<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 1996
REGISTRATION NO. 333-9713
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
OUTDOOR SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
DELAWARE 86-0736400
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
---------------------
2502 N. BLACK CANYON HIGHWAY
PHOENIX, ARIZONA 85009
(602) 246-9569
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
---------------------
OUTDOOR SYSTEMS PAINTING, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
ARIZONA 86-0638522
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
---------------------
2502 N. BLACK CANYON HIGHWAY
PHOENIX, ARIZONA 85009
(602) 246-9569
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
---------------------
OS ADVERTISING OF TEXAS PAINTING, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
TEXAS 86-0638816
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
---------------------
2502 N. BLACK CANYON HIGHWAY
PHOENIX, ARIZONA 85009
(602) 246-9569
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
---------------------
OS BASELINE, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
ARIZONA 86-0795338
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
---------------------
2502 N. BLACK CANYON HIGHWAY
PHOENIX, ARIZONA 85009
(602) 246-9569
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
---------------------
<PAGE> 2
DECADE COMMUNICATIONS GROUP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
COLORADO 84-1291420
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
---------------------
2502 N. BLACK CANYON HIGHWAY
PHOENIX, ARIZONA 85009
(602) 246-9569
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
---------------------
BENCH ADVERTISING COMPANY
OF COLORADO, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
COLORADO 84-0862025
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
---------------------
2502 N. BLACK CANYON HIGHWAY
PHOENIX, ARIZONA 85009
(602) 246-9569
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
---------------------
NEW YORK SUBWAYS ADVERTISING CO., INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C>
ARIZONA 86-0443845
(State or other jurisdiction of incorporation) (I.R.S. Employer Identification No.)
</TABLE>
---------------------
2502 N. BLACK CANYON HIGHWAY
PHOENIX, ARIZONA 85009
(602) 246-9569
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
---------------------
WILLIAM S. LEVINE
CHAIRMAN OF THE BOARD
OUTDOOR SYSTEMS, INC.
2502 N. BLACK CANYON HIGHWAY
PHOENIX, ARIZONA 85009
(602) 246-9569
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
---------------------
WITH COPIES TO:
<TABLE>
<S> <C>
G. WILLIAM SPEER, ESQ. ROGER MELTZER, ESQ.
WILLIAM B. SHEARER, JR., ESQ. CAHILL GORDON & REINDEL
POWELL, GOLDSTEIN, FRAZER & MURPHY 80 PINE STREET
191 PEACHTREE STREET, N.E., 16TH FLOOR NEW YORK, NEW YORK 10005
ATLANTA, GEORGIA 30303 (212) 701-3000
(404) 572-6600
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
---------------------
If the only securities being registered on this Form are being offered
pursuant to 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, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===================================================================================================================
PROPOSED PROPOSED
TITLE OF EACH CLASS AMOUNT MAXIMUM MAXIMUM
OF SECURITIES TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER NOTE OFFERING PRICE REGISTRATION FEE
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
% Senior Subordinated Notes due 2006...... $150,000,000 100% $150,000,000 $51,724(1)
- -------------------------------------------------------------------------------------------------------------------
Guarantees of % Senior Subordinated Notes
due 2006..................................... (2) (2) (2) (2)
===================================================================================================================
</TABLE>
(1) Previously paid.
(2) This Registration Statement covers the Guarantees to be issued by each of
the Company's U.S. subsidiaries. Such Guarantees are to be issued for no
additional consideration and, therefore, no additional registration fee is
required.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 3
THIS PROSPECTUS AND THE INFORMATION CONTAINED HEREIN ARE SUBJECT TO CHANGE,
COMPLETION OR AMENDMENT WITHOUT NOTICE. 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.
UNDER NO CIRCUMSTANCES SHALL THIS PROSPECTUS CONSTITUTE AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE
WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE
SECURITIES LAWS OF ANY SUCH JURISDICTION.
SUBJECT TO COMPLETION, DATED OCTOBER 4, 1996
PROSPECTUS
$150,000,000
OUTDOOR SYSTEMS
% SENIOR SUBORDINATED NOTES DUE 2006
------------------
The % Senior Subordinated Notes due 2006 (the "Notes") are being
offered (the "Offering") by Outdoor Systems, Inc. (the "Company"), in connection
with the consummation of the Transactions (as defined herein), including the
recent acquisition (the "Acquisition") of substantially all of the billboard
advertising operations of the outdoor advertising division ("Gannett Outdoor")
of Gannett Co., Inc. ("Gannett") by the Company. On August 22, 1996, the Company
completed an offering of 8,590,000 shares of its Common Stock for net proceeds
of approximately $284.2 million.
Interest on the Notes will be payable in cash semi-annually on each
and , commencing , 1997. The Notes will be redeemable at the
option of the Company, in whole or in part, on or after , 2001, at the
redemption prices set forth herein, plus accrued and unpaid interest thereon to
the date of redemption. In addition, the Company may redeem in the aggregate up
to 35% of the original principal amount of the Notes on or prior to ,
1999 at a redemption price equal to 110% of the aggregate principal amount
thereof, plus accrued and unpaid interest thereon to the redemption date, with
the net proceeds of one or more Public Equity Offerings (as defined herein),
provided that at least $97.5 million of the aggregate principal amount of the
Notes originally issued remain outstanding. Upon a Change of Control (as defined
herein), each holder of the Notes will be entitled to require the Company to
purchase such holder's Notes at 101% of the principal amount thereof, plus
accrued and unpaid interest thereon to the date of purchase.
The Notes will be general unsecured obligations of the Company subordinate
in right of payment to all existing and future Senior Indebtedness (as defined
herein) of the Company. The Notes will be unconditionally guaranteed, on an
unsecured senior subordinated basis, as to payment of principal, premium, if
any, and interest, jointly and severally, by all of the Company's domestic
subsidiaries (the "Guarantors"). As of June 30, 1996, after giving effect to the
Transactions and the Offering, the Company would have had approximately $455.9
million of Senior Indebtedness outstanding.
------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 11 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE NOTES.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
===================================================================================================
<S> <C> <C> <C>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC(1) COMMISSIONS(2) THE COMPANY(3)
- ---------------------------------------------------------------------------------------------------
Per Note............................... $ $ $
- ---------------------------------------------------------------------------------------------------
Total.................................. $ $ $
===================================================================================================
</TABLE>
(1) Plus accrued interest, if any, from the date of issuance.
(2) The Company and the Guarantors have agreed to indemnify the Underwriters (as
defined herein) against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting."
(3) Before deducting the expenses payable by the Company estimated to be
$ .
The Notes are offered by the Underwriters named herein, subject to prior
sale, when, as and if delivered to and accepted by them, and subject to certain
conditions, including their right to reject orders in whole or in part. It is
expected that delivery of the Notes will be made on or about , 1996
at the offices of CIBC Wood Gundy Securities Corp., New York, New York.
CIBC WOOD GUNDY SECURITIES CORP. ALEX. BROWN & SONS
INCORPORATED
------------------
The date of this Prospectus is , 1996.
<PAGE> 4
[INSIDE COVER PAGE CONTAINS PHOTOGRAPHS OF VARIOUS BILLBOARDS ADVERTISING
PRODUCTS FOR MCDONALD'S, CHEVROLET, HUDSON'S FINE JEWELRY AND ALTOIDS'.]
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
<PAGE> 5
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including notes thereto,
appearing elsewhere in this Prospectus or incorporated herein by reference.
Unless otherwise indicated, all information in this Prospectus gives effect to a
three-for-two Common Stock split effected in the form of a stock dividend paid
on July 22, 1996. The "Transactions" consist of the acquisition (the
"Acquisition") of substantially all of the billboard and transit advertising
operations of the outdoor advertising division ("Gannett Outdoor") of Gannett
Co., Inc. ("Gannett"), including the acquisition of the Houston Option (as
defined herein) (but not the consummation of the transactions contemplated by
the Houston Option), the Denver Disposition (as defined herein), the Debt Tender
Offer (as defined herein), the Acquisition Financing (as defined herein), a
proposed amendment to the Senior Credit Facility (as defined herein) and the
Other Acquisitions (as defined herein). See "The Transactions." As used herein,
the "Company" or "Outdoor Systems" refers to Outdoor Systems, Inc. together with
its consolidated subsidiaries and, where the context requires, includes the
business of Gannett Outdoor, and "market" in the United States refers to the
geographic area constituting a Designated Market Area as defined by The A.C.
Nielsen Company and in Canada refers to Census Metro Area as defined by
Statistics Canada.
THE COMPANY
Outdoor Systems, Inc. is the largest outdoor advertising company in North
America, operating approximately 58,000 advertising display faces in 22
metropolitan markets in the United States and seven metropolitan markets in
Canada. The Company has operations in seven of the ten largest United States
markets, as well as six of the ten largest Canadian markets. Giving effect to
the Acquisition, as if it occurred at the beginning of the applicable period,
the Company had pro forma net revenues of $314.4 million and pro forma EBITDA of
$113.3 million for the year ended December 31, 1995 and pro forma net revenues
of $154.8 million and pro forma EBITDA of $54.6 million for the six months ended
June 30, 1996.
Through the Acquisition, the Company significantly increased its presence
in North America and diversified into additional major metropolitan markets. The
following table sets forth, as of June 30, 1996 or for the year ended December
31, 1995, certain information with respect to the Company's outdoor markets
after giving effect to the Acquisition and the Denver Disposition (dollars in
thousands):
<TABLE>
<CAPTION>
MALL TOTAL
MARKET 1995 PRO FORMA 30-SHEET 8-SHEET AND AIRPORT DISPLAY
MARKET RANK NET REVENUES BULLETINS POSTERS POSTERS POSTERS TRANSIT FACES
- ----------------------------------- ------ -------------- --------- -------- ------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
UNITED STATES:
New York/New Jersey(1)............. 1 $ 53,188 579 2,730 125 -- 3,507 6,941
Los Angeles........................ 2 41,739 785 2,962 -- -- 2,804 6,551
Chicago............................ 3 6,499 155 -- 638 -- -- 793
Philadelphia....................... 4 1,941 -- -- -- -- 690 690
San Francisco...................... 5 18,679 202 972 571 -- 1,346 3,091
Detroit............................ 9 20,264 438 1,340 104 -- 800 2,682
Houston(2)......................... 10 5,480 377 -- -- -- -- 377
Atlanta............................ 11 21,654 748 1,910 -- -- -- 2,658
Sacramento(3)...................... 17 -- 60 291 -- -- -- 351
Phoenix............................ 18 16,745 605 1,530 677 -- 1,418 4,230
St. Louis.......................... 19 8,010 268 852 -- -- -- 1,120
Denver............................. 21 7,975 163 775 -- -- 5,300 6,238
San Diego.......................... 22 5,349 114 540 -- -- 668 1,322
New Haven(4)....................... 26 5,496 149 835 -- -- -- 984
Kansas City........................ 33 6,988 198 849 -- -- -- 1,047
Grand Rapids....................... 38 4,339 110 550 -- -- 80 740
New Orleans........................ 40 9,532 346 1,053 481 -- 213 2,093
Louisville......................... 49 8,002 320 1,067 264 -- -- 1,651
Flint.............................. 59 2,705 93 450 20 -- -- 563
Rochester.......................... 72 308 -- -- -- -- 240 240
Tucson............................. 81 1,700 112 6 345 -- -- 463
Columbus, GA....................... 127 2,596 180 422 100 -- -- 702
</TABLE>
1
<PAGE> 6
<TABLE>
<CAPTION>
MALL TOTAL
MARKET 1995 PRO FORMA 30-SHEET 8-SHEET AND AIRPORT DISPLAY
MARKET RANK NET REVENUES BULLETINS POSTERS POSTERS POSTERS TRANSIT FACES
- ----------------------------------- --- ------ --- ----- --- --- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CANADA:
Toronto............................ 1 $ 39,280 303 1,834 -- 418 2,474 5,029
Montreal........................... 2 12,045 134 770 -- 322 1,794 3,020
Ottawa............................. 6 1,691 23 214 -- 68 -- 305
Winnipeg........................... 7 4,959 154 415 -- 77 406 1,052
Quebec City........................ 8 3,530 71 782 -- 194 296 1,343
Hamilton(5)........................ 9 -- 36 288 -- 80 576 980
Halifax............................ 14 1,612 11 122 -- 26 214 373
Other.............................. N/A 2,080 24 108 -- 108 94 334
------ --- ----- --- --- ----- -----
Total.......................... $314,386 6,758 23,667 3,325 1,293 22,920 57,963
======== ===== ====== ===== ===== ====== ======
</TABLE>
- ---------------
(1) All of the Company's bulletins and posters are located in New Jersey.
(2) Includes only Outdoor Systems' existing Houston operations. The Company has
the right to acquire Gannett Outdoor's Houston operations pursuant to the
Houston Option. See "The Transactions -- The Houston Option."
(3) Net revenues are included with San Francisco.
(4) Includes advertising display faces in New Haven, as well as other areas of
Connecticut.
(5) Net revenues are included with Toronto.
THE ACQUISITION
On August 22, 1996, the Company purchased substantially all of the assets
of Gannett Outdoor, including the stock of certain indirect subsidiaries of
Gannett, for approximately $640 million in cash, plus the net book value of
working capital and certain other specified assets of Gannett Outdoor (which net
book value increased the purchase price by approximately $60 million). See "The
Transactions -- The Acquisition."
The Company acquired from Gannett a total of approximately 40,000
advertising display faces consisting of bulletins, posters and transit
advertising display faces in 15 metropolitan markets in the United States and
seven metropolitan markets in Canada. As a result of the Acquisition, the
Company owns and operates approximately 58,000 advertising display faces located
in 22 metropolitan markets in the United States and seven metropolitan markets
in Canada. Management believes that upon the successful consolidation of Gannett
Outdoor with the existing business of Outdoor Systems, the Company's position as
a leading provider of outdoor advertising services will be significantly
enhanced.
The Company believes that there are significant opportunities for revenue
enhancement in its combined operations. The increased presence in North America
resulting from the Acquisition should allow the Company to expand its services
to national advertisers through direct sales efforts offering access to multiple
markets. In addition, the Company believes that its operating and sales
strategies will allow it to improve utilization of the Gannett Outdoor
advertising display faces.
The Company also believes that the consolidation of certain administrative,
sales management and leasing management functions in connection with the
Acquisition will result in certain cost savings, including the reduction and
consolidation of duplicative (i) production and sales overhead functions, (ii)
production and administrative support positions, (iii) national sales and
marketing support functions, and (iv) accounting and administrative functions.
The Company believes it will achieve additional cost savings by closing one of
Gannett Outdoor's production facilities in Canada and by consolidating the
Canadian accounting and administrative functions. In addition to these cost
savings, the Company believes that it may be able to achieve additional cost
savings arising from (i) reductions in facility costs arising from renegotiated
rents or reduced space and the reduction of expenses relating to terminated
employees, (ii) a reduction in labor costs arising from production efficiencies
and a reduced number of direct production and direct sales employees, and (iii)
increased sales efficiencies arising from a modification of the sales
compensation system. See "Risk Factors -- Challenges of Business Integration."
The Company financed the purchase price of the Acquisition and the related
refinancing of certain existing indebtedness of the Company and paid the fees
and expenses associated with the Acquisition and the acquisition financing
through (i) a revolving credit facility and term loans of up to $530.0 million
under a senior credit facility (the "Senior Credit Facility"), (ii) bridge loans
of $180.0 million (the "Bridge Financing") under a senior subordinated credit
facility (the "Subordinated Credit Facility"), and (iii) the
2
<PAGE> 7
offering of 8,590,000 shares of Common Stock for net proceeds to the Company of
approximately $284.2 million (the "Common Stock Offering"). The Company used
approximately $40.0 million of net proceeds received upon the exercise of the
Underwriters' over-allotment option in the Common Stock Offering to reduce
indebtedness incurred under the Subordinated Credit Facility. The Common Stock
Offering, the Bridge Financing and the financing obtained under the Senior
Credit Facility are hereinafter referred to as the "Acquisition Financing."
Concurrently with or shortly following the consummation of the Offering, it is
expected that the Senior Credit Facility will be amended to provide for a
revolving credit facility and term loans of up to an aggregate of $600.0 million
and to make certain other changes. See "Description of Senior Credit Facility."
OPERATING STRATEGY
The Company's primary objective is to be the leading provider of outdoor
advertising services in each of its markets. Outdoor Systems' successful
operating strategy, focusing on superior sales and service, optimal management
of its inventory, centralized administration and strategic acquisitions, has
enabled it to improve the historical operating results in each of its existing
markets. Management intends to apply this strategy to each of its newly-acquired
markets.
- - Superior Sales and Service. The Company seeks to gain market share in each of
its markets through an intensive focus on customer sales and service, quality
displays and competitive pricing. Outdoor Systems has recruited and trained a
skilled sales force that is motivated by a program of commission-based
compensation and supported by a network of experienced local managers who
operate under a centrally coordinated marketing plan. Each Outdoor Systems
market has a general manager who is actively engaged in sales. In addition,
the Company seeks to attract and retain advertisers through creative
advertising layouts, timely installation and rotation of displays and rapid
response to customer needs.
- - Optimal Inventory Management. The Company seeks to balance advertising rate
growth with optimal occupancy of its displays in order to maximize revenues.
The Company's variety of outdoor advertising and transit displays in its
geographically diverse markets permits flexibility in pricing and packaging
its display inventory.
- - Centralized Administration. Outdoor Systems has historically consolidated
substantially all of its administration, accounting, sales management and
leasing management functions at its Phoenix headquarters and plans to
consolidate a significant amount of these functions relating to the business
of Gannett Outdoor into its Phoenix headquarters and four regional offices.
This centralization allows the Company to focus local efforts on customer
service and sales and to exercise greater control over administrative costs
and expenditures.
- - Strategic Acquisitions. Although the Company's focus will be the
consolidation and integration of Gannett Outdoor and the promotion of internal
growth of both new and existing properties, the Company will also continue to
pursue strategic acquisitions in existing and new markets to achieve increased
operating efficiencies, greater geographic diversification and increased
market penetration. The Company is primarily interested in continued expansion
in the 50 largest United States markets, because these markets typically
generate greater outdoor market revenues, readily attract national
advertisers, provide a better basis for regional advertising, attract quality
management and offer opportunities to gain a larger market share from
competitive media.
The Company believes that its experienced and sales-oriented management
team is an important asset in the successful implementation of its operating
strategy. William S. Levine, Chairman, Arthur R. Moreno, President and Chief
Executive Officer, and Wally C. Kelly, Senior Vice President of Sales, together
possess over 56 years of sales and management experience in the outdoor
advertising industry. In addition, the Outdoor Systems' general managers in its
existing markets have an average of nearly 14 years of experience in the outdoor
advertising industry. The industry experience of Mr. Moreno and other members of
Outdoor Systems' management team includes significant prior experience with
Gannett Outdoor.
The Company was organized in 1980. The Company's executive offices are
located at 2502 N. Black Canyon Highway, Phoenix, Arizona 85009, and its
telephone number is (602) 246-9569.
3
<PAGE> 8
THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Issuer............................. Outdoor Systems, Inc.
Securities Offered................. $150,000,000 principal amount of % Senior Subordinated
Notes due 2006 (the "Notes").
Maturity Date...................... , 2006.
Interest Rate...................... The Notes will bear interest at a rate of % per annum.
Interest Payment Dates............. Interest will accrue on the Notes from the date of
issuance (the "Issue Date") and will be payable
semi-annually on each and ,
commencing , 1997.
Ranking............................ The Notes will be general unsecured obligations of the
Company subordinate in right of payment to all existing
and future Senior Indebtedness (as defined herein) of
the Company, including indebtedness under the Senior
Credit Facility, and senior in right of payment to all
subordinated indebtedness of the Company. At June 30,
1996, after giving pro forma effect to the Transactions
and the Offering, the Company would have had
approximately $455.9 million of Senior Indebtedness
outstanding.
Guarantees......................... The Notes will be unconditionally guaranteed, on a
senior subordinated basis, as to the payment of
principal, premium, if any, and interest, jointly and
severally (the "Guarantees"), by all of the direct and
indirect domestic subsidiaries of the Company (the
"Guarantors"). The Guarantees will be subordinated to
all Senior Indebtedness of the respective Guarantors.
Optional Redemption................ The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after
, 2001 at the redemption prices set forth
herein, together with accrued and unpaid interest
thereon to the date of redemption. In addition, the
Company, at its option, may redeem in the aggregate up
to 35% of the original principal amount of Notes at any
time prior to , 1999, at a redemption price
equal to 110% of the principal amount thereof plus
accrued and unpaid interest thereon to the redemption
date with the net proceeds of one or more Public Equity
Offerings; provided, however, that at least $97.5
million aggregate principal amount of Notes remain
outstanding and that such redemption occurs within 60
days following the closing of any such Public Equity
Offering.
Change of Control.................. In the event of a Change of Control (as defined herein),
the Company will be required to make an offer to
purchase all outstanding Notes at a price equal to 101%
of the principal amount thereof, plus accrued and unpaid
interest to the date of purchase. See "Description of
the Notes -- Change of Control Offer." There can be no
assurance that the Company will have sufficient funds or
will be contractually permitted by outstanding Senior
Indebtedness to pay the required purchase price for all
Notes tendered by holders upon a Change of Control.
</TABLE>
4
<PAGE> 9
<TABLE>
<CAPTION>
<S> <C>
Certain Covenants.................. The Indenture governing the Notes (the "Indenture") will
contain covenants for the benefit of the holders of the
Notes that, among other things, restrict the ability of
the Company and its Restricted Subsidiaries (as defined
herein) to: (i) incur additional Indebtedness (as
defined herein); (ii) pay dividends and make
distributions; (iii) make certain investments; (iv)
create liens; (v) enter into transactions with
affiliates; (vi) issue stock of a Restricted Subsidiary;
(vii) enter into sale and leaseback transactions; (viii)
merge or consolidate the Company or the Guarantors; and
(ix) transfer or sell assets. These covenants are
subject to a number of important exceptions. See
"Description of the Notes -- Certain Covenants."
Use of Proceeds.................... The net proceeds from the sale of the Notes will be used
to repay borrowings under the Subordinated Credit
Facility and to pay related fees and expenses. The
remaining net proceeds, if any, will be used to pay a
portion of the outstanding borrowings under the Senior
Credit Facility.
</TABLE>
For more complete information regarding the Notes, including the
definitions of certain capitalized terms used above, see "Description of the
Notes."
RISK FACTORS
Prospective purchasers of the Notes should consider carefully the
information set forth under the caption "Risk Factors," and all other
information set forth in this Prospectus, in evaluating an investment in the
Notes.
5
<PAGE> 10
SUMMARY PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The following sets forth summary unaudited pro forma consolidated financial
information derived from the Unaudited Consolidated Pro Forma Financial
Information included elsewhere in this Prospectus. The summary unaudited pro
forma consolidated statement of operations for the year ended December 31, 1995
and for the latest twelve month period ended June 30, 1996 give effect to (i)
the Transactions, (ii) the net reduction in operating expenses of Gannett
Outdoor, (iii) the effect of conforming the capitalization of property and
equipment accounting policy of Gannett Outdoor to that of Outdoor Systems, and
(iv) the Offering and the application of the net proceeds therefrom as if each
had occurred at the beginning of the respective periods. The summary unaudited
pro forma balance sheet as of June 30, 1996 has been prepared as if the
Transactions and the Offering had occurred on June 30, 1996.
The summary unaudited pro forma consolidated financial information does not
purport to present the actual financial position or results of operations of the
Company had the transactions and events assumed therein in fact occurred on the
dates specified, nor are they necessarily indicative of the results of
operations that may be achieved in the future. The summary unaudited pro forma
consolidated financial information is based on certain assumptions and
adjustments described in the notes to the Unaudited Consolidated Pro Forma
Financial Information and should be read in conjunction therewith. See
"Management's Discussion and Analysis of Results of Operations and Financial
Condition," the Consolidated Financial Statements and the Notes thereto of
Outdoor Systems and the Combined Financial Statements and Notes thereto of
Gannett Outdoor, included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
LATEST
TWELVE
PRO FORMA MONTHS ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, 1995 1996
----------------- ------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues................................................ $ 314,386 $322,248
Direct advertising expenses................................. 174,353 176,389
General and administrative expenses......................... 26,723 26,672
Depreciation and amortization............................... 51,585 51,723
-------- --------
Operating income............................................ 61,725 67,464
Interest expense............................................ 54,139 54,139
Net income.................................................. 5,468 8,404
OTHER DATA:
EBITDA(1)................................................... $ 113,310 $119,187
EBITDA margin(2)............................................ 36.0% 37.0%
Capital expenditures........................................ $ 21,661 $ 21,368
Number of advertising displays.............................. 53,000 58,000
Ratio of EBITDA to interest expense(3)...................... 2.20x
Ratio of total debt to EBITDA(3)............................ 5.08x
PRO FORMA
ACTUAL AS OF
AS OF JUNE 30,
JUNE 30, 1996 1996
----------------- ------------
BALANCE SHEET DATA:
Working capital............................................. $ 7,882 $ 64,795
Total assets................................................ 160,545 954,236
Total debt.................................................. 138,633 605,937
Stockholders' equity........................................ 10,424 277,177
</TABLE>
- ---------------
(1) "EBITDA" is defined as operating income (loss) before depreciation and
amortization expense. While EBITDA should not be considered in isolation or
as a substitute for net income, cash flows from operating activities and
other income or cash flow statement data prepared in accordance with
generally accepted accounting principles, or as a measure of profitability
or liquidity, management understands that it is widely used by certain
investors as one measure to evaluate the financial performance of companies
in the outdoor advertising industry.
(2) "EBITDA margin" is EBITDA stated as a percentage of net revenues.
(3) If the Senior Credit Facility is not amended as proposed, the ratio of
EBITDA to interest expense and the ratio of total debt to EBITDA would be
2.04x and 5.06x, respectively.
6
<PAGE> 11
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
The following table sets forth summary historical financial data for
Outdoor Systems and Gannett Outdoor for the periods indicated. The information
presented below is qualified in its entirety by, and should be read in
conjunction with, "Management's Discussion and Analysis of Results of Operations
and Financial Condition," "Selected Historical Financial and Other Data" and the
Consolidated Financial Statements and Notes thereto of Outdoor Systems and the
Combined Financial Statements and Notes thereto of Gannett Outdoor.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------- -------------------------
OUTDOOR SYSTEMS(1) 1993 1994 1995 1995 1996
- ---------------------------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues(2)....................... $ 49,151 $ 52,077 $ 64,813 $ 29,738 $ 36,527
Operating expenses:
Direct advertising expenses......... 23,721 24,433 30,462 14,596 16,151
General and administrative
expenses.......................... 2,777 3,357 4,096 2,007 2,213
Depreciation and amortization....... 10,421 9,165 9,970 4,958 5,259
Gain on 1994 Disposal................. -- 4,325 -- -- --
Operating income...................... 12,232 19,447 20,285 8,177 12,904
Interest expense...................... 11,894 16,393 17,199 9,017 7,929
Net income (loss)(3).................. (3,176) 1,333 2,768 (840) 2,141
OTHER DATA:
EBITDA(4)............................. $ 22,653 $ 24,287 $ 30,255 $ 13,135 $ 18,163
EBITDA margin(5)...................... 46.1% 46.6% 46.7% 44.2% 49.7%
Capital expenditures.................. $ 4,387 $ 4,924 $ 7,070 $ 4,251 $ 2,891
Number of advertising displays........ 10,800 11,900 12,700 12,000 18,000
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
--------------------------------------- -------------------------
GANNETT OUTDOOR 1993 1994 1995 1995 1996
- ---------------------------------------- ----------- ----------- ----------- ----------- -----------
INCOME STATEMENT DATA:
Net revenues.......................... $ 225,165 $ 235,236 $ 247,271 $ 115,888 $ 117,733
Other income (loss)................... 25 (67) 193 266 201
----------- ----------- ----------- ----------- -----------
Total revenues................. 225,190 235,169 247,464 116,154 117,934
----------- ----------- ----------- ----------- -----------
Direct expenses:
Direct advertising.................. 159,927 163,362 171,091 82,955 82,410
General and administrative.......... 30,572 33,866 33,101 16,123 17,169
Depreciation and amortization....... 19,669 19,692 17,262 8,743 8,822
----------- ----------- ----------- ----------- -----------
Excess of revenues over direct
expenses............................ $ 15,022 $ 18,249 $ 26,010 $ 8,333 $ 9,533
=========== =========== =========== =========== ===========
</TABLE>
(see footnotes on the following page)
7
<PAGE> 12
NOTES TO SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
(1) In December 1994, the Company acquired substantially all of the assets and
business of Capitol Outdoor Advertising, Inc. in Atlanta (the "1994
Acquisition"), and in connection with the 1994 Acquisition simultaneously
sold its then-existing outdoor advertising displays in Atlanta (the "1994
Disposal") (the 1994 Acquisition and the 1994 Disposal are collectively
referred to as the "Atlanta Transaction"). In addition, in 1993 the Company
refinanced a substantial portion of its indebtedness with 10.75% Senior
Notes due 2003. Accordingly, operating results are not necessarily
comparable on a year-to-year basis. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition."
(2) Net revenues are gross revenues minus agency commissions, plus other income
of $1.0 million and $0.4 million for the years ended December 31, 1994 and
1995, respectively, and $0.3 million for the six months ended June 30, 1996.
(3) Deferred financing costs of $3.3 million and $0.8 million associated with
borrowings which were retired or redeemed were charged as an extraordinary
loss during 1993 and the six months ended June 30, 1996, respectively.
(4) "EBITDA" is defined as operating income (loss) before depreciation and
amortization expense and, in 1994, before the gain on the 1994 Disposal.
While EBITDA should not be considered in isolation or as a substitute for
net income, cash flows from operating activities and other income or cash
flow statement data prepared in accordance with generally accepted
accounting principles, or as a measure of profitability or liquidity,
management understands that it is widely used by certain investors as one
measure to evaluate the financial performance of companies in the outdoor
advertising industry.
(5) "EBITDA margin" is EBITDA stated as a percentage of net revenues.
8
<PAGE> 13
THE TRANSACTIONS
THE ACQUISITION
On August 22, 1996, the Company purchased substantially all of the assets
of Gannett Outdoor, including the stock of certain indirect subsidiaries of
Gannett, for approximately $640 million in cash, plus the net book value of
working capital and certain other specified assets of Gannett Outdoor (which net
book value increased the purchase price by approximately $60 million). As a
result of the Acquisition, the Company acquired from Gannett a total of
approximately 40,000 advertising display faces consisting of bulletins, posters
and transit advertising displays in and around New York, Los Angeles, Chicago,
Philadelphia, San Francisco, Detroit, Sacramento, St. Louis, Denver, San Diego,
New Haven, Kansas City, Grand Rapids, Flint and Rochester and in various
locations in New Jersey and Canada.
THE ACQUISITION FINANCING
The Company financed the purchase price of the Acquisition and the related
refinancing of certain existing indebtedness of the Company and paid the fees
and expenses associated with the Acquisition and the Acquisition Financing
through (i) a revolving credit facility and term loans of up to $530 million
under the Senior Credit Facility, (ii) bridge loans of $180 million under the
Subordinated Credit Facility, and (iii) the Common Stock Offering. The Company
used approximately $40 million of net proceeds received upon the exercise of the
Underwriters' over-allotment option in the Common Stock Offering to reduce
indebtedness incurred under the Subordinated Credit Facility. Concurrently with
or shortly following the consummation of the Offering, it is expected that the
Senior Credit Facility will be amended to provide for a revolving credit
facility and term loans of up to an aggregate of $600 million and to make
certain other changes. See "Description of Senior Credit Facility."
THE DEBT TENDER OFFER
In connection with the Acquisition, the Company purchased, pursuant to a
tender offer and consent solicitation (the "Debt Tender Offer"), all but $15,000
aggregate principal amount of its outstanding 10 3/4% Senior Notes due 2003 (the
"Existing Notes") and obtained the consent of the holders of the Existing Notes
to modify or eliminate certain provisions of the indenture governing the
Existing Notes to permit, among other things, the consummation of the
Acquisition Financing. The aggregate consideration paid by the Company in the
Debt Tender Offer was $1,116.25 per $1,000 principal amount of Existing Notes
plus accrued and unpaid interest. The Company executed a supplemental indenture
reflecting the amendments.
THE HOUSTON OPTION
In connection with the Acquisition, Gannett agreed to cause Gannett Outdoor
Co. of Texas, Inc. ("Gannett of Texas") to grant to the Company an option (the
"Houston Option") to purchase, within 120 days after the closing of the
Acquisition, Gannett of Texas' outdoor operations in Houston, Texas, for a
purchase price of $10 million in cash, plus the net book value of working
capital and certain other specified assets of Gannett of Texas. The Company
exercised the Houston Option and intends to complete the acquisition
contemplated thereby as soon as practicable following the expiration or early
termination of the applicable waiting period under the Hart-Scott-Rodino Act.
The acquisition of the Houston assets could require the sale or other
disposition of part or all of Outdoor Systems' existing operations in Houston.
THE DENVER DISPOSITION
On August 8, 1996, the Company sold substantially all of its existing
billboard assets in Denver (the "Denver Disposition") to an unrelated party for
$9.2 million consisting of $2.8 million in cash paid at closing and a ten-year
promissory note for the balance of the purchase price. The promissory note bears
interest at a rate of 9% per annum and is payable in installments of $162,500
(including interest) per quarter with a final payment of the remaining principal
and unpaid interest upon maturity. The promissory note is secured by a first
lien on the assets sold. The promissory note and all security instruments in
connection therewith have been pledged to secure the Company's obligations under
the Senior Credit Facility.
9
<PAGE> 14
OTHER ACQUISITIONS
In May 1996, Outdoor Systems acquired control over perpetual easements for
1,360 plots of land in 17 eastern states for $21.8 million (plus future
consideration estimated to be payable beginning in 2006) from CSX Realty
Development Corporation (the "CSX Assets Acquisition"). Currently, 130 different
outdoor advertising companies have licenses to operate approximately 2,240
advertising displays on these plots of land. As a result of this purchase, the
Company has the right to collect the proceeds from these licenses. The Company
believes that the plots of land subject to the easements acquired in the CSX
Assets Acquisition (i) are located in attractive locations because of their
proximity to major highways, and (ii) provide a long-term, consistent revenue
stream due to their high occupancy license fees and renewal rates. The Company
is in the process of consolidating the operations acquired in the CSX Assets
Acquisition into its Atlanta market operations.
In April 1996, the Company acquired all of the stock of Decade
Communications Group, Inc. (the "Bench Ad Acquisition"), which owned
approximately 5,300 bus benches in the Denver metropolitan area for a purchase
price of approximately $1.8 million.
The CSX Assets Acquisition and the Bench Ad Acquisition are hereinafter
referred to as the "Other Acquisitions."
10
<PAGE> 15
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the Notes
offered by this Prospectus.
Leverage and Liquidity. Upon completion of the Offering and the proposed
amendment to the Senior Credit Facility, the Company's total indebtedness will
be approximately $605.9 million, representing approximately 69% of total
capitalization. There can be no assurance that the Company will have adequate
cash available to make required principal and interest payments. In addition,
the terms of the Senior Credit Facility include, and the Indenture will include,
significant operating and financial restrictions, such as limits on the
Company's ability to incur indebtedness, create liens, sell assets, engage in
mergers or consolidations, make investments and pay dividends.
The Company's high degree of leverage may have important consequences for
the Company: (i) the ability of the Company to obtain additional financing for
acquisitions, working capital, capital expenditures or other purposes, if
necessary, may be impaired or such financing may not be on terms favorable to
the Company; (ii) a substantial portion of the Company's cash flow will be used
to pay the Company's interest expense and under certain conditions to repay
indebtedness, which will reduce the funds that would otherwise be available to
the Company for its operations and future business opportunities; (iii) a
substantial decrease in net operating cash flows or an increase in expenses of
the Company could make it difficult for the Company to meet its debt service
requirements and force it to modify its operations; (iv) the Company may be more
highly leveraged than its competitors which may place it at a competitive
disadvantage; and (v) the Company's high degree of leverage may make it more
vulnerable to a downturn in its business or the economy generally. Any inability
of the Company to service its indebtedness or obtain additional financing, as
needed, would have a material adverse effect on the Company.
The Company's ability to pay interest and principal on the Notes and to
satisfy its other debt obligations will depend upon its future operating
performance, which will be affected by prevailing economic conditions and
financial, business and other factors, certain of which are beyond its control.
The Company anticipates that its operating cash flow, together with borrowings
under the Senior Credit Facility, will be sufficient to meet its operating
expenses and to service its debt requirements as they become due. However, if
the Company is unable to service its indebtedness, whether upon acceleration of
such indebtedness or in the ordinary course of business, the Company will be
forced to pursue one or more alternative strategies such as selling assets,
restructuring or refinancing its indebtedness, or seeking additional equity
capital. There can be no assurance that any of these strategies could be
effected on satisfactory terms, if at all. See "Management's Discussion and
Analysis of Results of Operations and Financial Condition -- Liquidity and
Capital Resources."
Subordination. The Notes will be unsecured and subordinated to the prior
payment in full of all Senior Indebtedness (as defined herein) whether existing
at the time of issuance of the Notes or thereafter incurred. As of June 30,
1996, on a pro forma basis, after giving effect to the Transactions and the
Offering, the aggregate outstanding principal amount of all Senior Indebtedness
would have been approximately $455.9 million. The indebtedness under the Senior
Credit Facility is secured by a first priority lien on substantially all of the
assets of the Company now owned or hereafter acquired and is guaranteed by the
Guarantors. The guarantees of the Senior Credit Facility are secured by a first
priority lien on substantially all of the assets of the respective Guarantors
now owned or acquired later. In the event of a bankruptcy, liquidation or
reorganization of the Company, the assets of the Company will be available to
pay obligations on the Notes only after all Senior Indebtedness has been paid in
full, and there may not be sufficient assets remaining to pay amounts due on any
or all of the Notes. In addition, the Company may not pay principal or premium,
if any, or interest on the Notes if any Senior Indebtedness is not paid when due
or any other default on any Senior Indebtedness occurs and the maturity of such
Senior Indebtedness is accelerated in accordance with its terms, unless in
either case, such amount has been paid in full or the default has been cured or
waived and such acceleration has been rescinded. In addition, if any default
occurs with respect to certain Senior Indebtedness and certain other conditions
are satisfied, the Company may not make any payments on the Notes for a
designated period of time.
11
<PAGE> 16
The Company's Canadian subsidiaries have not guaranteed the Company's
obligations under the Notes. The rights of the Company and its creditors,
including the holder of the Notes, to realize upon the assets of such
subsidiaries in the event of any such subsidiaries' liquidation or
reorganization (and the consequent right of holders of the Notes to participate
in those assets) will be subject to the prior claims of such subsidiaries'
creditors, including the lenders under the Senior Credit Facility, except to the
extent that the Company may itself be a creditor with recognized claims against
any such subsidiaries. In such case, the Company's claim would still be
subordinate to any security interests in the assets of such subsidiaries and any
indebtedness of such subsidiaries which is senior to the claims of the Company.
The Company's Canadian subsidiaries' borrowings under the Senior Credit Facility
are secured by substantially all of the assets of such subsidiaries. See
"Description of Senior Credit Facility."
Restrictive Debt Covenants. The Senior Credit Facility contains a number
of significant covenants that, among other things, restrict the ability of the
Company to (i) incur indebtedness; (ii) incur liens or guarantee obligations;
(iii) enter into mergers or consolidations or liquidate, wind up or otherwise
dispose of all or substantially all of its property, or make any material change
in its method of conducting business; (iv) with certain exceptions, sell or
otherwise dispose of property, business or assets; (v) declare or pay dividends
or distributions or purchase or redeem any shares of capital stock or pay
interest on subordinate indebtedness in cash at a rate per annum greater than
15% or in any other form at a rate per annum greater than 20%; (vi) make capital
expenditures; (vii) make loans or investments; (viii) make optional payments or
prepay or redeem indebtedness or amend or modify payment terms or interest on
indebtedness; (ix) enter into transactions with affiliates; (x) enter into sale
and leaseback arrangements; (xi) alter the business it conducts; or (xii) enter
into agreements prohibiting or limiting its ability to create liens upon its
assets or revenues to secure the obligations under the Senior Credit Facility.
In addition, under the Senior Credit Facility, the Company is required to comply
with financial covenants with respect to a maximum total leverage ratio and
senior leverage ratio and a minimum interest coverage ratio and fixed charge
coverage ratio. If the Company were unable to borrow under the Senior Credit
Facility due to a default, it could be left without sufficient liquidity.
Fraudulent Conveyance Considerations. Management of the Company believes
that the indebtedness of the Company represented by the Notes, and the
indebtedness of Guarantors under the guarantees of the Notes, are being incurred
for proper purposes and in good faith, and that, based on present forecasts,
asset valuations and other financial information, the Company and each of the
Guarantors will be, after giving effect to the incurrence of the Notes and the
consummation of the Transactions, solvent, will have sufficient capital for
carrying on their business and will be able to pay their debts as they mature.
Notwithstanding management's belief, if a court of competent jurisdiction in a
suit by an unpaid creditor or a representative of creditors (such as a trustee
in bankruptcy or a debtor-in-possession) were to find that the Company (or any
Guarantor) did not receive fair consideration or reasonably equivalent value for
incurring the Notes (or the Guarantee) or any debt being refinanced thereby and,
at the time of the incurrence of the Notes (or Guarantee) or such indebtedness,
the Company (or such Guarantor), was insolvent, was rendered insolvent by reason
of such incurrence, was engaged in a business or transaction for which its
remaining assets constituted unreasonably small capital, intended to incur, or
believed that it would incur, debts beyond its ability to pay as such debts
matured, or intended to hinder, delay or defraud its creditors, such court could
avoid such indebtedness. A possible consequence of such avoidance would be the
subordination of the indebtedness represented by the Notes or the respective
Guarantees to existing and future indebtedness of the respective Guarantors.
Another possible consequence would be the effective abrogation of the
Guarantees. The measure of insolvency for purposes of the foregoing will vary
depending upon the law of the relevant jurisdiction. Generally, however, a
company would be considered insolvent for purposes of the foregoing if the
present fair saleable value of the company's assets is less than the amount that
will be required to pay its probable liability on existing debts as they become
absolute and mature. In rendering its opinion on the validity of the Notes,
counsel for each of the Company and the Underwriters will express no opinion as
to federal or state laws relating to fraudulent transfers.
Challenges of Business Integration. The Company has never consummated an
acquisition of a business the size of Gannett Outdoor, and faces significant
challenges in integrating the operations of Gannett Outdoor
12
<PAGE> 17
with those of the Company. Integration of Gannett Outdoor will require
substantial attention from the Company's management team, which has had limited
experience in integrating operations of the size of Gannett Outdoor. Diversion
of management attention from the Company's existing business could have an
adverse impact on the revenues and operating results of the Company. There can
be no assurance that the Company will be able to integrate the operations of the
Company and Gannett Outdoor successfully. In addition, Gannett Outdoor
historically has operated with a higher cost structure than the Company and the
pro forma financial statements assume that the Company will be able to achieve
significant cost reductions following the Acquisition, including cost reductions
associated with employee reductions and production plant closings. The Company
could face regulatory, contractual and other restrictions on its ability to
implement the cost reductions. There can be no assurance that the Company will
be successful in reducing the overhead and other costs associated with Gannett
Outdoor, or that realization of such cost reductions will not be delayed. In
addition, to the extent that the Company is successful in achieving part or all
of such cost reductions, there can be no assurance that the reductions will not
have a material adverse effect on the business of the Company.
Nature of Acquisition Agreement; Limited Recourse to Seller. The
representations and warranties made by Gannett in connection with the
Acquisition relating to Gannett Outdoor and the assets acquired and the
associated indemnities are limited and qualified. The Company's recourse to
Gannett is extremely limited. In addition, the Acquisition was consummated on a
very rapid schedule, and Outdoor Systems' ability to conduct due diligence was
limited by time constraints and other factors. Accordingly, unanticipated events
or liabilities related to the Gannett Outdoor business could materially and
adversely affect the Company and the success of the Acquisition.
Increase in Interest Rates. All of the indebtedness under the Senior
Credit Facility bears interest at variable rates. While the Company is required
by the Senior Credit Facility to enter into interest rate cap agreements to
reduce its exposure to increases in such interest rates with respect to at least
$265 million of indebtedness ($225 million upon amendment of the Senior Credit
Facility), such agreements will not apply to the Company's entire variable rate
debt and, therefore, will not entirely eliminate the Company's exposure to
variable rates. Any increase in the interest rates on the Company's indebtedness
will reduce funds available to the Company for its operations and future
business opportunities and will exacerbate the consequences of the Company's
leveraged capital structure. See "Description of Senior Credit Facility."
Prior Stockholders' Deficiency; Prior Period Losses. Until completion of
its initial public offering in April 1996, Outdoor Systems had a Common
Stockholders' Equity Deficiency as a result of net losses attributable to common
stockholders for periods prior to December 31, 1995. Outdoor Systems' net losses
in prior periods resulted in significant part from substantial depreciation and
amortization expenses related to assets purchased in Outdoor Systems'
acquisitions, interest expense associated with related indebtedness and deferred
financing cost charges recorded as extraordinary losses. Outdoor Systems
realized a net loss attributable to common stockholders during the first six
months of 1996 of approximately $1.3 million, in part due to a pre-tax
extraordinary loss of $1.4 million ($0.8 million net of tax benefit) arising
from the discount on subordinated debt retired in connection with its initial
public offering and a $2.3 million charge to additional paid in capital arising
from the unamortized discount on preferred stock retired as part of the initial
public offering. When the Bridge Financing is retired, the Company will write
off deferred financing costs related thereto (approximately $7.0 million if the
Bridge Financing is retired in the third quarter of 1996). In addition, the
Company incurred a commitment fee of $3.3 million related to a preferred stock
commitment that was not exercised and will incur an extraordinary loss of $13.3
million related to the Debt Tender Offer. The Company will record goodwill and
other intangible assets of approximately $60 million in connection with the
Acquisition, which will be amortized over a period of 30 years. In addition, the
cost basis of advertising structures acquired by the Company from Gannett will
increase by approximately $482.5 million over the $132.6 million historic cost
basis, which will be amortized over 20 years. The increased depreciation,
amortization, interest and other expenses associated with the Acquisition may
result in net losses in the future. There can be no assurance that the Company
will become profitable in the future.
13
<PAGE> 18
Acquisition Strategy. The Company's growth has been facilitated by
strategic acquisitions that have substantially increased the Company's inventory
of advertising displays. One element of the Company's operating strategy is to
make strategic acquisitions in markets in which it currently competes as well as
in new 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, and the Company is likely to face competition from other outdoor
advertising companies or other parties for acquisition opportunities that are
available. In addition, if the prices sought by sellers of outdoor advertising
displays and companies continue to rise, as management believes may happen, the
Company may find fewer acceptable acquisition opportunities. There can be no
assurance that the Company will have sufficient capital resources to complete
acquisitions, that acquisitions can be completed on terms acceptable to the
Company, or that any acquisitions that are completed can be successfully
integrated into the Company. While the Company continues to evaluate acquisition
opportunities, there are no material acquisitions pending as of the date of this
Prospectus.
Economic Conditions; Advertising Trends. The Company relies on sales of
advertising space for its revenues and its operating results therefore are
affected by general economic conditions, as well as trends in the advertising
industry. A reduction in advertising expenditures available for the Company's
displays could result from a general decline in economic conditions, a decline
in economic conditions in particular markets where the Company conducts business
or a reallocation of advertising expenditures to other available media by
significant users of the Company's displays. While the Company has benefitted
from special events in the past, there can be no assurance that the Company will
continue to benefit to the same degree in the future from special events such as
the 1996 Olympic Games in Atlanta, and results in a particular market, year or
period could be adversely affected by the lack of such special events.
Tobacco revenues have historically accounted for a significant portion of
outdoor advertising revenues. Beginning in 1992, the leading tobacco companies
substantially reduced their domestic advertising expenditures in response to a
declining population of smokers in the United States, societal pressures to
reduce advertising, consolidation in the tobacco industry and increasing price
competition from generic products. In 1995, tobacco advertising accounted for
9.1% of Outdoor Systems' net revenues, and 9.9% of Gannett Outdoor's net
revenues. In addition, the Food and Drug Administration recently promulgated
rules which, among other things, would limit certain types of outdoor
advertising by tobacco companies. There can be no assurance that the tobacco
industry will not further reduce advertising expenditures in the future or that
future legislation or rules will not further limit the use of outdoor
advertising by tobacco companies.
Competition. The Company faces competition for advertising revenues from
other outdoor advertising companies, as well as from other media such as radio,
television, print media 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 has increased substantially over the past several years to
include advertising displays in shopping centers and malls, airports, stadiums,
movie theaters and supermarkets, and on taxis, trains, buses and subways. Some
of the Company's competitors, principally in other media such as radio and
television, are substantially larger, better capitalized and have access to
greater resources than the Company. There can be no assurance that outdoor
advertising media will be able to compete with other types of media, or that the
Company will be able to compete successfully 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
management and sales personnel, in particular its President and Chief Executive
Officer, Arthur R. Moreno, and its Senior Vice President of Sales, Wally C.
Kelly. Although the Company has designed its incentive and compensation programs
to retain key employees, including options to purchase shares of Common Stock
(certain of which are subject to forfeiture in the event the recipients violate
non-competition clauses included therein), the Company has no employment
contracts with any of its employees, and none of its employees are bound by
non-competition agreements. The unavailability of the continuing services of its
executive officers and other key management and sales personnel could have a
material adverse effect on the Company's business.
14
<PAGE> 19
Regulation of Outdoor Advertising. Outdoor advertising displays are
subject to governmental regulation at the federal, state, provincial and local
levels. These regulations, in some cases, limit the height, size, location and
operation of billboards and, in limited circumstances, regulate the content of
the advertising copy displayed on the billboards. Some governmental regulations
prohibit the construction of new billboards or the replacement, relocation,
enlargement or upgrading of existing structures. Some cities, including Houston,
Kansas City and St. Louis, have adopted amortization ordinances or regulations
under which, after the expiration of a specified period of time, billboards must
be removed at the owner's expense and without the payment of compensation.
Ordinances requiring the removal of a billboard without compensation, whether
through amortization or otherwise, are being challenged in various state and
federal courts with conflicting results. To date, regulations in the Company's
markets have not materially adversely affected its operations. However, no
assurance can be given as to the effect on the Company of existing laws and
regulations or of new laws and regulations that may be adopted in the future.
See "Business -- Government Regulation."
Contract Consents. The transfer by Gannett to the Company of certain
contractual and other rights as part of the Acquisition requires the consent and
approval of certain other parties doing business with Gannett Outdoor prior to
the Acquisition. In addition, transfer of the capital stock of certain of the
subsidiaries of Gannett may violate change of control or other non-assignment
clauses contained in contracts to which such subsidiaries are a party. These
contractual and other rights were assigned to the Company as part of the
Acquisition even though the Company did not have all of the consents and
approvals required for such transfer prior to the closing of the Acquisition
which could result in termination of or default under such contracts or other
rights. There can be no assurance that the Company will receive the requisite
consents or approvals or obtain any necessary waivers to secure the benefits of
any such contracts.
Transit Business. A portion of the business acquired from Gannett Outdoor
(net revenues of approximately $28.5 million in 1995) consists of revenues under
contracts for the operation of display faces on bus shelters and in subway
stations and subways in the City of New York. Transfer of rights under these
contracts requires consent from the relevant public authorities. The Company has
obtained a number of such consents. Although the Company anticipates that it
will be able to secure the remaining consents or make other arrangements
providing to it the benefit of these contracts, there can be no assurance that
it will be able to do so. Further, most of these contracts are subject to
termination upon short notice by the applicable governmental authority,
terminate at scheduled times which impose competitive bidding and other
requirements for renewal, include letter of credit and other requirements
obligating the Company to fund and meet certain minimum payment requirements to
the governmental authority and erect and maintain shelters in the applicable
jurisdiction, and contain other performance obligations which are imposed on the
Company. There can be no assurance that these various obligations and conditions
will not adversely affect the Company. The transit business in New York
historically has generated relatively low operating margins and there can be no
assurance that the Company will be able to improve the performance of this
business.
Environmental Matters. As the owner, lessee or operator of various real
properties and facilities, the Company is subject to various federal, state and
local environmental laws and regulations. To date, compliance with such laws and
regulations has not had a material adverse effect on the historical business of
Outdoor Systems. However, a number of the properties acquired from Gannett have
existing environmental conditions relating primarily to underground storage
tanks for which the Company has assumed responsibility in connection with the
Acquisition. In addition, two of the sites are adjacent to Superfund sites and
other properties are in the vicinity of other industrial properties with known
contamination. Of the two properties adjacent to a Superfund site, one is
believed to be contaminated by such site. Although the Company believes that the
existing environmental conditions are manageable, there can be no assurance that
these conditions will not create greater costs than currently expected or that
compliance with existing or new environmental laws or regulations will not
require the Company to make significant expenditures in the future, all of which
could adversely affect the Company.
Seasonality. The Company's revenues and operating results have exhibited
some degree of seasonality in past periods. Typically, the Company experiences
its strongest financial performance in the fourth quarter and its lowest
revenues in the first quarter. The Company expects this trend to continue in the
future. Because
15
<PAGE> 20
a significant portion of the Company's expenses are fixed, a reduction in
revenues in any quarter is likely to result in a period-to-period decline in
operating performance and net income.
Control by Executive Officers and Directors. Upon consummation of the
Offering, the Company's executive officers, directors and their respective
affiliates will beneficially own (including for this purpose options exercisable
within 60 days after the date of this Prospectus and shares over which such
persons have voting control) approximately 49% of the outstanding shares of
Common Stock. Such persons, if acting together, would have sufficient voting
power to control the outcome of corporate actions submitted to the stockholders
for approval and to control the management and affairs of the Company, including
the election of the Board of Directors of the Company. As a result of such
control, certain transactions may not be possible without the approval of such
stockholders, including proxy contests, mergers involving the Company and tender
offers or other purchases of Common Stock that could give stockholders of the
Company the opportunity to realize a premium over the then-prevailing market
price for their shares of Common Stock. See "Principal Stockholders."
Lack of a Public Market for the Notes. There is no public market for the
Notes and the Company does not intend to list the Notes on any securities
exchange or for quotation over any over-the-counter market. The Company has been
advised by the Underwriters that the Underwriters intend to make a market in the
Notes following the completion of the Offering. However, the Underwriters are
under no obligation to do so and may discontinue any market making activities at
any time without notice. No assurance can be given as to the liquidity of the
trading market for the Notes or that an active public market for the Notes will
develop or, if developed, will continue. If an active public market does not
develop or is not maintained, the market price and liquidity of the Notes may be
adversely affected.
Change of Control. In the event of a Change of Control, the Company will
be required to offer to repurchase all of the outstanding Notes at 101% of the
principal amount thereof plus any accrued and unpaid interest thereon to the
date of the purchase. A Change of Control under the Indenture will result in a
default under the Senior Credit Facility. The exercise by the holders of the
Notes of their right to require the Company to repurchase the Notes upon a
Change of Control could also cause a default under other indebtedness of the
Company, even if the Change of Control itself does not, because of the financial
effect of such repurchase on the Company. The Company's ability to pay cash to
the holders of the Notes upon a repurchase may be limited by the Company's then
existing financial resources. There can be no assurance that in the event of a
Change of Control, the Company will have, or will have access to, sufficient
funds or will be contractually permitted under the terms of outstanding
indebtedness to pay the required purchase price for all Notes tendered by
holders upon a Change of Control. See "Description of the Notes -- Change of
Control Offer" and "Description of Senior Credit Facility."
Risks Associated with Forward-Looking Statements. This Prospectus contains
and incorporates by reference certain statements that are "forward-looking
statements" within the meaning of Section 27A of the Securities Act and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").
Those statements include, among other things, the discussions of the Company's
business strategy and expectations concerning the Company's market position,
future operations, margins, profitability, liquidity and capital resources, as
well as statements concerning the integration of the Acquisition and achievement
of cost savings in connection therewith. Investors in the Notes offered hereby
are cautioned that reliance on any forward-looking statement involves risks and
uncertainties, and that although the Company believes that the assumptions on
which the forward-looking statements contained herein are based are reasonable,
any of those assumptions could prove to be inaccurate, and as a result, the
forward-looking statements based on those assumptions also could be incorrect.
The uncertainties in this regard include, but are not limited to, those
identified in the risk factors discussed above. In light of these and other
uncertainties, the inclusion of a forward-looking statement herein should not be
regarded as a representation by the Company that the Company's plans and
objectives will be achieved.
16
<PAGE> 21
USE OF PROCEEDS
The net proceeds to the Company from the sale of the Notes offered hereby
are estimated to be approximately $144.8 million, after deducting estimated
underwriting discounts and commissions and offering expenses. The Company
intends to use the net proceeds to repay amounts outstanding under the
Subordinated Credit Facility. The remaining net proceeds, if any, are intended
to be used to pay outstanding borrowings under the Senior Credit Facility. As of
the date hereof, the Company has $140 million principal amount of indebtedness
outstanding under the Subordinated Credit Facility which currently bears
interest at an interest rate of approximately 11.7% per annum. The Subordinated
Credit Facility matures on August 22, 2006. For information relating to the
interest rates and maturities applicable to borrowings under the Senior Credit
Facility, see "Description of Senior Credit Facility" herein.
CAPITALIZATION
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth the consolidated capitalization of the
Company (i) as of June 30, 1996, (ii) pro forma giving effect as of June 30,
1996 to the Acquisition, the Debt Tender Offer and the Acquisition Financing,
all of which occurred on August 22, 1996 and (iii) pro forma as further adjusted
giving effect to the Offering and the application of the estimated net proceeds
therefrom and the proposed amendment to the Senior Credit Facility. This table
should be read in conjunction with the information contained in "Unaudited
Consolidated Pro Forma Financial Information" and Outdoor Systems' consolidated
financial statements and notes thereto appearing elsewhere herein.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
----------------------------------------
PRO FORMA PRO FORMA
AS ADJUSTED AS ADJUSTED
FOR THE FOR THE
ACTUAL TRANSACTIONS(1) OFFERING(2)
-------- --------------- -----------
<S> <C> <C> <C>
Current maturities of long-term debt....................... $ 173 $ 0 $ 0
-------- -------- --------
Long-term debt:
Senior Credit Facility................................... 23,750 459,497 455,897
Existing Notes........................................... 114,670 -- --
Subordinated Credit Facility............................. -- 140,000 --
Notes.................................................... -- -- 150,000
Other.................................................... 40 40 40
-------- -------- --------
Total long-term debt.................................. 138,460 599,537 605,937
-------- -------- --------
Common stockholders' equity:
Common Stock, $0.01 par value............................ 180 266 266
Additional paid in capital............................... 33,987 316,808 316,808
Accumulated deficit(3)................................... (19,690) (31,694) (35,844)
Treasury stock (at cost) 7,650,297 shares................ (4,053) (4,053) (4,053)
-------- -------- --------
Total common stockholders' equity(4).................. 10,424 281,327 277,177
-------- -------- --------
Total capitalization............................. $149,057 $ 880,864 $ 883,114
======== ======== ========
</TABLE>
- ---------------
(1) Pro forma to give effect to the consummation of the Acquisition, the Debt
Tender Offer and the Acquisition Financing.
(2) Pro forma as adjusted to give effect to the Offering and the application of
the net proceeds therefrom and the proposed amendment to the Senior Credit
Facility.
(3) Pro forma as adjusted for the Transactions also reflects the write-off of a
$3.3 million commitment fee related to a preferred stock commitment that was
not exercised. Pro forma as adjusted for the Offering reflects the write-off
of approximately $7.0 million of deferred financing costs incurred in
connection with the borrowings under the Subordinated Credit Facility. Such
amounts were reduced by related tax benefits.
(4) Excludes 4,100,184 shares of Common Stock issuable upon exercise of options,
of which 2,884,135 are exercisable immediately and 1,216,049 vest ratably
over a four-year period, and 156,797 shares of Common Stock issuable in
settlement of accounts under the Company's Incentive Plan.
17
<PAGE> 22
UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
The following unaudited consolidated pro forma financial information
combines the historical financial information of the Company and Gannett Outdoor
at June 30, 1996 and for the year ended December 31, 1995, the twelve month
period ended June 30, 1996 and for the six month period ended June 30, 1996,
giving effect to (i) the Transactions (including the proposed amendment to the
Senior Credit Facility); (ii) the net reduction in operating expenses of Gannett
Outdoor; (iii) the effect of conforming the capitalization of property and
equipment accounting policy of Gannett Outdoor to that of the Company; and (iv)
the Offering and the application of the net proceeds therefrom. The pro forma
consolidated balance sheet as of June 30, 1996 has been prepared as if the
Transactions and the Offering had occurred on June 30, 1996.
The detailed assumptions used to prepare the unaudited consolidated pro
forma financial information are contained in the notes to unaudited consolidated
pro forma financial information. The unaudited consolidated pro forma financial
information reflects the use of the purchase method of accounting for the
Acquisition.
Pro forma adjustments for the Acquisition are based upon preliminary
estimates, available information and certain assumptions that the management of
the Company deems appropriate. Final adjustments may differ from the pro forma
adjustments presented herein. The unaudited consolidated pro forma financial
information does not purport to represent the results of operations or the
financial position of the Company and Gannett Outdoor that actually would have
resulted had the Acquisition occurred as of the date indicated, nor should it be
taken as indicative of the future results of the operations or future financial
position of the Company and Gannett Outdoor. The unaudited consolidated pro
forma financial information should be read in conjunction with the notes to
unaudited consolidated pro forma financial information and the separate
historical financial statements and notes thereto of the Company and Gannett
Outdoor which are contained elsewhere herein.
This pro forma data does not give effect to cost reductions that are
anticipated to be achieved subsequent to the Acquisition from (i) reductions in
facility costs arising from renegotiated rents or reduced space and the
elimination of expenses relating to terminated employees; (ii) a reduction in
labor costs arising from production efficiencies and a reduced number of direct
production and direct sales employees; and (iii) increased sales efficiencies
arising from a modification of the sales compensation system.
18
<PAGE> 23
OUTDOOR SYSTEMS, INC.
UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET
JUNE 30, 1996
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO FORMA PRO FORMA
GANNETT ACQUISITION OFFERING PRO FORMA
COMPANY OUTDOOR ADJUSTMENTS PRO FORMA ADJUSTMENTS AS ADJUSTED
-------- -------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CURRENT ASSETS............................. $ 15,070 $ 81,202 $ 4,404(1) $ 100,676 $ 100,676
PROPERTY AND EQUIPMENT -- Net.............. 112,457 132,636 482,537(1) 727,630 727,630
PERPETUAL LAND EASEMENTS................... 23,674 -- 23,674 23,674
INTANGIBLE ASSETS -- Net................... -- 41,243 23,563(2) 60,000 60,000
(4,806)(1)
DEFERRED FINANCING COSTS................... 3,920 -- (3,274)(3) 17,207 $ 7,750(4) 24,957
16,561(1)
BRIDGE DEFERRED FINANCING COSTS............ -- -- 8,300(1) 8,300 (1,350)(4) --
(6,950)(5)
DEFERRED INCOME TAXES...................... 3,827 -- 7,900(1) 11,727 2,800(5) 14,527
OTHER ASSETS............................... 1,597 1,175 2,772 2,772
-------- -------- --------- -------- --------- --------
TOTAL...................................... $160,545 $256,256 $ 535,185 $ 951,986 $ 2,250 $ 954,236
======== ======== ========= ======== ========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES........................ $ 7,188 $ 23,113 $ 5,580(1) $ 35,881 $ 35,881
-------- -------- --------- -------- --------
LONG-TERM DEBT:
10.75% Senior Notes...................... 114,670 -- (114,670)(1) -- --
Senior Credit Facility................... 23,750 -- 435,747(1) 459,497 $ (3,600)(4) 455,897
Subordinated Credit Facility............. -- -- 140,000(1) 140,000 (140,000)(4) --
Notes.................................... -- -- -- 150,000(4) 150,000
Other long-term obligations.............. 40 -- 40 40
-------- -------- --------- -------- --------- --------
Total long-term obligations............ 138,460 -- 461,077 599,537 6,400 605,937
-------- -------- --------- -------- --------- --------
OTHER LONG-TERM LIABILITIES................ 4,473 7,205 23,563(2) 35,241 35,241
-------- -------- --------- -------- --------- --------
Total liabilities...................... 150,121 30,318 490,220 670,659 6,400 677,059
-------- -------- --------- -------- --------- --------
NET ASSETS TO BE ACQUIRED.................. -- 225,938 (225,938)(1) -- --
-------- -------- --------- -------- --------- --------
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock............................. 180 -- 86(1) 266 266
Additional paid-in capital............... 33,987 -- 282,821(1) 316,808 316,808
Accumulated deficit...................... (19,690) -- (13,330)(1) (31,694) (4,150)(5) (35,844)
(3,274)(3)
(3,300)(1)
7,900(1)
Treasury stock........................... (4,053) -- (4,053) (4,053)
-------- -------- --------- -------- --------- --------
Total stockholders' equity (deficit)... 10,424 -- 270,903 281,327 (4,150) 277,177
-------- -------- --------- -------- --------- --------
TOTAL...................................... $160,545 $256,256 $ 535,185 $ 951,986 $ 2,250 $ 954,236
======== ======== ========= ======== ========= ========
</TABLE>
19
<PAGE> 24
OUTDOOR SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET
AT JUNE 30, 1996
(DOLLARS IN THOUSANDS)
The following explanations describe the assumptions used in determining the
pro forma adjustments necessary to present the pro forma financial position of
the Company after giving effect to the Acquisition, the Debt Tender Offer and
the Acquisition Financing.
<TABLE>
<S> <C>
1. Entry records the Acquisition Financing that the Company used to acquire
Gannett Outdoor and the use of the financing proceeds:
DEBIT
(CREDIT)
Sale of 8,590,000 shares of Common Stock
Common Stock................................................................... $ (86)
Additional paid in capital..................................................... (282,821)
Increase debt as follows:
Senior Credit Facility......................................................... (435,747)
Subordinated Credit Facility................................................... (140,000)
Elimination of historical net assets of Gannett Outdoor........................ 225,938
Change in assets and liabilities resulting from allocation of purchase price:
Intangibles.................................................................... (4,806)
Property and equipment......................................................... 482,537
Increase in deferred financing costs attributable to the Bridge Financing...... 8,300
Increase in other deferred financing costs..................................... 16,561
Increase in accumulated deficit due to premium paid and other costs of
tendering for 10.75% Senior Notes............................................ 13,330
Increase in accumulated deficit due to commitment fee for preferred stock...... 3,300
Increase in current assets..................................................... 4,404
Accrual for estimated severance costs for Gannett Outdoor employees to be
terminated at Acquisition date (estimated to be an average of six weeks
compensation)................................................................ (5,580)
Redemption of 10.75% Senior Notes.............................................. 114,670
Deferred income taxes.......................................................... 7,900
Increase in accumulated deficit to record tax benefit on write-off of tender
fees and financing costs..................................................... (7,900)
$ 0
2. Entry records the increase in intangibles (excess of costs over net assets
acquired) and deferred income taxes arising from application of SFAS No. 109
to allocation of purchase price:
Intangibles.................................................................... $ 23,563
Deferred income taxes.......................................................... (23,563)
$ 0
3. Entry records the write-off of deferred financing cost related to the 10.75%
Senior Notes:
Write-off of deferred financing costs.......................................... $ (3,274)
Increase in accumulated deficit................................................ 3,274
$ 0
</TABLE>
20
<PAGE> 25
OUTDOOR SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET -- (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
4. Entry records the sale of the Notes and the application of the net proceeds
therefrom:
DEBIT
(CREDIT)
Deferred financing costs....................................................... $ 7,750
Refund of bridge deferred financing costs...................................... (1,350)
Senior Credit Facility......................................................... 3,600
Subordinated Credit Facility................................................... 140,000
Notes.......................................................................... (150,000)
$ 0
5. Entry records the write-off of the bridge deferred financing costs:
Deferred tax asset............................................................. $ 2,800
Bridge deferred financing costs................................................ (6,950)
Accumulated deficit............................................................ 4,150
$ 0
</TABLE>
21
<PAGE> 26
OUTDOOR SYSTEMS, INC.
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ACQUISITION ADJUSTMENTS
--------------------- --------------------------------------- PRO FORMA
GANNETT ACQUISITION SUPPLEMENTAL PRO OFFERING PRO FORMA
COMPANY OUTDOOR ADJUSTMENTS TOTAL ADJUSTMENTS FORMA ADJUSTMENTS AS ADJUSTED
---------- -------- ----------- -------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Outdoor
advertising -- net... $ 64,396 $247,271 $ (1,112)(1) $310,555 $ 310,555 $ 310,555
Other income..... 417 193 3,221(1) 3,831 3,831 3,831
---------- -------- -------- -------- ---------- ----------
Net
revenues... 64,813 247,464 2,109 314,386 314,386 314,386
---------- -------- -------- -------- ---------- ----------
OPERATING EXPENSES:
Direct
advertising.... 30,462 171,091 (756)(1) 200,797 $ (4,080)(4) 174,353 174,353
(22,364)(5)
General and
administrative... 4,096 33,101 374(1) 37,571 (10,848)(6) 26,723 26,723
Depreciation and
amortization... 9,970 17,262 172(1) 51,585 51,585 51,585
24,181(2)
---------- -------- -------- -------- -------- ---------- ----------
Total
operating
expenses... 44,528 221,454 23,971 289,953 (37,292) 252,661 252,661
---------- -------- -------- -------- -------- ---------- ----------
OPERATING INCOME... 20,285 26,010 (21,862) 24,433 37,292 61,725 61,725
INTEREST EXPENSE... 17,199 -- 43,732(3) 61,970 61,970 $(7,831)(8) 54,139
1,039(1)
---------- -------- -------- -------- -------- ---------- -------- ----------
INCOME (LOSS)
BEFORE INCOME
TAXES............ 3,086 26,010 (66,633) (37,537) 37,292 (245 ) 7,831 7,586
INCOME TAXES
(BENEFIT)........ 318 -- 318 (1,332)(7) (1,014 ) 3,132(9) 2,118
---------- -------- -------- -------- -------- ---------- -------- ----------
NET INCOME
(LOSS)........... 2,768 26,010 (66,633) (37,855) 38,624 769 4,699 5,468
LESS PREFERRED AND
COMMON STOCK
ITEMS............ (2,461) -- (2,461) (2,461 ) (2,461 )
---------- -------- -------- -------- -------- ---------- -------- ----------
INCOME (LOSS)
ATTRIBUTABLE TO
COMMON
STOCKHOLDERS..... $ 307 $ 26,010 $ (66,633) $(40,316) $ 38,624 $ (1,692 ) $ 4,699 $ 3,007
========== ======== ======== ======== ======== ========== ======== ==========
INCOME (LOSS) PER
COMMON AND COMMON
EQUIVALENT
SHARES........... $ .02 $ (.07 ) $ .12
========== ========== ==========
WEIGHTED AVERAGE
NUMBER OF COMMON
AND COMMON
EQUIVALENT SHARES
OUTSTANDING...... 16,949,385 25,539,385 25,539,385
========== ========== ==========
</TABLE>
22
<PAGE> 27
OUTDOOR SYSTEMS, INC.
