to any Loan, its nature as an Alternate Base
Rate Loan or a Eurodollar Loan.
"Unmatured Default" means an event which but for the lapse of time or
the giving of notice, or both, would constitute a Default.
The foregoing definitions shall be equally applicable to both the
singular and plural forms of the defined terms.
ARTICLE II -- THE CREDITS
2.1. Commitment; Reduction of Commitment. From and including the date
of this Agreement and prior to the Termination Date, the Lender agrees, on the
terms and conditions set forth in this Agreement, to make Loans to the Borrower
from time to time in amounts which, when added to the amount of the then
outstanding L/C Obligations (after giving effect to any payment thereof made
with the proceeds of such Loans), shall not exceed, in the aggregate at any one
time outstanding, the Commitment. The Borrower may permanently reduce the
Commitment, in integral multiples of $100,000, upon at least five Business Days'
written notice to the Lender; provided, however, that the amount of the
Commitment may not be reduced below the aggregate principal amount of the
outstanding Loans.
2.2. Types of Loans; Minimum Amount; Lending Installations. Subject to
the terms of this Agreement, the Borrower may borrow, repay and reborrow at any
time prior to the Termination Date. The Loans may be Alternate Base Rate Loans
or Eurodollar Loans, or a combination thereof, selected by the Borrower in
accordance with Sections 2.5 and 2.6. Each Loan shall be in the minimum amount
of $100,000. The Lender may book the Loans at any Lending Installation, as
selected by the Lender. All terms of the Loan Documents shall apply to and may
be enforced by or on behalf of any such Lending Installation.
2.3. Principal Payments. The Borrower may from time to time pay,
without penalty or premium, in a minimum aggregate amount of $100,000, any
portion of the outstanding Alternate Base Rate Loans upon two Business Days'
prior notice to the Lender. The Borrower may from time to time pay, without
penalty or premium, all outstanding Eurodollar Loans, or, in a minimum aggregate
amount of $100,000 or any integral multiple thereof, any portion of the
outstanding Eurodollar Loans upon three Business Days' prior notice to the
Lender; provided, however, that if any such payment occurs, whether because of
acceleration, prepayment or otherwise, or a Eurodollar Loan is not made on the
date specified by the Borrower for any reason other than default by the Lender,
the Borrower will indemnify the Lender for any loss or cost incurred by it
resulting therefrom, including, without limitation, any loss or cost in
liquidating or employing deposits acquired to fund or maintain the Eurodollar
Loan. Any outstanding Loans and all other unpaid Obligations shall be paid in
full
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by the Borrower, and the Commitment to lend hereunder shall expire, on the
Termination Date.
2.4. Fees. The Borrower agrees to pay to the Lender a commitment fee
of 1/8% per annum on the daily unborrowed portion of the Commitment (with the
outstanding L/C Obligations being deemed usage of the Commitment) from the date
hereof to and including the Termination Date, payable on the last day of each
March, June, September and December hereafter and on the Termination Date. All
accrued fees shall be payable on the effective date of any termination of the
obligations of the Lender to make Loans hereunder.
2.5. Method of Selecting Types and Interest Periods for New Loans.
The Borrower shall select the Type of Loan and the Interest Period, if any,
applicable to each Loan from time to time. The Borrower shall give the Lender
irrevocable notice (a "Borrowing Notice") not later than 10:00 a.m. (Chicago
time) at least one Business Day before the Borrowing Date of each Alternate Base
Rate Loan and three Business Days before the Borrowing Date for each Eurodollar
Loan, specifying for each Loan: (i) the Borrowing Date, which shall be a
Business Day, (ii) the aggregate amount, (iii) the Type, and (iv) the Interest
Period, if any, applicable thereto. The Lender will make the funds available to
the Borrower at the Lender's address specified pursuant to Article XII.
2.6. Conversion and Continuation of Outstanding Loans. Alternate Base
Rate Loans shall continue as such unless and until converted into Eurodollar
Loans or are repaid. Each Eurodollar Loan shall continue until, and may not be
converted prior to, the end of the then applicable Interest Period therefor, at
which time such Eurodollar Loan shall be automatically converted into an
Alternate Base Rate Loan unless such Eurodollar Loan was repaid or the Borrower
shall have given the Lender irrevocable notice (a "Conversion/Continuation
Notice") requesting that, at the end of such Interest Period, such Eurodollar
Loan continue as such for the same or another Interest Period. The Borrower
shall give the Lender a Conversion/Continuation Notice prior to the date of the
requested conversion or continuation, but not later than the times identified in
Section 2.5 for Borrowing Notices, specifying for each Loan being converted or
continued: (i) the requested date which shall be a Business Day; (ii) the
aggregate amount and Type; and (iii) the amount and Type(s) of Loan(s) into
which such Loan is to be converted or continued and the duration of the Interest
Period, if any, applicable thereto.
2.7. Changes in Interest Rate. Each Alternate Base Rate Loan shall
bear interest, at the Alternate Base Rate, on the outstanding principal amount
thereof, for each day from and including the date such Loan is made or is
automatically converted from a Eurodollar Loan pursuant to Section 2.6 to but
excluding the date it is paid or is converted into a Eurodollar Loan pursuant to
Section 2.6. Changes in the Alternate Base Rate will take effect simultaneously
with each change in the Alternate Base Rate. Each Eurodollar Loan shall bear
interest on the outstanding principal amount thereof for each day during the
Interest Period applicable thereto from and including the first day of such
Interest Period to (but not including) the last day of such Interest Period at
the Eurodollar Rate applicable thereto. No Interest Period may end after the
Termination Date.
2.8. Rates Applicable After Default. Notwithstanding anything to the
contrary contained in Section 2.5 or 2.6, during the continuance of a Default or
Unmatured Default the Lender may, at its option, by notice to the Borrower,
declare that no Loan may be made as, converted into or continued as a Eurodollar
Loan. During the continuance of a Default, the Lender may, at its option, by
notice to the Borrower, declare that (i) each Eurodollar Loan shall bear
interest for the remainder of the applicable Interest Period at the rate
otherwise applicable to such Interest Period plus 2% per annum, and (ii) each
Alternate Base Rate Loan shall bear interest at a rate per annum equal to the
Alternate Base Rate in effect from time to time plus 2% per annum, provided
that, during the continuance of a Default under Section 7.2, 7.6 or 7.7, the
interest rates set forth in clauses (i) and (ii) above shall be applicable to
all Loans without any election or action on the part of the Lender.
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2.9. Method of Payment. All payments of the Obligations hereunder shall
be made, without setoff, deduction, or counterclaim, in immediately available
funds to the Lender at the Lender's address, by noon (local time) on the date
when due. The Lender is hereby authorized to charge the account of the Borrower
maintained with the Lender for each payment of principal, interest and fees as
it becomes due hereunder.
2.10. Noteless Agreement; Evidence of Indebtedness. The Lender shall
maintain in accordance with its usual practice an account or accounts in which
it will record (a) the amount of each Loan made hereunder, the Type thereof and
the Interest Period with respect thereto, (b) the amount of any principal or
interest due and payable or to become due and payable from the Borrower to the
Lender hereunder and (c) the amount of any sum received by the Lender hereunder
from the Borrower. The entries maintained in such accounts shall be prima facie
evidence of the existence and amounts of the Obligations therein recorded;
provided, however, that the failure of the Lender to maintain such accounts or
any error therein shall not in any manner affect the obligation of the Borrower
to repay the Obligations in accordance with their terms. The Lender may request
that the Loans be evidenced by a promissory note (a "Note"). In such event, the
Borrower shall prepare, execute and deliver to the Lender a Note payable to the
order of the Lender in a form supplied by the Lender. Thereafter, the Loans
evidenced by such Note and interest thereon shall at all times (including after
any assignment pursuant to Section 11.3) be represented by one or more Notes
payable to the order of the payee named therein or any assignee pursuant to
Section 11.3, except to the extent that the Lender or any such assignee
subsequently returns any such Note for cancellation and requests that such Loans
once again be evidenced as described above.
2.11. Telephonic Notices. The Borrower hereby authorizes the Lender to
extend, convert or continue Loans, effect selections of Types of Loans and to
transfer funds based on telephonic notices made by any person or persons the
Lender in good faith believes to be acting on behalf of the Borrower. If the
Borrower's records differ in any material respect from the action taken by the
Lender, the records of the Lender shall govern absent manifest error.
2.12. Interest Payment Dates; Interest and Fee Basis. Interest accrued
on each Alternate Base Rate Loan shall be payable on the last day of each March,
June, September and December, commencing with the first such date to occur after
the date hereof, on any date on which the Alternate Base Rate Loan is prepaid
due to acceleration or otherwise, and at maturity. Interest accrued on each
Eurodollar Loan shall be payable on the last day of its applicable Interest
Period, on any date on which the Eurodollar Loan is prepaid, whether by
acceleration or otherwise, and at maturity. Interest accrued on each Eurodollar
Loan having an Interest Period longer than three months shall also be payable on
the last day of each three-month interval during such Interest Period. Interest
and commitment fees shall be calculated for actual days elapsed on the basis of
a 360-day year. Interest shall be payable for the day a Loan is made but not for
the day of any payment if payment is received prior to noon (local time) at the
place of payment. If any payment of principal of or interest on a Loan shall
become due on a day which is not a Business Day, such payment shall be made on
the next succeeding Business Day and, in the case of a principal payment, such
extension of time shall be included in computing interest in connection with
such payment.
ARTICLE III -- CHANGE IN CIRCUMSTANCES
The Borrower agrees to pay to the Lender such amounts as will
compensate the Lender for any increase in the cost to the Lender of making or
maintaining any Loan hereunder or of maintaining the Commitment to make Loans
hereunder, by reason of a change in any reserve (except Reserve Requirements),
tax, capital guidelines, special deposit, or similar requirement with respect to
assets of, deposits with or for the account of,
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or credit extended by, or commitments extended by, the Lender which are imposed
on, or deemed applicable by, the Lender, under any law, treaty, rule, regulation
(including, without limitation, Regulation D of the Board of Governors of the
Federal Reserve System), any interpretation thereof by any governmental, fiscal,
monetary or other authority charged with the administration thereof or having
jurisdiction over such Loan or the Lender, or any requirement imposed by any
such authority, whether or not having the force of law. Such additional amounts
shall be payable on demand. The Lender may suspend the availability of any Type
of Eurodollar Loan if maintenance of such Loan at a suitable Lending
Installation becomes illegal or if deposits matching such Loan are unavailable
to the Lender or if the Eurodollar Rate fails to reflect the cost to the Lender
of making or maintaining such Loan.
ARTICLE IV -- CONDITIONS PRECEDENT
4.1. Initial Loan. The Lender shall not be required to make the
initial Loan hereunder unless the Borrower has furnished to the Lender the
following: (i) a Note payable to the Lender, if so requested by the Lender; (ii)
the Pledge Agreement, together with all Pledged Instruments (as defined therein)
(which Pledged Instruments shall have a fair market value of not less than
$3,100,000); (iii) evidence satisfactory to the Lender that the Existing Credit
Agreement shall have been terminated and that all indebtedness, obligations and
liabilities arising thereunder or in connection therewith (other than in respect
of the Existing L/Cs) shall have been paid in full; (iv) ratification, in form
and substance satisfactory to the Lender, of each Application for Irrevocable
Standby Letter of Credit and Security and Reimbursement Agreement for
Irrevocable Standby Letter of Credit (as the same may be amended or modified
from time to time, collectively the "Applications") executed and delivered by
the Borrower in connection with the Existing L/Cs; (v) payment in full of an
arrangement fee in the amount of $5,000; and (vi) such opinions of counsel,
certificates of incumbency, resolutions, by-laws and articles of incorporation
and such other closing documents as the Lender has requested.
4.2. Each Loan. The Lender shall not be required to make any Loan
(other than a Loan that, after giving effect thereto and to the application of
the proceeds thereof, does not increase the aggregate amount of outstanding
Loans), unless on the applicable Borrowing Date: (i) there exists no Default or
Unmatured Default; (ii) the representations and warranties contained in Article
V are true and correct as of such Borrowing Date except to the extent any such
representation or warranty is stated to relate solely to an earlier date, in
which case such representation or warranty shall be true and correct on and as
of such earlier date; and (iii) all legal matters incident to the making of such
Loan shall be satisfactory to the Lender and its counsel. Each Borrowing Notice
with respect to each such Loan shall constitute a representation and warranty by
the Borrower that the conditions contained in Sections 4.2(i) and (ii) have been
satisfied. The Lender may require a duly completed compliance certificate as a
condition to making a Loan.
ARTICLE V -- REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants to the Lender that:
5.1. Corporate Existence and Standing. Each of the Borrower and its
Subsidiaries is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite authority to conduct its business in each jurisdiction in which its
business is conducted.
5.2. Authorization and Validity. The Borrower has the power and
authority and legal right to execute and deliver the Loan Documents and to
perform its obligations thereunder. The execution and delivery
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by the Borrower of the Loan Documents and the performance of its obligations
thereunder have been duly authorized by proper corporate proceedings, and the
Loan Documents constitute legal, valid and binding obligations of the Borrower
enforceable against the Borrower in accordance with their terms, except as
enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors' rights generally.
