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As filed with the Securities and Exchange Commission on May 12, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------------
ADDVANTAGE MEDIA GROUP, INC.
(Exact name of registrant as specified in charter)
OKLAHOMA 58-1954497
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5100 EAST SKELLY DRIVE, MERIDIAN TOWER, SUITE 1080
TULSA, OKLAHOMA 74135
(918) 665-8414
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive office)
GARY W. YOUNG
ADDVANTAGE MEDIA GROUP, INC.
5100 EAST SKELLY DRIVE, MERIDIAN TOWER, SUITE 1080
TULSA, OKLAHOMA 74135
(918) 665-8414
(Address, including zip code, and telephone number, including area code, of
agent for service)
COPIES TO:
LYNNWOOD R. MOORE, JR., ESQUIRE
CONNER & WINTERS, A PROFESSIONAL CORPORATION
2400 FIRST NATIONAL TOWER, 15 EAST 5TH STREET
TULSA, OKLAHOMA 74103
(918) 586-5711
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to a dividend or interest reinvestment plans, please check the
following box: [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434, check
the following box: [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=====================================================================================================
Title of each class Amount Proposed maximum Proposed maximum Amount of
of securities to be to be offering price aggregate registration
registered registered(1) per share(2) offering price(2) fee
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------
Common Stock, $.01 par value 600,000 $3.90625 $2,343,750 $710.23
=====================================================================================================
</TABLE>
(1) Includes 50,000 shares issuable upon exercise of a warrant at an exercise
price of $1.00 per share.
(2) Estimated solely for the purposes of calculating the registration fee in
accordance with Rule 457(c) on the basis of the average of the bid and ask
price as quoted on the NASDAQ Small Cap Market on May 7, 1997.
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
Subject to Completion: Dated May 12, 1997
PROSPECTUS
- ----------
ADDVANTAGE MEDIA GROUP, INC.
600,000 SHARES OF COMMON STOCK, PAR VALUE $.01
This prospectus ("Prospectus") covers 600,000 shares ("Shares") of the
common stock, par value $.01 per share ("Common Stock") of ADDvantage Media
Group, Inc., an Oklahoma corporation (the "Company") which may be offered for
sale from time to time by the Selling Stockholders. See "Selling Stockholders."
The Company will not receive any of the proceeds from the sale of Shares by the
Selling Stockholders.
Sales of Shares by the Selling Stockholders may be effected from time to
time in one or more transactions, including block trades, in the over-the-
counter market, on one or more exchanges, in negotiated transactions or in a
combination of any such methods of sale. The selling price of the Shares may be
at the market price prevailing at the time of sale, at a price related to such
prevailing market price or at a negotiated price. The Selling Stockholders may
be deemed to be "underwriters" within the meaning of the Securities Act of 1933,
as amended (the "Securities Act"). See "Plan of Distribution." The Company has
agreed to indemnify the Selling Stockholders against certain civil liabilities,
including liabilities under the Securities Act.
The Company's Common Stock is traded on the NASDAQ Small Cap Market system
("NASDAQ") under the symbol "ADDM." On May 7, 1997, the closing bid price of
the Company's Common Stock as quoted by the NASDAQ was $3.9373 per share.
The Company has agreed to pay all the costs and fees relating to the
registration of the Shares covered by this Prospectus. However, the Company will
not pay any discounts, concessions or commissions payable to underwriters,
brokers, dealers or agents incident to the offering of the Shares covered by
this Prospectus or fees and expenses incurred by counsel for the Selling
Stockholders.
SEE "RISK FACTORS" ON PAGE 3 OF THIS PROSPECTUS FOR A DISCUSSION OF CERTAIN
FACTORS THAT PROSPECTIVE INVESTORS SHOULD CONSIDER PRIOR TO AN INVESTMENT IN
THESE SECURITIES.
------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE 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 May ____, 1997.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This Prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
-------------------------------------------
ALL STATEMENTS IN THIS PROSPECTUS OTHER THAN STATEMENTS OF HISTORICAL FACT
ARE FORWARD LOOKING STATEMENTS THAT ARE SUBJECT TO KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH COULD CAUSE ACTUAL RESULTS AND
PERFORMANCE OF THE COMPANY TO DIFFER MATERIALLY FROM SUCH STATEMENTS. THE
WORDS "BELIEVE," "EXPECT," "ANTICIPATE," "INTEND," "WILL," AND SIMILAR
EXPRESSIONS IDENTIFY FORWARD LOOKING STATEMENTS. ALTHOUGH THE COMPANY
BELIEVES THE EXPECTATIONS EXPRESSED IN SUCH FORWARD LOOKING STATEMENTS ARE
BASED ON REASONABLE ASSUMPTIONS WITHIN THE BOUNDS OF THE COMPANY'S
KNOWLEDGE OF ITS BUSINESS, SUCH STATEMENTS ARE NOT GUARANTEES OF FUTURE
PERFORMANCE AND ACTUAL RESULTS OR DEVELOPMENTS MAY DIFFER MATERIALLY FROM
THOSE IN THE FORWARD LOOKING STATEMENTS. IMPORTANT FACTORS THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE FORWARD LOOKING
STATEMENTS AND THE EXPECTATIONS OF THE COMPANY REFERRED TO IN THIS
PROSPECTUS INCLUDE WITHOUT LIMITATION THE FACTORS SET FORTH UNDER THE
HEADING "RISK FACTORS."
--------------------------------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended ("Exchange Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "Commission"). Such reports, proxy statements and other
information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D. C. 20549, as well as at its Regional Offices located at 7
World Trade Center, Suite 1300, New York, New York 10048, and 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material can
be obtained also from the Public Reference Section of the Commission, 450 Fifth
Street, N.W., Room 1024, Washington, D. C. 20549, at prescribed rates. Such
materials can be accessed through the World Wide Web site of the Commission,
which contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission
(http://www.sec.gov). The Company's Common Stock is listed with NASDAQ, and
reports, proxy statements and other information concerning the Company may also
be inspected at the NASDAQ offices at 1735 K Street, N.W., Washington, D. C.
20006-1506.
The Company filed a registration statement on Form S-3 (together with any
amendments thereto, the "Registration Statement") under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the Shares offered by
this Prospectus. This Prospectus constitutes a part of the Registration
Statement and omits certain information contained in the Registration Statement
in accordance with the rules and regulations of the Commission. Accordingly,
reference is made to the Registration Statement and the exhibits thereto for
further information with respect to the Company and the Shares offered hereby,
copies of which may be obtained at prescribed rates upon request to the
Commission in Washington, D. C. Any statements contained herein concerning the
provisions of any documents are not necessarily complete, and, in each instance,
such statements are qualified in their entirety by reference to such document
filed as an exhibit to the Registration Statement or otherwise filed with the
Commission.