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
TWELVE MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ACQUISITION ADJUSTMENTS
--------------------- --------------------------------------- PRO FORMA
GANNETT ACQUISITION SUPPLEMENTAL PRO OFFERING PRO FORMA
COMPANY OUTDOOR ADJUSTMENTS TOTAL ADJUSTMENTS FORMA ADJUSTMENTS AS ADJUSTED
---------- -------- ----------- -------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Outdoor
advertising -- net... $ 70,887 $249,116 $ (1,515)(1) $318,488 $ 318,488 $ 318,488
Other income..... 715 128 2,917(1) 3,760 3,760 3,760
------- ------- -------- -------- -------- --------
Net
revenues... 71,602 249,244 1,402 322,248 322,248 322,248
------- ------- -------- -------- -------- --------
OPERATING EXPENSES:
Direct
advertising.... 32,017 171,547 (982)(1) 202,582 $ (3,829)(4) 176,389 176,389
(22,364)(5)
General and
administrative... 4,302 33,146 300(1) 37,748 (11,076)(6) 26,672 26,672
Depreciation and
amortization... 10,271 17,341 9(1) 51,723 51,723 51,723
24,102(2)
------- ------- -------- -------- -------- -------- --------
Total
operating
expenses... 46,590 222,034 23,429 292,053 (37,269) 254,784 254,784
------- ------- -------- -------- -------- -------- --------
OPERATING INCOME... 25,012 27,210 (22,027) 30,195 37,269 67,464 67,464
INTEREST EXPENSE... 16,111 -- 44,820(3) 61,970 61,970 $(7,831)(8) 54,139
1,039(1)
------- ------- -------- -------- -------- -------- ------- --------
INCOME (LOSS)
BEFORE INCOME
TAXES............ 8,901 27,210 (67,886) (31,775) 37,269 5,494 7,831 13,325
INCOME TAXES
(BENEFIT)........ 2,308 -- 2,308 (1,363)(7) 945 3,132(9) 4,077
------- ------- -------- -------- -------- -------- ------- --------
INCOME (LOSS)
BEFORE
EXTRAORDINARY
LOSS............. 6,593 27,210 (67,886) (34,083) 38,632 4,549 4,699 9,248
EXTRAORDINARY
LOSS............. (844) (844) (844) (844 )
------- ------- -------- -------- -------- -------- ------- --------
NET INCOME
(LOSS)........... 5,749 27,210 (67,886) (34,927) 38,632 3,705 4,699 8,404
LESS PREFERRED AND
COMMON STOCK
ITEMS............ (4,727) -- (4,727) (4,727) (4,727 )
------- ------- -------- -------- -------- -------- ------- --------
INCOME (LOSS)
ATTRIBUTABLE TO
COMMON
STOCKHOLDERS..... $ 1,022 $ 27,210 $ (67,886) $ 39,654 $ 38,632 $ (1,022) $ 4,699 $ 3,677
======= ======= ======== ======== ======== ======== ======= ========
INCOME (LOSS) PER
COMMON AND COMMON
EQUIVALENT
SHARES........... $ .07 $ (.04) $ .15
======= ======== ========
WEIGHTED AVERAGE
NUMBER OF COMMON
AND COMMON
EQUIVALENT SHARES
OUTSTANDING...... 15,573,117 24,163,117 24,163,117
======= ======== ========
</TABLE>
23
<PAGE> 28
OUTDOOR SYSTEMS, INC.
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ACQUISITION ADJUSTMENTS
--------------------- --------------------------------------- PRO FORMA
GANNETT ACQUISITION SUPPLEMENTAL PRO OFFERING PRO FORMA
COMPANY OUTDOOR ADJUSTMENTS TOTAL ADJUSTMENTS FORMA ADJUSTMENTS AS ADJUSTED
---------- -------- ----------- -------- ------------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES:
Outdoor
advertising--net. $ 36,229 $117,733 $ (959) (1) $153,003 $ 153,003 $ 153,003
Other income..... 298 201 1,306 (1) 1,805 1,805 1,805
---------- -------- -------- -------- ---------- ----------
Net
revenues... 36,527 117,934 347 154,808 154,808 154,808
---------- -------- -------- -------- ---------- ----------
OPERATING EXPENSES:
Direct
advertising.... 16,151 82,410 (604)(1) 97,957 $ (400)(4) 86,375 86,375
(11,182)(5)
General and
administrative... 2,213 17,169 113(1) 19,495 (5,697)(6) 13,798 13,798
Depreciation and
amortization... 5,259 8,822 (77)(1) 25,904 25,904 25,904
11,900(2)
---------- -------- -------- -------- -------- ---------- ----------
Total
operating
expenses... 23,623 108,401 11,332 143,356 (17,279) 126,077 126,077
---------- -------- -------- -------- -------- ---------- ----------
OPERATING INCOME... 12,904 9,533 (10,985) 11,452 17,279 28,731 28,731
INTEREST EXPENSE... 7,929 -- 22,537(3) 30,986 30,986 $(3,916)(8) 27,070
520(1)
---------- -------- -------- -------- -------- ---------- ------- ----------
INCOME (LOSS)
BEFORE INCOME
TAXES............ 4,975 9,533 (34,042) (19,534) 17,279 (2,255) 3,916 1,661
INCOME TAXES
(BENEFIT)........ 1,990 -- 1,990 (2,892)(7) (902) 1,566(9) 664
---------- -------- -------- -------- -------- ---------- ------- ----------
INCOME (LOSS)
BEFORE
EXTRAORDINARY
LOSS............. 2,985 9,533 (34,042) (21,524) 20,171 (1,353) 2,350 997
EXTRAORDINARY
LOSS............. (844) (844) (844) (844)
---------- -------- -------- -------- -------- ---------- ------- ----------
NET INCOME
(LOSS)........... 2,141 9,533 (34,042) (22,368) 20,171 (2,197) 2,350 153
LESS PREFERRED AND
COMMON STOCK
ITEMS............ (3,461) -- (3,461) (3,461) (3,461)
---------- -------- -------- -------- -------- ---------- ------- ----------
INCOME (LOSS)
ATTRIBUTABLE TO
COMMON
STOCKHOLDERS..... $ (1,320) $ 9,533 $ (34,042) $(25,829) $ 20,171 $ (5,658) $ 2,350 $ (3,308)
========== ======== ======== ======== ======== ========== ======= ==========
INCOME (LOSS) PER
COMMON AND COMMON
EQUIVALENT
SHARES........... $ (.08) $ (.23) $ (.14)
========== ========== ==========
WEIGHTED AVERAGE
NUMBER OF COMMON
AND COMMON
EQUIVALENT SHARES
OUTSTANDING...... 15,573,117 24,163,117 24,163,117
========== ========== ==========
</TABLE>
24
<PAGE> 29
OUTDOOR SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995, FOR THE TWELVE MONTHS ENDED JUNE 30, 1996
AND FOR THE SIX MONTHS ENDED JUNE 30, 1996
(DOLLARS IN THOUSANDS)
The following explanations describe the assumptions used in determining the
pro forma adjustments necessary to present the pro forma results of operations
of the Company and Gannett Outdoor for the year ended December 31, 1995, for the
twelve months ended June 30, 1996 and for the six months ended June 30, 1996.
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1995 1996 1996
------------ ------------- ------------
<S> <C> <C> <C>
(1) Entry records pro forma changes in revenues and
expenses arising from the Bench Ad Acquisition
and the CSX Assets Acquisition in 1996, less
revenues and expenses of outdoor advertising
structures of the Company in Denver that will
be sold in the Denver Disposition:
Revenues....................................... $ (1,112) $ (1,515) $ (959)
Other income................................... 3,221 2,917 1,306
Direct advertising............................. (756) (982) (604)
General and administrative..................... 374 300 113
Depreciation and amortization.................. 172 9 (77)
Interest....................................... 1,039 1,039 520
Interest reflects the cost of such acquisitions at the Company's average borrowing rate less
interest on the proceeds from the sale of the certain outdoor advertising structures that will
be sold.
(2) Entry records the increase in depreciation and
amortization expense arising from purchase
accounting adjustments as follows:
</TABLE>
<TABLE>
<CAPTION>
ASSETS AMORTIZATION PERIOD
------------------------ ------------------------
<S> <C> <C> <C> <C>
Advertising structures 20 years $ 39,443 $ 39,443 $ 19,722
Goodwill 30 years 2,000 2,000 1,000
--------
Total............................................. 41,443 41,443 20,722
Amount recorded in financial statements........... 17,262 17,341 8,822
--------
Pro forma adjustment.............................. $ 24,181 $ 24,102 $ 11,900
======== ========= ========
</TABLE>
25
<PAGE> 30
OUTDOOR SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA
STATEMENTS OF OPERATIONS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1995 1996 1996
------------ ------------- ------------
<C> <S> <C> <C> <C>
(3) Entry records additional interest expense and
amortization of debt discount expense on the
debt issued in connection with the Acquisition
less interest on the 10.75% Senior Notes
redeemed, as follows:
Interest expense:
Senior Credit Facility......................... $ 41,355 $ 41,355 $ 20,678
Subordinated Credit Facility................... 16,380 16,380 8,190
Less interest on 10.75% Senior Notes and
existing senior credit facility......... (17,199) (16,111) (7,929)
Amortization of deferred financing
costs................................... 3,196 3,196 1,598
------------ ------------- ------------
Total interest expense......................... $ 43,732 $ 44,820 $ 22,537
========== =========== ==========
It is anticipated that the total amount of the bridge deferred financing costs will be written
off when the Bridge Financing is redeemed.
(4) Entry records a decrease in direct advertising
expenses due to differences in fixed asset
capitalization policies........................ $ 4,080 $ 3,829 $ 400
========== =========== ==========
(5) Entry records a decrease in payroll and payroll
related costs due to termination of employees
at date of the Acquisition or as soon as
permitted under applicable laws due to:
Elimination of production and sales overhead
functions................................. $ 7,724 $ 7,724 $ 3,862
Consolidation of Canadian production
facility.................................. 1,640 1,640 820
Elimination of production support
positions................................. 2,591 2,591 1,295
Elimination of national sales and marketing
support positions......................... 5,053 5,053 2,527
Elimination of administrative support
positions................................. 5,356 5,356 2,678
------------ ------------- ------------
$ 22,364 $ 22,364 $ 11,182
========== =========== ==========
Amounts for 1995 and the twelve months ended June 30, 1996 have been determined based upon
specific employees identified for termination plus benefits estimated to be 30% of payroll.
Amounts for the six months ended June 30, 1996 have been determined based upon 50% of 1995
amounts.
</TABLE>
26
<PAGE> 31
OUTDOOR SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA
STATEMENTS OF OPERATIONS -- (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
TWELVE MONTHS SIX MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, JUNE 30, JUNE 30,
1995 1996 1996
------------ ------------- ------------
<C> <S> <C> <C> <C>
(6) Entry records a decrease in payroll and payroll
related costs due to termination of employees
at date of the Acquisition or as soon as
permitted under applicable laws due to:
Elimination of national office functions....... $ 4,162 $ 4,162 $ 2,081
Consolidation of accounting and
administrative functions to eliminate
positions or duplicate
efforts................................... 5,770 5,770 2,885
------------ ------------- ------------
9,932 9,932 4,966
Expenses of national office to be closed....... 916 1,144 731
------------ ------------- ------------
$ 10,848 $ 11,076 $ 5,697
========== =========== ==========
Amounts for 1995 and the twelve months ended June 30, 1996 have been determined based upon
specific employees identified for termination plus benefits estimated to be 30% of payroll.
Amounts for the six months ended June 30, 1996 have been determined based upon 50% of 1995
amounts adjusted for known changes and actual expenses of the national office.
(7) Entry records the income tax effect of pro
forma adjustments at a blended rate of 40%..... $ 1,332 $ 1,363 $ 2,892
========== =========== ==========
(8) Entry records interest expense to reflect the
modification of the terms of the Senior Credit
Facility, issuance of $150,000 of Notes, the
redemption of the Subordinated Credit Facility
and the repayment of $3,600 under the Senior
Credit Facility:
Senior Credit Facility......................... $ 36,560 $ 36,560 $ 18,280
Notes.......................................... 14,438 14,438 7,219
Amortization of deferred financing costs....... 3,141 3,141 1,571
Less interest reflected in pro forma........... (61,970) (61,970) (30,986)
------------ ------------- ------------
$ (7,831) $ (7,831) $ (3,916)
========== =========== ==========
(9) Entry records the income tax effect of pro
forma adjustments at a blended rate of 40%..... $ 3,132 $ 3,132 $ 1,566
========== =========== ==========
</TABLE>
27
<PAGE> 32
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
The selected consolidated financial data presented below were derived from
the audited consolidated financial statements of the Company for the five years
ended December 31, 1995 and the unaudited interim consolidated financial
statements for the six-month periods ended June 30, 1995 and 1996. The financial
statements of the Company for the three years in the period ended December 31,
1995 and as of December 31, 1994 and 1995 were audited by Deloitte & Touche LLP,
independent auditors, as indicated in their report included elsewhere in this
Prospectus. The selected balance sheet data as of June 30, 1995 and 1996 and
statement of operations data for the six months ended June 30, 1995 and 1996 are
unaudited, but, in the opinion of management of the Company, reflect all
adjustments (consisting only of normal, recurring adjustments) necessary for
fair presentation of results for such periods. Results for these periods are not
necessarily indicative of the results that may be expected for the year ending
December 31, 1996. The data set forth below should be read in conjunction with
"Management's Discussion and Analysis of Results of Operations and Financial
Condition" and the Consolidated Financial Statements, including the Notes
thereto, appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
---------------------------------------------------------------- ----------------------
1991 1992 1993 1994 1995 1995 1996
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Net revenues(2)................ $ 30,439 $ 44,886 $ 49,151 $ 52,077 $ 64,813 $ 29,738 $ 36,527
Operating Expenses:
Direct advertising
expenses................... 15,341 21,781 23,721 24,433 30,462 14,596 16,151
General and administrative
expenses................... 1,989 2,238 2,777 3,357 4,096 2,007 2,213
Depreciation and
amortization............... 9,706 12,350 10,421 9,165 9,970 4,958 5,259
Gain on 1994 Disposal.......... -- -- -- 4,325 -- -- --
Operating income............... 3,403 8,517 12,232 19,447 20,285 8,177 12,904
Interest expense............... 7,657 9,526 11,894 16,393 17,199 9,017 7,929
Income (loss) before
extraordinary item and change
in accounting principle(3)... (4,254) (955) 111 1,333 2,768 (840) 2,985
Net income (loss).............. (4,254) 5,775 (3,176) 1,333 2,768 (840) 2,141
OTHER DATA:
EBITDA(4)...................... $ 13,109 $ 20,867 $ 22,653 $ 24,287 $ 30,255 $ 13,135 $ 18,163
EBITDA margin(5)............... 43.1% 46.5% 46.1% 46.6% 46.7% 44.2% 49.7%
Capital expenditures........... $ 3,311 $ 5,382 $ 4,387 $ 4,924 $ 7,070 $ 4,251 $ 2,891
Number of advertising
displays..................... 8,200 10,700 10,800 11,900 12,700 12,000 18,000
Ratio of earnings to fixed
charges(6)................... -- -- 1.02x 1.15x 1.14x -- 1.48x
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital................ $ 7,639 $ 5,218 $ 13,967 $ 15,022 $ 8,221 $ 10,681 $ 7,882
Total assets................... 108,621 129,651 129,433 151,260 138,213 144,599 160,545
Total debt..................... 99,608 109,283 129,812 155,204 142,269 151,021 138,633
Common stockholders' equity
(deficit).................... (25,607) (23,769) (28,811) (29,074) (28,767) (31,110) 10,424
</TABLE>
(See footnotes on the following page)
28
<PAGE> 33
NOTES TO SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(1) Prior to the Acquisition, the Company consummated significant acquisitions
during each of 1991, 1992 and 1994. In December 1994, the Company
consummated the Atlanta Transaction. In addition, in 1993 the Company
refinanced a substantial portion of its indebtedness with 10.75% Senior
Notes. Accordingly, operating results are not necessarily comparable on a
year-to-year basis. See "Management's Discussion and Analysis of Results of
Operations and Financial Condition."
(2) Net revenues are gross revenues minus agency commissions, plus other income
of $1.0 million and $0.4 million for the years ended December 31, 1994 and
1995, and $0.3 million for the six months ended June 30, 1996.
(3) Deferred financing costs of $3.3 million and $0.8 million associated with
borrowings which were retired or redeemed were charged as an extraordinary
loss during 1993 and the six months ended June 30, 1996, respectively. As of
January 1, 1992, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 109 Accounting for Income Taxes. SFAS No. 109 allows
the income tax consequences resulting from the utilization of net operating
loss carry forwards to be recorded as a deferred asset. The cumulative
effect of this change in accounting principle was a one-time credit to
income of $6.7 million in the first quarter of 1992. See "Management's
Discussion and Analysis of Results of Operations and Financial Condition."
(4) "EBITDA" is defined as operating income (loss) before depreciation and
amortization expense and, in 1994, before the gain on the 1994 Disposal.
While EBITDA should not be considered in isolation or as a substitute for
net income, cash flows from operating activities and other income or cash
flow statement data prepared in accordance with generally accepted
accounting principles, or as a measure of profitability or liquidity,
management understands that it is customarily used by certain investors as
one measure to evaluate the financial performance of companies in the
outdoor advertising industry.
(5) "EBITDA margin" is EBITDA stated as a percentage of net revenues.
(6) Earnings consist of pre-tax income (loss) before extraordinary loss plus
fixed charges, excluding capitalized interest. The Company's fixed charges
consist of (i) interest, whether expensed or capitalized; (ii) amortization
of debt expense, including any discount or premium, whether expensed or
capitalized; and (iii) a portion of rental expense representing the interest
factor. Earnings were inadequate to cover fixed charges by $4.3 million,
$1.0 million and $0.8 million for the years ended December 31, 1991 and 1992
and for the six months ended June 30, 1995, respectively.
29
<PAGE> 34
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the consolidated
financial statements and related notes thereto included elsewhere in this
Prospectus. The following discussion contains certain forward-looking statements
that involve risks and uncertainties. The Company's actual results could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, those discussed in "Risk
Factors," "Business" and elsewhere in this Prospectus, including, without
limitation, risks and uncertainties relating to leverage, the need for
additional funds, integration of the Acquisition, the ability of the Company to
achieve certain cost savings, the management of growth and the popularity of
outdoor advertising as an advertising medium.
Except as otherwise indicated, the following discussion relates to Outdoor
Systems on an historical basis, without giving effect to the Acquisition.
GENERAL
The performance of an outdoor advertising business, such as the Company, is
often measured by its ability to generate EBITDA. EBITDA is defined as operating
income (loss) before depreciation and amortization expense and, with respect to
1994, before the gain on the 1994 Disposal. Although EBITDA is not a measure of
performance calculated in accordance with generally accepted accounting
principles, the Company believes that EBITDA is accepted by the outdoor
advertising industry as a generally recognized measure of performance and is
used by analysts who report publicly on the performance of outdoor advertising
companies. Nevertheless, this measure should not be considered in isolation or
as a substitute for operating income, net income, net cash provided by operating
activities or any other measure for determining the Company's operating
performance or liquidity which is calculated in accordance with generally
accepted accounting principles.
Revenues are a function of both the occupancy of the Company's outdoor
advertising display inventory (the amount of time that its display faces contain
advertisements) and the rates that the Company charges for use of its display
faces. Accordingly, the Company focuses its sales efforts on attaining an
optimal "mix" of occupancy and rates in order to maximize revenues, and believes
that there are opportunities for additional improvements to its occupancy and
rate mix with respect to its entire inventory.
Net revenues are gross revenues less commissions paid to advertising
agencies that contract for the use of advertising display faces on behalf of
advertisers plus other income arising from the Company's operations. Advertisers
typically contract for advertising space through agencies, although in some
cases the Company sells advertising space directly to local or national
advertisers. Agency commissions are typically 15% of gross revenues on local
sales and 16 2/3% of gross revenues on national sales. The Company does not
consider agency commissions as "operating expenses," and measures its operating
performance based upon percentages of net revenues rather than gross revenues.
The Company's most significant operating expenses are direct advertising
expenses and general and administrative expenses. Direct advertising expenses
consist of rental payments to property owners for use of land on which
advertising display faces are located, production expenses and selling expenses.
Production expenses consist of salaries for operations personnel and real estate
representatives, materials and supplies used in the preparation and display of
advertising copy, annual permits, property taxes and other similar expenses.
Selling expenses consist of salaries and commissions for salespeople, travel and
entertainment relating to sales, sales administration and other similar
expenses. The Company's general and administrative expenses consist of expenses
related to accounting, administrative functions, insurance, bad debts and other
similar expenses.
The Company had Federal income tax net operating losses of approximately
$17.5 million as of December 31, 1995, which will expire over a period of years
beginning in 2003. The Company expects that the annual limit for use of its net
operating losses will be approximately $9.0 million for 1996 and 1997. See
30
<PAGE> 35
Note 8 to the Consolidated Financial Statements. Management believes that the
Company's taxable income will be sufficient to use the $17.5 million of net
operating losses prior to their expiration in 2009. However, there can be no
assurances that the Company will generate taxable income in the future.
CERTAIN EFFECTS OF THE ACQUISITION
Prior to the Acquisition, the Company owned and operated approximately
18,000 advertising display faces in eight metropolitan United States markets. As
a result of the Acquisition, the Company owns and operates approximately 58,000
advertising display faces located in 22 metropolitan markets in the United
States and seven metropolitan markets in Canada. Management believes that upon
the successful consolidation of Gannett Outdoor with the existing business of
Outdoor Systems, the Company's position as a leading provider of outdoor
advertising services will be significantly enhanced.
Certain Cost Savings. The Company believes that the consolidation of
certain administrative, sales management and leasing management functions will
result in certain cost savings, including the reduction and consolidation of
duplicative (i) production and sales overhead functions, (ii) production and
administrative support positions, (iii) national sales and marketing support
functions, and (iv) accounting and administrative functions. The Company
believes it will achieve additional cost savings by closing one of Gannett
Outdoor's production facilities in Canada and by consolidating the Canadian
accounting and administrative functions.
The Company believes that, had such cost savings been implemented as of
January 1, 1995, such savings would have approximated $33.2 million and $16.9
million in the aggregate during the fiscal year ended December 31, 1995 and the
six months ended June 30, 1996, respectively, as detailed below.
<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1995 1996
------------ ------------
(IN THOUSANDS)
<S> <C> <C>
Elimination of production and sales overhead functions......... $ 7,724 $ 3,862
Elimination of production support positions.................... 2,591 1,295
Elimination of national sales and marketing support
positions.................................................... 5,053 2,527
Elimination of administrative support positions................ 5,356 2,678
Consolidation of Canadian production facilities................ 1,640 820
Elimination of national office................................. 5,078 2,812
Consolidation of accounting and administrative positions....... 5,770 2,885
------------ ------------
$ 33,212 $ 16,879
========== ==========
</TABLE>
In addition to these cost savings, the Company believes that it may be able
to achieve additional cost savings arising from (i) reductions in facility costs
arising from renegotiated rents or reduced space and the reduction of expenses
relating to terminated employees, (ii) a reduction in labor costs arising from
production efficiencies and a reduced number of direct production and direct
sales employees, and (iii) increased sales efficiencies arising from a
modification of the sales compensation system.
While management believes that such cost savings are achievable, the
Company's ability to achieve such cost savings is uncertain and subject to
numerous factors, many of which are beyond the Company's control. There can be
no assurance that the Company will realize any such cost savings or that the
realization of such cost savings will not be delayed over an extended period of
time. In addition, the Company may discover currently unknown issues regarding
the cost savings plan. See "Risk Factors -- Challenges of Business Integration."
Certain Costs Associated with the Acquisition. The Company incurred
significant additional costs as a result of the Acquisition. The Acquisition
Financing significantly increased the Company's interest expense through adding
approximately $461 million to the Company's total indebtedness. Depreciation and
amortization expense also will increase significantly. The Company will record
goodwill and other intangible assets of approximately $60 million in connection
with the Acquisition, which will be amortized over a period of 30 years. In
addition, the cost basis of advertising structures acquired by the Company from
Gannett will increase by approximately $483 million over the approximately $133
million historic cost basis, which will be amortized over 20 years.
31
<PAGE> 36
Possible Revenue Enhancement. The Company also believes that there are
significant opportunities for revenue enhancement in its combined operations.
The increased presence in North America resulting from the Acquisition should
allow the Company to better market its services to national advertisers through
direct sales efforts offering access to multiple markets. In addition, the
Company believes that its operating and sales strategies will allow it to
improve utilization of the Gannett Outdoor advertising display faces. See "Risk
Factors -- Challenges of Business Integration."
RESULTS OF OPERATIONS
Comparison of Six Months Ended June 30, 1995 and June 30, 1996
Gross revenues increased 22.6% from $34.2 million during the first six
months of 1995 to $41.9 million in the first six months of 1996. This increase
was attributable to increased revenue in all markets, particularly in Atlanta
where the Company has experienced continued growth since the 1994 Acquisition,
and partially to revenues from the acquisition of bus benches and to revenues
from license fees from the acquisition of perpetual easements.
Agency commissions were 13.1% and 13.6% of gross revenues in the first six
months of 1995 and the first six months of 1996, respectively, primarily as a
result of a slightly higher proportion of revenues generated through advertising
agencies in 1996.
Net revenues, including recurring revenues from use licenses acquired with
perpetual easements in May 1996, increased by 22.8% from $29.7 million in the
first six months of 1995 to $36.5 million in the first six months of 1996,
primarily as a result of the increase in gross revenues.
Direct advertising expenses decreased by 4.9% as a percentage of net
revenues from 49.1% in the first six months of 1995 to 44.2% in the first six
months of 1996. This was primarily a result of increased net revenue coverage of
fixed costs included in direct advertising expenses.
General and administrative expenses decreased as a percentage of net
revenues from 6.7% for the first six months of 1995 to 6.1% for the first six
months of 1996. This decrease was due primarily to increased net revenue
coverage of fixed costs included in general and administrative expenses.
As a result of the above factors, EBITDA increased by 38.3% from $13.1
million for the first six months of 1995 to $18.2 million for the first six
months of 1996.
Depreciation and amortization expense increased by 6.1% from $5.0 million
in the first six months of 1995 to $5.3 million in the first six months of 1996,
primarily due to depreciation expense associated with small acquisitions in New
Orleans and Atlanta in the last half of 1995 and in Denver in April 1996, and
amortization expense associated with the May 1996 acquisition of perpetual
easements in the Atlanta market.
Interest expense deceased by 12.1% from $9.0 million in the first six
months of 1995 to $7.9 million in the first six months of 1996, primarily
because of the repayment of subordinated notes and the repayment of borrowings
under the Existing Senior Credit Facility as a result of the Company's initial
public offering completed in April 1996.
Income before income taxes and extraordinary loss increased from a loss of
$0.8 million in the first six months of 1995 to income of $5.0 million in the
first six months of 1996, primarily due to increased revenues and decreased
interest expense.
The Company recorded no income tax benefit for the first six months of 1995
compared to an income tax provision of approximately $2.0 million in the first
six months of 1996. The Company reported a $0.8 million extraordinary loss, net
of $0.6 million tax benefit, in the first six months of 1996 resulting from the
redemption of subordinated notes.
The foregoing factors contributed to the change in net income (loss) from a
net loss of $0.8 million for the first six months of 1995 to net income of $2.1
million for the first six months of 1996.
Comparison of Years Ended December 31, 1994 and December 31, 1995
Operating results for 1995 included a full twelve months of revenues from
the 1994 Acquisition, which was completed in December 1994. Gross revenues
increased by 26.3% from $59.2 million in 1994 to $74.7 million in 1995.
Approximately 73% of this increase in gross revenues was attributable to the net
increase in
32
<PAGE> 37
revenues from the 1994 Acquisition, with the remaining 27% of such increase
resulting from increased revenues in all other markets. The inclusion of a full
year of operating results from the 1994 Acquisition was the primary reason for
the increases in agency commissions, direct advertising expenses, general and
administrative expenses and EBITDA.
Agency commissions increased by 27.5% from $8.1 million in 1994 to $10.3
million in 1995. As a percentage of gross revenues, agency commissions increased
from 13.6% in 1994 to 13.8% in 1995 as a result of a slightly higher proportion
of revenues generated through advertising agencies.
Net revenues increased by 24.5% from $52.1 million in 1994 to $64.8 million
in 1995, primarily as a result of the increase in gross revenues which was
partially offset by the reduction of other income from $1.0 million in 1994 to
$0.4 million in 1995.
Direct advertising expenses increased by 24.7% from $24.4 million in 1994
to $30.5 million in 1995, primarily as a result of expenses associated with
increased net revenues. As a percentage of net revenues, direct advertising
expense was approximately 47.0% in both 1994 and 1995.
General and administrative expenses increased by 22.0% from $3.4 million in
1994 to $4.1 million in 1995, primarily due to increased provisions for bad
debts and increases in incentive and management compensation in 1995. As a
percentage of net revenues, general and administrative expenses decreased from
6.4% in 1994 to 6.3% in 1995, primarily due to increased net revenues.
As a result of the above factors, EBITDA increased by 24.6% from $24.3
million in 1994 to $30.3 million in 1995.
Depreciation and amortization expenses increased by 8.8% from $9.2 million
in 1994 to $10.0 million in 1995, primarily due to the net increase in
depreciation as a result of the 1994 Acquisition which was offset in part by
certain assets becoming fully depreciated during 1995. As a percentage of net
revenues, depreciation and amortization expense decreased from 17.6% in 1994 to
15.4% in 1995.
Interest expense increased by 4.9% from $16.4 million in 1994 to $17.2
million in 1995, as a result of interest expense related to obligations incurred
in connection with the 1994 Acquisition. As a percentage of net revenues,
interest expense decreased from 31.5% in 1994 to 26.5% in 1995, primarily due to
the increase in net revenues.
Income before taxes and extraordinary item was approximately $3.1 million
for both 1994 and 1995. Included in 1994 income before taxes and extraordinary
item was a $4.3 million gain on the 1994 Disposal. Disregarding the effect of
this gain, income before taxes and extraordinary item increased from a loss of
$1.3 million in 1994 to income of $3.1 million in 1995.
The Company recorded an income tax provision of $1.7 million in 1994 and
$0.3 million in 1995. The low effective tax rate in 1995 is the result of
reversing a $1.1 million valuation allowance for deferred income taxes. See Note
8 to the Consolidated Financial Statements.
The foregoing factors contributed to the increase of net income by 107.7%
from $1.3 million in 1994 to $2.8 million in 1995.
Comparison of Years Ended December 31, 1993 and December 31, 1994
Gross revenues increased by 4.5% from $56.6 million for 1993 to $59.2
million in 1994, primarily as a result of increased sales in 1994 but also due
to the inclusion of a partial month of revenues from the 1994 Acquisition.
Approximately 42% of the increase in gross revenues was attributable to the net
increase in revenues from operations acquired in the 1994 Acquisition, with the
remaining 58% of such increase resulting from increased revenues in the
Company's other markets. During 1994, the Company continued to replace 1993
reductions in tobacco revenues with increases in sales to other customers,
principally to consumer product companies, financial institutions and
professional service firms.
Agency commissions increased by 8.1% from $7.5 million in 1993 to $8.1
million in 1994 as a result of the increase in gross revenues. As a percentage
of gross revenues, agency commissions increased from 13.2% during 1993 to 13.6%
in 1994, primarily due to a slightly higher proportion of revenues being
generated through advertising agencies.
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<PAGE> 38
Net revenues increased by 5.9% from $49.2 million in 1993 to $52.1 million
in 1994, due to the increase in gross revenues and the early termination of an
agreement entered into in connection with an acquisition in 1992 in exchange for
a cash payment of $1.0 million, which has been included in other income.
Direct advertising expenses increased by 3.0% from $23.7 million in 1993 to
$24.4 million in 1994, primarily as a result of expenses associated with
increases in net revenues. As a percentage of net revenues, direct advertising
expenses decreased from 48.3% in 1993 to 47.0% in 1994, primarily due to
increases in net revenues as well as operating efficiencies.
General and administrative expenses increased by 20.9% from $2.8 million in
1993 to $3.4 million in 1994, primarily due to increased provisions for bad
debts in 1994, the inclusion of operating results of the 1994 Acquisition and
increased expenses associated with incentive and management compensation. As a
percentage of net revenues, general and administrative expenses increased from
5.6% in 1993 to 6.4% in 1994.
As a result of the above factors, EBITDA increased by 7.2% from $22.7
million in 1993 to $24.3 million in 1994.
Depreciation and amortization expenses decreased by 12.1% from $10.4
million in 1993 to $9.2 million in 1994, primarily due to full depreciation of
certain assets in 1994. As a percentage of net revenues, depreciation and
amortization expenses decreased from 21.2% in 1993 to 17.6% in 1994.
Interest expense increased by 37.8% from $11.9 million in 1993 to $16.4
million in 1994, primarily as a result of additional interest expense on the
Senior Notes which were outstanding for the full year of 1994. As a percentage
of net revenues, interest expense increased from 24.2% in 1993 to 31.5% in 1994.
Income before taxes and extraordinary item increased from $0.3 million in
1993 to $3.1 million in 1994. Included in 1994 income before taxes and
extraordinary item was a $4.3 million gain on the 1994 Disposal. Disregarding
the effect of this gain, income before taxes and extraordinary item decreased
from $0.3 million in 1993 to a loss of $1.3 million in 1994, primarily due to
increased interest expense relating to debt incurred in connection with the 1994
Acquisition.
The Company recorded an income tax provision of $0.2 million in 1993
compared to $1.7 million in 1994, as a result of the higher pre-tax income in
1994 from the gain on the 1994 Disposal. See Note 2 to the Consolidated
Financial Statements. The Company reported a $3.3 million extraordinary loss in
1993 resulting from the write-off of deferred financing costs associated with
borrowings which were retired or redeemed during 1993.
The foregoing factors contributed to the Company's $3.2 million net loss in
1993 compared to $1.3 million net income in 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Senior Credit Facility provides for revolving credit loans to the
Company of up to $40 million prior to completion of the acquisition of assets
under the Houston Option and $50 million thereafter and to the Canadian
subsidiary of the Company of up to cdn$35 million. The revolving credit loan
commitment applicable to the Company automatically reduces in each year
commencing in 1998, and continuing through 2002, and the revolving credit loan
commitment applicable to the Canadian subsidiary automatically reduces in each
year commencing in 1998 and continuing through 2001. The Company or the Canadian
subsidiary, as applicable, may prepay revolving credit loans (other than cdn$
loans constituting bankers' acceptances) and reborrow (up to the amount of the
revolving credit loan commitment then in effect, subject to certain conditions)
any amounts that are repaid or prepaid.
The Senior Credit Facility provides for a total term loan commitment of
$420 million and cdn$48 million. The term loans are payable in quarterly
installments commencing in 1997, with the final installment due in 2003. The
revolving credit loans and term loans bear interest at various rates tied to
base rates. See "Description of Senior Credit Facility."
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<PAGE> 39
It is expected that the Senior Credit Facility will be amended concurrently
with or shortly following the consummation of the Offering. The Senior Credit
Facility, as amended, will provide for revolving credit loans to the Company of
up to $150 million and to the Canadian subsidiary of the Company of up to $25
million. The revolving credit loan commitment applicable to the Company and the
Canadian subsidiary are expected to automatically reduce each year commencing in
1998 through 2002. The Senior Credit Facility, as amended, will provide for a
total term loan commitment to the Company of $350 million and to the Canadian
subsidiary of $75 million. The term loans will be payable in quarterly
installments commencing in 1997, with the final installment due in 2003. See
"Description of Senior Credit Facility."
The Company's working capital was $15.0 million and $8.2 million at
December 31, 1994 and 1995, respectively, and $7.9 million at June 30, 1996. The
decrease in working capital from December 31, 1994 to December 31, 1995 and from
December 31, 1995 to June 30, 1996 resulted primarily from a reduction in
accounts receivable as a result of improved collection efforts, the proceeds of
which were used to reduce the amount outstanding under the Company's then
existing senior credit facility. After giving effect to the Acquisition, the
Company's pro forma working capital at June 30, 1996 would have increased by
$59.9 million.
Net cash provided by operating activities increased from $11.5 million for
the year ended December 31, 1994 to $18.6 million for the year ended December
31, 1995, and increased from $7.1 million for the six months ended June 30, 1995
to $12.6 million for the six months ended June 30, 1996, primarily due to the
decrease in accounts receivable as well as higher income in 1995 and in the
first six months of 1996 compared to 1994 and the first six months of 1995. Net
cash used in investing activities decreased from $27.6 million in 1994 to $6.3
million in 1995, and increased from $4.3 million in the first six months of 1995
to $26.2 million in the first six months of 1996, primarily due to the net
expenditure in 1994 of $22.6 million in connection with the Atlanta Transactions
and expenditures in 1996 in connection with the CSX Assets Acquisition and the
Bench Ad Acquisition. Net cash provided by financing activities was $17.7
million in 1994 compared to $14.2 million in 1995, and net cash used in
financing activities was $4.9 million for the first six months of 1995 compared
to net cash provided by financing activities of $14.6 million for the first six
months of 1996. The changes from 1994 to 1995 were primarily due to the
repayment of debt during 1995 as compared to net borrowings of $21.1 million in
1994 under its then existing senior credit facility to finance the 1994
Acquisition. The changes for the six month periods were primarily due to the
borrowings under the then existing senior credit facility used to finance the
CSX Assets Acquisition and the completion of the Company's initial public
offering in April 1996.
The Company completed its initial public offering (the "IPO") of 4,016,088
shares of its Common Stock on April 24, 1996, resulting in net proceeds to the
Company of $37.4 million. The holders of the Common Stock Subject to Put Option
sold their shares upon the completion of the IPO, resulting in the removal of
the put option. The removal of the put option resulted in the liability
representing the Common Stock Subject to Put Option being credited to
stockholders' equity. The Company utilized a portion of the net proceeds from
the IPO to redeem at par or face value all of the outstanding Class A Preferred
Stock and the 1990 Subordinated Notes which were also held by these
stockholders. The Company utilized the remaining portion of the net proceeds to
redeem at par value all of the outstanding Class B Preferred Stock and the
Junior Subordinated Exchange Notes, and to repay $17.0 million of the then
existing senior credit facility.
The Company made approximately $4.9 million of capital expenditures in 1994
compared to approximately $7.1 million in 1995 and approximately $4.3 million
for the first six months of 1995 compared to approximately $2.9 million in the
first six months of 1996. On a pro forma basis giving effect to the Acquisition,
capital expenditures were $21.7 million in 1995 and $8.0 million in the first
six months of 1996. Currently, the Company has no material commitments for
capital expenditures, although it expects ongoing capital expenditures in the
ordinary course of business relating to its display inventory to continue and to
be in amounts not materially greater than the pro forma amounts of such capital
expenditures in 1995.
The Company believes that internally generated funds and amounts available
under the Senior Credit Facility will be sufficient to satisfy its operating
cash requirements and make required interest and principal payments under the
Senior Credit Facility and the Notes for the next twelve to twenty-four months.
The
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<PAGE> 40
Company may, however, require additional capital through borrowings or
securities offerings if the Company is not successful in integrating Gannett
Outdoor or the Company requires funding for additional acquisitions. There can
be no assurance that such capital will be available.
INFLATION
Because a significant portion of the Company's costs are fixed, the Company
does not believe that inflation has had or will have a material adverse effect
on its operations. However, there can be no assurance that a high rate of
inflation in the future will not have an adverse effect on the Company's
operations.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed Of, which established a new accounting principle for accounting for
the impairment of certain loans, certain investments in debt and equity
securities, long-lived assets that will be held and used including certain
identifiable intangibles and goodwill related to those assets, and long-lived
assets and certain identifiable intangibles to be disposed of. While the Company
has not completed its evaluation of the impact that will result from adopting
this statement, it does not believe that adoption of the statement will have a
significant impact on the Company's financial position and results of
operations. In addition, the Financial Accounting Standards Board issued SFAS
No. 123, Accounting for Stock-Based Compensation, which allows a Company to
record stock-based compensation on the basis of fair value. The Company will not
change to the fair value method and will continue to use Accounting Principles
Board Opinion No. 25 for measurement and recognition of employee stock based
compensation. The Company will present in its annual financial statements the
additional disclosures required under SFAS No. 123.
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<PAGE> 41
BUSINESS
GENERAL
The Company is the largest outdoor advertising company in North America,
operating approximately 58,000 advertising display faces in 22 metropolitan
markets in the United States and seven metropolitan markets in Canada. The
Company has significant operations in seven of the ten largest United States
markets and six of the ten largest Canadian markets. Through the Acquisition,
the Company significantly increased its presence in North America and
diversified into additional major metropolitan markets following the
Acquisition.
INDUSTRY OVERVIEW
The outdoor advertising industry has experienced increased advertiser
interest and revenue growth in recent years. Outdoor advertising generated total
revenues of approximately $1.8 billion in 1995, or approximately 1.1% of the
total advertising expenditures in the United States, and the out-of-home
advertising industry generated revenues in excess of $3.0 billion in 1995,
according to estimates by the OAAA. Outdoor advertising's 1995 revenues
represent growth of approximately 8.2% over estimated total revenues for 1994,
which compares favorably to the growth of total U.S. advertising expenditures of
approximately 7.7% during the same period.
Advertisers purchase outdoor advertising for a number of reasons. Outdoor
advertising offers repetitive impact and a relatively low cost
per-thousand-impressions, a commonly used media measurement, as compared to
television, radio, newspaper, magazines and direct mail marketing. Accordingly,
because of its cost-effective nature, outdoor advertising is a good vehicle to
build "mass market" support. In addition, outdoor advertising can be used to
target a defined audience in a specific location and, therefore, can be relied
upon by local businesses concentrating on a particular geographic area where
customers have specific demographic characteristics. For instance, restaurants,
motels, service stations and similar roadside businesses may use outdoor
advertising to reach potential customers close to the point of sale and provide
directional information. Other local businesses such as television and radio
stations and consumer products companies may wish to appeal more broadly to
customers and consumers in the local market. National brand name advertisers may
use the medium to attract customers generally and build brand awareness. In all
cases, outdoor advertising can be combined with other media such as radio and
television to reinforce messages being provided to consumers.
The outdoor advertising industry has experienced significant changes due to
a number of factors. First, the entire "out-of-home" advertising category has
expanded to include, in addition to traditional billboards and roadside
displays, displays in shopping centers and malls, airports, stadiums, movie
theaters and supermarkets, as well as on taxis, trains, buses and subways.
Second, while the outdoor advertising industry has experienced a decline in the
use of outdoor advertising by tobacco companies, it has increased its visibility
with and attractiveness to local advertisers as well as national retail and
consumer products-oriented companies. Third, the industry has benefited
significantly from improvements in production technology, including the use of
computer printing, vinyl advertising copy and improved lighting techniques,
which have facilitated a more dynamic, colorful and creative use of the medium.
This technological advance has permitted the outdoor advertising industry to
respond more promptly and cost effectively to the changing needs of its
advertising customers and to make greater use of advertising copy used in other
media. Lastly, the outdoor advertising industry has benefited from the growth in
automobile travel time for business and leisure due to increased highway
congestion and continued demographic shifts of residences and businesses from
the cities to outlying suburbs. The Company believes that the foregoing trends
have resulted in increased consumer exposure to existing billboard structures at
a time when other media have been fragmenting their audiences as the number of
broadcast and cable networks and other narrowly targeted formats has increased.
An expanding opportunity within the out-of-home advertising industry is
transit advertising. Local governments are providing transit shelters and
benches to enhance the service and image of local transit systems and these
locations, as well as buses, are increasingly being used for
out-of-home-advertising.
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<PAGE> 42
Municipalities have begun to issue contracts for transit displays on bus
shelters, subways, benches and buses to private enterprises. Under these
contracts, the private party constructs the shelters or benches, which it can
use for advertising displays. The primary benefits of privatizing transit
advertising are the avoidance of capital expenditures by the municipality, the
prospect of additional revenue for the municipality, the consistent quality that
a coordinated transit program can provide and the benefits of regular cleaning
and maintenance undertaken by private enterprises.
The outdoor advertising industry is comprised of several large outdoor
advertising and media companies with operations in multiple markets, as well as
many smaller and local companies operating a limited number of structures in a
single or a few local markets. While the industry has experienced some
consolidation within the past few years, the OAAA estimates that there are still
approximately 1,000 companies in the outdoor advertising industry operating
approximately 396,000 billboard displays. The Company expects the trend of
consolidation in the outdoor advertising industry to continue.
OPERATING STRATEGY
The Company's primary objective is to be the leading provider of outdoor
advertising services in each of its markets. Outdoor Systems' successful
operating strategy, focusing on superior sales and service, optimal management
of its inventory, centralized administration and strategic acquisitions, has
enabled it to improve the historical operating results in each of its existing
markets. Management intends to apply this strategy to each of its newly-acquired
markets.
- - Superior Sales and Service. The Company seeks to gain market share in each of
its markets through an intensive focus on customer sales and service, quality
displays and competitive pricing. Outdoor Systems has recruited and trained a
skilled sales force that is motivated by a program of commission-based
compensation and supported by a network of experienced local managers who
operate under a centrally coordinated marketing plan. Each Outdoor Systems
market has a general manager who is actively engaged in sales. In addition,
the Company seeks to attract and retain advertisers through creative
advertising layouts, timely installation and rotation of displays and rapid
response to customer needs.
- - Optimal Inventory Management. The Company seeks to balance advertising rate
growth with optimal occupancy of its displays in order to maximize revenues.
The Company's variety of outdoor advertising displays in its geographically
diverse markets permits flexibility in pricing and packaging its display
inventory.
- - Centralized Administration. Outdoor Systems has historically consolidated
substantially all of its administration, accounting, sales management and
leasing management functions at its Phoenix headquarters and plans to
consolidate a significant amount of these functions relating to the business
of Gannett Outdoor into its Phoenix headquarters and four regional markets.
This centralization allows the Company to focus local efforts on customer
service and sales and to exercise greater control over administrative costs
and expenditures, resulting in general and administrative expenses for Outdoor
Systems of 6.3% and 6.1% of net revenues for the year ended December 31, 1995
and the six months ended June 30, 1996, respectively. For the year ended
December 31, 1995 and the six months ended June 30, 1996, Gannett Outdoor's
general and administrative expenses were 13.4% and 14.6%, respectively, of net
revenues. The Company believes that it will be able to significantly reduce
the general and administrative expenses of Gannett Outdoor as part of the
integration of Gannett Outdoor's business with Outdoor Systems' operations.
- - Strategic Acquisitions. Although the Company's focus in the near term will be
the consolidation and integration of the Acquisition and the promotion of
internal growth of both new and existing properties, the Company will continue
to pursue strategic acquisitions in existing and new markets to achieve
increased operating efficiencies, greater geographic diversification and
increased market penetration. The Company is primarily interested in further
expansion in the 50 largest United States markets, because these markets
typically generate greater outdoor market revenues, readily attract national
advertisers, provide a better basis for regional advertising, attract quality
management and offer opportunities to gain a larger market share from
competitive media.
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<PAGE> 43
MARKETS
The Company's markets generally possess demographic characteristics that
are attractive to national advertisers, allowing the Company to package displays
in several of its markets in a single contract for advertisers in national and
regional campaigns. Each market also has unique local industries, businesses,
sports franchises and special events that are frequent users of outdoor
advertising. The following table sets forth, as of June 30, 1996 or for the year
ended December 31, 1995, certain information with respect to the Company's
outdoor markets after giving effect to the Acquisition and the Denver
Disposition (dollars in thousands):
<TABLE>
<CAPTION>
PERCENTAGE
1995 OF 1995 MALL AND TOTAL
MARKET PRO FORMA PRO FORMA 30-SHEET 8-SHEET AIRPORT DISPLAY
MARKET RANK NET REVENUES NET REVENUES BULLETINS POSTERS POSTERS POSTERS TRANSIT FACES
- ------------------------ ------ ------------ ------------ --------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
UNITED STATES:
New York/
New Jersey(1)......... 1 $ 53,188 16.9% 579 2,730 125 -- 3,507 6,941
Los Angeles............. 2 41,739 13.3 785 2,962 -- -- 2,804 6,551
Chicago................. 3 6,499 2.1 155 -- 638 -- -- 793
Philadelphia............ 4 1,941 0.6 -- -- -- -- 690 690
San Francisco........... 5 18,679 5.9 202 972 571 -- 1,346 3,091
Detroit................. 9 20,264 6.4 438 1,340 104 -- 800 2,682
Houston(2).............. 10 5,480 1.7 377 -- -- -- -- 377
Atlanta................. 11 21,654 6.9 748 1,910 -- -- -- 2,658
Sacramento(3)........... 17 -- -- 60 291 -- -- -- 351
Phoenix................. 18 16,745 5.4 605 1,530 677 -- 1,418 4,230
St. Louis............... 19 8,010 2.6 268 852 -- -- -- 1,120
Denver.................. 21 7,975 2.5 163 775 -- -- 5,300 6,238
San Diego............... 22 5,349 1.7 114 540 -- -- 668 1,322
New Haven(4)............ 26 5,496 1.8 149 835 -- -- -- 984
Kansas City............. 33 6,988 2.2 198 849 -- -- -- 1,047
Grand Rapids............ 38 4,339 1.4 110 550 -- -- 80 740
New Orleans............. 40 9,532 3.0 346 1,053 481 -- 213 2,093
Louisville.............. 49 8,002 2.6 320 1,067 264 -- -- 1,651
Flint................... 59 2,705 0.9 93 450 20 -- -- 563
Rochester............... 72 308 0.1 -- -- -- -- 240 240
Tucson.................. 81 1,700 0.5 112 6 345 -- -- 463
Columbus, GA............ 127 2,596 0.8 180 422 100 -- -- 702
CANADA:
Toronto................. 1 39,280 12.5 303 1,834 -- 418 2,474 5,029
Montreal................ 2 12,045 3.8 134 770 -- 322 1,794 3,020
Ottawa.................. 6 1,691 0.5 23 214 -- 68 -- 305
Winnipeg................ 7 4,959 1.6 154 415 -- 77 406 1,052
Quebec City............. 8 3,530 1.1 71 782 -- 194 296 1,343
Hamilton(5)............. 9 -- -- 36 288 -- 80 576 980
Halifax................. 14 1,612 0.5 11 122 -- 26 214 373
Other................... N/A 2,080 0.7 24 108 -- 108 94 334
------------ ----- --------- -------- ------- -------- ------- -------
Total............... $314,386 100.0% 6,758 23,667 3,325 1,293 22,920 57,963
============ ============ ======== ======== ======= ======== ====== =======
</TABLE>
- ---------------
(1) All of the Company's bulletins and posters are located in New Jersey.
(2) Includes only Outdoor Systems' existing Houston operations. The Company has
the right to acquire Gannett Outdoor's Houston operations pursuant to the
Houston Option. See "The Transactions -- The Houston Option."
(3) Net revenues are included with San Francisco.
(4) Includes advertising display faces in New Haven, as well as other areas of
Connecticut.
(5) Net revenues are included with Toronto.
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<PAGE> 44
INVENTORY
The Company operates four standard types of outdoor advertising billboards
and displays:
- - Bulletins generally are 14 feet high and 48 feet wide (672 square feet) and
consist of panels on which advertising copy is displayed. The advertising copy
is either hand painted onto the panels at the facilities of the outdoor
advertising company in accordance with design specifications supplied by the
advertiser and attached to the outdoor advertising structure, or is printed
with computer-generated graphics on a single sheet of vinyl that is "wrapped"
around the structure. On occasion, to attract more attention, some of the
panels may extend beyond the linear edges of the display face and may include
three-dimensional embellishments. Because of their greater impact and higher
cost, bulletins are usually located on major highways.
- - 30-sheet posters generally are 12 feet high by 25 feet wide (300 square feet)
and are the most common type of billboard. Advertising copy for 30-sheet
posters consists of lithographed or silk-screened paper sheets supplied by the
advertiser that are pasted and applied like wallpaper to the face of the
display, or single sheets of vinyl with computer-generated advertising copy
that are wrapped around the structure. 30-sheet posters are concentrated on
major traffic arteries.
- - Junior (8-sheet) posters usually are 6 feet high by 12 feet wide (72 square
feet). Displays are prepared and mounted in the same manner as 30-sheet
posters, except that vinyl sheets are not typically used on junior posters.
Most junior posters, because of their smaller size, are concentrated on city
streets and target pedestrian traffic.
- - Transit displays include displays on bus shelters, subways and bus benches.
Bus shelters and benches are usually constructed, owned and maintained by the
outdoor advertising company under a contract with the municipality or transit
authority which receives a share of the shelter's advertising revenues. Bus
shelter displays are enclosed within glassed, backlighted cases on sides of a
pedestrian shelter at an urban bus stop on city easements or sidewalks. Subway
displays are located within subway stations and walkways as well as in subway
trains. Advertisements appear on lithographed or silk-screened posters
supplied in a single sheet by the advertiser. Transit displays are an
attractive medium to advertisers using "vertical" advertising copy, such as
magazines and movie posters, because the advertising copy is easily adapted
for use in transit shelters.
Billboards generally are mounted on structures owned by the outdoor
advertising company and located on sites that are either owned or leased by it
or on which it has acquired a permanent easement. Billboard structures, bus
shelters and benches are durable, have long useful lives and do not require
substantial maintenance. When disassembled, they typically can be moved and
relocated at new sites.
SALES AND SERVICE
The Company devotes considerable time and resources to recruiting, training
and coordinating the activities of its sales force. Sales personnel are
compensated primarily on a commission basis to maximize the incentive to
perform. Messrs. Moreno and Kelly, the Company's two principal officers
responsible for day-to-day operations, have an aggregate of 40 years of
experience in the outdoor advertising industry, virtually all of which has been
spent in sales and management positions. The industry experience of Mr. Moreno
and other members of Outdoor Systems' management team includes significant prior
experience with Gannett Outdoor. Outdoor Systems' general managers in its
existing markets have an average of nearly 14 years of experience in the outdoor
advertising industry.
CUSTOMERS
Advertisers usually contract for outdoor displays through advertising
agencies, which are responsible for the artistic design and written content of
the advertising as well as the choice of media and the planning and
implementation of the overall campaign. The Company pays commissions to the
agencies for advertising contracts that are procured by or through those
agencies. Advertising rates are based on a particular display's exposure (or
number of "impressions" delivered) in relation to the demographics of the
particular market and its location within that market. The number of
"impressions" delivered by a display is measured by the number of vehicles
passing the site during a defined period and is weighted to give effect to such
factors as its proximity to other displays, the speed and viewing angle of
approaching traffic, the national average of adults
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<PAGE> 45
riding in vehicles and whether the display is illuminated. The number of
impressions delivered by a display is verified by independent auditing
companies.
The size and geographic diversity of the Company's markets expanded
significantly with the completion of the Acquisition, which the Company expects
will strengthen its ability to attract national advertisers by providing the
opportunity to package displays in several of its markets in a single contract
to allow a national advertiser to simplify its purchasing process and present
its message in several markets. National advertisers generally seek wide
exposure in major markets and therefore tend to make larger purchases. The
Company competes for national advertisers primarily on the basis of price,
availability and service.
The Company also focuses its efforts on local sales, and approximately
65.3% of the Company's pro forma gross revenues in 1995 were generated from
local advertisers. Local advertisers tend to have smaller advertising budgets
and require greater assistance from the Company's production and creative
personnel to design and produce advertising copy. In local sales, the Company
often expends more sales efforts on educating customers regarding the benefits
of outdoor media and helping potential customers develop an advertising strategy
using outdoor advertising. While price and availability are important
competitive factors, service and customer relationships are also critical
components of local sales.
Tobacco revenues have historically accounted for a significant portion of
outdoor advertising revenues. In the 1990s, due to a declining population of
smokers, societal pressures, consolidation in the tobacco industry and price
competition from generic brands, the leading tobacco companies substantially
reduced their expenditures for outdoor advertising. Because tobacco advertisers
often utilized some of the industry's prime inventory, the decline in
tobacco-related advertising expenditures made this space available for other
advertisers, including those that had not traditionally utilized outdoor
advertising. As a result of this decline in tobacco-related advertising revenues
and the increased use of outdoor advertising by other advertisers, the range of
the Company's advertisers has become quite diverse, with no single category of
advertisers accounting for more than 23% of pro forma net revenues in 1995. The
following table illustrates the diversity of the Company's advertising base:
1995 PRO FORMA NET REVENUES BY CATEGORY
<TABLE>
<CAPTION>
PERCENTAGE OF
NET REVENUES
---------------
<S> <C>
Retail/Consumer products............................................ 22.8%
Travel and Entertainment............................................ 22.6
Tobacco............................................................. 9.6
Liquor.............................................................. 6.7
Media............................................................... 6.1
Banking............................................................. 6.1
Restaurants......................................................... 4.5
Health.............................................................. 4.4
Automotive.......................................................... 2.8
Beer................................................................ 1.3
Home Building....................................................... 1.1
Miscellaneous....................................................... 12.0
-----
Total..................................................... 100.0%
=====
</TABLE>
PRODUCTION
The Company has internal production facilities and staff to perform the
full range of activities required to develop, create and install outdoor
advertising. Production work includes creating the advertising copy design and
layout, painting the design or coordinating its printing and installing the
designs on its displays. The Company usually provides its full range of
production services to local advertisers and to advertisers that are not
represented by advertising agencies, since national advertisers and advertisers
represented by advertising
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<PAGE> 46
agencies often use preprinted designs that require only installation. However,
the Company's creative and production personnel frequently are involved in
production activities even when advertisers are represented by agencies by
developing new designs or adapting copy from other media for use on billboards.
The Company's artists also assist in the development of marketing presentations,
demonstrations and strategies to attract new advertisers.
With the increased use of vinyl and pre-printed advertising copy furnished
to the outdoor advertising company by the advertiser or its agency, outdoor
advertising companies are becoming less responsible for labor-intensive
production work since vinyl and pre-printed copy is typically produced by the
advertiser or its agency and can be installed quickly. The Company believes that
this trend over time will reduce operating expenses associated with production
activities.
COMPETITION
The Company competes in each of its markets with other outdoor advertisers
as well as other media, including broadcast and cable television, radio, print
media and direct mail marketers. In addition, the Company also competes with a
wide variety of "out-of-home" media, including advertising in shopping centers
and malls, airports, stadiums, movie theaters and supermarkets, as well as on
taxis, trains, buses and subways. Advertisers compare relative costs of
available media and cost-per-thousand impressions, particularly when delivering
a message to customers with distinct demographic characteristics. In competing
with other media, outdoor advertising relies on its low cost per-thousand
impressions and its ability to reach a broad segment of the population in a
specific market or to target a particular geographic area or population with a
particular set of demographic characteristics within that market.
The outdoor advertising industry is highly fragmented, consisting of
several large outdoor advertising and media companies with operations in
multiple markets as well as smaller and local companies operating a limited
number of structures in single or a few local markets. Although some
consolidation has occurred over the past few years, according to the OAAA there
are approximately 1,000 companies in the outdoor advertising industry operating
approximately 396,000 billboard displays. In several of its markets, the Company
encounters direct competition from other major outdoor media companies. The
Company believes that its strong emphasis on sales and customer service and its
position as a major provider of advertising services in each of its markets
enable it to compete effectively with the other outdoor advertising companies,
as well as other media, within those markets. See, however, "Risk
Factors -- Competition."
GOVERNMENT REGULATION
U.S. Regulations. The outdoor advertising industry is subject to
governmental regulation at the federal, state and local level. Federal law,
principally the Highway Beautification Act of 1965, encourages states, by the
threat of withholding 10% of the federal appropriations for the construction and
improvement of highways within such states, to implement legislation to prohibit
billboards located within 660 feet of, or visible from, interstate and primary
highways except in commercial or industrial areas where off-site signage is
permitted provided it meets spacing and size restrictions. All of the states
have implemented regulations at least as restrictive as the Highway
Beautification Act, including the prohibition on the construction of new
billboards adjacent to federally-aided highways and the removal at the owner's
expense and without any compensation of any illegal signs on such highways. The
Highway Beautification Act, and the various state statutes implementing it,
require the payment of just compensation whenever governmental authorities
require legally erected and maintained billboards to be removed from areas
adjacent to federally-aided highways.
The states and local jurisdictions have, in some cases, passed additional
and more restrictive regulations on the construction, repair, upgrading, height,
size and location of outdoor advertising structures adjacent to federally-aided
highways and other thoroughfares. Such regulations, often in the form of
municipal building, sign or zoning ordinances, specify minimum standards for the
height, size and location of billboards. In some cases, the construction of new
billboards or relocation of existing billboards is prohibited. Some
jurisdictions also have restricted the ability to enlarge or upgrade existing
billboards, such as converting from wood to steel
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<PAGE> 47
or from nonilluminated to illuminated structures, and/or restrict the
reconstruction of billboards which are substantially destroyed as a result of
storms or other causes. From time to time governmental authorities order the
removal of billboards by the exercise of eminent domain. Thus far, the Company
believes it 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.
Amortization of billboards has also been adopted in varying forms in
certain jurisdictions. In theory, 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 the
state and federal courts and cases have reached differing conclusions as to the
constitutionality of these regulations. Several municipalities in the Company's
markets, including municipalities or townships in Houston, Kansas City and St.
Louis, currently have amortization ordinances or regulations. In Houston,
litigation is pending over the amortization and other provisions of the Houston
Sign Code, and the city is currently not enforcing its amortization
requirements. In other cities, amortization ordinances or regulations are not
being enforced or have been held unconstitutional. There can be no assurance,
however, that these ordinances or regulations will not be enforced in the
future.
In recent years, there have been movements to restrict billboard
advertising of certain products, including tobacco and alcohol. Congress has
passed no legislation at the federal level except legislation requiring health
hazard warnings similar to those on cigarette packages and print advertisements.
However, the Food and Drug Administration recently promulgated rules which,
among other things, prohibit tobacco companies from advertising on billboards
located within 1,000 feet of schools and playgrounds and limit other billboards
which advertise tobacco products to black-and-white, text only formats,
eliminating the use of color and images. Certain states in which the Company
operates have historically prohibited the outdoor advertising of distilled
spirits. In California, transit shelter advertising posters are maintained on
public right of way, and most of the contracts prohibit tobacco and/or alcohol
advertising. San Francisco has adopted an ordinance banning all tobacco and
alcohol advertising on public property, but has "grandfathered" Gannett
Outdoor's existing contract through 2002. For each of the past three years, the
California legislature has considered proposed legislation which would ban, or
substantially limit, all tobacco advertising on outdoor advertising. While that
legislation has not been passed, the proponents have publicly stated they will
continue to attempt to have such bans/limitations enacted. It is uncertain
whether additional legislation of this type will be enacted on the national
level or in any of the Company's markets.
Canadian Regulations. Outdoor advertising in Canada is subject to
regulation at the federal, provincial and municipal levels. These regulations
may prohibit outdoor signs advertising certain products in certain locations.
For example, in Ontario, billboards and posters advertising liquor may not be
placed within 200 meters of a primary or secondary school. A Federal Canadian
law banning tobacco advertising was recently overturned by the courts. However,
it is anticipated that new legislation may be introduced to regulate or restrict
tobacco advertising. Currently the tobacco industry is operating under a
voluntary advertising code. The placement of outdoor billboards and posters is
primarily regulated at the provincial and local level. For example, Quebec
regulates the placement of advertising adjacent to highways, as well as the
language of outdoor signs.
General. To date, regulations in the Company's markets have not materially
adversely affected its operations. However, the outdoor advertising industry is
heavily regulated and at various times and in various markets can be expected to
be subject to varying degrees of regulatory pressure affecting the operation of
advertising displays. Accordingly, although the Company's experience to date is
that the regulatory environment can be managed, no assurance can be given that
existing or future laws or regulations will not materially adversely affect the
Company.
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<PAGE> 48
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of the Company are as follows:
<TABLE>
<CAPTION>
YEARS
WITH
NAME AGE POSITION COMPANY
- --------------------------------- --- ---------------------------------------------- -------
<S> <C> <C> <C>
William S. Levine................ 64 Chairman of the Board and Director 16
Arthur R. Moreno................. 50 President, Chief Executive Officer and 12
Director
Wally C. Kelly................... 39 Senior Vice President 12
Bill M. Beverage................. 46 Treasurer, Secretary, Chief Financial Officer 6
Brian J. O'Connor................ 39 Director 3
Stephen F. Butterfield........... 43 Director --
</TABLE>
Mr. Levine, a founder and principal stockholder of the Company, has been
Chairman of the Board and a director of the Company since its formation. Mr.
Levine has 16 years of experience in the outdoor advertising industry. He is an
owner and officer of numerous privately-owned firms and commercial real estate
operations. Since 1990, Mr. Levine has dedicated a substantial portion of his
time to the Company's affairs.
Mr. Moreno has served as the Company's President and Chief Executive
Officer and has been a director of the Company since April 1984. Mr. Moreno has
23 years of experience in the outdoor advertising industry. From 1981 to 1984,
Mr. Moreno served as President and General Manager of Gannett Outdoor of New
Jersey. From 1979 to 1981, he was President and General Manager of Gannett
Outdoor of Kansas City (Missouri). From 1973 to 1981, Mr. Moreno worked in
Phoenix as a Vice President of Sales for Gannett Outdoor and its predecessor
company.
Mr. Kelly has been the Company's Senior Vice President since 1984. Mr.
Kelly has 17 years of experience in the outdoor advertising business. From 1979
to 1984, Mr. Kelly worked for Whiteco Metrocom, Inc. in Tucson (1979 to 1981) as
Sales Manager and in Chicago as Vice President of National Sales (1982 to 1984).
Mr. Beverage has served as the Company's controller since 1992, its
Treasurer and Secretary since May 1993, and its Chief Financial Officer since
October 1995. Mr. Beverage has 16 years of experience in the accounting
departments of various outdoor advertising companies. From 1990 to 1992, he
served as the Company's Atlanta real estate manager. From 1988 until 1990, he
worked for Outdoor Today, Inc. in Atlanta (which was acquired by the Company in
1990) as a consultant and as its accounting manager. Prior to 1988, he worked
for five years for Turner Outdoor Advertising in Atlanta and for four years for
Creative Displays in Atlanta. From 1976 to 1979, he was an auditor for Arthur
Young & Co. (now known as Ernst & Young).
Mr. O'Connor has been a Senior Vice President and financial principal of
Alden Capital Markets, Inc., which underwrites and trades securities for various
local governments in Arizona and the western United States, since 1990. From
1988 to 1990, he was a Senior Vice President with Capital Markets Corporation, a
financial advisor and underwriter of tax exempt securities for state and local
governments. From 1987 to 1988, he was a Vice President for Security Pacific
Merchant Bank in Phoenix. From 1983 to 1987, Mr. O'Connor was with Boettcher &
Company, Inc., a regional investment banking firm specializing in municipal
finance. Mr. O'Connor has been a director of the Company since 1993.
Mr. Butterfield has been President of Student Loan Acquisition Authority of
Arizona, a not-for-profit firm which participates in the secondary market for
student loans, since 1991. From 1988 to 1991, Mr. Butterfield served as
President of Western Loan Marketing Association. From 1987 to 1988, Mr.
Butterfield served as Vice President of Security Pacific Merchant Bank, and from
1983 to 1987 he was a partner of Boettcher & Company, Inc., a regional
investment banking firm specializing in municipal finance.
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<PAGE> 49
From 1974 to 1983, Mr. Butterfield served in various positions with Young Smith
& Peacock, an Arizona-based municipal bond house. Mr. Butterfield was elected a
director of the Company in April 1996.
The Company instituted a classified Board of Directors on April 17, 1996.
Upon the completion of their initial terms, which vary from one to three years,
all directors of the Company hold office for three year terms until the next
annual meeting of stockholders of the Company and until their successors are
duly elected and qualified. Executive officers of the Company are elected by the
Board of Directors on an annual basis and serve at the discretion of the Board
of Directors.
COMMITTEES OF THE BOARD OF DIRECTORS
The Board of Directors formed an Audit Committee on April 15, 1996, which
will be responsible for reviewing the Company's accounting controls and
recommending to the Board of Directors the engagement of the Company's outside
auditors. The members of the Company's Audit Committee are Messrs. O'Connor and
Butterfield.
The Board of Directors formed a Compensation Committee on April 15, 1996,
which will be responsible for reviewing and approving the amount and type of
consideration to be paid to senior management and for administering the
Company's stock option plans. The members of the Company's Compensation
Committee are Messrs. Levine, O'Connor and Butterfield.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the
compensation paid to the Company's Chief Executive Officer and the two other
executive officers whose total annual salary and bonus exceeded $100,000 for the
fiscal year ended December 31, 1995:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ------------
NAME AND ---------------------------------- RESTRICTED ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS STOCK AWARDS COMPENSATION(1)
- --------------------------- ---- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Arthur R. Moreno........... 1995 $375,000(2) $311,614(3) -- $ 1,305
President and Chief 1994 275,000 283,163(3) -- 1,349
Executive Officer 1993 275,000 268,239(3) -- 1,309
William S. Levine.......... 1995 $350,000(2)(4) -- -- --
Chairman of the Board 1994 250,000(4) -- -- --
1993 351,000(4) -- -- --
Wally C. Kelly............. 1995 $283,987 -- -- 330
Senior Vice President 1994 244,890 -- -- --
1993 239,231 -- $ 15,000(5) --
</TABLE>
- ---------------
(1) Represents contributions made by the Company on behalf of the named
executive officers to a 401(k) plan.