5.3. No Conflict; Government Consent. Neither the execution and
delivery by the Borrower of the Loan Documents, nor the consummation of the
transactions therein contemplated, nor compliance with the provisions thereof
will violate (i) any law, rule, regulation, order, writ, judgment, injunction,
decree or award binding on the Borrower or any of its Subsidiaries or (ii) the
Borrower's or any Subsidiary's articles of incorporation or by-laws, or (iii)
the provisions of any indenture, instrument or agreement to which the Borrower
or any of its Subsidiaries is a party or is subject, or by which it, or its
Property, is bound, or conflict with or constitute a default thereunder, or
result in, or require, the creation or imposition of any Lien in, of or on the
Property of the Borrower or a Subsidiary pursuant to the terms of any such
indenture, instrument or agreement. No order, consent, adjudication, approval,
license, authorization, or validation of, or filing, recording or registration
with, or exemption by, or other action in respect of any governmental or public
body or authority, or any subdivision thereof, which has not been obtained by
the Borrower or any of its Subsidiaries, is required to be obtained by the
Borrower or any of its Subsidiaries in connection with the execution and
delivery of the Loan Documents, the borrowings under this Agreement, the pledge
of collateral under the Pledge Agreement, the payment and performance by the
Borrower of the Obligations or the legality, validity, binding effect or
enforceability of any of the Loan Documents.
5.4. Financial Statements. The December 31, 1997, consolidated
financial statements of the Borrower and its Subsidiaries heretofore delivered
to the Lender were prepared in accordance with generally accepted accounting
principles in effect on the date such statements were prepared and fairly
present the consolidated financial condition and operations of the Borrower and
its Subsidiaries at such date and the consolidated results of their operations
for the period then ended.
5.5. Material Adverse Change. Since December 31, 1997, there has been
no change in the business, Property, prospects, condition (financial or
otherwise) or results of operations of the Borrower and its Subsidiaries which
could reasonably be expected to have a Material Adverse Effect.
5.6. Litigation and Contingent Obligations. There is no litigation,
arbitration, governmental investigation, proceeding or inquiry pending or, to
the knowledge of any of their officers, threatened against or affecting the
Borrower or any of its Subsidiaries which could reasonably be expected to have a
Material Adverse Effect. Other than any liability incident to any litigation,
arbitration or proceeding which could not reasonably be expected to have a
Material Adverse Effect, the Borrower has no material contingent obligations not
provided for or disclosed in the financial statements referred to in Section
5.4.
5.7. Compliance With Laws. The Borrower and its Subsidiaries have
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government or any instrumentality or
agency thereof, having jurisdiction over the conduct of their respective
businesses or the ownership of their respective Property. Neither the Borrower
nor any Subsidiary has received any notice to the effect that its operations are
not in material compliance with any of the requirements of applicable federal,
state and local environmental, health and safety statutes and regulations or the
subject of any federal or state investigation evaluating whether any remedial
action is needed to respond to a release of any toxic or hazardous waste or
substance into the environment, which non-compliance or remedial action could
reasonably be expected to have a Material Adverse Effect.
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5.8. Regulations. Margin stock (as defined in Regulation U of the Board
of Governors of the Federal Reserve System) constitutes less than 25% of the
value of those assets of the Borrower and its Subsidiaries that are subject to
any limitation on sale, pledge, or other restriction hereunder. Neither the
Borrower nor any Subsidiary is (i) an "investment company" or a company
"controlled" by an "investment company", within the meaning of the Investment
Company Act of 1940, as amended or (ii) a "holding company" or a "subsidiary
company" of a "holding company", or an "affiliate" of a "holding company" or of
a "subsidiary company" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
ARTICLE VI -- COVENANTS
During the term of this Agreement, unless the Lender shall otherwise
consent in writing:
6.1. Financial Reporting. The Borrower will maintain, for itself and
each Subsidiary, a system of accounting established and administered in
accordance with generally accepted accounting principles, and furnish to the
Lender:
(a) Within 90 days after the close of each of its fiscal years, an
unqualified audit report certified by independent certified public accountants,
acceptable to the Lender, prepared in accordance with generally accepted
accounting principles on a consolidated and consolidating basis (consolidating
statements need not be certified by such accountants) for itself and the
Subsidiaries, including balance sheets as of the end of such period, related
profit and loss and reconciliation of surplus statements, and a statement of
cash flows, accompanied by (i) any management letter prepared by said
accountants, and (ii) a certificate of said accountants that, in the course of
their examination necessary for their certification of the foregoing, they have
obtained no knowledge of any Default or Unmatured Default, or if, in the opinion
of such accountants, any Default or Unmatured Default shall exist, stating the
nature and status thereof.
(b) Within 45 days after the close of the first three quarterly periods
of each of its fiscal years, for itself and the Subsidiaries, consolidated and
consolidating unaudited balance sheets as at the close of each such period and
consolidated and consolidating profit and loss and reconciliation of surplus
statements and a statement of cash flows for the period from the beginning of
such fiscal year to the end of such quarter, all certified by its chief
financial officer.
(c) Together with the financial statements required hereunder, a
compliance certificate (in a form approved by the Lender) signed by its chief
financial officer stating that no Default or Unmatured Default exists, or if any
Default or Unmatured Default exists, stating the nature and status thereof.
(d) Promptly upon (i) the furnishing thereof to the shareholders of the
Borrower, copies of all financial statements, reports and proxy statements so
furnished and (ii) the filing thereof, copies of all registration statements and
annual, quarterly, monthly or other regular reports which the Borrower or any of
its Subsidiaries files with the Securities and Exchange Commission.
(e) Such other information (including non-financial information) as the
Lender may from time to time reasonably request.
6.2. Affirmative Covenants. The Borrower will, and will cause each
Subsidiary to:
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(a) Use the proceeds of the Loans to repay L/C Obligations, to repay
outstanding Loans and for working capital purposes. The Borrower will not, nor
will it permit any Subsidiary to, use any of the proceeds of the Loans to
purchase or carry any "margin stock" (as defined in Regulation U of the Board of
Governors of the Federal Reserve System) or to make any other acquisition.
(b) Give prompt notice in writing to the Lender of the occurrence of
any Default or Unmatured Default and of any other development, financial or
otherwise, which could reasonably be expected to have a Material Adverse Effect.
(c) Carry on and conduct its business in substantially the same manner
and in substantially the same fields of enterprise as it is presently conducted
and do all things necessary to remain duly incorporated, validly existing and in
good standing as a domestic corporation in its jurisdiction of incorporation and
maintain all requisite authority to conduct its business in each jurisdiction in
which its business is conducted.
(d) Timely file complete and correct United States federal and
applicable foreign, state and local tax returns required by law and pay when due
all taxes, assessments and governmental charges and levies upon it or its
income, profits or Property, except those which are being contested in good
faith by appropriate proceedings and with respect to which adequate reserves
have been set aside.
(e) Comply with all laws, rules, regulations, orders, writs, judgments,
injunctions, decrees or awards to which it may be subject.
(f) Permit the Lender, by its respective representatives and agents, to
inspect any of the Property, books and financial records of the Borrower and
each Subsidiary, to examine and make copies of the books of accounts and other
financial records of the Borrower and each Subsidiary, and to discuss the
affairs, finances and accounts of the Borrower and each Subsidiary with, and to
be advised as to the same by, their respective officers at such reasonable times
and intervals as the Lender may designate.
6.3. Negative Covenant. The Borrower will not, nor will it permit any
Subsidiary to, merge or consolidate with or into any other Person, except that a
Subsidiary may merge with the Borrower or a wholly-owned Subsidiary.
ARTICLE VII -- DEFAULTS
The occurrence of any one or more of the following events shall
constitute a Default:
7.1. Any representation or warranty made or deemed made by or on
behalf of the Borrower or any of its Subsidiaries to the Lender under or in
connection with this Agreement, any Loan, or any certificate or information
delivered in connection with this Agreement or any other Loan Document shall be
materially false on the date as of which made.
7.2. Nonpayment of principal of any Loan when due, or nonpayment of
interest upon any Loan or of any commitment fee or other obligations under any
of the Loan Documents within five days after the same becomes due.
7.3. The breach by the Borrower of any of the terms or provisions of
this Agreement which is not
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remedied within fifteen days after written notice from the Lender.
7.4. Failure of the Borrower or any of its Subsidiaries to pay any
Indebtedness when due; or a default shall occur under any agreement governing
any Indebtedness of the Borrower or any Subsidiary or any other event shall
occur or condition shall exist, the effect of which default, event or condition
is to cause, or to permit the holder or holders of such Indebtedness to cause,
such Indebtedness to become due prior to its stated maturity; or any
Indebtedness of the Borrower or any of its Subsidiaries shall be declared to be
due and payable or required to be prepaid or repurchased (other than by a
regularly scheduled payment) prior to the stated maturity thereof; or the
Borrower or any of its Subsidiaries shall not pay, or admit in writing its
inability to pay, its debts generally as they become due.
7.5. The Pledge Agreement shall for any reason fail to create a valid
first priority interest in the collateral purported to be covered thereby or
shall fail to remain in full force and effect or any action shall be taken to
discontinue or to assert the invalidity or unenforceability thereof or the
Borrower shall fail to comply with any of the terms or provisions thereof.
7.6. The Borrower or any of its Subsidiaries shall (i) have an order
for relief entered with respect to it under the Federal bankruptcy laws as now
or hereafter in effect, (ii) make an assignment for the benefit of creditors,
(iii) apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official for it or
any substantial portion of its Property, (iv) institute any proceeding seeking
an order for relief under the Federal bankruptcy laws as now or hereafter in
effect or seeking to adjudicate it a bankrupt or insolvent, or seeking
dissolution, winding up, liquidation, reorganization, arrangement, adjustment or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors or fail to file an answer or other
pleading denying the material allegations of any such proceeding filed against
it, (v) take any corporate or partnership action to authorize or effect any of
the foregoing actions set forth in this Section 7.6 or (vi) fail to contest in
good faith any appointment or proceeding described in Section 7.7.
7.7. Without the application, approval or consent of the Borrower or
any of its Subsidiaries, a receiver, trustee, examiner, liquidator or similar
official shall be appointed for the Borrower or any of its Subsidiaries or any
substantial portion of its Property, or a proceeding described in Section
7.6(iv) shall be instituted against the Borrower or any of its Subsidiaries and
such appointment continues undischarged or such proceeding continues undismissed
or unstayed for a period of 30 consecutive days.
7.8. Any reportable event (as defined in Section 4043 of ERISA) shall
occur in connection with any Plan.
7.9. The Borrower or any of its Subsidiaries shall fail within 30 days
to pay, bond or otherwise discharge any judgment or order for the payment of
money in excess of $50,000, which is not stayed on appeal or otherwise being
appropriately contested in good faith.
7.10. Sheldon Hurst or a trust for the benefit of Sheldon Hurst or his
spouse or descendants, partnership or limited liability company (in each case,
controlled by Sheldon Hurst) shall cease to own, free and clear of all Liens
(other than Liens in favor of the Lender) at least 25% of the outstanding shares
of voting stock of SGH Holdings, Inc. on a fully diluted basis or SGH Holdings,
Inc. shall cease to own, free and clear of all Liens or other encumbrances, 100%
of the outstanding shares of voting stock of the Borrower on a fully diluted
basis.
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ARTICLE VIII -- ACCELERATION, WAIVERS, AMENDMENTS AND REMEDIES
8.1. Acceleration. If any Default described in Section 7.6 or 7.7
occurs with respect to the Borrower, the obligation of the Lender to make Loans
hereunder shall automatically terminate and the Obligations shall immediately
become due and payable without any election or action on the part of the Lender.
If any other Default occurs, the Lender may terminate or suspend the obligations
to make Loans hereunder, or declare the Obligations to be due and payable, or
both, whereupon the Obligations shall become immediately due and payable,
without presentment, demand, protest or notice of any kind, all of which the
Borrower hereby expressly waives.
8.2. Amendments. Subject to the provisions of this Article VIII, the
Lender and the Borrower may enter into agreements supplemental hereto for the
purpose of amending the Loan Documents in any manner or waiving any Default
hereunder.
8.3. Preservation of Rights. No delay or omission of the Lender to
exercise any right under the Loan Documents shall impair such right or be
construed to be a waiver of any Default or an acquiescence therein, and the
making of a Loan notwithstanding the existence of a Default or the inability of
the Borrower to satisfy the conditions precedent to such Loan shall not
constitute any waiver or acquiescence. Any single or partial exercise of any
such right shall not preclude other or further exercise thereof or the exercise
of any other right, and no waiver, amendment or other variation of the terms,
conditions or provisions of the Loan Documents whatsoever shall be valid unless
in writing signed by the Lender, and then only to the extent in such writing
specifically set forth. All remedies contained in the Loan Documents or by law
afforded shall be cumulative and all shall be available to the Lender until the
Obligations have been paid in full.
ARTICLE IX -- GENERAL PROVISIONS
9.1. Entire Agreement; Severability of Provisions. The Loan Documents
embody the entire agreement and understanding between the Borrower and the
Lender and supersede all prior agreements and understandings between the
Borrower and the Lender relating to the subject matter thereof. Any provision in
any Loan Document that is held to be inoperative, unenforceable, or invalid in
any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable,
or invalid without affecting the remaining provisions in that jurisdiction or
the operation, enforceability, or validity of that provision in any other
jurisdiction, and to this end the provisions of all Loan Documents are declared
to be severable.
9.2. Benefits of this Agreement. This Agreement shall not be construed
so as to confer any right or benefit upon any Person other than the parties to
this Agreement and their respective successors and assigns, provided, however,
that the parties hereto expressly agree that First Chicago Capital Markets, Inc.
(the Arranger") shall enjoy the benefits of the provisions of Section 9.3 to the
extent specifically set forth therein and shall have the right to enforce such
provisions on its own behalf and in its own name to the same extent as if it
were a party to this Agreement
9.3. Expenses; Indemnification. The Borrower shall reimburse the
Lender and the Arranger for any costs, internal charges and out-of-pocket
expenses (including attorneys' fees and time charges of attorneys for the
Lender, which attorneys may be employees of the Lender) paid or incurred by the
Lender or the Arranger in connection with the preparation, negotiation,
execution, delivery, syndication, review, amendment, modification, and
administration of the Loan Documents. The Borrower also agrees to reimburse the
Arranger and the Lender for any costs, internal charges and out-of-pocket
expenses (including attorneys' fees and time
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charges of attorneys for the Arranger and the Lender, which attorneys may be
employees of the Arranger or the Lender) paid or incurred by the Arranger or the
Lender in connection with the collection and enforcement of the Loan Documents.