The mailing address, including zip code, and the telephone number of the
principal executive office of the Company is 5100 East Skelly Drive, Meridian
Tower, Suite 1080, Tulsa, Oklahoma 74135, telephone number (918) 665-8414.
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INCORPORATION BY REFERENCE
The following documents filed by the Company with the Commission under the
Exchange Act are incorporated by reference in this Prospectus and will be deemed
a part of this Prospectus:
(1) Annual Report on Form 10-KSB for the year ended December 31, 1996.
(2) Quarterly Report on Form 10-QSB for the three months ended March 31,
1997.
(3) Form 8-A dated June 28, 1991.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering under this Prospectus will be deemed to be
incorporated by reference into this Prospectus from the respective dates those
documents are filed. If any statement in this Prospectus, in a subsequent
supplement to this Prospectus or any document incorporated by reference in this
Prospectus is modified or superseded by a statement in this Prospectus, in a
subsequent supplement to this Prospectus, or in any document incorporated by
reference in this Prospectus, the earlier statement will be deemed, for the
purposes of this Prospectus to have been modified or superseded by the
subsequent statement, and the earlier statement is incorporated by reference
only as modified or to the extent it is not superseded.
The Company will provide to each person to whom this Prospectus is
delivered a copy of any or all of the documents which have been or may be
incorporated by reference in this Prospectus (other than certain exhibits to
those documents). Such copies will be provided upon written or oral request and
without charge. Requests should be directed to Gary W. Young, ADDvantage Media
Group Inc., 5100 East Skelly Drive, Meridian Tower, Suite 1080, Tulsa, Oklahoma
74135, telephone (918) 665-8414.
RISK FACTORS
An investment in the Common Stock involves a high degree of risk and should
not be made by persons who cannot afford the loss of their entire investment.
The following factors, in addition to those discussed elsewhere in this
Prospectus, should be considered carefully in evaluating the Company and its
business.
DEPENDENCE ON WAL-WART. Virtually all of the Company's current revenues
are generated from its contract with Wal-Mart Stores, Inc. ("Wal-Mart") for the
installation of the Shoppers Calculator(R) in all of Wal-Mart's "Supercenter"
stores ("Supercenters"). As a result, the Company is substantially dependent on
its relationship with Wal-Mart for both its current operations and its future
growth in the near term. While the Company recently obtained a contract with
Kmart Corporation ("Kmart") for the installation of the Shoppers Calculator(R)
program in certain Kmart stores, their is no assurance at this time that the
Company will be successful in generating revenues from the sale of advertising
under the Kmart contract. Accordingly, any adverse development affecting Wal-
Mart, any decision by Wal-Mart to reduce the number of Supercenters it plans to
open, or any decision by Wal-Mart to close existing Supercenter locations or any
material breach by either Wal-Mart or the Company of its obligations under the
contract could have a material adverse effect on the Company's operations and
future prospects.
The Company's relationship with Wal-Mart is governed by an agreement
between Wal-Mart and the Company, pursuant to which Wal-Mart has agreed to pay
the Company, before October 7, 1998, revenues totaling $23,554,800. These
revenues are payable to the Company at a rate of $2,700 per four-week
advertising cycle for each Supercenter in which the Company has completed the
installation of its calculators until the Company has received a total of
$23,554,800; provided, however, if the Company has not received revenues of
$23,554,800 prior to October 7, 1998, Wal-Mart is obligated to pay the
difference between such amount and the amount actually paid to the Company under
the agreement prior to such date. Upon the receipt by the Company of payments
totaling $23,554,800, the Company has the option to continue the agreement
through October 6, 1999. If the Company elects to continue the agreement, the
Company will be responsible for generating revenues from the sale of
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advertising on the calculators installed in the Supercenter chain and is
obligated to pay Wal-Mart 10% of such advertising gross revenues.
During the last quarter of 1996, at Wal-Mart's request, the Company assumed
primary responsibility for sales of advertising and has submitted to Wal-Mart
proposals relating to the recovery of the Company's costs and expenses incurred
in its advertising sales efforts, amending the sharing ratios after the
guaranteed amount of revenues has been received, and extending the contract
termination date. At March 31, 1997, no formal action on these proposals had
been taken. However, Wal-Mart is providing certain assistance to the Company by
providing, without charge to the advertiser or the Company:
. the right to place Shoppers Calculator(R) with flashing lights on the
shelf where the advertised products are located;
. broadcast advertising spots over each store's public address system
for products which are advertised on the Shoppers Calculator(R); and
. statistical information regarding sales of advertised products which
is useful in evaluating the effectiveness of the advertising on the
Shoppers Calculator(R).
This assistance is not required of Wal-Mart under the terms of the contract and
any or all of it could be terminated or modified at any time.
Upon expiration of the agreement, the parties would be required to enter
into a new agreement for the relationship to continue. The agreement is subject
to termination prior to its expiration upon any breach of any covenant,
agreement, representation or warranty under the agreement by any party,
including the Company's obligation to fulfill its installation obligations, that
is not cured within 30 days' written notice of such breach. If the Company
became unable to fulfill its installation and service obligations under the
agreement for any reason and, as a result, the agreement were terminated, such
termination would have a material adverse effect on the Company and could result
in termination of its operations.
LIMITED OPERATING HISTORY. The Company was formed in September 1989 but
did not commence any significant operations until 1990. The Company was a
development stage company from inception throughout a substantial portion of
1991 and generated only limited revenues through its original business plan of
selling the advertising space on its calculators installed in its grocery chain
network. Beginning in 1992, the Company changed its marketing emphasis to the
sale of the calculators to the grocery chains, giving such chains a higher share
of any advertising revenues generated by the Company, in an effort to generate
greater cash flow while continuing to add grocery chains to its network. In
addition, the Company found it necessary to implement a cost reduction program
commencing in 1992. In 1993, the Company made a strategic decision to re-direct
its marketing program to the mass merchandising industry and removed its
calculators from the grocery chain network. From 1993 through most of 1995, the
Company conducted product tests within the mass merchant industry and did not
generate any revenues. The Company began receiving revenues under its contract
with Wal-Mart in November of 1995 and, as of the date of this Prospectus, had
not commenced its Shoppers Calculator(R) program under the Kmart contract. As a
result, the Company has only a limited operating history under its current
business plan.
At December 31, 1996, the Company had positive worth, calculated in
accordance with generally accepted accounting principles. In 1996, the Company
earned revenues sufficient to cover its costs of sales and other expenses for
the first time during any full year of operations. Prior to 1996, the Company's
activities and related costs and expenses, along with interest expense, resulted
in losses being incurred in all annual periods and on a cumulative basis since
the Company's inception. There can be no assurance that the Company will be
able to sustain profitability in the future.