(2) Reflects an increase in annual salary as of July 1, 1995. In 1996, Mr.
Moreno's salary will be $475,000 and Mr. Levine's salary will be $450,000.
(3) Earned and paid in the current year in an amount determined by reference to
operating results for the prior year. Based upon an understanding between
the Company and Mr. Moreno, for so long as Mr. Moreno is the Chief Executive
Officer and President of the Company, Mr. Moreno may be awarded an annual
bonus in an amount equal to 1.25% of the Company's EBITDA for the
immediately preceding fiscal year as reported in the Company's audited
financial statements. The bonus will be awarded at the discretion of the
Board of Directors following a review by the Compensation Committee, and
will be made after the audited financial statements for the previous fiscal
year have been released by the Company's auditors. The bonus is paid to Mr.
Moreno in the year awarded. Based upon this formula, the amount of bonus
paid to Mr. Moreno in 1996 upon the approval of the Compensation Committee
was $378,185 (1.25% of EBITDA for 1995), and would have been approximately
$1.4 million based upon pro forma EBITDA for 1995.
(4) Mr. Levine received no salary, bonus or other compensation from the Company
in 1995, 1994 or 1993 for his services as Chairman of the Board. However, in
1995, 1994 and 1993 the Company agreed to pay an aggregate of $350,000,
45
<PAGE> 50
$250,000 and $351,000, respectively, to two entities controlled by Mr.
Levine as a management fee for providing Mr. Levine's services to the
Company. The Company intends to continue to compensate Mr. Levine through
these entities pursuant to this arrangement at an annual rate of $450,000.
See Note 10 to the Consolidated Financial Statements.
(5) Represents the value of Incentive Units awarded to Mr. Kelly pursuant to the
Incentive Plan as of the date of grant. Mr. Kelly received awards under the
Incentive Plan in prior years, which have increased in value pursuant to the
terms of the Plan. As of January 1, 1996, the total value of Mr. Kelly's
Incentive Units was $646,000. Mr. Kelly may elect to have the value of his
Incentive Units settled in cash or up to 51,595 shares of the Company's
Common Stock. The award in 1993 represents 1,198 of the total shares of
Common Stock that could ultimately be issued to Mr. Kelly in settlement of
his account.
PRINCIPAL STOCKHOLDERS
The table below sets forth the number and percentage of outstanding shares
of Common Stock beneficially owned by (i) each director of the Company, (ii)
each executive officer identified under "Management -- Executive Compensation,"
(iii) all directors and executive officers of the Company as a group, and (iv)
each person known by the Company to own beneficially more than 5% of the
outstanding shares of Common Stock. The Company believes that each individual or
entity named has sole investment and voting power with respect to shares of
Common Stock indicated as beneficially owned by such stockholder, except as
otherwise noted.
<TABLE>
<CAPTION>
NUMBER PERCENT
NAME OF BENEFICIAL OWNER OF SHARES OF CLASS
- ----------------------------------------------------------------------- ---------- ---------
<S> <C> <C>
William S. Levine...................................................... 9,877,660(1) 36.9%
1702 E. Highland, Suite 310
Phoenix, Arizona 85016
Arthur R. Moreno....................................................... 7,973,275(2) 27.1%
2502 N. Black Canyon Highway
Phoenix, Arizona 85009
Stephen J. Haberkorn................................................... 3,674,410(3) 13.7%
1702 E. Highland, Suite 310
Phoenix, Arizona 85016
Putnam Investments, Inc................................................ 1,869,150(4) 7.0%
One Post Office Square
Boston, Massachusetts 02109
Wally C. Kelly......................................................... 251,758(5) *
Stephen J. Butterfield................................................. 30,000 *
Brian J. O'Connor...................................................... 10,500 *
All directors and executive officers as a group (6 persons)............ 14,468,783 48.8%
</TABLE>
- ---------------
* Represents less than 1% of the number of outstanding shares of Common Stock.
(1) Includes 3,674,410 shares of Common Stock owned by M-K Link Investments
Limited Partnership ("M-K Link") over which Mr. Levine shares voting control
with Mr. Moreno and over which Messrs. Levine and Moreno have certain rights
of first refusal with respect to certain private sales; of those 3,674,410
shares, 201,005 shares are subject to an option granted to Mr. Levine (now
held by Mr. Levine's family partnership) and 1,328,945 shares are subject to
an option granted to Mr. Moreno (see Note 2 below). Mr. Levine disclaims
beneficial ownership of the shares owned by M-K Link except to the extent of
the 201,005 shares subject to the options granted to Mr. Levine. The options
for the 201,005 shares of Common Stock of M-K Link and the remaining
6,203,250 shares of Common Stock attributed to Mr. Levine are owned by
Levine Investments Limited Partnership, 1702 E. Highland, Suite 310,
Phoenix, Arizona 85016. Mr. Levine is the sole general partner of Levine
Investments Limited Partnership; Mr. Levine, his wife and children are the
limited partners. Mr. Levine disclaims beneficial ownership of such shares
and options except in his capacity as general partner to the extent of his
interest.
(2) Includes 3,674,410 shares of Common Stock owned by M-K Link over which Mr.
Moreno shares voting control with Mr. Levine and over which Messrs. Levine
and Moreno have certain rights of first refusal with respect to certain
private sales. Of those 3,674,410 shares, 1,328,945 shares are subject to an
option granted to Mr. Moreno and 201,005
46
<PAGE> 51
shares are subject to an option granted to Mr. Levine now held by Mr.
Levine's family partnership (see Note 1 above). Mr. Moreno disclaims
beneficial ownership of those shares owned by M-K Link except to the extent
of the 1,328,945 shares subject to the options granted to Mr. Moreno. Also
includes (i) 2,632,377 shares of Common Stock that may be purchased by Mr.
Moreno pursuant to options granted by the Company; (ii) 852,422 shares of
Common Stock held directly by Mr. Moreno, all of which are subject to a
pledge in favor of Mr. Haberkorn securing a note payable to Mr. Haberkorn;
and (iii) 814,077 shares held by BRN Properties Limited Partnership, an
Arizona limited partnership, of which Mr. Moreno and his wife are the sole
general partners and his children are limited partners, over which shares
Mr. Moreno retains voting and dispositive power. Does not include 457,524
shares of Common Stock subject to options under the Omnibus Plan that vest
ratably over four years.
(3) This number represents shares owned by M-K Link, 1,529,950 of which shares
are subject to options granted to Levine Investments Limited Partnership and
to Mr. Moreno. Mr. Haberkorn disclaims beneficial ownership of shares owned
by his family partnership, except to the extent of his interest therein, and
both he and his family partnership disclaim beneficial ownership of shares
subject to options in favor of Messrs. Levine and Moreno. Messrs. Levine and
Moreno hold certain voting and rights of refusal power as to shares owned by
M-K Link. See Notes 1 and 2 above.
(4) Based on Schedule 13G filed by the indicated person with the Securities and
Exchange Commission reporting beneficial ownership as of July 10, 1996. Each
of Putnam Investment Management, Inc. and the Putnam Advisory Company, Inc.,
wholly-owned registered investment advisors of Putnam Investments, Inc.
having the same address, also filed a Schedule 13G with the Commission
reporting beneficial ownership of 1,591,350 shares and 277,800 shares,
respectively.
(5) Represents an option to purchase shares of Common Stock from the Company.
Does not include any shares of Common Stock that Mr. Kelly may receive in
settlement of his Incentive Unit Awards or 225,000 shares of Common Stock
subject to options under the Omnibus Plan that vest ratably over four years.
47
<PAGE> 52
DESCRIPTION OF SENIOR CREDIT FACILITY
The following summary of certain provisions of the Senior Credit Facility
is qualified in its entirety by reference to the Credit Agreement relating to
the Senior Credit Facility, a copy of which is incorporated by reference in the
Registration Statement of which this Prospectus is a part. See "Available
Information." Capitalized terms used below and not defined have the meanings set
forth in the Credit Agreement relating to the Senior Credit Facility.
The Senior Credit Facility has been made available to the Company and the
Canadian Subsidiary (as defined herein) pursuant to the Third Amended and
Restated Credit Agreement dated as of August 22, 1996 among the Company, the
Canadian Subsidiary, the several banks and other financial institutions
(collectively, the "Lenders") from time to time parties thereto and Canadian
Imperial Bank of Commerce ("CIBC"), through its New York Agency, as United
States administrative agent for the Lenders, and CIBC, as Canadian
administrative agent for the Lenders. The term "Canadian Subsidiary" refers to
the entity that was formed by the Company in connection with the Acquisition
through an amalgamation of 3284085 Canada Inc., a wholly owned subsidiary of the
Company, and Mediacom Inc. The Senior Credit Facility provides for revolving
credit loans, letters of credit and term loans to the Company (the "US
Facility") payable in United States currency ("US Currency" or "$") and for
revolving credit loans, letters of credit, bankers' acceptances, and term loans
to the Canadian Subsidiary (the "Canadian Facility"), payable in Canadian
currency ("Canadian Currency" or "cdn$") or with respect to certain term loans
payable in US Currency. The Company and the Lenders are currently negotiating
amendments to certain of the provisions of the terms of the Senior Credit
Facility (the "Proposed Amendments") which are expected to become effective
concurrently with or shortly after the consummation of the Offering. The
following summary includes a description of certain of the changes to the Senior
Credit Facility which are expected to be made by the Proposed Amendments.
However, there can be no assurance that the Proposed Amendments will be executed
in the current form.
US FACILITY
Revolving Credit Loans. The US Facility currently provides for revolving
credit loans of up to $40 million prior to consummation of the acquisition of
Gannett of Texas' outdoor operations in Houston, Texas pursuant to the Houston
Option and $50 million upon and after consummation of such acquisition (see "The
Transactions -- The Houston Option"). The US revolving credit loan commitment
currently reduces automatically each year commencing in 1998 and continuing
through 2001.
The US Facility under the Proposed Amendments will provide for a revolving
credit loan commitment of up to $150 million, with such commitment automatically
reducing each year commencing in 1998 and continuing through 2002.
Term Loans. The US Facility currently provides for term loans in the
aggregate amount of $380 million, payable in quarterly installments commencing
in 1997 with a final installment due in 2003.
Under the terms of the Proposed Amendments, the US Facility will provide
for term loans in an aggregate amount of $350 million, payable in quarterly
installments commencing in 1997 with the final installment due in 2003.
Letters of Credit. The US Lenders have agreed to issue letters of credit
under the US Facility for the account of the Company during the US revolving
credit commitment period up to the letter of credit commitment amount of $30
million (but only to the extent there is available US revolving credit
commitment which is not being utilized). The Company is required to pay fees in
connection with the US letter of credit commitment and to reimburse amounts
drawn thereunder. Interest is payable on the amounts drawn until reimbursed at
the rate which would be payable on any outstanding and overdue ABR Loan.
US Facility Interest. The US revolving credit loans and US term loans may
be, at the option of the Company, Eurodollar Loans, ABR Loans, or a contribution
thereof. Eurodollar Loans bear interest at a rate per annum equal to the
Eurodollar rate (as hereinafter described) plus an applicable margin. The
"Eurodollar rate" is a rate per annum determined by CIBC, as administrative
agent, based upon the rates at which U.S. dollar deposits with a term comparable
to the interest period applicable to the Eurodollar Loan being made are
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<PAGE> 53
offered by leading banks in the London interbank deposit market (adjusted for
maximum reserves). ABR Loans bear interest at a rate per annum equal to the ABR
(as defined below) plus an applicable margin. "ABR" means, on a particular date,
a rate per annum equal to the highest of (a) the rate of interest most recently
announced by CIBC as its Base Rate, (b) the rate of interest for such date
offered in the interbank market to CIBC, as administrative agent, as the
overnight Federal Funds Rate, plus 1%, and (c) the rate determined by CIBC, as
administrative agent, based on the latest 3-week moving average of daily
secondary market morning offering rates in the United States for 3-month
certificates of deposit of major United States money market lenders as published
by the Federal Reserve Bank of New York (as adjusted for reserves and
assessments), plus 1%.
Security. The obligations of the Company under the Senior Credit Facility
are secured by a security interest in substantially all of the Company's assets,
including, with certain exceptions, both real and personal property.
CANADIAN FACILITY
Revolving Credit Loans. The Canadian Facility currently provides for a
revolving credit loan commitment to the Canadian Subsidiary of up to cdn$35
million (the equivalent of $25 million), which commitment reduces automatically
each year commencing in 1998 to 2001. Under the terms of the Proposed
Amendments, the Canadian revolving credit loan commitment will be extended to
2002.
Term Loans. The Canadian Facility currently provides for term loans to the
Canadian Subsidiary payable in Canadian Currency in the aggregate amount of
cdn$48 million (the equivalent of $35 million) and payable in US Currency in the
aggregate amount of $40 million. The Canadian Currency term loans are currently
payable in quarterly installments commencing in 1997 with the final installment
due in 2000 (which is expected to be extended to 2002 by the Proposed
Amendments). The US Currency term loans are payable in quarterly installments
commencing in 1997 with the final installment due in 2003.
Bankers' Acceptances. The Canadian Subsidiary is allowed to effect
revolving credit loan borrowings and certain term loan borrowings through the
issuance of bankers' acceptances in a minimum aggregate face amount of cdn$4
million and for a term of 30, 60, 90 or 180 days. Bankers' acceptances are
purchased by the Lenders from the Canadian Subsidiary at the applicable discount
rate which is the per annum rate of interest appearing on "Reuters Screen CDOR
Page" applicable to cdn$ bankers' acceptances of certain Canadian banks with a
term equivalent to the term of the bankers' acceptances being issued by the
Canadian Subsidiary.
Canadian Letters of Credit. The Lenders have agreed to purchase
participation interests in letters of credit issued by CIBC under the Canadian
Facility for the account of the Canadian Subsidiary during the Canadian
revolving credit commitment period up to the Canadian letter of credit
commitment amount of cdn$7 million (but only to the extent there is available
Canadian revolving credit commitment which is not being utilized). Interest is
payable on amounts drawn until reimbursed at the rate which would be payable on
any outstanding and overdue cdn$ Prime Loans. See "-- Canadian Facility
Interest" below.
Canadian Facility Interest. The Canadian revolving credit loans and the
Canadian Currency term loans may be, at the option of the Canadian Subsidiary,
cdn$ Prime Loans, bankers' acceptances or a combination thereof. Cdn$ Prime
Loans bear interest at a rate per annum equal to the cdn$ Prime Rate (as
hereinafter described) plus an applicable margin. The cdn$ Prime Rate is a rate
per annum equal to the greater of (i) the CIBC reference rate and (ii) the sum
of 0.50% plus the per annum rate of interest appearing on "Reuters Screen CDOR
Page" applicable to 30 day cdn$ bankers' acceptances of certain Canadian banks.
Bankers' acceptance are priced as described under "-- Bankers' Acceptances"
above. The US Currency term loans may be at the option of the Canadian
Subsidiary, Eurodollar Loans, ABR Loans or a combination thereof. See "-- US
Facility -- US Facility Interest".
Security. The obligations of the Canadian Subsidiary under the Senior
Credit Facility are secured by a security interest in substantially all of the
assets of the Canadian Subsidiary, including, with certain exceptions, both real
and personal property.
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<PAGE> 54
GENERAL TERMS
The US Facility and the Canadian Facility are subject to the following
terms:
Covenants. The Senior Credit Facility limits the ability of the Company
and its subsidiaries to, among other things: (i) incur indebtedness; (ii) incur
liens or guarantee obligations; (iii) enter into mergers, consolidations or
amalgamations or liquidate, wind up or otherwise dispose of all or substantially
all of its property, or make any material change in its method of conducting
business; (iv) with certain exceptions, sell or otherwise dispose of property,
business or assets; (v) declare or pay dividends or distributions or purchase or
redeem any shares of capital stock of the Company, or pay interest on
subordinated indebtedness in cash at a rate per annum greater than 15% or in any
other form at a rate per annum greater than 20%; (vi) make capital expenditures;
(vii) make loans or investments; (viii) make optional payments or prepay or
redeem indebtedness or amend or modify payment terms or interest on
indebtedness; (ix) enter into transactions with affiliates; (x) enter into sale
and leaseback arrangements; (xi) enter into any business except for the business
in which the Company and its subsidiaries were engaged on the date of the Senior
Credit Facility or which are directly related thereto; and (xii) enter into
agreements prohibiting or limiting the ability of the Company or any of its
subsidiaries to create liens upon its assets or revenues to secure the
obligations under the Senior Credit Facility. The Senior Credit Facility also
requires the Company and its subsidiaries to maintain a total leverage ratio and
a senior leverage ratio at certain levels and to maintain certain interest
expense coverage and fixed charges coverage. The Senior Credit Facility contains
various affirmative covenants including, without limitation, a covenant to enter
into hedging arrangements to provide interest rate protection in respect of a
portion of the Company's indebtedness.
Events of Default and Restrictions. The Senior Credit Facility contains
customary events of default, including, without limitation, the following: (i)
the Company's failure to pay principal or interest when due; (ii) the Company's
material breach of any covenant, representation or warranty; (iii) customary
cross-default provisions; (iv) certain events of bankruptcy, insolvency or
reorganization of the Company or its subsidiaries; (v) certain adverse events
under ERISA plans of the Company or its subsidiaries; (vi) the levy of certain
judgments against the Company or any of its subsidiaries; (vii) any of the
agreements or liens securing payment of the obligations of the Company or the
Subsidiary Guarantors under the Senior Credit Facility cease to be enforceable
or (viii) the destruction or loss without replacement of a certain percentage of
the total number of signs owned by the Company during a 12-month period. In
addition, the following events constitute events of default under the Senior
Credit Facility: (i) except for the Designated Holders (as defined below), any
person or group (within the meaning of Section 13(d) or 14(d) of the Securities
Exchange Act of 1934, as amended) (A) acquires beneficial ownership of 20% or
more of any outstanding class of capital stock having ordinary voting power in
the election of directors of the Company or (B) obtains the power to elect a
majority of the Company's directors; or (ii) the aggregate amount of capital
stock having ordinary voting power in the election of directors of the Company
held by the Designated Holders no longer constitutes 40% (or 25% under certain
circumstances) of the issued and outstanding capital stock having such voting
power; or (iii) either of the Designated Holders owns fewer than 60% of the
shares of capital stock of the Company of any class held by them on the date of
the closing of the Acquisition Financing; or (iv) a Change of Control, as
defined in the Indenture, occurs; or (v) the Board of Directors of the Company
does not consist of a majority of Continuing Directors. The term "Continuing
Directors" means the directors of the Company on the Closing Date and each other
director, if such other director's nomination for election to the Board of
Directors is recommended by a majority of the then Continuing Directors. The
term "Designated Holders" means William S. Levine and Arthur R. Moreno or any
trust solely for the benefit of Mr. Levine or his immediate family members or
Mr. Moreno or his immediate family members, as the case may be, or any
partnership all of the ownership interests in which are beneficially owned or
controlled by any of the foregoing; provided that with respect to any such trust
or partnership Mr. Levine or Mr. Moreno, as the case may be, has the power to
direct the voting of the shares of capital stock held by such trust or
partnership. The occurrence of an event of default permits the Lenders to
terminate the commitments and accelerate the indebtedness under the Senior
Credit Facility.
Mandatory Prepayments and Reduction in Revolving Credit Commitments. The
Senior Credit Facility requires with certain exceptions that net cash proceeds
from certain sales or transfers of assets of the Company
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or its subsidiaries or from the issuance, sale or other disposition of capital
stock or debt securities by the Company or its subsidiaries be applied first, to
payment of outstanding term loans and second, to the permanent reduction of the
revolving credit loan commitment then in effect. However, if certain conditions
are met, such net cash proceeds may be applied by the Company to refinancing of
subordinated indebtedness. In addition, in certain events cash flow of the
Company in excess of certain amounts is also required to be applied first, to
payment of outstanding term loans and second, to the permanent reduction of the
revolving credit loan commitments.
US Guarantee and Collateral Agreement. The Company's obligations under the
Senior Credit Facility are guaranteed by the Guarantors pursuant to a Guaranty
and Collateral Agreement in favor of CIBC, as US administrative agent for the
Lenders, and the Lenders. The Canadian Subsidiary's obligations under the Senior
Credit Facility are also guaranteed by the Company, the subsidiaries of the
Canadian Subsidiary and the Guarantors pursuant to the Guaranty and Collateral
Agreement. Each guarantor's obligations under the Guaranty and Collateral
Agreement is secured by a security interest in certain property of such
guarantor and certain pledged securities.
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DESCRIPTION OF THE NOTES
The Notes will be issued under an Indenture, dated as of , 1996
(the "Indenture") among the Company, the Guarantors and The Bank of New York, as
trustee (the "Trustee"). The terms of the Notes include those stated in the
Indenture and those made part of the Indenture by reference to the Trust
Indenture Act of 1939, as amended (the "Trust Indenture Act"), as in effect on
the date of the Indenture. The Notes are subject to all such terms, and holders
of the Notes are referred to the Indenture and the Trust Indenture Act for a
statement of them. The following is a summary of the material terms and
provisions of the Notes. This summary does not purport to be a complete
description of the Notes and is subject to the detailed provisions of, and
qualified in its entirety by reference to, the Notes and the Indenture
(including the definitions contained therein). A copy of the form of Indenture
has been filed as an exhibit to the Registration Statement of which this
Prospectus is a part. The definitions of certain capitalized terms are set forth
under "-- Certain Definitions" and throughout this description. Capitalized
terms that are used but not otherwise defined herein have the meanings assigned
to them in the Indenture and such definitions are incorporated herein by
reference. For purposes of this section, references to the "Company" include
only the Company and not its Subsidiaries.
GENERAL
The Notes will be limited in aggregate principal amount to $150 million.
The Notes will be general unsecured obligations of the Company, subordinated in
right of payment to Senior Indebtedness of the Company and senior in right of
payment to any current or future subordinated indebtedness of the Company.
The Notes will be unconditionally guaranteed, on a senior subordinated
basis, as to payment of principal, premium, if any, and interest, jointly and
severally, by the Guarantors (together with each other Restricted Subsidiary
which guarantees payment of the Notes pursuant to the covenant described under
"Guarantees of Certain Indebtedness").
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on , 2006. The Notes will bear interest at
a rate of % per annum from the date of original issuance until maturity.
Interest is payable semi-annually in arrears on and
commencing , 1997, to holders of record of the Notes at the close of
business on the immediately preceding , and
, respectively.
OPTIONAL REDEMPTION
The Notes will be redeemable at the option of the Company, in whole or in
part, at any time on or after , 2001 at the following
redemption prices (expressed as a percentage of principal amount), together, in
each case, with accrued and unpaid interest to the redemption date, if redeemed
during the twelve-month period beginning on , of each year
listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------- ----------
<S> <C>
2001................................................... %
2002................................................... %
2003................................................... %
2004 and thereafter.................................... %
</TABLE>
Notwithstanding the foregoing, the Company may redeem in the aggregate up
to 35% of the original principal amount of Notes at any time and from time to
time prior to , 1999 at a redemption price equal to 110% of the
aggregate principal amount so redeemed, plus accrued interest to the redemption
date out of the Net Proceeds of one or more Public Equity Offerings; provided
that at least $97.5 million of the principal amount of Notes originally issued
remain outstanding immediately after the occurrence of any such redemption and
that any such redemption occurs within 60 days following the closing of any such
Public Equity Offering.
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<PAGE> 57
In the event of redemption of fewer than all of the Notes, the Trustee
shall select by lot or in such other manner as it shall deem fair and equitable
the Notes to be redeemed; provided, however, that if a partial redemption is
made with the proceeds of a Public Equity Offering, selection of the Notes for
redemption shall be made by the Trustee only on a pro rata basis, unless such
method is otherwise prohibited. The Notes will be redeemable in whole or in part
upon not less than 30 nor more than 60 days' prior written notice, mailed by
first class mail to a holder's last address as it shall appear on the register
maintained by the Registrar of the Notes. On and after any redemption date,
interest will cease to accrue on the Notes or portions thereof called for
redemption unless the Company shall fail to redeem any such Note.
SUBORDINATION
The indebtedness represented by the Notes is, to the extent and in the
manner provided in the Indenture, subordinated in right of payment to the prior
payment and satisfaction in full in cash or cash equivalents of all existing and
future Senior Indebtedness of the Company. As of June 30, 1996, after giving pro
forma effect to the Transactions, the Offering and the application of the net
proceeds of the Offering, the principal amount of outstanding Senior
Indebtedness of the Company, on a consolidated basis, would have been
approximately $455.9 million.
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, arrangement, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, whether voluntary or involuntary, or any liquidation,
dissolution or other winding-up of the Company, whether voluntary or involuntary
and whether or not involving insolvency or bankruptcy, or any general assignment
for the benefit of creditors or other marshalling of assets or liabilities of
the Company (except in connection with the merger or consolidation of the
Company or its liquidation or dissolution following the transfer of
substantially all of its assets, upon the terms and conditions permitted under
the circumstances described under "-- Merger, Consolidation or Sale of Assets")
(all of the foregoing referred to herein individually as a "Bankruptcy
Proceeding" and collectively as "Bankruptcy Proceedings"), the holders of Senior
Indebtedness of the Company will be entitled to receive payment and satisfaction
in full in cash or cash equivalents of all amounts due on or in respect of all
Senior Indebtedness of the Company before the holders of the Notes are entitled
to receive or retain any payment or distribution of any kind on account of the
Notes. In the event that, notwithstanding the foregoing, the Trustee or any
holder of Notes receives any payment or distribution of assets of the Company of
any kind, whether in cash, property or securities, including, without
limitation, by way of set-off or otherwise, in respect of the Notes before all
Senior Indebtedness of the Company is paid and satisfied in full in cash, then
such payment or distribution will be held by the recipient in trust for the
benefit of holders of Senior Indebtedness and will be immediately paid over or
delivered to the holders of Senior Indebtedness or their representative or
representatives to the extent necessary to make payment in full in cash or cash
equivalents of all Senior Indebtedness remaining unpaid, after giving effect to
any concurrent payment or distribution, or provision therefor, to or for the
holders of Senior Indebtedness. By reason of such subordination, in the event of
liquidation or insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than other creditors of the Company, and
creditors of the Company who are not holders of Senior Indebtedness or of the
Notes may recover more, ratably, than the holders of the Notes.
No payment or distribution of any assets or securities of the Company or
any Restricted Subsidiary of any kind or character (including, without
limitation, cash, property and any payment or distribution which may be payable
or deliverable by reason of the payment of any other Indebtedness of the Company
being subordinated to the payment of the Notes by the Company) may be made by or
on behalf of the Company or any Restricted Subsidiary, including, without
limitation, by way of set-off or otherwise, for or on account of the Notes, or
for or on account of the purchase, redemption or other acquisition of the Notes,
and neither the Trustee nor any holder or owner of any Notes shall take or
receive from the Company or any Restricted Subsidiary, directly or indirectly in
any manner, payment in respect of all or any portion of Notes following the
delivery by the representative of the holders of Designated Senior Indebtedness
under or in respect of the Senior Credit Facility, for so long as there shall
exist any Designated Senior Indebtedness under or in respect of the Senior
Credit Facility, and thereafter, the holders of Designated Senior Indebtedness
(in either such case, the
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<PAGE> 58
"Representative") to the Trustee of written notice of (i) the occurrence of a
Payment Default or (ii) the occurrence of a Non-Payment Event of Default on
Designated Senior Indebtedness and the acceleration of the maturity of such
Designated Senior Indebtedness in accordance with its terms, and in any such
event, such prohibition shall continue until such Payment Default is cured,
waived in writing or ceases to exist or such acceleration has been rescinded or
otherwise cured. At such time as the prohibition set forth in the preceding
sentence shall no longer be in effect, subject to the provisions of the
following paragraph, the Company shall resume making any and all required
payments in respect of the Notes, including any missed payments.
Upon the occurrence of a Non-Payment Event of Default on Designated Senior
Indebtedness, no payment or distribution of any assets of the Company of any
kind or character (including, without limitation, cash, property and any payment
or distribution which may be payable or deliverable by reason of the payment of
any other Indebtedness of the Company being subordinated to the payment of the
Notes by the Company) may be made by the Company, including, without limitation,
by way of set-off or otherwise, for or on account of the Notes, or for or on
account of the purchase, redemption, defeasance or other acquisition of Notes,
and neither the Trustee nor any holder or owner of any Notes shall take or
receive from the Company, directly or indirectly in any manner, payment in
respect of all or any portion of the Notes, for a period (a "Payment Blockage
Period") commencing on the date of receipt by the Trustee of written notice from
the Representative of such Non-Payment Event of Default unless and until
(subject to any blockage of payments that may then be in effect under the
preceding paragraph) the earliest of (x) more than 179 days shall have elapsed
since receipt of such written notice by the Trustee, (y) such Non-Payment Event
of Default shall have been cured or waived in writing or shall have ceased to
exist or such Designated Senior Indebtedness shall have been paid in full or (z)
such Payment Blockage Period shall have been terminated by written notice to the
Company or the Trustee from such Representative, after which, in the case of
clause (x), (y) or (z), the Company shall resume making any and all required
payments in respect of the Notes, including any missed payments. Notwithstanding
any other provision of the Indenture, in no event shall a Payment Blockage
Period commenced in accordance with the provisions of the Indenture described in
this paragraph extend beyond 179 days from the date of the receipt by the
Trustee of the notice referred to above (the "Initial Blockage Period"). Any
number of additional Payment Blockage Periods may be commenced during the
Initial Blockage Period; provided, however, that no such additional Payment
Blockage Period shall extend beyond the Initial Blockage Period. After the
expiration of the Initial Blockage Period, no Payment Blockage Period may be
commenced until at least 180 consecutive days have elapsed from the last day of
the Initial Blockage Period. Notwithstanding any other provision of the
Indenture, no event of default with respect to Designated Senior Indebtedness
(other than a Payment Default) which existed or was continuing on the date of
the commencement of any Payment Blockage Period initiated by the Representative
shall be, or be made, the basis for the commencement of a second Payment
Blockage Period initiated by the Representative, whether or not within the
Initial Blockage Period, unless such event of default shall have been cured or
waived for a period of not less than 90 consecutive days.
Each Guarantee will, to the extent set forth in the Indenture, be
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness of the respective Guarantor, including obligations of such
Guarantor with respect to the Senior Credit Facility (including any guarantee
thereof), and will be subject to the rights of holders of Designated Senior
Indebtedness of such Guarantor to initiate blockage periods, upon terms
substantially comparable to the subordination of the Notes to all Senior
Indebtedness of the Company.
If the Company or any Guarantor fails to make any payment on the Notes or
any Guarantee, as the case may be, when due or within any applicable grace
period, whether or not on account of payment blockage provisions, such failure
would constitute an Event of Default under the Indenture and would enable the
holders of the Notes to accelerate the maturity thereof. See "Events of
Default."
A holder of Notes by his acceptance of Notes agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on his behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purpose.
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<PAGE> 59
CERTAIN COVENANTS
The Indenture will contain, among others, the following covenants.
Limitation on Additional Indebtedness
The Company will not, and will not permit any Restricted Subsidiary to,
directly or indirectly, incur (as defined) any Indebtedness (including Acquired
Indebtedness) unless (a) after giving effect to the incurrence of such
Indebtedness and the receipt and application of the proceeds thereof, the
Company's Leverage Ratio is less than (i) 6.50 to 1 if such Indebtedness is
incurred on or prior to , 1999, (ii) 6.25 to 1 if such Indebtedness
is incurred after , 1999 and on or prior to ,
2001 and (iii) 6.00 to 1 if such Indebtedness is incurred thereafter, and (b) no
Default or Event of Default shall have occurred and be continuing at the time or
as a consequence of the incurrence of such Indebtedness.
Notwithstanding the foregoing, the Company and the Restricted Subsidiaries
may incur Permitted Indebtedness; provided that the Company will not incur any
Permitted Indebtedness that ranks junior in right of payment to the Notes that
has a maturity or mandatory sinking fund payment prior to the maturity of the
Notes.
Limitation on Restricted Payments
The Company will not make, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such Restricted
Payment, the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the covenant set forth under "Limitation
on Additional Indebtedness"; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum of (1) 100% of the Company's Cumulative EBITDA
minus 1.4 times the Company's Cumulative Consolidated Interest Expense,
plus (2) 100% of the aggregate Net Proceeds and the fair market value of
securities or other property received by the Company from the issue or
sale, after the Issue Date, of Capital Stock (other than Disqualified
Capital Stock or Capital Stock of the Company issued to any Subsidiary of
the Company) of the Company or any Indebtedness or other securities of the
Company convertible into or exercisable or exchangeable for Capital Stock
(other than Disqualified Capital Stock) of the Company which has been so
converted or exercised or exchanged, as the case may be, plus (3) $10
million. For purposes of determining under this clause (c) the amount
expended for Restricted Payments, cash distributed shall be valued at the
face amount thereof and property other than cash shall be valued at its
fair market value.
The provisions of this covenant shall not prohibit (i) the payment of any
distribution within 60 days after the date of declaration thereof, if at such
date of declaration such payment would comply with the provisions of the
Indenture, (ii) the retirement of any shares of Capital Stock of the Company or
subordinated Indebtedness by conversion into, or by or in exchange for, shares
of Capital Stock (other than Disqualified Capital Stock), or out of, the Net
Proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of Capital Stock of the Company (other than
Disqualified Capital Stock), (iii) the redemption or retirement of Indebtedness
of the Company subordinated to the Notes in exchange for, by conversion into, or
out of the Net Proceeds of, a substantially concurrent sale or incurrence of
Indebtedness (other than any Indebtedness owed to a Subsidiary of the Company)
of the Company that is contractually subordinated in right of payment to the
Notes to at least the same extent as the subordinated Indebtedness being
redeemed or retired, (iv) the retirement of any shares of Disqualified Capital
Stock by conversion into, or by exchange for, shares of Disqualified Capital
Stock, or out of the Net Proceeds of the substantially concurrent sale (other
than to a Subsidiary of the Company) of other shares of Disqualified Capital
Stock, (v) the repurchase, redemption or other acquisition or retirement for
value of any shares of Capital Stock of
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<PAGE> 60
the Company (other than Disqualified Capital Stock) solely out of the proceeds
of any policy of insurance maintained to provide funds for such purpose, (vi)
the purchase, redemption or other acquisition for value of shares of Capital
Stock of the Company (other than Disqualified Capital Stock) or options on such
shares held by the Company's or the Restricted Subsidiaries' officers or
employees or former officers or employees (or their estates or beneficiaries
under their estates) upon the death, disability, retirement or termination of
employment of such current or former officers or employees pursuant to the terms
of an employee benefit plan or any other agreement pursuant to which such shares
of Capital Stock or options were issued or pursuant to a severance, buy-sell or
right of first refusal agreement with such current or former officer or
employee; provided that the aggregate cash consideration paid, or distributions
made, pursuant to this clause (vi) do not in any one fiscal year exceed $2
million, (vii) the making of Investments in Unrestricted Subsidiaries and joint
ventures; provided that the Net Investment therein shall not exceed an aggregate
of $10 million; provided, however, that the Company or the Restricted
Subsidiaries may make additional Investments pursuant to this clause (vii) up to
an additional Net Investment therein of $20 million if the Company is able, at
the time of any such Investment and immediately after giving effect thereto, to
incur at least $1.00 of additional Indebtedness (other than Permitted
Indebtedness) in compliance with the "Limitation on Additional Indebtedness"
covenant; provided, further, that in calculating the aggregate amount of
Restricted Payments made subsequent to the Issue Date for purposes of clause (c)
of the immediately preceding paragraph, the amount of Net Investment made
pursuant to clause (vii) shall be included in the calculation.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "Limitation on Restricted Payments" were computed,
which calculations may be based upon the Company's latest available financial
statements, and that no Default or Event of Default exists and is continuing and
no Default or Event of Default will occur immediately after giving effect to any
Restricted Payments.
Limitation on Other Senior Subordinated Debt
The Company will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, incur, contingently or otherwise, any
Indebtedness (other than the Notes and the Guarantees, as the case may be) that
is both (i) subordinate in right of payment to any Senior Indebtedness of the
Company or any of the Subsidiary Guarantors, as the case may be, and (ii) senior
in right of payment to the Notes or any of the Guarantees, as the case may be.
For purposes of this covenant, Indebtedness is deemed to be senior in right of
payment to the Notes and the Guarantees, as the case may be, if it is not
explicitly subordinate in right of payment to Senior Indebtedness at least to
the same extent as the Notes and the Guarantees, as the case may be, are
subordinate to Senior Indebtedness.
Limitations on Investments
The Company will not, and will not permit any of the Restricted
Subsidiaries to, make any Investment other than (i) a Permitted Investment or
(ii) an Investment that is made as a Restricted Payment in compliance with the
"Limitation on Restricted Payments" covenant after the Issue Date.
Limitations on Liens
The Company will not, and will not permit any of the Restricted
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind (other than Permitted Liens) upon any Property
of the Company or any Restricted Subsidiary or any shares of stock or debt of
any Restricted Subsidiary which owns Property, now owned or hereafter acquired,
unless (i) if such Lien secures Indebtedness which is pari passu with the Notes,
then the Notes are secured on an equal and ratable basis with the obligations so
secured until such time as such obligation is no longer secured by a Lien or
(ii) if such Lien secures Indebtedness which is subordinated to the Notes, any
such Lien shall be subordinated to the Lien granted to the Holders of the Notes
in the same collateral as that securing such Lien to the same extent as such
subordinated Indebtedness is subordinated to the Notes.
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Limitation on Transactions with Affiliates
The Company will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with any
Affiliate (including entities in which the Company or any of the Restricted
Subsidiaries own a minority interest) or holder of 10% or more of the Company's
Common Stock (each of the foregoing, an "Affiliate Transaction") or extend,
renew, waive or otherwise modify the terms of any Affiliate Transaction entered
into prior to the Issue Date unless (i) such Affiliate Transaction is between or
among the Company and/or Wholly-Owned Restricted Subsidiaries; or (ii) the terms
of such Affiliate Transaction are fair and reasonable to the Company or such
Restricted Subsidiary, as the case may be, and the terms of such Affiliate
Transaction are at least as favorable as the terms which could be obtained by
the Company or such Restricted Subsidiary, as the case may be, in a comparable
transaction made on an arm's-length basis between unaffiliated parties. In any
Affiliate Transaction involving an amount or having a value in excess of $1
million which is not permitted under clause (i) above, the Company must obtain a
resolution of the board of directors approved by a majority of the members of
the board of directors (and a majority of the disinterested members of the board
of directors) certifying that such Affiliate Transaction complies with clause
(ii) above. In transactions with a value in excess of $5 million which are not
permitted under clause (i) above, the Company must obtain a written opinion as
to the fairness of such a transaction from an independent investment banking
firm of nationally recognized standing.
The foregoing provisions will not apply to (i) any Restricted Payment that
is not prohibited by the provisions described under "Limitations on Restricted
Payments" contained herein, (ii) any transaction, approved by the Board of
Directors of the Company, with an officer or director of the Company or of any
Restricted Subsidiary in his or her capacity as officer or director entered into
in the ordinary course of business, including compensation and employee benefit
arrangements with any officer or director of the Company or of any Restricted
Subsidiary, or (iii) any Affiliate Transaction entered into prior to the Issue
Date.
Limitation on Creation of Subsidiaries
The Company shall not create or acquire, or permit any of the Restricted
Subsidiaries to create or acquire, any Subsidiary other than (i) a Restricted
Subsidiary existing as of the date of the Indenture, (ii) a Restricted
Subsidiary conducting a business similar or reasonably related to the business
of the Company and its Subsidiaries as conducted on the Issue Date or (iii) an
Unrestricted Subsidiary.
Guarantees of Certain Indebtedness
The Company will not permit any of the domestic Restricted Subsidiaries
(other than the Guarantors) to (a) incur, guarantee or secure through the
granting of Liens the payment of any Indebtedness under the Senior Credit
Facility or any refinancings thereof or (b) pledge any intercompany notes
representing obligations of any of the Restricted Subsidiaries to secure the
payment of any Indebtedness under the Senior Credit Facility or any refinancings
thereof, in each case unless such Restricted Subsidiary, the Company and the
Trustee execute and deliver a supplemental indenture evidencing such Restricted
Subsidiary's Guarantee under the Indenture. Thereafter, such Restricted
Subsidiary shall be a Guarantor for all purposes of the Indenture. As of the
Issue Date, the Company will have no domestic Subsidiaries, other than the
Guarantors. Mediacom, Inc., a Canadian corporation, which is a Restricted
Subsidiary, will not execute a Guarantee of the Company's obligations under the
Notes. See "Description of the Notes -- General."
Limitation on Dividends and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any of the Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
on the ability of any Restricted Subsidiary to (a) pay dividends or make any
other distributions to the Company or any Restricted Subsidiary on its Capital
Stock, (b) pay any Indebtedness owed to the Company
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or any Restricted Subsidiary, (c) make loans or advances to the Company or any
Restricted Subsidiary, (d) transfer any of its properties or assets to the
Company or any Restricted Subsidiary, (e) grant liens or security interests on
the assets of the Company or the Restricted Subsidiaries in favor of the holders
of the Notes, or (f) guarantee the Notes or any renewals or refinancings
thereof, except for Permitted Dividend Encumbrances.
Limitation on Certain Asset Sales
The Company will not, and will not permit any of the Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or such
Restricted Subsidiary, as the case may be, receives consideration at the time of
such sale or other disposition at least equal to the fair market value thereof
(as determined in good faith by the Company's board of directors, and evidenced
by a board resolution); (ii) not less than 85% of the consideration received by
the Company or such Restricted Subsidiary, as the case may be, is in the form of
cash or cash equivalents (those equivalents allowed under "Temporary Cash
Investments"), provided, however, that the amount of (x) any liabilities of the
Company or any Restricted Subsidiaries that are assumed by the transferee of
such assets, including any Indebtedness of a Restricted Subsidiary whose stock
is purchased by the transferee and (y) any notes or other securities received by
the Company or any such Restricted Subsidiary which are converted into cash
within 180 days of such Asset Sale (to the extent of cash received) shall be
deemed to be cash for purposes of this provision; provided further that the
Company or such Restricted Subsidiary will not be required to comply with this
clause (ii) with respect to a Permitted Asset Swap or a Houston Disposition; and
(iii) the Asset Sale Proceeds received by the Company or such Restricted
Subsidiary are applied (a) first, to the extent the Company elects, or is
required, to prepay, repay or purchase debt under any then existing Senior
Indebtedness of the Company or any Restricted Subsidiary within 270 days
following the receipt of the Asset Sale Proceeds from any Asset Sale; provided
that any such repayment shall result in a permanent reduction of the commitments
thereunder in an amount equal to the principal amount so repaid; (b) second, to
the extent of the balance of Asset Sale Proceeds after application as described
above, to the extent the Company elects, to an investment in assets (including
Capital Stock or other securities purchased in connection with the acquisition
of Capital Stock or property of another Person) used or useful in businesses
similar or ancillary to the business of the Company and the Restricted
Subsidiaries as conducted at the time of such Asset Sale, provided that such
investment occurs and such Asset Sale Proceeds are so applied within 270 days
following the receipt of such Asset Sale Proceeds (the "Reinvestment Date"); and
(c) third, if on the Reinvestment Date with respect to any Asset Sale, the
Available Asset Sale Proceeds exceed $10 million, the Company shall apply an
amount equal to such Available Asset Sale Proceeds to an offer to repurchase the
Notes, at a purchase price in cash equal to 100% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of repurchase (an "Excess
Proceeds Offer"). If an Excess Proceeds Offer is not fully subscribed, the
Company may retain the portion of the Available Asset Sale Proceeds not required
to repurchase Notes.
If the Company is required to make an Excess Proceeds Offer, the Company
shall mail, within 30 days following the Reinvestment Date, a notice to the
Holders stating, among other things: (1) that such Holders have the right to
require the Company to apply the Available Asset Sale Proceeds to repurchase
such Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase; (2)
the purchase date, which shall be no earlier than 30 days and not later than 60
days from the date such notice is mailed; (3) the instructions, determined by
the Company, that each Holder must follow in order to have such Notes
repurchased; and (4) the calculations used in determining the amount of
Available Asset Sale Proceeds to be applied to the repurchase of such Notes.
Limitation on Capital Stock of Restricted Subsidiaries
The Company will not (i) sell, pledge, hypothecate or otherwise convey or
dispose of any Capital Stock of a Restricted Subsidiary (other than under the
Senior Credit Facility or under the terms of any Designated Senior Indebtedness)
or (ii) permit any Restricted Subsidiary to issue any Capital Stock, other than
to the Company or a Wholly-Owned Restricted Subsidiary. The foregoing
restrictions shall not apply to an Asset Sale made in compliance with
"Limitation on Certain Asset Sales."
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Limitation on Sale and Lease-Back Transactions
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the fair
market value of the property sold, as determined by a board resolution of the
Company and (ii) the Company could incur the Attributable Indebtedness in
respect of such Sale and Lease-Back Transaction in compliance with the covenant
described under "Limitation on Additional Indebtedness."
Line of Business
The Company will not, and will not permit any of the Restricted
Subsidiaries to, engage in any business other than the business of out-of-home
advertising or a substantially similar business.
Payments for Consent
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or agreed
to be paid to all holders of the Notes which so consent, waive or agree to amend
in the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
CHANGE OF CONTROL OFFER
Within 30 days of the occurrence of a Change of Control, the Company shall
notify the Trustee in writing of such occurrence and shall make an offer to
purchase (the "Change of Control Offer") the outstanding Notes at a purchase
price equal to 101% of the principal amount thereof plus any accrued and unpaid
interest thereon to the Change of Control Payment Date (as hereinafter defined)
(such applicable purchase price being hereinafter referred to as the "Change of
Control Purchase Price") in accordance with the procedures set forth in this
covenant.
Within 30 days of the occurrence of a Change of Control, the Company also
shall (i) cause a notice of the Change of Control Offer to be sent at least once
to the Dow Jones News Service or similar business news service in the United
States and (ii) send by first-class mail, postage prepaid, to the Trustee and to
each holder of the Notes, at the address appearing in the register maintained by
the Registrar of the Notes, a notice stating:
(1) that the Change of Control Offer is being made pursuant to this
covenant and that all Notes tendered will be accepted for payment, and
otherwise subject to the terms and conditions set forth herein;
(2) the Change of Control Purchase Price and the purchase date (which
shall be a business day no earlier than 30 business days nor later than 60
business days from the date such notice is mailed (the "Change of Control
Payment Date"));
(3) that any Note not tendered will continue to accrue interest;
(4) that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
(5) that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the business day preceding the Change of Control
Payment Date;
(6) that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount
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of the Notes delivered for purchase, and a statement that such holder is
withdrawing his election to have such Notes purchased;
(7) that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, provided that each Note purchased and each such new
Note issued shall be in an original principal amount in denominations of
$1,000 and integral multiples thereof;
(8) any other procedures that a holder must follow to accept a Change
of Control Offer or effect withdrawal of such acceptance; and
(9) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient
to pay the purchase price of all Notes or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee Notes so accepted together with
an Officers' Certificate stating the Notes or portions thereof tendered to the
Company. The Paying Agent shall promptly mail to each holder of Notes so
accepted payment in an amount equal to the purchase price for such Notes, and
the Company shall execute and issue, and the Trustee shall promptly authenticate
and mail to such holder, a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered; provided that each such new Note shall be
issued in an original principal amount in denominations of $1,000 and integral
multiples thereof.
The Indenture requires that if the Senior Credit Facility is in effect, or
any amounts are owing thereunder or in respect thereof, at the time of the
occurrence of a Change of Control, prior to the mailing of the notice to holders
described in the second preceding paragraph, but in any event within 30 days
following any Change of Control, the Company covenants to (i) repay in full all
obligations under or in respect of the Senior Credit Facility or offer to repay
in full all obligations under or in respect of the Senior Credit Facility and
repay the obligations under or in respect of the Senior Credit Facility of each
lender who has accepted such offer or (ii) obtain the requisite consent under
the Senior Credit Facility to permit the repurchase of the Notes as described
above. The Company must first comply with the covenant described in the
preceding sentence before it shall be required to purchase Notes in the event of
a Change of Control; provided that the Company's failure to comply with the
covenant described in the preceding sentence constitutes an Event of Default
described in clause (c) under "Events of Default" below if not cured within 60
days after the notice required by such clause. As a result of the foregoing, a
holder of the Notes may not be able to compel the Company to purchase the Notes
unless the Company is able at the time to refinance all of the obligations under
or in respect of the Senior Credit Facility or obtain requisite consents under
the Senior Credit Facility. Failure by the Company to make a Change of Control
Offer when required by the Indenture constitutes a default under the Indenture
and, if not cured within 60 days after notice, constitutes an Event of Default.
The Indenture will provide that, (A) if the Company or any Restricted
Subsidiary has issued any outstanding Indebtedness that is subordinated in right
of payment to the Notes or the Guarantee of such Restricted Subsidiary or the
Company has issued any Preferred Stock, and the Company or such Restricted
Subsidiary is required to make a Change of Control Offer or to make a
distribution with respect to such subordinated Indebtedness or Preferred Stock
in the event of a change of control, the Company or such Restricted Subsidiary
shall not consummate any such offer or distribution with respect to such
subordinated Indebtedness or Preferred Stock until such time as the Company
shall have paid the Change of Control Purchase Price in full to the holders of
Notes that have accepted the Company's Change of Control Offer and shall
otherwise have consummated the Change of Control Offer made to holders of the
Notes and (B) the Company or any Restricted Subsidiary will not issue
Indebtedness that is subordinated in right of payment to the Notes or the
Guarantee of such Restricted Subsidiary and the Company will not issue Preferred
Stock with change of control provisions requiring the payment of such
Indebtedness or Preferred Stock prior to the payment of the Notes in the event
of a Change of Control under the Indenture.
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In the event that a Change of Control occurs and the holders of Notes
exercise their right to require the Company to purchase Notes, if such purchase
constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act
at that time, the Company will comply with the requirements of Rule 14e-1 as
then in effect with respect to such repurchase.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company will not and will not permit any Guarantor to consolidate with,
merge with or into, or transfer all or substantially all of its assets (as an
entirety or substantially as an entirety in one transaction or a series of
related transactions), to any Person unless: (i) the Company or the Guarantor,
as the case may be, shall be the continuing Person, or the Person (if other than
the Company or the Guarantor) formed by such consolidation or into which the
Company or the Guarantor, as the case may be, is merged or to which the
properties and assets of the Company or the Guarantor, as the case may be, are
transferred shall be a corporation organized and existing under the laws of the
United States or any State thereof or the District of Columbia and shall
expressly assume, by a supplemental indenture, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all of the obligations of the
Company or the Guarantor, as the case may be, under the Notes or the Guarantee
of such Guarantor, as the case may be, and the Indenture, and the obligations
under the Indenture shall remain in full force and effect; (ii) immediately
before and immediately after giving effect to such transaction, no Default or
Event of Default shall have occurred and be continuing; and (iii) immediately
after giving effect to such transaction on a pro forma basis the Company or such
Person could incur at least $1.00 of additional Indebtedness (other than
Permitted Indebtedness) under the covenant set forth under "Limitation on
Additional Indebtedness," provided that a Person that is a Guarantor may merge
into the Company or another Person that is a Guarantor without complying with
this clause (iii).
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
GUARANTEES
The Notes are guaranteed on a senior subordinated basis by the Guarantors.
All payments pursuant to the Guarantees by the Guarantors are subordinated in
right of payment to the prior payment in full of all Senior Indebtedness of the
Guarantor, to the same extent and in the same manner that all payments pursuant
to the Notes are subordinated in right of payment to the prior payment in full
of all Senior Indebtedness of the Company.
The obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor (including, without limitation, any guarantees of Senior Indebtedness)
and after giving effect to any collections from or payments made by or on behalf
of any other Guarantor in respect of the obligations of such other Guarantor
under its Guarantee or pursuant to its contribution obligations under the
Indenture, result in the obligations of such Guarantor under the Guarantee not
constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Guarantor that makes a payment or distribution under a Guarantee
shall be entitled to a contribution from each other Guarantor in a pro rata
amount based on the Adjusted Net Assets of each Guarantor.
A Guarantor shall be released from all of its obligations under its
Guarantee if all or substantially all of its assets are sold or all of its
Capital Stock is sold, in each case in a transaction in compliance with the
covenant described under "Limitation on Certain Asset Sales," or the Guarantor
merges with or into or consolidates with, or transfers all or substantially all
of its assets to, the Company or another Guarantor in a transaction in
compliance with "Merger, Consolidation or Sale of Assets," and such Guarantor
has delivered to the Trustee an officers' certificate and an opinion of counsel,
each stating that all conditions precedent herein provided for relating to such
transaction have been complied with.
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EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(a) default in payment of any principal of, or premium, if any, on the
Notes;
(b) default for 30 days in payment of any interest on the Notes;
(c) default by the Company or any Guarantor in the observance or
performance of any other covenant in the Notes or the Indenture for 60 days
after written notice from the Trustee or the holders of not less than 25%
in aggregate principal amount of the Notes then outstanding;
(d) default in the payment at final maturity of principal in an
aggregate amount of $10 million or more with respect to any Indebtedness of
the Company or any Restricted Subsidiary which default shall not be cured,
waived or postponed pursuant to an agreement with the holders of such
Indebtedness within 60 days after written notice, or the acceleration of
any such Indebtedness aggregating $10 million or more which acceleration
shall not be rescinded or annulled within 20 days after written notice as
provided in the Indenture;
(e) any final judgment or judgments which can no longer be appealed
for the payment of money in excess of $10 million (not covered by
insurance) shall be rendered against the Company or any Restricted
Subsidiary and shall not be discharged for any period of 60 consecutive
days during which a stay of enforcement shall not be in effect; and
(f) certain events involving bankruptcy, insolvency or reorganization
of the Company or any Restricted Subsidiary.
The Indenture provides that the Trustee may withhold notice to the holders
of the Notes of any default (except in payment of principal or premium, if any,
or interest on the Notes) if the Trustee considers it to be in the best interest
of the holders of the Notes to do so.
The Indenture will provide that if an Event of Default (other than an Event
of Default resulting from certain events of bankruptcy, insolvency or
reorganization) shall have occurred and be continuing, then the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding may declare to be immediately due and payable the entire principal
amount of all the Notes then outstanding plus accrued interest to the date of
acceleration and (i) such amounts shall become immediately due and payable or
(ii) if there are any amounts outstanding under or in respect of the Senior
Credit Facility, such amounts shall become due and payable upon the first to
occur of an acceleration of amounts outstanding under or in respect of the
Senior Credit Facility or five business days after receipt by the Company and
the Representative of the holders of Senior Indebtedness under or in respect of
the Senior Credit Facility of notice of the acceleration of the Notes; provided,
however, that after such acceleration but before a judgment or decree based on
acceleration is obtained by the Trustee, the holders of a majority in aggregate
principal amount of outstanding Notes may, under certain circumstances, rescind
and annul such acceleration if all Events of Default, other than nonpayment of
accelerated principal, premium or interest, have been cured or waived as
provided in the Indenture. In case an Event of Default resulting from certain
events of bankruptcy, insolvency or reorganization with respect to the Company
shall occur, the principal, premium and interest amount with respect to all of
the Notes shall be due and payable immediately without any declaration or other
act on the part of the Trustee or the holders of the Notes.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to waive any existing default or compliance with any
provision of the Indenture or the Notes and to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, subject to
certain limitations specified in the Indenture.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless also the holders of at least 25% in aggregate principal
amount of the outstanding Notes shall have made written request and offered
reasonable indemnity to the Trustee to institute
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such proceeding as a trustee, and unless the Trustee shall not have received
from the holders of a majority in aggregate principal amount of the outstanding
Notes a direction inconsistent with such request and shall have failed to
institute such proceeding within 60 days. However, such limitations do not apply
to a suit instituted on such Note on or after the respective due dates expressed
in such Note.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides the Company may elect either (a) to defease and be
discharged from any and all obligations with respect to the Notes (except for
the obligations to register the transfer or exchange of such Notes, to replace
temporary or mutilated, destroyed, lost or stolen Notes, to maintain an office
or agency in respect of the Notes and to hold monies for payment in trust)
("defeasance") or (b) to be released from their obligations with respect to the
Notes under certain covenants contained in the Indenture and described above
under "Covenants" ("covenant defeasance"), upon the deposit with the Trustee (or
other qualifying trustee), in trust for such purpose, of money and/or U.S.
Government Obligations (as defined in the Indenture) which through the payment
of principal and interest in accordance with their terms will provide money, in
an amount sufficient to pay the principal of, premium, if any, and interest on
the Notes, on the scheduled due dates therefor or on a selected date of
redemption in accordance with the terms of the Indenture. Such a trust may only
be established if, among other things, the Company has delivered to the Trustee
an opinion of counsel (as specified in the Indenture) (i) to the effect that
neither the trust nor the Trustee will be required to register as an investment
company under the Investment Company Act of 1940, as amended, and (ii)
describing either a private ruling concerning the Notes or a published ruling of
the Internal Revenue Service, to the effect that holders of the Notes or persons
in their positions will not recognize income, gain or loss for federal income
tax purposes as a result of such deposit, defeasance and discharge and will be
subject to federal income tax on the same amount and in the same manner and at
the same times, as would have been the case if such deposit, defeasance and
discharge had not occurred.
MODIFICATION OF INDENTURE
From time to time, the Company, the Guarantors and the Trustee may, without
the consent of holders of the Notes, amend the Indenture or the Notes or
supplement the Indenture for certain specified purposes, including providing for
uncertificated Notes in addition to certificated Notes, and curing any
ambiguity, defect or inconsistency, or making any other change that does not
materially and adversely affect the rights of any holder. The Indenture contains
provisions permitting the Company, the Guarantors and the Trustee, with the
consent of holders of at least a majority in principal amount of the outstanding
Notes, to modify or supplement the Indenture or the Notes, except that no such
modification shall, without the consent of each holder affected thereby, (i)
reduce the amount of Notes whose holders must consent to an amendment,
supplement, or waiver to the Indenture or the Notes, (ii) reduce the rate of or
change the time for payment of interest on any Note, (iii) reduce the principal
of or premium on or change the stated maturity of any Note, (iv) make any Note
payable in money other than that stated in the Note, (v) change the amount or
time of any payment required by the Notes or reduce the premium payable upon any
redemption of Notes, or change the time before which no such redemption may be
made, (vi) waive a default on the payment of the principal of, interest on, or
redemption payment with respect to any Note, (vii) amend, alter, change or
modify the obligation of the Company to make and consummate a Change of Control
Offer in the event of a Change of Control or make and consummate an Excess
Proceeds Offer after such obligation has arisen, or waive any Default in the
performance of any such offers or modify any of the provisions or definitions
with respect to any such offers or (viii) take any other action otherwise
prohibited by the Indenture to be taken without the consent of each holder
affected thereby.
REPORTS TO HOLDERS
So long as the Company is subject to the periodic reporting requirements of
the Exchange Act, it will continue to furnish the information required thereby
to the Commission and to the holders of the Notes. The Indenture provides that
even if the Company is entitled under the Exchange Act not to furnish such
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information to the Commission or to the holders of the Notes, they will
nonetheless continue to furnish such information to the Commission and holders
of the Notes.
COMPLIANCE CERTIFICATE
The Company will deliver to the Trustee on or before 100 days after the end
of the Company's fiscal year and on or before 50 days after the end of each of
the first, second and third fiscal quarters in each year an Officers'
Certificate stating whether or not the signers know of any Default or Event of
Default that has occurred. If they do, the certificate will describe the Default
or Event of Default and its status.
THE TRUSTEE
The Trustee under the Indenture will be the Registrar and Paying Agent with
regard to 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. During the existence of an Event of
Default, the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange Notes in accordance with the
Indenture. The Registrar under such Indenture may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and to pay
any taxes and fees required by law or permitted by the Indentures. The Registrar
is not required to transfer or exchange any Note selected for redemption. Also,
the Registrar is not required to transfer or exchange any Note for a period of
15 days before selection of the Notes to be redeemed.
The registered holder of a Note may be treated as the owner of it for all
purposes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Indenture. Reference is made to the Indenture for the
full definition of all such terms as well as any other capitalized terms used
herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of
the amount by which (x) the fair value of the property of such Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities),
but excluding liabilities under the Guarantee, of such Guarantor at such date
and (y) the present fair salable value of the assets of such Guarantor at such
date exceeds the amount that will be required to pay the probable liability of
such Guarantor on its debts (after giving effect to all other fixed and
contingent liabilities and after giving effect to any collection from any
Subsidiary of such Guarantor in respect of the obligations of such Subsidiary
under the Guarantee), excluding Indebtedness in respect of the Guarantee, as
they become absolute and matured.
"Advertising Displays" mean all posters, signs, billboards and other
outdoor advertising displays and related sites therefor owned or leased (as
lessee) by the Company and the Restricted Subsidiaries.
"Affiliate" of any specified Person means any other Person which directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such specified Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, means the
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possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Asset Acquisition" means (i) an Investment by the Company or any
Restricted Subsidiary in any other Person pursuant to which such Person shall
become a Restricted Subsidiary or shall be consolidated or merged with the
Company or any Restricted Subsidiary or (ii) the acquisition by the Company or
any Restricted Subsidiary of assets of any Person comprising a division or line
of business of such Person.
"Asset Sale" means the sale, transfer or other disposition (other than to
the Company or any of its Restricted Subsidiaries) in any single transaction or
series of related transactions having a fair market value in excess of $1
million of (a) any Capital Stock of or other equity interest in any Restricted
Subsidiary, (b) all or substantially all of the assets of the Company or of any
Restricted Subsidiary, (c) real property or (d) all or substantially all of the
assets of any business owned by the Company or any Restricted Subsidiary or a
division, line of business or comparable business segment of the Company or any
Restricted Subsidiary thereof; provided that Asset Sales shall not include
sales, leases, conveyances, transfers or other dispositions to the Company or to
a Restricted Subsidiary or to any other Person if after giving effect to such
sale, lease, conveyance, transfer or other disposition such other Person becomes
a Restricted Subsidiary.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Company or any Restricted Subsidiary from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Restricted Subsidiary as a result of such Asset Sale and (d) deduction of
appropriate amounts to be provided by the Company or such Restricted Subsidiary
as a reserve, in accordance with GAAP, against any liabilities associated with
the assets sold or disposed of in such Asset Sale and retained by the Company or
such Restricted Subsidiary after such Asset Sale, including, without limitation,
pension and other post employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
the assets sold or disposed of in such Asset Sale, and (ii) promissory notes and
other noncash consideration received by the Company or any Restricted Subsidiary
from such Asset Sale or other disposition upon the liquidation or conversion of
such notes or noncash consideration into cash.
"Attributable Indebtedness" under the Indenture in respect of a Sale and
Lease-Back Transaction means, as at the time of determination, the greater of
(i) the fair value of the property subject to such arrangement (as determined by
the board of directors of the Company) and (ii) the present value of the notes
(discounted at the rate of interest implicit in such transaction) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale and Lease-Back Transaction (including any period for
which such lease has been extended).
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sale that have not been applied in
accordance with clauses (iii)(a) or (iii)(b), and which have not yet been the
basis for an Excess Proceeds Offer in accordance with clause (iii)(c) of the
first paragraph of "Certain Covenants -- Limitation on Certain Asset Sales."
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated) of capital stock, partnership interests
or any other participation, right or other interest in the nature of an equity
interest in such Person or any option, warrant or other security convertible
into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Change of Control" means the occurrence of one or more of the following
events: (i) any sale, lease, exchange or other transfer (in one transaction or a
series of related transactions) of all or substantially all of the assets of the
Company to any Person or group of related Persons for purposes of Section 13(d)
of the Exchange Act (a "Group"), together with any Affiliates thereof; (ii) the
approval by the holders of Capital
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Stock of the Company of any plan or proposal for the liquidation or dissolution
of the Company; (iii) the Permitted Holders, individually or in the aggregate,
shall cease to beneficially own (within the meaning of Rule 13d-3 under the
Exchange Act), directly or indirectly, Voting Stock representing at least 25% of
the total voting power of all Voting Stock of the Company; (iv) any Person or
Group (other than the Permitted Holders) shall become the owner, directly or
indirectly, beneficially or of record, of Voting Stock representing more than
30% of the total voting power of all Voting Stock of the Company; or (v) the
replacement of a majority of the board of directors of the Company over a
two-year period from the directors who constituted the board of directors of the
Company at the beginning of such period, and such replacement shall not have
been approved by a vote of at least two-thirds of the board of directors of the
Company then still in office who either were members of such board of directors
at the beginning of such period or whose election as a member of such board of
directors was previously so approved.
"Common Stock" of any Person means all Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management and policies of such Person.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on an
income statement for such Person and its Subsidiaries (Restricted Subsidiaries
in the case of the Company) on a consolidated basis (including, but not limited
to, imputed interest included in Capitalized Lease Obligations, all commissions,
discounts and other fees and charges owed with respect to letters of credit and
bankers' acceptance financing, the net costs associated with hedging
obligations, the interest portion of any deferred payment obligation,
amortization of discount or premium, if any, and all other non-cash interest
expense (other than interest amortized to cost of sales)) plus, without
duplication, all net capitalized interest for such period and all interest
incurred or paid under any guarantee of Indebtedness (including a guarantee of
principal, interest or any combination thereof) of any Person, plus the amount
of all dividends or distributions paid on Disqualified Capital Stock (other than
dividends paid or payable in shares of Capital Stock of the Company); provided,
however, that, solely for purposes of the calculation of 1.4 times the Company's
Cumulative Consolidated Interest Expense in clause (c) of the "Limitation on
Restricted Payments" covenant, "Consolidated Interest Expense" shall exclude the
amortization of deferred financing fees.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries
(Restricted Subsidiaries in the case of the Company) for such period, on a
consolidated basis, determined in accordance with GAAP; provided, however, that
(a) the Net Income of any Person (the "other Person") in which the Person in
question or any of its Subsidiaries (Restricted Subsidiaries in the case of the
Company) has less than a 100% interest (which interest does not cause the net
income of such other Person to be consolidated into the net income of the Person
in question in accordance with GAAP) shall be included only to the extent of the
amount of dividends or distributions paid to the Person in question or such
Subsidiary, (b) the Net Income of any Subsidiary (Restricted Subsidiary in the
case of the Company) of the Person in question that is subject to any
restriction or limitation on the payment of dividends or the making of other
distributions (other than pursuant to the Notes or the Indenture) shall be
excluded to the extent of such restriction or limitation, (c)(i) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition and (ii) any net gain (but not loss)
resulting from an Asset Sale by the Person in question or any of its
Subsidiaries other than in the ordinary course of business shall be excluded,
and (d) extraordinary gains and losses shall be excluded.
"Cumulative Consolidated Interest Expense" means, as of any date of
determination, Consolidated Interest Expense of the Company from the Issue Date
to the end of the Company's most recently ended full fiscal quarter prior to
such date, taken as a single accounting period.
"Cumulative EBITDA" means, as of any date of determination, EBITDA of the
Company from the Issue Date to the end of the Company's most recently ended full
fiscal quarter prior to such date, taken as a single accounting period.
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"Designated Senior Indebtedness," as to the Company or any Guarantor, as
the case may be, means any Senior Indebtedness (a) under or in respect of the
Senior Credit Facility, or (b) which at the time of determination exceeds $50
million in aggregate principal amount (or accreted value in the case of
Indebtedness issued at a discount) outstanding or available under a committed
facility, and (i) which is specifically designated in the instrument evidencing
such Senior Indebtedness as "Designated Senior Indebtedness" by such Person and
(ii) as to which the Trustee has been given written notice of such designation.
"Disqualified Capital Stock" means any Capital Stock of the Company or any
Restricted Subsidiary which, by its terms (or by the terms of any security into
which it is convertible or for which it is exchangeable at the option of the
holder), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
at the option of the holder thereof, in whole or in part, on or prior to the
maturity date of the Notes, for cash or securities constituting Indebtedness.
Without limitation of the foregoing, Disqualified Capital Stock shall be deemed
to include any Preferred Stock of the Company with respect to which, under the
terms of such Preferred Stock, by agreement or otherwise, the Company is
obligated to pay current dividends or distributions in cash during the period
prior to the maturity date of the Notes; provided, however, that Preferred Stock
that is issued with the benefit of provisions requiring a change of control
offer to be made for such Preferred Stock in the event of a change of control of
the Company, which provisions have substantially the same effect as the
provisions of the Indenture described under "Change of Control," shall not be
deemed to be Disqualified Capital Stock solely by virtue of such provisions.
"EBITDA" means, for any Person, for any period, an amount equal to (a) the
sum of, without duplication, (i) Consolidated Net Income for such period, plus
(ii) the provision for taxes for such period based on income or profits to the
extent such income or profits were included in computing Consolidated Net Income
and any provision for taxes utilized in computing net loss under clause (i)
hereof, plus (iii) Consolidated Interest Expense for such period (but only
including Redeemable Dividends in the calculation of such Consolidated Interest
Expense to the extent that such Redeemable Dividends have not been excluded in
the calculation of Consolidated Net Income), plus (iv) depreciation for such
period on a consolidated basis, plus (v) amortization of intangibles for such
period on a consolidated basis, plus (vi) any other non-cash items reducing
Consolidated Net Income for such period, minus (b) all non-cash items increasing
Consolidated Net Income for such period, all for such Person and its
Subsidiaries determined in accordance with GAAP, except that with respect to the
Company each of the foregoing items shall be determined on a consolidated basis
with respect to the Company and the Restricted Subsidiaries only; and provided,
however, that, for purposes of calculating EBITDA during any fiscal quarter,
cash income from a particular Investment of such Person shall be included only
(x) if cash income has been received by such Person with respect to such
Investment during each of the previous four fiscal quarters, or (y) if the cash
income derived from such Investment is attributable to Temporary Cash
Investments.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
"Houston Disposition" means the sale by the Company of any or all of the
assets representing outdoor advertising assets serving the Houston, Texas
market.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such person (and
"incurrence," "incurred," "incurable," and "incurring" shall have meanings
correlative to the foregoing); provided that a change in GAAP that results in an
obligation of such Person that exists at such time becoming Indebtedness shall
not be deemed an incurrence of such Indebtedness.