The Borrower further agrees to indemnify the Arranger and the Lender, its
directors, officers and employees against all losses, claims, damages,
penalties, judgments, liabilities and expenses (including, without limitation,
all expenses of litigation or preparation therefor whether or not the Arranger
or the Lender is a party thereto) which any of them may pay or incur arising out
of or relating to this Agreement, the other Loan Documents, the transactions
contemplated hereby or the direct or indirect application or proposed
application of the proceeds of any Loan hereunder except to the extent that they
are determined in a final non- appealable judgment by a court of competent
jurisdiction to have resulted from the gross negligence or willful misconduct of
the party seeking indemnification. The obligations of the Borrower under this
Section shall survive the termination of this Agreement.
9.4. Survival of Representations; Taxes. All representations and
warranties of the Borrower contained in this Agreement shall survive delivery of
the Note and the making of the Loans herein contemplated. Any taxes (excluding
federal income taxes on the overall net income of the Lender) or other similar
assessments or charges made by any governmental or revenue authority in respect
of the Loan Documents shall be paid by the Borrower, together with interest and
penalties, if any.
ARTICLE X -- SETOFF
In addition to, and without limitation of, any rights of the Lender
under applicable law, if the Borrower becomes insolvent, however evidenced, or
any Default occurs, any and all deposits (including all account balances,
whether provisional or final and whether or not collected or available) and any
other Indebtedness at any time held or owing by the Lender or any affiliate of
the Lender to or for the credit or account of the Borrower may be offset and
applied toward the payment of the Obligations owing to the Lender, whether or
not the Obligations, or any part hereof, shall then be due.
ARTICLE XI -- ASSIGNMENTS; PARTICIPATIONS
11.1. Successors and Assigns. The terms and provisions of the Loan
Documents shall be binding upon and inure to the benefit of the Borrower and the
Lender and their respective successors and assigns, except that (i) the Borrower
shall not have the right to assign its rights or obligations under the Loan
Documents and (ii) any assignment by the Lender must be made in compliance with
Section 11.3. Notwithstanding clause (ii) of this Section, the Lender may at any
time, without the consent of the Borrower, assign all or any portion of its
rights under this Agreement and any Note to a Federal Reserve Bank; provided,
however, that no such assignment to a Federal Reserve Bank shall release the
transferor Lender from its obligations hereunder. Any assignee or transferee of
the rights to any Loan or any Note agrees by acceptance thereof to be bound by
all the terms and provisions of the Loan Documents. Any request, authority or
consent of any Person, who at the time of making such request or giving such
authority or consent is the owner of the rights to any Loan (whether or not a
Note has been issued in evidence thereof), shall be conclusive and binding on
any subsequent holder, transferee or assignee of the rights to such Loan.
11.2. Participations. The Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time sell to one or more
banks or other entities ("Participants") participating interests in any Loan
owing to it, any Note held by it, the Commitment or any other interest of the
Lender under the Loan Documents. In the event of any such sale by the Lender of
participating interests to a Participant, the Lender's obligations under the
Loan Documents shall remain unchanged, the Lender shall remain solely
responsible to the
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other parties hereto for the performance of such obligations, the Lender shall
remain the owner of its Loans and the holder of any Note issued to it in
evidence thereof for all purposes under the Loan Documents, all amounts payable
by the Borrower under this Agreement shall be determined as if the Lender had
not sold such participating interests, and the Borrower and the Lender shall
continue to deal solely and directly with each other in connection with the
Lender's rights and obligations under the Loan Documents. The Borrower agrees
that each Participant shall be deemed to have the right of setoff provided in
Article X in respect of its participating interest in amounts owing under the
Loan Documents to the same extent as if the amount of its participating interest
were owing directly to it as a Lender under the Loan Documents, provided that
the Lender shall retain the right of setoff provided in Article X with respect
to the amount of participating interests sold to each Participant. The Lender
agrees to share with each Participant, and each Participant, by exercising the
right of setoff provided in Article X, agrees to share with the Lender, any
amount received pursuant to the exercise of its right of setoff, such amounts to
be shared in accordance with Article X as if each Participant were a Lender.
11.3. Assignments. The Lender may, in the ordinary course of its
business and in accordance with applicable law, at any time assign to one or
more banks or other entities ("Purchasers") all or any part of its rights and
obligations under the Loan Documents. The Borrower hereby agrees to execute any
amendment and/or any other document that may be necessary to effectuate such an
assignment. Such assignment shall be evidenced by the Lender's standard form (to
be supplied upon request). The consent of the Borrower shall be required prior
to an assignment becoming effective with respect to a Purchaser that is not a
Lender or an affiliate thereof; provided, however, that if a Default has
occurred and is continuing, the consent of the Borrower shall not be required.
Such consent shall not be unreasonably withheld. Upon delivering to the Borrower
a notice of assignment, together with any required consent, such assignment
shall become effective on the effective date specified in such notice of
assignment. On and after the effective date of such assignment, such Purchaser
shall for all purposes be a Lender party to the other Loan Documents and shall
have all the rights and obligations of a Lender under the Loan Documents, to the
same extent as if it were an original party hereto, and no further consent or
action by the Borrower shall be required to release the Lender with respect to
the percentage of the Commitment and Loans assigned to such Purchaser. Upon the
consummation of any such assignment to a Purchaser, the transferor Lender, the
Lender and the Borrower shall, if the Lender or the Purchaser desires, make
appropriate arrangements so that new Notes or, as appropriate, replacement
Notes, are issued to the Lender and Purchaser, in each case in principal amounts
reflecting their respective Commitments, as adjusted pursuant to such
assignment.
11.4. Dissemination of Information; Tax Treatment. The Borrower
authorizes the Lender to disclose to any Participant or Purchaser or any other
Person acquiring an interest in the Loan Documents by operation of law (each a
"Transferee") and any prospective Transferee any and all information in the
Lender's possession concerning the creditworthiness of the Borrower and its
Subsidiaries. If any interest in any Loan Document is transferred to any
Transferee which is organized under the laws of any jurisdiction other than the
United States or any State thereof, the transferor Lender shall cause such
Transferee, concurrently with the effectiveness of such transfer, to deliver to
the Lender such completed forms with respect to withholding taxes as the
Borrower may reasonably require.
ARTICLE XII -- NOTICES
All notices, requests and other communications to any party hereunder
shall be in writing (including bank wire, telex, facsimile transmission or
similar writing) and shall be given to such party: (x) in the case of the
Borrower or the Lender, at its address, facsimile number or telex number set
forth on the signature pages hereof, or (y) in the case of any party, such other
address, facsimile number or telex number as such party may
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hereafter specify for the purpose by notice to the other. Each such notice,
request or other communication shall be effective (i) if given by telex, when
such telex is transmitted to the telex number specified in this Section and the
appropriate answerback is received, (ii) if given by facsimile transmission,
when transmitted to the facsimile number specified in this Section and
confirmation of receipt is received, (iii) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (iv) if given by any other means, when delivered at
the address specified in this Section; provided that notices to the Lender under
Article II shall not be effective until received.
ARTICLE XIII -- COUNTERPARTS
This Agreement may be executed in any number of counterparts, all of
which taken together shall constitute one agreement, and any of the parties
hereto may execute this Agreement by signing any such counterpart. This
Agreement shall be effective when it has been executed by the Borrower and the
Lender.
ARTICLE XIV -- GOVERNING LAW; JURISDICTION; JURY TRIAL WAIVER
14.1. CHOICE OF LAW; CONSENT TO JURISDICTION. THE LOAN DOCUMENTS (OTHER
THAN THOSE CONTAINING A CONTRARY EXPRESS CHOICE OF LAW PROVISION) SHALL BE
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF
THE STATE OF ILLINOIS, BUT GIVING EFFECT TO FEDERAL LAWS APPLICABLE TO NATIONAL
BANKS. THE BORROWER HEREBY IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION
OF ANY UNITED STATES FEDERAL OR ILLINOIS STATE COURT SITTING IN CHICAGO IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO ANY LOAN DOCUMENTS AND THE
BORROWER HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR
PROCEEDING MAY BE HEARD AND DETERMINED IN ANY SUCH COURT AND IRREVOCABLY WAIVES
ANY OBJECTION IT MAY NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH SUIT,
ACTION OR PROCEEDING BROUGHT IN SUCH A COURT OR THAT SUCH COURT IS AN
INCONVENIENT FORUM. NOTHING HEREIN SHALL LIMIT THE RIGHT OF THE LENDER TO BRING
PROCEEDINGS AGAINST THE BORROWER IN THE COURTS OF ANY OTHER JURISDICTION. ANY
JUDICIAL PROCEEDING BY THE BORROWER AGAINST THE LENDER OR ANY AFFILIATE THEREOF
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY WAY ARISING OUT OF, RELATED
TO, OR CONNECTED WITH ANY LOAN DOCUMENT SHALL BE BROUGHT ONLY IN A COURT IN
CHICAGO, ILLINOIS.
14.2. WAIVER OF JURY TRIAL. THE BORROWER AND THE LENDER HEREBY WAIVE
TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY
MATTER (WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT
OF, RELATED TO, OR CONNECTED WITH ANY LOAN DOCUMENT OR THE RELATIONSHIP
ESTABLISHED THEREUNDER.
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IN WITNESS WHEREOF, the Borrower and the Lender have executed this
Agreement as of the date first above written.
TRI-STATE OUTDOOR MEDIA GROUP, INC.
By: /s/ WILLIAM G. MCLENDON
----------------------------------------
Print Name: WILLIAM G. MCLENDON
---------------------------------
Title: CFO
-------------------------------------
3416 Highway 41 South
Tifton, Georgia 31794
Phone: (800) 732-8261
Fax: (912) 386-0203
Attention: Mr. William G. McLendon
Chief Financial Officer
Commitment
$3,000,000 THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ RONNA BURY-PRINCE
----------------------------------------
Print Name: RONNA BURY-PRINCE
---------------------------------
Title: VICE PRESIDENT
-------------------------------------
One First National Plaza
Chicago, Illinois 60670
Phone: (312) 732-5475
Fax: (312) 732-8587
Attention: Ms. Laurie Blazek
Vice President
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ANNEX I
EXISTING L/C's
<TABLE>
<CAPTION>
Letter of Credit Date of Expiry
No. Issuance Amount Date Beneficiary
- ---------------- -------- ------ ------ -----------
<S> <C> <C> <C> <C>
00324651 2/27/98 $1,250,000 8/27/00 Transfinance Bank
00324578 7/28/97 $ 25,000 7/15/98 SCDOT
</TABLE>
17
<PAGE> 18
ANNEX II
PLEDGE AGREEMENT
This Pledge Agreement (the "Pledge Agreement") dated as of May 20, 1998
is made by Tri-State Outdoor Media Group, Inc., a Kansas corporation (the
"Borrower"), in favor of The First National Bank of Chicago and its domestic and
foreign offices, branches, subsidiaries and affiliates (collectively, the
"Lender").
W I T N E S S E T H:
WHEREAS, the Borrower and the Lender have entered into that certain
Credit Agreement dated of even date herewith (as amended or modified from time
to time, the "Credit Agreement"; capitalized terms used herein and not otherwise
defined herein shall have the meanings attributed to such terms in the Credit
Agreement) pursuant to which the Lender has agreed to make certain loans (the
"Loans") to the Borrower from time to time;
WHEREAS, it is a condition precedent, among others, to the making of
Loans under the Credit Agreement that the Borrower execute and deliver this
Pledge Agreement;
WHEREAS, the Lender has heretofore issued, on behalf of the Borrower,
certain standby letters of credit (as the same may be amended, modified, renewed
or extended from time to time, each an "Existing L/C" and collectively the
"Existing L/C's") pursuant to certain Applications for Irrevocable Standby
Letters of Credit and Security and Reimbursement Agreements for Irrevocable
Standby Letter of Credit (as the same may be amended or modified from time to
time, collectively the "Applications");
WHEREAS, the Borrower and the Lender have heretofore entered into a
certain Interest Exchange Agreement dated as of May 14, 1997 (as amended,
modified or supplemented from time to time, the "Rate Hedging Agreement");
WHEREAS, in order to (i) induce the Lender to make Loans under the
Credit Agreement and (ii) secure the Secured Obligations (as hereinafter
defined), the Borrower desires to so execute and deliver this Pledge Agreement;
and
WHEREAS, the Borrower has delivered to the Lender and confirms the
delivery to the Lender of Pledged Instruments (as hereinafter defined) in an
amount equal to at least $3,100,000;
NOW, THEREFORE, in consideration of the premises herein contained, and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the Borrower hereby agrees as follows:
1. The term "Pledged Instruments" as used herein shall mean and include
all certificates of deposit issued and held by the Lender whether now owned or
hereafter acquired by the Borrower or in which the Borrower at any time has any
interest up to the amount of $3,100,000, and shall also mean and include the
certificates of deposit listed on Exhibit "A" hereto and any instrument or
deposit to which the Borrower shall become entitled for any reason whatsoever as
an addition to, in substitution for or in exchange or refunding of any or all of
such deposits or instruments of the Borrower and all proceeds thereof up to the
amount of
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$3,100,000.