4
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REQUIREMENTS FOR CAPITAL. The Company's agreement with Wal-Mart
contemplates the expansion of the number of calculators to be installed to
approximately 519,600 calculators in 433 Supercenters by 1998. The Company
anticipates that the revenues generated under the Wal-Mart agreement will
provide the Company with sufficient working capital to fund the manufacturing
and service costs anticipated to meet the Company's commitments under the Wal-
Mart agreement. In addition, the Company anticipates that such revenues will be
sufficient to fund the proposed installation of the Company's calculators under
the Kmart agreement. The Company will market its mass merchandising program to
other mass merchandising retail chains. If the Company is successful in
obtaining contracts with such chains, it is possible the Company would require
additional funds to finance future operations under those contracts. The amount
of working capital which the Company may have to obtain through additional
third-party financing will depend on the level of cash flow generated under the
Wal-Mart agreement and the specific terms of any contract entered into with
additional retailers. The Company currently has no commitments for any
additional third-party financing, and there can be no assurance that the Company
will be able to obtain such financing if it becomes necessary to do so or that,
if such financing is obtained, such financing will be on terms and conditions
that are favorable to the Company.
DEPENDENCE ON SINGLE PRODUCT. The Company's financial condition and
prospects are substantially dependent on the successful marketing of its solar-
powered calculator program (marketed under the registered trademark "Shoppers
Calculator(R)") to mass merchandising chains and the sale of advertising space
thereon. Although the Company intends to develop other in-store advertising
products in the future, the Company has no other products or services in the
planning stages at this time and the Shoppers Calculator(R) is its only product
currently available for commercial exploitation. Accordingly, the Company's
financial success may be substantially dependent on the commercial acceptance of
the Shoppers Calculator(R) by advertisers. See "The Company."
COMMERCIAL ACCEPTANCE BY ADVERTISERS. The Company believes that the
commercial success of the Shoppers Calculator(R) is ultimately dependent on its
commercial acceptance by advertisers. The Company's previous efforts to
establish its Shoppers Calculator(R) program in the grocery chain industry
failed to achieve the desired level of acceptability by national advertisers
due, in the Company's belief, to the limited size and geographic scope of its
grocery chain network. See "Rick Factors - Dependence on Wal-Mart." While the
Company received favorable results and responses in its test marketing of the
Shoppers Calculator(R) in mass merchandising retail stores, it has yet to
receive sufficient commitments for advertising to demonstrate the commercial
acceptance of the Shoppers Calculator(R) program. Accordingly, there can be no
assurance at this time that the Company's Shoppers Calculator(R) program in the
mass merchandising industry will be commercially accepted by advertisers.
NO ASSURANCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. The
Company's Common Stock is currently quoted on the NASDAQ Small Cap Market
system. The market price of the Company's securities may be highly volatile.
There have been periods of extreme fluctuation in the stock market that, in many
cases, are unrelated to the operating performance of the issuers of the affected
securities. Securities of issuers having relatively limited capitalization as
the Company are particularly susceptible to significant fluctuations in response
to variations in operating results. If the Company is unable to comply with
certain capital surplus maintenance requirements imposed by the NASDAQ Small Cap
Market system, trading of the Common Stock on the NASDAQ Small Cap Market system
may be suspended or terminated. In this event, public trading of the Company's
securities may be significantly more limited than would otherwise be the case
and its securities may, from time to time, be subject to the "penny stock
restrictions", which may have the effect of delaying transactions in stocks
which are subject to such restrictions.
COMPETITION. Currently, most major mass merchandising chains have not
licensed third parties to sell in-store advertising in their retail stores. As a
result, the Company may be one of the first advertising providers serving the
mass merchants' retail stores. However, there are numerous competitors
providing other types of in-store advertising mediums to other types of
retailers including the framed advertising on the front of each shopping cart,
shelf and aisle signs and displays, and check-out counter signage. Most of
these possible competitors have greater financial and human resources and
generally a more diversified product line than the Company. In addition,
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one or more of the Company's competitors could develop a product similar or,
should it choose to dispute the validity of the design patent, identical to the
Shoppers Calculator(R) and compete directly against the Company. Since most
manufacturers and suppliers have limited advertising budgets, the Company
competes with all other advertising media. It is still uncertain whether the
Shoppers Calculator(R) will be able to compete effectively for available
advertising dollars.
DEPENDENCE ON THIRD-PARTY MANUFACTURERS. The Company presently has no
manufacturing facilities. As a result, it must rely upon third parties to
manufacture all components necessary to assemble the calculators, thus giving
the Company less control over the prices, quality and timing of its products
than it might otherwise have if it had sufficient resources to manufacture such
products itself. In addition, the manufacturer of a major component of the
Company's calculator units is located in Hong Kong which is scheduled to come
under the government of the People's Republic of China on June 30, 1997.
Accordingly, there is a risk that such relationship may be interrupted or
terminated requiring the Company to locate alternative manufacturers which may
result in increased costs to the Company.
DEPENDENCE ON KEY PERSONNEL. The Company's ability to develop and market
its product and to achieve and maintain a competitive position depends, in large
part, on its ability to attract and retain qualified personnel. Competition for
such personnel is intense and there can be no assurance that the Company will be
able to attract and retain such personnel. The Company is dependent in
particular upon the services of its executive officers. The loss of one or more
of its executive officers could have a materially adverse effect on the Company.
The Company currently maintains life insurance on each of Charles H. Hood, its
Chairman and President, and Gary W. Young, its Executive Vice President-Finance
and Administration and Treasurer, in an amount of $1,900,000 and $1,800,000,
respectively, for the benefit of the Company.
GOVERNMENT REGULATION. The furnishing of advertising allowances, credits
or compensation to retail establishments by manufacturers or distributors must
comply with certain federal laws and with regulations promulgated by the Federal
Trade Commission (the "FTC"). Advertisers may require that the programs in
which they participate comply with such laws and FTC regulations, which may
affect the timing and terms under which the Company's programs may be provided
and may make such programs more costly. In addition, the laws and FTC
regulations are very technical and may be subject to differing interpretations.
The Company will attempt to maintain compliance with such laws and regulations,
however, there can be no assurance that it will be able to do so.
PATENT RISKS. The Company has acquired all rights in a design patent issued
in December 1986 on the Shoppers Calculator(R) described as a "Calculator for a
Shopping Cart." In addition, the Company has acquired all rights in a U.S.
design patent issued in 1992 on the Shoppers Calculator(R) described as a
"Calculator with Advertising Space for a Shopping Cart Handle" and additional
design patents on package concept calculators. There can be no assurance,
however, that the design patents will provide adequate protection against
competing products.