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"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other accrued liabilities arising in the ordinary
course of business) if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, and shall also include, to the extent not otherwise included (i) any
Capitalized Lease Obligations, (ii) obligations secured by a lien to which the
property or assets owned or held by such Person is subject, whether or not the
obligation or obligations secured thereby shall have been assumed, (iii)
guarantees of items of other Persons which would be included within this
definition for such other Persons (whether or not such items would appear upon
the balance sheet of the guarantor), (iv) all obligations for the reimbursement
of any obligor on any banker's acceptance or for reimbursement of any obligor on
any letter of credit with respect to drawings made thereunder and not yet
reimbursed, (v) in the case of the Company, Disqualified Capital Stock of the
Company or any Restricted Subsidiary, and (vi) obligations of any such Person
under any Interest Rate Agreement applicable to any of the foregoing (if and to
the extent such Interest Rate Agreement obligations would appear as a liability
upon a balance sheet of such Person prepared in accordance with GAAP). The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above,
provided (i) that the amount outstanding at any time of any Indebtedness issued
with original issue discount, including the Notes, is the principal amount of
such Indebtedness less the remaining unamortized portion of the original issue
discount of such Indebtedness at such time as determined in conformity with GAAP
and (ii) that Indebtedness shall not include any liability for federal, state,
local or other taxes. Notwithstanding any other provision of the foregoing
definition, any trade payable arising from the purchase of goods or materials or
for services obtained in the ordinary course of business shall not be deemed to
be "Indebtedness" of the Company or any of the Restricted Subsidiaries for
purposes of this definition. Furthermore, guarantees of (or obligations with
respect to letters of credit supporting) Indebtedness otherwise included in the
determination of such amount shall not also be included.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance, account
receivable (other than an account receivable arising in the ordinary course of
business), loan or capital contribution to (by means of transfers of property to
others, payments for property or services for the account or use of others or
otherwise), the purchase of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person. Investments shall exclude
extensions of trade credit on commercially reasonable terms in accordance with
normal trade practices.
"Issue Date" means the date the Notes are first issued by the Company and
authenticated by the Trustee under the Indenture.
"Leverage Ratio" means the ratio of (i) the sum of the aggregate
outstanding amount of Indebtedness of the Company and the Restricted
Subsidiaries as of the date of calculation on a consolidated basis in accordance
with GAAP to (ii) the Company's EBITDA for the four full fiscal quarters (the
"Four Quarter Period") ending on or prior to the date of determination for which
financial statements are available. For purposes of this definition, the
Company's "EBITDA" shall be calculated on a pro forma basis after giving effect
to any Asset Sales or Asset Acquisitions (including, without limitation, any
Asset Acquisition giving rise to the need to make such calculation as a result
of the Company or one of the Restricted Subsidiaries (including any Person who
becomes a Restricted Subsidiary as a result of such Asset Acquisition)
incurring, assuming or otherwise becoming liable for Indebtedness) at any time
on or subsequent to the first day of the Four Quarter Period and on or prior to
the date of determination, as if such Asset Sale or Asset Acquisition (including
any EBITDA associated with such Asset Acquisition and including any pro forma
expense and
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cost reductions determined in accordance with Article 11 of Regulation S-X
relating to such Asset Acquisition) occurred on the first day of the Four
Quarter Period.
"Lien" means with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Net Investment" means the excess of (i) the aggregate amount of all
Investments in Unrestricted Subsidiaries and joint ventures made by the Company
and the Restricted Subsidiaries on or after the Issue Date (in the case of an
Investment made other than in cash, the amount shall be the fair market value of
such Investment as determined in good faith by the board of directors of the
Company) over (ii) the sum of (A) the aggregate amount returned in cash on such
Investments whether through interest payments, principal payments, dividends or
other distributions, (B) the net cash proceeds received by the Company or any
Restricted Subsidiary from the disposition of all or any portion of such
Investments (other than to a Subsidiary of the Company) and (C) the fair market
value (as determined in good faith by the board of directors of the Company) of
any Unrestricted Subsidiary that subsequently becomes a Wholly-Owned Restricted
Subsidiary; provided, however, that with respect to all Investments made in any
Unrestricted Subsidiary or any joint venture, the sum of clauses (A), (B) and
(C) above with respect to such Investments shall not exceed the aggregate amount
of all such Investments made in such Unrestricted Subsidiary or such joint
venture, as the case may be.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by the
Company, the aggregate net proceeds received by the Company, after payment of
expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the board of directors, at the time of
receipt) and (b) in the case of any exchange, exercise, conversion or surrender
of outstanding securities of any kind for or into shares of Capital Stock of the
Company which is not Disqualified Capital Stock, the net book value of such
outstanding securities on the date of such exchange, exercise, conversion or
surrender (plus any additional amount required to be paid by the holder to the
Company upon such exchange, exercise, conversion or surrender, less any and all
payments made to the holders, e.g., on account of fractional shares and less all
expenses incurred by the Company in connection therewith).
"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate the
maturity of any Designated Senior Indebtedness.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer, the President or any Vice President and
the Chief Financial Officer or any Treasurer of such Person that shall comply
with applicable provisions of the Indenture.
"Payment Default" means any default, whether or not any requirement for the
giving of notice, the lapse of time or both, or any other condition to such
default becoming an event of default has occurred, in the payment of principal
of (or premium, if any) or interest on or any other amount payable in connection
with Designated Senior Indebtedness.
"Permitted Asset Swap" means the exchange, in the ordinary course of the
outdoor advertising business, of any interest of the Company or any of the
Restricted Subsidiaries in any Advertising Display or Displays for a similar
interest in an Advertising Display or Displays of a Person other than the
Company or such Restricted Subsidiary; provided that (i) the aggregate fair
market value (as determined in good faith by the board of directors of the
Company) of the Advertising Display or Displays being transferred by the Company
or such Restricted Subsidiary is not greater than the aggregate fair market
value (as determined in good faith by the board of directors of the Company) of
the Advertising Display or Displays received by the Company or such
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Restricted Subsidiary in such exchange and (ii) the aggregate fair market value
(as determined in good faith by the board of directors of the Company) of all
Advertising Displays transferred by the Company and the Restricted Subsidiaries
in connection with exchanges in any period of twelve consecutive months shall
not exceed $10 million.
"Permitted Dividend Encumbrances" means encumbrances or restrictions (a)
existing on the Issue Date, (b) arising by reason of Acquired Indebtedness of
any Restricted Subsidiary existing at the time such Person became a Restricted
Subsidiary; provided that in the case of clause (b) above such encumbrances or
restrictions were not created in anticipation of such Person becoming a
Restricted Subsidiary and are not applicable to the Company or any of the other
Restricted Subsidiaries, (c) arising under the Senior Credit Facility is in
effect on the Issue Date, and refinancings thereof; provided that the
encumbrances and restrictions contained in any such refinancing agreement are no
less favorable to the Holders of Notes than those contained in the Senior Credit
Facility as in effect on the Issue Date, (d) arising under Refinancing
Indebtedness; provided that the terms and conditions of any such restrictions
are no less favorable to the Holders of Notes than those under the Indebtedness
being refinanced and (e) customary provisions restricting the assignment of any
contract or interest of the Company or any Restricted Subsidiary.
"Permitted Holders" means William S. Levine, Arthur R. Moreno, any trust
solely for the benefit of Messrs. Levine and Moreno or their respective
immediate family members, or any partnership all the ownership interests in
which are beneficially owned or controlled by any of the foregoing; provided
that with respect to any such trust or partnership either Mr. Levine or Mr.
Moreno (or in the event of the death or incapacity of Mr. Levine or Mr. Moreno,
as the case may be, an immediate family member or the legal representative)
shall at all times have the exclusive power to direct the voting of the shares
of Voting Stock of the Company held by such trust or partnership.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Restricted Subsidiary pursuant
to the Senior Credit Facility in an amount not to exceed an aggregate of
$540 million plus cdn$83 million (which at the option of the Company may be
$60 million) minus the amount of any such Indebtedness permanently retired
with the Asset Sale Proceeds from any Asset Sale;
(ii) Indebtedness under the Notes and the Guarantees;
(iii) Indebtedness not covered by any other clause of this definition
which is outstanding on the date of the Indenture;
(iv) Indebtedness of the Company to any Wholly-Owned Restricted
Subsidiary and Indebtedness of any Restricted Subsidiary to the Company or
another Restricted Subsidiary;
(v) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Purchase Money Indebtedness and Capitalized Lease Obligations do not in the
aggregate exceed 5% of the Company's consolidated total assets;
(vi) Interest Rate Agreements and any guarantees thereof;
(vii) additional Indebtedness of the Company not to exceed $40 million
in principal amount outstanding at any time; and
(viii) Refinancing Indebtedness.
"Permitted Investments" means, for any Person, Investments made on or after
the date of the Indenture consisting of:
a) Investments by the Company or by a Restricted Subsidiary in the
Company or a Wholly-Owned Restricted Subsidiary;
b) Temporary Cash Investments;
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c) Investments by the Company or by a Restricted Subsidiary in a
Person, if as a result of such Investment (a) such Person becomes a
Restricted Subsidiary or (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary;
d) reasonable and customary loans made to employees in connection with
their relocation not to exceed $2 million in the aggregate at any one time
outstanding; and
e) an Investment that is made by the Company or a Restricted
Subsidiary in the form of any stock, bonds, notes, debentures, partnership
or joint venture interests or other securities that are issued by a third
party to the Company or such Restricted Subsidiary solely as partial
consideration for the consummation of an Asset Sale that is otherwise
permitted under the covenant described under "Limitation on Certain Asset
Sales."
"Permitted Liens" means (i) Liens existing on the Issue Date, (ii) Liens on
property or assets of, or any shares of stock of or secured debt of, any
corporation existing at the time such corporation becomes a Restricted
Subsidiary or at the time such corporation is merged into the Company or any of
the Restricted Subsidiaries; provided that such Liens are not incurred in
connection with, or in contemplation of, such corporation becoming a Restricted
Subsidiary or merging into the Company or any of the Restricted Subsidiaries,
(iii) Liens securing Refinancing Indebtedness; provided that any such Lien does
not extend to or cover any Property, shares or debt other than the Property,
shares or debt securing the Indebtedness so refunded, refinanced or extended,
(iv) Liens in favor of the Company or any of the Restricted Subsidiaries, (v)
Liens to secure Purchase Money Indebtedness that is otherwise permitted under
the Indenture; provided that (a) any such Lien is created solely for the purpose
of securing Indebtedness representing, or incurred to finance, refinance or
refund, the cost (including sales and excise taxes, installation and delivery
charges and other direct costs of, and other direct expenses paid or charged in
connection with, such purchase or construction) of such Property, (b) the
principal amount of the Indebtedness secured by such Lien does not exceed 100%
of such costs, and (c) such Lien does not extend to or cover any Property other
than such item of Property and any improvements on such item, (vi) statutory
liens or landlords', carriers', warehouseman's, mechanics', suppliers',
materialmen's, repairmen's or other like Liens arising in the ordinary course of
business which do not secure any Indebtedness and with respect to amounts not
yet delinquent or being contested in good faith by appropriate proceedings, if a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor, (vii) other Liens securing
obligations incurred in the ordinary course of business which obligations do not
exceed $5 million in the aggregate at any one time outstanding, (viii) any
extensions, substitutions, replacements or renewals of the foregoing, (ix) Liens
for taxes, assessments or governmental charges that are being contested in good
faith by appropriate proceedings, (x) Liens securing Capitalized Lease
Obligations permitted to be incurred under clause (v) of the definition of
"Permitted Indebtedness," provided that any such Lien does not extend to any
property other than that subject to the underlying lease and (xi) Liens securing
Senior Indebtedness and Guarantor Senior Indebtedness.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries
(Restricted Subsidiaries in the case of the Company) under GAAP.
"Public Equity Offering" means a public offering by the Company of shares
of its common stock (however designated and whether voting or non-voting) and
any and all rights, warrants or options to acquire such common stock pursuant to
a registration statement registered pursuant to the Act.
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"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Redeemable Dividend" means, for any dividend or distribution with regard
to Disqualified Capital Stock, the quotient of the dividend or distribution
divided by the difference between one and the maximum statutory federal income
tax rate (expressed as a decimal number between 1 and 0) then applicable to the
issuer of such Disqualified Capital Stock.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances or
extends any Indebtedness of the Company or the Restricted Subsidiaries
outstanding on the Issue Date or other Indebtedness permitted to be incurred by
the Company or the Restricted Subsidiaries pursuant to the terms of the
Indenture (other than pursuant to clauses (iv), (v), (vi) and (vii) of the
definition of Permitted Indebtedness), but only to the extent that (i) the
Refinancing Indebtedness is subordinated to the Notes to at least the same
extent as the Indebtedness being refunded, refinanced or extended, if at all,
(ii) the Refinancing Indebtedness is scheduled to mature either (a) no earlier
than the Indebtedness being refunded, refinanced or extended, or (b) after the
maturity date of the Notes, (iii) the portion, if any, of the Refinancing
Indebtedness that is scheduled to mature on or prior to the maturity date of the
Notes has a weighted average life to maturity at the time such Refinancing
Indebtedness is incurred that is equal to or greater than the weighted average
life to maturity of the portion of the Indebtedness being refunded, refinanced
or extended that is scheduled to mature on or prior to the maturity date of the
Notes, (iv) such Refinancing Indebtedness is in an aggregate principal amount
that is equal to or less than the sum of (a) the aggregate principal amount then
outstanding under the Indebtedness being refunded, refinanced or extended, (b)
the amount of accrued and unpaid interest, if any, and premiums owed, if any,
not in excess of preexisting prepayment provisions on such Indebtedness being
refunded, refinanced or extended and (c) the amount of customary fees, expenses
and costs related to the incurrence of such Refinancing Indebtedness, and (v)
such Refinancing Indebtedness is incurred by the same Person that initially
incurred the Indebtedness being refunded, refinanced or extended, except that
the Company may incur Refinancing Indebtedness to refund, refinance or extend
Indebtedness of any Wholly-Owned Restricted Subsidiary.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Capital Stock of
the Company or any Restricted Subsidiary of the Company or any payment made to
the direct or indirect holders (in their capacities as such) of Capital Stock of
the Company or any Restricted Subsidiary (other than (x) dividends or
distributions payable solely in Capital Stock (other than Disqualified Stock) or
in options, warrants or other rights to purchase Capital Stock (other than
Disqualified Stock), and (y) in the case of Restricted Subsidiaries of the
Company, dividends or distributions payable to the Company or to a Wholly-Owned
Restricted Subsidiary), (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company or any of the
Restricted Subsidiaries (other than Capital Stock owned by the Company or a
Wholly-Owned Restricted Subsidiary), (iii) the making of any principal payment
on, or the purchase, defeasance, repurchase, redemption or other acquisition or
retirement for value, prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, of any Indebtedness which is subordinated in
right of payment to the Notes other than subordinated Indebtedness acquired in
anticipation of satisfying a scheduled sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
acquisition), (iv) the making of any Investment or guarantee of any Investment
in any Person other than a Permitted Investment, (v) any designation of a
Restricted Subsidiary as an Unrestricted Subsidiary on the basis of the
Investment by the Company therein and (vi) forgiveness of any Indebtedness of an
Affiliate of the Company (other than a Wholly-Owned Restricted Subsidiary) to
the Company or a Restricted Subsidiary. For purposes of determining the amount
expended for Restricted Payments, cash distributed or invested shall be valued
at the face amount thereof and property other than cash shall be valued at its
fair market value.
"Restricted Subsidiary" means a Subsidiary of the Company other than an
Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
existing as of the Issue Date. The board of directors of the Company may
designate any Unrestricted Subsidiary or any Person that is to become a
Subsidiary of the
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Company as a Restricted Subsidiary if immediately after giving effect to such
action (and treating any Acquired Indebtedness as having been incurred at the
time of such action), the Company could have incurred at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
"Limitation on Additional Indebtedness" covenant.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary of any
real or tangible personal property, which property has been or is to be sold or
transferred by the Company or such Restricted Subsidiary to such Person in
contemplation of such leasing.
"Senior Credit Facility" means the Third Amended and Restated Credit
Agreement dated as of August 22, 1996 among the Company, 3284085 Canada, Inc.,
the several lenders from time to time parties thereto and Canadian Imperial Bank
of Commerce, as administrative agent, together with the documents related
thereto (including, without limitation, any guarantee agreements and security
documents), in each case as such agreements may be amended (including any
amendment and restatement thereof), supplemented or otherwise modified from time
to time, including any agreement extending the maturity of, refinancing,
replacing or otherwise restructuring (including adding Subsidiaries of the
Company as additional borrowers or guarantors thereunder) all or any portion of
the Indebtedness under such agreement or any successor or replacement agreement
and whether by the same or any other agent, lender or group of lenders.
"Senior Indebtedness" means the principal of and premium, if any, and
interest (including, without limitation, interest accruing or that would have
accrued but for the filing of a bankruptcy, reorganization or other insolvency
proceeding whether or not such interest constitutes an allowable claim in such
proceeding) on, and any and all other fees, charges, expense reimbursement
obligations and other amounts due pursuant to the terms of all agreements,
documents and instruments providing for, creating, securing or evidencing or
otherwise entered into in connection with (a) all obligations of the Company
owed to lenders under the Senior Credit Facility, (b) all obligations of the
Company with respect to any Interest Rate Agreement, (c) all obligations of the
Company to reimburse any bank or other person in respect of amounts paid under
letters of credit, acceptances or other similar instruments, (d) all other
current or future Indebtedness of the Company which does not provide that it is
to rank pari passu with or subordinate to the Notes and (e) all deferrals,
renewals, extensions and refundings of, and amendments, modifications and
supplements to, any of the Senior Indebtedness described above. Notwithstanding
anything to the contrary in the foregoing, Senior Indebtedness will not include
(i) Indebtedness of the Company to any of its Subsidiaries, (ii) Indebtedness
represented by the Notes, (iii) any Indebtedness which by the express terms of
the agreement or instrument creating, evidencing or governing the same is junior
or subordinate in right of payment to any item of Senior Indebtedness, (iv) any
trade payable arising from the purchase of goods or materials or for services
obtained in the ordinary course of business, or (v) that portion of any
Indebtedness (other than Indebtedness described in clause (a) of the immediately
preceding sentence of this definition which relates to reimbursement obligations
(whether in the form of loans or otherwise) under letters of credit with respect
to drawings made thereunder and not yet reimbursed) which is incurred in
violation of the Indenture.
"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which more
than 50% of the total voting power of the Capital Stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
officers or trustees thereof is held by such first-named Person or any of its
Subsidiaries; or (ii) in the case of a partnership, joint venture, association
or other business entity, with respect to which such first-named Person or any
of its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the first-named Person for
financial statement purposes.
"Temporary Cash Investments" means (i) Investments in marketable, direct
obligations issued or guaranteed by the United States of America, or of any
governmental agency or political subdivision thereof, maturing within 365 days
of the date of purchase; (ii) Investments in certificates of deposit issued by a
bank organized under the laws of the United States of America or any state
thereof or the District of Columbia, in
73
<PAGE> 78
each case having capital, surplus and undivided profits totaling more than
$500,000,000 and rated at least A by Standard & Poor's Corporation and A-2 by
Moody's Investors Service, Inc., maturing within 365 days of purchase; or (iii)
Investments not exceeding 365 days in duration in money market funds that invest
substantially all of such funds' assets in the Investments described in the
preceding clauses (i) and (ii).
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Company which is classified after the
Issue Date as an Unrestricted Subsidiary by a resolution adopted by the board of
directors of the Company; provided that a Subsidiary of the Company organized or
acquired after the Issue Date may be so classified as an Unrestricted Subsidiary
only if such classification is in compliance with the covenant set forth under
"Limitation on Restricted Payments." The Trustee shall be given prompt notice by
the Company of each resolution adopted by the board of directors of the Company
under this provision, together with a copy of each such resolution adopted.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock in such Person entitling the holders thereof to vote
under ordinary circumstances in the election of members of the board of
directors or other governing body of such Person.
"Wholly-Owned Restricted Subsidiary" means any Restricted Subsidiary, all
of the outstanding voting securities (other than directors' qualifying shares)
of which are owned, directly or indirectly, by the Company.
74
<PAGE> 79
UNDERWRITING
Upon the terms and subject to the conditions stated in the Underwriting
Agreement dated the date hereof, each of CIBC Wood Gundy Securities Corp. ("CIBC
Wood Gundy") and Alex. Brown & Sons Incorporated ("Alex. Brown" and collectively
the "Underwriters") has agreed severally, and not jointly, to purchase, and the
Company has agreed to sell, that principal amount of the Notes offered hereby
set forth opposite its name below.
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT
UNDERWRITERS OF THE NOTES
--------------------------------------------------------------------- ----------------
<S> <C>
CIBC Wood Gundy Securities Corp. .................................... $
Alex. Brown & Sons Incorporated......................................
----------------
Total...................................................... $150,000,000
=============
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to pay for and accept delivery of the Notes are subject to approval
of certain legal matters by counsel and to certain other conditions. The
Underwriting Agreement also provides that the Company and the Guarantors will
indemnify the Underwriters and their controlling persons against certain
liabilities and expenses, including liabilities under the Securities Act. The
Underwriters are obligated to take and pay for all of the Notes offered hereby
if any such Notes are taken.
The Underwriters propose to offer the Notes directly to the public
initially at the public offering price set forth on the cover page of this
Prospectus. After the initial public offering of the Notes, the offering price
and other selling terms may be changed by the Underwriters.
Prior to the Offering, there has been no public market for the Notes. The
Company does not intend to list any of the Notes on a national securities
exchange or to seek admission thereof for trading in the National Association of
Securities Dealers Automated Quotation System. The Underwriters have advised the
Company that they currently intend to make a market in the Notes, but are not
obligated to do so and may discontinue any such market making at any time
without notice. Accordingly, there can be no assurance as to the liquidity of,
or that an active trading market will develop for, the Notes.
The Underwriters have advised the Company that they will not confirm sales
to discretionary accounts.
Under the Conduct Rules of the National Association of Securities Dealers,
Inc. (the "NASD"), no member of the NASD or an affiliate of a member shall
participate in the distribution of a public offering of debt securities issued
by a company if the member and/or its affiliates have a conflict of interest (as
defined) with the company unless the yield at which such debt securities are to
be distributed to the public is not lower than that recommended by a "qualified
independent underwriter" meeting certain standards. As defined by the NASD, a
"conflict of interest" exists when a member and/or its affiliates in the
aggregate beneficially own 10% or more of the equity or subordinated debt of a
company or when more than 10% of the net offering proceeds are intended to be
paid to a member participating in the distribution and/or its affiliated
persons.
CIBC Wood Gundy is an affiliate of CIBC which is the administrative agent
and a lender under the Senior Credit Facility and the agent under the
Subordinated Credit Facility. CIBC, Inc., an affiliate of CIBC Wood Gundy, holds
approximately $72 million in aggregate principal amount of the loans outstanding
under the Subordinated Credit Facility. The proceeds of the Offering will be
used to repay the amounts outstanding under the Subordinated Credit Facility
and, to the extent any proceeds remain, to repay a portion of the amounts
outstanding under the Senior Credit Facility. CIBC Wood Gundy acted as dealer
manager in connection with the Debt Tender Offer for which it was reimbursed for
its costs and expenses and also provided the Company with financial advisory
services in connection with the Acquisition for which it received customary
fees. The Underwriters also participated as underwriters in the Common Stock
Offering.
Alex. Brown will act as a qualified independent underwriter in connection
with the Offering and the yield at which the Notes will be distributed to the
public will be no less than that recommended by it. Alex. Brown will participate
in the preparation of this Prospectus and the Registration Statement of which
this Prospectus is a part and will exercise the usual standards of due diligence
with respect thereto. Alex. Brown will receive no additional fees in connection
with acting as qualified independent underwriter. The Company and the
75
<PAGE> 80
Guarantors will indemnify Alex. Brown for acting as qualified independent
underwriter against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the
Company by Powell, Goldstein, Frazer & Murphy, Atlanta, Georgia. Certain legal
matters will be passed upon for the Underwriters by Cahill Gordon & Reindel (a
partnership including a professional corporation), New York, New York.
EXPERTS
The Consolidated Financial Statements of the Company as of December 31,
1995 and 1994 and for each of the three years in the period ended December 31,
1995 included in this Prospectus and the Registration Statement of which it is a
part have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their report appearing elsewhere herein and in the Registration Statement,
and have been so included in reliance upon such reports given upon their
authority as experts in accounting and auditing.
The Consolidated Statement of Operations of Capitol Outdoor Advertising,
Inc. and Subsidiary and its predecessor company, Creative Outdoor Advertising of
Atlanta, Inc. for the seven month period ended July 31, 1993, the five month
period ended December 31, 1993 and the nine month period ended September 30,
1994, included in this Prospectus and Registration Statement of which it is a
part have been audited by Deloitte & Touche LLP, independent auditors, as stated
in their report appearing elsewhere herein and in the Registration Statement and
have been so included in reliance upon such reports given upon their authority
as experts in accounting and auditing.
The Gannett Outdoor Combined Statement of Net Assets to be Acquired by
Outdoor Systems, Inc. as of December 31, 1994 and 1995 and the Gannett Outdoor
Combined Statements of Revenues and Direct Expenses of Net Assets to be Acquired
by Outdoor Systems, Inc. for the years ended December 31, 1993, 1994 and 1995
included in this Prospectus and Registration Statement of which it is a part
have been audited by Deloitte & Touche LLP, independent auditors, as stated in
their report appearing elsewhere herein and in the Registration Statement, and
have been so included in reliance upon such reports given upon their authority
as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports and other information with the Securities and Exchange
Commission (the "Commission").
The Company has filed with the Commission a Registration Statement (which
term shall include all amendments thereto) on Form S-3 under the Securities Act
of 1933, as amended (the "Securities Act"), with respect to the 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,
certain parts of which are omitted in accordance with the rules and regulations
of the Commission. Statements contained in this Prospectus as to the contents of
any contract, agreement or other document referred to herein are not necessarily
complete.
With respect to each report or other information filed with the Commission
pursuant to the Exchange Act, and such contract, agreement or document filed as
an exhibit to the Registration Statement, reference is made to such exhibit for
a more complete description, and each such statement is deemed to be qualified
in all respects by such reference. The Registration Statement 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.
76
<PAGE> 81
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's (i) Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as amended by Form 10-K/A and Form 10-K/A2, (ii) Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1996 and June 30, 1996,
and (iii) Current Report on Form 8-K dated May 22, 1996, Current Report on Form
8-K dated July 16, 1996, as amended by Form 8-K/A dated July 18, 1996 and Form
8-K/A2 dated July 30, 1996, and Current Report on Form 8-K dated August 27, 1996
have been filed with the Commission and are incorporated in this Prospectus by
reference and made a part hereof.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 and
15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to
the termination of the Offering shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the respective dates of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document incorporated or
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute part of this Prospectus.
The Company undertakes to provide without charge to each person, including
any beneficial owner of Common Stock, to whom a copy of this Prospectus has been
delivered, upon written or oral request, a copy of any or all information
incorporated by reference in this Prospectus (not including exhibits to such
information, unless such exhibits are specifically incorporated by reference
into such information). Such requests should be directed to Outdoor Systems,
Inc., Attention: Bill M. Beverage, Chief Financial Officer, Treasurer and
Secretary, at 2502 North Black Canyon Highway, Phoenix, Arizona 85009, telephone
number (602) 246-9569.
77
<PAGE> 82
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY:
Independent Auditors' Report.......................................... F-2
Consolidated Balance Sheets as of December 31, 1994 and 1995 and June
30, 1996............................................................ F-3
Consolidated Statements of Operations for the years ended December 31,
1993, 1994 and 1995 and the six months ended June 30, 1995 and
1996................................................................ F-4
Consolidated Statements of Common Stockholders' Equity (Deficiency)
for the years ended December 31, 1993, 1994 and 1995 and the six
months ended June 30, 1996.......................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1993, 1994 and 1995 and the six months ended June 30, 1995 and
1996................................................................ F-6
Notes to Consolidated Financial Statements............................ F-7
CAPITOL OUTDOOR ADVERTISING, INC. AND SUBSIDIARY:
Independent Auditors' Report.......................................... F-18
Consolidated Statements of Operations for the Periods ended July 30,
1993, December 31, 1993 and September 30, 1994...................... F-19
Notes to Consolidated Statements of Operations........................ F-20
GANNETT OUTDOOR:
Independent Auditors' Report.......................................... F-23
Combined Statements of Net Assets to be Acquired as of December 31,
1994 and 1995 and June 30, 1996..................................... F-24
Combined Statements of Revenues and Direct Expenses of Net Assets to
be Acquired for the years ended December 31, 1993, 1994 and 1995 and
six months ended June 30, 1995 and 1996............................. F-25
Notes to Combined Financial Statements................................ F-26
</TABLE>
F-1
<PAGE> 83
INDEPENDENT AUDITORS' REPORT
Board of Directors
Outdoor Systems, Inc.
Phoenix, Arizona
We have audited the accompanying consolidated balance sheets of Outdoor
Systems, Inc. and subsidiaries (the "Company") as of December 31, 1995 and 1994,
and the related consolidated statements of operations, common stockholders'
equity (deficiency) and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Outdoor Systems, Inc. and
subsidiaries at December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
January 31, 1996, except as to Note 12, the date of which is April 17, 1996
and as to Note 13, the date of which is July 22, 1996
F-2
<PAGE> 84
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JUNE 30,
1994 1995 1996
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents.............................................. $ 3,658 $ 1,739 $ 2,655
Accounts receivable, less allowance for doubtful accounts of $1,016,
$1,010 and $1,057.................................................... 16,271 10,971 9,649
Other current assets, principally prepaid land leases, including
amounts due from related parties of $59, $62 and $36 (Note 10)....... 3,691 2,304 2,351
Deferred income taxes (Note 8)......................................... 421 415 415
-------- -------- --------
Total current assets............................................ 24,041 15,429 15,070
PROPERTY AND EQUIPMENT -- Net (Notes 3 and 4)............................ 114,923 111,729 112,457
PERPETUAL LAND EASEMENT LEASED TO OUTDOOR ADVERTISING COMPANIES (Note
13).................................................................... 23,674
PREPAID LAND LEASES AND OTHER ASSETS..................................... 1,545 1,525 1,597
DEFERRED FINANCING COSTS -- Net.......................................... 5,411 4,275 3,920
DEFERRED INCOME TAXES (Note 8)........................................... 5,340 5,255 3,827
-------- -------- --------
$151,260 $138,213 $ 160,545
======== ======== ========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable....................................................... $ 1,338 $ 642 $ 193
Accrued interest....................................................... 4,927 4,843 4,714
Accrued commissions.................................................... 1,489 483 413
Unearned revenue....................................................... -- -- 739
Accrued expenses and other liabilities................................. 1,139 690 956
Current maturities of long-term debt (Note 4).......................... 126 550 173
-------- -------- --------
Total current liabilities....................................... 9,019 7,208 7,188
LONG-TERM DEBT (Note 4).................................................. 155,078 141,719 138,460
OTHER LONG-TERM OBLIGATIONS (Notes 7 and 12)............................. 757 984 4,473
-------- -------- --------
Total liabilities............................................... 164,854 149,911 150,121
-------- -------- --------
COMMON STOCK -- Subject to put option (estimated redemption value $4,758
in 1998) (Notes 9 and 12).............................................. 2,756 3,420 --
-------- -------- --------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 9):
REDEEMABLE PREFERRED STOCK (Notes 2, 5 and 12):
Exchangeable preferred stock -- 10% cumulative, $1 par value,
authorized, issued and outstanding, 24,235 shares (redemption value
$4,000).............................................................. 3,422 3,504 --
Class A preferred stock -- $1 par value, authorized, issued and
outstanding, 40,000 shares (redemption value $8,000)................. 4,683 5,526 --
Class B preferred stock -- 9% cumulative, $1 par value, authorized
5,000 shares; issued and outstanding, 4,619 shares................... 4,619 4,619 --
-------- -------- --------
Total redeemable preferred stock................................ 12,724 13,649 --
-------- -------- --------
COMMON STOCKHOLDERS' EQUITY (DEFICIENCY) (Notes 2, 4,
5, 6 and 13):
Common stock -- $.01 par value, authorized, 60,000,000 shares; issued,
21,714,566 shares; outstanding, 14,064,269 (1994 and 1995)........... 4 4 180
Additional Paid in Capital............................................. -- -- 33,987
Accumulated deficit.................................................... (25,025) (24,718) (19,690)
Treasury stock at cost, 5,100,198 shares............................... (4,053) (4,053) (4,053)
-------- -------- --------
Total common stockholders' equity (deficiency).................. (29,074) (28,767) 10,424
-------- -------- --------
$151,260 $138,213 $ 160,545
======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 85
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------------ -----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Outdoor advertising.................... $ 56,622 $ 59,150 $ 74,690 $ 34,209 $ 41,929
Less agency commissions................ 7,471 8,073 10,294 4,471 5,700
---------- ---------- ---------- ---------- ----------
49,151 51,077 64,396 29,738 36,229
Other income (Note 11)................. -- 1,000 417 -- 298
---------- ---------- ---------- ---------- ----------
Net revenues................... 49,151 52,077 64,813 29,738 36,527
---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES:
Direct advertising, including $140,
$139, $139, $70 and $70 to related
parties (Note 10)................... 23,721 24,433 30,462 14,596 16,151
General and administrative, including
$34, $59, $261, $124 and $225 to
related parties
(Note 10)........................... 2,777 3,357 4,096 2,007 2,213
Depreciation and amortization.......... 10,421 9,165 9,970 4,958 5,259
---------- ---------- ---------- ---------- ----------
Total operating expenses....... 36,919 36,955 44,528 21,561 23,623
---------- ---------- ---------- ---------- ----------
GAIN ON 1994 DISPOSAL (Notes 2 and 13)... -- 4,325 -- -- --
---------- ---------- ---------- ---------- ----------
OPERATING INCOME......................... 12,232 19,447 20,285 8,177 12,904
INTEREST EXPENSE......................... 11,894 16,393 17,199 9,017 7,929
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE ITEMS SET FORTH
BELOW.................................. 338 3,054 3,086 (840) 4,975
INCOME TAX PROVISION
(Note 8)............................... 227 1,721 318 -- 1,990
---------- ---------- ---------- ---------- ----------
INCOME (LOSS)BEFORE EXTRAORDINARY LOSS... 111 1,333 2,768 (840) 2,985
EXTRAORDINARY LOSS (Note 2).............. 3,287 -- -- -- 844
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS)........................ $ (3,176) $ 1,333 $ 2,768 $ (840) $ 2,141
========== ========== ========== ========== ==========
LESS STOCK DIVIDENDS, ACCRETIONS AND
DISCOUNTS ON REDEMPTION (Note 13)...... 2,572 1,596 2,461 1,195 3,461
---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON
STOCKHOLDERS........................... $ (5,748) $ (263) $ 307 $ (2,035) $ (1,320)
========== ========== ========== ========== ==========
NET INCOME (LOSS) PER COMMON AND
EQUIVALENT SHARE
(Notes 1 and 13)
Income (loss) before extraordinary
loss................................ $ (.17) $ (.02) $ .02 $ (.12) $ (.03)
Extraordinary loss..................... (.22) -- -- -- (.05)
---------- ---------- ---------- ---------- ----------
Net income (loss) per common share..... $ (.39) $ (.02) $ .02 $ (.12) $ (.08)
========== ========== ========== ========== ==========
Weighted average number of
shares.............................. 14,819,223 14,064,269 16,949,385 16,834,464 15,573,117
========== ========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 86
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMMON STOCKHOLDERS' EQUITY (DEFICIENCY)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
---------------------------------- ENDED
1993 1994 1995 JUNE 30, 1996
-------- -------- -------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
COMMON STOCK:
Balance, beginning of year...................... $ 1 $ 4 $ 4 $ 4
Additional common shares issued in stock
exchange (Note 2)............................ 3 -- -- --
Stock split..................................... -- -- -- 150
Initial public offering......................... -- -- -- 26
-------- -------- -------- --------
Balance, end of year............................ 4 4 4 180
-------- -------- -------- --------
ADDITIONAL PAID IN CAPITAL:
Balance, beginning of year...................... -- -- -- --
Stock split..................................... -- -- -- (150)
Initial public offering......................... -- -- -- 36,616
Preferred stock accretion and discount on
redemption (Note 13)......................... -- -- -- (2,479)
-------- -------- -------- --------
Balance, end of year............................ -- -- -- 33,987
-------- -------- -------- --------
ACCUMULATED DEFICIT:
Balance, beginning of year...................... (19,717) (24,762) (25,025) (24,718)
Net income (loss)............................... (3,176) 1,333 2,768 2,141
Common and preferred stock accretion (Notes 2, 5
and 9)....................................... (545) (714) (1,507) (689)
Redemption of warrants, increasing rate
redeemable preferred stock and exchange of
common stock in connection with refinancing
(Notes 2, 5 and 9)........................... 703 -- -- --
Preferred stock dividends....................... (2,027) (882) (954) (293)
Redemption of common stock subject to put
option....................................... -- -- -- 3,869
-------- -------- -------- --------
Balance, end of year............................ (24,762) (25,025) (24,718) (19,690)
-------- -------- -------- --------
COMMON STOCK IN TREASURY:
Balance, beginning of year...................... (4,053) (4,053) (4,053) (4,053)
-------- -------- -------- --------
Balance, end of year............................ (4,053) (4,053) (4,053) (4,053)
-------- -------- -------- --------
TOTAL COMMON STOCKHOLDERS' EQUITY (DEFICIENCY).... $(28,811) $(29,074) $(28,767) $10,424
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 87
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
--------------------------------- --------------------
1993 1994 1995 1995 1996
--------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss)................................................... $ (3,176) $ 1,333 $ 2,768 $ (840) $ 2,141
Gain on sale of land................................................ -- -- (417) -- --
Gain on 1994 Disposal............................................... -- (4,325) -- -- --
Extraordinary loss.................................................. 3,287 -- -- -- 844
Decrease in deferred taxes.......................................... -- 1,324 90 -- 1,428
Amortization of discounts on notes payable.......................... 420 383 363 177 912
Increase in obligations under warrants.............................. 133 -- -- -- --
Depreciation and amortization....................................... 10,421 9,165 9,970 4,958 5,259
Changes in assets and liabilities, net of effects from acquisitions
and disposal (Note 2):
(Increase) decrease in accounts receivable.......................... (3,247) 1,884 5,300 3,697 1,322
Decrease in prepaid expenses and other.............................. 668 704 2,486 196 210
Increase (decrease) in accrued interest............................. 3,028 187 (84) 7 (123)
Increase (decrease) in accounts payable and other liabilities....... 350 850 (1,924) (1,078) 566
Decrease in due to related parties.................................. (351) -- -- -- --
--------- -------- -------- -------- --------
Net cash provided by operating activities..................... 11,533 11,505 18,552 7,117 12,559
--------- -------- -------- -------- --------
INVESTING ACTIVITIES:
Investment in bus benches........................................... -- -- -- -- (1,817)
Capital expenditures................................................ (4,387) (4,924) (7,070) (4,251) (2,891)
Proceeds from sale of land.......................................... -- -- 769 -- --
Payments for 1994 Acquisition....................................... -- (44,347) -- -- --
Net Proceeds from 1994 Disposal..................................... -- 21,715 -- -- --
Acquisition of perpetual easements.................................. -- -- -- -- (21,525)
--------- -------- -------- -------- --------
Net cash (used in) investing activities....................... (4,387) (27,556) (6,301) (4,251) (26,233)
--------- -------- -------- -------- --------
FINANCING ACTIVITIES:
Proceeds from long-term debt........................................ 125,935 39,252 10,679 5,500 28,353
Principal payments on long-term debt and capital leases............. (104,948) (20,051) (23,977) (10,011) (33,744)
Principal payments on short-term debt............................... -- (675) -- -- --
Redemption of preferred stock and common stock warrants............. (21,328) -- -- -- --
Cash dividends paid on preferred stock.............................. (282) (800) (872) (416) (293)
Transaction fees and expenses relating to refinancing............... (5,408) -- -- -- --
Redemption of preferred and exchangeable preferred stock............ -- -- -- -- (16,369)
Initial public offering............................................. -- -- -- -- 36,643
--------- -------- -------- -------- --------
Net cash (used in) provided by financing activities........... (6,031) 17,726 (14,170) (4,927) 14,590
--------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................. 1,115 1,675 (1,919) (2,061) 916
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................ 868 1,983 3,658 3,658 1,739
--------- -------- -------- -------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............................. $ 1,983 $ 3,658 $ 1,739 $ 1,597 $ 2,655
========= ======== ======== ======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION --
Cash paid for interest.............................................. $ 7,346 $ 14,095 $ 16,162 $ 8,479 $ 7,616
========= ======== ======== ======== ========
Cash paid for income taxes.......................................... $ 254 $ 343 $ 227 $ 158 $ 244
========= ======== ======== ======== ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
In conjunction with acquisitions described in Note 2, liabilities
were
assumed as follows:
Fair value of assets acquired....................................... $ -- $ 45,696 $ -- -- -- --
Cash paid........................................................... -- (42,636) -- -- --
--------- -------- -------- -------- --------
Liabilities assumed and incurred and issuance of notes payable...... $ -- $ 3,060 $ -- -- --
========= ======== ======== ======== ========
Accretion of common and preferred stock (Notes 2, 5 and 9).......... $ 545 $ 714 $ 1,507 -- $ 689
========= ======== ======== ======== ========
Accrued dividends on exchangeable preferred stock................... $ 31 $ 82 $ 82 94 --
========= ======== ======== ======== ========
Increasing rate redeemable preferred stock dividends
(Note 5).......................................................... $ 1,714 $ -- $ -- -- --
========= ======== ======== ======== ========
Forgiveness of dividends on increasing rate redeemable preferred
stock (Note 5).................................................... $ 2,719 $ -- $ -- -- --
========= ======== ======== ======== ========
Exchange of common stock for Class B preferred stock, charged
to accumulated stockholders capital deficiency (Note 2)........... $ 1,900 $ -- $ -- -- --
========= ======== ======== ======== ========
Additional obligation on CSX transaction (Note 13).................. $ -- $ -- $ -- -- $ 2,198
========= ======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 88
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization -- Outdoor Systems, Inc. was incorporated on February 22,
1980, and is engaged principally in the rental of advertising space on outdoor
advertising structures in Houston, Atlanta, Phoenix, Denver, New Orleans,
Louisville, Tucson and Columbus, Ga.
Principles of Consolidation -- The consolidated financial statements
include the accounts of Outdoor Systems, Inc. and its subsidiaries
(collectively, the "Company"). All significant intercompany accounts and
transactions have been eliminated in consolidation.
Significant accounting policies are as follows:
a. Cash and cash equivalents -- For purposes of the consolidated
statements of cash flows, the Company considers all highly liquid
investments with an initial maturity of three months or less to be cash
equivalents.
b. Property and equipment are recorded at cost. Normal maintenance and
repair costs are expensed. Improvements which extend the life or usefulness
of an asset are capitalized. Depreciation is computed principally on a
straight-line method based upon the following useful lives:
<TABLE>
<S> <C>
Buildings............................................. 25 to 32 years
Advertising structures................................ 5 to 15 years
Vehicles.............................................. 3 to 5 years
Furniture and fixtures................................ 5 years
</TABLE>
c. Deferred financing costs are amortized using the effective interest
method over the terms of the related loans.
d. Intangibles include the excess purchase price over net assets
acquired and are amortized over a 15 year period. Amortization expense was
$435, $47, and $47 in 1993, 1994 and 1995, respectively.
e. Revenue recognition -- The Company recognizes revenue from
advertising contracts when billed, which is on a straight-line pro rata
monthly basis in accordance with contract terms. Costs associated with
providing service for specific contracts are expensed as incurred, although
such contracts generally extend beyond one month.
f. Net income (loss) per share -- Primary income (loss) per common and
common equivalent share is computed on the weighted average number of
common shares outstanding during each year and includes shares issuable
upon exercise of stock options when the effect of such issuance is
dilutive. Such amounts have been adjusted to reflect the 36.4535-for-1
stock split as discussed in Note 12 and the three for two stock split
discussed in Note 13.
g. New accounting pronouncements -- In March 1995, the Financial
Accounting Standards Board issued SFAS No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." The Company has not completed the process of evaluating the impact
that will result from adopting this Statement. However, management does not
believe the adoption will have a significant impact on the Company's
financial position and results of operations. SFAS No. 121 is required to
be adopted in the first quarter of 1996. In October 1995, the Financial
Accounting Standards Board issued SFAS No. 123 "Accounting for Stock Based
Compensation". The Company has determined that it will not change to the
fair value method and will continue to use Accounting Principles Board
Opinion No. 25 for measurement and recognition of employee stock based
compensation. SFAS No. 123 will require additional disclosures in the 1996
financial statements.
F-7
<PAGE> 89
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
h. Use of Estimates -- The preparation of financial statements in
conformity with generally accepted accounting principles necessarily
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reported period.
Actual results could differ from these estimates.
2. REFINANCING, ACQUISITIONS AND DISPOSALS
1994 ACQUISITION
On December 19, 1994, the Company acquired the assets of Capitol Outdoor
Advertising, Inc. (the "1994 Acquisition") located in Atlanta, Georgia. This
acquisition has been accounted for using the purchase method of accounting, and
the results of operations have been included in the consolidated financial
statements subsequent to the acquisition. Consideration for this transaction
consisted of the following:
<TABLE>
<S> <C>
Cash paid.................................................................. $42,636
Liabilities assumed........................................................ 1,345
-------
Total............................................................ 43,981
Acquisition costs.......................................................... 1,715
-------
Total cost of acquisition........................................ $45,696
=======
The Company has recorded the assets acquired as shown below:
Current assets........................................................... $ 2,789
Property and equipment, principally advertising structures............... 42,626
Other long-term assets................................................... 281
-------
Total............................................................ $45,696
=======
</TABLE>
1994 DISPOSAL
As a condition of allowing the 1994 Acquisition, the United States Justice
Department required the Company to sell substantially all the operating assets
of its business then operating in Atlanta (the "1994 Disposal"). This disposal
was effective December 19, 1994. Assets sold included billboards, certain other
depreciable assets and certain non-cash current assets. These assets were sold
for $22,000 plus a short-term note receivable of $1,355 for the non-cash current
assets. The resulting gain on sale of $4,325 is included in income for 1994.
The following table summarizes unaudited pro forma operating results for
the Company for the two years in the two-year period ended December 31, 1994,
assuming that the 1994 Acquisition and 1994 Disposal had occurred at the
beginning of the applicable year and after giving effect to financing costs and
purchase accounting adjustments.
<TABLE>
<CAPTION>
1993 1994
------- -------
<S> <C> <C>
Consolidated gross revenues....................................... $66,704 $70,324
======= =======
Income (loss) before extraordinary loss........................... $ 308 $ (563)
======= =======
Net income (loss)................................................. $ 185 $ (338)
======= =======
</TABLE>
REFINANCING
On August 17, 1993, the Company issued $115.0 million of Senior Notes due
2003 (the "Senior Notes"). The Company used the net proceeds of the Senior Notes
and borrowings under a New Credit Facility (Note 4) (which under certain
circumstances may be up to $40.0 million), to (i) repay all
F-8
<PAGE> 90
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
outstanding borrowings under the Revolving Credit Agreement, (ii) redeem all
outstanding shares of the Company's Increasing Rate Redeemable Preferred Stock,
(iii) retire the 10% Subordinated Notes and purchase all of the Warrants related
thereto and (iv) pay associated transaction fees and expenses. The redemption of
the Increasing Rate Redeemable Preferred Stock resulted in the Company issuing
shares of a new series of redeemable preferred stock designated Class B
Preferred Stock (Note 5) for 50% of the accrued and unpaid dividends. The
balance of the accrued and unpaid dividends have been credited to accumulated
deficit. The Class B Preferred Stock will be redeemable on December 31, 2003 and
will pay dividends at the rate of 9.0% per annum. In connection with the
refinancing the Company: (i) issued Class B Preferred Stock in exchange for
certain shares of Common Stock owned by one stockholder; (ii) exchanged a
portion of the Junior Subordinated Exchange Notes for Exchangeable Preferred
Stock (Note 4), the redemption date of which will be July 1, 2004; (iii)
modified the 1990 Subordinated Notes to extend their respective maturities to
December 31, 2003, to accrue interest at 7.9% until March 2000 and at 18.0%
thereafter and to amend certain covenants relating thereto; (iv) amended the
terms of its Series A Preferred Stock (which was redesignated as "Class A
Preferred Stock"); and (v) issued to the holders of Common Stock approximately
353 shares of Common Stock for every share of outstanding Common Stock.
Deferred financing costs of $3,287, associated with borrowings which were
retired or redeemed, have been charged as an extraordinary loss as of December
31, 1993.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Advertising structures......................................... $148,107 $153,080
Vehicles....................................................... 1,560 1,832
Furniture and fixtures......................................... 2,406 2,654
Buildings...................................................... 4,674 4,747
Other.......................................................... 148 481
Land........................................................... 5,834 6,628
-------- --------
Total................................................ 162,729 169,422
Less accumulated depreciation.................................. 47,806 57,693
-------- --------
Property and equipment -- net................................ $114,923 $111,729
======== ========
</TABLE>
The Company has granted a security interest in substantially all of its
assets to lenders in connection with its existing credit facility.
F-9
<PAGE> 91
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
4. LONG-TERM DEBT
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
10.75% Senior Notes............................................ $115,000 $114,670
Credit Facility, interest at 8.75% as of December 31, 1995..... 33,777 21,000
1990 Subordinated Notes, due through December, 2003, net of
unamortized discount of $816 and $517, respectively.......... 5,184 5,483
Junior subordinated exchange notes, net of unamortized discount
of $348 and $284, respectively............................... 877 941
Other notes payable, interest at 9.5% as of December 31,
1995......................................................... 366 175
-------- --------
Total................................................ 155,204 142,269
Less current maturities...................................... 126 550
-------- --------
Total long-term debt -- net.......................... $155,078 $141,719
======== ========
</TABLE>
Future maturities of long-term debt as of December 31 are as follows:
<TABLE>
<CAPTION>
1995
--------
<S> <C>
1996.............................................................. $ 550
1997.............................................................. 750
1998.............................................................. 6,598
1999.............................................................. 16,750
2000.............................................................. --
Thereafter........................................................ 117,621
--------
Total................................................... $142,269
========
</TABLE>
At December 31, 1995, the Company was in compliance with the covenants of
its debt agreements.
10.75% SENIOR NOTES
In connection with the refinancing discussed in Note 2, on August 17, 1993,
the Company issued the Senior Notes which mature on August 17, 2003. The Senior
Notes are senior, unsecured obligations of the Company ranking pari passu with
all other present and future indebtedness of the Company and prior in right of
payment to all present subordinated indebtedness of the Company and any future
indebtedness of the Company that by its terms is subordinated in right of
payment to the Senior Notes. The Company's obligations under the Credit Facility
(discussed below) are secured by substantially all the Company's assets and, as
a consequence thereof, the holders of such indebtedness will have a prior claim
upon those assets.
The Senior Notes require the Company to comply with certain restrictive
covenants which limit, among other things, the amount of additional indebtedness
the Company or any of its subsidiaries may incur and the payment of dividends
and include other payment restrictions affecting subsidiaries, and prohibits the
Company from incurring transactions with affiliates which are less favorable to
the Company than if conducted with a third party. Under the Indenture, dividends
on Common Stock can be paid when Cumulative Cash Flow (as defined in the
Indenture), exceeds specified multiples of interest expense. As of December 31,
1995, the Company is not able to pay dividends on its Common Stock under this
restriction.
CREDIT FACILITY
In connection with the refinancing discussed in Note 2, the Company entered
into a Credit Facility, due December 1999, which consists of a revolving line of
credit facility, providing for (i) up to $40.0 million in
F-10
<PAGE> 92
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
borrowings that may be used for general corporate purposes, including working
capital requirements and acquisitions and (ii) a $1.5 million letter of credit
subfacility.
The commitments of the lenders under the Credit Facility will be reduced by
20% on each December 31, commencing December 31, 1996 through December 31, 1998
and by the remaining 40% on December 31, 1999. The Company is required to repay
any borrowings to the extent the aggregate amount outstanding under the Credit
Facility exceeds the aggregate commitments in effect from time to time. The
Company may prepay borrowings under the Credit Facility.
At the Company's option, the revolving loans bear interest at a rate per
annum based upon moving CD rates or LIBOR. LIBOR loans are available for
interest periods of one, two, three, six or twelve months. The applicable margin
will vary depending on the Leverage Ratio at the time loans are made.
The Company's obligations under the Credit Facility are secured by first
priority liens (subject to certain permitted encumbrances) on substantially all
the assets of the Company.
The Credit Facility restricts the Company and its subsidiaries other than
Unrestricted Subsidiaries (as defined) from, among other things, (i) incurring
additional indebtedness and contingent liabilities, (ii) creating liens, (iii)
entering into sale and leaseback transactions, (iv) paying dividends (other than
to the Company) in excess of certain amounts and effecting certain other
transactions involving the capital stock of the Company, and (v) amending the
Notes and other material agreements of the Company.
Moreover, conditions of default arise if tobacco advertisement revenues
exceed 20% of the Company's net revenues in 1994 and 15% in any year thereafter.
The Credit Facility also restricts the Company's ability to make capital
expenditures, investments or consummate acquisitions and requires the Company to
comply with financial covenants concerning cash interest coverage and leverage.
1990 SUBORDINATED NOTES
The Company has the right to prepay the 1990 Subordinated Notes provided
that the Company also redeems, pro rata based on face amount outstanding, the
Class A Preferred shares (Note 5) at the same time. The 1990 Subordinated Notes
pay interest on a cash basis, subject to a deferral provision, at 7.9% of the
$6,000 principal amount and were recorded at a discount from the face amount
using an imputed interest rate of 16%. The 1990 Subordinated Notes are
subordinated and junior in right of payment to the borrowings under the Credit
Facility and Senior Notes and are subject to various covenants and restrictions.
FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments". The carrying amounts
and estimated fair values of the Company's financial instruments are as follows:
The carrying values of cash and cash equivalents, receivables, accounts
payable and accrued expenses approximate fair values due to the short-term
maturities of these instruments. Variable rate long-term debt instruments are
estimated to approximate fair values as rates are tied to short-term indices.
The Senior Notes are estimated to approximate market value as the trade
price of those notes approximates par value at December 31, 1995. 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.
F-11
<PAGE> 93
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. REDEEMABLE PREFERRED STOCK
Redeemable preferred stock at December 31 consists of the following:
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
Exchangeable Preferred Stock, 10% cumulative dividend, $1 par
value -- authorized, issued and outstanding, 24,235 shares..... $ 3,422 $ 3,504
Class A Preferred Stock, $1 par value -- authorized, issued and
outstanding 40,000 shares...................................... 4,683 5,526
Class B Preferred Stock, 9% cumulative, $1 par
value -- authorized, 5,000 shares; issued and outstanding,
4,619 shares................................................... 4,619 4,619
------- -------
Total redeemable preferred stock....................... $12,724 $13,649
======= =======
</TABLE>
Exchangeable Preferred Stock has a required redemption in 2004 at a par
value of $4,000 and has a dividend rate of 10%. The Company has the option to
exchange such preferred stock for Junior Subordinated Exchange Notes.
Class A Preferred Stock has a mandatory redemption date of December 31,
2003, at a par value of $200 per share or $8,000 plus all accrued and unpaid
dividends through the redemption date. The Class A Preferred Stock has been
recorded at a discount of 16% which is being accreted through March 31, 1998 by
a charge to accumulated deficit. Dividends are declared and paid at the
discretion of the Company's Board of Directors. As of December 31, 1994 and
1995, no dividends have been declared or paid. The Company has the option to
redeem any or all shares of the Class A Preferred Stock prior to the mandatory
redemption date at the redemption rate plus declared and unpaid dividends, if
any. The preferred stock also requires mandatory redemption at specified amounts
prior to maturity upon the occurrence of the Company's early repayment of its
1990 Subordinated Notes, a significant change in the Company's common
stockholders, or a substantial asset transfer. The mandatory redemption price is
the greater of the redemption value or the alternative redemption price, as
defined in the Company's Articles of Incorporation. The Company is subject to
several negative covenants under the Class A Preferred Stock purchase agreement,
which limits the Company regarding the subsequent issuances of capital stock. In
addition, the holder of the Class A Preferred Stock has the right to elect one
member of the Company's Board of Directors.
Class B Preferred Stock is redeemable in 2003 at a par value of $4,619 plus
all accrued and unpaid dividends through the redemption date, and was issued by
the Company in connection with the refinancing discussed in Note 2.
6. STOCK OPTIONS
The Company has issued options to purchase shares of the Company's common
stock at values believed to represent the fair value of such shares at date of
grant. No options were issued during 1994 or 1995. As of December 31, 1994 and
1995, outstanding options were 2,984,132 shares (2,309,804 at $.07 and 674,328
at $1.24 per share).
The options outstanding are fully exercisable and have no expiration date.
As of December 31, 1995, no options have been exercised.
7. BENEFIT PLANS
The Company has established an Incentive Plan (the "Plan") covering certain
managers and key employees. Incentive Awards ("Awards") made under the Plan in
the form of shares of phantom stock are at the discretion of the Board of
Directors and are based on the individual's performance. Awards are valued
F-12
<PAGE> 94
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
each year based upon the estimated value of the Company. The awards are vested
at the date of grant and any increases in value vest over a four year period.
Distributions are made over a ten year period, which begins upon termination of
employment. For the years ended December 31, 1993, 1994 and 1995, the Company
charged earnings for compensation expense of $134, $218 and $304, respectively.
The Company has a 401(k) savings plan under which it has the discretion of
making contributions as a percentage of employee contributions. For the years
ended December 31, 1993, 1994 and 1995, the Company's contributions to the
401(k) plan were $43, $49 and $56, respectively.
8. INCOME TAXES
The provision (benefit) for income taxes is composed of the following for
the years ended December 31,
<TABLE>
<CAPTION>
1993 1994 1995
---- ------ ----
<S> <C> <C> <C>
Current
Federal................................................... $ -- $ 179 $ 50
State -- including franchise taxes........................ 227 218 177
---- ------ ----
Total current............................................... 227 397 227
Deferred.................................................. -- 1,324 91
---- ------ ----
Total income tax provision........................ $227 $1,721 $318
==== ====== ====
</TABLE>
The Company has federal net operating loss carryforwards of approximately
$17,457 as of December 31, 1995. These net operating loss carryforwards expire
as follows: $1,047 (2003), $3,494 (2004), $4,308 (2005), $4,104 (2006), $1,193
(2007), $3,243 (2008), and $68 (2009).
On January 1, 1992, the Company experienced a change in ownership, as
defined, under Section 382 of the Internal Revenue Code. The effect of this is
to place an annual limit of $4,500 on the use of historic net operating losses
through December 31, 1991. To the extent that this limit exceeds the actual loss
used in any taxable year, such excess may be carried forward to the following
year.
The Company believes, based on operating results in 1995, and its
expectations for the future, that taxable income of the Company will more likely
than not be sufficient to utilize all of the $17,457 net operating loss
carryforwards prior to their ultimate expiration in the year 2009. Although
realization is not assured, management believes it is more likely than not that
all of the deferred tax asset will be realized. 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.
The tax effected temporary differences and carryforwards comprising
deferred taxes at December 31, are as follows:
<TABLE>
<CAPTION>
1994 1995
------- ----------
<S> <C> <C>
Current:
Financial statement expenses not currently deductible for
income tax purposes......................................... $ 421 $ 415
------- -------
Non-current:
Financial statement expenses not currently deductible for
income tax purposes......................................... 181 393
Excess of tax over book depreciation........................... (1,184) (1,992)
Tax loss and other credit carryforwards........................ 7,428 6,854
Valuation allowance............................................ (1,085) --
------- -------
5,340 5,255
------- -------
Total deferred tax asset............................... $ 5,761 $ 5,670
======= =======
</TABLE>
F-13
<PAGE> 95
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following is a reconciliation of the income taxes to the statutory
rates:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Statutory rate.................................................. 34% 34% 34%
Impact of adjustment to valuation allowance..................... -- -- (34)
Impact of the net operating losses.............................. (34) -- --
State income taxes, franchise tax............................... 67 20 7
Other........................................................... -- 2 3
--
--- ---
Reported rate................................................... 67% 56% 10%
=== == ===
</TABLE>
9. COMMITMENTS AND OTHER
COMMON STOCK SUBJECT TO PUT OPTION
In 1990, the Company issued 1,072,662 shares of common stock in connection
with the financing of an acquisition. Under certain circumstances, the Company
has the option to redeem the common stock at any time prior to March 1998;
however, subsequent to March 1998, at the request of the holder, the Company is
required to redeem the common stock at a redemption price based upon the
appraised value of the common stock as of the redemption date.
Because this common stock is subject to redemption at the option of the
holder, the Company is accreting the stock to its estimated appraised value over
the redemption period based upon annual estimates of value determined as a
multiple of cash flow. Accretion is calculated on a straight-line basis and is
charged directly to stockholders' deficit. Annual changes in value are reflected
retroactively.
LEASES
The Company leases land and equipment under operating leases with various
terms expiring at various dates. Certain of the land leases provide for periodic
rental increases. At December 31, 1995, minimum annual rentals under all
operating leases for the next five years are as follows:
<TABLE>
<S> <C>
1996............................................................... $12,659
1997............................................................... 8,418
1998............................................................... 5,128
1999............................................................... 2,347
2000............................................................... 799
Thereafter......................................................... 4,660
-------
Total.................................................... $34,011
=======
</TABLE>
Operating lease expense was $9,757, $9,969 and $13,533 for 1993, 1994 and
1995, respectively.
LITIGATION
The Company is involved in various legal matters that management considers
to be in the normal course of business. In management's opinion, based upon the
advice of legal counsel, such matters will be settled without material effect on
the Company's financial position or results of operations.
10. TRANSACTIONS WITH RELATED PARTIES
During 1993, 1994 and 1995, the Company entered into a number of
transactions with officers and/or stockholders of the Company, affiliated
companies and affiliated partnerships.
F-14
<PAGE> 96
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following summarizes those transactions as of and for the years ended
December 31:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Due from employees and related parties, included in other
current assets.............................................. $101 $ 59 $ 62
==== ==== ====
Rental income from affiliated company......................... $ 60 $ 45 $ 24
==== ==== ====
Land rent paid to affiliated company and related parties...... $140 $139 $139
==== ==== ====
Administrative services agreement............................. $ 94 $104 $ 35
==== ==== ====
Services agreement............................................ $351 $250 $350
==== ==== ====
</TABLE>
11. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1ST QTR. 2ND QTR. 3RD QTR. 4TH QTR.
-------- -------- -------- --------
<S> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE
AMOUNTS)
1994:
Net revenues..................................... $ 10,502 $ 12,798 $ 13,457 $ 15,320
Operating income................................. 1,661 3,891 4,308 5,262
Gain on 1994 Disposal............................ -- -- -- 4,325
Net income (loss)................................ (1,397) (5) (546) 3,281
Net income (loss) per common share............... (.14) (.04) (.08) .24
</TABLE>
The fourth quarter of 1994 includes other income of $1.0 million relating
to cash payments received from the early termination of agreements made in
connection with an acquisition in 1992.
<TABLE>
<S> <C> <C> <C> <C>
1995:
Net revenues..................................... $ 13,758 $ 15,979 $ 16,886 $ 18,190
Operating income................................. 3,048 5,128 5,586 6,523
Net income (loss)................................ (1,265) 425 1,400 2,208
Net income (loss) per common share............... (.11) (.01) .04 .10
</TABLE>
12. SUBSEQUENT EVENTS
INITIAL PUBLIC OFFERING
In February 1996, the Company reached an agreement with the holders of the
Common Stock Subject to Put Option (Note 9) under which such stockholders will
sell these shares at the time the Company completes an initial public offering
("IPO") if the IPO occurs in 1996. The Company will utilize a portion of the net
proceeds from the IPO to redeem at par or face value all of the outstanding
Class A Preferred Stock and the 1990 Subordinated Notes which are also held by
these shareholders.
The Company is preparing for an IPO of its common stock, which if
successful will result in the removal of the put option as discussed above. The
removal of the put option will result in the liability representing the Common
Stock Subject to Put Option to be credited to stockholders' equity.
In connection with the IPO contemplated during 1996, the Company's Board of
Directors adopted a resolution which on April 17, 1996 increased the authorized
number of common shares to 60,000,000 and split the common stock 36.4535 for 1.
In addition, the Board of Directors authorized the issuance of 12,000,000 shares
of preferred stock, the terms of which will be designated at the time of
issuance. All per share information in these financial statements has been
adjusted to give effect to this split.
In connection with the IPO, effective January 1, 1996, the Company ceased
allocating amounts to the accounts maintained under the Incentive Plan (Note 7).
The Company is offering to each current employee
F-15
<PAGE> 97
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
who is a participant in the Incentive Plan the alternative of having their
account settled in cash, in shares of the Common Stock of the Company, or both,
with actual distributions of cash or Common Stock subject to both vesting
requirements and terms and conditions similar to those under which distributions
would have been made under the Incentive Plan. To the extent participants elect
to settle their accounts in Common Stock, the Company would issue (subject to
the vesting requirements and distribution terms and conditions) to such
participants Common Stock at the initial public offering price. As of December
31, 1995, approximately $1.0 million has been previously charged to expense and
is accrued as a liability. Those portions of accounts under the Incentive Plan
that were not vested as of January 1, 1996 aggregating $0.6 million will vest
and will be charged to expense over a four-year period under a new vesting
schedule following the settlement.
Upon completion of the IPO, the Company will issue options for 1,216,049
common shares to key employees at an exercise price equal to the IPO price. Such
options will vest over a four year period.
13. UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
applicable to interim financial statements. Accordingly, they do not include all
of the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments and reclassifications considered necessary for a fair and comparable
presentation have been included and are of a normal recurring nature. Operating
results for the six months ended June 30, 1996, are not necessarily indicative
of the results that may be expected for the year ending December 31, 1996.
COMPLETION OF INITIAL PUBLIC OFFERING
On April 24, 1996, the Company completed its IPO by selling 4,016,088
shares of its Common Stock. The Company received approximately $37.4 million net
of underwriting discounts and commissions.
REDEMPTION OF DEBENTURES AND PREFERRED STOCK
As contemplated in the IPO completed April 24, 1996, the Company redeemed
$6,108 of Subordinated Debt and $10,364 of Preferred Stock for cash of $7,514
and $12,619, respectively. These redemptions of the subordinated debt resulted
in an extraordinary loss of $844, net of tax benefit of $562 and the redemption
of the Preferred Stock resulted in a reduction of income attributable to common
share holdings of $2,254, representing the unamortized discount on the Preferred
Stock.
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
On January 1, 1996, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
to be Disposed Of". The adoption of SFAS No. 121 had no effect on these interim
unaudited financial statements.
ACQUISITIONS
On May 22, 1996, the Company completed the acquisition of perpetual
easements from CSX Realty Development Corporation ("CSX") for $21.6 million in
cash and certain future payments in an aggregate amount not to exceed $10.0
million payable over a period of ten years beginning no later than the year 2006
with the exact amount and timing to be determined based upon the results of the
Company's operations of the easements. The perpetual easements are located on
real property interests of CSX for the purpose of licensing
F-16
<PAGE> 98
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
rights to operate outdoor advertising displays which are leased to independent
outdoor advertising companies and will be amortized on a straight line basis
over 40 years.
On July 9, 1996, the Company signed a purchase agreement with Gannett Co.,
Inc. under which the Company will acquire Gannett Outdoor for $690.0 million
cash, subject to certain working capital adjustments on the date of closing. The
Company has obtained a commitment for the financing. The completion of the
transaction is subject to a number of conditions, including the expiration or
early termination of the waiting period under the Hart Scott Rodino Anti-Trust
Improvement Act of 1976.
STOCK SPLIT
On June 27, 1996, the Board of Directors authorized a 3 for 2 stock split
in the form of a stock dividend payable on July 22, 1996 to holders of record on
July 8, 1996. All share and per share data in these financial statements have
been adjusted to reflect the split.
F-17
<PAGE> 99
INDEPENDENT AUDITORS' REPORT
Board of Directors
Outdoor Systems, Inc.
Phoenix, Arizona
We have audited the accompanying consolidated statements of operations of
Capitol Outdoor Advertising, Inc. and Subsidiary and its predecessor company,
Creative Outdoor Advertising of Atlanta, Inc. ("historical information")
(together the "Company"), for the seven month period ended July 30, 1993, the
five month period ended December 31, 1993 and the nine month period ended
September 30, 1994. The Company was acquired in December 1994 by Outdoor
Systems, Inc. (Note 1). This historical information is the responsibility of
Company management. Our responsibility is to express an opinion on the
historical information based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the historical information is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the historical information. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation of the historical information. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the historical information referred to above presents
fairly, in all material respects, the results of operations of the Company for
the seven month period ended July 30, 1993, the five month period ended December
31, 1993 and the nine month period ended September 30, 1994 in conformity with
generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
January 16, 1995
F-18
<PAGE> 100
CAPITOL OUTDOOR ADVERTISING, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
1993
--------------------------- 1994
SEVEN MONTH FIVE MONTH -------------
PERIOD ENDED PERIOD ENDED NINE MONTH
JULY 30, DECEMBER 31, PERIOD ENDED
1993 1993 SEPTEMBER 30,
------------ ------------ -------------
(000'S OMITTED)
<S> <C> <C> <C>
REVENUES:
Outdoor advertising.................................... $10,516 $8,108 $15,559
Less agency commission................................. (1,461) (1,151) (2,245)
------- ------- -------
Net revenues................................... 9,055 6,957 13,314
------- ------- -------
OPERATING EXPENSES:
Direct advertising..................................... 5,362 3,557 6,838
General and administrative............................. 1,949 1,165 2,233
Depreciation and amortization.......................... 1,464 1,016 1,837
Other -- net........................................... 2 691 966
------- ------- -------
Total operating expenses....................... 8,777 6,429 11,874
------- ------- -------
OPERATING INCOME......................................... 278 528 1,440
INTEREST EXPENSE -- Net.................................. 5,156 1,438 2,733
------- ------- -------
LOSS BEFORE INCOME TAX BENEFIT........................... (4,878) (910) (1,293)
INCOME TAX BENEFIT....................................... -- 318 512
------- ------- -------
NET LOSS................................................. $(4,878) $ (592) $ (781)
======= ======= =======
</TABLE>
See notes to consolidated statements of operations.