2. To secure the prompt and complete payment of (i) the Obligations,
(ii) the L/C Obligations, (ii) any and all indebtedness and other liabilities
(including, without limitation, fees, interest and expenses (including
attorneys' fees and time charges of attorneys for the Lender, which attorneys
may be employees of the Lender)) of the Borrower to the Lender, direct and
indirect, absolute and contingent, under, arising out of, or in any way
connected with the Rate Hedging Agreement (the "Rate Hedging Obligations") and
(iv) the observance and performance of the other obligations, covenants and
agreements now or hereafter existing under this Pledge Agreement or under the
Credit Agreement, the other Loan Documents, the Applications or the Rate Hedging
Agreement (all hereinafter collectively called the "Secured Obligations"), the
Borrower hereby pledges, assigns, delivers and sets over to the Lender all of
the Pledged Instruments and hereby grants to the Lender a security interest in
the Pledged Instruments and in the proceeds thereof.
3. The Borrower authorizes the Lender and its employees and agents to
make such internal adjustments of its books and records as are necessary to
reflect the security interest granted hereunder, and the Borrower agrees to
execute and deliver from time to time such documents and instruments, and take
such other actions as are necessary or appropriate to ensure the Lender has a
first perfected security interest in the Pledged Instruments.
4. (i) If any Default (as hereinafter defined) has occurred and is
continuing, the Lender may: (a) require all interest on the Pledged Instruments
to be deposited in a special non-interest bearing cash collateral account with
the Lender and (b) at its option, apply the collected balances in said cash
collateral account to the payment of the Secured Obligations whether or not the
Secured Obligations shall then be due, or hold said cash collateral account as
further security for the Secured Obligations. The Borrower shall have no control
whatsoever over said cash collateral account and hereby grants to the Lender a
security interest in said cash collateral account if and when created.
(ii) If the Borrower shall become entitled to receive or shall
receive any certificate whether in substitution of, or in exchange for any of
the Pledged Instruments, or otherwise, the Borrower agrees to accept the same as
the Lender's agent and to hold the same in trust for the Lender and to deliver
the same forthwith to the Lender in the exact form received, with the
endorsement of the Borrower when necessary, to be held by the Lender, subject to
the terms hereof, as further security for the Secured Obligations.
5. Upon the occurrence of any Default, the Secured Obligations
(including, without limitation, to the extent permitted by the terms thereof,
any undrawn and unexpired Existing L/Cs) shall, at the election of the Lender
become forthwith due and payable, and in the case of a Default described in
Section 7.6 or 7.7 of the Credit Agreement, shall automatically become
immediately due and payable, all without demand, presentment, notice,
advertisement or protest of any kind, all of which (collectively, any "Notice")
are hereby expressly waived by the Borrower, and the Lender shall have the
right, without any Notice, to forthwith appropriate and realize upon the Pledged
Instruments, or any part thereof. The proceeds of any such appropriation or
realization shall be applied first, to the costs and expenses of every kind
(including, without limitation, the fees and expenses of outside and in-house
counsel to the Lender) incurred by the Lender in connection with the safekeeping
or liquidation of the Pledged Instruments and the collection and enforcement of
the Secured Obligations, second, to payment of any accrued and unpaid interest
and fees on the Secured Obligations, third, to payment of the principal of the
Secured Obligations, and fourth, to payment of any other Secured Obligations. In
the event the proceeds of any such appropriation or realization are insufficient
to pay all amounts to which the Lender is legally entitled, the Borrower will be
liable for the deficiency to the fullest extent permitted by law, together with
interest thereon, at a rate per annum equal to the sum of the Alternate Base
Rate plus 2% per
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annum, and for the reasonable fees and expenses of any attorneys employed by the
Lender (including, without limitation, the fees and expenses of outside and
in-house counsel to the Lender) to collect such deficiency.
"Default" means (i) any default in the payment of any Secured
Obligation when due, whether at maturity, by acceleration or otherwise; (ii) a
"Default" under and as defined in the Credit Agreement; or (iii) failure of the
Borrower to comply with any of the terms or provisions of this Pledge Agreement,
any of the Applications, the Rate Hedging Agreement or any other agreement
governing the creation or terms of any Secured Obligation.
6. The Borrower represents and warrants that as of the date hereof it
is the direct and beneficial owner of all of the Pledged Instruments. The
Borrower further represents and warrants that all of the Pledged Instruments are
owned by the Borrower free and clear of any pledge, mortgage, hypothecation,
lien, charge, encumbrance or any security interest in said Pledged Instruments
or the proceeds thereof, except for the security interest granted to the Lender
hereunder. The Borrower further represents and warrants that this Pledge
Agreement and delivery of the Pledged Instruments constitutes a valid first lien
on and perfected security interest in all of the Pledged Instruments and the
proceeds thereof, subject to no prior security interests, liens, charges or
encumbrances or to any agreement purporting to grant to any third party a
security interest in the property or assets of the Borrower which would include
the Pledged Instruments.
7. (i) The Borrower hereby covenants and agrees that so long as any of
the Secured Obligations shall be outstanding and unpaid (including, without
limitation, any undrawn and unexpired Existing L/C), in whole or in part, the
Borrower will not liquidate, withdraw or otherwise dispose of any of the Pledged
Instruments, nor will the Borrower create, incur or permit to exist any pledge,
mortgage, lien, charge, encumbrance or any security interest whatsoever with
respect to any of the Pledged Instruments or the proceeds thereof other than
that created hereby.
(ii) The Borrower warrants and will defend the right, title,
special property and security interest of the Lender in and to the Pledged
Instruments against the claims of any person, firm, corporation or other entity.
(iii) The Borrower hereby covenants and agrees that so long as
any of the Secured Obligations shall be outstanding and unpaid (including,
without limitation, any undrawn and unexpired Existing L/Cs), in whole or in
part, the aggregate amount of the Pledged Instruments shall at all times be
equal to at least $3,100,000. The Lender shall at all times have the right to
require from the Borrower that there shall be lodged with the Lender as security
for all existing Secured Obligations additional Pledged Instruments so that the
aggregate amount of the Pledged Instruments shall at all times be equal to at
least $3,100,000.
8. No course of dealing between the Borrower and the Lender, nor any
failure to exercise, nor any delay in exercising, on the part of the Lender, any
right, power or privilege hereunder or under any of the Applications or any
other instruments delivered by the Borrower to the Lender shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege. The rights and remedies
herein provided and provided in the Credit Agreement, the other Loan Documents,
the Applications, the Rate Hedging Agreement and in all other agreements,
instruments and documents delivered, or to be delivered, in connection therewith
are cumulative and are in addition to, and not exclusive of, any rights or
remedies provided by law, including, without limitation, the rights and remedies
of a secured party under the Uniform Commercial Code. The provisions of this
Pledge Agreement are severable and if any clause or provision hereof shall be
held invalid or unenforceable in whole or in part then such invalidity or
unenforceability shall attach only to such clause or provision, or part thereof,
and shall not in any manner affect such clause or provision in any other
20
<PAGE> 21
jurisdiction or any other clause or provision in this Pledge Agreement in any
jurisdiction.
9. This Pledge Agreement shall inure to the benefit of the Borrower and
the Lender and their respective successors and assigns, except that the Borrower
shall not assign this Pledge Agreement without the prior written consent of the
Lender.
10. The Borrower agrees to reimburse the Lender promptly upon demand
for any and all costs, internal charges and out-of-pocket expenses (including
attorneys' fees and time charges of attorneys for the Lender, which attorneys
may be employees of the Lender) paid or incurred by the Lender in connection
with the preparation, review, execution, delivery, amendment, modification,
collection and enforcement of this Pledge Agreement. The obligations of the
Borrower under this Section 10 shall survive the termination of this Pledge
Agreement.
11. This Pledge Agreement shall become effective as of the date first
above written upon the Lender's receipt of the following:
(i) A counterpart of this Pledge Agreement duly executed by
the Borrower.
(ii) Evidence, satisfactory to the Lender, that the Borrower
and its appointed signatory have been appropriately
authorized to execute this Pledge Agreement and to pledge
the Pledged Instruments hereunder.
(iii) An incumbency certificate, executed by the Secretary, an
Assistant Secretary or other appropriate person of the
Borrower, which shall identify by name and title and bear
the signature of the appointed signatory of the Borrower
authorized to sign this Pledge Agreement, upon which
certificate the Lender shall be entitled to rely until
informed of any change in writing by the Borrower.
(iv) Such other documents as the Lender or its counsel may
reasonably request.
12. THIS PLEDGE AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE INTERNAL LAWS (AND NOT THE LAW OF CONFLICTS) OF THE STATE
OF ILLINOIS.
13. THE BORROWER HEREBY CONSENTS TO THE JURISDICTION OF ANY
LOCAL, STATE, OR FEDERAL COURT LOCATED WITHIN THE CITY OF CHICAGO, ILLINOIS AND
WAIVES ANY OBJECTION WHICH THE BORROWER MAY HAVE BASED ON IMPROPER VENUE OR
FORUM NON CONVENIENS TO THE CONDUCT OF ANY PROCEEDING IN ANY SUCH COURT AND
CONSENTS THAT ALL SERVICE OF PROCESS BE MADE BY MAIL OR MESSENGER DIRECTED TO IT
AT THE ADDRESS SET FORTH BELOW ITS SIGNATURE HERETO. NOTHING CONTAINED IN THIS
SECTION SHALL AFFECT THE RIGHT OF THE LENDER TO BRING ANY ACTION OR PROCEEDING
AGAINST THE BORROWER OR ITS PROPERTY IN THE COURTS OF ANY OTHER JURISDICTION.
THE BORROWER AND THE LENDER WAIVE THEIR RIGHT TO TRIAL BY JURY IN ANY JUDICIAL
PROCEEDING RELATING TO OR IN ANY WAY ARISING OUT OF THIS PLEDGE AGREEMENT.
14. All notices and other communications provided to any party
hereto under this Pledge Agreement shall be in writing or by telex or by
facsimile and addressed or delivered to such party at its address
21
<PAGE> 22
set forth below its signature hereto or at such other address as may be
designated by such party in a notice to the other party. Any notice, if mailed
and properly addressed with postage prepaid, shall be deemed given when
received; any notice, if transmitted by telex or facsimile, shall be deemed
given when transmitted (answerback confirmed in the case of telexes and
electronic or telephonic confirmation in the case of facsimiles). The parties
hereto may each change the address for service of notice upon it by a notice in
writing to the other parties hereto.
IN WITNESS WHEREOF, the Borrower has executed this Pledge
Agreement in favor of the Lender as of the date first above written.
TRI-STATE OUTDOOR MEDIA GROUP, INC.
By: /s/ WILLIAM G. MCLENDON
----------------------------------------
Title: CFO
-------------------------------------
3416 Highway 41 South
Tifton, Georgia 31794
Attention: W.G. McLendon ,
------------------------
Accepted:
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ LAURIE BLAZEK
----------------------------------------
Title: VICE PRESIDENT
------------------------------------
One First National Plaza
Suite 0629
Chicago, Illinois 60670
Attention: Ms. Laurie Blazek
22
<PAGE> 23
EXHIBIT "A"
CERTIFICATES OF DEPOSIT
23
<PAGE> 24
SCHEDULE "1"
LIENS
24
<PAGE> 25
RATIFICATION AND REAFFIRMATION OF
APPLICATIONS
THIS RATIFICATION AND REAFFIRMATION OF APPLICATIONS (this
"Ratification") is entered into as of May 20, 1998 by TRI-STATE OUTDOOR MEDIA
GROUP, INC. (the "Applicant"), for the benefit of THE FIRST NATIONAL BANK OF
CHICAGO (the "Issuer").
WHEREAS, TRI-STATE OUTDOOR MEDIA GROUP, INC. (the "Borrower"), certain
LENDERS and The First National Bank of Chicago entered into that certain Second
Amended and Restated Credit Agreement dated as of February 27, 1998 (the
"Existing Credit Agreement"), as amended pursuant to which certain letters of
credit were issued by the Issuer upon the application of the Applicant (the
"Existing Facility L/Cs");
WHEREAS, in connection with the Existing L/Cs, the Applicant executed
and delivered to the Issuer those certain Applications for Irrevocable Standby
Letter of Credit and Security and Reimbursement Agreement for Irrevocable
Standby Letter of Credit dated July 28, 1997 and February 27, 1998, respectively
(collectively, the "Applications");
WHEREAS, the Applicant and the Issuer have entered into a Credit
Agreement dated of even date herewith (the "Credit Agreement");
WHEREAS, it is a condition precedent, among others, to the making of
any loan under the Credit Agreement that this ratification of the Applications
be executed and delivered by the Applicant; and
WHEREAS, the Applicant expects to realize direct benefits as a result
of the contemplated loans under the Credit Agreement and therefore desires to
deliver this Reaffirmation to satisfy such condition precedent;
NOW, THEREFORE, in consideration of the undertakings set forth herein
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the Applicant hereby:
(i) acknowledges receipt of a copy of the Credit Agreement,
(ii) acknowledges and agrees that neither the termination of
the Existing Credit Agreement nor the terms of the
Credit Agreement shall release, discharge, or otherwise
limit or affect in any manner any of its obligations
under or in connection with Applications or the
Existing L/Cs,
(iii) ratifies and reaffirms all of the terms and provisions
of, and all of its obligations under, the Applications
and the Existing L/Cs, and
(iv) agrees to pay the fees set forth on Exhibit "A" hereto.
<PAGE> 26
IN WITNESS WHEREOF, the Pledgor has executed this Ratification as of
the date first above written.
TRI-STATE OUTDOOR MEDIA GROUP, INC.