The Company has filed the necessary documentation to seek design patents or
registered designs in Australia, Canada, France, Germany, the United Kingdom and
Venezuela with respect to the U.S. design patent issued in August 1992. Design
patents or registered designs for the Shoppers Calculator(R) have been granted
or registered in Australia, Canada, Germany and the United Kingdom. There is no
assurance that foreign design patents will ultimately be granted in those
countries where applications are pending. In addition, there is no assurance
that the granting of design patents or the registration of registered designs
will provide adequate protection against competing products.
The Company believes that the design patent issued in August 1992 is
material and important to its business because of (i) the protection it should
provide against competitors using this precise design of advertising medium, and
(ii) the revenues it believes it will be able to generate through leasing and
sales of the Shoppers Calculators and licensing their use. However, the Company
does not believe that the design patient is essential to its success.
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Because of its development and marketing activities to date and the size of the
potential market, the Company believes that it could operate profitably even if
it did not have the protection of the design patent. The granting of a patent
by the U.S. Patent Office is not determinative of the validity of a patent; such
validity can be disputed by third parties in legal proceedings or the Company
may be forced to institute legal proceedings to enforce validity. If any such
legal proceedings were commenced, the costs thereof could be substantial and
have a material adverse effect on the Company. The Company will benefit from
the design patent and pending design patent only if it is successful in its
efforts to market the advertising space to advertisers, however, there is no
assurance that such advertising will be commercially accepted. Additionally,
substitutes for successfully patented items are frequently developed and there
can be no assurance that a substitute for the Shoppers Calculator(R) will not be
successfully developed and marketed, which could have a material adverse effect
on the future operations of the Company.
LIMITATION ON DIRECTOR LIABILITY UNDER OKLAHOMA LAW. Pursuant to the
Company's Certificate of Incorporation and under Oklahoma law, directors of the
Company are not liable to the Company or its shareholders for monetary damages
for breach of fiduciary duty, except for liability in connection with a breach
of duty of loyalty, for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, for dividend payments or
stock repurchases that are illegal under Oklahoma law or for any transaction in
which a director has derived an improper personal benefit.
NO DIVIDENDS ON COMMON STOCK; PRIORITY OF PREFERRED STOCK DIVIDENDS. The
Company has paid no dividends to holders of its Common Stock since its
inception. The Company currently intends to retain any earnings in excess of the
dividends payable on its outstanding shares of the Company's Series A Preferred
Stock to finance future growth. At March 31, 1997, the Company had 227,750
shares of Series A Preferred Stock outstanding on which all accrued dividends
must be paid to the holders thereof before dividends may be declared and paid on
the Company's Common Stock. Dividends accrue on the Preferred Stock at the rate
of $.40 per share per year, payable quarterly. At March 31, 1997, there were
accrued but unpaid dividends of $432,850 and accrued interest thereon in the
amount of $109,382 payable with respect to the Preferred Stock.
ANTI-TAKEOVER EFFECTS OF ISSUANCE OF PREFERRED STOCK. The Board of
Directors has the authority to issue shares of preferred stock in one or more
series, to fix the number of shares constituting any such series, and to fix the
rights and preferences of the shares constituting any series, without any
further vote or action by the stockholders. The issuance of preferred stock by
the Board of Directors could adversely affect the rights of the holders of
Common Stock. For example, such issuance could result in a class of securities
outstanding that would have preferences with respect to voting rights and
dividends and in liquidation over the Common Stock, and could (upon conversion
or otherwise) enjoy all of the rights appurtenant to Common Stock. The Board's
authority to issue preferred stock could discourage potential takeover attempts
and could delay or prevent a change in control of the Company through merger,
tender offer, proxy contest or otherwise by making such attempts more difficult
to achieve or more costly. There are 1,000,000 shares of preferred stock
authorized, of which 300,000 have been designated as Series A Preferred Stock,
and of which 227,750 shares are outstanding as of March 31, 1997. The Board of
Directors has no present intention to issue any additional shares of preferred
stock.
THE COMPANY
ADDvantage Media Group, Inc. was organized under the laws of the State of
Oklahoma in September 1989. The Company markets solar-powered calculators which
are attached to the handles of shopping carts. These calculators contain an
advertising space available for sale to advertisers for presenting an
advertising message to consumers. The calculators are known by the registered
trademark of "Shoppers Calculators(R)."
7
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The Company's business plan calls for marketing the Shoppers Calculator(R)
program to retail chains, principally mass merchandisers, and selling or
assisting in the sale of the advertising space available on the units to
advertisers and sharing the advertising revenues with the retail chains. The
Company has entered into an agreement with Wal-Mart for the installation of its
calculators in all of Wal-Mart's Supercenters throughout the continental United
States. The addition of the Supercenters into the Shoppers Calculator(R)
program currently constitutes the Company's principal business operations. At
March 31, 1997, the Company had installed its calculators at 327 Supercenters.
On June 3, 1996, the Company entered into an agreement with Kmart
Corporation ("Kmart") for the installation of its calculators in designated
Kmart and Super Kmart Center Stores. Under the Kmart agreement, the Company
will install and maintain its Shoppers Calculator(R) in certain Kmart and Super
Kmart Center Stores and will be responsible for generating revenues, which will
be shared with Kmart, from the sale of the advertising messages. The agreement
provides an initial term of one year and continues thereafter on a month to
month basis until terminated by either party on 60 days priority notice.
Although the number of Kmart Stores to be included initially in the Shoppers
Calculator(R) program has not been determined, the Company anticipates that the
agreement will include initially approximately 125 Super Kmart Centers and 56
Kmart "Pantry" stores. The Company anticipates that it will not commence
installation of its calculators in the Kmart stores until (a) it receives
sufficient advertising commitments necessary to cover the manufacturing and
installation costs of the calculators to be installed in such store and (b) the
company's new calculator units are available for installation. At this time,
the Company is not able to predict when or if the installation of Shoppers
Calculator(R) in Kmart stores will commence.
USE OF PROCEEDS
The Company will not receive any part of the proceeds of the sale of
Shares. See "Plan of Distribution." The Shares include 50,000 Shares which may
be acquired by L.G. Zangani, Inc. at an exercise price of $1.00 per share upon
the exercise of a warrant issued by the Company (the "Warrant"). The Company
will receive the exercise price of $50,000 if the Warrant is exercised in full.
Any amounts received by the Company from the exercise of such Warrant, less the
Company's share of the estimated expenses of the cost of this Offering, are not
allocated to a specific purpose and will be used by the Company as general
working capital.