F-19
<PAGE> 101
CAPITOL OUTDOOR ADVERTISING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED STATEMENTS OF OPERATIONS
SEVEN MONTH PERIOD ENDED JULY 30, 1993,
FIVE MONTH PERIOD ENDED DECEMBER 31, 1993 AND
NINE MONTH PERIOD ENDED SEPTEMBER 30, 1994
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
On December 19, 1994, Outdoor Systems Inc., ("OSI") acquired from a
subsidiary of CIGNA Corporation ("CIGNA") all of the outdoor operating assets of
Capitol Outdoor Advertising, Inc. ("Capitol"), a company engaged in the outdoor
advertising business in Atlanta, Georgia, for $38,750,000 plus additional
consideration for certain working capital assets. This statement of operations
of Capitol, is prepared on the basis set forth below:
During the seven month period ended July 30, 1993, Capitol operated as
Creative Outdoor Advertising of Atlanta, Inc. ("Creative") which was a
subsidiary of Adams Outdoor Advertising ("Adams"). On July 30, 1993, in partial
settlement of amounts owed CIGNA by Adams, a subsidiary of CIGNA acquired from
Adams substantially all of the assets of Creative and assumed its liabilities.
At that date, the name was changed from Creative to Capitol. As a result, during
the period covered by these consolidated financial statements, Capitol was a
subsidiary of two different parent companies with two different cost bases. The
statement of operations for the seven month period ended July 30, 1993, when
Creative was a subsidiary of Adams, is, therefore, not comparable to the
statements of operations for the five and nine month periods ended December 31,
1993 and September 30, 1994, respectively, when Capitol was a subsidiary of
CIGNA.
The consolidated statements of operations includes historical operations of
the operations of Capitol under the ownership discussed above and may not be
representative of the operations under different ownership. Management fees of
$369,700 during the seven month period ended July 30, 1993, have been included
in administrative expenses.
A summary of significant accounting policies:
a. Revenues are recognized from advertising contracts when billed, which is
on a monthly basis in accordance with contract terms. Costs associated with
providing service for specific contracts are charged to expense as incurred,
although such contracts generally extend beyond one month.
b. Depreciation expense is computed using the straight-line method at rates
estimated to depreciate the applicable assets over their estimated useful lives.
c. Barter Transactions -- In the normal course of business, the Company
enters into barter transactions which represent the exchange of advertising for
goods or services recorded generally at the estimated fair value of the products
or services received. Barter revenue is recognized when advertising services are
rendered, and barter expense is recognized when the related product or services
are received.
2. INCOME TAXES
During the five month period ended December 31, 1993 and the nine month
period ended September 30, 1994, the Company was included in the consolidated
United States federal income tax return filed by CIGNA. In accordance with a tax
sharing agreement, the provision for federal income tax expense or benefit
allocated to the Company is computed as if the Company was filing a separate
federal income tax return and includes benefits that were available by virtue of
the Company being included in CIGNA's consolidated tax return filing.
F-20
<PAGE> 102
CAPITOL OUTDOOR ADVERTISING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED STATEMENTS OF OPERATIONS -- (CONTINUED)
The components of the benefit for income taxes are as follows:
<TABLE>
<CAPTION>
FIVE MONTH NINE MONTH
PERIOD ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
1993 1994
------------ -------------
(000'S OMITTED)
<S> <C> <C>
Current:
Federal.......................................... -- $ (796)
State............................................ -- (231)
--------
Total current...................................... -- (1,027)
Deferred........................................... $ (318) 515
------- --------
Total benefit for income taxes........... $ (318) $ (512)
======= ========
</TABLE>
A reconciliation of the difference between the benefit for income taxes at
the statutory United States federal income tax rate is as follows for the nine
month period ended September 30, 1994:
<TABLE>
<CAPTION>
FIVE MONTH NINE MONTH
PERIOD ENDED PERIOD ENDED
DECEMBER 31, SEPTEMBER 30,
1993 1994
------------ -------------
(000'S OMITTED)
<S> <C> <C>
Income tax at statutory United States federal
income tax rate.................................. $ (318) $ (440)
(Decrease) increase in taxes:
State taxes -- net............................... -- (76)
Other............................................ -- 4
------- --------
Total.................................... $ (318) $ (512)
======= ========
</TABLE>
Deferred income taxes are generally recognized when assets and liabilities
have different carrying values for financial statement and tax reporting
purposes. These differences result primarily from depreciation
3. INTEREST
Substantially all interest expense reflected in the consolidated statements
of operations for the periods ended December 31, 1993 and September 30, 1994
arose from debt due to affiliates. All such debt was repaid from the proceeds
from the sale to OSI.
Substantially all interest expense for the seven month period ended July
31, 1993 arose from debt due to CIGNA, which as explained in Note 1, was
partially settled through the acquisition of Creative by CIGNA.
4. COMMITMENTS AND CONTINGENCIES
The Company leases signs and space on which to place signs in commercial
and industrial zoned areas along high-traffic routes in cities or close to
highly populated urban areas. The Company also leases a building used in its
operations. These leases have terms ranging from one to fifteen years.
Creative entered into a master lease agreement in 1991 with Adams Outdoor
Leasing Company, Inc. ("AOL"), a company related through common ownership. Lease
rents of approximately $266,000 were paid to AOL in the seven month period ended
July 31, 1993.
F-21
<PAGE> 103
CAPITOL OUTDOOR ADVERTISING, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED STATEMENTS OF OPERATIONS -- (CONTINUED)
At September 30, 1994, minimum rental payments under these noncancelable
operating leases having terms greater than one year are approximately as
follows:
<TABLE>
<S> <C>
1994..................................................... $ 792,750
1995..................................................... 2,200,409
1996..................................................... 1,687,344
1997..................................................... 1,337,313
1998..................................................... 929,407
1999..................................................... 637,145
----------
Total.......................................... $ 7,584,368
==========
</TABLE>
In some of the localities in which the Company operates, outdoor
advertising is the object of 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
earnings.
The Company is the defendant in certain legal matters, the outcome of which
is currently unknown. Management believes the Company's liability, if any, will
not have a material effect in the accompanying consolidated financial
statements.
5. DEFERRED SAVINGS AND PROFIT SHARING PLAN
The Company has a 401(k) deferred savings and profit sharing plan.
Employees must have attained age 21 and completed one year of service to
participate in the Plan. Employees may contribute up to 10% of their salaries,
and the Company matches employee contributions at the rate of 50% (to a maximum
of 3% of the employee's compensation). The Company's expense related to the plan
totaled approximately $27,000, $28,000 and $9,000 for the seven, five and nine
month periods ended September 30, 1994, respectively.
* * * * * *
F-22
<PAGE> 104
INDEPENDENT AUDITORS' REPORT
Gannett Co., Inc.
Arlington, Virginia
We have audited the accompanying combined statements of net assets to be
acquired by Outdoor Systems, Inc. as of December 31, 1995 and 1994, and the
related combined statements of revenues and direct expenses of net assets of
Gannett Outdoor to be acquired by Outdoor Systems, Inc. (collectively, "the
financial statements") for each of the three years in the period ended December
31, 1995, pursuant to the Asset Purchase Agreement among Gannett Co., Inc. and
Outdoor Systems, Inc. dated July 9, 1996, as described in Note 1 to the
financial statements. The financial statements include the accounts of the
entities set forth in Note 1, all of which (collectively "Gannett Outdoor") are
under common ownership and common management of Gannett Co., Inc. These
financial statements are the responsibility of the management of Gannett
Outdoor. Our responsibility is to express an opinion on the 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 were prepared to present the combined
net assets and the revenues and direct expenses of net assets of Gannett Outdoor
to be acquired by Outdoor Systems, Inc. pursuant to the Asset Purchase Agreement
described in Note 1, and are not intended to be a complete presentation of
Gannett Outdoor's assets and liabilities or revenues and direct expenses.
In our opinion, such combined financial statements present fairly, in all
material respects, the combined net assets of Gannett Outdoor to be acquired by
Outdoor Systems, Inc. pursuant to the Asset Purchase Agreement described in Note
1, as of December 31, 1995 and 1994, and the combined revenues and direct
expenses of net assets of Gannett Outdoor to be acquired by Outdoor Systems,
Inc. for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
July 25, 1996
F-23
<PAGE> 105
GANNETT OUTDOOR
COMBINED STATEMENTS OF NET ASSETS TO BE ACQUIRED BY
OUTDOOR SYSTEMS, INC.
(DOLLARS IN THOUSANDS)
ASSETS TO BE ACQUIRED
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- JUNE 30,
1994 1995 1996
-------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C>
CURRENT ASSETS:
Cash............................................................... $ 2,460
Marketable securities.............................................. 12 $ 12
Receivables -- net................................................. 46,598 53,127 $ 60,426
Other current assets -- principally prepaid leases................. 13,843 15,038 20,776
-------- -------- --------
Total current assets........................................ 62,913 68,177 81,202
PROPERTY AND EQUIPMENT -- Net (Note 3)............................... 141,204 136,183 132,636
INTANGIBLES -- Net (Note 3).......................................... 43,841 42,046 41,243
OTHER ASSETS......................................................... 1,235 1,242 1,175
-------- -------- --------
Total assets to be acquired................................. 249,193 247,648 256,256
-------- -------- --------
LIABILITIES TO BE ASSUMED AND NET ASSETS
CURRENT LIABILITIES:
Accounts payable................................................... 8,983 8,042 13,136
Accrued liabilities................................................ 6,757 7,652 8,914
Deferred income.................................................... 1,381 878 1,063
-------- -------- --------
Total current liabilities................................... 17,121 16,572 23,113
DEFERRED TAXES (Note 8).............................................. 6,737 6,853 6,856
OTHER LIABILITIES.................................................... 653 283 349
-------- -------- --------
Total liabilities to be assumed............................. 24,511 23,708 30,318
COMMITMENTS AND CONTINGENCIES (Note 5)
-------- -------- --------
NET ASSETS TO BE ACQUIRED............................................ $224,682 $223,940 $225,938
======== ======== ========
</TABLE>
See notes to combined financial statements.
F-24
<PAGE> 106
GANNETT OUTDOOR
COMBINED STATEMENTS OF REVENUES
AND DIRECT EXPENSES OF NET ASSETS
TO BE ACQUIRED BY OUTDOOR SYSTEMS, INC.
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTH PERIODS
ENDED
YEARS ENDED DECEMBER 31, JUNE 30,
------------------------------ -------------------
1993 1994 1995 1995 1996
-------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Net advertising revenues.................. $225,165 $235,236 $247,271 $115,888 $117,733
Other income (loss)....................... 25 (67) 193 266 201
-------- -------- -------- -------- --------
Total revenues.................... 225,190 235,169 247,464 116,154 117,934
-------- -------- -------- -------- --------
DIRECT EXPENSES (Note 6):
Direct advertising........................ 159,927 163,362 171,091 82,955 82,410
General and administrative................ 30,572 33,866 33,101 16,123 17,169
Depreciation and amortization............. 19,669 19,692 17,262 8,743 8,822
-------- -------- -------- -------- --------
Total operating expenses.......... 210,168 216,920 221,454 107,821 108,401
-------- -------- -------- -------- --------
EXCESS OF REVENUES OVER DIRECT EXPENSES..... $ 15,022 $ 18,249 $ 26,010 $ 8,333 $ 9,533
======== ======== ======== ======== ========
</TABLE>
See notes to combined financial statements.
F-25
<PAGE> 107
GANNETT OUTDOOR
NOTES TO COMBINED FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
UNAUDITED SIX MONTH PERIODS ENDED JUNE 30, 1995 AND 1996
(DOLLARS IN THOUSANDS)
1. BASIS OF PRESENTATION
On July 9, 1996, Gannett Co., Inc. ("Gannett") and Outdoor Systems, Inc.
("Outdoor Systems") signed an agreement under which Outdoor Systems will acquire
substantially all of the outdoor advertising business of Gannett ("the Purchase
Agreement"). The Gannett Outdoor Advertising Business in Houston, Texas is not
reflected in these financial statements because it is not covered by the
Purchase Agreement. Consummation of the Purchase Agreement is subject to a
number of conditions, including the expiration or early termination of the
waiting period under the Hart Scott Rodino Anti-Trust Improvement Act of 1976.
The accompanying combined statements of net assets to be acquired by
Outdoor Systems and the related combined statements of revenues and direct
expenses of net assets to be acquired by Outdoor Systems include the accounts of
the outdoor advertising division of Gannett and the accounts of its outdoor
advertising subsidiaries, Mediacom Inc. and New York Subways Advertising Co.
(referred to collectively as "Gannett Outdoor" or "the Companies"). The
Companies operate the outdoor advertising business of Gannett and have no
separate legal status or existence.
The statement of net assets to be acquired by Outdoor Systems includes the
assets and liabilities of Gannett Outdoor on the historical cost basis of
Gannett. The related statement of revenues and direct expenses includes
historical revenues and direct expenses of the Companies when owned by Gannett
and may not be representative of the revenues and direct expenses when under
different ownership. These financial statements reflect certain direct expenses
that are administered by Gannett and are allocated to Gannett Outdoor (Note 6).
Certain other indirect expenses which are reflected as a part of Outdoor
Advertising operations of Gannett have been excluded from these financial
statements because of their indirect nature. The expenses reflected in these
statements are not necessarily indicative of the costs and expenses that would
have resulted had the Companies been operated by Outdoor Systems. Charges for
interest and taxes have not been included in these financial statements because
they are considered to be corporate expenses of Gannett and not allocable to the
Companies.
Because the financial statements are not those of a separate legal entity
and the related cash flow activities for the years would not be practicable to
obtain or meaningful, a separate statement of cash flows is not presented.
The Companies are engaged principally in the rental of advertising space on
outdoor advertising structures in the New York Tri State area, Michigan,
Chicago, California, Kansas City, St. Louis, Denver, and throughout Canada.
2. SIGNIFICANT ACCOUNTING POLICIES
Revenues -- The Companies recognize revenues when billed, which is on a
monthly straight-line pro rata basis in accordance with contract terms. Costs
associated with providing service for specific contracts are expensed as
incurred, although such contracts generally extend beyond one month.
Property and equipment are recorded at cost. Normal repairs and maintenance
are expensed while improvements which extend the useful life of the asset are
capitalized. Depreciation is computed on a straight-line basis over the
following useful lives:
<TABLE>
<S> <C>
Buildings............................................. 30 to 40 years
Advertising structures................................ 10 to 30 years
Vehicles.............................................. 4 to 15 years
Other equipment....................................... 5 to 10 years
</TABLE>
F-26
<PAGE> 108
GANNETT OUTDOOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Intangibles are principally excess of purchase price over net assets
acquired and those acquired after October 31, 1970 are amortized over 40 years.
The Companies periodically review for changes in circumstances to determine
whether there are conditions that indicate that the carrying amount of such
assets may not be recoverable. If such conditions are deemed to exist, the
Companies will determine whether estimated future undiscounted cash flows are
less than the carrying amount of such assets, in which case the Companies will
calculate an impairment loss. Any impairment loss will be recorded as a
component of the operating expenses.
Foreign Currency assets and liabilities are generally translated into U.S.
dollars using the exchange rates in effect at the statement of net assets date.
Revenue and direct expenses are generally translated using the average exchange
rate throughout the period.
Use of Estimates -- The preparation of these financial statements
necessarily requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reported period. Actual results
could differ from these estimates.
3. PROPERTY AND EQUIPMENT AND INTANGIBLES
Property and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Advertising structures......................................... $249,971 $253,716
Equipment...................................................... 33,694 35,612
Buildings and improvements..................................... 23,953 24,186
Construction in progress....................................... 2,099 3,816
Land........................................................... 9,936 10,437
-------- --------
Total................................................ 319,653 327,767
Less accumulated depreciation.................................. 178,449 191,584
-------- --------
Property and equipment -- net................................ $141,204 $136,183
======== ========
</TABLE>
Depreciation expense was $16,628, $16,725 and $15,467 for the three years
ended December 31, 1993, 1994 and 1995, respectively.
Intangibles consist of the following at December 31:
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Total intangibles.............................................. $ 57,673 $ 57,255
Less accumulated amortization.................................. 13,832 15,209
-------- --------
Intangibles -- net............................................. $ 43,841 $ 42,046
======== ========
</TABLE>
Amortization expense was $3,041, $2,967 and $1,795 for the three years
ended December 31, 1993, 1994 and 1995, respectively.
4. EMPLOYEE BENEFIT PLANS
Substantially all of the Companies' non-union domestic employees are
covered by Gannett's principle defined benefit retirement plan. (Note 6) Under
the terms of the Purchase Agreement, Gannett will retain all domestic pension
obligations and will retain all plan assets.
Mediacom, Inc., Gannett Outdoor's Canadian operation, maintains a
combination of a defined benefit/defined contribution pension plan which
provides retirement benefits for substantially all employees based
F-27
<PAGE> 109
GANNETT OUTDOOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
on length of service and remuneration. Pension obligations are funded with
independent trustees in accordance with legal requirements.
The Plan's funded status at December 31, 1994, the date of the most recent
actuarial valuation, less amounts applicable to the defined contribution plan
and amounts recognized in the combined statement of net assets to be acquired at
December 31, 1995 are as follows:
<TABLE>
<S> <C>
Accumulated benefit obligation..................................... $ 9,512
Effect of projected future compensation increases.................. 4,362
-------
Projected benefit obligation....................................... 13,874
Plan assets at fair value.......................................... 13,540
-------
Plan assets less than projected benefit obligation................. 334
Unrecognized loss.................................................. 67
-------
Accrued pension cost............................................... $ 267
=======
</TABLE>
Assumptions at December 31 used in accounting for the Plan were as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---- ---- ----
<S> <C> <C> <C>
Discount or settlement rate............................. 8.0 % 8.0 % 8.0 %
Rate of increase in compensation levels................. 6.5 % 6.5 % 6.5 %
Expected long-term rate of return on Plan assets........ 8.0 % 8.0 % 8.0 %
</TABLE>
The Plan's assets consist of money market accounts and investments in
common stocks, mutual funds, real estate and corporate bonds.
In addition, the Company has 401(k) plans for substantially all United
States employees and certain locations have union sponsored pension plans for
union employees to which the Company makes contractual contributions. The
companies contributed $116, $136 and $153 to these plans for the three years
ended December 31, 1993, 1994 and 1995, respectively.
5. COMMITMENTS AND CONTINGENCIES
Leases -- The Companies lease land, buildings and equipment under operating
leases with various terms expiring at various dates. At December 31, 1995,
minimum annual rentals under all non cancellable operating leases are as
follows:
<TABLE>
<S> <C>
1996............................................................... $ 3,141
1997............................................................... 3,125
1998............................................................... 3,071
1999............................................................... 2,536
2000............................................................... 1,609
Thereafter......................................................... 2,964
-------
Total.................................................... $16,446
=======
</TABLE>
Operating lease expense was $61,553, $61,302 and $62,616 for the three
years ended December 31, 1993, 1994 and 1995. The majority of such leases are
for advertising structures on a month to month basis.
The Companies operate under exclusive sales contracts with various
municipalities including the Department of Transportation ("DOT") in various
cities and the Metropolitan Transit Authority of New York ("MTA") expiring from
1996 through 2009. Such contracts allow for the exclusive right to advertise on
buses, subways and transit shelters within these communities in exchange for a
percentage of the revenues
F-28
<PAGE> 110
GANNETT OUTDOOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
generated under the contracts. Annual consideration on the contract with the MTA
is subject to an annual minimum guarantee of $6,010,000.
Litigation -- The Companies are involved in various legal matters that
management considers to be in the normal course of business. In the Companies
management's opinion, based upon the advice of legal counsel, such matters will
be settled without material effect on the Companies' financial position or
results of operations.
6. TRANSACTIONS WITH GANNETT
During 1993, 1994 and 1995, the Companies received corporate charges from
Gannett for insurance and substantially all employee benefit costs. Such amounts
were allocated to the Companies based upon estimates of the Companies' pro rata
portion of such costs. Amounts included in the statements of revenues and direct
expenses for such items are as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------ ------ ------
<S> <C> <C> <C>
Insurance................................................ $3,162 $2,450 $2,862
Employee benefits........................................ $2,897 $3,158 $3,262
</TABLE>
7. CANADIAN OPERATIONS
For the three years ended December 31 amounts included in the combined
financial statements applicable to Canadian operations were as follows:
<TABLE>
<CAPTION>
1993 1994 1995
------- ------- -------
<S> <C> <C> <C>
Revenues.............................................. $56,417 $57,686 $66,380
Excess of revenues over direct expenses............... $ 5,294 $ 5,738 $ 7,712
Assets................................................ $84,376 $47,714 $51,888
</TABLE>
8. OTHER
Deferred taxes are applicable to Mediacom Inc. the Companies' Canadian
subsidiary. Such taxes arise principally from the amortization of advertising
structures for tax purposes over a shorter period than amortized for financial
statement purposes.
9. NOTES TO INTERIM COMBINED FINANCIAL STATEMENTS
Basis of Presentation -- The accompanying unaudited interim combined
financial statements have been prepared utilizing generally accepted accounting
principles applicable to interim financial statements. Accordingly, such
financial statements are limited as set forth in Note 1 and also do not include
all of the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments and reclassifications considered necessary for a fair and comparable
presentation have been included and are of a normal recurring nature. Operating
results for the six month period ended June 30, 1996, are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996.
Gannett Acquisition -- On July 9, 1996, Gannett signed the Purchase
Agreement with Outdoor Systems under which Outdoor Systems will acquire Gannett
Outdoor for approximately $690,000 cash, subject to certain working capital
adjustments on the date of closing. The completion of the Agreement is subject
to a number of conditions, including the expiration or early termination of the
waiting period under the Hart Scott Rodino Anti-Trust Improvement Act of 1976.
F-29
<PAGE> 111
GANNETT OUTDOOR
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
Accounting Matters -- On January 1, 1996, the Companies adopted 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
adoption of SFAS No. 121 had no effect on these combined financial statements.
F-30
<PAGE> 112
[INSIDE BACK COVER]
[Map of the United States and Canada under the
caption "Outdoor Systems Advertising" showing
state and principal bounderies and
identifying various cities]
<PAGE> 113
======================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR BY ANY UNDERWRITER.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY THE NOTES BY ANYONE IN ANY JURISDICTION IN WHICH THE PERSON MAKING
THE OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANY PERSON TO WHOM IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL CREATE ANY IMPLICATION THAT THERE
HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... 1
The Transactions...................... 9
Risk Factors.......................... 11
Use of Proceeds....................... 17
Capitalization........................ 17
Unaudited Consolidated Pro Forma
Financial Information............... 18
Selected Consolidated Financial and
Other Data.......................... 28
Management's Discussion and Analysis
of Results of Operations and
Financial Condition................. 30
Business.............................. 37
Management............................ 44
Principal Stockholders................ 46
Description of Senior Credit
Facility............................ 48
Description of the Notes.............. 52
Underwriting.......................... 75
Legal Matters......................... 76
Experts............................... 76
Available Information................. 76
Incorporation of Certain Documents by
Reference........................... 77
Index to Consolidated Financial
Statements.......................... F-1
</TABLE>
======================================================
======================================================
$150,000,000
OUTDOOR SYSTEMS
% SENIOR SUBORDINATED
NOTES DUE 2006
------------------------
P R O S P E C T U S
-----------------------
CIBC WOOD GUNDY SECURITIES CORP.
ALEX. BROWN & SONS
INCORPORATED
, 1996
======================================================
<PAGE> 114
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following is a statement of estimated expenses incurred in connection
with the Notes being registered hereby, other than underwriting discounts and
commissions:
<TABLE>
<S> <C>
SEC Registration Fee...................................................... $ 77,587
NASD Filing Fee........................................................... 23,000
Trustee's Fees and Expenses............................................... 10,000
Printing and Engraving Expenses........................................... 125,000
Legal Fees and Expenses................................................... 290,000
Accounting Fees and Expenses.............................................. 150,000
Blue Sky Fees and Expenses (including legal fees)......................... 10,000
Miscellaneous............................................................. 64,413
--------
Total........................................................... $750,000
========
</TABLE>
The foregoing items, except for the SEC Registration Fee and the NASD
Filing Fee are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "Delaware Law"),
Article VII of the Registrant's Third Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation"), and Article VI of the
Company's Amended and Restated Bylaws (the "Bylaws") provide for indemnification
of the Registrant's directors and officers to the maximum extent provided by
Delaware law, which may include liabilities under the Securities Act of 1933, as
amended (the "Securities Act").
Section 8 of the Underwriting Agreement provides for indemnification by the
Underwriters of directors, officers and controlling persons of the Company
against certain liabilities, including liabilities under the Securities Act,
under certain circumstances.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the Company
pursuant to its Certificate of Incorporation, Bylaws, the Underwriting Agreement
or otherwise, the Company has been advised that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the 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.
As permitted by Section 102(b) of the Delaware Law, the Certificate of
Incorporation provides that directors of the Company shall have no personal
liability to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except (i) for any breach of a director's duty of
loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or knowing violations of law,
(iii) under Section 174 of the Delaware Law, or (iv) for any transaction from
which a director derived an improper personal benefit.
The Company does not maintain directors' and officers' liability insurance.
II-1
<PAGE> 115
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<S> <S>
1.1 -- Form of Underwriting Agreement
2.1 -- Asset Purchase Agreement, dated July 9, 1996, entered into among the Registrant,
Gannett Co., Inc., Combined Communications Corporation, Gannett Transit, Inc.,
Shelter Media Communications, Inc., and Gannett International Communications, Inc.
(filed as Exhibit 99.1 to the Registrant's Current Report on Form 8-K dated July
16, 1996 and incorporated herein by reference)
2.2 -- Form of Option by Gannett Outdoor Co. of Texas, Inc., in favor of the Registrant
together with the form of Asset Purchase Agreement by and between the Registrant
and Gannett Outdoor Co. of Texas, Inc. (filed as Exhibit 99.2 to the Registrant's
Current Report on Form 8-K dated July 16, 1996 and incorporated herein by
reference)
4.3 -- Form of Indenture among the Registrant, the Guarantors and The Bank of New York,
as Trustee, relating to the % Senior Subordinated Notes due 2006
4.4 -- Form of Note (included in Exhibit 4.3)
5.1 -- Opinion of Powell, Goldstein, Frazer & Murphy
12.1 -- Schedule of Ratio of Earnings to Fixed Charges
23.1 -- Consent of Deloitte & Touche LLP
23.2 -- Consent of Powell, Goldstein, Frazer & Murphy (included in Exhibit 5.1)
24.1 -- Powers of Attorney for officers and directors*
24.2 -- Powers of Attorney for officers and directors of New York Subways Advertising Co.,
Inc.
25.1 -- Statement of Eligibility of Trustee on Form T-1
27 -- Financial Data Schedule (for SEC use only)*
</TABLE>
- ---------------
* Previously filed.
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as the 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 foregoing provisions, 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 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.
II-2
<PAGE> 116
(c) The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this Registration Statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of the
Registration Statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE> 117
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Phoenix, State of Arizona, on the 4th day of
October, 1996.
OUTDOOR SYSTEMS, INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- -------------------------------- -----------------
<S> <C> <C>
ARTHUR R. MORENO* President (Principal Executive October 4, 1996
- ------------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and October 4, 1996
- ------------------------------------- Director
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief October 4, 1996
- ------------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial Officer)
BRIAN J. O'CONNOR* Director October 4, 1996
- -------------------------------------
Brian J. O'Connor
STEPHEN F. BUTTERFIELD* Director October 4, 1996
- -------------------------------------
Stephen F. Butterfield
*By: /s/ BILL M. BEVERAGE
- -------------------------------------
Bill M. Beverage
Attorney-in-Fact
</TABLE>
II-4
<PAGE> 118
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Phoenix, State of Arizona, on the 4th day of
October, 1996.
OUTDOOR SYSTEMS PAINTING, INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- -------------------------------- -----------------
<S> <C> <C>
ARTHUR R. MORENO* President (Principal Executive October 4, 1996
- ------------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and October 4, 1996
- ------------------------------------- Director
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief October 4, 1996
- ------------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial
Officer)
*By: /s/ BILL M. BEVERAGE
- -------------------------------------
Bill M. Beverage
Attorney-in-Fact
</TABLE>
II-5
<PAGE> 119
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Phoenix, State of Arizona, on the 4th day of
October, 1996.
OS ADVERTISING OF TEXAS, INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ---------------------------------- ----------------
<S> <C> <C>
ARTHUR R. MORENO* President (Principal Executive October 4, 1996
- ------------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and Director October 4, 1996
- -------------------------------------
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief October 4, 1996
- ------------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial Officer)
*By: /s/ BILL M. BEVERAGE
- -------------------------------------
Bill M. Beverage
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 120
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Phoenix, State of Arizona, on the 4th day of
October, 1996.
OS BASELINE, INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- --------------------------------- -----------------
<S> <C> <C>
ARTHUR R. MORENO* President (Principal Executive October 4, 1996
- ------------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and October 4, 1996
- ------------------------------------- Director
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief October 4, 1996
- ------------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial Officer)
*By: /s/ BILL M. BEVERAGE
- -------------------------------------
Bill M. Beverage
Attorney-in-Fact
</TABLE>
II-7
<PAGE> 121
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Phoenix, State of Arizona, on the 4th day of
October, 1996.
DECADE COMMUNICATIONS GROUP, INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ---------------------------------- ----------------
<S> <C> <C>
ARTHUR R. MORENO* President (Principal Executive October 4, 1996
- ------------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and Director October 4, 1996
- -------------------------------------
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief October 4, 1996
- ------------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial Officer)
*By: /s/ BILL M. BEVERAGE
- -------------------------------------
Bill M. Beverage
Attorney-in-Fact
</TABLE>
II-8
<PAGE> 122
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Phoenix, State of Arizona, on the 4th day of
October, 1996.
BENCH ADVERTISING COMPANY OF COLORADO,
INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- --------------------------------- -----------------
<S> <C> <C>
ARTHUR R. MORENO* President (Principal Executive October 4, 1996
- ------------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and October 4, 1996
- ------------------------------------- Director
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief October 4, 1996
- ------------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial Officer)
*By: /s/ BILL M. BEVERAGE
- -------------------------------------
Bill M. Beverage
Attorney-in-Fact
</TABLE>
II-9
<PAGE> 123
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form S-3 and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Phoenix, State of Arizona, on the 4th day of
October, 1996.
NEW YORK SUBWAYS ADVERTISING CO., INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons on behalf
of the Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- ---------------------------------- ----------------
<S> <C> <C>
ARTHUR R. MORENO* President (Principal Executive October 4, 1996
- ------------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and Director October 4, 1996
- -------------------------------------
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief October 4, 1996
- ------------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial Officer)
*By: /s/ BILL M. BEVERAGE
- -------------------------------------
Bill M. Beverage
Attorney-in-Fact
</TABLE>
II-10
<PAGE> 1
EXHIBIT 1.1
OUTDOOR SYSTEMS, INC.
$150,000,000
[ ]% Senior Subordinated Notes due 2006
UNDERWRITING AGREEMENT
[ ], 1996
CIBC WOOD GUNDY SECURITIES CORP.
ALEX. BROWN & SONS INCORPORATED
c/o CIBC Wood Gundy Securities Corp.
425 Lexington Avenue
3rd Floor
New York, New York 10017
Ladies and Gentlemen:
Outdoor Systems, Inc., a Delaware corporation (the "Company"),
and each of the Company's subsidiaries listed in Exhibit A hereto (each, a
"Subsidiary Guarantor" and, collectively, the "Subsidiary Guarantors" and,
together with the Company, the "Issuers") hereby confirm their agreement with
you (the "Underwriters"), as set forth below.
1. The Securities. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Underwriters
$150,000,000 aggregate principal amount of its [ ]% Senior Subordinated Notes
due 2006 (the "Notes"). The obligations of the Company under the Indenture (as
hereinafter defined) and the Notes will be unconditionally guaranteed (the
"Guarantees"), on a joint and several basis, by each Subsidiary Guarantor. The
Notes and the Guarantees are to be issued pursuant to the Indenture (the
"Indenture"), dated [ ], 1996, among the Company, The Bank of New York, a New
York Banking corporation, as trustee (the "Trustee"), and the Subsidiary
Guarantors. The Notes and the Guarantees are hereinafter referred to
collectively as the "Securities."
2. Representations and Warranties of the Issuers. The Issuers,
jointly and severally, represent and warrant to and agree with the Underwriters
that:
(a) A registration statement on Form S-3 (File No. 333-9713
with respect to the Securities, including a prospectus, subject to
completion, has been filed with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended
(together with the
<PAGE> 2
-2-
rules and regulations of the Commission promulgated thereunder, the
"Act") by the Issuers with respect to the Securities; and one or more
amendments to such registration statement also have been so filed.
After the execution of this Agreement, the Issuers will file with the
Commission either (x) if such registration statement, as it may have
been amended, has been declared by the Commission to be effective under
the Act prior to the execution and delivery hereof, a prospectus in the
form most recently included in an amendment to such registration
statement (or, if no such amendment shall have been filed, in such
registration statement) with only such changes or insertions therein as
are required by Rule 430A under the Act or permitted by Rule 424(b)
under the Act and as have been provided to and approved by the
Underwriters or their counsel prior to the filing thereof and as to
which the Underwriters shall not have reasonably objected; or (y) if
such registration statement, as it may have been amended, has not been
declared by the Commission to be effective under the Act prior to the
execution and delivery hereof, an amendment to such registration
statement, including a form of final prospectus, a copy of which
amendment has been furnished to and approved by the Underwriters or
their counsel prior to the proposed filing thereof. As used in this
Agreement, the term "Registration Statement" means such registration
statement, as amended at the time when it was or is declared effective,
including all financial schedules and exhibits thereto and including
any information omitted therefrom pursuant to Rule 430A under the Act
and included in the Prospectus (as hereinafter defined); the term
"Preliminary Prospectus" means each prospectus, subject to completion,
filed with such registration statement or any amendment thereto
(including the prospectus, subject to completion, if any, included in
the Registration Statement or any amendment thereto at the time it was
or is declared effective); and the term "Prospectus" means the
prospectus first filed with the Commission pursuant to Rule 430A and
Rule 424(b), if required, or, if no prospectus is required to be filed
pursuant to Rule 430A or Rule 424(b), such term means the prospectus
included in such Registration Statement, provided that if a revised
prospectus shall be provided to the Underwriters by the Company for use
in connection with the offering and sale of the Securities that differs
from the prospectus on file at the Commission at the time such
Registration Statement becomes effective or as first filed under Rule
430A and Rule 424(b), the term "Prospectus" shall refer to the revised
prospectus from and after the time it is first provided to the
Underwriters for such use. If the
<PAGE> 3
-3-
Company has filed an abbreviated registration statement to register
additional securities pursuant to Rule 462(b) under the Act (the "Rule
462 Registration Statement") then any reference herein to "Registration
Statement" shall be deemed to include such Rule 462 Registration
Statement. All references in this Agreement to the Registration
Statement, Preliminary Prospectus and Prospectus and to financial
statements and schedules and other information that is "contained,"
"included," "set forth," "described in" or "stated" therein (and all
other references of like import) shall be deemed to mean and include
all such financial statements and schedules and other information that
is or is deemed to be incorporated by reference therein; and all
references in this Agreement to amendments or supplements to the
Registration Statement, the Preliminary Prospectus or the Prospectus
shall be deemed to mean and include the filing of any document under
the Securities Exchange Act of 1934, as amended (together with the
rules and regulations of the Commission promulgated thereunder, the
"1934 Act"), that is or is deemed to be incorporated by reference
therein.
(b) The Commission has not issued any order preventing or
suspending the use of any Preliminary Prospectus nor instituted any
proceeding for such purpose. When the Registration Statement or any
amendment thereto was or is declared effective, it (i) contained all
statements required to be stated therein in accordance with, and
complied or will comply in all material respects with the requirements
of the Act and (ii) did not or will not contain any untrue statement of
a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading. When the Registration Statement becomes effective, the
Indenture will have been qualified under and will conform in all
material respects to the requirements of the Trust Indenture Act of
1939, as amended (together with the rules and regulations of the
Commission thereunder, "Trust Indenture Act"). The Prospectus, and any
amendment or supplement thereto, on the date first filed with the
Commission pursuant to Rule 424(b) (or if not filed, on the date first
provided to the Underwriters in connection with the offering and sale
of the Securities) and on the Closing Date (i) complied or will comply
in all material respects with the requirements of the Act and (ii) did
not or will not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary
in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
<PAGE> 4
-4-
The foregoing provisions of this paragraph (b) do not apply to
statements or omissions in the Registration Statement or any amendment
thereto or the Prospectus or any amendment or supplement thereto made
in reliance upon and in conformity with written information furnished
to the Company by any Underwriter specifically for use therein, or to
the Statement of Eligibility and Qualification (Form T-1) under the
Trust Indenture Act of the Trustee filed as an exhibit to the
Registration Statement.
(c) The documents incorporated or deemed to be incorporated by
reference in the Prospectus, at the time they were or hereafter are
filed with the Commission, complied and will comply in all material
respects with the requirements of the 1934 Act, and when read together
with the other information in the Prospectus, at the time the
Registration Statement and any amendments thereto became or becomes
effective and at the Closing Date, did not and will not 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, in the light of the circumstances under which they were made,
not misleading.
(d) Each of the Issuers and the Subsidiaries (as hereinafter
defined) has been duly incorporated and each of the Issuers and the
Subsidiaries is validly existing in good standing as a corporation
under the laws of its jurisdiction of incorporation, with the requisite
corporate power and authority to own its properties and conduct its
business as now conducted as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus)
and is duly qualified to do business as a foreign corporation in good
standing in all other jurisdictions where the ownership or leasing of
its properties or the conduct of its business requires such
qualification, except where the failure to be so qualified would not,
individually or in the aggregate, have a material adverse effect on the
business, condition (financial or other), prospects or results of
operations of the Company and the Subsidiaries, taken as a whole, (any
such event, a "Material Adverse Effect"); the Company had as of the
date specified therein the authorized, issued and outstanding
capitalization set forth in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus); except as
set forth in Exhibit B hereto, the Company does not have any
subsidiaries (the "Subsidiaries") or own directly or indirectly any of
the capital stock or
<PAGE> 5
-5-
other equity securities of any other person; all of the outstanding
shares of capital stock of the Issuers and the Subsidiaries have been
duly authorized and validly issued, are fully paid and nonassessable
and were not issued in violation of any preemptive or similar rights
and are owned free and clear of all liens, encumbrances, equities and
restrictions on transferability (other than those imposed by the Act
and the state securities or "Blue Sky" laws); except as set forth in
the Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus), all of the outstanding shares of
capital stock of the Subsidiaries are owned by the Company, free and
clear of all liens, encumbrances, equities and restrictions on
transferability (other than those imposed by the Act and the State
securities or "Blue Sky" laws); except as set forth in the Registration
Statement and the Prospectus (or, if the Prospectus is not in
existence, the most recent Preliminary Prospectus), no options,
warrants or other rights to purchase from the Company or any
Subsidiary, agreements or other obligations of the Company or any
Subsidiary to issue or other rights to convert any obligation into, or
exchange any securities for, shares of capital stock of or ownership
interests in the Company or any Subsidiary are outstanding; and no
holder of securities of the Company or any Subsidiary is entitled to
have such securities registered under the Registration Statement.
(e) The Securities have been duly and validly authorized by
each of the Issuers for issuance and when executed by the Issuers and
authenticated by the Trustee in accordance with the provisions of the
Indenture, and delivered to and paid for by the Underwriters in
accordance with the terms hereof, will have been duly executed, issued
and delivered and will constitute valid and legally binding obligations
of the Issuers, entitled to the benefits of the Indenture and
enforceable against the Issuers in accordance with their terms except
that the enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors' rights
generally or (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a proceeding
at law or in equity); each of the Issuers has all requisite corporate
power and authority to execute, deliver and perform its obligations
under the Indenture and the Securities; and the Indenture has been duly
and validly authorized by the Issuers and qualified under the Trust
<PAGE> 6
-6-
Indenture Act and, when executed and delivered by the Issuers (assuming
the due authorization, execution and delivery by the Trustee), will
constitute a valid and legally binding agreement of the Issuers,
enforceable against the Issuers in accordance with its terms except
that the enforcement thereof may be limited by (i) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect relating to or affecting creditors' rights
generally or (ii) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is considered in a proceeding
at law or in equity).
(f) Each of the Issuers has the requisite corporate power and
authority to execute, deliver and perform its obligations under this
Agreement. This Agreement has been duly and validly authorized by the
Issuers and, when executed and delivered by the Issuers, will
constitute a valid and legally binding agreement of the Issuers,
enforceable against the Issuers in accordance with its terms except (i)
that the enforcement thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in
effect relating to or affecting creditors' rights generally or general
principles of equity and the discretion of the court before which any
proceeding therefor may be brought (regardless of whether such
enforcement is considered in a proceeding at law or in equity) and (ii)
as any rights to indemnity or contribution hereunder may be limited by
federal and state securities laws and public policy considerations.
(g) No consent, approval, authorization or order of any court
or governmental agency or body is required for the performance of this
Agreement, the Securities or the Indenture by the Issuers or to the
consummation by the Issuers of any of the transactions contemplated
hereby and thereby, or the application of the proceeds of the issuance
of the Securities as described in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus), except as
may be required and have been obtained under the Act, the Trust
Indenture Act or state securities or "Blue Sky" laws in connection with
the purchase and distribution of the Securities by the Underwriters;
and none of the Issuers is (i) in violation of its certificate of
incorporation or bylaws, (ii) in violation of any statute, judgment,
decree, order, rule or regulation applicable to it or any of its
properties or
<PAGE> 7
-7-
assets, which violation would, individually or in the aggregate, have a
Material Adverse Effect, or (iii) in default in the performance or
observance of any obligation, agreement, covenant or condition
contained in this Agreement, the Securities or the Indenture or any
other contract, indenture, mortgage, deed of trust, loan agreement,
note, lease, license, franchise agreement, permit, certificate or
agreement or instrument to which it is a party or to which it is
subject, which default would, individually or in the aggregate, have a
Material Adverse Effect.
(h) The execution, delivery and performance by the Issuers of
this Agreement, the Securities and the Indenture and the consummation
by the Issuers of the transactions contemplated hereby and thereby and
by the Prospectus and the fulfillment of the terms hereof and thereof,
will not violate, conflict with or constitute or result in a breach of
or a default under (or an event that, with notice or lapse of time, or
both, would constitute a breach of or a default under) any of (a) the
terms or provisions of any contract, indenture, mortgage, deed of
trust, loan agreement, note, lease, license, franchise agreement,
permit, certificate or agreement or instrument to which any of the
Company or the Subsidiaries is a party or to which any of their
respective properties or assets are subject, which violation, conflict,
breach or default would, individually or in the aggregate, have a
Material Adverse Effect, (b) the certificate of incorporation or bylaws
of any of the Company or the Subsidiaries or (c) (assuming compliance
with all applicable state securities or "Blue Sky" laws) any statute,
judgment, decree, order, rule or regulation of any court or
governmental agency or other body applicable to the Company or the
Subsidiaries or any of their respective properties or assets, which
violation, conflict, breach or default would, individually or in the
aggregate, have a Material Adverse Effect.
(i) The audited consolidated financial statements and
schedules included in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) present fairly the consolidated financial position, results
of operations and cash flows of such entities at the dates and for the
periods to which they relate and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis,
except as otherwise stated therein; the unaudited consolidated
financial statements and the related
<PAGE> 8
-8-
notes included in the Registration Statement and the Prospectus (or, if
the Prospectus is not in existence, the most recent Preliminary
Prospectus) present fairly the consolidated financial position, results
of operations and cash flows of such entities at the dates and for the
periods to which they relate, subject to year end audit adjustments and
have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis except as otherwise stated
therein and have been prepared on a basis substantially consistent with
that of the audited financial statements referred to above except as
otherwise stated therein; the summary and selected financial and
statistical data included in the Registration Statement and the
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus) present fairly the information shown therein
and have been prepared and compiled on a basis consistent with the
audited and unaudited financial statements included therein, except as
otherwise stated therein; and Deloitte & Touche L.L.P., which has
examined certain of such financial statements and schedules as set
forth in its reports included in the Registration Statement and the
Prospectus, is an independent public accounting firm as required by the
Act.
(j) The pro forma financial statements and other pro forma
financial information (including the notes thereto) included in the
Registration Statement and the Prospectus (or, if the Prospectus is not
in existence, the most recent Preliminary Prospectus) (A) have been
prepared in accordance with applicable requirements of Regulation S-X
promulgated under the Act and (B) have been properly computed on the
bases described therein; and the assumptions used in the preparation of
the pro forma financial statements and other pro forma financial
information included in the Registration Statement and the Prospectus
(or, if the Prospectus is not in existence, the most recent Preliminary
Prospectus) are reasonable and the adjustments used therein are
appropriate to give effect to the transactions or circumstances
referred to therein.
(k) Except as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus), there is not pending or, to the best knowledge of the
Issuers, threatened any action, suit, proceeding, inquiry or
investigation, governmental or otherwise, to which any of the Company
or the Subsidiaries is a party, or to which their respective properties
or assets are subject, before or brought by any court, arbitrator or
governmental
<PAGE> 9
-9-
agency or body, that, if determined adversely to the Company or the
Subsidiaries would, individually or in the aggregate, have a Material
Adverse Effect or that seeks to restrain, enjoin, prevent the
consummation of or otherwise challenge the issuance or sale of the
Securities to be sold hereunder or the application of the proceeds
therefrom or the other transactions described in the Prospectus.
(l) None of the Company or the Subsidiaries has any liability
for any prohibited transaction or funding deficiency or any complete or
partial withdrawal liability with respect to any pension, profit
sharing or other plan which is subject to the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), to which any of the
Company or the Subsidiaries makes or ever has made a contribution and
in which any employee of any of the Company or the Subsidiaries is or
has ever been a participant. With respect to such plans, the Company
and the Subsidiaries are in compliance in all material respects with
all provisions of ERISA.
(m) The Company and the Subsidiaries own or possess adequate
licenses or other rights to use all patents, trademarks, service marks,
trade names, copyrights and know-how that are necessary to conduct
their business as described in the Prospectus (or, if the Prospectus is
not in existence, the most recent Preliminary Prospectus).
(n) None of the Company or the Subsidiaries has received any
notice of infringement of or conflict with (or knows of any such
infringement of or conflict with) asserted rights of others with
respect to any patents, trademarks, service marks, trade names,
copyrights or know-how that, if such assertion of infringement or
conflict were sustained, would, individually or in the aggregate, have
a Material Adverse Effect.
(o) Each of the Company and the Subsidiaries has obtained all
licenses, permits, franchises and other governmental authorizations,
the lack of which would, individually or in the aggregate, have a
Material Adverse Effect.
(p) Subsequent to the respective dates as of which information
is given in the Registration Statement and the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus)
and except as described therein, (i) the Company and the Subsidiaries
have not
<PAGE> 10
-10-
incurred any material liabilities or obligations, direct or contingent,
or entered into any material transactions, in either case whether or
not in the ordinary course of business, and (ii) the Company and the
Subsidiaries have not purchased any of their respective outstanding
capital stock, or declared, paid or otherwise made any dividend or
distribution of any kind on any of their respective capital stock or
otherwise.
(q) There are no legal or governmental proceedings required to
be described in the Registration Statement or Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary Prospectus)
that are not described as required, nor are there any contracts or
other documents required to be described in the Registration Statement
or Prospectus (or, if the Prospectus is not in existence, the most
recent Preliminary Prospectus) or to be filed as exhibits to the
Registration Statement by the Act that have not been described or filed
as required. Except as described in the Prospectus (or, if the
Prospectus is not in existence, the most recent Preliminary
Prospectus), none of the Company or the Subsidiaries is in default
under any of the contracts filed as exhibits to the Registration
Statement, has received a notice or claim of any such default or has
knowledge of any breach of any of the contracts filed as exhibits to
the Registration Statement by the other party or parties thereto,
except such defaults or breaches as would not, individually or in the
aggregate, have a Material Adverse Effect.
(r) None of the Company or the Subsidiaries has taken or will
take any action that would cause this Agreement or the issuance or sale
of the Securities to violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System, in each case as in effect, or
as the same may hereafter be in effect, on the Closing Date.
(s) Each of the Company and the Subsidiaries has good and
marketable title to all real property described in the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary
Prospectus) as being owned by it and good and marketable title to the
leasehold estate in the real property described therein as being leased
by it, free and clear of all liens, charges, encumbrances or
restrictions, except, in each case, as described in the Prospectus (or,
if the Prospectus is not in existence, the most recent Preliminary
Prospectus) or such as would not, individually or in the aggregate,
have a Material Adverse
<PAGE> 11
-11-
Effect. All leases, contracts and agreements, including those referred
to in or filed as exhibits to the Registration Statement, to which the
Company or any of the Subsidiaries is a party or by which any of them
is bound are valid and enforceable against the Company or any such
Subsidiary, are, to the knowledge of the Issuers, valid and enforceable
against the other party or parties thereto and are in full force and
effect.
(t) Each of the Company and the Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns,
except where the failure to so file such returns would not,
individually or in the aggregate, have a Material Adverse Effect, and
have paid all taxes shown as due thereon; and other than tax
deficiencies which the Company or any Subsidiary is contesting in good
faith and for which adequate reserves have been provided, and there is
no tax deficiency that has been asserted against the Company or any
Subsidiary that would, individually or in the aggregate, have a
Material Adverse Effect.
(u) (i) Immediately after the consummation of the transactions
contemplated by the Agreement, the fair value and present fair saleable
value of the assets of the Company will exceed the sum of its stated
liabilities and identified contingent liabilities; and (ii) the Company
is not, nor will it be, after giving effect to the execution, delivery
and performance of the Agreement, and the consummation of the
transactions contemplated hereby, (a) left with unreasonably small
capital with which to carry on its business as it is proposed to be
conducted, (b) unable to pay its debts (contingent or otherwise) as
they mature or (c) insolvent.
(v) Except as disclosed in the Registration Statement or
Prospectus (or, if the Prospectus is not in existence, the most recent
Preliminary Prospectus), and except as would not individually or in the
aggregate have a Material Adverse Effect (A) each of the Company and
the Subsidiaries is in compliance with all applicable Environmental
Laws, (B) each of the Company and the Subsidiaries has made all filings
and provided all notices required under any applicable Environmental
Law, and has all permits, authorizations and approvals required under
any applicable Environmental Laws and is in compliance with their
requirements, (C) there is no civil, criminal or administrative action,
suit, demand, claim, hearing, notice of violation, investigation,
proceeding, notice or demand letter or request for
<PAGE> 12
-12-
information pending or, to the best knowledge of the Issuers,
threatened against the Company or any of the Subsidiaries under any
Environmental Law, (D) no Lien has been recorded under any
Environmental Law with respect to any assets, facility or property
owned, operated, leased or controlled by the Company or any of the
Subsidiaries, (E) neither the Company nor any of the Subsidiaries has
received notice that it has been identified as a potentially
responsible party under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended ("CERCLA") or any
comparable state law, (F) no property or facility of the Company or any
of the Subsidiaries is (i) listed or proposed for listing on the
National Priorities List under CERCLA or (ii) listed in the
Comprehensive Environmental Response, Compensation, Liability
Information System List promulgated pursuant to CERCLA, or on any
comparable list maintained by any state or local governmental
authority.
For purposes of this Agreement, the following terms shall have
the following meanings: "Environmental Law" means any federal, state,
local or municipal statute, law, rule, regulation, ordinance, code,
policy or rule of common law and any judicial or administrative
interpretation thereof, including any judicial or administrative order,
consent decree or judgment binding on any of the Issuers or the
Subsidiaries, relating to pollution or protection of the environment or
health or safety or any chemical, material or substance, that is
subject to regulation thereunder. "Environmental Claims" means any and
all administrative, regulatory or judicial actions, suits, demands,
demand letters, claims, notices of responsibility, information
requests, liens, notices of noncompliance or violation, investigations
or proceedings relating in any way to any Environmental Law.
(w) None of the Company or the Subsidiaries is required to
register as an "investment company" or a company "controlled by" an
"investment company" within the meaning of the Investment Company Act
of 1940, as amended.
(x) Except as stated in the Prospectus (or, if the Prospectus
is not in existence, the most recent Preliminary Prospectus) none of
the Company or the Subsidiaries or any of such entities' directors,
officers or controlling persons, has taken, directly or indirectly, any
action designed, or that might reasonably be expected, to cause or
result, under the Act or otherwise, in, or that has
<PAGE> 13
-13-
constituted, stabilization or manipulation of the price of any security
of any Issuer to facilitate the sale or resale of the Securities (it
being understood that no representation or warranty is made as to any
actions by the Underwriters).
(y) Each of the Company and the Subsidiaries is in compliance
with all provisions of Section 517.075 of Florida Statutes, as amended,
relating to issuers doing business with Cuba.
3. Purchase, Sale and Delivery of the Securities. On the basis
of the representations, warranties, agreements and covenants herein contained
and subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Underwriters, and each of the Underwriters severally
agrees to purchase from the Company, at [ ]% of their principal amount, the
respective aggregate principal amounts of the Notes set forth opposite their
respective names on Exhibit C hereto. The obligations of the Underwriters under
this Agreement are several and not joint.
One or more certificates in definitive form for the Notes that
the Underwriters have agreed to purchase hereunder, and in such denomination or
denominations and registered in such name or names, as each Underwriter requests
upon notice to the Company at least 48 hours prior to the Closing Date, shall be
delivered by or on behalf of the Company, against payment by or on behalf of the
Underwriters, of the purchase price therefor by wire transfer of immediately
available funds net of the overnight cost of such funds to the account of the
Company previously designated by it in writing. Such delivery of and payment for
the Securities shall be made at the offices of Cahill Gordon & Reindel, 80 Pine
Street, New York, New York 10005, at 9:00 A.M., New York time, on [ ], 1996, or
at such date as the Underwriters and the Company may agree upon or as the
Underwriters may determine pursuant to Section 7(i) hereof, such time and date
of delivery against payment being herein referred to as the "Closing Date." The
Company will make such certificate or certificates for the Securities available
for checking and packaging by the Underwriters at the offices in New York, New
York of CIBC Wood Gundy Securities Corp. at least 24 hours prior to the Closing
Date.
The Issuers hereby confirm their engagement of Alex. Brown &
Sons Incorporated and Alex. Brown & Sons Incorporated hereby confirms its
engagement with the Issuers to render services as, a "qualified independent
underwriter" within the
<PAGE> 14
-14-
meaning of Rules 2720(b)(15)(A) through (b)(15)(G) of the Conduct
Rules of the NASD with respect to the offering and sale of the
Securities. Alex. Brown & Sons Incorporated, solely in its
capacity as qualified independent underwriter and not otherwise,
is referred to herein as the "Independent Underwriter."
4. Offering by the Underwriters. After the Registration
Statement becomes effective, the Underwriters propose to offer for sale to the
public the Securities at the price and upon the terms set forth in the
Prospectus. The Underwriters will notify the Issuers when such offer and sale
has been completed.
5. Certain Covenants. The Issuers jointly and severally
covenant and agree with the Underwriters that:
(i) Each of the Issuers will use its best efforts to cause the
Registration Statement, if not effective at the time of execution of
this Agreement, and any amendments thereto, to become effective
promptly. If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in
reliance upon Rule 430A of the rules and regulations of the Commission
under the Act, then immediately following the execution of this
Agreement, the Issuers will prepare, and thereafter the Issuers will
file or transmit for filing with the Commission in accordance with such
Rule 430A and Rule 424(b) of the rules and regulations of the
Commission under the Act, copies of an amended Prospectus relating to
such Registration Statement, or, if required by such Rule 430A, a
post-effective amendment to such Registration Statement (including an
amended Prospectus), containing all information so omitted. During any
time when a prospectus relating to the Securities is required to be
delivered under the Act, the Issuers will comply with all requirements
imposed by the Act, the Exchange Act and the Trust Indenture Act to the
extent necessary to permit the continuance of sales or dealings in the
Securities in accordance with the provisions hereof and of the
Prospectus. The Issuers will give each Underwriter notice of their
intention to file any amendment to the Registration Statement
(including any post-effective amendment) or any amendment or supplement
to the Prospectus (including any revised prospectus that the Issuers
propose for use by the Underwriters in connection with the offering of
the Securities that differs from any prospectus on file at the
Commission at the time the Registration Statement including such
prospectus becomes effective, whether or not such revised prospectus is
<PAGE> 15
-15-
required to be filed pursuant to Rule 424(b) of the rules and
regulations of the Commission under the Act), will furnish the
Underwriters with copies of any such amendment or supplement a
reasonable amount of time prior to such proposed filing or use, as the
case may be, and will not file any such amendment or supplement or use
any such prospectus to which the Underwriters or counsel for the
Underwriters shall reasonably object or which is not in compliance with
the Act. The Issuers will advise the Underwriters, promptly after they
receive notice thereof, of the time when the Registration Statement or
any amendment thereto has been filed or declared effective or the
Prospectus or any amendment or supplement thereto has been filed.
(ii) The Issuers will advise the Underwriters, promptly after
receiving notice or obtaining knowledge thereof, of (a) the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or any amendment thereto or any order preventing
or suspending the use of any Preliminary Prospectus or the Prospectus,
or any amendment or supplement thereto, (b) the suspension of the
qualification of the Securities for offering or sale in any
jurisdiction, (c) the institution, threatening or contemplation of any
proceeding for any such purpose or (d) any request made by the
Commission for amending the Registration Statement, for amending or
supplementing the Prospectus or for additional information. Each of the
Issuers will use its best efforts to prevent the issuance of any such
stop order and, if any such stop order is issued, to obtain the
withdrawal thereof as promptly as possible.
(iii) The Issuers will cooperate with the Underwriters in
arranging for the qualification of the Securities for offering and sale
under the securities or "Blue Sky" laws of such jurisdictions as the
Underwriters may designate and will continue such qualifications in
effect for as long as may be necessary to complete the distribution of
the Securities by the Underwriters; provided, however, that in
connection therewith none of the Issuers shall be required to qualify
as a foreign corporation or to execute a general consent to service of
process in any jurisdiction or to take any other action that would
subject it to general service of process or to taxation in respect of
doing business in any jurisdiction in which it is not otherwise
subject.
<PAGE> 16
-16-
(iv) If any event shall occur as a result of which it is
necessary, in the opinion of counsel for the Underwriters, to amend or
supplement the Prospectus in order to make such Prospectus not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if for any other reason it shall be
necessary to amend or supplement the Prospectus in order to comply with
the Act and the Exchange Act, the Issuers shall (subject to Section
5(i)) forthwith amend or supplement such Prospectus so that, as so
amended or supplemented, such Prospectus will not include an untrue
statement of a material fact or omit to state a material fact necessary
in order to make the statements therein, in the light of the
circumstances existing at the time it is delivered to a purchaser, not
misleading and will comply in all material respects with the Act and
the Exchange Act, and the Issuers will furnish to the Underwriters,
without charge, a reasonable number of copies of such amendment or
supplement.
(v) The Issuers will, without charge, provide (a) to each
Underwriter and to counsel for the Underwriters a signed copy of each
registration statement originally filed with respect to the Securities
and each amendment thereto (in each case including exhibits thereto)
and (b) so long as a prospectus relating to the Securities is required
to be delivered under the Act, as many copies of each Preliminary
Prospectus or Prospectus or any amendment or supplement thereto as the
Underwriters may reasonably request.
(vi) The Company will make generally available to its security
holders as soon as practicable, but not later than 90 days after the
close of the period covered thereby, a consolidated earning statement
(in form complying with the provisions of Rule 158 of the rules and
regulations of the Commission under the Act ("Rule 158")) covering a
twelve-month period beginning not later than the first day of the
fiscal quarter of the Company next following the "effective date" (as
defined in Rule 158) of the Registration Statement, which consolidated
earning statement shall satisfy the provisions of Section 11(a) of the
Act.
(vii) During the period of five years hereafter, the Company
will furnish to the Underwriters (a) as soon as available, a copy of
each report or other communication (financial or otherwise) of the
Company mailed to the Trustee or holders of the Notes, stockholders or
filed with the Commission, and (b) from time to time such other
<PAGE> 17
-17-
information concerning the Company as you may reasonably
request.
(viii) If this Agreement shall terminate or shall be
terminated after execution pursuant to any provisions hereof (other
than solely by reason of a default by the Underwriters of their
obligations hereunder after all conditions hereunder have been
satisfied in accordance herewith) or if this Agreement shall be
terminated by the Underwriters because of any failure or refusal on the
part of the Issuers to comply with the terms or fulfill any of the
conditions of this Agreement, the Company agrees to reimburse you for
all reasonable out-of-pocket expenses (including fees and expenses of
counsel for the Underwriters) incurred by you in connection herewith.
(ix) The Company will apply the net proceeds from the sale of
the Securities as set forth under "Use of Proceeds" in the Prospectus.
(x) Prior to the Closing Date, the Company will furnish to the
Underwriters, as soon as they have been prepared by or are available to
the Company, a copy of any unaudited interim consolidated financial
statements of the Company and the Subsidiaries, for any period
subsequent to the period covered by the most recent financial
statements appearing in the Registration Statement and the Prospectus.
6. Expenses. Notwithstanding any termination of this Agreement
(pursuant to Section 10 or otherwise), the Issuers jointly and severally agree
to pay the following costs and expenses and all other costs and expenses
incident to the performance by the Issuers of their obligations hereunder: (i)
the preparation, printing or reproduction, and filing with the Commission of the
registration statement (including financial statements and exhibits thereto),
each Preliminary Prospectus, the Prospectus and each amendment or supplement to
any of them; (ii) the printing (or reproduction) and delivery (including
postage, air freight charges and charges for counting and packaging) of such
copies of the registration statement, each Preliminary Prospectus, the
Prospectus and all amendments or supplements to any of them as may be reasonably
requested for use in connection with the offering and sale of the Securities;
(iii) the preparation, printing, authentication, issuance and delivery of
certificates for the Securities, including any stamp taxes in connection with
the original issuance and sale of the Notes and trustees' fees; (iv) the
reproduction and delivery of this Agreement, the preliminary and supplemental
"Blue Sky"
<PAGE> 18
-18-
memoranda and all other agreements or documents reproduced and delivered in
connection with the offering of the Securities; (v) the registration or
qualification of the Securities for offer and sale under the securities or Blue
Sky laws of the several states (including filing fees and the fees, expenses and
disbursements of Cahill Gordon & Reindel, counsel to the Underwriters, relating
to such registration and qualification); (vi) the filing fees in connection with
any filings required to be made with the National Association of Securities
Dealers, Inc. (the "NASD") (including the fees and disbursements of Cahill
Gordon & Reindel, counsel to the Underwriters, in respect thereof and in
connection with obtaining an opinion of the NASD concerning the fairness of the
terms and arrangements of the underwriting of the Securities); (vii) the
transportation and other expenses incurred by or on behalf of Company
representatives in connection with presentations to prospective purchasers of
the Securities; (viii) the fees and expenses of the Company's accountants and
the fees and expenses of counsel (including local and special counsel) for the
Issuers; (ix) fees and expenses of the Trustee including fees and expenses of
its counsel; and (x) any fees charged by investment rating agencies for the
rating of the Securities.
7. Conditions of the Underwriters' Obligations. The several
obligations of the Underwriters to purchase and pay for the Securities are
subject to the accuracy of the representations and warranties contained herein,
to the performance by the Issuers of their respective covenants and agreements
hereunder and to the following additional conditions unless waived in writing by
the Underwriters:
(i) If the registration statement originally filed with
respect to any of the Securities, or any amendment thereto filed prior
to the Closing Date has not been declared effective as of the time of
execution hereof, such registration statement or such amendment shall
have been declared effective not later than 12:00 noon, New York City
time, on the date (which shall not be later than the second business
day after the date of execution hereof) on which the amendment to such
registration statement originally filed with respect to such
Securities, or to the Registration Statement, as the case may be,
containing information regarding the initial public offering price of
such Securities has been filed with the Commission, or such later time
and date as shall have been consented to by the Underwriters; if
required, the Prospectus and any amendment or supplement thereto shall
have been filed in accordance with Rule 424(b) under the Act; no stop
order suspending the
<PAGE> 19
-19-
effectiveness of the Registration Statement or any amendment thereto or
the qualification of the Indenture under the Trust Indenture Act shall
have been issued and no proceedings for that purpose shall have been
instituted or to the knowledge of the Issuers or the Underwriters,
shall be threatened or contemplated by the Commission; and the Issuers
shall have complied with or satisfactorily responded to any request of
the Commission for additional information.
(ii) The Underwriters shall have received an opinion of
counsel to the Issuers in form and substance satisfactory to the
Underwriters and counsel to the Underwriters, dated the Closing Date,
of Powell, Goldstein, Frazer & Murphy, substantially in the form of
Exhibit D hereto. In rendering such opinion, Powell, Goldstein, Frazer
& Murphy shall have received and may rely upon such certificates and
other documents and information, including one or more opinions of
local counsel reasonably acceptable to the Underwriters and Cahill
Gordon & Reindel, counsel to the Underwriters, as they may reasonably
request to pass upon such matters.
(iii) The Underwriters shall have received an opinion, dated
the Closing Date, of Cahill Gordon & Reindel, counsel to the
Underwriters, with respect to the sufficiency of certain legal matters
relating to this Agreement and such other related matters as the
Underwriters may require. In rendering such opinion, Cahill Gordon &
Reindel shall have received and may rely upon such certificates and
other documents and information as they may reasonably request to pass
upon such matters. In addition, in rendering their opinion, Cahill
Gordon & Reindel may state that its opinion is limited to matters of
New York, Delaware corporate and federal law.
(iv) The Underwriters shall have received from Deloitte &
Touche L.L.P., independent public accountants for the Issuers,
"comfort" letters dated the date hereof and the Closing Date, in form
and substance reasonably satisfactory to the Underwriters and Cahill
Gordon & Reindel, counsel to the Underwriters.
(v) The representations and warranties of the Issuers
contained in this Agreement shall be true and correct on and as of the
Closing Date; the Issuers shall have complied in all material respects
with all agreements and satisfied all conditions on their part to be
performed or satisfied hereunder at or prior to the Closing Date.
<PAGE> 20
-20-
(vi) There shall not have been any change in the capital stock
of the Issuers nor any material increase in the consolidated short-term
or long-term debt of the Issuers from that set forth or contemplated in
the Registration Statement or the Prospectus (or any amendment or
supplement thereto) and (b) the Issuers shall not have any liabilities
or obligations, contingent or otherwise (whether or not in the ordinary
course of business), that are material to the Issuers, taken as a
whole, other than those reflected in the Registration Statement or the
Prospectus (or any amendment or supplement thereto).
(vii) None of the issuance and sale of the Securities pursuant
to this Agreement or the Prospectus shall be enjoined (temporarily or
permanently) and no restraining order or other injunctive order shall
have been issued; and there shall not have been any legal action,
order, decree or other administrative proceeding instituted or
threatened against any of the Issuers or against you relating to the
issuance of the Securities or the Underwriters' activities in
connection therewith or any other transactions contemplated by this
Agreement or the Prospectus.
(viii) Subsequent to the effective date of this Agreement,
there shall not have occurred (i) any change, or any development
involving a prospective change, in or affecting the condition
(financial or other), business, properties, prospects or results of
operations of the Company and the Subsidiaries, taken as a whole, not
contemplated by the Prospectus that, in your opinion, would materially
adversely affect the market for the Securities, or (ii) any event or
development relating to or involving any of the Company or the
Subsidiaries or any of the officers or directors of the Company or the
Subsidiaries that makes any statement made in the Prospectus untrue or
that, in the opinion of the Issuers and their counsel or the
Underwriters and their counsel, requires the making of any addition to
or change in the Prospectus in order to state a material fact required
by the Act or any other law to be stated therein or necessary in order
to make the statements made therein not misleading.
(ix) The Underwriters shall have received certificates, dated
the Closing Date and signed by the chief executive officer and the
chief financial officer of the Company and each Subsidiary Guarantor
(or such other officers as are acceptable to the Underwriters), to the
effect that:
<PAGE> 21
-21-
a. All of the representations and warranties of the
Issuers set forth in this Agreement are true and
correct as if made on and as of the Closing Date and
the Issuers have complied in all material respects
with all agreements and satisfied all conditions on
their part to be performed or satisfied at or prior
to the Closing Date.
b. No stop order suspending the effectiveness of the
Registration Statement or any amendment thereto or
the qualification of the Indenture under the Trust
Indenture Act has been issued, and no proceedings for
those purposes have been instituted or, to the best
of the Issuer's knowledge, are threatened or
contemplated by the Commission.
c. None of the issuance and sale of the Securities
pursuant to this Agreement or the Prospectus have
been enjoined (temporarily or permanently) and no
restraining order or other injunctive order has
been issued and there has not been any legal
action, order, decree or other administrative
proceeding instituted or threatened against any of
the Issuers relating to the issuance of the
Securities or the Underwriters' activities in
connection therewith or in connection with any
other transactions contemplated by this Agreement
or the Prospectus.
d. Subsequent to the effective date of this
Agreement, there has not occurred (i) any change,
or any development involving a prospective change,
in or affecting the condition (financial or
other), business, properties, prospects or results
of operations of the Company and the Subsidiaries,
taken as a whole, not contemplated by the
Prospectus that would materially adversely affect
the market for the Securities, or (ii) any event
or development relating to or involving any of the
Company or the Subsidiaries or any of the
respective officers or directors of the Company or
the Subsidiaries that makes any statement made in
the Prospectus untrue or that requires the making
of any addition to or change in the Prospectus in
order to state a material fact required by the Act
or any other law to be stated therein or necessary
in order to make the statements made therein not
misleading.