By: /s/ WILLIAM G. MCLENDON
------------------------------------
William G. McLendon
Chief Financial Officer
ACCEPTED:
THE FIRST NATIONAL BANK OF CHICAGO,
AS AGENT
By: /s/ LAURIE BLAZEK
-----------------------------------
Laurie Blazek
Vice President
<PAGE> 27
EXHIBIT "A"
L/C FEES
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in this Registration Statement on Form S-4 of
our report, dated March 27, 1998, relating to the financial statements of
Tri-State Outdoor Media Group, Inc., which appears in the Registration
Statement. We also consent to the reference to us under the headings "Experts"
and "Selected Historical Financial and Other Data" in such Registration
Statement. However, it should be noted that McGladrey & Pullen, LLP has not
prepared or certified such "Selected Historical Financial and Other Data."
/s/ MCGLADREY & PULLEN, LLP
--------------------------------------
McGladrey & Pullen
West Palm Beach, Florida
July 13, 1998
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in this Registration Statement on Form S-4 of
our report, dated March 13, 1997 relating to the financial statements of
Tri-State Outdoor Media Group, Inc., which appears in the Registration
Statement. We also consent to the reference to us under the headings "Experts"
and "Selected Historical Financial and Other Data" in such Registration
Statement. However, it should be noted that McGrail, Merkel, Quinn & Associates
has not prepared or certified such "Selected Historical Financial and Other
Data".
/s/ MCGRAIL MERKEL QUINN &
ASSOCIATES
----------------------------------------
McGrail Merkel Quinn & Associates
Scranton, Pennsylvania
July 13, 1998
<PAGE> 1
EXHIBIT 23.3
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in this Registration Statement on Form S-4 of
our report, dated March 2, 1998 relating to the financial statements of Unisign
Corporation, Inc. Outdoor Advertising Division, which appears in the
Registration Statement. We also consent to the reference to us under the
headings "Experts" in such Registration Statement.
/s/ MCGRAIL MERKEL QUINN &
ASSOCIATES
----------------------------------------
McGrail Merkel Quinn & Associates
Scranton, Pennsylvania
July 13, 1998
<PAGE> 1
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We hereby consent to the use in this Registration Statement on Form S-4 of
our reports, dated January 15, 1997 and February 28, 1998, relating to the
financial statements of Tri-State Systems, Inc., which appear in the
Registration Statement. We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
/s/ SMITH & RADIGAN
--------------------------------------
Smith & Radigan
Atlanta, Georgia
July 15, 1998
<PAGE> 1
EXHIBIT 25.1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939, AS AMENDED, OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) [ ]
------------------------
IBJ SCHRODER BANK & TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
NEW YORK 13-5375195
(STATE OF INCORPORATION (I.R.S. EMPLOYER
IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
</TABLE>
ONE STATE STREET
NEW YORK, NEW YORK 10004
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
TERENCE RAWLINS, ASSISTANT VICE PRESIDENT
IBJ SCHRODER BANK & TRUST COMPANY
ONE STATE STREET
NEW YORK, NEW YORK 10004
(212) 858-2000
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
TRI-STATE OUTDOOR MEDIA GROUP, INC.
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
KANSAS 48-1061763
(STATE OR JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
3416 HIGHWAY 41 SOUTH
TIFTON, GEORGIA 31793
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
11% SENIOR NOTES DUE 2008
(TITLE OF INDENTURE SECURITIES)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT
IS SUBJECT.
New York State Banking Department
Two Rector Street
New York, New York
Federal Deposit Insurance Corporation
Washington, D.C.
Federal Reserve Bank of New York Second District
33 Liberty Street
New York, New York
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes
ITEM 2. AFFILIATIONS WITH THE OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.
The obligor is not an affiliate of the trustee.
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING SECURITIES OF THE
TRUSTEE:
<TABLE>
<CAPTION>
AS OF JULY 8, 1998
- ---------------------------------------------------------------------------------------------
COL. A. COL. B.
- ---------------------------------------------- ----------------------------------------------
TITLE OF CLASS AMOUNT OUTSTANDING
- ---------------------------------------------- ----------------------------------------------
<S> <C>
</TABLE>
Not Applicable.
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
IF THE TRUSTEE IS 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, FURNISH THE FOLLOWING INFORMATION:
(a) TITLE OF THE SECURITIES OUTSTANDING UNDER EACH SUCH OTHER INDENTURE
Not Applicable
(b) A BRIEF STATEMENT OF THE FACTS RELIED UPON AS A BASIS FOR THE CLAIM
THAT NO CONFLICTING INTEREST WITHIN THE MEANING OF SECTION 310(b)(1) OF
THE ACT ARISES AS A RESULT OF THE TRUSTEESHIP UNDER ANY SUCH OTHER
INDENTURE, INCLUDING A STATEMENT AS TO HOW THE INDENTURE SECURITIES
WILL RANK AS COMPARED WITH THE SECURITIES ISSUED UNDER SUCH OTHER
INDENTURE.
Not Applicable
ITEM 5. INTERLOCKING DIRECTORIES AND SIMILAR RELATIONSHIPS WITH THE OBLIGOR OR
UNDERWRITERS.
IF THE TRUSTEE OR 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, IDENTIFY EACH SUCH PERSON HAVING
ANY SUCH CONNECTION AND STATE THE NATURE OF EACH SUCH CONNECTION.
Not Applicable
2
<PAGE> 3
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE TRUSTEE
OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER, AND EXECUTIVE
OFFICER OF THE OBLIGOR:
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
------ ------ ------ ------
PERCENT OF VOTING
AMOUNT OWNED SECURITIES REPRESENTED BY
NAME OF OWNER TITLE OF CLASS BENEFICIALLY AMOUNT GIVEN IN COL. C
------------- -------------- ------------ -------------------------
<S> <C> <C> <C>
Not Applicable
</TABLE>
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE TRUSTEE
OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH DIRECTOR,
PARTNER AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER:
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
------ ------ ------ ------
PERCENT OF VOTING
AMOUNT OWNED SECURITIES REPRESENTED BY
NAME OF OWNER TITLE OF CLASS BENEFICIALLY AMOUNT GIVEN IN COL. C
------------- -------------- ------------ -------------------------
<S> <C> <C> <C>
Not Applicable
</TABLE>
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO SECURITIES OF THE OBLIGOR OWNED
BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT BY THE
TRUSTEE:
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
------ ------ ------ ------
AMOUNT OWNED BENEFICIALLY OR PERCENT OF VOTING
HELD AS COLLATERAL SECURITY FOR SECURITIES REPRESENTED BY
NAME OF OWNER TITLE OF CLASS OBLIGATIONS IN DEFAULT AMOUNT GIVEN IN COL. C
------------- -------------- ------------------------------- -------------------------
<S> <C> <C> <C>
Not Applicable
</TABLE>
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR OBLIGATIONS
IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE OBLIGOR, FURNISH THE
FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH UNDERWRITER ANY OF
WHICH ARE SO OWNED OR HELD BY THE TRUSTEE:
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
------ ------ ------ ------
AMOUNT OWNED BENEFICIALLY OR PERCENT OF VOTING
HELD AS COLLATERAL SECURITY FOR SECURITIES REPRESENTED BY
NAME OF OWNER TITLE OF CLASS OBLIGATIONS IN DEFAULT AMOUNT GIVEN IN COL. C
------------- -------------- ------------------------------- -------------------------
<S> <C> <C> <C>
Not Applicable.
</TABLE>
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF CERTAIN
AFFILIATES OR SECURITYHOLDER OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR OBLIGATIONS
IN DEFAULT VOTING SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE TRUSTEE
(1) OWNS 10 PERCENT OR MORE VOTING SECURITIES OF THE OBLIGOR OR (2) IS AN
AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR, FURNISH THE FOLLOWING
INFORMATION AS TO THE VOTING SECURITIES OF SUCH PERSON:
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
------ ------ ------ ------
AMOUNT OWNED BENEFICIALLY OR PERCENT OF VOTING
HELD AS COLLATERAL SECURITY FOR SECURITIES REPRESENTED BY
NAME OF OWNER TITLE OF CLASS OBLIGATIONS IN DEFAULT AMOUNT GIVEN IN COL. C
------------- -------------- ------------------------------- -------------------------
<S> <C> <C> <C>
Not Applicable
</TABLE>
3
<PAGE> 4
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A PERSON
OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR OBLIGATIONS
IN DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE TRUSTEE, OWNS
50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR, FURNISH THE
FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH ANY OF WHICH ARE SO
OWNED OR HELD BY THE TRUSTEE:
<TABLE>
<CAPTION>
COL. A COL. B COL. C
------ ------ ------
NATURE OF INDEBTEDNESS AMOUNT OUTSTANDING DATE DUE
---------------------- ------------------ --------
<C> <C> <S>
Not Applicable
</TABLE>
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE TRUSTEE,
FURNISH THE FOLLOWING INFORMATION:
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D
------ ------ ------ ------
AMOUNT OWNED BENEFICIALLY
OR HELD AS COLLATERAL PERCENT OF VOTING
SECURITY FOR OBLIGATIONS IN SECURITIES REPRESENTED BY
NAME OF OWNER TITLE OF CLASS DEFAULT AMOUNT GIVEN IN COL. C
------------- -------------- --------------------------- -------------------------
<S> <C> <C> <C>
Not Applicable
</TABLE>
ITEM 13. DEFAULTS BY THE OBLIGOR.
(a) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE
SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH
DEFAULT.
Not Applicable
(b) IF THE TRUSTEE IS 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, OR IS TRUSTEE FOR
MORE THAN ONE OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE,
STATE WHETHER THERE HAS BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR
SERIES, IDENTIFY THE INDENTURE OR SERIES AFFECTED, AND EXPLAIN THE
NATURE OF ANY SUCH DEFAULT.
Not Applicable
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
IF ANY UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
Not Applicable
ITEM 15. FOREIGN TRUSTEES.
IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE FOREIGN TRUSTEE IS AUTHORIZED
TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED UNDER THE
ACT.
Not Applicable
4
<PAGE> 5
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF ELIGIBILITY.
*1. A COPY OF THE CHARTER OF IBJ SCHRODER BANK & TRUST COMPANY AS AMENDED
TO DATE. (SEE EXHIBIT 1A TO FORM T-1, SECURITIES AND EXCHANGE
COMMISSION FILE NO. 22-18460).
*2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS (INCLUDED IN EXHIBIT 1 ABOVE).
*3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE, AS AMENDED TO DATE (SEE
EXHIBIT 4 TO FORM T-1, SECURITIES AND EXCHANGE COMMISSION FILE NO.
22-19146).
*4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, AS AMENDED TO DATE (SEE
EXHIBIT 4 TO FORM T-1, SECURITIES AND EXCHANGE COMMISSION FILE NO.
22-19146).
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4, IF THE OBLIGOR IS IN
DEFAULT. NOT APPLICABLE.
6. THE CONSENT OF THE UNITED STATES INSTITUTIONAL TRUSTEE REQUIRED BY
SECTION 321(b) OF THE ACT.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
- ---------------
* The Exhibits thus designated are incorporated herein by reference as exhibits
hereto. Following the description of such Exhibits is a reference to the copy
of the Exhibit heretofore filed with the Securities and Exchange Commission,
to which there have been no amendments or changes.
NOTE
In answering any item in this Statement of Eligibility which relates to
matters peculiarly within the knowledge of the obligor and its directors or
officers, the trustee has relied upon information furnished to it by the
obligor.
Inasmuch as this Form T-1 is filed prior to the ascertainment by the
trustee of all facts on which to base responsive answers to Item 2, the answer
to said Item are based on incomplete information.
Item 2, may, however, be considered as correct unless amended by an
amendment to this Form.
Pursuant to General Instruction B, the trustee has responded to Items 1, 2
and 16 of this form to the best knowledge of the trustee as indicated in Item
13, the obligor is not in default under any indenture under which the applicant
is trustee.
5
<PAGE> 6
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, IBJ Schroder Bank & Trust Company, a corporation organized
and existing under the laws of the State of New York, has duly caused this
statement of eligibility & qualification to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York, and State
of New York, on the 8th day of July, 1998.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ TERENCE RAWLINS
------------------------------------
Terence Rawlins
Assistant Vice President
6
<PAGE> 7
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the issue by Tri-State Outdoor Media
Group, Inc. of its 11% Senior Notes due 2008, we hereby consent that reports of
examinations by Federal, State, Territorial, or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
IBJ SCHRODER BANK & TRUST COMPANY
By: /s/ TERENCE RAWLINS
------------------------------------
Terence Rawlins
Assistant Vice President
Dated: July 8, 1998
7
<PAGE> 8
EXHIBIT 7
CONSOLIDATED REPORT OF CONDITION OF
IBJ SCHRODER BANK & TRUST COMPANY
OF NEW YORK, NEW YORK
AND FOREIGN AND DOMESTIC SUBSIDIARIES
REPORT AS OF MARCH 31, 1998
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
--------------
<C> <S> <C> <C> <C>
ASSETS
1. Cash and balance due from depository institutions:
a. Noninterest-bearing balances and currency and coin...................... $ 29,353
b. Interest-bearing balances............................................... 15,329
2. Securities:
a. Held-to-maturity securities............................................. $ 186,942
b. Available-for-sale securities........................................... $ 102,403
3. Federal funds sold and securities purchased under
agreements to resell in domestic offices of the bank
and of its Edge and Agreement subsidiaries and in IBFs:
Federal Funds sold and Securities purchased under agreements to resell....... $ 176,231
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income.................... $1,673,749
b. LESS: Allowance for loan and lease losses................... $ 83,611
c. LESS: Allocated transfer risk reserve....................... $ -0-
d. Loans and leases, net of unearned income, allowance, and reserve........ $1,610,138
5. Trading assets held in trading accounts...................................... $ 584
6. Premises and fixed assets (including capitalized leases)..................... $ 2,575
7. Other real estate owned...................................................... $ 819
8. Investments in unconsolidated subsidiaries and associated companies.......... $ -0-
9. Customers' liability to this bank on acceptances outstanding................. $ 503
10. Intangible assets............................................................ $ -0-
11. Other assets................................................................. $ 61,923
12. TOTAL ASSETS................................................................. $2,186,800
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
DOLLAR AMOUNTS
IN THOUSANDS
--------------
<C> <S> <C> <C> <C>
LIABILITIES
13. Deposits:
a. In domestic offices..................................................... $ 659,051
(1) Noninterest-bearing......................................... $ 288,134
(2) Interest-bearing............................................ $ 370,917
b. In foreign offices, Edge and Agreement subsidiaries, and IBFs........... $1,141,113
(1) Noninterest-bearing......................................... $ 19,428
(2) Interest-bearing............................................ $1,121,685
14. Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBFs:
Federal Funds purchased and Securities sold under agreements to repurchase... $ -0-
15. a. Demand notes issued to the U.S. Treasury................................ $ 5,000
b. Trading Liabilities..................................................... $ 344
16. Other borrowed money:
a. With a remaining maturity of one year or less........................... $ 61,963
b. With a remaining maturity of more than one year......................... $ 1,763
c. With a remaining maturity of more than three years...................... $ 2,242