The Company has agreed to pay all costs and fees relating to the
registration of the Common Stock covered by this Prospectus, except for any
discounts, concessions or commissions payable to underwriters, brokers, dealers
or agents incident to the offering of the Shares covered by this Prospectus or
any legal fees incurred by any Selling Shareholders relating to this offering.
SELLING STOCKHOLDERS
This Prospectus covers offers from time to time by each of the Selling
Stockholders. The following table sets forth (a) the name of each Selling
Stockholder, (b) the number shares of Common Stock beneficially owned as of the
date of this Prospectus by each Selling Stockholder, (c) the number of shares of
Common Stock offered under this Prospectus, (d) the number of shares of Common
Stock beneficially owned after the offering, assuming that all shares of Common
Stock being offered hereby are sold and that such are outstanding, and (e) the
percentage of Common Stock beneficially owned after completion of this offering
assuming that all shares of Common Stock being offered hereby are sold and that
such are outstanding.
8
<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
OF
COMMON
COMMON COMMON STOCK
STOCK STOCK BENEFICIALLY
BENEFICIALLY COMMON BENEFICIALLY OWNED AFTER
OWNED STOCK OWNED AFTER COMPLETION
PRIOR TO BEING COMPLETION OF OF
SELLING STOCKHOLDER OFFERING OFFERED OFFERING/(1)/ OFFERING/(1)/
------------------- -------- ------- ------------- -------------
<S> <C> <C> <C> <C>
W. S. Atherton 240,000/(2)/ 50,000 190,000/(2)/ 3.2%
J. Larre Barrett/(3)/ 119,680/(4)/ 50,000 69,680/(4)/ 1.2%
David A. Cole 30,000 25,000 5,000 *
Donald Conway 87,000 50,000 37,000 *
Edward G. Culverwell 109,000/(5)/ 25,000 84,000 1.4%
Culverwell & Co., Inc. 92,812/(6)/ 50,000 42,812 *
Robert W. Davis 170,150 25,000 145,150 2.5%
Richard S. Friedman 25,000 25,000 0 -
Timothy J. Hayes 295,000/(7)/ 50,000 245,000/(7)/ 4.9%
Charles H. Hood/(8)/ 568,800/(9)/ 12,500 556,300/(9)/ 9.2%
Fred Karp 50,000 50,000 0 -
Robert J. Koenig 50,000 50,000 0 -
Jeffrey Markowitz 25,000 25,000 0 -
L. G. Zangani, Inc. 50,000/(10)/ 50,000 0 -
Michael R. and Angela S. Wagner 15,500 12,500 3,000 *
Todd E. and Suellen H. Young 53,000 50,000 3,000 *
</TABLE>
- ------------------
* Less than one percent
(1) Assumes (a) all Shares covered by this Prospectus are sold, (b) the Selling
Stockholder does not acquire beneficial ownership of additional shares of
Common Stock after the date of this Prospectus, and (c) the Company does
not issue any additional shares of Common Stock after the date of this
Prospectus other than upon the exercise of the Warrant. The amounts
indicated are based on outstanding Common Stock of 5,856,584 shares as of
March 31, 1997. Shares of Common Stock which a person has the right to
acquire within 60 days are deemed to be outstanding for the purpose of
computing the percentage ownership of such person, but are not determined
to be outstanding for the purpose of computing the percentage ownership of
any other person.
(2) Includes 30,000 shares which represent Mr. Atherton's beneficial ownership
interest in shares held by Atherton & Murphy Investment Company.
9
<PAGE>
(3) Mr. Barrett is a Director of the Company.
(4) Includes 50,000 shares subject to options which are currently exercisable.
(5) Does not include 92,812 shares held by Culverwell & Co., Inc., of which Mr.
Culverwell is the majority stockholder.
(6) Culverwell & Co., Inc. ("Culverwell") acquired these shares as partial
consideration for underwriting and/or broker-dealer services rendered to
the Company prior to this offering. Culverwell has rendered such services
to the Company from time to time in connection with the Company's initial
public offering of its Common Stock and subsequent private offerings.
(7) Mr. Hayes acquired these shares as partial consideration for equipment
leasing services rendered to the Company by Timmer Leasing ("Timmer"),
which is controlled by Mr. Hayes. Includes 25,000 shares held of record by
Timmer.
(8) Mr. Hood is the Chairman of the Board, President and a Director of the
Company.
(9) Includes 190,000 shares subject to options which are currently exercisable.
(10) L.G. Zangani, Inc. ("Zangani") may acquire these shares upon the exercise
of warrants issued by the Company to Zangani in 1993 as partial
consideration for public relations and marketing services rendered to the
Company. Such warrants have an exercise price of $1.00 per share.
PLAN OF DISTRIBUTION
The Shares may be offered and sold pursuant to this Prospectus from time to
time by the Selling Stockholders, or by pledgees, donees, transferees or other
successors in interest. The Shares may be sold by the Selling Stockholders in
one or more transactions on the NASDAQ or otherwise at market prices then
prevailing or in privately negotiated transactions. The shares may be sold by
one or more of the following: (i) ordinary brokerage transactions and
transactions in which the broker solicits purchasers; (ii) purchases and resale
by a broker-dealer for its account pursuant to this Prospectus, and (iii) a
block trade in which the broker-dealer so engaged will attempt to sell the
Shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction. The Company has not been advised by the Selling
Stockholders that they have, as of the date hereof, made any arrangements
relating to the distribution of the Shares covered by this Prospectus. In
effecting sales, broker-dealers engaged by the Selling Stockholders may arrange
for other broker-dealers to participate, and, in such case, broker-dealers will
receive commissions or discounts from the Selling Stockholders in amounts to be
negotiated immediately prior to sale.
In offering the Shares, the Selling Stockholders and any broker-dealers and
any other participating broker-dealers who execute sales for the Selling
Stockholders may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales, and any profits realized by the
Selling Stockholders and the compensation of such broker-dealer may be deemed to
be underwriting discounts and commissions. In addition, any Shares covered by
this Prospectus which qualify for sale pursuant to Rule 144 may be sold under
Rule 144 rather than pursuant to this Prospectus.
10
<PAGE>
LEGAL OPINION
Certain legal matters in connection with the shares offered hereby will be
passed upon for the Company by Conner & Winters, A Professional Corporation,
Tulsa, Oklahoma.
EXPERTS
The financial statements and schedules incorporated by reference in this
Prospectus and elsewhere in the Registration Statement, to the extent and for
the periods indicated in their reports, have been audited by Tullius Taylor
Sartain & Sartain, independent public accountants, and are included herein in
reliance upon the authority of said firm as experts in giving such reports.
11
<PAGE>
No dealer, salesman or other person has been authorized to give any information
not contained in 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 a solicitation
of an offer to buy any of the securities offered hereby in any jurisdiction to
any person to whom it is unlawful to make such offer in such jurisdiction.