<PAGE> 22
-22-
e. There has not been any change in the capital stock
of the Company or the Subsidiaries nor any
material increase in the consolidated short-term
or long-term debt of the Company from that set
forth or contemplated in the Registration
Statement or the Prospectus (or any amendment or
supplement thereto) and (b) the Company and the
Subsidiaries have no liabilities or obligations,
contingent or otherwise (whether or not in the
ordinary course of business), that are material to
the Company and the Subsidiaries, taken as a
whole, other than those reflected in the
Registration Statement or the Prospectus (or any
amendment or supplement thereto).
(x) The Issuers shall have furnished or caused to be furnished
to you such further certificates and documents as the Underwriters
shall have reasonably requested.
Any certificate or document signed by any officer of an Issuer
and delivered to the Underwriters or to counsel for the Underwriters, shall be
deemed a representation and warranty by such Issuer, to each Underwriter as to
the statements made therein.
All such opinions, certificates, letters, schedules, documents
or instruments delivered pursuant to this Agreement will comply with the
provisions hereof only if they are reasonably satisfactory in all material
respects to the Underwriters and counsel to the Underwriters. The Issuers shall
furnish to the Underwriters such conformed copies of such opinions,
certificates, letters, schedules, documents and instruments in such quantities
as the Underwriters shall reasonably request.
8. Indemnification and Contribution. (a) Each Issuer jointly
and severally agrees to indemnify and hold harmless each Underwriter, and each
person, if any, who controls either of the Underwriters within the meaning of
Section 15 of the Act or Section 20 of the Exchange Act, against any losses,
claims, damages or liabilities to which such Underwriter or such controlling
person may become subject under the Act, the Exchange Act or otherwise, insofar
as any 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 (A) the registration
<PAGE> 23
-23-
statement originally filed with respect to the Securities or any
amendment thereto or any Preliminary Prospectus or the Prospectus or
any amendment or supplement thereto or (B) any application or other
document, or any amendment or supplement thereto, executed by any
Issuer or based upon written information furnished by or on behalf of
any Issuer 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"); or
(ii) the omission or alleged omission to state, in the
registration statement or any amendment thereto, any Preliminary
Prospectus or the 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, in the light of the
circumstances under which they were made, not misleading, and will
reimburse, as incurred, each Underwriter and each such controlling
person for any legal or other expenses reasonably incurred by such
Underwriter 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 none of the Issuers will be liable in any such
case to an Underwriter or any controlling person of such Underwriter 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 any
amendment thereto, any Preliminary Prospectus or the Prospectus or any
amendment or supplement thereto, or any Application in reliance upon
and in conformity with written information furnished to the Issuers by
or on behalf of such Underwriter specifically for use therein; and
provided, further, that none of the Issuers will be liable to an
Underwriter or any person controlling such Underwriter with respect to
any such untrue statement or omission made in any Preliminary
Prospectus that is corrected in the Prospectus (or any amendment or
supplement thereto) if the person asserting any such loss, claim,
damage or liability purchased Securities from such Underwriter in
reliance upon the Preliminary Prospectus but was not sent or given a
copy of the Prospectus (as amended or supplemented) that was made
available by the Issuers to such Underwriter at or prior to the written
confirmation of the sale of the Securities to such person in any case
where such delivery of such Prospectus (as so amended or supplemented)
is required by
<PAGE> 24
-24-
the Act, unless such failure to deliver such Prospectus (as amended or
supplemented) was a result of noncompliance by the Issuers with Section
5(v)(b) of this Agreement. This indemnity agreement will be in addition
to any liability that the Issuers may otherwise have to the indemnified
parties. None of the Issuers will, without the prior written consent of
the Underwriters, settle or compromise or consent to the entry of any
judgment in any pending or threatened claim, action, suit or proceeding
in respect of which indemnification by the Underwriters may be sought
hereunder (whether or not the Underwriters or any person who controls
either of the Underwriters within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act is a party to such claim, action,
suit or proceeding), unless such settlement, compromise or consent
includes an unconditional release of the Underwriters and each such
controlling person from all liability arising out of such claim,
action, suit or proceeding.
(b) Each Issuer also jointly and severally agrees to indemnify
and hold harmless the Independent Underwriter and each person, if any, who
controls the Independent Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities incurred as a result of the Independent Underwriter's participation
as a "qualified independent underwriter" within the meaning of Rules
2720(b)(15)(A) through (b)(15)(G) of the Conduct Rules of the NASD in connection
with the offering of the Securities, except for any losses, claims, damages,
liabilities and judgments resulting from the Independent Underwriter's or such
controlling person's willful misconduct or gross negligence.
(c) Each Underwriter will severally and not jointly indemnify
and hold harmless the Issuers, their respective directors, officers who signed
the Registration Statement and each person, if any, who controls any of the
Issuers within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any losses, claims, damages or liabilities to which any of
the Issuers or any such director, officer or controlling person may become
subject under the Act, the Exchange Act, or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in the Registration Statement or any amendment thereto, any
Preliminary Prospectus or the Prospectus or any amendment or supplement thereto
or any Application, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement was made in reliance upon and
in
<PAGE> 25
-25-
conformity with written information furnished to any of the Issuers by or on
behalf of such Underwriter 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 any of the Issuers
or any such director, officer or controlling person in connection with
investigating or defending against or appearing as a third-party witness in
connection with any such loss, claim, damage, liability or action in respect
thereof. This indemnity agreement will be in addition to any liability that the
Underwriters may otherwise have to the indemnified parties. The Underwriters
will not, without the prior written consent of the Issuers, settle or compromise
or consent to the entry of any judgment in any pending or threatened claim,
action, suit or proceeding in respect of which indemnification by any of the
Issuers may be sought hereunder (whether or not any of the Issuers or any person
who controls the Issuers within the meaning of Section 15 of the Act or Section
20 of the Exchange Act is a party to such claim, action, suit or proceeding),
unless such settlement, compromise or consent includes an unconditional release
of any such Issuer and each such controlling person from all liability arising
out of such claim, action, suit or proceeding or otherwise with the consent of
the Issuers.
(d) Promptly after receipt by an indemnified party under this
Section 8 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 8, notify the indemnifying party of the commencement thereof;
but the omission so to notify the indemnifying party will not relieve it from
any liability that it may have to any indemnified party except to the extent
that such omission results in the forfeiture by the indemnifying party of
substantial rights and defenses. In case any such action is brought against any
indemnified party, and such indemnified party 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 reasonably
satisfactory to such indemnified party; provided, however, that if the named
parties in any such action (including any impleaded parties) 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 that are different from or additional to
those available to any such indemnifying party, then the indemnifying parties
shall not have the right to direct the defense of such action on behalf of such
indemnified party or
<PAGE> 26
-26-
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 so 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 8 for any legal or
other expenses, other than reasonable and documented out-of-pocket 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 immediately 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 the Underwriters in the
case of paragraph (b) of this Section 8 or the Issuers in the case of paragraph
(c) of this Section 8, representing the indemnified parties under such paragraph
(a) or paragraph (c), as the case may be, who are parties to such action or
actions); (ii) the indemnifying party has authorized in writing the employment
of counsel for the indemnified party at the expense of the indemnifying parties;
or (iii) the indemnifying party shall have failed to assume the defense or
retain counsel reasonably satisfactory to the indemnified party. If indemnity is
sought pursuant to paragraph (b) of this Section 8, then in addition to such
counsel for the indemnified parties, the indemnifying party shall be liable for
the reasonable fees and expenses of not more than one separate counsel (in
addition to any necessary local counsel) for the Independent Underwriter in its
capacity as a "qualified independent underwriter" and all persons, if any, who
control the Independent Underwriter within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act if, in the reasonable judgment of the
Independent Underwriter, there may exist a conflict of interest between the
Independent Underwriter and the other indemnified parties. In the case of any
such separate counsel for the Independent Underwriter and such control persons
of the Independent Underwriter, such counsel, which shall be reasonably
acceptable to the Issuers, shall be designated in writing by the Independent
Underwriter. After such notice from the indemnifying parties to such indemnified
party (so long as the indemnified party shall have informed the indemnifying
parties of such action in accordance with this Section 8 on a timely basis prior
to the indemnified party seeking indemnification hereunder), the indemnifying
parties will not be
<PAGE> 27
-27-
liable under this Section 8 for the costs and expenses of any settlement of such
action effected by such indemnified party without the consent of the
indemnifying party, unless such indemnified party waived its rights under this
Section 8, in which case the indemnified party may effect such a settlement
without such consent.
(e) In circumstances in which the indemnity agreement provided
for in the preceding paragraphs of this Section 8 is unavailable or insufficient
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). The relative benefits received by the Issuers on the one hand and the
Underwriters on the other shall be deemed to be in the same proportion as the
total proceeds from the offering of the Securities (before deducting expenses)
received by the Issuers bear to the total underwriting discounts and commissions
received by the Underwriters. 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 relates to information supplied by the Issuers on the one hand,
or the Underwriters on the other, the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission, and any other equitable considerations appropriate in the
circumstances. The Issuers and the Underwriters agree that the Independent
Underwriter will not receive any additional benefits hereunder for serving as
the Independent Underwriter in connection with the offering and sale of the
Securities. The Issuers and the Underwriters agree that it would not be
equitable if the amount of such contribution were determined by pro rata or per
capita allocation (even if the Issuers on the one hand and the Underwriters on
the other hand were treated as one entity for such purpose) or by any other
method of allocation that does not
<PAGE> 28
-28-
take into account the equitable considerations referred to in the first sentence
of this paragraph (e). Notwithstanding any other provision of this paragraph
(e), the Underwriters shall not be obligated to make contributions hereunder
that in the aggregate exceed the total underwriting discounts and commissions
received by the Underwriters under this Agreement, less the aggregate amount of
any damages that the Underwriters have otherwise been required to pay by reason
of the untrue or alleged untrue statements, and no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this paragraph (e), each person, if any, who
controls any of the Underwriters within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act shall have the same rights to contribution as the
Underwriters, and each director of any of the Issuers, each officer of any of
the Issuers who signed the Registration Statement and each person, if any, who
controls any of the Issuers within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, shall have the same rights to contribution as
the Issuers.
9. Survival Clause. The respective representations,
warranties, agreements, covenants, indemnities and other statements of the
Issuers, their respective officers and the Underwriters set forth in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement shall remain in full force and effect, regardless of (i) any
investigation made by or on behalf of the Issuers, any of their respective
officers or directors, the Underwriters or any controlling person referred to in
Section 8 hereof and (ii) delivery of and payment for the Securities, and shall
be binding upon and shall inure to the benefit of, any successors, assigns,
heirs, personal representatives of the Issuers, the Underwriters and indemnified
parties referred to in Section 8 hereof. The respective agreements, covenants,
indemnities and other statements set forth in Sections 6 and 8 hereof shall
remain in full force and effect, regardless of any termination or cancellation
of this Agreement.
10. Termination. (a) This Agreement may be
terminated in the sole discretion of the Underwriters by notice
to the Issuers given in the event that the Issuers shall have
failed, refused or been unable to satisfy all conditions on its
respective part to be performed or satisfied hereunder on or
prior to the Closing Date or, if at or prior to the Closing Date:
(i) any of the Company or the Subsidiaries shall have
sustained any loss or interference with respect to their
<PAGE> 29
-29-
respective businesses or properties from fire, flood, hurricane,
earthquake, accident or other calamity, whether or not covered by
insurance, or from any labor dispute or any legal or governmental
proceeding, which loss or interference has had or has a material
adverse effect on the business, condition (financial or other),
properties, prospects or results of operations of the Company and the
Subsidiaries, taken as a whole, or there shall have been any material
adverse change, or any development involving a prospective material
adverse change (including without limitation a change in management or
control of the Issuers), in the business, condition (financial or
other), properties, prospects or results of operations of the Company
and the Subsidiaries, taken as a whole, except as described in or
contemplated by the Prospectus (exclusive of any amendment or
supplement thereto);
(ii) trading in securities generally on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market
shall have been suspended or minimum or maximum prices shall have been
established on any such exchange;
(iii) a banking moratorium shall have been declared by
New York or United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or (C) any material change in the financial
markets of the United States that, in the sole judgment of the
Underwriters, makes it impracticable or inadvisable to proceed with the
public offering or the delivery of the Securities as contemplated by
the Registration Statement, as amended as of the date hereof; or
(v) any securities of the Company shall have been downgraded
or placed on any "watch list" for possible downgrading by any
nationally recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 10
shall be without liability of any party to any other party except as provided in
Section 9 hereof.
11. Notices. All communications hereunder shall be in writing
and, if sent to the Underwriters, shall be mailed,
<PAGE> 30
-30-
delivered or telecopied and confirmed in writing to the Underwriters c/o CIBC
Wood Gundy Securities Corp., 425 Lexington Avenue, 3rd Floor, New York, New York
10017, Attention: Kevin P. Magid, and with a copy to Cahill Gordon & Reindel, 80
Pine Street, New York, New York 10005, Attention: Roger Meltzer, Esq. If sent to
any of the Issuers, shall be mailed, delivered or telecopied and confirmed in
writing, to c/o Outdoor Systems, Inc., 2502 North Black Canyon Highway, Phoenix,
Arizona 85009, Attention: Chief Executive Officer, and with a copy to Powell,
Goldstein, Frazer & Murphy, 191 Peachtree Street NE, 16th Floor, Atlanta,
Georgia 30303, Attention: William B. Shearer, Esq.
12. Successors. This Agreement shall inure to the benefit of
and be binding upon the Underwriters and each of the Issuers and their
respective successors and legal representatives, and nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person any legal or equitable right, remedy or claim under or in respect of this
Agreement, or any provisions herein contained; this Agreement and all conditions
and provisions hereof being intended to be and being for the sole and exclusive
benefit of such persons and for the benefit of no other person except that (i)
the indemnities of the Issuers contained in Section 8 of this Agreement shall
also be for the benefit of any person or persons who control the Underwriters
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
and (ii) the indemnities of the Underwriters contained in Section 8 of this
Agreement shall also be for the benefit of the directors of the Issuers, their
respective officers who have signed the Registration Statement and any person or
persons who controls any Issuer within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act. No purchaser of Securities from the Underwriters
will be deemed a successor because of such purchase.
13. Joint and Several Obligations. All of the obligations of
the Issuers hereunder shall be joint and several obligations of each of them.
14. Information Supplied by the Underwriters. The statements
set forth in the last paragraph on the front cover page of the Prospectus and in
the [ ] paragraphs under the heading "Underwriting" in the Prospectus (to the
extent such statements relate to the Underwriters) constitute the only
information furnished by the Underwriters to the Issuers for purposes of
Sections 2(b) and 8 hereof.
15. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto and supersedes all
<PAGE> 31
-31-
prior agreements, understandings and arrangements, oral or written, among the
parties hereto with respect to the subject matter hereof.
16. Default of Underwriters. If any Underwriter defaults in
its obligations to purchase Securities hereunder and arrangements satisfactory
to the non-defaulting Underwriter and the Company for the purchase of such
Securities by other persons are not made within 36 hours after such default,
this Agreement will terminate without liability on the part of the
non-defaulting Underwriter or the Company, except as provided in Sections 6 and
8. As used in this Agreement, the term "Underwriter" includes any person
substituted for an Underwriter under this Section . Nothing herein will relieve
a defaulting Underwriter from liability for its default.
17. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT
GIVING EFFECT TO ANY PROVISIONS RELATING TO CONFLICTS OF LAW.
18. Counterparts. This Agreement may be executed 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.
<PAGE> 32
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this letter shall constitute a binding agreement among the
Issuers and the Underwriters.
Very truly yours,
OUTDOOR SYSTEMS, INC.
By:_____________________________________
Name:
Title:
OUTDOOR SYSTEMS PAINTING, INC.
By:_____________________________________
Name:
Title:
OS ADVERTISING OF TEXAS PAINTING,
INC.
By:_____________________________________
Name:
Title:
OS BASELINE, INC.
By:_____________________________________
Name:
Title:
DECADE COMMUNICATIONS GROUP, INC.
By:_____________________________________
Name:
Title:
BENCH ADVERTISING COMPANY OF
COLORADO, INC.
By:_____________________________________
Name:
Title:
<PAGE> 33
NEW YORK SUBWAYS ADVERTISING CO.,
INC.
By:_______________________________
Name:
Title:
The foregoing Agreement is hereby confirmed and accepted as of the date first
above written.
CIBC WOOD GUNDY SECURITIES CORP.
By: _________________________________
Name:
Title:
ALEX. BROWN & SONS INCORPORATED
By: _________________________________
Name:
Title:
<PAGE> 34
Exhibit A
Subsidiary Guarantors
Outdoor Systems Painting, Inc.
OS Advertising of Texas Painting, Inc.
OS Baseline, Inc.
Decade Communications Group, Inc.
Bench Advertising Company of Colorado, Inc.
New York Subways Advertising Co., Inc.
<PAGE> 35
Exhibit B
Subsidiaries
Outdoor Systems Painting, Inc.
OS Advertising of Texas Painting, Inc.
OS Baseline, Inc.
Decade Communications Group, Inc.
Bench Advertising Company of Colorado, Inc.
New York Subways Advertising Co., Inc.
Mediacom Inc.
<PAGE> 36
Exhibit C
<TABLE>
<CAPTION>
Principal Amount
Underwriter of Notes
<S> <C>
CIBC Wood Gundy Securities Corp. $
Alex. Brown & Sons Incorporated -------------------
Total $150,000,000
===================
</TABLE>
<PAGE> 37
Exhibit D
Form of Opinion of Powell, Goldstein, Frazer & Murphy
Opinion, dated the Closing Date and addressed to the
Underwriters, of Powell, Goldstein, Frazer & Murphy, counsel to
the Issuers, to the effect that:
(i) Each of the Company and the Subsidiaries has been duly
incorporated and is validly existing in good standing, as a corporation
under the laws of its jurisdiction of incorporation, with the requisite
corporate power and authority to own its properties and conduct its
business as described in the Prospectus and is duly qualified to do
business as a foreign corporation in good standing in all other
jurisdictions where the ownership or leasing of its properties or the
conduct of its business requires such qualification, except where the
failure to be so qualified would not, individually or in the aggregate,
have a Material Adverse Effect; the Company had as of the date
specified herein the authorized, issued and outstanding capitalization
set forth in the Prospectus; the outstanding shares of capital stock of
the Company and the Subsidiaries have been duly authorized and validly
issued, are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights and are owned free and
clear of all liens, encumbrances, equities and restrictions on
transferability (other than those imposed by the Act and the state
securities or "Blue Sky" laws); except as set forth in the Registration
Statement and Prospectus, all of the outstanding shares of capital
stock of the Subsidiaries are owned directly or indirectly by the
Company free and clear of all liens, encumbrances, equities and
restrictions on transferability (other than those imposed by the Act
and the State securities or "Blue Sky" laws); except as set forth in
the Registration Statement and Prospectus, no options, warrants or
other rights to purchase from the Company or any Subsidiary or,
agreements or other obligations of the Company or any Subsidiary to
issue or other rights to cause the Company or any Subsidiary to convert
any obligation into, or exchange any securities for, shares of capital
stock or ownership interests in the Company or any Subsidiary are
outstanding; and, no holder of securities of the Company or any
Subsidiary is entitled to have such securities registered under the
Registration Statement.
(ii) The Securities have been duly and validly authorized by
each of the Issuers and when executed by the Issuers and authenticated
by the Trustee in accordance with
<PAGE> 38
-2-
the provisions of the Indenture, and delivered to and paid for by the
Underwriters in accordance with the terms of the Underwriting
Agreement, will have been duly executed, issued and delivered and will
constitute valid and legally binding obligations of the Issuers,
entitled to the benefits of the Indenture and enforceable against the
Issuers in accordance with their terms, except that the enforcement
thereof may be subject to (a) bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or other similar laws now or
hereafter in effect relating to creditors' rights generally, and (b)
general principles of equity and the discretion of the court before
which any proceeding therefor may be brought (regardless of whether
enforceability is considered in a proceeding at law or in equity).
(iii) Each of the Issuers has the requisite corporate power
and corporate authority to execute, deliver and perform its obligations
under the Indenture and the Securities; the Indenture has been duly and
validly authorized by the Issuers and qualified under the Trust
Indenture Act and, when executed and delivered by the Issuers (assuming
the due authorization, execution and delivery by the Trustee), will
constitute a valid and legally binding agreement of the Issuers,
enforceable against the Issuers in accordance with its terms, except
that the enforcement thereof may be subject to (a) bank ruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights
generally and (b) general principles of equity and the discretion of
the court before which any proceeding therefor may be brought
(regardless of whether enforceability is considered in a proceeding at
law or in equity).
(iv) Each of the Issuers has the requisite corporate power and
authority to execute, deliver and perform its obligations under the
Underwriting Agreement. The Underwriting Agreement has been duly and
validly authorized by the Issuers and, when executed and delivered by
the Issuers, will constitute a valid and legally binding agreement of
the Issuers, enforceable against the Issuers in accordance with its
terms except (i) that the enforcement thereof may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar
laws now or hereafter in effect relating to or affecting creditors'
rights generally or general principles of equity and the discretion of
the court before which any proceeding therefor may be brought
(regardless of whether such enforcement is
<PAGE> 39
-3-
considered in a proceeding at law or in equity) and (ii) as any rights
to indemnity or contribution hereunder may be limited by federal and
state securities laws and public policy considerations.
(v) No consent, approval, authorization or order of any
governmental agency or body is required for the performance of any of
the Underwriting Agreement, the Securities or the Indenture or any of
the agreements contemplated thereby or delivered in connection
therewith, or the consummation of the transactions contemplated thereby
or by the Prospectus, except such as may be required and have been
obtained as described in the Prospectus or under the Act, the Trust
Indenture Act or state securities or "Blue Sky" laws in connection with
the purchase and distribution of the Securities.
(vi) None of the Company or the Subsidiaries is (a) in
violation of its certificate of incorporation or bylaws, (b) in
violation of any statute, judgment, decree, order, rule or regulation
applicable to any of its properties or assets, which violation would,
individually or in the aggregate, have a Material Adverse Effect or (c)
in breach of or in default under any of the Underwriting Agreement, the
Securities or the Indenture or any other contract, indenture, mortgage,
deed of trust, loan agreement, note, lease, license, franchise
agreement, permit, certificate or agreement or instrument to which it
is a party or to which it is subject, which breach or default would
individually or in the aggregate, have a Material Adverse Effect.
(vii) The execution, delivery and performance by the Issuers
of the Underwriting Agreement, the Securities or the Indenture and the
consummation by the Issuers of the transactions contemplated thereby
and the fulfillment of the terms thereof, will not violate, conflict
with or constitute or result in a breach of or a default under (or an
event that with notice or lapse of time, or both, would constitute a
breach of or a default under) any of the terms or provisions of (a) the
certificate of incorporation or bylaws of the Company or the
Subsidiaries (b) any contract, indenture, mortgage, deed of trust, loan
agreement, note, lease, license, franchise agreement or agreement or
instrument to which any of the Company or the Subsidiaries is a party
or to which any of their respective properties or assets are subject or
(c) (assuming compliance with all applicable state securities and "Blue
Sky" laws) any statute, judgment, decree, order, rule or regulation of
any
<PAGE> 40
-4-
court or governmental agency or body applicable to any of the Company
or the Subsidiaries or any of their respective properties or assets,
which violation, conflict, breach or default would, individually or in
the aggregate, have any Material Adverse Effect.
(viii) Except as described in the Prospectus and Registration
Statement, there are no legal or governmental proceedings pending or
threatened to which any of the Company or the Subsidiaries is a party
or to which the respective properties or assets of the Company or the
Subsidiaries are subject that are required to be described in the
Registration Statement or the Prospectus and are not described therein,
or that seek to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Securities to the
Underwriters or the consummation of the other transactions described in
the Prospectus; and no legal or governmental proceedings and no
contract, agreement or other document is required to be described in
the Registration Statement or the Prospectus or to be filed as an
exhibit to the Registration Statement that is not described therein or
filed as required.
(ix) Each document (other than the financial statements and
schedules included therein) filed pursuant to the Act or incorporated
or deemed to be incorporated by reference in the Registration Statement
and Prospectus and filed pursuant to the Exchange Act complied when so
filed as to form in all material respects with the Act and the Exchange
Act.
(x) The statements set forth under the captions "Risk
Factors--Regulation of Outdoor Advertising," "Business--Government
Regulation," "Description of Capital Stock," "Description of
Indebtedness and Other Commitments," "Description of Notes" and
"Underwriting" in the Prospectus and the Registration Statement,
insofar as such statements purport to summarize legal documents or
statements of law or legal conclusions are accurate summaries in all
material respects and the Indenture and the Securities conform in all
material respects to the description thereof in the Prospectus and the
Registration Statement.
(xi) None of the Company or the Subsidiaries is required to
register as an "investment company" or a company "controlled by" an
"investment company" as such terms are defined in the Investment
Company Act of 1940, as amended.
<PAGE> 41
-5-
(xii) The sale, issuance, execution or delivery of the
Securities will not violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System.
(xiii) (a) The Registration Statement, as of its effective
date, and the Prospectus, as of its date, comply as to form in all
material respects with the requirements of the Act, except that in each
case we express no opinion as to the financial statements, schedules
and other financial and statistical data included therein, or the
Statement of Eligibility and Qualification of the Trustee on Form T-1,
and (b) the Indenture complies as to form in all material respects with
the requirements of the Trust Indenture Act.
(xiv) The Registration Statement and all post-effective
amendments, if any, have been declared effective under the Act; any
required filing of the Prospectus pursuant to Rule 424(b) has been made
in a manner and within the time period required by Rule 424(b); and, to
the best of our knowledge, no stop order suspending the effectiveness
of the Registration Statement or any post-effective amendment thereto
has been issued, and no proceedings for that purpose have been
instituted or threatened, by the Commission.
In addition, we have participated in conferences with officers
and other representatives of the Issuers, representatives of the independent
public accountants and representatives of the Underwriters at which the contents
of the Registration Statement and the Prospectus were discussed and, although we
are not passing upon and do not assume any responsibility for the accuracy,
completeness or fairness of the statements contained in the Registration
Statement or Prospectus or the documents incorporated by reference therein
(except as indicated in clause (x) above) and have not made any independent
check or verification thereof, on the basis of the foregoing (relying as to
materiality to a large extent upon the statements of officers and other
representatives of the Issuers) no facts have come to our attention that have
caused us to believe that either the Registration Statement at the time it
became effective, or any post-effective amendment thereto as of its date and as
of the Closing Date, contained or contains an untrue statement of a material
fact or omitted or omits to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or that the
Prospectus as of its respective date and as of the Closing Date, or any
amendment or supplement thereto as of its respective date and as of the Closing
Date, contained or contains an untrue statement of
<PAGE> 42
-6-
a material fact or omitted or omits to state a material fact necessary in order
to make the statements therein, in the light of the circumstances under which
they were made, not misleading (it being understood that we express no opinion
on the financial statements or other financial and statistical data or
information included or incorporated by reference in the Registration Statement
or Prospectus or the Statement of Eligibility and Qualification of the Trustee
on Form T-1).
<PAGE> 1
EXHIBIT 4.3
OUTDOOR SYSTEMS, INC.
THE GUARANTORS
and
THE BANK OF NEW YORK, as Trustee
--------------------
INDENTURE
Dated as of [ ], 1996
--------------------
$150,000,000
[ ]% Senior Subordinated Notes due 2006
<PAGE> 2
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
310(a)(1).........................................................7.10
(a)(2)......................................................7.10
(a)(3)......................................................N.A.
(a)(4)......................................................N.A.
(b).........................................................7.08; 7.10;
12.02
(b)(1)......................................................7.10
(b)(9)......................................................7.10
(c).........................................................N.A.
311(a)............................................................7.11
(b).........................................................7.11
(c).........................................................N.A.
312(a)............................................................2.05
(b).........................................................12.03
(c).........................................................12.03
313(a)............................................................7.06
(b)(1)......................................................7.06
(b)(2)......................................................7.06
(c).........................................................12.02
(d).........................................................7.06
314(a)............................................................4.02; 4.04
12.02
(b).........................................................N.A.
(c)(1)......................................................12.04; 12.05
(c)(2)......................................................12.04; 12.05
(c)(3)......................................................N.A.
(d).........................................................N.A.
(e).........................................................12.05
(f).........................................................N.A.
315(a)............................................................7.01; 7.02
(b).........................................................7.05; 12.02
(c).........................................................7.01
(d).........................................................6.05; 7.01;
7.02
(e).........................................................6.11
316(a) (last sentence)............................................12.06
(a)(1)(A)...................................................6.05
(a)(1)(B)...................................................6.04
(a)(2)......................................................8.02
(b).........................................................6.07
(c).........................................................8.04
317(a)(1).........................................................6.08
(a)(2)......................................................6.09
(b).........................................................7.12
318(a)............................................................12.01
- --------------------
N.A. means Not Applicable
NOTE: This Cross-Reference Table shall not, for any purpose,
be deemed to be a part of the Indenture.
<PAGE> 3
TABLE OF CONTENTS
Page
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.......................................... 1
Section 1.02. Other Definitions.................................... 23
Section 1.03. Incorporation by Reference of
Trust Indenture Act................................ 24
Section 1.04. Rules of Construction................................ 25
ARTICLE 2.
THE NOTES
Section 2.01. Form and Dating...................................... 25
Section 2.02. Execution and Authentication......................... 26
Section 2.03. Registrar and Paying Agent........................... 26
Section 2.04. Paying Agent To Hold Assets in Trust................. 27
Section 2.05. Noteholder Lists..................................... 27
Section 2.06. Transfer and Exchange................................ 28
Section 2.07. Replacement Notes.................................... 28
Section 2.08. Outstanding Notes.................................... 29
Section 2.09. Temporary Notes...................................... 29
Section 2.10. Cancellation......................................... 29
Section 2.11. Defaulted Interest................................... 30
Section 2.12. Deposit of Moneys.................................... 30
Section 2.13. CUSIP Number......................................... 30
ARTICLE 3.
REDEMPTION
Section 3.01. Notices to Trustee................................... 31
Section 3.02. Selection by Trustee of Notes To
Be Redeemed........................................ 31
Section 3.03. Notice of Redemption................................. 31
Section 3.04. Effect of Notice of Redemption....................... 32
Section 3.05. Deposit of Redemption Price.......................... 33
Section 3.06. Notes Redeemed in Part............................... 33
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes..................................... 33
Section 4.02. SEC Reports.......................................... 34
Section 4.03. Waiver of Stay, Extension or Usury
Laws............................................... 34
Section 4.04. Compliance Certificate............................... 35
Section 4.05. Payment of Taxes and Other Claims.................... 36
-i-
<PAGE> 4
Page
Section 4.06. Maintenance of Properties and
Insurance............................................. 36
Section 4.07. Compliance with Laws.................................... 37
Section 4.08. Corporate Existence..................................... 37
Section 4.09. Maintenance of Office or Agency......................... 38
Section 4.10. Limitation on Additional Indebtedness................... 38
Section 4.11. Limitation on Investments............................... 39
Section 4.12. Limitation on Capital Stock of
Subsidiaries.......................................... 39
Section 4.13. Limitation on Restricted Payments....................... 39
Section 4.14. Limitation on Other Senior
Subordinated Debt..................................... 41
Section 4.15. Limitation on Certain Asset Sales....................... 42
Section 4.16. Limitation on Transactions with
Affiliates............................................ 44
Section 4.17. Limitations on Liens.................................... 45
Section 4.18. Limitations on Creation of
Subsidiaries.......................................... 46
Section 4.19. Limitation on Sale and Lease-Back
Transactions.......................................... 46
Section 4.20. Limitation on Dividends and other
Payment Restrictions Affecting
Subsidiaries.......................................... 46
Section 4.21. Guarantees of Certain Indebtedness...................... 47
Section 4.22. Payments for Consent.................................... 47
Section 4.23. Line of Business........................................ 47
Section 4.24. Change of Control....................................... 47
ARTICLE 5.
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger
and Sale of Assets.................................... 50
Section 5.02. Successor Person Substituted............................ 51
ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default....................................... 52
Section 6.02. Acceleration............................................ 54
Section 6.03. Other Remedies.......................................... 54
Section 6.04. Waiver of Past Defaults and Events
of Default............................................ 55
Section 6.05. Control by Majority..................................... 55
Section 6.06. Limitation on Suits..................................... 55
Section 6.07. Rights of Holders To Receive Payment.................... 56
Section 6.08. Collection Suit by Trustee.............................. 56
Section 6.09. Trustee May File Proofs of Claim........................ 57
Section 6.10. Priorities.............................................. 57
Section 6.11. Undertaking for Costs................................... 58
-ii-
<PAGE> 5
Page
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee............................... 58
Section 7.02. Rights of Trustee............................... 59
Section 7.03. Individual Rights of Trustee.................... 60
Section 7.04. Trustee's Disclaimer............................ 61
Section 7.05. Notice of Defaults.............................. 61
Section 7.06. Reports by Trustee to Holders................... 61
Section 7.07. Compensation and Indemnity...................... 61
Section 7.08. Replacement of Trustee.......................... 62
Section 7.09. Successor Trustee by Consolidation,
Merger or Conversion.......................... 63
Section 7.10. Eligibility; Disqualification................... 63
Section 7.11. Preferential Collection of Claims
Against Company............................... 64
Section 7.12. Paying Agents................................... 64
ARTICLE 8.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders...................... 64
Section 8.02. With Consent of Holders......................... 65
Section 8.03. Compliance with Trust Indenture Act............. 67
Section 8.04. Revocation and Effect of Consents............... 67
Section 8.05. Notation on or Exchange of Notes................ 68
Section 8.06. Trustee To Sign Amendments, etc................. 68
ARTICLE 9.
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.......................... 68
Section 9.02. Legal Defeasance................................ 69
Section 9.03. Covenant Defeasance............................. 70
Section 9.04. Conditions to Defeasance or Covenant
Defeasance.................................... 70
Section 9.05. Deposited Money and U.S. Government
Obligations To Be Held in Trust;
Other Miscellaneous Provisions................ 72
Section 9.06. Reinstatement................................... 73
Section 9.07. Moneys Held by Paying Agent..................... 73
Section 9.08. Moneys Held by Trustee.......................... 74
ARTICLE 10.
GUARANTEE OF NOTES
Section 10.01. Guarantee....................................... 74
Section 10.02. Execution and Delivery of Guarantees............ 76
Section 10.03. Limitation of Guarantee......................... 76
Section 10.04. Additional Guarantors........................... 77
-iii-
<PAGE> 6
Page
Section 10.05. Release of Guarantor................................... 77
Section 10.06. Guarantee Obligations Subordinated
to Guarantor Senior Indebtedness..................... 77
Section 10.07. Payment Over of Proceeds upon
Dissolution, etc., of a Guarantor.................... 78
Section 10.08. Suspension of Guarantee Obligations
When Guarantor Senior Indebtedness
in Default........................................... 80
Section 10.09. Subrogation to Rights of Holders of
Guarantor Senior Indebtedness........................ 82
Section 10.10. Guarantee Subordination Provisions
Solely To Define Relative Rights..................... 83
Section 10.11. Application of Certain Article 11
Provisions........................................... 84
ARTICLE 11.
SUBORDINATION OF NOTES
Section 11.01. Notes Subordinate to Senior
Indebtedness......................................... 84
Section 11.02. Payment Over of Proceeds upon
Dissolution, etc..................................... 84
Section 11.03. Suspension of Payment When Senior
Indebtedness in Default.............................. 86
Section 11.04. Trustee's Relation to Senior
Indebtedness......................................... 88
Section 11.05. Subrogation to Rights of Holders
of Senior Indebtedness............................... 89
Section 11.06. Provisions Solely To Define Relative
Rights............................................... 89
Section 11.07. Trustee To Effectuate Subordination.................... 90
Section 11.08. No Waiver of Subordination Provisions.................. 90
Section 11.09. Notice to Trustee...................................... 91
Section 11.10. Reliance on Judicial Order or
Certificate of Liquidating Agent..................... 92
Section 11.11. Rights of Trustee as a Holder of
Senior Indebtedness; Preservation
of Trustee's Rights.................................. 92
Section 11.12. Article Applicable to Paying Agents.................... 93
Section 11.13. No Suspension of Remedies.............................. 93
ARTICLE 12.
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls........................... 93
Section 12.02. Notices................................................ 93
Section 12.03. Communications by Holders with
Other Holders........................................ 95
Section 12.04. Certificate and Opinion as to
Conditions Precedent................................. 95
-iv-
<PAGE> 7
Page
Section 12.05. Statements Required in Certificate
and Opinion........................................... 95
Section 12.06. When Treasury Notes Disregarded......................... 96
Section 12.07. Rules by Trustee and Agents............................. 96
Section 12.08. Business Days; Legal Holidays........................... 96
Section 12.09. Governing Law........................................... 96
Section 12.10. No Adverse Interpretation of Other
Agreements............................................ 97
Section 12.11. No Recourse Against Others.............................. 97
Section 12.12. Successors.............................................. 97
Section 12.13. Multiple Counterparts................................... 97
Section 12.14. Table of Contents, Headings, etc........................ 97
Section 12.15. Separability............................................ 98
EXHIBITS
Exhibit A. Form of Note............................................ A-1
-v-
<PAGE> 8
INDENTURE, dated as of [ ], 1996, among OUTDOOR SYSTEMS, INC.,
a Delaware corporation, as Issuer (the "Company"), the GUARANTORS (as
hereinafter defined), and THE BANK OF NEW YORK, a New York Banking corporation,
as Trustee (the "Trustee").
Each party agrees as follows for the benefit of the other
parties and for the equal and ratable benefit of the Holders of the Company's [
]% Senior Subordinated Notes due
2006 (the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
Section 1.01. Definitions.
"Acquired Indebtedness" means Indebtedness of a Person
(including an Unrestricted Subsidiary) existing at the time such Person becomes
a Restricted Subsidiary or assumed in connection with the acquisition of assets
from such Person.
"Adjusted Net Assets" of a Guarantor at any date shall mean
the lesser of the amount by which (x) the fair value of the property of such
Guarantor exceeds the total amount of liabilities, including, without
limitation, contingent liabilities (after giving effect to all other fixed and
contingent liabilities), but excluding liabilities under the Guarantee, of such
Guarantor at such date and (y) the present fair salable value of the assets of
such Guarantor at such date exceeds the amount that will be required to pay the
probable liability of such Guarantor on its debts (after giving effect to all
other fixed and contingent liabilities and after giving effect to any collection
from any Subsidiary of such Guarantor in respect of the obligations of such
Subsidiary under the Guarantee), excluding Indebtedness in respect of the
Guarantee, as they become absolute and matured.
"Advertising Displays" mean all posters, signs, billboards and
other outdoor advertising displays and related sites therefor owned or leased
(as lessee) by the Company and the Restricted Subsidiaries.
"Affiliate" of any specified Person means any other Person
which directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, such specified Person. For the
purposes of this definition, "control" (including, with correlative
<PAGE> 9
-2-
meanings, the terms "controlling," "controlled by," and "under common control
with"), as used with respect to any Person, means the possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise.
"Agent" means any Registrar, Paying Agent, co-registrar or
agent for service of notices and demands.
"Asset Acquisition" means (i) an Investment by the Company or
any Restricted Subsidiary in any other Person pursuant to which such Person
shall become a Restricted Subsidiary or shall be consolidated or merged with the
Company or any Restricted Subsidiary or (ii) the acquisition by the Company or
any Restricted Subsidiary of assets of any Person comprising a division or line
of business of such Person.
"Asset Sale" means the sale, transfer or other disposition
(other than to the Company or any of its Restricted Subsidiaries) in any single
transaction or series of related transactions having a fair market value in
excess of $1 million of (a) any Capital Stock of or other equity interest in any
Restricted Subsidiary, (b) all or substantially all of the assets of the Company
or of any Restricted Subsidiary, (c) real property or (d) all or substantially
all of the assets of any business owned by the Company or any Restricted
Subsidiary thereof; provided that Asset Sales shall not include sales, leases,
conveyances, transfers or other dispositions to the Company or to a Restricted
Subsidiary or to any other Person if after giving effect to such sale, lease,
conveyance, transfer or other disposition such other Person becomes a Restricted
Subsidiary.
"Asset Sale Proceeds" means, with respect to any Asset Sale,
(i) cash received by the Company or any Restricted Subsidiary from such Asset
Sale (including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Restricted Subsidiary as a result of such Asset Sale and (d) deduction of
appropriate amounts to be provided by the Company or such Restricted Subsidiary
as a reserve, in accordance with GAAP, against any liabilities associated with
the assets sold or disposed of in such Asset Sale and retained
<PAGE> 10
-3-
by the Company or such Restricted Subsidiary after such Asset Sale, including,
without limitation, pension and other post-employment benefit liabilities and
liabilities related to environmental matters or against any indemnification
obligations associated with the assets sold or disposed of in such Asset Sale,
and (ii) promissory notes and other non-cash consideration received by the
Company or any Restricted Subsidiary from such Asset Sale or other disposition
upon the liquidation or conversion of such notes or non-cash consideration into
cash.
"Attributable Indebtedness" in respect of a Sale and
Lease-Back Transaction means, as at the time of determination, the greater of
(i) the fair value of the property subject to such arrangement (as determined by
the Board of Directors of the Company) and (ii) the present value of the notes
(discounted at the rate of interest implicit in such transaction) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale and Lease-Back Transaction (including any period for
which such lease has been extended).
"Available Asset Sale Proceeds" means, with respect to any
Asset Sale, the aggregate Asset Sale Proceeds from such Asset Sale that have not
been applied in accordance with clauses (iii)(a) or (iii)(b) of Section 4.15 and
which have not been the basis for an Excess Proceeds Offer in accordance with
clause (iii)(c) of such Section 4.15.
"Board of Directors" means the Board of Directors of the
Company or a Guarantor, as appropriate, or any committee authorized to act
therefor.
"Board Resolution" means a copy of a resolution certified
pursuant to an Officers' Certificate to have been duly adopted by the Board of
Directors of the Company or a Guarantor, as appropriate, and to be in full force
and effect, and delivered to the Trustee.
"Capital Stock" means, with respect to any Person, any and all
shares or other equivalents (however designated) of capital stock, partnership
interests or any other participation, right or other interest in the nature of
an equity interest in such Person or any option, warrant or other security
convertible into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented
by obligations under a lease that is required to be
<PAGE> 11
-4-
capitalized for financial reporting purposes in accordance with GAAP, and the
amount of such Indebtedness shall be the capitalized amount of such obligations
determined in accordance with GAAP.
"Cash Equivalents" means (i) direct obligations of the United
States of America or any agency thereof, or obligations guaranteed or insured by
the United States of America, provided that in each case such obligations mature
within one year from the date of acquisition thereof, (ii) certificates of
deposit maturing within one year from the date of creation thereof issued by any
U.S. national or state banking institution having capital, surplus and undivided
profits aggregating at least $500,000,000 and rated at least A- 1 by S&P and P-1
by Moody's, (iii) commercial paper with a maturity of 180 days or less issued by
a corporation (except an Affiliate of the Company) 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 and (iv) repurchase agreements and reverse
repurchase agreements relating to marketable direct obligations issued or
unconditionally guaranteed by the United States of America or issued by an
agency thereof and backed by the full faith and credit of the United States of
America, in each case maturing within one year from the date of acquisition;
provided that the terms of such agreements comply with the guidelines set forth
in the Federal Financial Agreements of Depository Institutions with Securities
Dealers and Others, as adopted by the Comptroller of the Currency.
"Change of Control" means the occurrence of one or more of the
following events: (i) any sale, lease, exchange or other transfer (in one
transaction or a series of related transactions) of all or substantially all of
the assets of the Company to any Person or group of related Persons for purposes
of Section 13(d) of the Exchange Act (a "Group"), together with any Affiliates
thereof; (ii) the approval by the holders of Capital Stock of the Company of any
plan or proposal for the liquidation or dissolution of the Company; (iii) the
Permitted Holders, individually or in the aggregate, shall cease to beneficially
own (within the meaning of Rule 13d-3 under the Exchange Act), directly or
indirectly, Voting Stock representing at least 25% of the total voting power of
all Voting Stock of the Company; (iv) any Person or Group (other than the
Permitted Holders) shall become the owner, directly or indirectly, beneficially
or of record, of Voting Stock representing more than 30% of the total voting
power of all Voting Stock of the Company; or (v) the replacement of a
<PAGE> 12
-5-
majority of the Board of Directors of the Company over a two-year period from
the directors who constituted the Board of Directors of the Company at the
beginning of such period, and such replacement shall not have been approved by a
vote of at least two-thirds of the Board of Directors of the Company then still
in office who either were members of such Board of Directors at the beginning of
such period or whose election as a member of such Board of Directors was
previously so approved.
"Common Stock" of any Person means all Capital Stock of such
Person that is generally entitled to (i) vote in the election of directors of
such Person or (ii) if such Person is not a corporation, vote or otherwise
participate in the selection of the governing body, partners, managers or others
that will control the management and policies of such Person.
"Company" means the party named as such in the first paragraph
of this Indenture until a successor replaces such party pursuant to Article 5 of
this Indenture and thereafter means the successor and any other primary obligor
on the Notes.
"Company Request" means any written request signed in the name
of the Company by the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer or the Treasurer and attested to by the
Secretary or any Assistant
Secretary of the Company.
"Consolidated Interest Expense" means, with respect to any
Person, for any period, the aggregate amount of interest which, in conformity
with GAAP, would be set forth opposite the caption "interest expense" or any
like caption on an income statement for such Person and its Subsidiaries
(Restricted Subsidiaries in the case of the Company) on a consolidated basis
(including, but not limited to, imputed interest included in Capitalized Lease
Obligations, all commissions, discounts and other fees and charges owed with
respect to letters of credit and bankers' acceptance financing, the net costs
associated with hedging obligations, the interest portion of any deferred
payment obligation, amortization of discount or premium, if any, and all other
non-cash interest expense (other than interest amortized to cost of sales))
plus, without duplication, all net capitalized interest for such period and all
interest incurred or paid under any guarantee of Indebtedness (including a
guarantee of principal, interest or any combination thereof) of any Person, plus
the amount of all dividends or distributions paid on Disqualified Capital Stock
(other than dividends paid or payable in shares of Capital Stock of the
Company); provided, however, that "Consolidated
<PAGE> 13
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Interest Expense" shall exclude the amortization of deferred financing fees.
"Consolidated Net Income" means, with respect to any Person,
for any period, the aggregate of the Net Income of such Person and its
Subsidiaries (Restricted Subsidiaries in the case of the Company) for such
period, on a consolidated basis, determined in accordance with GAAP; provided,
however, that (a) the Net Income of any Person (the "other Person") in which the
Person in question or any of its Subsidiaries (Restricted Subsidiaries in the
case of the Company) has less than a 100% interest (which interest does not
cause the net income of such other Person to be consolidated into the net income
of the Person in question in accordance with GAAP) shall be included only to the
extent of the amount of dividends or distributions paid to the Person in
question or such Subsidiary, (b) the Net Income of any Subsidiary (Restricted
Subsidiary in the case of the Company) of the Person in question that is subject
to any restriction or limitation on the payment of dividends or the making of
other distributions (other than pursuant to the Notes or this Indenture) shall
be excluded to the extent of such restriction or limitation, (c)(i) the Net
Income of any Person acquired in a pooling of interests transaction for any
period prior to the date of such acquisition and (ii) any net gain (but not
loss) resulting from an Asset Sale by the Person in question or any of its
Subsidiaries other than in the ordinary course of business shall be excluded,
and (d) extraordinary gains and losses shall be excluded.
"Corporate Trust Office" means the office of the Trustee at
which at any particular time its corporate trust business shall be principally
administered, which office at the date of execution of this Indenture is located
at [ ].
"Cumulative Consolidated Interest Expense" means, as of any
date of determination, Consolidated Interest Expense of the Company from the
Issue Date to the end of the Company's most recently ended full fiscal quarter
prior to such date, taken as a single accounting period.
"Cumulative EBITDA" means, as of any date of determination,
EBITDA of the Company from the Issue Date to the end of the Company's most
recently ended full fiscal quarter prior to such date, taken as a single
accounting period.
"Default" means any event that is, or with the passing of time
or giving of notice or both would be, an Event of Default.
<PAGE> 14
-7-
"Designated Senior Indebtedness," as to the Company or any
Guarantor, as the case may be, means any Senior Indebtedness (a) under or in
respect of the Senior Credit Facility, or (b) which at the time of determination
exceeds $50 million in aggregate principal amount (or accreted value in the case
of Indebtedness issued at a discount) outstanding or available under a committed
facility, and (i) which is specifically designated in the instrument evidencing
such Senior Indebtedness as "Designated Senior Indebtedness" by such Person and
(ii) as to which the Trustee has been given written notice of such designation.
"Disqualified Capital Stock" means any Capital Stock of the
Company or any Restricted Subsidiary which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Notes, for cash or securities constituting
Indebtedness. Without limitation of the foregoing, Disqualified Capital Stock
shall be deemed to include any Preferred Stock of the Company with respect to
which, under the terms of such Preferred Stock, by agreement or otherwise, the
Company is obligated to pay current dividends or distributions in cash during
the period prior to the maturity date of the Notes; provided, however, that
Preferred Stock that is issued with the benefit of provisions requiring a change
of control offer to be made for such Preferred Stock in the event of a change of
control of the Company, which provisions have substantially the same effect as
the provisions described in Section 4.23, shall not be deemed to be Disqualified
Capital Stock solely by virtue of such provisions.
"EBITDA" means, for any Person, for any period, an amount
equal to (a) the sum of, without duplication, (i) Consolidated Net Income for
such period, plus (ii) the provision for taxes for such period based on income
or profits to the extent such income or profits were included in computing
Consolidated Net Income and any provision for taxes utilized in computing net
loss under clause (i) hereof, plus (iii) Consolidated Interest Expense for such
period (but only including Redeemable Dividends in the calculation of such
Consolidated Interest Expense to the extent that such Redeemable Dividends have
not been excluded in the calculation of Consolidated Net Income), plus (iv)
depreciation for such period on a consolidated basis, plus (v) amortization of
<PAGE> 15
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intangibles for such period on a consolidated basis, plus (vi) any other
non-cash items reducing Consolidated Net Income for such period, minus (b) all
non-cash items increasing Consolidated Net Income for such period, all for such
Person and its Subsidiaries determined in accordance with GAAP, except that with
respect to the Company each of the foregoing items shall be determined on a
consolidated basis with respect to the Company and the Restricted Subsidiaries
only; and provided, however, that, for purposes of calculating EBITDA during any
fiscal quarter, cash income from a particular Investment of such Person shall be
included only (x) if cash income has been received by such Person with respect
to such Investment during each of the previous four fiscal quarters, or (y) if
the cash income derived from such Investment is attributable to Temporary Cash
Investments.
"Exchange Act" means the Securities Exchange Act of
1934, as amended.
"fair market value" means, unless otherwise specified, with
respect to any asset or property, the price which could be negotiated in an
arm's-length, free market transaction, for cash, between a willing seller and a
willing and able buyer, neither of whom is under undue pressure or compulsion to
complete the transaction. Fair market value shall be determined by the Board of
Directors of the Company acting reasonably and in good faith and shall be
evidenced by a Board Resolution of the Company delivered to the Trustee.
"GAAP" means generally accepted accounting principles
consistently applied as in effect in the United States from time to time.
"Guarantee" means the guarantee of the Obligations of the
Company with respect to the Notes by each Guarantor pursuant to the terms of
Article 10 hereof.
"Guarantor" means (i) each of Outdoor Systems Painting, Inc.,
an Arizona corporation, OS Advertising of Texas Painting Inc., a Texas
corporation, OS Baseline, Inc., an Arizona corporation, Decade Communications
Group, Inc., a Colorado Corporation, Bench Advertising Company of Colorado,
Inc., a Colorado Corporation, and New York Subways Advertising Co., Inc., an
Arizona corporation, and (ii) each Restricted Subsidiary of the Company that
hereafter becomes a Guarantor pursuant to Section 10.04, and "Guarantors" means
such entities, collectively.
<PAGE> 16
-9-
"Guarantor Senior Indebtedness" means the principal of and
premium, if any, and interest (including, without limitation, interest accruing
or that would have accrued but for the filing of a bankruptcy, reorganization or
other insolvency proceeding whether or not such interest constitutes an
allowable claim in such proceeding) on, and any and all other fees, charges,
expense reimbursement obligations, indemnities and other amounts due pursuant to
the terms of all agreements, documents and instruments providing for, creating,
securing, guaranteeing or evidencing or otherwise entered into in connection
with, (a) Guarantor's direct incurrence of any Indebtedness or its guarantee of
all Indebtedness of the Company, in each case, owed to lenders under or in
respect of the Senior Credit Facility, (b) all obligations of such Guarantor
with respect to any Interest Rate Agreement, (c) all obligations of such
Guarantor to reimburse any bank or other person in respect of amounts paid under
letters of credit, acceptances or other similar instruments, (d) all other
Indebtedness of such Guarantor which does not provide that it is to rank pari
passu with or subordinate to the Guarantees and (e) all deferrals, renewals,
extensions and refundings of, and amendments, modifications and supplements to,
any of the Guarantor Senior Indebtedness described above. Notwithstanding
anything to the contrary in the foregoing, Guarantor Senior Indebtedness will
not include (i) Indebtedness of such Guarantor to any of its Subsidiaries, (ii)
Indebtedness represented by the Notes and the Guarantees, (iii) any Indebtedness
which by the express terms of the agreement or instrument creating, evidencing
or governing the same is junior or subordinate in right of payment to any item
of Guarantor Senior Indebtedness, (iv) any trade payable arising from the
purchase of goods or materials or for services obtained in the ordinary course
of business or (v) that portion of any Indebtedness (other than Indebtedness
described in clause (a) of the immediately preceding sentence of this definition
which relates to reimbursement obligations (whether in the form of loans or
otherwise) under letters of credit with respect to drawings made thereunder and
not yet reimbursed) which is incurred in violation of the Indenture.
"Holder" or "Noteholder" means the Person in whose name a Note
is registered on the Registrar's books.
"Houston Disposition" means the sale by the Company of any or
all of the assets representing outdoor advertising assets serving the Houston,
Texas market.
<PAGE> 17
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"incur" means, with respect to any Indebtedness or other
obligation of any Person, to create, issue, incur (by conversion, exchange or
otherwise), assume, guarantee or otherwise become liable in respect of such
Indebtedness or other obligation or the recording, as required pursuant to GAAP
or otherwise, of any such Indebtedness or other obligation on the balance sheet
of such Person (and "incurrence," "incurred," "incurrable," and "incurring"
shall have meanings correlative to the foregoing); provided that a change in
GAAP that results in an obligation of such Person that exists at such time
becoming Indebtedness shall not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to
any Person, any indebtedness at any time outstanding, secured or unsecured,
contingent or otherwise, which is for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of such Person or only to a
portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any Property (excluding, without limitation, any balances that
constitute accounts payable or trade payables, and other accrued liabilities
arising in the ordinary course of business) if and to the extent any of the
foregoing indebtedness would appear as a liability upon a balance sheet of such
Person prepared in accordance with GAAP, and shall also include, to the extent
not otherwise included (i) any Capitalized Lease Obligations, (ii) obligations
of others secured by a lien to which the property or assets owned or held by
such Person is subject, whether or not the obligation or obligations secured
thereby shall have been assumed, (iii) guarantees of Obligations of other
Persons which would be included within this definition for such other Persons
(whether or not such items would appear upon the balance sheet of the
guarantor), (iv) all obligations for the reimbursement of any obligor on any
banker's acceptance or for reimbursement of any obligor on any letter of credit
with respect to drawings made thereunder and not yet reimbursed, (v) in the case
of the Company, Disqualified Capital Stock of the Company or any Restricted
Subsidiary, and (vi) obligations of any such Person under any Interest Rate
Agreement applicable to any of the foregoing (if and to the extent such Interest
Rate Agreement obligations would appear as a liability upon a balance sheet of
such Person prepared in accordance with GAAP). The amount of Indebtedness of any
Person at any date shall be the outstanding balance at such date of all
unconditional obligations as described above, provided (i) that the amount
outstanding at any time of any
<PAGE> 18
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Indebtedness issued with original issue discount, including the Notes, is the
principal amount of such Indebtedness less the remaining unamortized portion of
the original issue discount of such Indebtedness at such time as determined in
conformity with GAAP and (ii) that Indebtedness shall not include any liability
for Federal, state, local or other taxes. Notwithstanding any other provision of
the foregoing definition, any trade payable arising from the purchase of goods
or materials or for services obtained in the ordinary course of business shall
not be deemed to be "Indebtedness" of the Company or any of the Restricted
Subsidiaries for purposes of this definition. Furthermore, guarantees of (or
obligations with respect to letters of credit supporting) Indebtedness otherwise
included in the determination of such amount shall not also be included.
"Indenture" means this Indenture as amended, restated or
supplemented from time to time.
"Interest Payment Date" means the stated maturity of
an installment of interest on the Notes.
"Interest Rate Agreement" means, for any Person, any interest
rate swap agreement, interest rate cap agreement, interest rate collar agreement
or other similar agreement designed to protect the party indicated therein
against fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance,
account receivable (other than an account receivable arising in the ordinary
course of business), loan or capital contribution to (by means of transfers of
property to others, payments for property or services for the account or use of
others or otherwise), the purchase of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities of, the acquisition,
by purchase or otherwise, of all or substantially all of the business or assets
or stock or other evidence of beneficial ownership of, any Person. Investments
shall exclude extensions of trade credit on commercially reasonable terms in
accordance with normal trade practices.
"Issue Date" means the date the Notes are first issued by the
Company and authenticated by the Trustee under this Indenture.
"Leverage Ratio" means the ratio of (i) the sum of the
aggregate outstanding amount of Indebtedness of the Company and the Restricted
Subsidiaries as of the date of calculation
<PAGE> 19
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on a consolidated basis in accordance with GAAP to (ii) the Company's EBITDA for
the four full quarters (the "Four Quarter Period") ending on or prior to the
date of determination for which financial statements are available. For purposes
of this definition, the Company's "EBITDA" shall be calculated on a pro forma
basis after giving effect to any Asset Sales or Asset Acquisitions (including,
without limitation, any Asset Acquisition giving rise to the need to make such
calculation as a result of the Company or one of the Restricted Subsidiaries
(including any Person who becomes a Restricted Subsidiary as a result of such
Asset Acquisition) incurring, assuming or otherwise becoming liable for
Indebtedness) at any time on or subsequent to the first day of the Four Quarter
Period and on or prior to the date of determination, as if such Asset Sale or
Asset Acquisition (including any EBITDA associated with such Asset Acquisition
and including any pro forma expense and cost reductions determined in accordance
with Article 11 of Regulation S-X relating to such Asset Acquisition) occurred
on the first day of the Four Quarter Period.
"Lien" means, with respect to any Property or assets of any
Person, any mortgage or deed of trust, pledge, hypothecation, assignment,
deposit arrangement, security interest, lien, charge, easement, encumbrance,
preference, priority, or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such Property or assets
(including, without limitation, any Capitalized Lease Obligation, conditional
sales, or other title retention agreement having substantially the same economic
effect as any of the foregoing).
"Maturity Date" means October [ ], 2006.
"Moody's" means Moody's Investors Service, Inc. and
its successors.
"Net Income" means with respect to any Person for any period,
the net income (loss) of such Person determined in accordance with GAAP.
"Net Investment" means the excess of (i) the aggregate amount
of all Investments in Unrestricted Subsidiaries and joint ventures made by the
Company and the Restricted Subsidiaries on or after the Issue Date (in the case
of an Investment made other than in cash, the amount shall be the fair market
value of such Investment as determined in good faith by the Board of Directors
of the Company) over (ii) the sum of (A) the aggregate amount returned in cash
on such
<PAGE> 20
-13-
Investments whether through interest payments, principal payments, dividends or
other distributions, (B) the net cash proceeds received by the Company or any
Restricted Subsidiary from the disposition of all or any portion of such
Investments (other than to a Subsidiary of the Company) and (C) the fair market
value (as determined in good faith by the Board of Directors of the Company) of
any Unrestricted Subsidiary that subsequently becomes a Wholly-Owned Restricted
Subsidiary; provided, however, that with respect to all Investments made in any
Unrestricted Subsidiary or any joint venture, the sum of clauses (A), (B) and
(C) above with respect to such Investments shall not exceed the aggregate amount
of all such Investments made in such Unrestricted Subsidiary or such joint
venture, as the case may be.
"Net Proceeds" means (a) in the case of any sale of Capital
Stock by the Company, the aggregate net proceeds received by the Company, after
payment of expenses, commissions and the like incurred in connection therewith,
whether such proceeds are in cash or in property (valued at the fair market
value thereof, as determined in good faith by the Board of Directors, at the
time of receipt) and (b) in the case of any exchange, exercise, conversion or
surrender of outstanding securities of any kind for or into shares of Capital
Stock of the Company which is not Disqualified Capital Stock, the net book value
of such outstanding securities on the date of such exchange, exercise,
conversion or surrender (plus any additional amount required to be paid by the
holder to the Company upon such exchange, exercise, conversion or surrender,
less any and all payments made to the holders, e.g., on account of fractional
shares and less all expenses incurred by the Company in connection therewith).
"Non-Payment Event of Default" means any event (other than a
Payment Default) the occurrence of which entitles one or more Persons to
accelerate the maturity of any Designated Senior Indebtedness.
"Notes" means the securities that are issued under this
Indenture, as amended or supplemented from time to time pursuant to this
Indenture.
"Obligations" means, with respect to any Indebtedness, any
principal, premium, interest, penalties, fees, indemnifications, reimbursements,
damages and other expenses payable under the documentation governing such
Indebtedness.
<PAGE> 21
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"Officer" means the Chief Executive Officer, the President,
any Vice President, the Chief Financial Officer, the Treasurer or the Secretary
of the Company or a Guarantor, or any other officer designated by the Board of
Directors, as the case may be.
"Officers' Certificate" means, with respect to any Person, a
certificate signed by the Chief Executive Officer, the President or any Vice
President, and the Chief Financial Officer or any Treasurer of such Person that
shall comply with applicable provisions of this Indenture.
"Opinion of Counsel" means a written opinion from legal
counsel which counsel is reasonably acceptable to the Trustee.
"Payment Default" means any default, whether or not any
requirement for the giving of notice, the lapse of time or both, or any other
condition to such default becoming an event of default has occurred, in the
payment of principal of (or premium, if any) or interest on or any other amount
payable in connection with Designated Senior Indebtedness.
"Permitted Asset Swap" means the exchange, in the ordinary
course of the outdoor advertising business, of any interest of the Company or
any of the Restricted Subsidiaries in any Advertising Display or Displays for a
similar interest in an Advertising Display or Displays of a Person other than
the Company or such Restricted Subsidiary; provided that (i) the aggregate fair
market value (as determined in good faith by the Board of Directors of the
Company) of the Advertising Display or Displays being transferred by the Company
or such Restricted Subsidiary is not greater than the aggregate fair market
value (as determined in good faith by the Board of Directors of the Company) of
the Advertising Display or Displays received by the Company or such Restricted
Subsidiary in such exchange and (ii) the aggregate fair market value (as
determined in good faith by the Board of Directors of the Company) of all
Advertising Displays transferred by the Company and the Restricted Subsidiaries
in connection with exchanges in any period of twelve consecutive months shall
not exceed $10 million.
"Permitted Dividend Encumbrances" means encumbrances or
restrictions (a) existing on the Issue Date, (b) arising by reason of Acquired
Indebtedness of any Restricted Subsidiary existing at the time such Person
became a Restricted Subsidiary; provided that in the case of clause (b) above
such
<PAGE> 22
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encumbrances or restrictions were not created in anticipation of such Person
becoming a Restricted Subsidiary and are not applicable to the Company or any of
the other Restricted Subsidiaries, (c) arising under the Senior Credit Facility
is in effect on the Issue Date, and refinancings thereof; provided that the
encumbrances and restrictions contained in any such refinancing agreement are no
less favorable to the Holders of Notes than those contained in the Senior Credit
Facility as in effect on the Issue Date, (d) arising under Refinancing
Indebtedness; provided that the terms and conditions of any such restrictions
are no less favorable to the Holders of Notes than those under the Indebtedness
being refinanced and (e) customary provisions restricting the assignment of any
contract or interest of the Company or any Restricted Subsidiary.
"Permitted Holders" means William S. Levine, Arthur R. Moreno,
any trust solely for the benefit of Messrs. Levine and Moreno or their
respective immediate family members, or any partnership all the ownership
interests in which are beneficially owned or controlled by any of the foregoing;
provided that with respect to any such trust or partnership either Mr. Levine or
Mr. Moreno (or in the event of the death or incapacity of Mr. Levine or Mr.
Moreno, as the case may be, an immediate family member of the legal
representative) shall at all times have the exclusive power to direct the voting
of the shares of Voting Stock of the Company held by such trust or partnership.
"Permitted Indebtedness" means:
(a) Indebtedness of the Company or any Restricted Subsidiary pursuant
to the Senior Credit Facility in an amount not to exceed $575 million, less the
aggregate amount of all principal repayments thereunder (to the extent, in the
case of payments of revolving credit Indebtedness, that the corresponding
commitments have been permanently reduced) or scheduled payments actually made
thereunder;
(b) Indebtedness under the Notes and the Guarantees;
(c) Indebtedness not covered by any other clause of this definition
which is outstanding on the date of the Indenture;
(d) Indebtedness of the Company to any Wholly-Owned Restricted
Subsidiary and Indebtedness of any Restricted
<PAGE> 23
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Subsidiary to the Company or another Restricted Subsidiary;
(e) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which Purchase
Money Indebtedness and Capitalized Lease Obligations do not in the aggregate
exceed 5% of the Company's consolidated total assets;
(f) Interest Rate Agreements and any guarantees thereof;
(g) additional Indebtedness of the Company not to
exceed $40 million in principal amount outstanding at any
time; and
(h) Refinancing Indebtedness.
"Permitted Investments" means, for any Person, Investments
made on or after the date of this Indenture consisting of:
(i) Investments by the Company or by a Restricted Subsidiary in the
Company or a Wholly-Owned Restricted Subsidiary;
(ii) Temporary Cash Investments;
(iii) Investments by the Company or by a Restricted Subsidiary in a
Person, if as a result of such Investment (a) such Person becomes a Restricted
Subsidiary of the Company or (b) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary;
(iv) reasonable and customary loans made to employees in connection
with their relocation not to exceed $2 million in the aggregate at any one time
outstanding; and
(v) an Investment that is made by the Company or a Restricted
Subsidiary in the form of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities that are issued by a third party to
the Company or such Restricted Subsidiary solely as partial consideration for
the consummation of an Asset
<PAGE> 24
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Sale that is otherwise permitted under Section 4.15 hereof.
"Permitted Liens" means (i) Liens existing on the issue date,
(ii) Liens on property or assets of, or any shares of stock of or secured debt
of, any corporation existing at the time such corporation becomes a Restricted
Subsidiary or at the time such corporation is merged into the Company or any of
the Restricted Subsidiaries; provided that such Liens are not incurred in
connection with, or in contemplation of, such corporation becoming a Restricted
Subsidiary or merging into the Company or any of the Restricted Subsidiaries,
(iii) Liens securing Refinancing Indebtedness; provided that any such Lien does
not extend to or cover any Property, shares or debt other than the Property,
shares or debt securing the Indebtedness so refunded, refinanced or extended,
(iv) Liens in favor of the Company or any of the Restricted Subsidiaries, (v)
Liens to secure Purchase Money Indebtedness that is otherwise permitted under
this Indenture; provided that (a) any such Lien is created solely for the
purpose of securing Indebtedness representing, or incurred to finance, refinance
or refund, the cost (including sales and excise taxes, installation and delivery
charges and other direct costs of, and other direct expenses paid or charged in
connection with, such purchase or construction) of such Property, (b) the
principal amount of the Indebtedness secured by such Lien does not exceed 100%
of such costs, and (c) such Lien does not extend to or cover any Property other
than such item of Property and any improvements on such item, (vi) statutory
liens or landlords', carriers', warehouseman's, mechanics', suppliers',
materialmen's, repairmen's or other like Liens arising in the ordinary course of
business which do not secure any Indebtedness and with respect to amounts not
yet delinquent or being contested in good faith by appropriate proceedings, if a
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor, (vii) other Liens securing
obligations incurred in the ordinary course of business which obligations do not
exceed $5 million in the aggregate at any one time outstanding, (viii) any
extensions, substitutions, replacements or renewals of the foregoing, (ix) Liens
for taxes, assessments or governmental charges that are being contested in good
faith by appropriate proceedings, (x) Liens securing Capitalized Lease
Obligations permitted to be incurred under clause (v) of the definition of
"Permitted Indebtedness," provided that any such Lien does not extend to any
property other than that subject to the underlying lease and (ix) Liens securing
Senior Indebtedness and Guarantor Senior Indebtedness.
<PAGE> 25
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"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however
designated, which entitles the holder thereof to a preference with respect to
dividends, distributions or liquidation proceeds of such Person over the holders
of other Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal,
tangible, intangible or mixed property owned by such Person whether or not
included in the most recent consolidated balance sheet of such Person and its
Subsidiaries (Restricted Subsidiaries in the case of the Company) under GAAP.
"Public Equity Offering" means a public offering by the
Company of shares of its common stock (however designated and whether voting or
non-voting) and any and all rights, warrants or options to acquire such common
stock pursuant to a registration statement registered pursuant to the Act.