17. Not applicable.
18. Bank's liability on acceptances executed and outstanding..................... $ 503
19. Subordinated notes and debentures............................................ $ -0-
20. Other liabilities............................................................ $ 70,344
21. TOTAL LIABILITIES............................................................ $1,942,313
22. Limited-life preferred stock and related surplus............................. $ N/A
EQUITY CAPITAL
23. Perpetual preferred stock and related surplus................................ $ -0-
24. Common stock................................................................. $ 29,649
25. Surplus (exclude all surplus related to preferred stock)..................... $ 217,008
26. a. Undivided profits and capital reserves.................................. $ (2,291)
b. Net unrealized gains (losses) on available-for-sale securities.......... $ 121
27. Cumulative foreign currency translation adjustments.......................... $ -0-
28. TOTAL EQUITY CAPITAL......................................................... $ 244,487
29. TOTAL LIABILITIES AND EQUITY CAPITAL......................................... $2,186,800
</TABLE>
9
<PAGE> 10
REGISTERED OFFICE OF THE ISSUER
Tri-State Outdoor Media Group, Inc.
3416 Highway 41 South
Tifton, Georgia 31793
AUDITORS OF THE ISSUER
McGladrey & Pullen, LLP
1555 Palm Beach Lakes Boulevard, Suite 1400
West Palm Beach, Florida 33401
TRUSTEE
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
REGISTRAR AND TRANSFER AGENT
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
LEGAL ADVISOR TO THE COMPANY
As to U.S. law
St. John & Wayne, L.L.C.
Two Penn Plaza East
Newark, New Jersey 07105-2249
<PAGE> 1
EXHIBIT 25.2
LETTER OF TRANSMITTAL
TO EXCHANGE
11% SENIOR NOTES DUE 2008
OF
TRI-STATE OUTDOOR MEDIA GROUP, INC.
PURSUANT TO THE PROSPECTUS
DATED , 1998
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., EASTERN STANDARD TIME, ON
, 1998, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN PRIOR TO 5:00 P.M., EASTERN STANDARD TIME, ON THE EXPIRATION DATE.
To: IBJ Schroder Bank & Trust Company, Exchange Agent
<TABLE>
<S> <C> <C>
By Registered or Certified By Facsimile: 212-858-2611 By Hand/
Mail: (For Eligible Institutions Overnight Delivery:
One State Street Only) One State Street
New York, New York 10004 Confirm by Telephone: New York, New York 10004
Attention: Reorganization 212-858-2103 Attention: Reorganization
Operations Department Operations Department
</TABLE>
For Information Call:
212-858-2103
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER
THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS
VIA FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
The undersigned acknowledges receipt of the Exchange Offer Prospectus dated
, 1998 (the "Exchange Offer Prospectus") of Tri-State Outdoor
Media Group, Inc., a Kansas corporation (the "Company" or the "Issuer") and this
Letter of Transmittal, which may be amended from time to time (this "Letter"),
which together constitute the Issuer's offer to exchange (the "Exchange Offer"),
up to $100,000,000 in aggregate principal amount of its 11% Senior Notes due
2008 (the "Exchange Notes") for up to $100,000,000 in aggregate principal amount
of its outstanding 11% Senior Notes due 2008 that were issued and sold in
reliance on an exemption from registration under the Securities Act of 1933, as
amended (the "Existing Notes" and, together with the Exchange Notes, the
"Notes").
The undersigned has completed, executed and delivered this Letter to
indicate the action he or she desires to take with respect to the Exchange
Offer.
All holders of Existing Notes who wish to tender their Existing Notes must,
prior to the Expiration Date: (1) complete, sign, date and mail or otherwise
deliver this Letter to the Exchange Agent, in person or to the address set forth
above and (2) tender his or her Existing Notes or, if a tender of Existing Notes
is to be made by book-entry transfer to the account maintained by the Exchange
Agent at The Depository Trust Company (the "Book-Entry Transfer Facility"),
confirm such book-entry transfer (a "Book-Entry Confirmation"), in each case in
accordance with the procedures for tendering described in the Instructions to
this Letter. Holders of Existing Notes whose certificates are not immediately
available, or who are unable to deliver their certificates or Book-Entry
Confirmation and all other documents required by this Letter to be delivered to
the Exchange Agent on or prior to the Expiration Date, must tender their
Existing Notes according to the guaranteed delivery procedures set forth under
the caption "The Exchange Offer -- How to Tender" in the Prospectus. (See
Instruction 1).
The Instructions included with this Letter must be followed in their
entirety. Questions and requests for assistance or for additional copies of the
Prospectus or this Letter may be directed to the Exchange Agent at the address
listed above, or William G. McLendon, Chief Financial Officer of the Company, at
(800) 732-8261 or at 3416 Highway 41 South, Tifton, Georgia 31793.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL, INCLUDING
THE INSTRUCTIONS TO THIS LETTER, CAREFULLY
BEFORE CHECKING ANY BOX BELOW
Capitalized terms used in this Letter and not defined herein shall have
respective meanings ascribed to them in the Prospectus.
List below the Existing Notes of which you are the holder. If the space
provided below is inadequate, list the certificate numbers and principal amount
of Existing Notes on a separate signed schedule and affix it hereto.
BOX 1
- --------------------------------------------------------------------------------
TO BE COMPLETED BY ALL TENDERING HOLDERS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) TOTAL
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) CERTIFICATE AMOUNT
APPEAR(S) ON EXISTING NOTES) NUMBERS(1) EXIST
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
Totals:
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 3
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned tenders to the Issuer the principal amount of Existing Notes
indicated above. Subject to, and effective upon, the acceptance for exchange of
the Existing Notes tendered with this Letter, the undersigned exchanges, assigns
and transfers to, or upon the order of, the Issuer all right, title and interest
in and to the Existing Notes tendered.
The undersigned constitutes and appoints the Exchange Agent as his or her
agent and attorney-in-fact (with full knowledge that the Exchange Agent also
acts as the agent of the Issuer) with respect to the tendered Existing Notes,
with full power of substitution, to: (a) deliver certificates for such Existing
Notes, (b) deliver Existing Notes and all accompanying evidence of transfer and
authenticity to or upon the order of the Issuer upon receipt by the Exchange
Agent, as the undersigned's agent, of the Exchange Notes to which the
undersigned is entitled upon the acceptance by the Issuer of the Existing Notes
tendered under the Exchange Offer and (c) receive all benefits and otherwise
exercise all rights of beneficial ownership of the Existing Notes, all in
accordance with the terms of the Exchange Offer. The power of attorney granted
in this paragraph shall be deemed irrevocable and coupled with an interest.
The undersigned hereby represents and warrants that he or she has full
power and authority to tender, exchange, assign and transfer the Existing Notes
tendered hereby and that the issuer will acquire good and unencumbered title
thereto, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned will, upon request, execute
and deliver any additional documents deemed by the Issuer to be necessary or
desirable to complete the assignment and transfer of the Existing Notes
tendered. The undersigned has read and agrees to all of the terms of the
Exchange Offer.
- ---------------
(1) Need not be completed if Existing Notes are being tendered by book-entry
transfer.
(2) Unless otherwise indicated, the entire principal amount of Existing Notes
represented by a certificate or Book-Entry Confirmation delivered to the
Exchange Agent will be deemed to have been tendered. Existing Notes tendered
hereby must be in a principal amount of $1,000 and integral multiples
thereof.
The undersigned also acknowledges that the Exchange Offer is being made in
reliance on interpretations of the Staff of the Securities and Exchange
Commission as set forth in no-action letters issued to third parties. Based on
these interpretations, the Issuer believes that Exchange Notes issued pursuant
to the Exchange Offer in exchange for the Existing Notes may be offered for
resale, resold or otherwise transferred by holders thereof (other than any
holder which is (i) an "affiliate" of the Issuer within the meaning of Rule 405
under the Securities Act, (ii) a broker-dealer who acquired Existing Notes
directly from the Issuer or (iii) a broker-dealer who acquired Existing Notes as
a result of market-making or other trading activities) without compliance with
the registration and prospectus delivery provisions of the Securities Act
provided that such Exchange Notes are acquired in the ordinary course of such
holders' business, and such holders have no arrangement with any person to
holders' business, and such holders have no arrangement with any person to
participate in a distribution of such Exchange Notes.
The undersigned agrees that acceptance of any tendered Existing Notes by
the Issuer and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Issuer of its obligations under the
Registration Rights Agreement (as defined in the Exchange Offer Prospectus) and
that, upon the issuance of the Exchange Notes, the Issuer will have no further
obligations or liabilities thereunder (except in certain limited circumstances).
By tendering Existing Notes, the undersigned certifies (a) that it is not an
"affiliate" of the Issuer within the meaning of Rule 405 under the Securities
Act, that it is not a broker-dealer that owns Existing Notes acquired directly
from the Issuer or an affiliate of the undersigned's business and that the
undersigned has no arrangement with any person to participate in the
distribution of the Exchange Notes or (b) that it is an "affiliate" (as so
defined) of the Issuer or of the initial purchasers in the original offering of
the Existing Notes, and that it will comply with the registration and prospectus
delivery requirements of the Securities Act to the extent applicable to it.
The undersigned acknowledges that, if it is a broker-dealer that will
receive Exchange Notes for its own account as a result of market making
activities or other trading activities, it will deliver a prospectus in
<PAGE> 4
connection with any resale of such Exchange Notes and that it has not entered
into any arrangement or understanding with the Issuer or an affiliate of the
Issuer in connection with any resale of such Exchange Notes. By so acknowledging
and by delivering a prospectus, a broker-dealer will not be deemed to admit that
it is an "underwriter" within the meaning of the Securities Act.
The undersigned understands that the Issuer may accept the undersigned's
tender by delivering written notice of acceptance to the Exchange Agent, at
which time the undersigned's right to withdraw such tender will terminate.
All authority conferred or agreed to be conferred by this Letter shall
survive the death or incapacity of the undersigned, and every obligation of the
undersigned under this Letter shall be binding upon the undersigned's heirs,
personal representatives, successors and assigns. Tenders may be withdrawn only
in accordance with the procedures set forth in the Instructions contained in
this Letter.
Unless otherwise indicated under "Special Delivery Instructions" below, the
Exchange Agent will deliver Exchange Notes (and, if applicable, a certificate
for any Existing Notes not tendered but represented by a certificate also
encompassing Existing Notes which are tendered) to the undersigned at the
address set forth in Box 1 above.
The undersigned acknowledges that the Exchange Offer is subject to the more
detailed terms set forth in the Prospectus and, in case of any conflict between
the terms set forth in the Prospectus and this Letter, the Prospectus shall
prevail.
<PAGE> 5
BOX 2
METHOD OF DELIVERY
[ ] CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED BY BOOK-ENTRY
TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH A
BOOK-ENTRY TRANSFER FACILITY SPECIFIED ABOVE AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:
------------------------------------------------
Name of Book-Entry Transfer Facility:
-----------------------------------------
[ ] The Depository Trust Company
Account Number: Transaction Code Number:
--------------- ---------------
[ ] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF
TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s):
-----------------------------------------------
Window Ticket Number (if any):
------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
---------------------------
Name of Eligible Institution which Guaranteed Delivery:
-----------------------
If delivered by Book-Entry Transfer Facility, check box of Book-Entry Transfer
Facility:
[ ] The Depository Trust Company
Account Number: Transaction Code Number:
--------------- ---------------
[ ] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED EXISTING
NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH
ABOVE.
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE EXISTING NOTES OR ITS
OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A
"PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF
THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
-------------------------------------------------------------------------
Address:
----------------------------------------------------------------------
<PAGE> 6
BOX 3
- --------------------------------------------------------------------------------
SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS
OF EXISTING NOTES REGARDLESS OF WHETHER
EXISTING NOTES ARE BEING PHYSICALLY DELIVERED HEREWITH)
X
-------------------------------------------------------------------------------
X
-------------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S) OR AUTHORIZED SIGNATORY)
Must be signed by the registered holder(s) of Existing Notes exactly as their
name(s) appear(s) on certificate(s) for the Existing Notes or by person(s)
authorized to become registered holder(s) by endorsements and documents
transmitted with this Letter. If signature is by trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, agent or
other person acting in a fiduciary or representative capacity, please provide
the following information and see Instruction 3 below.