Neither the delivery of this Prospectus nor any sale hereunder shall under any
circumstances create any implication that there has been no change in the
affairs of the Company since the date hereof.
-----------------------
Table of Contents
Page
----
Available Information.................................................... 2
Incorporation by Reference............................................... 3
Risk Factors............................................................. 3
The Company.............................................................. 7
Use of Proceeds.......................................................... 8
Selling Stockholders..................................................... 8
Plan of Distribution..................................................... 10
Legal Opinion............................................................ 11
Experts.................................................................. 11
600,000 SHARES
ADDVANTAGE MEDIA GROUP, INC.
COMMON STOCK
----------------
PROSPECTUS
----------------
MAY ___, 1997
12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<CAPTION>
Nature of Expense
-----------------
<S> <C>
SEC Registration Fee..................... $ 710
Legal Fees (Including Blue Sky).......... $ 8,000
Accounting Fees and Expenses............. $ 3,000
Printing................................. $ 2,000
Miscellaneous............................ $ 1,290
Total............................... $15,000
</TABLE>
The foregoing expenses, except for the SEC Registration Fee, are estimates.
ITEM 15. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company's Amended Certificate of Incorporation ("Certificate of
Incorporation") and Bylaws provide that each person who was or is made a party
to, or is involved in, any action, suit or proceeding by reason of the fact that
he or she was a director or officer of the Company (or was serving at the
request of the Company as a director, officer, employee or agent for another
entity) will be indemnified and held harmless by the Company, to the fullest
extent not prohibited by the Oklahoma General Corporation Act.
Under Section 1031 of the Oklahoma General Corporation Act, a corporation
may indemnify a director, officer, employee or agent of the corporation against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him or her if he or she acted in
good faith and in a manner he or she reasonably believed to be in or not opposed
to the best interests of the corporation and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. In the case of an action brought by or in the right of a corporation,
the corporation may indemnify a director, officer, employee or agent of the
corporation against expenses (including attorneys' fees) actually and reasonably
incurred by him or her if he or she acted in good faith and in a manner he or
she reasonably believed to be in the best interests of the corporation, except
that no indemnification shall be made in respect of any claim, issue or matter
as to which such person shall have been adjudged to be liable to the corporation
unless a court finds that, in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as the
court shall deem proper.
The Company's Certificate of Incorporation ("Certificate of Incorporation")
provides that to the maximum extent permitted by the Oklahoma General
Corporation Act, a director of the Company shall not be liable to the Company or
its shareholders for monetary damages for breach of fiduciary duty as a
director. The Oklahoma General Corporation Act permits Oklahoma corporations to
include in their certificates of incorporation a provision eliminating or
limiting director liability for monetary damages arising from breaches of their
fiduciary duty. The only limitations imposed under the statute and the
Company's Certificate of Incorporation are that the provision may not eliminate
or limit a director's liability (I) for breaches of the director's duty of
loyalty to the corporation or its
13
<PAGE>
shareholders, (ii) for acts or omissions not in good faith or involving
intentional misconduct or known violations or law, (iii) for the payment of
unlawful dividends or unlawful stock purchases or redemptions, or (iv) for
transactions in which the director derived an improper personal benefit.
ITEM 16. EXHIBITS
4.1 Form of Registration Agreement.
5.1 Opinion of Conner & Winters, A Professional Corporation, as to the
legality of the securities being registered.
23.1 Consent of Tullius Taylor Sartain & Sartain.
23.2 Consent of Conner & Winters, A Professional Corporation (included in
opinion filed as Exhibit 5.1).
ITEM 17. UNDERTAKINGS
The Company hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to the Registration Statement to:
(i) Include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended (the "Securities Act");
(ii) Reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change in the
information set forth in the Registration Statement;
(iii) Include any additional or changed material information on
the plan of distribution.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required in a post-effective amendment is incorporated by
reference from periodic reports filed by the Company under the Securities
Exchange Act of 1934, as amended (the "Exchange Act").
(2) That, for the purpose of determining any liability under the Securities
Act, each post-effective amendment will be treated as a new registration
statement of the securities offered, and the offering of the securities at
that time to be the initial bona fide offering.
(3) To file a post-effective amendment to remove from registration any of
the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to the indemnification provisions described herein, or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company 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 Company 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.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Tulsa, State of Oklahoma, on the 9th day of May,
1997.
ADDvantage Media Group, Inc.
By: /s/ Charles H. Hood
----------------------------------
Charles H. Hood, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement was signed by the following persons in the capacities and
on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Charles H. Hood President and Director May 9, 1997
- ------------------------ (Principal Executive Officer)
Charles H. Hood
/s/ Gary W. Young Executive Vice President- May 9, 1997
- ------------------------ Finance and Administration,
Gary W. Young Treasurer and Director
Chief Financial Officer
(Principal Financial
and Accounting Officer)
Director May ___, 1997
- ------------------------
J. Larre Barrett
/s/ John W. Condon Director May 9, 1997
- ------------------------
John W. Condon
15
<PAGE>
INDEX TO EXHIBITS
Sequentially
Numbered
Exhibit No. Description Page
----------- ----------- ----
4.1 Form of Registration Agreement. 17
5.1 Opinion of Conner & Winters, A Professional 18
Corporation, as to the legality of the securities
being registered.
23.1 Consent of Tullius Taylor Sartain & Sartain. 19
23.2 Consent of Conner & Winters, A Professional 18
Corporation (included in opinion filed as
Exhibit 5.1).
16
<PAGE>
EXHIBIT 4.1
REGISTRATION AGREEMENT
----------------------
THIS REGISTRATION AGREEMENT ("Agreement") is entered into this _____ day of
May, 1996, between ADDVANTAGE MEDIA GROUP, INC., an Oklahoma corporation (the
"Company"), and ______________________________, an individual (the "Selling
Stockholder").