"Purchase Money Indebtedness" means any Indebtedness incurred
in the ordinary course of business by a Person to finance the cost (including
the cost of construction) of an item of Property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Redeemable Dividend" means, for any dividend or distribution
with regard to Disqualified Capital Stock, the quotient of the dividend or
distribution divided by the difference between one and the maximum statutory
federal income tax rate (expressed as a decimal number between 1 and 0) then
applicable to the issuer of such Disqualified Capital Stock.
"Redemption Date" when used with respect to any Note to be
redeemed means the date fixed for such redemption pursuant to this Indenture.
"Refinancing Indebtedness" means Indebtedness that refunds,
refinances or extends any Indebtedness of the Company or the Restricted
Subsidiaries outstanding on the Issue Date or other Indebtedness permitted to be
incurred by the Company or the Restricted Subsidiaries pursuant to the terms of
the Indenture (other than pursuant to clauses (iv), (v), (vi) and
<PAGE> 26
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(vii) of the definition of Permitted Indebtedness), but only to the extent that
(i) the Refinancing Indebtedness is subordinated to the Notes to at least the
same extent as the Indebtedness being refunded, refinanced or extended, if at
all, (ii) the Refinancing Indebtedness is scheduled to mature either (a) no
earlier than the Indebtedness being refunded, refinanced or extended, or (b)
after the maturity date of the Notes, (iii) the portion, if any, of the
Refinancing Indebtedness that is scheduled to mature on or prior to the maturity
date of the Notes has a weighted average life to maturity at the time such
Refinancing Indebtedness is incurred that is equal to or greater than the
weighted average life to maturity of the portion of the Indebtedness being
refunded, refinanced or extended that is scheduled to mature on or prior to the
maturity date of the Notes, (iv) such Refinancing Indebtedness is in an
aggregate principal amount that is equal to or less than the sum of (a) the
aggregate principal amount then outstanding under the Indebtedness being
refunded, refinanced or extended, (b) the amount of accrued and unpaid interest,
if any, and premiums owed, if any, not in excess of preexisting prepayment
provisions on such Indebtedness being refunded, refinanced or extended and (c)
the amount of customary fees, expenses and costs related to the incurrence of
such Refinancing Indebtedness, and (v) such Refinancing Indebtedness is incurred
by the same Person that initially incurred the Indebtedness being refunded,
refinanced or extended, except that the Company may incur Refinancing
Indebtedness to refund, refinance or extend Indebtedness of any Wholly-Owned
Restricted Subsidiary.
"Responsible Officer" when used with respect to the Trustee,
means any officer within the corporate trust department of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Payment" means any of the following: (i) the
declaration or payment of any dividend or any other distribution or payment on
Capital Stock of the Company or any Restricted Subsidiary of the Company or any
payment made to the direct or indirect holders (in their capacities as such) of
Capital Stock of the Company or any Restricted Subsidiary of the Company (other
than (x) dividends or distributions payable solely in Capital Stock (other than
Disqualified Stock) or in
<PAGE> 27
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options, warrants or other rights to purchase Capital Stock (other than
Disqualified Stock), and (y) in the case of Restricted Subsidiaries of the
Company, dividends or distributions payable to the Company or to a Wholly-Owned
Restricted Subsidiary), (ii) the purchase, redemption or other acquisition or
retirement for value of any Capital Stock of the Company or any of the
Restricted Subsidiaries (other than Capital Stock owned by the Company or a
Wholly-Owned Restricted Subsidiary), (iii) the making of any principal payment
on, or the purchase, defeasance, repurchase, redemption or other acquisition or
retirement for value, prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, of any Indebtedness which is subordinated in
right of payment to the Notes other than subordinated Indebtedness acquired in
anticipation of satisfying a scheduled sinking fund obligation, principal
installment or final maturity (in each case due within one year of the date of
acquisition), (iv) the making of any Investment or guarantee of any Investment
in any Person other than a Permitted Investment, (v) any designation of a
Restricted Subsidiary as an Unrestricted Subsidiary on the basis of the
Investment by the Company therein and (vi) forgiveness of any Indebtedness of an
Affiliate of the Company (other than a Wholly-Owned Restricted Subsidiary) to
the Company or a Restricted Subsidiary. For purposes of determining the amount
expended for Restricted Payments, cash distributed or invested shall be valued
at the face amount thereof and property other than cash shall be valued at its
fair market value.
"Restricted Subsidiary" means a Subsidiary of the Company
other than an Unrestricted Subsidiary and includes all of the Subsidiaries of
the Company existing as of the Issue Date. The Board of Directors of the Company
may designate any Unrestricted Subsidiary or any Person that is to become a
Subsidiary of the Company as a Restricted Subsidiary if immediately after giving
effect to such action (and treating any Acquired Indebtedness as having been
incurred at the time of such action), the Company could have incurred at least
$1.00 of additional Indebtedness (other than Permitted Indebtedness) pursuant to
Section 4.10.
"Sale and Lease-Back Transaction" means any arrangement with
any Person providing for the leasing by the Company or any Restricted Subsidiary
of any real or tangible personal Property, which Property has been or is to be
sold or transferred by the Company or such Restricted Subsidiary to such Person
in contemplation of such leasing.
<PAGE> 28
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"S&P" means Standard & Poor's Corporation and its successors.
"SEC" means the United States Securities and Exchange
Commission as constituted from time to time or any successor performing
substantially the same functions.
"Securities Act" means the Securities Act of 1933, as
amended.
"Senior Credit Facility" means the Third Amended and Restated
Credit Agreement dated as of August 22, 1996 among the Company, 3284085 Canada,
Inc., the several lenders from time to time parties thereto and Canadian
Imperial Bank of Commerce, as administrative agent, together with the documents
related thereto (including, without limitation, any guarantee agreements and
security documents), in each case as such agreements may be amended (including
any amendment and restatement thereof), supplemented or otherwise modified from
time to time, any agreement extending the maturity of, refinancing, replacing or
otherwise restructuring (including adding Subsidiaries of the Company as
additional borrowers or guarantors thereunder) all or any portion of the
Indebtedness under such agreement or any successor or replacement agreement and
whether by the same or any other agent, lender or group of lenders.
"Senior Indebtedness" means the principal of and premium, if
any, and interest (including, without limitation, interest accruing or that
would have accrued but for the filing of a bankruptcy, reorganization or other
insolvency proceeding whether or not such interest constitutes an allowable
claim in such proceeding) on, and any and all other fees, charges, expense
reimbursement obligations, and other amounts due pursuant to the terms of all
agreements, documents and instruments providing for, creating, securing or
evidencing or otherwise entered into in connection with (a) all obligations of
the Company owed to lenders under the Senior Credit Facility, (b) all
obligations of the Company with respect to any Interest Rate Agreement, (c) all
obligations of the Company to reimburse any bank or other person in respect of
amounts paid under letters of credit, acceptances or other similar instruments,
(d) all other current Indebtedness of the Company which does not provide that it
is to rank pari passu with or subordinate to the Notes and (e) all deferrals,
renewals, extensions and refundings of and amendments, modifications and
supplements to, any of the Senior Indebtedness described above. Notwithstanding
anything to the contrary in the foregoing,
<PAGE> 29
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Senior Indebtedness will not include (i) Indebtedness of the Company to any of
its Subsidiaries, (ii) Indebtedness represented by the Notes, (iii) any
Indebtedness which by the express terms of the agreement or instrument creating,
evidencing or governing the same is junior or subordinate in right of payment to
any item of Senior Indebtedness, (iv) any trade payable arising from the
purchase of goods or materials or for services obtained in the ordinary course
of business or (v) that portion of any Indebtedness (other than Indebtedness
described in clause (a) of the immediately preceding sentence of this definition
which relates to reimbursement obligations (whether in the form of loans or
otherwise) under letters of credit with respect to drawings made thereunder and
not yet reimbursed) which is incurred in violation of the Indenture.
"Subsidiary" of any specified Person means any corporation,
partnership, joint venture, association or other business entity, whether now
existing or hereafter organized or acquired, (i) in the case of a corporation,
of which more than 50% of the total voting power of the Capital Stock entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, officers or trustees thereof is held by such first-named Person or
any of its Subsidiaries; or (ii) in the case of a partnership, joint venture,
association or other business entity, with respect to which such first-named
Person or any of its Subsidiaries has the power to direct or cause the direction
of the management and policies of such entity by contract or otherwise or if in
accordance with GAAP such entity is consolidated with the first-named Person for
financial statement purposes.
"Temporary Cash Investments" means (i) Investments in
marketable direct obligations issued or guaranteed by the United States of
America, or of any governmental agency or political subdivision thereof,
maturing within 365 days of the date of purchase; (ii) Investments in
certificates of deposit issued by a bank organized under the laws of the United
States of America or any state thereof or the District of Columbia, in each case
having capital, surplus and undivided profits totaling more than $500,000,000
and rated at least A by Standard & Poor's Corporation and A-2 by Moody's
Investors Service, Inc., maturing within 365 days of purchase; or (iii)
Investments not exceeding 365 days in duration in money market funds that invest
substantially all of such funds' assets in the Investments described in the
preceding clauses (i) and (ii).
<PAGE> 30
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"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code
SectionSection 77aaa-77bbbb) as in effect on the date of this Indenture (except
as provided in Section 8.03 hereof).
"Trust Officer" means any officer or assistant officer of the
Trustee assigned by the Trustee to administer trust accounts.
"Trustee" means the party named as such in this Indenture
until a successor replaces it pursuant to this Indenture and thereafter means
the successor.
"Unrestricted Subsidiary" means (a) any Subsidiary of an
Unrestricted Subsidiary and (b) any Subsidiary of the Company which is
classified after the Issue Date as an Unrestricted Subsidiary by a resolution
adopted by the Board of Directors of the Company; provided that a Subsidiary of
the Company organized or acquired after the Issue Date may be so classified as
an Unrestricted Subsidiary only if such classification is in compliance with
Section 4.13 hereof. The Trustee shall be given prompt notice by the Company of
each resolution adopted by the Board of Directors of the Company under this
provision, together with a copy of each such resolution adopted.
"U.S. Government Obligations" means direct
non-callable obligations of, or non-callable obligations
guaranteed by, the United States of America for the payment of
which obligation or guarantee the full faith and credit of the
United States of America is pledged.
"Voting Stock" means, with respect to any Person, securities
of any class or classes of Capital Stock in such Person entitling the holders
thereof to vote under ordinary circumstances in the election of members of the
Board of Directors or other governing body of such Person.
"Wholly-Owned Restricted Subsidiary" means any Restricted
Subsidiary, all of the outstanding voting securities (other than directors'
qualifying shares) of which are owned, directly or indirectly, by the Company.
Section 1.02. Other Definitions.
The definitions of the following terms may be found in the
sections indicated as follows:
<PAGE> 31
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Term Defined in Section
"Affiliate Transaction".............................. 4.16
"Bankruptcy Law"..................................... 6.01
"Business Day"....................................... 12.08
"Change of Control Offer"............................ 4.24
"Change of Control Payment Date"..................... 4.24
"Change of Control Purchase Price"................... 4.24
"Covenant Defeasance"................................ 9.03
"Custodian".......................................... 6.01
"Event of Default"................................... 6.01
"Excess Proceeds Offer".............................. 4.15
"Guarantee Payment Blockage Period".................. 10.08
"Guarantor Representative............................ 10.08
"Initial Blockage Period"............................ 11.03
"Initial Guarantee Blockage Period".................. 10.08
"Legal Defeasance"................................... 9.02
"Legal Holiday"...................................... 12.08
"Offer Period"....................................... 4.15
"Paying Agent"....................................... 2.03
"Payment Blockage Period"............................ 11.03
"Purchase Date"...................................... 4.15
"Registrar".......................................... 2.03
"Reinvestment Date".................................. 4.15
"Representative"..................................... 11.03
Section 1.03. Incorporation by Reference of Trust
Indenture Act.
Whenever this Indenture refers to a provision of the TIA, the
portion of such provision required to be incorporated herein in order for this
Indenture to be qualified under the TIA is incorporated by reference in and made
a part of this Indenture. The following TIA terms used in this Indenture have
the following meanings:
"Commission" means the SEC.
"indenture securities" means the Notes.
"indenture securityholder" means a Noteholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means
the Trustee.
<PAGE> 32
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"obligor on the indenture securities" means the Company, the
Guarantors or any other obligor on the Notes or the
Guarantees.
All other terms used in this Indenture that are defined by the
TIA, defined in the TIA by reference to another statute or defined by SEC rule
have the meanings therein assigned to them.
Section 1.04. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it herein, whether
defined expressly or by reference;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular; and
(5) words used herein implying any gender shall apply to every
gender.
ARTICLE 2.
THE NOTES
Section 2.01. Form and Dating.
The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A which is incorporated in and
made part of this Indenture. The Notes may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company may use
"CUSIP" numbers in issuing the Notes. The Company shall approve the form of the
Notes. Each Note shall be dated the date of its authentication.
The terms and provisions contained in the Notes and the
Guarantee shall constitute, and are hereby expressly made, a part of this
Indenture and, to the extent applicable, the Company, the Guarantors and the
Trustee, by their execution and
<PAGE> 33
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delivery of this Indenture, expressly agree to such terms and provisions and to
be bound thereby.
Section 2.02. Execution and Authentication.
The Notes shall be executed on behalf of the Company by two
Officers of the Company or an Officer and an Assistant Secretary of the Company.
Such signature may be either manual or facsimile. The Company's seal shall be
impressed, affixed, imprinted or reproduced on the Notes and may be in facsimile
form.
If an Officer whose signature is on a Note no longer holds
that office at the time the Trustee authenticates the Note, the Note shall be
valid nevertheless.
A Note shall not be valid until the Trustee manually signs the
certificate of authentication on the Note. Such signature shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee or an authenticating agent shall authenticate
Notes for original issue in the aggregate principal amount of $150,000,000 upon
a Company Request. The aggregate principal amount of Notes outstanding at any
time may not exceed such amount except as provided in Section 2.07 hereof. The
Notes shall be issuable only in registered form without coupons and only in
denominations of $1,000 and integral multiples thereof.
The Trustee may appoint an authenticating agent reasonably
acceptable to the Company to authenticate Notes. An authenticating agent may
authenticate Notes 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 right as an Agent to deal with the
Company or an Affiliate of the Company.
Section 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Notes may
be presented for registration of transfer or for exchange ("Registrar"), an
office or agency located in the Borough of Manhattan, City of New York, State of
New York where Notes may be presented for payment ("Paying Agent") and an office
or agency where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Registrar shall keep a register of
the Notes and
<PAGE> 34
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of their transfer and exchange. The Company may have one or more co-registrars
and one or more additional paying agents. Neither the Company nor any Affiliate
of the Company may act as Paying Agent. The Company may change any Paying Agent,
Registrar or co-registrar without notice to any Noteholder.
The Company shall enter into an appropriate agency agreement
with any Registrar or Paying Agent not a party to this Indenture. The agreement
shall implement the provisions of this Indenture that relate to such Agent. The
Company shall notify the Trustee of the name and address of any such Agent. If
the Company fails to maintain a Registrar or Paying Agent, or agent for service
of notices and demands, or fails to give the foregoing notice, the Trustee shall
act as such. The Company initially appoints the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the Notes.
Section 2.04. Paying Agent To Hold Assets in Trust.
The Company shall require each Paying Agent other than the
Trustee to agree in writing that, subject to Articles 10 and 11, each Paying
Agent shall hold in trust for the benefit of the Holders or the Trustee all
assets held by the Paying Agent for the payment of principal of, or interest on,
the Notes (whether such assets have been distributed to it by the Company or any
other obligor on the Notes), and the Company and the Paying Agent shall notify
the Trustee in writing of any Default by the Company (or any other obligor on
the Notes) in making any such payment. The Company at any time may require a
Paying Agent to distribute all assets held by it to the Trustee and account for
any assets disbursed and the Trustee may at any time during the continuance of
any Payment Default, upon written request to a Paying Agent, require such Paying
Agent to distribute all assets held by it to the Trustee and to account for any
assets distributed. Upon distribution to the Trustee of all assets that shall
have been delivered by the Company to the Paying Agent, the Paying Agent shall
have no further liability for such assets.
Section 2.05. Noteholder Lists.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Noteholders. If the Trustee is not the Registrar, the Company shall
furnish to the Trustee as of each Record Date and on or before each related
Interest Payment Date, and at such other times as the Trustee may request in
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writing, a list in such form and as of such date as the Trustee may reasonably
require of the names and addresses of Noteholders.
Section 2.06. Transfer and Exchange.
When a Note is presented to the Registrar with a request to
register the transfer thereof, the Registrar shall register the transfer as
requested if the requirements of applicable law are met and, when Notes are
presented to the Registrar with a request to exchange them for an equal
principal amount of Notes of other authorized denominations, the Registrar shall
make the exchange as requested provided that every Note presented or surrendered
for registration of transfer or exchange shall be duly endorsed, or be
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Registrar duly executed by the Holder thereof or his attorney
duly authorized in writing. To permit transfers and exchanges, upon surrender of
any Note for registration of transfer at the office or agency maintained
pursuant to Section 2.03 hereof, the Company shall execute and the Trustee shall
authenticate Notes at the Registrar's request. Any exchange or transfer shall be
without charge, except that the Company may require payment by the Holder of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in relation to a transfer or exchange, but this provision shall not apply to any
exchange pursuant to Sections 2.09, 3.06 or 8.05 hereof. The Trustee shall not
be required to register transfers of Notes or to exchange Notes for a period of
15 days before selection of any Notes to be redeemed. The Trustee shall not be
required to exchange or register transfers of any Notes called or being called
for redemption in whole or in part, except the unredeemed portion of any Note
being redeemed in part.
Section 2.07. Replacement Notes.
If a mutilated Note is surrendered to the Trustee or if the
Holder of a Note presents evidence to the satisfaction of the Company and the
Trustee that the Note has been lost, destroyed or wrongfully taken, the Company
shall issue and the Trustee shall authenticate a replacement Note if the
Trustee's requirements are met. An indemnity bond may be required by the Company
or the Trustee that is sufficient in the judgment of the Company and the Trustee
to protect the Company, the Trustee or any Agent from any loss which any of them
may suffer if a Note is replaced. The Company may charge such Holder for its
reasonable, out-of-pocket expenses in replacing a Note,
<PAGE> 36
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including reasonable fees and expenses of counsel. Every replacement Note is an
additional obligation of the Company.
Section 2.08. Outstanding Notes.
Notes outstanding at any time are all Notes authenticated by
the Trustee except for those cancelled by it, those delivered to it for
cancellation, and those described in this Section 2.08 as not outstanding.
If a Note is replaced pursuant to Section 2.07 (other than a
mutilated Note surrendered for replacement), it ceases to be outstanding until
the Company and the Trustee receive proof satisfactory to each of them that the
replaced Note is held by a bona fide purchaser. A mutilated Note ceases to be
outstanding upon surrender of such Note and replacement thereof pursuant to
Section 2.07.
If a Paying Agent holds on a Redemption Date or Maturity Date
money sufficient to pay the principal of, premium, if any, and accrued interest
on Notes payable on that date and is not prohibited from paying such money to
the Holders thereof pursuant to the terms of this Indenture, then on and after
that date such Notes cease to be outstanding and interest on them ceases to
accrue.
Subject to Section 12.06, a Note does not cease to be
outstanding solely because the Company or an Affiliate holds the Note.
Section 2.09. Temporary Notes.
Until definitive Notes are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form, and shall carry all rights, of definitive
Notes but may have variations that the Company considers appropriate for
temporary Notes. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate definitive Notes in exchange for temporary Notes
presented to it.
Section 2.10. Cancellation.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Notes surrendered to them for transfer, exchange or payment. The Trustee, or
at the direction of the Trustee, the Registrar or the Paying Agent,
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and no one else, shall cancel and at the written request of the Company, shall
dispose of all Notes surrendered for transfer, exchange, payment or
cancellation. If the Company or any Guarantor shall acquire any of the Notes,
such acquisition shall not operate as a redemption or satisfaction of the
Indebtedness represented by such Notes unless and until the same are surrendered
to the Trustee for cancellation or pursuant to this Section 2.10.
Section 2.11. Defaulted Interest.
If the Company defaults in a payment of interest on the Notes,
it shall pay the defaulted amounts, plus any interest payable on defaulted
amounts pursuant to Section 4.01 hereof, to the persons who are Noteholders on a
subsequent special record date, which date shall be the fifteenth day next
preceding the date fixed by the Company for the payment of defaulted interest or
the next succeeding Business Day if such date is not a Business Day. At least 15
days before the special record date, the Company shall mail or cause to be
mailed to each Noteholder, with a copy to the Trustee, a notice that states the
special record date, the payment date, and the amount of defaulted interest, and
interest payable on such defaulted interest, if any, to be paid.
Section 2.12. Deposit of Moneys.
Prior to 10:00 a.m., New York City time, on each Interest
Payment Date and on the Maturity Date, the Company shall have deposited with the
Paying Agent in immediately available funds money sufficient to make cash
payments, if any, due on such Interest Payment Date or on the Maturity Date, as
the case may be, in a timely manner which permits the Trustee to remit payment
to the Holders on such Interest Payment Date or on the Maturity Date, as the
case may be.
Section 2.13. CUSIP Number.
The Company in issuing the Notes may use one or more "CUSIP"
numbers, and if so, the Trustee shall use the CUSIP number(s) in notices of
redemption or exchange as a convenience to Holders, provided that any such
notice may state that no representation is made as to the correctness or
accuracy of the CUSIP number(s) printed in the notice or on the Notes, and that
reliance may be placed only on the other identification numbers printed on the
Notes.
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ARTICLE 3.
REDEMPTION
Section 3.01. Notices to Trustee.
If the Company elects to redeem Notes pursuant to Paragraph 6
of the Notes, it shall notify the Trustee of the Redemption Date and the
principal amount of Notes to be redeemed at least 30 days (unless a shorter
notice shall be satisfactory to the Trustee) but not more than 60 days before
the Redemption Date. Any such notice may be cancelled at any time prior to
notice of such redemption being mailed to any Holder and shall thereby be void
and of no effect.
Section 3.02. Selection by Trustee of Notes To Be Redeemed.
If fewer than all of the Notes are to be redeemed, the Trustee
shall select the Notes to be redeemed pro rata, by lot or by any other method
that the Trustee considers fair and appropriate and, if such Notes are listed on
any securities exchange, by a method that complies with the requirements of such
exchange.
The Trustee shall make the selection from the Notes
outstanding and not previously called for redemption and shall promptly notify
the Company in writing of the Notes selected for redemption and, in the case of
any Note selected for partial redemption, the principal amount thereof to be
redeemed. Notes in denominations of $1,000 may be redeemed only in whole. The
Trustee may select for redemption portions (equal to $1,000 or integral
multiples thereof) of the principal amount of Notes that have denominations
larger than $1,000. Provisions of this Indenture that apply to Notes called for
redemption also apply to portions of Notes called for redemption.
Section 3.03. Notice of Redemption.
At least 30 days, and no more than 60 days, before a
Redemption Date, the Company shall mail, or cause to be mailed, a notice of
redemption by first-class mail to each Holder of Notes to be redeemed at his or
her last address as the same appears on the registry books maintained by the
Registrar pursuant to Section 2.03 hereof.
The notice shall identify the Notes to be redeemed (including
the CUSIP number(s) thereof) and shall state:
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(1) the Redemption Date;
(2) the redemption price;
(3) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the Redemption Date and upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion will be issued;
(4) the name and address of the Paying Agent;
(5) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(6) that, unless (a) the Company defaults in making the redemption
payment or (b) such redemption payment is prohibited pursuant to Article 10 or
11 hereof or otherwise, interest on the Notes called for redemption ceases to
accrue on and after the Redemption Date, and the only remaining right of the
Holders of such Notes is to receive payment of the redemption price upon
surrender to the Paying Agent of the Notes redeemed;
(7) the paragraph of the Notes pursuant to which the Notes called for
redemption are being redeemed; and
(8) if fewer than all the Notes are to be redeemed, the identification
of the particular Notes (or portion thereof) to be redeemed, as well as the
aggregate principal amount of Notes to be redeemed and the aggregate principal
amount of Notes to be outstanding after such partial redemption.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's sole expense.
Section 3.04. Effect of Notice of Redemption.
Once the notice of redemption described in Section 3.03 is
mailed, Notes called for redemption become due and payable on the Redemption
Date and at the redemption price, plus interest, if any, accrued to the
Redemption Date. Upon surrender to the Trustee or Paying Agent, such Notes shall
be paid at the redemption price, plus accrued interest, if any, to the
Redemption Date unless prohibited by Article 10 or 11,
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provided that if the Redemption Date is after a regular interest payment record
date and on or prior to the Interest Payment Date, the accrued interest shall be
payable to the Holder of the redeemed Notes registered on the relevant record
date.
Section 3.05. Deposit of Redemption Price.
On or prior to 10:00 A.M., New York City time, on each
Redemption Date, the Company shall deposit with the Paying Agent in immediately
available funds money sufficient to pay the redemption price of and accrued
interest, if any, on all Notes to be redeemed on that date other than Notes or
portions thereof called for redemption on that date which have been delivered by
the Company to the Trustee for cancellation.
On and after any Redemption Date, if money sufficient to pay
the redemption price of and accrued interest on Notes called for redemption
shall have been made available in accordance with the preceding paragraph, the
Notes called for redemption will cease to accrue interest and the only right of
the Holders of such Notes will be to receive payment of the redemption price of
and, subject to the proviso in Section 3.04, accrued and unpaid interest on such
Notes to the Redemption Date. If any Note called for redemption shall not be so
paid, interest will be paid, from the Redemption Date until such redemption
payment is made, on the unpaid principal of the Note and any interest not paid
on such unpaid principal, in each case, at the rate and in the manner provided
in the Notes.
Section 3.06. Notes Redeemed in Part.
Upon surrender of a Note that is redeemed in part, the Trustee
shall authenticate for a Holder a new Note equal in principal amount to the
unredeemed portion of the Note surrendered.
ARTICLE 4.
COVENANTS
Section 4.01. Payment of Notes.
The Company shall pay the principal of and interest on the
Notes on the dates and in the manner provided in the Notes and this Indenture.
An installment of principal or
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interest shall be considered paid on the date it is due if the Trustee or Paying
Agent holds on that date money designated for and sufficient to pay such
installment and is not prohibited from paying such money to the Holders pursuant
to the terms of this Indenture.
The Company shall pay interest on overdue principal, and
overdue interest, to the extent lawful, at the rate specified in the Notes.
Section 4.02. SEC Reports.
The Company will deliver to the Trustee within 15 days after
the filing of the same with the SEC, copies of the quarterly and annual report
and of the information documents and other reports, if any, which the Company is
required to file with the SEC pursuant to Section 13 or 15(d) of the Notes
Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
will file with the SEC, to the extent permitted, and provide the Trustee and
Holders of Notes with such quarterly and annual reports and such information,
documents and other reports specified in Section 13 and 15(d) of the Exchange
Act. The Company will also comply with the other provisions of TIA Section
314(a).
Section 4.03. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead (as a defense or
otherwise) or in any manner whatsoever claim or take the benefit or advantage
of, any stay or extension law or any usury law or other law which would prohibit
or forgive the Company from paying all or any portion of the principal of,
premium, if any, and/or interest on the Notes as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
<PAGE> 42
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Section 4.04. Compliance Certificate.
(a) The Company shall deliver to the Trustee, within 100 days
after the end of each fiscal year and on or before 50 days after the end of the
first, second and third quarters of each fiscal year, an Officers' Certificate
which complies with TIA Section 314(a)(4) stating that a review of the
activities of the Company and its Subsidiaries during such fiscal year or fiscal
quarter, as the case may be, has been made under the supervision of the signing
Officers with a view to determining whether each has kept, observed, performed
and fulfilled its obligations under this Indenture, and further stating, as to
each such Officer signing such certificate, that to the best of his or her
knowledge each has kept, observed, performed and fulfilled each and every
covenant contained in this Indenture and is not in default in the performance or
observance of any of the terms, provisions and conditions hereof (or, if a
Default or Event of Default shall have occurred, describing all such Defaults or
Events of Default of which he or she may have knowledge and what action each is
taking or proposes to take with respect thereto) and that to the best of his or
her knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action each is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current
recommendations of the American Institute of Certified Public Accountants, the
year-end financial statements delivered pursuant to Section 4.02 above shall be
accompanied by a written statement of the Company's independent public
accountants (who shall be a firm of established national reputation) that in
making the examination necessary for certification of such financial statements
nothing has come to their attention which would lead them to believe that the
Company has violated any provisions of this Article 4 or Article 5 hereof of
this Indenture or, if any such violation has occurred, specifying the nature and
period of existence thereof, it being understood that such accountants shall not
be liable directly or indirectly for any failure to obtain knowledge of any such
violation.
(c) (i) If any Default or Event of Default has occurred and is
continuing or (ii) if any Holder seeks to exercise any remedy hereunder with
respect to a claimed Default under this Indenture or the Notes, the Company
shall deliver to the Trustee an Officers' Certificate specifying such event,
<PAGE> 43
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notice or other action within five Business Days of its becoming aware of such
occurrence.
Section 4.05. 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, (i) all taxes, assessments
and governmental charges (including withholding taxes and any penalties,
interest and additions to taxes) levied or imposed upon it or any of its
Subsidiaries or properties of it or any of its Subsidiaries and (ii) all lawful
claims for labor, materials and supplies that, if unpaid, might by law become a
Lien upon the property of it or any of its Subsidiaries; 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 if the amount,
applicability or validity thereof is being contested in good faith by
appropriate proceedings and an adequate reserve has been established therefor to
the extent required by GAAP.
Section 4.06. Maintenance of Properties and Insurance.
(a) The Company shall cause all properties used in, or useful
to the conduct of, its business or the business of any of its Subsidiaries to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in its
judgment may be necessary, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times unless the
failure to so maintain such properties (together with all other such failures)
would not have a material adverse effect on the financial condition or results
of operations of the Company and its Subsidiaries, taken as a whole; provided,
however, that nothing in this Section 4.06 shall prevent the Company or any
Subsidiary from discontinuing the operation or maintenance of any of such
properties, or disposing of any of them, if such discontinuance or disposal is
in the good faith judgment of the Board of Directors of the Company or the
Subsidiary concerned, as the case may be, desirable in the conduct of the
business of the Company or such Subsidiary, as the case may be, and is not
disadvantageous in any material respect to the Holders.
(b) The Company shall provide or cause to be provided, for
itself and each of its Subsidiaries, insurance (including appropriate
self-insurance) against loss or damage of the kinds that, in the reasonable,
good faith opinion of the
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Company are adequate and appropriate for the conduct of the business of the
Company and such Subsidiaries in a prudent manner, with reputable insurers or
with the government of the United States of America or an agency or
instrumentality thereof, in such amounts, with such deductibles, and by such
methods as shall be customary, in the good faith judgment of the Company, for
corporations similarly situated in the industry, unless the failure to provide
such insurance (together with all other such failures) would not have a material
adverse effect on the financial condition or results of operations of the
Company and its Subsidiaries, taken as a whole.
Section 4.07. Compliance with Laws.
The Company shall, and shall cause each of its Subsidiaries
to, comply with all applicable statutes, rules, regulations, orders and
restrictions of the United States of America, all states and municipalities
thereof, and of any governmental department, commission, board, regulatory
authority, bureau, agency and instrumentality of the foregoing, in respect of
the conduct of its businesses and the ownership of its properties, except for
such noncompliances as would not in the aggregate have a material adverse effect
on the business or financial condition of the Company and its Subsidiaries,
taken as a whole.
Section 4.08. Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to
be done all things necessary to preserve and keep in full force and effect (i)
its corporate existence, and the corporate, partnership or other existence of
each Restricted Subsidiary, in accordance with the respective organizational
documents (as the same may be amended from time to time) of each Restricted
Subsidiary and the rights (charter and statutory), licenses and franchises of
the Company and its Restricted Subsidiaries; provided, however, that the Company
shall not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Restricted Subsidiaries,
if the Board of Directors shall determine that the 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
adverse in any material respect to the Holders.
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Section 4.09. Maintenance of Office or Agency.
The Company shall maintain an office or agency where Notes may
be surrendered for registration of transfer or exchange or for presentation for
payment and where notices and demands to or upon the Company in respect of the
Notes and this Indenture may be served. The Company shall give prompt written
notice to the Trustee of the location, and any change in the location, of such
office or agency. If at any time the Company shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee as set forth in Section 12.02.
The Company may also from time to time designate one or more
other offices or agencies where the Notes may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations.
The Company shall give prompt written notice to the Trustee of such designation
or rescission and of any change in the location of any such other office or
agency.
The Company hereby initially designates the Corporate Trust
Office of the Trustee set forth in Section 12.02 as such office of the Company.
Section 4.10. Limitation on Additional Indebtedness.
The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, incur any Indebtedness (including
Acquired Indebtedness) unless (a) after giving effect to the incurrence of such
Indebtedness and the receipt and application of the proceeds thereof, the
Company's Leverage Ratio is less than (i) 6.50 to 1 if such Indebtedness is
incurred on or prior to , 1999, (ii) 6.25 to 1 if such Indebtedness is incurred
after , 1999 and on or prior to , 2001 and (iii) 6.00 to 1 if such Indebtedness
is incurred thereafter, and (b) no Default or Event of Default shall have
occurred and be continuing at the time or as a consequence of the incurrence of
such Indebtedness.
Notwithstanding the foregoing, the Company and the Restricted
Subsidiaries may incur Permitted Indebtedness; provided that the Company will
not incur any Permitted Indebtedness that ranks junior in right of payment to
the Notes
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that has a maturity or mandatory sinking fund payment prior to
the maturity of the Notes.
Section 4.11. Limitations on Investments
The Company will not, and will not permit any of the
Restricted Subsidiaries to, make any Investment other than (i) a Permitted
Investment or (ii) an Investment that is made as a Restricted Payment in
compliance with Section 4.13 after the Issue Date.
Section 4.12. Limitation on Capital Stock of
Restricted Subsidiaries.
The Company will not (i) sell, pledge, hypothecate or
otherwise convey or dispose of any Capital Stock of a Restricted Subsidiary
(other than under the Senior Credit Facility or under the terms of any
Designated Senior Indebtedness) or (ii) permit any Restricted Subsidiary to
issue any Capital Stock, other than to the Company or a Wholly-Owned Restricted
Subsidiary. The foregoing restrictions shall not apply to an Asset Sale made in
compliance with Section 4.15.
Section 4.13. Limitation on Restricted Payments.
The Company will not make, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, make, any Restricted
Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such
Restricted Payment, the Company could incur $1.00 of additional
Indebtedness (other than Permitted Indebtedness) under Section 4.10;
and
(c) immediately after giving effect to such Restricted
Payment, the aggregate of all Restricted Payments declared or made
after the Issue Date does not exceed the sum of (1) 100% of the
Company's Cumulative EBITDA minus 1.4 times the Company's Cumulative
Consolidated Interest Expense, plus (2) 100% of the aggregate Net
Proceeds and the fair market value of securities or other property
received by the Company from the issue or sale, after the Issue Date,
of Capital Stock (other than Disqualified Capital Stock or Capital
Stock of
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the Company issued to any Subsidiary of the Company) of the Company or
any Indebtedness or other securities of the Company convertible into or
exercisable or exchangeable for Capital Stock (other than Disqualified
Capital Stock) of the Company which has been so converted or exercised
or exchanged, as the case may be, plus (3) $10 million. For purposes of
determining under this clause (c) the amount expended for Restricted
Payments, cash distributed shall be valued at the face amount thereof
and property other than cash shall be valued at its fair market value.
The provisions of this Section 4.13 shall not prohibit (i) the
payment of any distribution within 60 days after the date of declaration
thereof, if at such date of declaration such payment would comply with the
provisions of this Indenture, (ii) the retirement of any shares of Capital Stock
of the Company or Indebtedness which is subordinated in right of payment to the
Notes by conversion into, or by or in exchange for, shares of Capital Stock
(other than Disqualified Capital Stock), or out of the Net Proceeds of the
substantially concurrent sale (other than to a Subsidiary of the Company) of
other shares of Capital Stock of the Company (other than Disqualified Capital
Stock), (iii) the redemption or retirement of Indebtedness of the Company which
is subordinated in right of payment to the Notes in exchange for, by conversion
into, or out of the Net Proceeds of, a substantially concurrent sale or
incurrence of Indebtedness (other than any Indebtedness owed to a Subsidiary of
the Company) of the Company that is contractually subordinated in right of
payment to the Notes to at least the same extent as the subordinated
Indebtedness being redeemed or retired, (iv) the retirement of any shares of
Disqualified Capital Stock by conversion into, or by exchange for, shares of
Disqualified Capital Stock, or out of the Net Proceeds of the substantially
concurrent sale (other than to a Subsidiary of the Company) of other shares of
Disqualified Capital Stock, (v) the repurchase, redemption or other acquisition
or retirement for value of any shares of Capital Stock of the Company (other
than Disqualified Capital Stock) solely out of the proceeds of any policy of
insurance maintained to provide funds for such purpose, (vi) the purchase,
redemption or other acquisition for value of shares of Capital Stock of the
Company (other than Disqualified Capital Stock) or options on such shares held
by the Company's or the Restricted Subsidiaries' officers or employees or former
officers or employees (or their estates or beneficiaries under their estates)
upon the death, disability, retirement or termination of employment of such
current or former officers or employees pursuant to the terms of an employee
benefit plan or
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any other agreement pursuant to which such shares of Capital Stock or options
were issued or pursuant to a severance, buy-sell or right of first refusal
agreement with such current or former officer or employee; provided that the
aggregate cash considerations paid, or distributions made, pursuant to this
clause (vi) do not in any one fiscal year exceed $2 million, (vii) the making of
Investments in Unrestricted Subsidiaries and joint ventures; provided that the
Net Investment therein shall not exceed an aggregate of $10 million; provided,
however, that the Company or the Restricted Subsidiaries may make additional
Investments pursuant to this clause (vii) up to an additional Net Investment
therein of $20 million if the Company is able, at the time of any such
Investment and immediately after giving effect thereto, to incur at least $1.00
of additional Indebtedness (other than Permitted Indebtedness) in compliance
with Section 4.10; provided, further, that in calculating the aggregate amount
of Restricted Payments made subsequent to the Issue Date for purposes of clause
(c) of the immediately preceding paragraph, the amount of Net Investment made
pursuant to clause (vii) shall be included in the calculation.
Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by this Section 4.13 were computed, which calculations may
be based upon the Company's latest available financial statements, and that no
Default or Event of Default exists and is continuing and no Default or Event of
Default will occur immediately after giving effect to any Restricted Payments.
Section 4.14. Limitation on Other Senior Subordinated Debt.
The Company will not, and will not permit any of its
Restricted Subsidiaries to, directly or indirectly, incur, contingently or
otherwise, any Indebtedness (other than the Notes and the Guarantees, as the
case may be) that is both (i) subordinate in right of payment to any Senior
Indebtedness of the Company or any Guarantor Senior Indebtedness of the
Guarantors, as the case may be, and (ii) senior in right of payment to the Notes
or any of the Guarantees, as the case may be. For purposes of this Section 4.14,
Indebtedness is deemed to be senior in right of payment to the Notes and the
Guarantees, as the case may be, if it is not explicitly subordinate in right of
payment to Senior Indebtedness at least to the same extent as the Notes and the
Guarantees, as the case
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may be, are subordinate to Senior Indebtedness and Guarantor
Senior Indebtedness, respectively.
Section 4.15. Limitation on Certain Asset Sales.
The Company will not, and will not permit any of the
Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company or
such Restricted Subsidiary, as the case may be, receives consideration at the
time of such sale or other disposition at least equal to the fair market value
thereof (as determined in good faith by the Company's Board of Directors, and
evidenced by a Board Resolution); (ii) not less than 85% of the consideration
received by the Company or such Restricted Subsidiary, as the case may be, is in
the form of cash or Temporary Cash Investments; provided, however, that the
Company or such Restricted Subsidiary will not be required to comply with this
clause (ii) with respect to a Permitted Asset Swap or a Houston Disposition; and
(iii) the Asset Sale Proceeds received by the Company or such Restricted
Subsidiary are applied (a) first, to the extent the Company elects, or is
required, to prepay, repay or purchase debt under any then existing Senior
Indebtedness of the Company or Guarantor Senior Indebtedness of any Restricted
Subsidiary within 270 days following the receipt of the Asset Sale Proceeds from
any Asset Sale; provided that any such repayment shall result in a permanent
reduction of the commitments thereunder in an amount equal to the principal
amount so repaid; (b) second, to the extent of the balance of Asset Sale
Proceeds after application as described above, to the extent the Company elects,
to an investment in assets (including Capital Stock or other securities
purchased in connection with the acquisition of Capital Stock or property of
another Person) used or useful in businesses similar or ancillary to the
business of the Company and the Restricted Subsidiaries as conducted at the time
of such Asset Sale, provided that such investment occurs and such Asset Sale
Proceeds are so applied within 270 days following the receipt of such Asset Sale
Proceeds (the "Reinvestment Date"); and (c) third, if on the Reinvestment Date
with respect to any Asset Sale, the Available Asset Sale Proceeds exceed $10
million, the Company shall apply an amount equal to such Available Asset Sale
Proceeds to an offer to repurchase the Notes, at a purchase price in cash equal
to 100% of the principal amount thereof plus accrued and unpaid interest, if
any, to the date of repurchase (an "Excess Proceeds Offer"). If an Excess
Proceeds Offer is not fully subscribed, the Company may retain the portion of
the Available Asset Sale Proceeds not required to repurchase Notes.
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(b) If the Company is required to make an Excess Proceeds
Offer, the Company shall mail, within 30 days following the Reinvestment Date, a
notice to the Holders with a copy to the Trustee which shall include, among
other things, the instructions, determined by the Company, that such Holder must
follow in order to have such Notes repurchased and the calculations used in
determining the amount of Available Asset Sale Proceeds to be applied to the
repurchase of such Notes. The notice, which shall govern the terms of the Excess
Proceeds Offer, shall also state:
(1) that the Excess Proceeds Offer is being made pursuant to
this Section 4.15 and that the Excess Proceeds Offer shall remain open
for a period of 20 Business Days following its commencement or such
longer period as may be required by law (the "Offer Period");
(2) that such Holders have the right to require the Company to
apply the Available Asset Sale Proceeds to repurchase such Notes at a
purchase price in cash equal to 100% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of purchase;
(3) the purchase price and the purchase date (the "Purchase
Date") which shall be no earlier that 30 days and not later than 60
days from the date such notice is mailed;
(4) that any Note not tendered or accepted for payment will
continue to accrue interest;
(5) that any Note accepted for payment pursuant to the Excess
Proceeds Offer shall cease to accrue interest on and after the Purchase
Date;
(6) that Holders electing to have a Note purchased pursuant to
any Excess Proceeds Offer will be required to surrender the Note, with
the form entitled "Option of Holder to Elect Purchase" on the reverse
of the Note completed, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice
at least three Business Days before the Purchase Date;
(7) that Holders will be entitled to withdraw their election
if the Company, depositary or Paying Agent, as the case may be,
receives, not later than the expiration of the Offer Period, a
facsimile transmission or letter
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setting forth the name of the Holder, the principal amount of the Note
the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have the Note purchased;
(8) that, if the aggregate principal amount of Notes
surrendered by Holders exceeds the Available Asset Sale Proceeds, the
Company shall select the Notes to be purchased on a pro rata basis
(with such adjustments as may be deemed appropriate by the Company so
that only Notes in denominations of $1,000, or integral multiples
thereof, shall be purchased); and
(9) that Holders whose Notes were purchased only in part will
be issued new Notes equal in principal amount to the unpurchased
portion of the Notes surrendered.
On or before the Purchase Date, the Company shall, to the
extent lawful, accept for payment, on a pro rata basis to the extent necessary,
Notes or portions thereof tendered pursuant to the Excess Proceeds Offer,
deposit with the Paying Agent U.S. legal tender sufficient to pay the purchase
price plus accrued interest, if any, on the Notes to be purchased and deliver to
the Trustee an Officers' Certificate stating that such Notes or portions thereof
were accepted for payment by the Company in accordance with the terms of this
Section 4.15. The Paying Agent shall promptly (but in any case not later than
three Business Days after the Purchase Date) mail or deliver to each tendering
Holder an amount equal to the purchase price of the Note tendered by such Holder
and accepted by the Company for purchase, and the Company shall promptly issue a
new Note, and the Trustee shall authenticate and mail or make available for
delivery such new Note to such Holder equal in principal amount to any
unpurchased portion of the Note surrendered. Any Note not so accepted shall be
promptly mailed or delivered by the Company to the Holder thereof. The Company
will publicly announce the results of the Excess Proceeds Offer on the Purchase
Date. If an Excess Proceeds Offer is not fully subscribed, the Company may
retain that portion of the Available Asset Sale Proceeds not required to
repurchase Notes.
Section 4.16. Limitation on Transactions with Affiliates.
(a) The Company will not, and will not permit any of the
Restricted Subsidiaries to, directly or indirectly, enter into or suffer to
exist any transaction or series of related transactions (including, without
limitation, the sale, purchase, exchange or lease of assets, property or
services)
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with any Affiliate (including entities in which the Company or any of the
Restricted Subsidiaries owns a minority interest) or holder of 10% or more of
the Company's Common Stock (each of the foregoing, an "Affiliate Transaction")
or extend, renew, waive or otherwise modify the terms of any Affiliate
Transaction entered into prior to the Issue Date unless (i) such Affiliate
Transaction is between or among the Company and/or Wholly-Owned Restricted
Subsidiaries; or (ii) the terms of such Affiliate Transaction are fair and
reasonable to the Company or such Restricted Subsidiary, as the case may be, and
the terms of such Affiliate Transaction are at least as favorable as the terms
which could be obtained by the Company or such Restricted Subsidiary, as the
case may be, in a comparable transaction made on an arm's-length basis between
unaffiliated parties. In any Affiliate Transaction involving an amount or having
a value in excess of $1 million which is not permitted under clause (i) above,
the Company must obtain a Board Resolution approved by a majority of the members
of the Board of Directors of the Company (and a majority of the disinterested
members of the Board of Directors of the Company) certifying that such Affiliate
Transaction complies with clause (ii) above. In transactions with a value in
excess of $5 million which are not permitted under clause (i) above, the Company
must obtain a written opinion as to the fairness of such a transaction from an
independent investment banking firm of nationally recognized standing.
(b) The foregoing provisions will not apply to (i) any
Restricted Payment that is not prohibited by Section 4.13, (ii) any transaction,
approved by the Board of Directors of the Company, with an officer or director
of the Company or of any Restricted Subsidiary in his or her capacity as officer
or director entered into in the ordinary course of business, including
compensation and employee benefit arrangements with any officer or director of
the Company or of any Restricted Subsidiary, or (iii) any Affiliate Transaction
entered into prior to the Issue Date.
Section 4.17. Limitations on Liens.
The Company will not, and will not permit any of the
Restricted Subsidiaries to, create, incur or otherwise cause or suffer to exist
or become effective any Liens of any kind (other than Permitted Liens) upon any
Property of the Company or any Restricted Subsidiary or any shares of stock or
debt of any Restricted Subsidiary which owns Property, now owned or hereafter
acquired, unless (i) if such Lien secures Indebtedness which is pari passu with
the Notes, then the Notes
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are secured on an equal and ratable basis with the obligations so secured until
such time as such obligation is no longer secured by a Lien or (ii) if such Lien
secures Indebtedness which is subordinated to the Notes, any such Lien shall be
subordinated to the Lien granted to the Holders of the Notes in the same
collateral as that securing such Lien to the same extent as such subordinated
Indebtedness is subordinated to the Notes.
Section 4.18. Limitation on Creation of Subsidiaries.
The Company shall not create or acquire, or permit any of the
Restricted Subsidiaries to create or acquire, any Subsidiary other than (i) a
Restricted Subsidiary existing as of the Issue Date, (ii) a Restricted
Subsidiary conducting a business similar or reasonably related to the business
of the Company and its Subsidiaries as conducted on the Issue Date or (iii) an
Unrestricted Subsidiary.
Section 4.19. Limitation on Sale and Lease-Back Transactions.
The Company will not, and will not permit any Restricted
Subsidiary to, enter into any Sale and Lease-Back Transaction unless (i) the
consideration received in such Sale and Lease-Back Transaction is at least equal
to the fair market value of the property sold, as determined by a Board
Resolution of the Company, and (ii) the Company could incur the Attributable
Indebtedness in respect of such Sale and Lease- Back Transaction in compliance
with Section 4.10.
Section 4.20. Limitation on Dividends and Other Payment
Restrictions Affecting Subsidiaries.
The Company will not, and will not permit any of the
Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or
suffer to exist or become effective any consensual encumbrance or restriction of
any kind on the ability of any Restricted Subsidiary to (a) pay dividends or
make any other distributions to the Company or any Restricted Subsidiary on its
Capital Stock, (b) pay any Indebtedness owed to the Company or any Restricted
Subsidiary, (c) make loans or advances to the Company or any Restricted
Subsidiary, (d) transfer any of its properties or assets to the Company or any
Restricted Subsidiary, (e) grant Liens on or security interests in the assets of
the Company or the Restricted Subsidiaries in favor of the Holders of the Notes,
or (f) guarantee the Notes or any renewals or refinancings thereof, except for
Permitted Dividend Encumbrances.
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Section 4.21. Guarantees of Certain Indebtedness.
The Company will not permit any of the domestic Restricted
Subsidiaries (other than the Guarantors) to (a) incur, guarantee or secure
through the granting of Liens the payment of any Indebtedness under the Senior
Credit Facility or any refinancings thereof or (b) pledge any intercompany notes
representing obligations of any of the Restricted Subsidiaries to secure the
payment of any Indebtedness under the Senior Credit Facility or any refinancings
thereof, in each case unless such Restricted Subsidiary, the Company and the
Trustee execute and deliver a supplemental indenture evidencing such Restricted
Subsidiary's Guarantee under this Indenture. Thereafter, such Restricted
Subsidiary shall be a Guarantor for all purposes of this Indenture.
Section 4.22. Payments for Consent.
Neither the Company nor any of its Subsidiaries shall,
directly or indirectly, pay or cause to be paid any consideration, whether by
way of interest, fee or otherwise, to any Holder of any Notes for or as an
inducement to any consent, waiver or amendment of any of the terms or provisions
of this Indenture or the Notes unless such consideration is offered to be paid
or agreed to be paid to all Holders of the Notes which so consent, waive or
agree to amend in the time frame set forth in solicitation documents relating to
such consent, waiver or agreement.
Section 4.23. Line of Business.
The Company will not, and will not permit any of the
Restricted Subsidiaries to, engage in any business other than the business of
out-of-home advertising or a substantially similar business.
Section 4.24. Change of Control.
(a) Within 30 days of the occurrence of a Change of Control,
the Company shall notify the Trustee in writing of such occurrence and shall
make an offer to purchase (the "Change of Control Offer") the outstanding Notes
at a purchase price equal to 101% of the principal amount thereof plus any
accrued and unpaid interest thereon to the Change of Control Payment Date (such
purchase price being hereinafter referred to as the "Change of Control Purchase
Price") in accordance with the procedures set forth in this Section 4.24.
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If the Senior Credit Facility is in effect, or any amounts are
owing thereunder or in respect thereof, at the time of the occurrence of a
Change of Control, prior to the mailing of the notice to Holders described in
paragraph (b) below, but in any event within 30 days following any Change of
Control, the Company covenants to (i) repay in full all obligations under or in
respect of the Senior Credit Facility or offer to repay in full all obligations
under or in respect of the Senior Credit Facility and repay the obligations
under or in respect of the Senior Credit Facility of each lender who has
accepted such offer or (ii) obtain the requisite consent under the Senior Credit
Facility to permit the repurchase of the Notes pursuant to this Section 4.24.
The Company must first comply with the covenant described in the preceding
sentence before it shall be required to purchase Notes in the event of a Change
of Control; provided that the Company's failure to comply with the covenant
described in the preceding sentence constitutes an Event of Default described in
clause (3) under Section 6.01 hereof if not cured within 60 days after the
notice required by such clause.
(b) Within 30 days of the occurrence of a Change of Control,
the Company also shall (i) cause a notice of the Change of Control Offer to be
sent at least once to the Dow Jones News Service or similar business news
service in the United States and (ii) send by first-class mail, postage prepaid,
to the Trustee and to each Holder of the Notes, at the address appearing in the
register maintained by the Registrar of the Notes, a notice stating:
(i) that the Change of Control Offer is being made pursuant to
this Section 4.24 and that all Notes tendered will be accepted for
payment, and otherwise subject to the terms and conditions set forth
herein;
(ii) the Change of Control Purchase Price and the purchase
date (which shall be a business day no earlier than 30 business days
nor later than 60 business days from the date such notice is mailed
(the "Change of Control Payment Date"));
(iii) that any Note not tendered will continue to accrue
interest;
(iv) that, unless the Company defaults in the payment of the
Change of Control Purchase Price, any Notes accepted for payment
pursuant to the Change of Control
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Offer shall cease to accrue interest after the Change of
Control Payment Date;
(v) that Holders accepting the offer to have their Notes
purchased pursuant to a Change of Control Offer will be required to
surrender the Notes to the Paying Agent at the address specified in the
notice prior to the close of business on the business day preceding the
Change of Control Payment Date;
(vi) that Holders will be entitled to withdraw their
acceptance if the Paying Agent receives, not later than the close of
business on the third Business Day preceding the Change of Control
Payment Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the Notes
delivered for purchase, and a statement that such Holder is withdrawing
his election to have such Notes purchased;
(vii) that Holders whose Notes are being purchased only in
part will be issued new Notes equal in principal amount to the
unpurchased portion of the Notes surrendered, provided that each Note
purchased and each such new Note issued shall be in an original
principal amount in denominations of $1,000 and integral multiples
thereof;
(viii) any other procedures that a Holder must follow to
accept a Change of Control Offer or effect withdrawal of such
acceptance; and
(ix) the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to
the extent lawful, (i) accept for payment Notes or portions thereof tendered
pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent
money sufficient to pay the purchase price of all Notes or portions thereof so
tendered and (iii) deliver or cause to be delivered to the Trustee Notes so
accepted together with an Officers' Certificate stating the Notes or portions
thereof tendered to the Company. The Paying Agent shall promptly mail to each
Holder of Notes so accepted payment in an amount equal to the purchase price for
such Notes, and the Company shall execute and issue, and the Trustee shall
promptly authenticate and mail to such Holder, a new Note equal in principal
amount to any unpurchased portion of the Notes surrendered; provided that each
such new Note shall be issued in an original principal
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amount in denominations of $1,000 and integral multiples thereof.
(c) (i) If the Company or any Restricted Subsidiary has issued
any outstanding (A) Indebtedness that is subordinated in right of payment to the
Notes or the Guarantee of such Restricted Subsidiary or (B) Preferred Stock, and
the Company or such Restricted Subsidiary is required to repurchase, or make an
offer to repurchase, such Indebtedness, or redeem, or make an offer to redeem,
such Preferred Stock or to make a distribution with respect to such subordinated
Indebtedness or Preferred Stock in the event of a change of control, the Company
or such Restricted Subsidiary shall not consummate any such offer or
distribution with respect to such subordinated Indebtedness or Preferred Stock
until such time as the Company shall have paid the Change of Control Purchase
Price in full to the Holders of Notes that have accepted the Company's Change of
Control Offer and shall otherwise have consummated the Change of Control Offer
made to Holders of the Notes and (ii) the Company or any Restricted Subsidiary
will not issue Indebtedness that is subordinated in right of payment to the
Notes or the Guarantee of such Restricted Subsidiary or Preferred Stock with
change of control provisions requiring the payment of such Indebtedness or
Preferred Stock prior to the payment of the Notes in the event of a Change of
Control under this Indenture.
In the event that a Change of Control occurs and the holders
of Notes exercise their right to require the Company to purchase Notes, if such
purchase constitutes a "tender offer" for purposes of Rule 14e-1 under the
Exchange Act at that time, the Company will comply with the requirements of Rule
14e-1 as then in effect with respect to such repurchase.
ARTICLE 5.
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation,
Merger and Sale of Assets.
(a) The Company will not and will not permit any Guarantor to
consolidate with, merge with or into, or transfer all or substantially all of
its assets (as an entirety or substantially as an entirety in one transaction or
a series of related transactions), to any Person unless: (i) the Company or the
Guarantor, as the case may be, shall be the continuing
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Person, or the Person (if other than the Company or the Guarantor) formed by
such consolidation or into which the Company or the Guarantor, as the case may
be, is merged or to which the properties and assets of the Company or the
Guarantor, as the case may be, are transferred shall be a corporation organized
and existing under the laws of the United States or any State thereof or the
District of Columbia and shall expressly assume, by a supplemental indenture,
executed and delivered to the Trustee, in form satisfactory to the Trustee, all
of the obligations of the Company or the Guarantor, as the case may be, under
the Notes or the Guarantee of such Guarantor, as the case may be, and this
Indenture, and the obligations under this Indenture shall remain in full force
and effect; (ii) immediately before and immediately after giving effect to such
transaction, no Default or Event of Default shall have occurred and be
continuing; and (iii) immediately after giving effect to such transaction on a
pro forma basis the Company or such Person could incur at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to Section
4.10 hereof, provided that a Person that is a Guarantor may merge into the
Company or another Person that is a Guarantor without complying with this clause
(iii).
(b) In connection with any consolidation, merger or transfer
of assets contemplated by this Section 5.01, the Company shall deliver or cause
to be delivered, to the Trustee, in form and substance reasonably satisfactory
to the Trustee, an Officers' Certificate and an Opinion of Counsel, each stating
that such consolidation, merger or transfer and the supplemental indenture in
respect thereto comply with this Section 5.01 and that all conditions precedent
herein provided for relating to such transaction or transactions have been
complied with.
Section 5.02. Successor Person Substituted.
Upon any consolidation or merger, or any transfer of all or
substantially all of the assets of the Company or any Guarantor in accordance
with Section 5.01 above, the successor corporation formed by such consolidation
or into which the Company is merged or to which such transfer is made shall
succeed to, and be substituted for, and may exercise every right and power of,
the Company or such Guarantor under this Indenture with the same effect as if
such successor corporation had been named as the Company or such Guarantor
herein, and thereafter the predecessor corporation shall be relieved of all
obligations and covenants under this Indenture and the Notes.
<PAGE> 59
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ARTICLE 6.
DEFAULTS AND REMEDIES
Section 6.01. Events of Default.
An "Event of Default" occurs if:
(1) there is a default in the payment of any principal of, or
premium, if any, on the Notes when the same becomes due and payable at
maturity, upon acceleration, redemption or otherwise, whether or not
such payment is prohibited by the provisions of Article 11 hereof;
(2) there is a default in the payment of any interest on any
Note when the same becomes due and payable and the Default continues
for a period of 30 days, whether or not such payment is prohibited by
the provisions of Article 11 hereof;
(3) the Company or any Guarantor defaults in the observance or
performance of any other covenant in the Notes or this Indenture for 60
days after written notice from the Trustee or the Holders of not less
than 25% in the aggregate principal amount of the Notes then
outstanding;
(4) there is a default in the payment at final maturity of
principal in an aggregate amount of $10 million or more with respect to
any Indebtedness of the Company or any Restricted Subsidiary which
default shall not be cured, waived or postponed pursuant to an
agreement with the holders of such Indebtedness within 60 days after
written notice, or the acceleration of any such Indebtedness
aggregating $10 million or more which acceleration shall not be
rescinded or annulled within 20 days after written notice to the
Company of such Default by the Trustee or any Holder;
(5) a court of competent jurisdiction enters a final judgment
or judgments which can no longer be appealed for the payment of money
in excess of $10 million (not covered by insurance) against the Company
or any Restricted Subsidiary and such judgment remains undischarged for
a period of 60 consecutive days during which a stay of enforcement of
such judgment shall not be in effect;
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(6) the Company or any Restricted Subsidiary pursuant to or
within the meaning of any Bankruptcy Law:
(A) commences a voluntary case,
(B) consents to the entry of an order for relief
against it in an involuntary case,
(C) consents to the appointment of a Custodian of it
or for all or substantially all of its property,
(D) makes a general assignment for the benefit of its
creditors, or
(E) generally is not paying its debts as they become
due; or
(7) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Lay that:
(A) is for relief against the Company or any
Restricted Subsidiary in an involuntary case,
(B) appoints a Custodian of the Company or any
Restricted Subsidiary or for all or substantially all of the
property of the Company or any Restricted Subsidiary, or
(C) orders the liquidation of the Company or any
Restricted Subsidiary,
and the order or decree remains unstayed and in effect for
60 days.
The term "Bankruptcy Law" means Title 11, U.S. Code or any
similar Federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator or similar official under any
Bankruptcy Law.
The Trustee may withhold notice to the Holders of the Notes of
any Default (except in payment of principal or premium, if any, or interest on
the Notes) if the Trustee considers it to be in the best interest of the Holders
of the Notes to do so.
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Section 6.02. Acceleration.
If an Event of Default (other than an Event of Default arising
under Section 6.01(6) or (7) with respect to the Company) occurs and is
continuing, the Trustee by notice to the Company, or the Holders of not less
than 25% in aggregate principal amount of the Notes then outstanding may by
written notice to the Company and the Trustee declare to be immediately due and
payable the entire principal amount of all the Notes then outstanding plus
accrued and unpaid interest to the date of acceleration and (i) such amounts
shall become immediately due and payable or (ii) if there are any amounts
outstanding under or in respect of the Senior Credit Facility, such amounts
shall become due and payable upon the first to occur of an acceleration under or
in respect of the Senior Credit Facility or five Business Days after receipt by
the Company and the Representative of notice of the acceleration of the Notes;
provided, however, that after such acceleration but before a judgement or decree
based on such acceleration is obtained by the Trustee, the Holders of a majority
in aggregate principal amount of the outstanding Notes may rescind and annul
such acceleration and its consequences if (i) all existing Events of Default,
other than the nonpayment of accelerated principal, premium, if any, or interest
that has become due solely because of the acceleration, have been cured or
waived, (ii) to the extent the payment of such interest is lawful, interest on
overdue installments of interest and overdue principal, which has become due
otherwise than by such declaration of acceleration, has been paid and (iii) if
the rescission would not conflict with any judgment or decree. No such
rescission shall affect any subsequent Default or impair any right consequent
thereto. In case an Event of Default specified in Section 6.01(6) or (7) with
respect to the Company occurs, such principal, premium, if any, and interest
amount with respect to all of the Notes shall be due and payable immediately
without any declaration or other act on the part of the Trustee or the Holders
of the Notes.
Section 6.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee
may pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of, or premium, if any, and interest on the Notes or to
enforce the performance of any provision of the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does
not possess any of the Notes or does not produce any of them in
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the proceeding. A delay or omission by the Trustee or any Noteholder in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. No remedy is exclusive of any other remedy. All available
remedies are cumulative to the extent permitted by law.
Section 6.04. Waiver of Past Defaults and Events of Default.
Subject to Sections 6.02, 6.07 and 8.02 hereof, the Holders of
a majority in principal amount of the Notes then outstanding have the right to
waive any existing Default or Event of Default or compliance with any provision
of this Indenture or the Notes. 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 Indenture; but no such waiver shall extend
to any subsequent or other Default or Event of Default or impair any right
consequent thereto.
Section 6.05. Control by Majority.
The Holders of a majority in principal amount of the Notes
then outstanding may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee by this Indenture. The Trustee, however, may
refuse to follow any direction that conflicts with law or this Indenture or that
the Trustee determines may be unduly prejudicial to the rights of another
Noteholder or that may involve the Trustee in personal liability; provided that
the Trustee may take any other action deemed proper by the Trustee which is not
inconsistent with such direction.
Section 6.06. Limitation on Suits.
Subject to Section 6.07 below, a Noteholder may not institute
any proceeding or pursue any remedy with respect to this Indenture or the Notes
unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
(2) the Holders of at least 25% in aggregate principal amount
of the Notes then outstanding make a written request to the Trustee to
pursue the remedy;
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(3) such Holder or Holders offer to the Trustee indemnity
reasonably satisfactory to the Trustee against any loss, liability or
expense to be incurred in compliance with such request;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60 day period by the Holders of a
majority in aggregate principal amount of the Notes then outstanding.
A Noteholder may not use this Indenture to prejudice the
rights of another Noteholder or to obtain a preference or priority over another
Noteholder.
Section 6.07. Rights of Holders To Receive Payment.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal of, or premium, if
any, and interest of the Note on or after the respective due dates expressed in
the Note, or to bring suit for the enforcement of any such payment on or after
such respective dates, is absolute and unconditional and shall not be impaired
or affected without the consent of the Holder.
Section 6.08. Collection Suit by Trustee.
If an Event of Default in payment of principal, premium or
interest specified in Section 6.01(1) or (2) hereof occurs and is continuing,
the Trustee may recover judgment in its own name and as trustee of an express
trust against the Company or the Guarantors (or any other obligor on the Notes)
for the whole amount of unpaid principal and accrued interest remaining unpaid,
together with interest on overdue principal and, to the extent that payment of
such interest is lawful, interest on overdue installments of interest, in each
case at the rate then borne by the Notes, and such further amounts 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.
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Section 6.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Noteholders allowed in any judicial proceedings relative to the Company or the
Guarantors (or any other obligor upon the Notes), any of their respective
creditors or any of their respective property and shall be entitled and
empowered to collect and receive any monies or other property payable or
deliverable on any such claims and to distribute the same after deduction of its
charges and expenses to the extent that any such charges and expenses are not
paid out of the estate in any such proceedings and any custodian in any such
judicial proceeding is hereby authorized by each Noteholder 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 Noteholders, to pay to the Trustee any
amount due to 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 7.07 hereof.
Nothing herein contained shall be deemed to authorize the
Trustee to authorize or consent to or accept or adopt on behalf of any
Noteholder any plan or reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof, or to authorize the
Trustee to vote in respect of the claim of any Noteholder in any such
proceedings.
Section 6.10. Priorities.
If the Trustee collects any money pursuant to this Article 6,
it shall pay out the money in the following order:
FIRST: to the Trustee for amounts due under Section 7.07
hereof;
SECOND: to Noteholders for amounts due and unpaid on the Notes
for principal, premium, if any, and interest as to each, ratably,
without preference or priority of any kind, according to the amounts
due and payable on the Notes; and
THIRD: to the Company or, to the extent the Trustee collects
any amount from any Guarantor, to such Guarantor.
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The Trustee may fix a record date and payment date for any
payment to Noteholders pursuant to this Section 6.10.
Section 6.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a
Holder pursuant to Section 6.07 hereof or a suit by Holders of more than 10% in
principal amount of the Notes then outstanding.
ARTICLE 7.
TRUSTEE
Section 7.01. Duties of Trustee.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise or use under the same circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(1) The Trustee need perform only those duties that are
specifically set forth in this Indenture and no covenants or
obligations shall be implied in this Indenture against the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture but, in the case of any such certificates or opinions
which by any provision hereof are specifically
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required to be furnished to the Trustee, the Trustee shall be under a
duty to examine the same to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(1) This paragraph does not limit the effect of paragraph (b)
of this Section 7.01.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Sections 6.02 and 6.05 hereof.
(d) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its rights or powers if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
satisfactory to it against such risk or liability is not reasonably assured to
it.
(e) Whether or not therein expressly so provided, paragraphs
(a), (b), (c) and (d) of this Section 7.01 shall govern every provision of this
Indenture that in any way relates to the Trustee.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company or
any Guarantor. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by the law.
Section 7.02. Rights of Trustee.
Subject to Section 7.01 hereof:
(1) The Trustee may rely on and shall be protected in acting
or refraining from acting upon any document reasonably believed by it
to be genuine and to have been signed or presented by the proper
person. The Trustee
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need not investigate any fact or matter stated in the document.
(2) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel, or both,
which shall conform to the provisions of Section 12.05 hereof. The
Trustee shall be protected and shall not be liable for any action it
takes or omits to take in good faith in reliance on such certificate or
opinion.
(3) The Trustee may act through agents and shall not be
responsible for the misconduct or negligence of any agent appointed by
it with due care.
(4) The Trustee shall not be liable for any action it takes or
omits to take in good faith which it reasonably believes to be
authorized or within its rights or powers.
(5) The Trustee may consult with counsel of its selection, and
the advice or opinion of such counsel as to matters of law shall be
full and complete authorization and protection from liability in
respect of any action taken, omitted or suffered by it hereunder in
good faith and in accordance with the advice or opinion of such
counsel.
(6) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request,
order or direction of any of the Holders pursuant to the provisions of
this Indenture, unless such Holders shall have offered to the Trustee
reasonable security or indemnity against the costs, expenses and
liabilities which may be incurred therein or thereby.
Section 7.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may make loans to, accept deposits from,
perform services for or otherwise deal with the Company or any Guarantor, or any
Affiliates thereof, with the same rights it would have if it were not Trustee.
Any Agent may do the same with like rights. The Trustee, however, shall be
subject to Sections 7.10 and 7.11 hereof.
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Section 7.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or
adequacy of this Indenture or the Notes, it shall not be accountable for the
Company's use of the proceeds from the sale of Notes or any money paid to the
Company pursuant to the terms of this Indenture and it shall not be responsible
for any statement in the Notes other than its certificate of authentication.
Section 7.05. Notice of Default.
If a Default or an Event of Default occurs and is continuing
and if it is known to the Trustee, the Trustee shall mail to each Noteholder
notice of the Default or the Event of Default, as the case may be, within 90
days after it occurs. Except in the case of a Default or an Event of Default in
payment of the principal of, or premium, if any, or interest on any Note the
Trustee may withhold the notice if and so long as the Board of Directors of the
Trustee, the executive committee or any trust committee of such board and/or its
Trust Officers in good faith determine(s) that withholding the notice is in the
interests of the Noteholders.
Section 7.06. Reports by Trustee to Holders.
Within 60 days after May 15 of each year, commencing the May 15
following the date of this Indenture, the Trustee shall mail to each
Noteholder a brief report dated as of such May 15 that complies with TIA
Section 313(a). The Trustee also shall comply with TIA Sections 313(b)
and 313(c).