Name(s) ------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title)
---------------------------------------------------------------
Address:
-------------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and
Telephone Number:---------------------------------------------------------------
SIGNATURE GUARANTEE
(SEE INSTRUCTION 3 BELOW)
Name of Eligible Institution
Guaranteeing Signature(s)
-------------------------------------------------------
Address (including zip code)
and Telephone No. (including
area code) of Firm:
-------------------------------------------------------------
Authorized Signature:
-----------------------------------------------------------
Printed Name:
-------------------------------------------------------------------
Title:
--------------------------------------------------------------------------
Dated:
--------------------- , 1998
<PAGE> 7
BOX 4
------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Existing Notes in a
principal amount not tendered or not accepted for payment, or the Exchange
Notes, are to be issued in the name of someone other than the undersigned,
or if Existing Notes are to be returned by credit to an account maintained
by DTC.
Issue and deliver (check appropriate box):
[ ] Existing Notes not tendered or
[ ] Exchange Notes, to:
Name
-----------------------------------------------
(PLEASE PRINT)
Address
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER
(YOU MUST ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
Credit unaccepted Existing Notes tendered by book-entry transfer to:
[ ] The Depository Trust Company
Account set forth below:
------------------------------------------------------------
(DTC ACCOUNT NUMBER)
BOX 5
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Existing Notes in a
principal amount not tendered or not accepted for payment, or Exchange
Notes, are to be sent to someone other than the undersigned at an address
other than that shown above.
Deliver (check appropriate box):
[ ] Existing Notes not tendered or
[ ] Exchange Notes, to:
Name
------------------------------------------------
(PLEASE PRINT)
Address
------------------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
TAXPAYER IDENTIFICATION NUMBER
(YOU MUST ALSO COMPLETE SUBSTITUTE FORM W-9 BELOW)
<PAGE> 8
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE
EXCHANGE OFFER
1. DELIVERY OF THIS LETTER AND CERTIFICATES. Certificates for Existing
Notes or a Book-Entry Confirmation, as the case may be, as well as a properly
completed and duly executed copy of this Letter and any other documents required
by this Letter, must be received by the Exchange Agent at one of its addresses
set forth herein on or before the Expiration Date. The method of delivery of
this Letter, certificates for Existing Notes or a Book-Entry Confirmation, as
the case may be, and any other required documents is at the election and risk of
the tendering holder, but except as otherwise provided below, the delivery will
be deemed made when actually received by the Exchange Agent. If delivery is by
mail, the use of registered mail with return receipt requested, properly
insured, is suggested.
Holders whose Existing Notes are not immediately available or who cannot
deliver their Existing Notes or a Book-Entry Confirmation, as the case may be,
and all other required documents to the Exchange Agent on or before the
Expiration Date may tender their Existing Notes pursuant to the guaranteed
delivery procedures set forth in the Prospectus. Pursuant to such procedure: (i)
tenders must be made by or through an Eligible Institution (as defined in
Instruction 3 below); (ii) prior to the Expiration Date, the Exchange Agent must
have received from the Eligible Institution a properly completed and duly
executed Notice of Guaranteed Delivery (by telegram, telex, facsimile
transmission, mail or hand delivery) (x) setting forth the name and address of
the holder, the description of the Existing Notes and the principal amount of
Existing Notes tendered, (y) stating that the tender is being made thereby and
(z) guaranteeing that, within three New York Stock Exchange trading days after
the date of execution of such Notice of Guaranteed Delivery, this Letter
together with the certificates representing the Existing Notes or a Book-Entry
Confirmation, as the case may be, and any other documents required by this
Letter will be deposited by the Eligible Institution with the Exchange Agent and
(iii) the certificates for all tendered Existing Notes or a Book-Entry (iii) the
certificates for all tendered Existing Notes or a Book-Entry Confirmation, as
the case may be, as well as all other documents required by this Letter, must be
received by the Exchange Agent within three New York Stock Exchange trading days
after the date of execution of such Notice of Guaranteed Delivery, all as
provided in the Exchange Offer Prospectus under the caption "The Exchange
Offer -- How to Tender."
Holders of Existing Notes that are tendering by book-entry transfer to the
Exchange Agent's account at the Depository Trust Company ("DTC") can execute the
tender through the DTC Automated Tender Offer Program ("ATOP") for which the
transaction will be eligible. DTC participants should transmit their acceptance
to DTC, which will verify the acceptance and execute a book-entry delivery to
the Exchange Agent's account at DTC. DTC will then send an Agent's Message to
the Exchange Agent for its acceptance. DTC participants may also accept the
Exchange Offer by submitting a notice of guaranteed delivery through ATOP.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Existing Notes will be
determined by the Issuer, whose determination will be final and binding. The
Issuer reserves the absolute right to reject any or all tenders that are not in
proper form or the acceptance of which, in the opinion of the Issuer's counsel,
would be unlawful. The Issuer also reserves the right to waive any
irregularities or conditions of tender as to particular Existing Notes. All
tendering holders, by execution of this Letter, waive any right to receive
notice of acceptance of their Existing Notes.
Neither the Issuer, the Exchange Agent nor any other person shall be
obligated to give notice of defects or irregularities in any tender, nor shall
any of them incur any liability for failure to give any such notice.
2. PARTIAL TENDERS (NOT APPLICABLE TO HOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER); WITHDRAWALS. If less than the entire principal amount of any Existing
Notes evidenced by a submitted certificate or by a Book-Entry Confirmation is
tendered, the tendering holder must fill in the principal amount tendered in the
fourth column of Box 1 above. ALL OF THE EXISTING NOTES REPRESENTED BY A
CERTIFICATE OR BY A BOOK-ENTRY CONFIRMATION DELIVERED TO THE EXCHANGE AGENT WILL
BE DEEMED TO HAVE BEEN TENDERED UNLESS OTHERWISE INDICATED. A certificate for
Existing Notes not tendered will be sent to the holder, unless otherwise
provided in Box 5, as
<PAGE> 9
soon as practicable after the Expiration Date, in the event that less than the
entire principal amount of Existing Notes represented by a submitted certificate
is tendered (or, in the case of Existing Notes tendered by book-entry transfers,
such non-exchanged Existing Notes will be credited to an account maintained by
the holder with the Book-Entry Transfer Facility).
If not yet accepted, a tender pursuant to the Exchange Offer may be
withdrawn prior to the Expiration Date. To be effective with respect to the
tender of Existing Notes, a notice of withdrawal must: (i) be received by the
Exchange Agent before the Issuer notifies the Exchange Agent that it has
accepted the tender of Existing Notes pursuant to the Exchange Offer; (ii)
specify the name of the person who tendered the Existing Notes; (iii) contain a
description of the Existing Notes to be withdrawn, the certificate numbers shown
on the particular certificates evidencing such Existing Notes and the principal
amount of Existing Notes represented by such certificates and (iv) be signed by
the holder in the same manner as the original signature on this Letter
(including any required signature guarantee).
3. SIGNATURES ON THIS LETTER; ASSIGNMENT; GUARANTEE OF SIGNATURES. If
this Letter is signed by the holder(s) of Existing Notes tendered hereby, the
signature must correspond with the name(s) as written on the face of the
certificate(s) for such Existing Notes, without alteration, enlargement or any
change whatsoever.
If any of the Existing Notes tendered hereby are owned by two or more joint
owners, all owners must sign this Letter. If any tendered Existing Notes are
held in different names on several certificates, it will be necessary to are
held in different names on several certificates, it will be necessary to
complete, sign and submit as many separate copies of this Letter as there are
names in which certificates are held.
If this Letter is signed by the holder of record and (i) the entire
principal amount of the holder's Existing Notes are tendered and/or (ii)
untendered Existing Notes, if any, are to be issued to the holder of record,
then the holder of record need not endorse any certificates for tendered
Existing Notes, nor provide a separate bond power. In any other case, the holder
of record must transmit a separate bond power with this Letter.
If this Letter or any certificate or assignment is signed by trustees,
executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in a fiduciary or representative capacity, such
persons should so indicate when signing and proper evidence satisfactory to the
Issuer of their authority to so act must be submitted, unless waived by the
Issuer.
Signatures on this Letter must be guaranteed by an Eligible Institution,
unless Existing Notes are tendered: (i) by a holder who has not completed the
Box entitled "Special Issuance Instructions" or "Special Delivery Instructions"
on this Letter or (ii) for the account of an Eligible Institution. In the event
that the signatures in this Letter or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantees must be by an eligible
guarantor institution which is a member of The Securities Transfer Agents
Medallion Program (STAMP), The New York Stock Exchanges Medallion Signature
Program (MSP) or The Stock Exchanges Medallion Program (SEMP) (collectively,
"Eligible Institutions"). If Existing Notes are registered in the name of a
person other than the signer of this Letter, the Existing Notes surrendered for
exchange must be endorsed by, or be accompanied by a written instrument or
instruments of sole discretion, duly executed by the registered holder with the
signature thereon guaranteed by an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders should
indicate, in Box 4 or 5, as applicable, the name and address to which the
Exchange Notes or certificates for Existing Notes not exchanged are to be issued
or sent, if different from the name and address of the person signing this
Letter. In the case of issuance in a different name, the tax identification
number of the person named must also be indicated. Holders tendering Existing
Notes by book-entry transfer may request that Existing Notes not exchanged be
credited to such account maintained at the Book-Entry Transfer Facility as such
holder may designate.
5. TAX IDENTIFICATION NUMBER. Federal income tax law requires that a
holder whose tendered Existing Notes are accepted for exchange must provide the
Exchange Agent (as payor) with his or her correct taxpayer identification number
("TIN"), which, in the case of a holder who is an individual, is his or her
social security number. If the Exchange Agent is not provided with the correct
TIN, the holder may be subject to a $50
<PAGE> 10
penalty imposed by the Internal Revenue Service. In addition, delivery to the
holder of the Exchange Notes pursuant to the Exchange Offer may be subject to
back-up withholding. (If withholding results in overpayment of taxes, a refund
may be obtained.) Exempt holders (including, among others, all corporations and
certain foreign individuals) are not subject to these back-up withholding and
reporting requirements. See the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional
instructions.
Under federal income tax laws, payments that may be made by the Issuer on
account of Exchange Notes issued pursuant to the Exchange Offer may be subject
to back-up withholding at a rate of 31%. In order to prevent back-up
withholding, each tendering holder must provide his or her correct TIN by
completing the "Substitute Form W-9" referred to above, certifying that the TIN
provided is correct (or that the holder is awaiting a TIN) and that: (i) the
holder has not been notified by the Internal Revenue Service that he or she is
subject to back-up withholding as a result of a failure to report all interest
or dividends; or (ii) the Internal Revenue Service has notified the holder that
he or she is no longer subject to back-up withholding; or (iii) certify in
accordance with the Guidelines that such holder is exempt from back-up
withholding. If the Existing Notes are in more than one name or are not in the
name of the actual owner, consult the enclosed Guidelines for information on
which TIN to report.
6. TRANSFER TAXES. The Issuer will pay all transfer taxes, if any,
applicable to the transfer of Existing Notes to it or its order pursuant to the
Exchange Offer. If, however, the Exchange Notes or certificates for Existing
Notes not exchanged are to be delivered to, or are to be issued in the name of,
any person other than the record holder, or if tendered certificates are
recorded in the name of any person other than the person signing this Letter, or
if a transfer tax is imposed by any reason other than the transfer of Existing
Notes to the Issuer or its order pursuant to the Exchange Offer, then the amount
of such transfer taxes (whether imposed on the record holder or any other
person) will be payable by the tendering holder. If satisfactory evidence of
payment of taxes or exemption from taxes is not submitted with this Letter, the
amount of transfer taxes will be billed directly to the tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter.
7. WAIVER OF CONDITIONS; NO CONDITIONAL TENDERS. The Issuer reserves the
absolute right to amend or waive any of the specified conditions in the Exchange
Offer in the case of any Existing Notes tendered.
No alternative, conditional, irregular or contingent tenders will be
accepted.
8. MUTILATED, LOST, STOLEN OR DESTROYED CERTIFICATES. Any holder whose
certificate for Existing Notes have been mutilated, lost, stolen or destroyed
should contact the Exchange Agent at the address indicated above, for further
instructions.
9. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus or this Letter, may be directed to the Exchange Agent.
IMPORTANT: THIS LETTER (OR FACSIMILE THEREOF), TOGETHER WITH CERTIFICATES
OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS, MUST BE
RECEIVED BY THE EXCHANGE AGENT, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE EXCHANGE AGENT, ON OR PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON
THE EXPIRATION DATE.
<PAGE> 11
Name(s) as shown above of registered owners of 11% Senior Secured Notes (if
joint ownership, list first and circle the name of the person or entity whose
taxpayer identification number you enter in Part I below).
- --------------------------------------------------------------------------------
Business Name (sole proprietors, see enclosed Instructions for Substitute FORM
W-9)
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------------
SUBSTITUTE PART I -- PLEASE PROVIDE YOUR TAXPAYER --------------------------------------
FORM W-9 IDENTIFICATION NUMBER IN THE BOX AT RIGHT Social Security Number
DEPARTMENT OF THE AND CERTIFY BY SIGNING AND DATING BELOW.
TREASURY OR---------------------------------
INTERNAL REVENUE SERVICE Employer Identification
Number
Payer's Request for
Taxpayer ------------------------------------------------------------------------------------
Identification Number) PART II -- Payees exempt from backup withholding, see the enclosed instructions for
and Certification Substitute FORM W-9 -- Request for Taxpayer Identification Number and Certification.
- --------------------------------------------------------------------------------------------------------------
PART III -- CERTIFICATION. Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a number
to be issued to me), and
(2) I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not
been notified by Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of
failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject
to backup withholding.
CERTIFICATE INSTRUCTIONS. You must cross out item (2) above if you have been notified by the IRS that you
are subject to backup withholding because of underreporting interest or dividends on your tax return.