W I T N E S S E T H:
--------------------
WHEREAS, the Selling Stockholder is the record and beneficial owner of the
number of shares (the "Shares") of common stock, par value $.01 per share, of
the Company (the "Common Stock") set forth on the signature page of this
Agreement;
WHEREAS, the Shares are restricted securities and may not be transferred
unless registered under the Securities Act of 1933, as amended (the "Securities
Act"), or pursuant to an exemption from such registration;
WHEREAS, in order to provide the Selling Stockholder the opportunity to
transfer the Shares, the Company agrees to use reasonable efforts to register
the Shares under the Securities Act upon the terms and conditions set forth in
this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and the respective
covenants and agreements contained herein, the parties hereto agree as follows:
1. Registration Under Securities Act of 1933. As soon as reasonably
-----------------------------------------
practicable, the Company will prepare and file with the Securities and Exchange
Commission (the "Commission") a registration statement on Form S-3 under the
Securities Act (the "Registration Statement"), covering the offer and sale of
all of the Shares. The Company will use its reasonable efforts to cause the
Registration Statement to become effective and to remain effective and current
with respect to the Shares until December 31, 1997. The Company will take all
other action necessary or appropriate to cause the prospectus included in the
Registration Statement (the "Prospectus") to be available for the sale of the
Shares from time to time during such period by the Stockholder in ordinary
brokerage transactions in the over-the-counter market or on any national
securities exchange on which the Common Stock is then listed, in block trades,
or in negotiated transactions. The Company will be obligated to prepare and file
only one Registration Statement. The Company's obligations under this paragraph
1 will be deemed satisfied if: (a) the Registration Statement is not effective
within four months after the initial filing thereof as a result of any reason
other than (i) a material adverse development in the business of the Company or
(ii) any act or matter within the actual control of the Company, or (b) the
Registration Statement is abandoned or withdrawn by the Company for the reason
that, in the good faith judgment of the Board of Directors of the Company, such
abandonment or withdrawal is in the best interest of the Company. Upon the
registration of the offer and sale of the Shares with the Commission, the
Company agrees as follows:
1.1 Prospectus. The Company will furnish the Selling Stockholder with (a)
----------
the number of copies of a current Prospectus, including the
preliminary prospectus, as Selling Stockholder reasonably requires in
order to effectuate the offer and sale
<PAGE>
of the Shares included in the Registration Statement, and (b) such
other documents as the Selling Stockholder may reasonably request.
1.2 Blue Sky Laws. The Company will use its reasonable efforts to
-------------
register or qualify the Shares under the blue sky laws, to the extent
applicable, of each state which the Company deems appropriate or
necessary. Notwithstanding the foregoing, the Company will not be
obligated to register or qualify any Shares under those blue sky laws
which the Company deems are unduly burdensome in connection with the
registration or qualification of the Shares in a particular state.
1.3 Other Actions. The Company will take such other actions as may be
-------------
reasonably necessary or advisable to enable the Selling Stockholder to
consummate the sale or distribution in each jurisdiction in which such
Selling Stockholder reasonably requests that the Shares be sold. The
Company will not be required to qualify as a foreign corporation or
broker-dealer in any jurisdiction or to file a consent to service of
process in any jurisdiction in any action other than one arising out
of the offering or sale of the Shares.
2. Selling Stockholder Information. As a condition precedent to the
-------------------------------
obligations of the Company to take any action pursuant to paragraph 1, the
Selling Stockholder will furnish to the Company information regarding the Shares
to be included in the Registration Statement, the intended method of disposition
of such securities, and such additional information regarding the Selling
Stockholder or the Shares as the Company reasonably requests or may be required
in connection with the action to be taken by the Company.
3. Payment of Expenses. The Company will pay all expenses incurred in
--------------------
connection with any registration of the offer and sale of the Shares pursuant to
the provisions paragraph 1 of this Agreement. The Selling Stockholder will pay
(a) all underwriting discounts and concessions, brokerage commissions,
applicable insurance and transfer taxes relating to the sale of the Shares, and
(b) all fees and expenses incurred by counsel for the Selling Stockholder,
except as provided in paragraph 4.
4. Indemnification. If the Company includes any Shares in a Registration
---------------
Statement filed by the Company with the Commission, the Company and the Selling
Stockholder agree as follows:
4.1 By the Company. Except provided in paragraph 4.1.2, the Company will
--------------
indemnify and hold harmless the Selling Stockholder and each other
entity or person, if any, controlling the Selling Stockholder within
the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act (a "Controlling Party"), against any Stockholder
Liability (as defined below) to which the Selling Stockholder or the
Controlling Party may become subject under the Securities Act.
-2-
<PAGE>
4.1.1 Stockholder Liability. As used in this paragraph 4.1, the term
---------------------
"Stockholder Liability" means any losses, claims, damages or
liabilities under the Securities Act with respect to the
Registration Statement, including any preliminary Prospectus or
final Prospectus and any amendments or supplements thereto,
arising out of or based upon: (a) any untrue or alleged untrue
statement of material fact contained therein; or (b) the omission
or alleged omission to state therein a material fact required to
be stated therein, or necessary to make the statements therein
not misleading.
4.1.2 Exception to Indemnity. The indemnity agreement contained in
----------------------
paragraph 4.1 will not apply to (a) amounts paid in settlement
of any Stockholder Liability if such settlement is effected
without the consent of the Company, which consent will not be
unreasonably withheld; (b) any Stockholder Liability to the
extent that the Stockholder Liability arises out of, or is based
upon, any untrue statement or alleged untrue statement or
omission or alleged omission made in connection with the
Registration Statement, preliminary or final Prospectus, or
amendments or supplements thereto, in reliance upon, and in
conformity with, written information furnished to the Company for
use in connection with the Registration Statement by the Selling
Stockholder or Controlling Party.
4.2 By the Selling Stockholder. Except as otherwise provided in paragraph
--------------------------
4.2.2., the Selling Stockholder will indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed
the Registration Statement that includes Shares, each person, if any,
who controls the Company within the meaning of the Securities Act or
the Exchange Act, and each agent for the Company against any Company
Liability (as defined below) to which the Company or any such
director, officer, controlling person, or agent may become subject
under the Securities Act.
4.2.1 Company Liability. As used in this paragraph 4.2, the term
-----------------
"Company Liability" means any losses, claims, damages or
liabilities with respect to the Registration Statement, including
any preliminary or final Prospectus and any amendments or
supplements thereto, arising out of or based upon: (a) any untrue
statement or alleged untrue statement of a material fact
contained therein; or (b) the omission or alleged omission to
state therein a material fact required to be stated therein 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 omission or alleged untrue statement or omission was
made in reliance upon, and in conformity with, written
information furnished by, or on behalf of, the Selling
Stockholder for use in connection with such Registration
Statement.
-3-
<PAGE>
4.2.2 Exception to Indemnity. The indemnity agreement contained in
----------------------
this paragraph 4.2 will not apply to amounts paid in settlement
of any Company Liability if such settlement is effected without
the consent of the Selling Stockholder, which consent will not be
unreasonably withheld. The indemnification obligation of the
Selling Stockholder will be limited to an amount equal to the
proceeds to the Selling Stockholder of the Shares sold pursuant
to the Registration Statement.
5. Indemnification Procedure. Upon receipt of notice of the commencement of
-------------------------
any action, a person (an "Indemnified Party") entitled to indemnification
pursuant to paragraph 4 of this Agreement will notify in writing the
indemnifying party if a claim in respect thereof is to be made against the
indemnifying party under paragraph 4. The failure to notify promptly the
indemnifying party will relieve the indemnifying party from any liability to the
Indemnified Party under paragraph 4.
5.1 Defense by Indemnifying Party. If any action is brought against an
-----------------------------
Indemnified Party and the Indemnified Party notifies the indemnifying
party of the commencement of such action, the indemnifying party will
have the option to assume all or any part of the defense of such
action, either alone or jointly with any other indemnifying party. If
the indemnifying party assumes all or any part of such defense, the
indemnifying party's counsel will be reasonably satisfactory to the
Indemnified Party. After notice from the indemnifying party to the
Indemnified Party of its election to assume the defense of such
action, the indemnifying party will not be liable to the Indemnified
Party under paragraph 4 for any legal or other expenses subsequently
incurred by the Indemnified Party in connection with the defense of
such action, except as provided in paragraph 5.2.
5.2 Expenses; Conflict. The Indemnified Party will have the right to
------------------
participate in the defense of, and to employ separate counsel in, any
action in which the indemnifying party assumes the defense. The fees
and expenses of such counsel will be paid by the Indemnified Party,
except that the indemnifying party will pay such reasonable fees and
expenses of such counsel if: (a) the employment of such counsel has
been specifically authorized in writing by the indemnifying party and
the indemnifying party has agreed, in writing, to pay such fees and
expenses, or (b) an Indemnified Party or parties and the indemnifying
party are the named parties to any such action (including any
impleaded parties) and (i) the Indemnified Party has been advised by
counsel for the indemnifying party that there are defenses available
to the Indemnified Party that the indemnifying party or its counsel
refuses to accept or (ii) counsel for the indemnifying party
reasonably determines that there may be a conflict between the
position of the indemnifying party and the Indemnified Party in
conducting the defense of such action. In the event of (b) above,
counsel for the Indemnified Party (at the indemnifying party's
expense) will be entitled to conduct only that part of the
-4-
<PAGE>
Indemnified Party's or parties' defense that counsel for the
indemnifying party declines to, or cannot, conduct because of the
foregoing reasons.
5.3 Counsel for Indemnifying Parties. The indemnifying party or parties
--------------------------------
will not, in connection with any one such action or separate, but
substantially similar or related actions in the same jurisdiction and
arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate
firm of attorneys for all such Indemnified Party or parties.
6. Notices. Except as otherwise specified herein to the contrary, all
-------
notices, requests, demands and other communications required or desired to be
given hereunder will only be effective if given in writing, by hand or fax, by
certified or registered mail, return receipt requested, postage prepaid, or by
U. S. Express Mail service, or by private overnight mail service (e.g., Federal
Express). Any such notice will be deemed to have been given (a) on the business
day actually received if given by hand or by fax, (b) on the business day
immediately subsequent to mailing, if sent by U.S. Express Mail service or
private overnight mail service, or (c) five (5) business days following the
mailing thereof, if mailed by certified or registered mail, postage prepaid,
return receipt requested, and all such notices will be sent to the following
addresses (or to such other address or addresses as a party may have advised the
other in the manner provided in this paragraph 6 to:
If to the Company: ADDvantage Media Group, Inc.
5100 East Skelly Drive
Meridian Tower, Suite 1080
Tulsa, Oklahoma 74135
Attention: Gary W. Young, Executive Vice President
If to the Selling The address listed on the books
Stockholder: and records of the Company
7. Headings. The paragraph headings in the Agreement are included as a matter
--------
of convenience and will not affect the construction of this Agreement.
8. Applicable Law. This Agreement will be governed by, and construed in
--------------
accordance with, the laws of the State of Oklahoma, without giving effect to the
principles of conflicts of law thereof.
-5-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been signed by the parties hereto
this ____ day of May, 1997.
ADDVANTAGE MEDIA GROUP, INC., an
Oklahoma corporation
By
---------------------------------------
Gary W. Young, Executive Vice President
("Company")
Name:
- ---------------------------------- ------------------------------------
Number of Shares requested to be
registered in the Registration ("Selling Stockholder")
Statement
-6-
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF CONNER & WINTERS APPEARS HERE]
May 12, 1997
ADDvantage Media Group, Inc.
5100 East Skelly Drive, Meridian Tower, Suite 1080
Tulsa, Oklahoma 74135
(918) 665-8414
Re: ADDvantage Media Group, Inc.; Form S-3 Registration Statement Our
File No. 3963.37
------------------------------------------------------------
Ladies and Gentlemen:
We have acted as special counsel to ADDvantage Media Group, Inc. (the
"Company") in connection with the Form S-3 Registration Statement (the
"Registration Statement") to be filed by the Company with the Securities and
Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act"). The Registration Statement relates to the proposed reoffer
and resale from time to time by certain Selling Stockholders (as defined in the
Registration Statement) of up to 600,000 shares of the Company's common stock,
par value $.01 per share ("Common Stock"), including up to 50,000 shares of
Common Stock by L.G. Zangani, Inc. ("Zangani") that Zangani may acquire upon the
exercise of a warrant previously issued by the Company to Zangani ("Warrant").
In reaching the conclusions expressed in this opinion, we have (a) examined
such corporate records, certificates of officers, other documents, and questions
of law as we have considered necessary or appropriate, (b) relied upon the
accuracy of facts and information set forth in all such documents, and (c)
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as copies, and the authenticity of the originals from
which all such copies were made.
On the basis of such examination and review, we are of the opinion that (a)
the 50,000 shares issuable upon exercise of the Warrant have been duly
authorized and, if and when issued, delivered and paid for pursuant to the terms
of the Warrant, will constitute validly issued, fully paid and non-assessable
shares of Common Stock, and (b) the remaining 550,000 shares covered by the
Registration Statement are validly issued, fully paid, and non-assessable shares
of Common Stock.
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May 12, 1997
Page 2
We consent to the reference to our firm under the heading "Legal Opinion"
and to the filing of this opinion as Exhibit 5.1 to the Registration Statement.
Very truly yours,
CONNER & WINTERS,
A Professional Corporation
/s/ Conner & Winters
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in this registration
statement of ADDvantage Media Group, Inc. on Form S-3 of our report dated March
10, 1997, on our audits of the consolidated financial statements and financial
statement schedules of ADDvantage Media Group, Inc. as of December 31, 1996 and
1995, and for the years ended December 31, 1996 and 1995, which report is
included in the Company's Annual Report on Form 10-KSB.
/s/ TULLIUS TAYLOR SARTAIN & SARTAIN
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TULLIUS TAYLOR SARTAIN & SARTAIN
Tulsa, Oklahoma
May 9, 1997