- --------------------------------------------------------------------------------------------------------------
SIGNATURE__________________________________________________________ DATE ___________________________________
</TABLE>
NOTE: PLEASE PROVIDE YOUR SOCIAL SECURITY NUMBER OR OTHER TAXPAYER
IDENTIFICATION NUMBER ON THIS SUBSTITUTE FORM W-9 AND CERTIFY THEREIN THAT
YOU ARE NOT SUBJECT TO BACKUP WITHHOLDING. FAILURE COMPLETE AND RETURN
THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO
YOU. FOR ASSISTANCE, SEE THE ENCLOSED INSTRUCTIONS FOR SUBSTITUTE FORM
W-9.
<PAGE> 12
INSTRUCTIONS FOR SUBSTITUTE FORM W-9
HOLDERS SHOULD READ CAREFULLY THE FOLLOWING INSTRUCTIONS FOR COMPLETING THE
ENCLOSED SUBSTITUTE FORM W-9 AND CONSULT THEIR OWN TAX ADVISORS FOR MORE
DETAILED INFORMATION.
PURPOSE OF FORM. The Company is required to obtain your Taxpayer Identification
Number (TIN) and to report income paid to you to the IRS. Use the Substitute
Form W-9 to give your correct TIN to the Company and (1) to certify the TIN you
are giving is correct (or you are waiting for a number to be issued), (2) to
certify you are not subject to backup withholding, or (3) to claim exemption
from backup withholding if you are an exempt payee. Giving your correct TIN and
making the appropriate certifications will prevent payments from the Company
from being subject to backup withholding. If you are subject to backup
withholding, the Company is required to withhold and pay to the IRS 31% of
payments made to you.
HOW TO GET A TIN. If you do not have a TIN, apply for one immediately. To
apply, get Form SS-5, Application for a Social Security Number Card (for
individuals), from your local office of the Social Security Administration, or
Form SS-4, Application for Employer Identification Number (for businesses and
all other entities), from your local IRS office. If you do not have a TIN, write
"Applied For" in the space for the TIN in Part I, sign and date the form, and
give it to the Company. Generally, you will then have 60 days to get a TIN and
give it to the Company. If the Company does not receive your TIN within 60 days,
backup withholding, if applicable, will begin and continue until you furnish
your TIN. As soon as you receive your TIN, complete another Form W-9, include
your TIN, sign and date the form, and give it to the Company. Note: Writing
"Applied For" on the form means that you have already applied for a TIN or that
you intend to apply for one soon.
PENALTIES. You are subject to a penalty of $50 for each failure to furnish your
correct TIN to the Company unless your failure is due to reasonable cause and
not to willful neglect. If, with no reasonable basis, you make a false statement
that results in no backup withholding, you are subject to a $500 penalty.
Willfully falsifying certifications or affirmations may subject you to criminal
penalties, including fines and/or imprisonment.
WHAT NAME AND TIN TO GIVE THE COMPANY. If you are an individual, you must
generally enter the name shown on your social security card, and your correct
TIN is your social security number (SSN). However, if you have changed your last
name, for instance, due to marriage, without informing the Social Security
Administration of the name change, please enter your first name, the last name
shown on your social security card, and your new last name. Enter your SSN in
Part I. If you are a sole proprietor, you must enter your individual name. You
may also enter your business name or "doing business as" name on the business
name line. Enter your name as shown on your social security card and business
name as it was used to apply for your Employer Identification Number ("EIN") on
Form SS-4. You may enter either your SSN or EIN as your correct TIN in Part I.
Other payees, please refer to the table below.
NAME AND TIN TO ENTER ON FORM W-9
<TABLE>
<C> <S> <C>
- ---------------------------------------------------------------
ENTER NAME
FOR THIS TYPE OF PAYEE: AND SSN OF:
- ---------------------------------------------------------------
1. Individual The individual
2. Two or more individuals The actual owner or,
if joint, the first
person on the Note(*)
3. Custodian account of a minor The minor(**)
(Uniform Gift to Minors Act)
4. a. A revocable savings trust The grantor-trustee(*)
(grantor is also trustee)
b. So-called trust account that is The actual owner(*)
not a legal or valid state law
trust
5. Sole proprietorship The owner(**)
- ---------------------------------------------------------------
- ---------------------------------------------------------------
ENTER NAME
FOR THIS TYPE OF PAYEE: AND EIN OF:
- ---------------------------------------------------------------
6. Sole proprietorship The owner(***)
7. A valid trust, estate, or pension Legal entity(****)
trust
8. Corporate The corporation
9. Association, club, religious, The organization
charitable educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered nominee The broker or nominee
- ---------------------------------------------------------------
</TABLE>
* List first and circle the name of the person whose number you furnish.
** Circle minor's name and furnish the minor's SSN.
*** You must show your individual name, but you may also enter your business
or "doing business as" name. You may use either your SSN or EIN.
**** List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the TIN of the personal representative or trustee
unless the legal entity itself is not designated as a registered owner.)
NOTE: If no name is circled when more than one name is listed, the number will
be considered to be that of the first name listed.
<PAGE> 13
FOR PAYEES EXEMPT FROM BACKUP WITHHOLDING. Certain payees are exempt from
backup withholding and information reporting. Individuals (including sole
proprietors) are not exempt. Corporations are exempt from backup withholding for
certain payments, such as interest and dividends. For a complete list of exempt
payees, contact the Information Agent. If you are an exempt payee, you should
still complete the Form W-9 to avoid possible erroneous backup withholding.
If you are a nonresident alien or a foreign entity not subject to backup
withholding, you must give the Company a completed Form W-8 -- Certificate of
Foreign Status to avoid backup withholding.
INSTRUCTIONS FOR PART III -- CERTIFICATION. If the Notes are in more than one
name or are not in the name of the actual owner, only the person whose TIN is
shown in Part I should sign.
PRIVACY ACT NOTICE. Section 6109 of the Internal Revenue Code requires you to
give your correct TIN to persons who must file information returns with the IRS
to report interest, dividends, and certain other income paid to you, mortgage
interest you paid, the acquisition or abandonment of secured property,
cancellation of debt, or contributions you made to an IRA. The IRS uses the
numbers for identification purposes and to help verify the accuracy of your tax
return. You must provide your TIN whether or not you are required to file a tax
return. Payers must generally withhold 31% of taxable interest, dividend, and
certain other payments to a payee who does not give a TIN to a payer. Certain
penalties also may apply.
<PAGE> 1
Please read the accompanying instructions carefully.
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and
conditions set forth in the Prospectus and the related Letter of Transmittal,
receipt of which are hereby acknowledged, the aggregate principal amount of
Existing Notes set forth below pursuant to the guaranteed delivery procedures
described in the Prospectus and the Letter of Transmittal. The undersigned
hereby tenders the Existing Notes listed below.
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
PLEASE SIGN AND COMPLETE
- -----------------------------------------------------------------------------------------------------------------
Signature(s) of Registered Holders or Authorized Address(es): ------------------------------------
Signatory: ---------------------------------------------------
---------------------------------------------------
- ----------------------------------------------------- Area Code and Telephone:---------------------
If Existing Notes will book-entry transfer, c
- ----------------------------------------------------- [ ] The Depository Trust Transaction Code No.:
Name(s) of Registered Holder(s): ---------------------------------------------------
Depository Account No.:
- ----------------------------------------------------- ---------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------
Principal Amount of Existing Notes Tendered:
- -----------------------------------------------------
Certificate No(s). of Existing Notes
(if available)
- -----------------------------------------------------
- -----------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
This Notice of Guaranteed Delivery must be signed by the registered holder(s) of Notes exactly as their
name(s) appear(s) on the Existing Notes or by person(s) authorized to become registered holder(s) by
endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee,
guardian, attorney-in-fact, officer of a corporation, executor, administrator, agent or other representative,
such person must provide the following information.
Please print name(s) and address(es)
Name(s):
--------------------------------------------------------------------------------------------------------------
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Capacity:
--------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------
Address(es):
--------------------------------------------------------------------------------------------------------------
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DO NOT SEND EXISTING NOTES WITH THIS FORM. EXISTING NOTES SHOULD BE SENT TO THE EXCHANGE AGENT, TOGETHER WITH
A PROPERLY COMPLETED AND VALIDLY EXECUTED LETTER OF TRANSMITTAL.
</TABLE>
- --------------------------------------------------------------------------------
<PAGE> 2
<TABLE>
<S> <C>
- -----------------------------------------------------------------------------------------------------------------
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of the Securities Transfer Agents Medallion Program, the Stock Exchange
Medallion Program or the New York Stock Exchange Medallion Signature Program, hereby guarantees that, within
three business days from the date of this Notice of Guaranteed Delivery, a properly completed and validly
executed Letter of Transmittal (or a facsimile thereof), together with Existing Notes tendered hereby in proper
form for transfer (or confirmation of the book-entry transfer of such Existing Notes into the Depository's
account at DTC pursuant to the procedures for book-entry transfer set forth in the Prospectus under the caption
"The Exchange Offer -- How to Tender") and all other required documents will be deposited by the undersigned
with the Exchange Agent at its address set forth above.
- -----------------------------------------------------------------------------------------------------------------
Name of Firm: ----------------------------------- ---------------------------------------------------
AUTHORIZED SIGNATURE
Address: ------------------------------------------
Name:------------------------------------------
- -----------------------------------------------------
Title:--------------------------------------------
Area Code and Tel. No.: ------------------------
Date:--------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
DO NOT SEND EXISTING NOTES WITH THIS FORM. ACTUAL SURRENDER OF EXISTING NOTES
MUST BE MADE PURSUANT TO, AND BE ACCOMPANIED BY, A PROPERLY COMPLETED AND
VALIDLY EXECUTED LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS.
<PAGE> 3
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to 5:00 p.m., New York City
time, on the Expiration Date. The method of delivery of this Notice of
Guaranteed Delivery and any other required documents to the Exchange Agent is at
the election and risk of the holder and the delivery will be deemed made only
when actually received by the Exchange Agent. If delivery is by mail, registered
or certified mail properly insured, with return receipt requested, is
recommended. In all cases sufficient time should be allowed to assure timely
delivery. For a description of the guaranteed delivery procedure, see
Instruction 1 of the Letter of Transmittal.
2. SIGNATURES ON THIS NOTICE OF GUARANTEED DELIVERY. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the Existing Notes
referred to herein, the signature must correspond with the name(s) written on
the face of the Existing Notes with alteration, enlargement, or any change
whatsoever. If this Notice of Guaranteed Delivery is signed by a participant of
the book-entry transfer facility whose name appears on a security position
listing as the owner of Existing Notes, the signature must correspond with the
name shown on the security position listing as the owner of the Existing Notes.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any Existing Notes listed or a participant of the
book-entry transfer facility, this Notice of Guaranteed Delivery must be
accompanied by appropriate bond powers, signed as the name of the registered
holder(s) appears on the Existing Notes or signed as the name of the participant
shown on the book-entry transfer facility's security position listing.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing.
3. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders may also contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
<PAGE> 1
EXHIBIT 25.4
EXCHANGE AGENCY AGREEMENT
This Agreement is entered into as of July , 1998 between IBJ Schroder
Bank & Trust Company, a banking corporation organized under the laws of the
State of New York, as Exchange Agent (the "Agent"), Tri-State Outdoor Media
Group, Inc., a corporation organized under the laws of the State of Kansas (the
"Company").
The Company proposes to exchange $1,000 principal amount of the Company's
11% Senior Notes due 2008, [Series B] (the "New Notes" or "Exchange Notes") in
exchange (the "Exchange Offer") for an equal aggregate principal amount of the
Company's outstanding 11% Senior Notes due 2008, [Series A] (the "Existing
Notes") pursuant to the Exchange Agency Agreement dated as of July , 1998 and
the accompanying Letter of Transmittal. The Exchange Offer will terminate at
5:00 p.m. New York City Time on , unless extended by the Company
in its sole discretion (the "Expiration Date"). The New Notes are to be issued
by the Company pursuant to the terms of an Indenture dated as of May 15, 1998
(the "Indenture") between the Company and IBJ Schroder Bank & Trust Company, as
trustee (the "Trustee").
Subject to the provisions hereof, the Company hereby appoints and the Agent
hereby accepts the appointment as Agent for the purposes of receiving, accepting
for delivery and otherwise acting upon tenders of the Existing Notes (the
"Certificates") in accordance with the form of Letter of Transmittal attached
hereto (the "L/T") and with the terms and conditions set forth herein and under
the caption "The Exchange Offer" in the Prospectus.
The Agent has received the following documents (the "Exchange Offer
Documents") in connection with its appointment:
(1) L/T
(2) a form of Notice of Guaranteed Delivery
(3) the Prospectus
(4)
The Agent is authorized and hereby agrees to act as follows:
(a) to address, and deliver by hand or next day courier, a complete set of
the Exchange Offer Documents to each person who, prior to the
Expiration Date, becomes a registered holder of Existing Notes promptly
after such person becomes a registered holder of Existing Notes;
(b) to receive all tenders of Existing Notes made pursuant to the Exchange
Offer and stamp the L/T with the day, month and approximate time of
receipt;
(c) to examine each L/T and Existing Note received to determine that all
requirements necessary to constitute a valid tender have been met. The
Agent shall be entitled to rely on the electronic messages sent by the
Depository Trust Company ("DTC") regarding ATOP delivery of the Notes
to the Agent's account at DTC from the DTC participants listed on the
DTC position listing provided to the Agent;
(d) to take such actions necessary and appropriate to correct any
irregularity or deficiency associated with any tender not in proper
order;
(e) to follow instructions given by Sheldon G. Hurst/William G. McLendon of
the Company, with respect to the waiver of any irregularities or
deficiencies associated with any tender;
(f) to hold all valid tenders subject to further instructions from Sheldon
G. Hurst/William G. McLendon of the Company;