A copy of each report at the time of its mailing to
Noteholders shall be filed with the SEC and each stock exchange, if any, on
which the Notes are listed. The Company shall promptly notify the Trustee when
the Notes are listed on any stock exchange and the Trustee shall comply with TIA
Section 313(d).
Section 7.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time
reasonable compensation for its services. The Trustee's compensation shall not
be limited by any provision of law on compensation of a trustee of an express
trust. The Company shall reimburse the Trustee upon request for all reasonable
disbursements, expenses and advances incurred or made by it in connection with
its duties under this Indenture, including the
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reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any and all loss or liability incurred by it in connection with the
acceptance or performance of its duties under this Indenture including the
reasonable costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its
powers or duties hereunder. The Trustee shall notify the Company promptly of
any claim asserted against the Trustee for which it may seek indemnity.
However, the failure by the Trustee to so notify the Company shall not relieve
the Company of its obligations. Notwithstanding the foregoing, the Company and
the Guarantors need not reimburse the Trustee for any expense or indemnify
it against any loss or liability incurred by the Trustee through its negligence
or bad faith. To secure the payment obligations of the Company and the
Guarantors in this Section 7.07, the Trustee shall have a lien prior to the
Notes on all money or property held or collected by the Trustee except such
money or property held in trust to pay principal of and interest on particular
Notes.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(6) or (7) hereof occurs, the expenses
and the compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
For purposes of this Section 7.07, the term "Trustee" shall
include any trustee appointed pursuant to Article 9.
Section 7.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company in writing.
The Holders of a majority in principal amount of the outstanding Notes may
remove the Trustee by notifying the removed Trustee in writing and may appoint a
successor Trustee with the Company's written consent which consent shall not be
unreasonably withheld. The Company may remove the Trustee at its election if:
(1) the Trustee fails to comply with Section 7.10 hereof;
(2) the Trustee is adjudged a bankrupt or an insolvent;
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(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Company shall promptly notify each
Holder of such event and shall promptly appoint a successor Trustee.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Company or the Holders of at least 10% in principal amount of the outstanding
Notes may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 7.10 hereof, any
Noteholder may petition any court of competent jurisdiction for the removal of
the Trustee and the appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Immediately following
such delivery, the retiring Trustee shall, subject to its rights under Section
7.07 hereof, transfer all property held by it as Trustee to the successor
Trustee, the resignation or removal of the retiring Trustee shall become
effective, and the successor Trustee shall have all the rights, powers and
duties of the Trustee under this Indenture. A successor Trustee shall mail
notice of its succession to each Noteholder.
Section 7.09. Successor Trustee by Consolidation, Merger
or Conversion.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust assets to, another
corporation, subject to Section 7.10 hereof, the successor corporation without
any further act shall be the successor Trustee.
Section 7.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1), (2) and (5) in every respect. The Trustee
shall have a combined capital and
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surplus of at least $100,000,000 as set forth in its most recent published
annual report of condition. The Trustee shall comply with TIA Section 310(b),
including the provision in Section 310(b)(1).
Section 7.11. Preferential Collection of Claims Against
Company.
The Trustee shall comply with TIA Section 311(a), excluding
any creditor relationship listed in TIA Section 311 (b). A Trustee who has
resigned or been removed shall be subject to TIA Section 311(a) to the extent
indicated therein.
Section 7.12. Paying Agents.
The Company shall cause each Paying Agent other than the
Trustee to execute and deliver to it and the Trustee an instrument in which such
agent shall agree with the Trustee, subject to the provisions of this Section
7.12:
(1) that it will hold all sums held by it as agent for the
payment of principal of, or premium, if any, or interest on, the Notes
(whether such sums have been paid to it by the Company or by any
obligor on the Notes) in trust for the benefit of Holders of the Notes
or the Trustee;
(2) that it will at any time during the continuance of any
Event of Default, upon written request from the Trustee, deliver to the
Trustee all sums so held in trust by it together with a full accounting
thereof; and
(3) that it will give the Trustee written notice within three
(3) Business Days of any failure of the Company (or by any obligor on
the Notes) in the payment of any installment of the principal of,
premium, if any, or interest on, the Notes when the same shall be due
and payable.
ARTICLE 8.
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.
The Company and the Guarantors, when authorized by a
Board Resolution of each of them, and the Trustee may amend or
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supplement this Indenture or the Notes without notice to or consent of any
Noteholder:
(1) to comply with Section 5.01 hereof;
(2) to provide for uncertificated Notes in addition to
certificated Notes;
(3) to comply with any requirements of the SEC under the TIA;
(4) to cure any ambiguity, defect or inconsistency, or to make
any other change that does not materially and adversely affect the
rights of any Noteholder; or
(5) to make any other change that does not, in the opinion of
the Trustee, adversely affect in any material respect the rights of any
Noteholders hereunder.
The Trustee is hereby authorized to join with the Company and
the Guarantors in the execution of any supplemental indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations which may be therein contained, but the Trustee
shall not be obligated to enter into any such supplemental indenture which
adversely affects its own rights, duties or immunities under this Indenture.
Section 8.02. With Consent of Holders.
The Company, the Guarantors, when authorized by a Board
Resolution of each of them, and the Trustee may amend or supplement this
Indenture or the Notes with the written consent of the Holders of not less than
a majority in aggregate principal amount of the outstanding Notes without notice
to any Noteholder. The Holders of not less than a majority in aggregate
principal amount of the outstanding Notes may waive compliance in a particular
instance by the Company with any provision of this Indenture or the Notes
without notice to any Noteholder. Subject to Section 8.04, without the consent
of each Noteholder affected, however, an amendment, supplement or waiver,
including a waiver pursuant to Section 6.04, may not:
(1) reduce the amount of Notes whose Holders must consent to
an amendment, supplement or waiver to this Indenture or the Notes;
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(2) reduce the rate of or change the time for payment of
interest on any Note;
(3) reduce the principal of or premium on or change the stated
maturity of any Note;
(4) make any Note payable in money other than that stated in
the Note;
(5) change the amount or time of any payment required by the
Notes or reduce the premium payable upon any redemption of the Notes in
accordance with Paragraph 6 of the Notes, or change the time before
which no such redemption may be made;
(6) waive a default in the payment of the principal of,
interest on, or redemption payment with respect to, any Note;
(7) make any changes in Sections 6.04 or 6.07 hereof or this
sentence of Section 8.02;
(8) amend, alter, change or modify the obligation of the
Company to make and consummate a Change of Control Offer in the event
of a Change of Control or make and consummate an Excess Proceeds Offer
after such obligation has arisen or waive any Default in the
performance of any such offers or modify any of the provisions or
definitions with respect to any such offers;
(9) affect the ranking of the Notes or the Guarantees in a
manner adverse to the Holders; or
(10) take any other action otherwise prohibited by this
Indenture to be taken without the consent of each holder affected
thereby.
After an amendment, supplement or waiver under this Section
8.02 becomes effective, the Company shall mail to the Holders a notice briefly
describing the amendment, supplement or waiver.
Upon the request of the Company, accompanied by a Board
Resolution authorizing the execution of any such supplemental indenture, and
upon the receipt by the Trustee of evidence reasonably satisfactory to the
Trustee of the consent of the Noteholders as aforesaid and upon receipt by the
Trustee of the documents described in Section 8.06 hereof, the Trustee
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shall join with the Company and the Guarantors in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture, in which case the Trustee
may in its discretion, but shall not be obligated to, enter into such
supplemental indenture.
It shall not be necessary for the consent of the Holders under
this Section to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.
Section 8.03. Compliance with Trust Indenture Act.
Every amendment to or supplement of this Indenture or the
Notes shall comply with the TIA as then in effect.
Section 8.04. Revocation and Effect of Consents.
Until an amendment, supplement, waiver or other action becomes
effective, a consent to it by a Holder of a Note is a continuing consent
conclusive and binding upon such Holder and every subsequent Holder of the same
Note or portion thereof, and of any Note issued upon the transfer thereof or in
exchange therefor or in place thereof, even if notation of the consent is not
made on any such Note. Any such Holder or subsequent Holder, however, may revoke
the consent as to his Note or portion of a Note, if the Trustee receives the
notice of revocation before the date the amendment, supplement, waiver or other
action becomes effective.
The Company may, but shall not be obligated to, fix a record
date for the purpose of determining the Holders entitled to consent to any
amendment, supplement, or waiver which record date shall be at least 30 days
prior to the first solicitation of such consent. If a record date is fixed,
then, notwithstanding the preceding paragraph, those Persons who were Holders at
such record date (or their duly designated proxies), and only such Persons,
shall be entitled to consent to such amendment, supplement, or waiver or to
revoke any consent previously given, whether or not such Persons continue to be
Holders after such record date. No such consent shall be valid or effective for
more than 90 days after such record date.
After an amendment, supplement, waiver or other action becomes
effective, it shall bind every Noteholder, unless it makes a change described in
any of clauses (1) through (10) of Section 8.02 hereof. In that case the
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amendment, supplement, waiver or other action shall bind each Holder of a Note
who has consented to it and every subsequent Holder of a Note or portion of a
Note that evidences the same debt as the consenting Holder's Note; provided that
any such waiver shall not impair or affect the right of any Holder to receive
payment of principal of and interest on a Note, on or after the respective due
dates expressed in such Note, or to bring suit for the enforcement of any such
payment on or after such respective dates without the consent of such Holder.
Section 8.05. Notation on or Exchange of Notes.
If an amendment, supplement, or waiver changes the terms of a
Note, the Trustee may request the Holder of the Note to deliver it to the
Trustee. In such case, the Trustee shall place an appropriate notation on the
Note about the changed terms and return it to the Holder. Alternatively, if the
Company or the Trustee so determines, the Company in exchange for the Note shall
issue and the Trustee shall authenticate a new security that reflects the
changed terms. Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment supplement or waiver.
Section 8.06. Trustee To Sign Amendments, etc.
The Trustee shall sign any amendment, supplement or waiver
authorized pursuant to this Article 8 if the amendment, supplement or waiver
does not adversely affect the rights, duties, liabilities or immunities of the
Trustee. If it does, the Trustee may, but need not, sign it. In signing or
refusing to sign such amendment, supplement or waiver the Trustee shall be
entitled to receive and, subject to Section 7.01 hereof, shall be fully
protected in relying upon an Officers' Certificate and an Opinion of Counsel
stating that such amendment, supplement or waiver is authorized or permitted by
this Indenture. The Company or any Guarantor may not sign an amendment or
supplement until the Board of Directors of the Company or such Guarantor, as
appropriate, approves it.
ARTICLE 9.
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.
The Company and the Guarantors may terminate their obligations under
the Notes, the Guarantees and this Indenture,
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except the obligations referred to in the last paragraph of this Section 9.01,
if there shall have been cancelled by the Trustee or delivered to the Trustee
for cancellation all Notes theretofore authenticated and delivered (other than
any Notes that are asserted to have been destroyed, lost or stolen and that
shall have been replaced as provided in Section 2.07 hereof) and the Company has
paid all sums payable by it hereunder or deposited all required sums with the
Trustee.
After such delivery the Trustee upon request shall acknowledge
in writing the discharge of the Company's and the Guarantors' obligations under
the Notes, the Guarantees and this Indenture except for those surviving
obligations specified below.
Notwithstanding the satisfaction and discharge of this
Indenture, the obligations of the Company in Sections 7.07, 9.05 and 9.06 hereof
shall survive.
Section 9.02. Legal Defeasance.
The Company may at its option, by Board Resolution, be
discharged from its obligations with respect to the Notes and the Guarantors
discharged from their obligations under the Guarantees on the date the
conditions set forth in Section 9.04 below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, such Legal Defeasance means that the Company
shall be deemed to have paid and discharged the entire indebtedness represented
by the Notes and to have satisfied all its other obligations under such Notes
and this Indenture insofar as such Notes are concerned (and the Trustee, at the
expense of the Company, shall, subject to Section 9.06 hereof, 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 Notes to receive solely from the trust funds described in
Section 9.04 hereof and as more fully set forth in such Section , payments in
respect of the principal of, premium, if any, and interest on such Notes when
such payments are due, (B) the Company's obligations with respect to such Notes
under Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08 and 4.09 hereof, (C) the
rights, powers, trusts, duties, and immunities of the Trustee hereunder
(including claims of, or payments to, the Trustee under or pursuant to Section
7.07 hereof) and (D) this Article 9. Subject to compliance with this Article 9,
the Company may exercise its option under this Section 9.02 with respect to the
Notes notwithstanding the prior exercise of its option under Section 9.03 below
with respect to the Notes.
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Section 9.03. Covenant Defeasance.
At the option of the Company, pursuant to a Board Resolution,
the Company and the Guarantors shall be released from their respective
obligations under Sections 4.02 through 4.08 and Sections 4.10 through 4.24
hereof, inclusive, and clause (a)(iii) of Section 5.01 hereof with respect to
the outstanding Notes on and after the date the conditions set forth in Section
9.04 hereof are satisfied (hereinafter, "Covenant Defeasance"). For this
purpose, such Covenant Defeasance means that the Company and the Guarantors may
omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such specified Section or portion
thereof, whether directly or indirectly by reason of any reference elsewhere
herein to any such specified Section or portion thereof or by reason of any
reference in any such specified Section or portion thereof to any other
provision herein or in any other document, but the remainder of this Indenture
and the Notes shall be unaffected thereby.
Section 9.04. Conditions to Defeasance or Covenant
Defeasance.
The following shall be the conditions to application of
Section 9.02 or Section 9.03 hereof to the outstanding Notes:
(1) the Company shall irrevocably have deposited or caused to
be deposited with the Trustee (or another trustee satisfying the
requirements of Section 7.10 hereof who shall agree to comply with the
provisions of this Article 9 applicable to it) as funds in trust for
the purpose of making the following payments, specifically pledged as
security for, and dedicated solely to, the benefit of the Holders of
the Notes, (A) money in an amount, or (B) U.S. Government Obligations
which through the scheduled payment of principal and interest in
respect thereof in accordance with their terms will provide, not later
than the due date of any payment, money in an amount, or (C) a
combination thereof, sufficient, in the opinion of a
nationally-recognized firm of independent public accountants expressed
in a written certification thereof delivered to the Trustee, to pay and
discharge, and which shall be applied by the Trustee (or other
qualifying trustee) to pay and discharge, the principal of, premium, if
any, and accrued interest on the outstanding Notes at the maturity date
of such principal, premium, if any, or interest, or on dates for
payment and
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redemption of such principal, premium, if any, and interest selected in
accordance with the terms of this Indenture and of the Notes;
(2) no Event of Default or Default with respect to the Notes
shall have occurred and be continuing on the date of such deposit, or
shall have occurred and be continuing at any time during the period
ending on the 91st day after the date of such deposit or, if longer,
ending on the day following the expiration of the longest preference
period under any Bankruptcy Law applicable to the Company in respect of
such deposit (it being understood that this condition shall not be
deemed satisfied until the expiration of such period);
(3) such Legal Defeasance or Covenant Defeasance shall not
cause the Trustee to have a conflicting interest for purposes of the
TIA with respect to any securities of the Company;
(4) such Legal Defeasance or Covenant Defeasance shall not
result in a breach or violation of, or constitute default under any
other agreement or instrument to which the Company is a party or by
which it is bound;
(5) the Company shall have delivered to the Trustee an Opinion
of Counsel stating that, as a result of such Legal Defeasance or
Covenant Defeasance, neither the trust nor the Trustee will be required
to register as an investment company under the Investment Company Act
of 1940, as amended;
(6) in the case of an election under Section 9.02 above, the
Company shall have delivered to the Trustee an Opinion of Counsel
stating that (i) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling to the effect that
or (ii) there has been a change in any applicable Federal income tax
law with the effect that, and such opinion shall confirm that, the
Holders of the outstanding Notes or persons in their positions will not
recognize income, gain or loss for Federal income tax purposes solely
as a result of such Legal Defeasance and will be subject to Federal
income tax on the same amounts, in the same manner, including as a
result of prepayment, and at the same times as would have been the case
if such Legal Defeasance had not occurred;
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(7) in the case of an election under Section 9.03 hereof, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders of the outstanding Notes will not recognize
income, gain or loss for Federal income tax purposes as a result of
such 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;
(8) 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 Legal
Defeasance under Section 9.02 above or the Covenant Defeasance under
Section 9.03 hereof (as the case may be) have been complied with;
(9) the Company shall have delivered to the Trustee an
Officers' Certificate stating that the deposit under clause (1) was not
made by the Company with the intent of defeating, hindering, delaying
or defrauding any creditors of the Company or others; and
(10) the Company shall have paid or duly provided for payment
under terms mutually satisfactory to the Company and the Trustee all
amounts then due to the Trustee pursuant to Section 7.07 hereof.
Section 9.05. Deposited Money and U.S. Government
Obligations To Be Held in Trust; Other
Miscellaneous Provisions.
All money and U.S. Government Obligations (including the
proceeds thereof) deposited with the Trustee pursuant to Section 9.04 hereof in
respect of the outstanding Notes shall be held in trust and applied by the
Trustee, in accordance with the provisions of such Notes and this Indenture, to
the payment, either directly or through any Paying Agent as the Trustee may
determine, to the Holders of such Notes, of all sums due and to become due
thereon in respect of principal, premium, if any, and accrued interest, but such
money need not be segregated from other funds except to the extent required by
law.
The Company and the Guarantors shall pay and indemnify the
Trustee against any tax, fee or other charge imposed on or assessed against the
U.S. Government Obligations deposited pursuant to Section 9.04 hereof or the
principal,
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premium, if any, 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 Notes.
Anything in this Article 9 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 9.04 hereof 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 Legal Defeasance or Covenant
Defeasance.
Section 9.06. Reinstatement.
If the Trustee or Paying Agent is unable to apply any money or
U.S. Government Obligations in accordance with Section 9.01, 9.02 or 9.03 hereof
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's and each Guarantor's obligations under this
Indenture, the Notes and the Guarantees shall be revived and reinstated as
though no deposit had occurred pursuant to this Article 9 until such time as the
Trustee or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with Section 9.01 hereof; provided, however, that if
the Company or the Guarantors have made any payment of principal of, premium, if
any, or accrued interest on any Notes because of the reinstatement of their
obligations, the Company or the Guarantors, as the case may be, shall be
subrogated to the rights of the Holders of such Notes to receive such payment
from the money or U.S. Government Obligations held by the Trustee or Paying
Agent.
Section 9.07. Moneys Held by Paying Agent.
In connection with the satisfaction and discharge of this
Indenture, all moneys then held by any Paying Agent under the provisions of this
Indenture shall, upon demand of the Company, be paid to the Trustee, or if
sufficient moneys have been deposited pursuant to Section 9.01 hereof, to the
Company (or, if such moneys had been deposited by the Guarantors, to such
Guarantors), and thereupon such Paying Agent shall be released from all further
liability with respect to such moneys.
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Section 9.08. Moneys Held by Trustee.
Any moneys deposited with the Trustee or any Paying Agent or
then held by the Company or the Guarantors in trust for the payment of the
principal of, or premium, if any, or interest on any Note that are not applied
but remain unclaimed by the Holder of such Note for two years after the date
upon which the principal of, or premium, if any, or interest on such Note shall
have respectively become due and payable shall be repaid to the Company (or, if
appropriate, the Guarantors) upon Company Request, or if such moneys are then
held by the Company or the Guarantors in trust, such moneys shall be released
from such trust; and the Holder of such Note entitled to receive such payment
shall thereafter, as an unsecured general creditor, look only to the Company and
the Guarantors for the payment thereof, and all liability of the Trustee or such
Paying Agent with respect to such trust money shall thereupon cease; provided,
however, that the Trustee or any such Paying Agent, before being required to
make any such repayment, may, at the expense of the Company and the Guarantors,
either mail to each Noteholder affected, at the address shown in the register of
the Notes maintained by the Registrar pursuant to Section 2.03 hereof, or cause
to be published once a week for two successive weeks, in a newspaper published
in the English language, customarily published each Business Day and of general
circulation in the City of New York, New York, a 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 mailing or publication, any unclaimed balance of
such moneys then remaining will be repaid to the Company. After payment to the
Company or the Guarantors or the release of any money held in trust by the
Company or any Guarantors, as the case may be, Noteholders entitled to the money
must look only to the Company and the Guarantors for payment as general
creditors unless applicable abandoned property law designates another person.
ARTICLE 10.
GUARANTEE OF NOTES
Section 10.01. Guarantee.
Subject to the provisions of this Article 10, each Guarantor
hereby jointly and severally unconditionally guarantees to each Holder and to
the Trustee, on behalf of the Holders, (i) the due and punctual payment of the
principal of,
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and premium, if any, and interest on each Note, when and as the same shall
become due and payable, whether at maturity, by acceleration or otherwise, the
due and punctual payment of interest on the overdue principal of, and premium,
if any, and interest on the Notes, to the extent lawful, and the due and
punctual performance of all other Obligations of the Company to the Holders or
the Trustee all in accordance with the terms of such Note and this Indenture,
and (ii) in the case of any extension of time of payment or renewal of any Notes
or any of such other Obligations, that the same will be promptly paid in full
when due or performed in accordance with the terms of the extension or renewal,
at stated maturity, by acceleration or otherwise. Each Guarantor hereby agrees
that its obligations hereunder shall be absolute and unconditional, irrespective
of, and shall be unaffected by, any invalidity, irregularity or unenforceability
of any such Note or this Indenture, any failure to enforce the provisions of any
such Note or this Indenture, any waiver, modification or indulgence granted to
the Company with respect thereto by the Holder of such Note or the Trustee, or
any other circumstances which may otherwise constitute a legal or equitable
discharge of a surety or such Guarantor.
Each Guarantor hereby waives diligence, presentment, filing of
claims with a court in the event of merger or bankruptcy of the Company, any
right to require a proceeding first against the Company, protest or notice with
respect to any such Note or the Indebtedness evidenced thereby and all demands
whatsoever, and covenants that this Guarantee will not be discharged as to any
such Note except by payment in full of the principal thereof, premium if any,
and interest thereon and as provided in Section 9.01 hereof. Each Guarantor
further agrees that, as between such 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 6 hereof for the
purposes of this 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 declaration of acceleration of
such Obligations as provided in Article 6 hereof, such Obligations (whether or
not due and payable) shall forthwith become due and payable by each Guarantor
for the purpose of this Guarantee. In addition, without limiting the foregoing
provisions, upon the effectiveness of an acceleration under Article 6 hereof,
the Trustee shall promptly make a demand for payment on the Notes under the
Guarantee provided for in this Article 10 and not discharged.
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The Guarantee set forth in this Section 10.01 shall not be
valid or become obligatory for any purpose with respect to a Note until the
certificate of authentication on such Note shall have been signed by or on
behalf of the Trustee.
Section 10.02. Execution and Delivery of Guarantees.
To evidence the Guarantee set forth in this Article 10, each
Guarantor hereby agrees that a notation of such Guarantee shall be placed on
each Note authenticated and made available for delivery by the Trustee and that
this Guarantee shall be executed on behalf of each Guarantor by the manual or
facsimile signature of an Officer of each Guarantor.
Each Guarantor hereby agrees that the Guarantee set forth in
Section 10.01 shall remain in full force and effect notwithstanding any failure
to endorse on each Note a notation of such Guarantee.
If an Officer of a Guarantor whose signature is on the
Guarantee no longer holds that office at the time the Trustee authenticates the
Note on which the Guarantee is endorsed, the Guarantee shall be valid
nevertheless.
The delivery of any Note by the Trustee, after the
authentication thereof hereunder, shall constitute due delivery of the Guarantee
set forth in this Indenture on behalf of each Guarantor.
Section 10.03. Limitation of Guarantee.
The obligations of each Guarantor are limited to the maximum
amount as will, after giving effect to all other contingent and fixed
liabilities of such Guarantor (including, without limitation, any guarantees of
Senior Indebtedness) and after giving effect to any collections from or payments
made by or on behalf of any other Guarantor in respect of the obligations of
such other Guarantor under its Guarantee or pursuant to its contribution
obligations under this Indenture, result in the obligations of such Guarantor
under the Guarantee not constituting a fraudulent conveyance or fraudulent
transfer under federal or state law. Each Guarantor that makes a payment or
distribution under a Guarantee shall be entitled to a contribution from each
other Guarantor in a pro rata amount based on the Adjusted Net Assets of each
Guarantor.
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Section 10.04. Additional Guarantors.
The Company covenants and agrees that it will cause any Person which becomes
obligated to guarantee the Notes, pursuant to the terms of Section 4.21
hereof, to execute a guarantee satisfactory in form and substance to the
Trustee pursuant to which such Restricted Subsidiary shall guarantee the
obligations of the Company under the Notes and this Indenture in accordance
with this Article 10 with the same effect and to the same extent as if such
Person had been named herein as a Guarantor.
Section 10.05. Release of Guarantor.
A Guarantor shall be released from all of its obligations
under its Guarantee if:
(i) the Guarantor has sold all or substantially all of its
assets or the Company and its Restricted Subsidiaries have sold all of
the Capital Stock of the Guarantor owned by them, in each case in a
transaction in compliance with Sections 4.15 and 5.01 hereof; or
(ii) the Guarantor merges with or into or consolidates with,
or transfers all or substantially all of its assets to, the Company or
another Guarantor in a transaction in compliance with Section 5.01
hereof;
and in each such case, the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to such transactions have been complied
with.
Section 10.06. Guarantee Obligations Subordinated
to Guarantor Senior Indebtedness.
Each Guarantor covenants and agrees, and each Holder of Notes,
by its acceptance thereof, likewise covenants and agrees, that to the extent and
in the manner hereinafter set forth in this Article 10, the Indebtedness
represented by the Guarantee and the payment of the principal of, premium, if
any, and interest on the Notes pursuant to the Guarantee by such Guarantor are
hereby expressly made subordinate and subject in right of payment as provided in
this Article 10 to the prior payment in full in cash or Cash Equivalents or, as
acceptable to the holders of Guarantor Senior Indebtedness of such Guarantor, in
any other manner, of all Guarantor Senior Indebtedness of such Guarantor.
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This Section 10.06 and the following Sections 10.07 through
10.11 shall constitute a continuing offer to all Persons who, in reliance upon
such provisions, become holders of or continue to hold Guarantor Senior
Indebtedness of any Guarantor; and such provisions are made for the benefit of
the holders of Guarantor Senior Indebtedness of each Guarantor; and such holders
are made obligees hereunder and they or each of them may enforce such
provisions.
Section 10.07. Payment Over of Proceeds upon Dissolution,
etc., of a Guarantor.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to any Guarantor or to its
creditors, as such, or to its assets, whether voluntary or involuntary, or (b)
any liquidation, dissolution or other winding-up of any Guarantor, whether
voluntary or involuntary and whether or not involving insolvency or bankruptcy
or (c) any general assignment for the benefit of creditors or any other
marshaling of assets or liabilities of any Guarantor, then and in any such
event:
(1) the holders of all Guarantor Senior Indebtedness of such
Guarantor shall be entitled to receive payment in full in cash or Cash
Equivalents or, as acceptable to the holders of such Guarantor Senior
Indebtedness, in any other manner, of all amounts due on or in respect
of all such Guarantor Senior Indebtedness, or provision shall be made
for such payment, before the Holders of the Notes are entitled to
receive, pursuant to the Guarantee of such Guarantor, any payment or
distribution of any kind or character by such Guarantor on account of
any of its Obligations on its Guarantee; and
(2) any payment or distribution of assets of such Guarantor of
any kind or character, whether in cash, property or securities, by
set-off or otherwise, to which the Holders or the Trustee would be
entitled but for the subordination provisions of this Article 10 shall
be paid by the liquidating trustee or agent or other Person making such
payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the holders of Guarantor
Senior Indebtedness of such Guarantor or their representative or
representatives or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Guarantor Senior
Indebtedness may have been issued,
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ratably according to the aggregate amounts remaining unpaid on account
of such Guarantor Senior Indebtedness held or represented by each, to
the extent necessary to make payment in full in cash or Cash
Equivalents or, as acceptable to the Holders of such Guarantor Senior
Indebtedness of such Guarantor, in any other manner, of all such
Guarantor Senior Indebtedness remaining unpaid, after giving effect to
any concurrent payment or distribution to the holders of such Guarantor
Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing
provisions of this Section 10.07, the Trustee or the Holder of any Note
shall have received any payment or distribution of assets of such
Guarantor of any kind or character, whether in cash, property or
securities, including, without limitation, by way of set-off or
otherwise, in respect of any of its Obligations on its Guarantee before
all Guarantor Senior Indebtedness of such Guarantor is paid in full or
payment thereof provided for, then and in such event such payment or
distribution shall be paid over or delivered forthwith to the trustee
in bankruptcy, receiver, liquidating trustee, custodian, assignee,
agent or other Person making payment or distribution of assets of such
Guarantor for application to the payment of all such Guarantor Senior
Indebtedness remaining unpaid, to the extent necessary to pay all of
such Guarantor Senior Indebtedness in full in cash, Cash Equivalents
or, as acceptable to the holders of such Guarantor Senior Indebtedness,
any other manner, after giving effect to any concurrent payment or
distribution to or for the holders of such Guarantor Senior
Indebtedness.
The consolidation of a Guarantor with, or the merger of a
Guarantor with or into, another Person or the liquidation or dissolution of a
Guarantor following the conveyance, transfer or lease of its properties and
assets substantially as an entirety to another Person upon the terms and
conditions set forth in Article 5 hereof shall not be deemed a dissolution,
winding-up, liquidation, reorganization, assignment for the benefit of creditors
or marshaling of assets and liabilities of such Guarantor for the purposes of
this Article 10 if the Person formed by such consolidation or the surviving
entity of such merger or the Person which acquires by conveyance, transfer or
lease such properties and assets substantially as an entirety, as the case may
be, shall, as a part of such consolidation, merger, conveyance, transfer or
lease, comply with the conditions set forth in such Article 5 hereof.
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Section 10.08. Suspension of Guarantee Obligations
When Guarantor Senior Indebtedness
in Default.
(a) Unless Section 10.07 hereof shall be applicable, after the
occurrence of a Payment Default with respect to any Designated Senior
Indebtedness which constitutes Guarantor Senior Indebtedness, no payment or
distribution of any assets or securities of a Guarantor (or any Restricted
Subsidiary or Subsidiary of such Guarantor) of any kind or character (including,
without limitation, cash, property and any payment or distribution which may be
payable or deliverable by reason of the payment of any other Indebtedness of
such Guarantor being subordinated to its Obligations on its Guarantee) may be
made by or on behalf of such Guarantor (or any Restricted Subsidiary or
Subsidiary of such Guarantor), including, without limitation, by way of set-off
or otherwise, for or on account of its Obligations on its Guarantee, and neither
the Trustee nor any holder or owner of any Notes shall take or receive from any
Guarantor (or any Subsidiary of such Guarantor), directly or indirectly in any
manner, payment in respect of all or any portion of its Obligations on its
Guarantee following the delivery by the representative of the holders of
Designated Senior Indebtedness under or in respect of the Senior Credit
Facility, for so long as there shall exist any Designated Senior Indebtedness
under or in respect of the Senior Credit Facility, and, thereafter, the holders
of Designated Senior Indebtedness which constitutes Guarantor Senior
Indebtedness (in either such case, the "Guarantor Representative") to the
Trustee of written notice of (i) the occurrence of a Payment Default on
Designated Senior Indebtedness which constitutes Guarantor Senior Indebtedness
or (ii) the occurrence of a Non-Payment Event of Default on Designated Senior
Indebtedness which constitutes Guarantor Senior Indebtedness and the
acceleration of the maturity of such Designated Senior Indebtedness in
accordance with its terms, and in any such event, such prohibition shall
continue until such Payment Default is cured, waived in writing or ceases to
exist or such acceleration has been rescinded or otherwise cured. At such time
as the prohibition set forth in the preceding sentence shall no longer be in
effect, subject to the provisions of the following paragraph (b), such Guarantor
shall resume making any and all required payments in respect of its Obligations
on its Guarantee.
(b) Unless Section 10.07 hereof shall be applicable, upon the
occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness
guaranteed by a Guarantor (which
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guarantee constitutes Guarantor Senior Indebtedness of such Guarantor), no
payment or distribution of any assets of such Guarantor of any kind or character
(including, without limitation, cash, property and any payment or distribution
which may be payable or deliverable by reason of the payment of any other
Indebtedness of such Guarantor being subordinated to its Obligations on its
Guarantee) shall be made by such Guarantor, including, without limitation, by
way of set-off or otherwise, on account of any of its Obligations on its
Guarantee, and neither the Trustee nor any holder or owner of any Notes shall
take or receive from any Guarantor (or any Restricted Subsidiary or Subsidiary
of such Guarantor), directly or indirectly in any manner, payment in respect of
all or any portion of its Obligations on its Guarantee for a period (the
"Guarantee Payment Blockage Period") commencing on the date of receipt by the
Trustee of written notice from the Guarantor Representative of such Non-Payment
Event of Default, unless and until (subject to any blockage of payments that may
then be in effect under the preceding paragraph (a)) the earliest to occur of
the following events: (x) more than 179 days shall have elapsed since the date
of receipt of such written notice by the Trustee, (y) such Non-Payment Event of
Default shall have been cured or waived in writing or shall have ceased to exist
or such Designated Senior Indebtedness shall have been discharged or paid in
full in cash or Cash Equivalents or (z) such Guarantee Payment Blockage Period
shall have been terminated by written notice to such Guarantor or the Trustee
from the Guarantor Representative initiating such Guarantee Payment Blockage
Period, or the holders of at least a majority in principal amount of such issue
of Designated Senior Indebtedness, after which, in the case of clause (x), (y)
or (z), such Guarantor shall resume making any and all required payments in
respect of its Obligations on its Guarantee. Notwithstanding any other
provisions of this Indenture, no Non-Payment Event of Default with respect to
Designated Senior Indebtedness which existed or was continuing on the date of
the commencement of any Guarantee Payment Blockage Period initiated by the
Guarantor Representative shall be, or be made, the basis for the commencement of
a second Guarantee Payment Blockage Period initiated by the Guarantor
Representative unless such event of default shall have been cured or waived for
a period of not less than 90 consecutive days. In no event shall a Guarantee
Payment Blockage Period extend beyond 179 days from the date of the receipt by
the Trustee of the notice referred to in this Section 10.08(b) or, in the event
of a Non-Payment Event of Default which formed the basis for a Payment Blockage
Period under Section 11.03(b) hereof, 179 days from the date of the receipt by
the Trustee of the notice referred to in Section
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11.03(b) (the "Initial Guarantee Blockage Period"). Any number of additional
Guarantee Payment Blockage Periods may be commenced during the Initial Guarantee
Blockage Period; provided, however, that no such additional Guarantee Payment
Blockage Period shall extend beyond the Initial Guarantee Blockage Period. After
the expiration of the Initial Guarantee Blockage Period, no Guarantee Payment
Blockage Period may be commenced under this Section 10.08(b) and no Payment
Blockage Period may be commenced under Section 11.03(b) hereof until at least
180 consecutive days have elapsed from the last day of the Initial Guarantee
Blockage Period.
(c) In the event that, notwithstanding the foregoing, the Trustee or
the Holder of any Note shall have received any payment from a Guarantor
prohibited by the foregoing provisions of this Section 10.08, then and in such
event such payment shall be paid over and delivered forthwith to the Guarantor
Representative initiating the Guarantee Payment Blockage Period, in trust for
distribution to the holders of Guarantor Senior Indebtedness or, if no amounts
are then due in respect of Guarantor Senior Indebtedness, promptly returned to
the Guarantor, or as a court of competent jurisdiction shall direct.
Section 10.09. Subrogation to Rights of Holders
of Guarantor Senior Indebtedness.
Upon the payment in full of all amounts payable under or in respect
of all Guarantor Senior Indebtedness of a Guarantor, the Holders shall be
subrogated to the rights of the holders of such Guarantor Senior Indebtedness to
receive payments and distributions of cash, property and securities of such
Guarantor made on such Guarantor Senior Indebtedness until all amounts due to be
paid under the Guarantee shall be paid in full. For the purposes of such
subrogation, no payments or distributions to holders of Guarantor Senior
Indebtedness of any cash, property or securities to which Holders of the Notes
or the Trustee would be entitled except for the provisions of this Article 10,
and no payments over pursuant to the provisions of this Article 10 to holders of
Guarantor Senior Indebtedness by Holders of the Notes or the Trustee, shall, as
among each Guarantor, its creditors other than holders of Guarantor Senior
Indebtedness and the Holders of the Notes, be deemed to be a payment or
distribution by such Guarantor to or on account of such Guarantor Senior
Indebtedness.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of
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this Article 10 shall have been applied, pursuant to the provisions of this
Article 10, to the payment of all amounts payable under Guarantor Senior
Indebtedness, then and in such case, the Holders shall be entitled to receive
from the holders of such Guarantor Senior Indebtedness at the time outstanding
any payments or distributions received by such holders of Guarantor Senior
Indebtedness in excess of the amount sufficient to pay all amounts payable under
or in respect of such Guarantor Senior Indebtedness in full in cash or Cash
Equivalents.
Section 10.10. Guarantee Subordination Provisions
Solely To Define Relative Rights.
The subordination provisions of this Article 10 are and are intended
solely for the purpose of defining the relative rights of the Holders of the
Notes on the one hand and the holders of Guarantor Senior Indebtedness on the
other hand. Nothing contained in this Article 10 or elsewhere in this Indenture
or in the Notes is intended to or shall (a) impair, as among each Guarantor, its
creditors other than holders of its Guarantor Senior Indebtedness and the
Holders of the Notes, the obligation of such Guarantor, which is absolute and
unconditional, to make payments to the Holders in respect of its Obligations on
its Guarantee in accordance with its terms; or (b) affect the relative rights
against such Guarantor of the Holders of the Notes and creditors of such
Guarantor other than the holders of the Guarantor Senior Indebtedness; or (c)
prevent the Trustee or the Holder of any Note from exercising all remedies
otherwise permitted by applicable law upon a Default or an Event of Default
under this Indenture, subject to the rights, if any, under this Article 10 of
the holders of Guarantor Senior Indebtedness (1) in any case, proceeding,
dissolution, liquidation or other winding-up, assignment for the benefit of
creditors or other marshaling of assets and liabilities of the Company referred
to in Section 10.07 hereof, to receive, pursuant to and in accordance with such
Section , cash, property and securities otherwise payable or deliverable to the
Trustee or such Holder, or (2) under the conditions specified in Section 10.08
hereof, to prevent any payment prohibited by such Section or enforce their
rights pursuant to Section 10.08(c) hereof.
The failure by any Guarantor to make a payment in respect of its
obligations on its Guarantee by reason of any provision of this Article 10 shall
not be construed as preventing the occurrence of a Default or an Event of
Default hereunder.
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Section 10.11. Application of Certain
Article 11 Provisions.
The provisions of Sections 11.04, 11.07, 11.08, 11.09, 11.10, 11.12
and 11.13 hereof shall apply, mutatis mutandis, to each Guarantor and their
respective holders of Guarantor Senior Indebtedness and the rights, duties and
obligations set forth therein shall govern the rights, duties and obligations of
each Guarantor, the holders of Guarantor Senior Indebtedness, the Holders and
the Trustee with respect to the Guarantee and all references therein to Article
11 hereof shall mean this Article 10.
ARTICLE 11.
SUBORDINATION OF NOTES
Section 11.01. Notes Subordinate to Senior Indebtedness.
The Company covenants and agrees, and each Holder of Notes, by its
acceptance thereof, likewise covenants and agrees, that, to the extent and in
the manner hereinafter set forth in this Article 11, the Indebtedness
represented by the Notes and the payment of the principal of, premium, if any,
and interest on the Notes are hereby expressly made subordinate and subject in
right of payment as provided in this Article 11 to the prior payment in full in
cash or Cash Equivalents or, as acceptable to the holders of Senior
Indebtedness, in any other manner, of all Senior Indebtedness.
This Article 11 shall constitute a continuing offer to all Persons
who, in reliance upon such provisions, become holders of or continue to hold
Senior Indebtedness; and such provisions are made for the benefit of the holders
of Senior Indebtedness; and such holders are made obligees hereunder and they or
each of them may enforce such provisions.
Section 11.02. Payment Over of Proceeds upon
Dissolution, etc.
In the event of (a) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, whether voluntary or involuntary or (b) any
liquidation, dissolution or other winding-up of the Company, whether voluntary
or involuntary and whether or not involving
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insolvency or bankruptcy, or (c) any general assignment for the benefit of
creditors or any other marshalling of assets or liabilities of the Company, then
and in any such event:
(1) the holders of Senior Indebtedness shall be entitled to receive
payment in full in cash or Cash Equivalents or, as acceptable to the
holders of Senior Indebtedness, in any other manner, of all amounts due on
or in respect of all Senior Indebtedness, or provision shall be made for
such payment, before the Holders of the Notes are entitled to receive any
payment or distribution of any kind or character on account of principal
of, premium, if any, or interest on the Notes; and
(2) any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, by set-off or
otherwise, to which the Holders or the Trustee would be entitled but for
the provisions of this Article 11 shall be paid by the liquidating trustee
or agent or other Person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating trustee or otherwise,
directly to the holders of Senior Indebtedness or their representative or
representatives or to the trustee or trustees under any indenture under
which any instruments evidencing any of such Senior Indebtedness may have
been issued, ratably according to the aggregate amounts remaining unpaid
on account of the Senior Indebtedness held or represented by each, to the
extent necessary to make payment in full in cash, Cash Equivalents or, as
acceptable to the holders of Senior Indebtedness, in any other manner, of
all Senior Indebtedness remaining unpaid, after giving effect to any
concurrent payment or distribution, or provision therefor, to the holders
of such Senior Indebtedness; and
(3) in the event that, notwithstanding the foregoing provisions of
this Section 11.02, the Trustee or the Holder of any Note shall have
received any payment or distribution of assets of the Company of any kind
or character, whether in cash, property or securities, including, without
limitation, by way of set-off or otherwise, in respect of principal of,
premium, if any, and interest on the Notes before all Senior Indebtedness
is paid in full or payment thereof provided for, then and in such event
such payment or distribution shall be paid over or delivered forthwith to
the trustee in bankruptcy, receiver, liquidating trustee, custodian,
assignee, agent
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or other Person making payment or distribution of assets of the Company
for application to the payment of all Senior Indebtedness remaining
unpaid, to the extent necessary to pay all Senior Indebtedness in full in
cash, Cash Equivalents or, as acceptable to the holders of Senior
Indebtedness, any other manner, after giving effect to any concurrent
payment or distribution, or provision therefor, to or for the holders of
Senior Indebtedness.
The consolidation of the Company with, or the merger of the Company
with or into, another Person or the liquidation or dissolution of the Company
following the conveyance, transfer or lease of its properties and assets
substantially as an entirety to another Person upon the terms and conditions set
forth in Article 5 hereof shall not be deemed a dissolution, winding-up,
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of the Company for the purposes of this
Article 11 if the Person formed by such consolidation or the surviving entity of
such merger or the Person which acquires by conveyance, transfer or lease such
properties and assets substantially as an entirety, as the case may be, shall,
as a part of such consolidation, merger, conveyance, transfer or lease, comply
with the conditions set forth in such Article 5 hereof.
Section 11.03. Suspension of Payment When Senior
Indebtedness in Default.
(a) Unless Section 11.02 hereof shall be applicable, after the
occurrence of a Payment Default no payment or distribution of any assets or
securities of the Company or any Restricted Subsidiary of any kind or character
(including, without limitation, cash, property and any payment or distribution
which may be payable or deliverable by reason of the payment of any other
Indebtedness of the Company being subordinated to the payment of the Notes by
the Company) may be made by or on behalf of the Company or any Restricted
Subsidiary, including, without limitation, by way of set-off or otherwise, for
or on account of principal of, premium, if any, or interest on the Notes, or for
or on account of the purchase, redemption or other acquisition of the Notes, and
neither the Trustee nor any holder or owner of any Notes shall take or receive
from the Company or any Restricted Subsidiary, directly or indirectly in any
manner, payment in respect of all or any portion of Notes following the delivery
by the representative of the holders of Designated Senior Indebtedness under or
in respect of the Senior Credit Facility and, thereafter, the holders of
Designated Senior Indebtedness (in either such case,
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the "Representative") to the Trustee of written notice of (i) the occurrence of
a Payment Default on Designated Senior Indebtedness or (ii) the occurrence of a
Non-Payment Event of Default on Designated Senior Indebtedness and the
acceleration of the maturity of Designated Senior Indebtedness in accordance
with its terms, and in any such event, such prohibition shall continue until
such Payment Default is cured, waived in writing or ceases to exist or such
acceleration has been rescinded or otherwise cured. At such time as the
prohibition set forth in the preceding sentence shall no longer be in effect,
subject to the provisions of the following paragraph (b), the Company shall
resume making any and all required payments in respect of the Notes, including
any missed payments.
(b) Unless Section 11.02 hereof shall be applicable, upon the
occurrence of a Non-Payment Event of Default on Designated Senior Indebtedness,
no payment or distribution of any assets or securities of the Company of any
kind or character (including, without limitation, cash, property and any payment
or distribution which may be payable or deliverable by reason of the payment of
any other Indebtedness of the Company being subordinated to the payment of the
Notes by the Company) shall be made by or on behalf of the Company, including,
without limitation, by way of set-off or otherwise, on account of any principal
of, premium, if any, or interest on the Notes or on account of the purchase,
redemption, defeasance or other acquisition of Notes, and neither the Trustee
nor any holder or owner of any Notes shall take or receive from the Company,
directly or indirectly in any manner, payment in respect of all or any portion
of the Notes, for a period ("Payment Blockage Period") commencing on the date of
receipt by the Trustee of written notice from the Representative of such
Non-Payment Event of Default unless and until (subject to any blockage of
payments that may then be in effect under the preceding paragraph (a)) the
earliest to occur of the following events: (x) more than 179 days shall have
elapsed since the date of receipt of such written notice by the Trustee, (y)
such Non-Payment Event of Default shall have been cured or waived in writing or
shall have ceased to exist or such Designated Senior Indebtedness shall have
been discharged or paid in full in cash or Cash Equivalents or (z) such Payment
Blockage Period shall have been terminated by written notice to the Company or
the Trustee from the Representative initiating such Payment Blockage Period, or
the holders of at least a majority in principal amount of such issue of
Designated Senior Indebtedness, after which, in the case of clause (x), (y) or
(z), the Company shall resume making any and all required payments in respect of
the Notes, including any missed
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payments. Notwithstanding any other provisions of this Indenture, no Non-Payment
Event of Default with respect to Designated Senior Indebtedness which existed or
was continuing on the date of the commencement of any Payment Blockage Period
initiated by the Representative shall be, or be made, the basis for the
commencement of a second Payment Blockage Period initiated by the Representative
unless such event of default shall have been cured or waived for a period of not
less than 90 consecutive days. In no event shall a Payment Blockage Period
extend beyond 179 days from the date of the receipt by the Trustee of the notice
referred to in this Section 11.03(b) (the "Initial Blockage Period"). Any number
of additional Payment Blockage Periods may be commenced during the Initial
Blockage Period; provided, however, that no such additional Payment Blockage
Period shall extend beyond the Initial Blockage Period. After the expiration of
the Initial Blockage Period, no Payment Blockage Period may be commenced under
this Section 11.03(b) and no Guarantee Payment Blockage Period may be commenced
under Section 10.08(b) hereof until at least 180 consecutive days have elapsed
from the last day of the Initial Blockage Period.
(c) In the event that, notwithstanding the foregoing, the Trustee or
the Holder of any Note shall have received any payment prohibited by the
foregoing provisions of this Section 11.03, then and in such event such payment
shall be paid over and delivered forthwith to the Representative initiating the
Payment Blockage Period, in trust for distribution to the holders of Senior
Indebtedness or, if no amounts are then due in respect of Senior Indebtedness,
promptly returned to the Company, or otherwise as a court of competent
jurisdiction shall direct.
Section 11.04. Trustee's Relation to Senior
Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform or to observe only such of its covenants and obligations
as are specifically set forth in this Article 11, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness and the Trustee shall
not be liable to any holder of Senior Indebtedness if it shall mistakenly pay
over or deliver to Holders, the Company or any other Person moneys or assets to
which any holder of Senior Indebtedness shall be entitled by virtue of this
Article 11 or otherwise.
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Section 11.05. Subrogation to Rights of Holders
of Senior Indebtedness.
Upon the payment in full of all Senior Indebtedness, the Holders of
the Notes shall be subrogated to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of,
premium, if any and interest on the Notes shall be paid in full. For purposes of
such subrogation, no payments or distributions to the holders of Senior
Indebtedness of any cash, property or securities to which the Holders of the
Notes or the Trustee would be entitled except for the provisions of this Article
11, and no payments over pursuant to the provisions of this Article 11 to the
holders of Senior Indebtedness by Holders of the Notes or the Trustee, shall, as
among the Company, its creditors other than holders of Senior Indebtedness and
the Holders of the Notes, be deemed to be a payment or distribution by the
Company to or on account of the Senior Indebtedness.
If any payment or distribution to which the Holders would otherwise
have been entitled but for the provisions of this Article 11 shall have been
applied, pursuant to the provisions of this Article 11, to the payment of all
amounts payable under the Senior Indebtedness of the Company, then and in such
case the Holders shall be entitled to receive from the holders of such Senior
Indebtedness at the time outstanding any payments or distributions received by
such holders of such Senior Indebtedness in excess of the amount sufficient to
pay all amounts payable under or in respect of such Senior Indebtedness in full
in cash or Cash Equivalents.
Section 11.06. Provisions Solely To Define Relative
Rights.
The provisions of this Article 11 are and are intended solely for
the purpose of defining the relative rights of the Holders of the Notes on the
one hand and the holders of Senior Indebtedness on the other hand. Nothing
contained in this Article or elsewhere in this Indenture or in the Notes is
intended to or shall (a) impair, as among the Company, its creditors other than
holders of Senior Indebtedness and the Holders of the Notes, the obligation of
the Company, which is absolute and unconditional, to pay to the Holders of the
Notes the principal of, premium, if any, and interest on the Notes as and when
the same shall become due and payable in accordance with their terms; or (b)
affect the relative rights against the Company of the Holders of the Notes and
creditors of the
<PAGE> 97
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Company other than the holders of Senior Indebtedness; or (c) prevent the
Trustee or the Holder of any Note from exercising all remedies otherwise
permitted by applicable law upon a Default or an Event of Default under this
Indenture, subject to the rights, if any, under this Article 11 of the holders
of Senior Indebtedness (1) in any case, proceeding, dissolution, liquidation or
other winding-up, assignment for the benefit of creditors or other marshaling of
assets and liabilities of the Company referred to in Section 11.02 hereof, to
receive, pursuant to and in accordance with such Section , cash, property and
securities otherwise payable or deliverable to the Trustee or such Holder, or
(2) under the conditions specified in Section 11.03, to prevent any payment
prohibited by such Section or enforce their rights pursuant to Section 11.03(c)
hereof.
The failure to make a payment on account of principal of, premium,
if any, or interest on the Notes by reason of any provision of this Article 11
shall not be construed as preventing the occurrence of a Default or an Event of
Default hereunder.
Section 11.07. Trustee To Effectuate Subordination.
Each Holder of a Note by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes,
including, in the event of any dissolution, winding-up, liquidation or
reorganization of the Company whether in bankruptcy, insolvency, receivership
proceedings, or otherwise, the timely filing of a claim for the unpaid balance
of the indebtedness of the Company owing to such Holder in the form required in
such proceedings and the causing of such claim to be approved. If the Trustee
does not file such a claim prior to 30 days before the expiration of the time to
file such a claim, the holders of Senior Indebtedness, or any Representative,
may file such a claim on behalf of Holders of the Notes.
Section 11.08. No Waiver of Subordination
Provisions.
(a) No right of any present or future holder of any Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any
<PAGE> 98
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non-compliance by the Company with the terms, provisions and covenants of this
Indenture, regardless of any knowledge thereof any such holder may have or be
otherwise charged with.
(b) Without limiting the generality of subsection (a) of this
Section 11.08, the holders of Senior Indebtedness may, at any time and from time
to time, without the consent of or notice to the Trustee or the Holders of the
Notes, without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article 11 or the
obligations hereunder of the Holders of the Notes to the holders of Senior
Indebtedness, do any one or more of the following: (1) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness or any instrument evidencing the same or any agreement under which
Senior Indebtedness is outstanding; (2) sell, exchange, release or otherwise
deal with any property pledged, mortgaged or otherwise securing Senior
Indebtedness; (3) release any Person liable in any manner for the collection or
payment of Senior Indebtedness; and (4) exercise or refrain from exercising any
rights against the Company and any other Person; provided, however, that in no
event shall any such actions limit the right of the Holders of the Notes to take
any action to accelerate the maturity of the Notes pursuant to Article 6 hereof
or to pursue any rights or remedies hereunder or under applicable laws if the
taking of such action does not otherwise violate the terms of this Indenture.
Section 11.09. Notice to Trustee.
(a) The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee at its Corporate Trust Office in respect of the Notes.
Notwithstanding the provisions of this Article 11 or any other provision of this
Indenture, the Trustee shall not be charged with knowledge of the existence of
any facts which would prohibit the making of any payment to or by the Trustee in
respect of the Notes, unless and until the Trustee shall have received written
notice thereof from the Company or a holder of Senior Indebtedness or from any
trustee, fiduciary or agent therefor; and, prior to the receipt of any such
written notice, the Trustee, subject to the provisions of this Section 11.09,
shall be entitled in all respects to assume that no such facts exist.
(b) Subject to the provisions of Section 7.01 hereof, the Trustee
shall be entitled to rely on the delivery
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to it of a written notice to the Trustee and the Company by a Person
representing itself to be a holder of Senior Indebtedness (or a trustee,
fiduciary or agent therefor) to establish that such notice has been given by a
holder of Senior Indebtedness (or a trustee, fiduciary or agent therefor);
provided, however, that failure to give such notice to the Company shall not
affect in any way the ability of the Trustee to rely on such notice. In the
event that the Trustee determines in good faith that further evidence is
required with respect to the right of any Person as a holder of Senior
Indebtedness to participate in any payment or distribution pursuant to this
Article 11, the Trustee may request such Person to furnish evidence to the
reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness
held by such Person, the extent to which such Person is entitled to participate
in such payment or distribution and any other facts pertinent to the rights of
such Person under this Article 11, and if such evidence is not furnished, the
Trustee may defer any payment to such Person pending judicial determination as
to the right of such Person to receive such payment.
Section 11.10. Reliance on Judicial Order or
Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Company referred
to in this Article 11, the Trustee, subject to the provisions of Section 7.01
hereof, and the Holders shall be entitled to rely upon any order or decree
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding-up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Trustee or to the Holders, for the purpose of ascertaining the
Persons entitled to participate in such payment or distribution, the holders of
Senior Indebtedness and other Indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 11.
Section 11.11. Rights of Trustee as a Holder of
Senior Indebtedness; Preservation
of Trustee's Rights.
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article 11 with
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respect to any Senior Indebtedness which may at any time be held by it, to the
same extent as any other holder of Senior Indebtedness, and nothing in this
Indenture shall deprive the Trustee of any of its rights as such holder. Nothing
in this Article 11 shall apply to claims of, or payments to, the Trustee under
or pursuant to Section 7.07 hereof.
Section 11.12. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article 11 shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article 11 in addition to or in place of the Trustee.
Section 11.13. No Suspension of Remedies.
Nothing contained in this Article 11 shall limit the right of the
Trustee or the Holders of Notes to take any action to accelerate the maturity of
the Notes pursuant to Article 6 or to pursue any rights or remedies hereunder or
under applicable law, subject to the rights, if any, under this Article 11 of
the holders, from time to time, of Senior Indebtedness.
ARTICLE 12.
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls.
If any provision of this Indenture limits, qualifies or conflicts
with another provision which is required to be included in this Indenture by the
TIA, the required provision shall control.
Section 12.02. Notices.
Any notice or communication shall be given in writing and delivered
in person, sent by facsimile, delivered by commercial courier service or mailed
by first-class mail, postage prepaid, addressed as follows:
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If to the Company or any Guarantor:
Outdoor Systems, Inc.
2502 N. Black Canyon Highway
Phoenix, Arizona 85009
Attention: Chief Financial Officer
Copy to:
Powell, Goldstein, Frazer & Murphy
191 Peachtree Street, N.E., 16th Floor
Atlanta, Georgia 30303
Attention: William B. Shearer, Jr., Esq.
If to the Trustee:
Attention:
The Company, the Guarantors or the Trustee by written notice to the
others may designate additional or different addresses for subsequent notices or
communications. Any notice or communication to the Company, the Trustee, or the
Guarantors shall be deemed to have been given or made as of the date so
delivered if personally delivered; when answered back, if telexed; when receipt
is acknowledged, if telecopied; and five (5) calendar days after mailing if sent
by registered or certified mail, postage prepaid (except that a notice of change
of address shall not be deemed to have been given until actually received by the
addressee).
Any notice or communication mailed to a Noteholder shall be mailed
to him by first-class mail, postage prepaid, at his address shown on the
register kept by the Registrar.
Failure to mail a notice or communication to a Noteholder or any
defect in it shall not affect its sufficiency with respect to other Noteholders.
If a notice or communication to a Noteholder is mailed in the manner provided
above, it shall be deemed duly given, whether or not the addressee receives it.
<PAGE> 102
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In case by reason of the suspension of regular mail service, or by
reason of any other cause, it shall be impossible to mail any notice as required
by this Indenture, then such method of notification as shall be made with the
approval of the Trustee shall constitute a sufficient mailing of such notice.
Section 12.03. Communications by Holders with Other Holders.
Noteholders may communicate pursuant to TIA Section 312(b) with
other Noteholders with respect to their rights under this Indenture or the
Notes. The Company, the Guarantors, the Trustee, the Registrar and anyone else
shall have the protection of TIA Section 312(c).
Section 12.04. Certificate and Opinion as to Conditions
Precedent.
Upon any request or application by the Company or any Guarantor to
the Trustee to take any action under this Indenture, the Company shall furnish
to the Trustee:
(1) an Officers' Certificate (which shall include the statements set
forth in Section 12.05 below) stating that, in the opinion of the signers, all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with; and
(2) an Opinion of Counsel (which shall include the statements set forth
in Section 12.05 below) stating that, in the opinion of such counsel, all such
conditions precedent have been complied with.
Section 12.05. Statements Required in Certificate and Opinion.
Each certificate and opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(2) 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;
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(3) a statement that, in the opinion of such Person, it or he has made
such examination or investigation as is necessary to enable it or him to express
an informed opinion as to whether or not such covenant or condition has been
complied with; and
(4) a statement as to whether or not, in the opinion of such Person,
such covenant or condition has been complied with.
Section 12.06. When Treasury Notes Disregarded.
In determining whether the Holders of the required aggregate
principal amount of Notes have concurred in any direction, waiver or consent,
Notes owned by the Company, any Guarantor or any other obligor on the Notes or
by any Affiliate of any of them shall be disregarded, except that for the
purposes of determining whether the Trustee shall be protected in relying on any
such direction, waiver or consent, only Notes which the Trustee actually knows
are so owned shall be so disregarded. Notes so owned which have been pledged in
good faith shall not be disregarded if the pledgee establishes to the
satisfaction of the Trustee the pledgee's right so to act with respect to the
Notes and that the pledgee is not the Company, a Guarantor or any other obligor
upon the Notes or any Affiliate of any of them.
Section 12.07. Rules by Trustee and Agents.
The Trustee may make reasonable rules for action by or
at meetings of Noteholders. The Registrar and Paying Agent may
make reasonable rules for their functions.
Section 12.08. Business Days; Legal Holidays.
A "Business Day" is a day that is not a Legal Holiday. A "Legal
Holiday" is a Saturday, a Sunday, a federally- recognized holiday or a day on
which banking institutions are not required to be open in the State of New York.
If a payment date is a Legal Holiday at a place of payment, payment may be made
at that place on the next succeeding day that is not a Legal Holiday, and no
interest shall accrue for the intervening period.
Section 12.09. Governing Law.
THIS INDENTURE, THE NOTES AND THE GUARANTEES SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
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STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE
OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. EACH OF THE
PARTIES HERETO AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE
OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
INDENTURE, THE NOTES OR THE GUARANTEES.
Section 12.10. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan,
security or debt agreement of the Company or any Subsidiary thereof. No such
indenture, loan, security or debt agreement may be used to interpret this
Indenture.
Section 12.11. No Recourse Against Others.
A director, officer, employee, stockholder or incorporator, as such,
of the Company shall not have any liability for any obligations of the Company
under the Notes or the Indenture or for any claim based on, in respect of or by
reason of such obligations or their creations. Each Noteholder by accepting a
Note waives and releases all such liability. Such waiver and release are part of
the consideration for the issuance of the Notes.
Section 12.12. Successors.
All agreements of the Company and the Guarantors in this Indenture
and the Notes shall bind their respective successors. All agreements of the
Trustee, any additional trustee and any Paying Agents in this Indenture shall
bind its successor.
Section 12.13. Multiple Counterparts.
The parties may sign multiple counterparts of this Indenture. Each
signed counterpart shall be deemed an original, but all of them together
represent one and the same agreement.
Section 12.14. Table of Contents, Headings, etc.
The table of contents, cross-reference sheet and headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part hereof, and shall in no way
modify or restrict any of the terms or provisions hereof.
<PAGE> 105
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Section 12.15. Separability.
Each provision of this Indenture shall be considered separable and
if for any reason any provision which is not essential to the effectuation of
the basic purpose of this Indenture or the Notes 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.
<PAGE> 106
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IN WITNESS WHEREOF, the parties have caused this Indenture to be
duly executed, and the Company's corporate seal to be hereunto affixed and
attested, all as of the date and year first written above.
OUTDOOR SYSTEMS, INC.
By:_____________________________________
Name:
Title:
ATTEST:
______________________________
Name:
Title:
Guarantors:
OUTDOOR SYSTEMS PAINTING, INC.
OS ADVERTISING OF TEXAS
PAINTING, INC.
OS BASELINE, INC.
DECADE COMMUNICATIONS GROUP,
INC.
BENCH ADVERTISING COMPANY OF
COLORADO, INC.
NEW YORK SUBWAYS ADVERTISING
CO., INC.
By: ____________________________________
Name:
Title:
ATTEST:
____________________________
Name:
Title:
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THE BANK OF NEW YORK,
as Trustee
By:__________________________
Name:
Title:
ATTEST:
____________________________
Name:
Title:
<PAGE> 108
EXHIBIT A
CUSIP__________
No. $
OUTDOOR SYSTEMS, INC.
[ ]% SENIOR SUBORDINATED NOTE DUE 2006
Outdoor Systems, Inc., a Delaware corporation (the "Company", which
term includes any successor corporation), for value received promises to pay to
______________________________ or registered assigns the principal sum of
___________________ Dollars, on , 2006.
Interest Payment Dates: and ,
commencing , 1997
Record Dates: and
Reference is made to the further provisions of this Security
contained herein, which will for all purposes have the same effect as if set
forth at this place.
A-1
<PAGE> 109
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.
OUTDOOR SYSTEMS, INC.
By:______________________________________
By:______________________________________
[SEAL]
Certificate of Authentication:
This is one of the [ ]% Senior
Subordinated Notes due 2006 referred to in
the within-mentioned Indenture
Dated:
THE BANK OF NEW YORK,
as Trustee
By: ___________________________________
Authorized Signatory
A-2
<PAGE> 110
(REVERSE SIDE)
OUTDOOR SYSTEMS, INC.
[ ]% SENIOR SUBORDINATED NOTE DUE 2006
1. INTEREST.
Outdoor Systems, Inc., a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note semiannually on
and of each year (each an "Interest Payment Date"), commencing on , 1997 at the
rate of [ ]% per annum. Interest will be computed on the basis of a 360-day year
of twelve 30-day months. Interest on the Notes will accrue from the most recent
date to which interest has been paid or, if no interest has been paid, from the
date of the original issuance of the Notes.
The Company shall pay interest on overdue principal, and on overdue
premium, if any, and overdue interest, to the extent lawful, at a rate equal to
the rate of interest otherwise payable on the Notes.
2. METHOD OF PAYMENT.
The Company will pay interest on this Note provided for in Paragraph
1 above (except defaulted interest) to the person who is the registered Holder
of this Note at the close of business on the or preceding the Interest Payment
Date. The Holder must surrender this Note to a Paying Agent to collect principal
payments. 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; provided, however, that the Company may pay principal,
premium, if any, and interest by check payable in such money. It may mail an
interest check to the Holder's registered address.
3. PAYING AGENT AND REGISTRAR.
Initially, The Bank of New York, a New York banking corporation (the
"Trustee"), will act as Paying Agent and Registrar. The Company may change any
Paying Agent or Registrar without notice to the Holders of the Notes. Neither
the Company nor any of its Subsidiaries or Affiliates may act as Paying Agent
but may act as registrar or co-registrar.
A-3
<PAGE> 111
4. INDENTURE; RESTRICTIVE COVENANTS.
The Company issued this Note under an Indenture dated as of [ ],
1996 (the "Indenture") among the Company, the Guarantors and the Trustee. The
terms of this Note include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code
Sections 77aaa-77bbbb) as in effect on the date of the Indenture. This
Note is subject to all such terms, and the Holder of this Note is referred to
the Indenture and said Trust Indenture Act for a statement of them. All
capitalized terms in this Note, unless otherwise defined, have the meanings
assigned to them by the Indenture.
The Notes are general unsecured obligations of the Company limited
to $150,000,000 aggregate principal amount. The Indenture imposes certain
restrictions on, among other things, the incurrence of indebtedness, the
incurrence of liens and the issuance of capital stock by the Company and its
subsidiaries, mergers and sale of assets, the payments of dividends on, or the
repurchase of, capital stock of the Company, certain other restricted payments
by the Company and its subsidiaries, the creation of subsidiaries, certain
transactions with, and investments in, its affiliates.
5. SUBORDINATION.
The Indebtedness evidenced by the Notes is, to the extent and in the
manner provided in the Indenture, subordinated and subject in right of payment
to the prior payment in full in cash or Cash Equivalents of all Senior
Indebtedness as defined in the Indenture, and this Note is issued subject to
such provisions. Each Holder of this Note, by accepting the same, (a) agrees to
and shall be bound by such provisions, (b) authorizes and directs the Trustee,
on behalf of such Holder, to take such action as may be necessary or appropriate
to effectuate the subordination as provided in the Indenture and (c) appoints
the Trustee attorney-in-fact of such Holder for such purpose.
6. OPTIONAL REDEMPTION.
The Notes will be redeemable at the option of the Company, in whole
or in part, at any time on or after , 2001 at the following redemption prices
(expressed as a percentage of principal amount), together, in each case, with
accrued and unpaid interest to the redemption date, if redeemed during the
twelve-month period beginning on , of each year listed below:
A-4
<PAGE> 112
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2001...................................... %
2002...................................... %
2003...................................... %
2004 and thereafter....................... 100.000%
</TABLE>
Notwithstanding the foregoing, the Company may redeem in the
aggregate up to 35% of the original principal amount of the Notes at any time
and from time to time prior to , 1999 at a redemption price equal to 110% of the
aggregate principal amount so redeemed, plus accrued interest to the redemption
date out of the Net Proceeds of one or more Public Equity Offerings; provided,
that at least $97.5 million of the principal amount of the Notes originally
issued remain outstanding immediately after the occurrence of any such
redemption and that any such redemption occurs within 60 days following the
closing of any such Public Equity Offering.
7. NOTICE OF REDEMPTION.
Notice of redemption will be mailed via first-class mail at least 30
days but not more than 60 days prior to the redemption date to each Holder of
Notes to be redeemed at its registered address as it shall appear on the
register of the Notes maintained by the Registrar. On and after any Redemption
Date, interest will cease to accrue on the Notes or portions thereof called for
redemption unless the Company shall fail to redeem any such Note.
8. OFFERS TO PURCHASE.
The Indenture requires that certain proceeds from Asset Sales be
used, subject to further limitations contained therein, to make an offer to
purchase certain amounts of Notes in accordance with the procedures set forth in
the Indenture. The Company is also required to make an offer to purchase Notes
upon occurrence of a Change of Control in accordance with procedures set forth
in the Indenture.
9. DENOMINATIONS, TRANSFER, EXCHANGE.
The Notes are in registered form without coupons in denominations of
$1,000 and integral multiples thereof. A Holder may register the transfer or
exchange of Notes 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 of or exchange any Note
selected for redemption or register the transfer of or exchange any Note for a
period of 15 days before a selection of Notes to be redeemed
A-5
<PAGE> 113
or any Note after it is called for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part.
10. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner of it
for all purposes.
11. UNCLAIMED MONEY.
If money for the payment of principal, premium or interest on any
Note remains unclaimed for two years, the Trustee or Paying Agent will pay the
money back to the Company at its request. After that, Holders entitled to money
must look to the Company for payment as general creditors unless an "abandoned
property" law designates another person.
12. AMENDMENT, SUPPLEMENT AND WAIVER.
Subject to certain exceptions, the Indenture or the Notes may be
modified, amended or supplemented by the Company, the Guarantors and the Trustee
with the consent of the Holders of at least a majority in principal amount of
the Notes then outstanding and any existing default or compliance with any
provision may be waived in a particular instance with the consent of the Holders
of a majority in principal amount of the Notes then outstanding. Without the
consent of Holders, the Company, the Guarantors and the Trustee may amend the
Indenture or the Notes or supplement the Indenture for certain specified
purposes including providing for uncertificated Notes in addition to
certificated Notes, and curing any ambiguity, defect or inconsistency, or making
any other change that does not materially and adversely affect the rights of any
Holder.
13. SUCCESSOR ENTITY.
When a successor corporation assumes all the obligations of its
predecessor under the Notes and the Indenture and immediately before and
thereafter no Default exists and certain other conditions are satisfied, the
predecessor corporation will be released from those obligations.
14. DEFAULTS AND REMEDIES.
If an Event of Default occurs and is continuing, the Trustee or the
Holders of at least 25% in aggregate principal amount of Notes then outstanding
may declare all the Notes to be due and payable immediately in the manner and
with the effect provided in the Indenture. Holders of Notes may not enforce the
Indenture or the Notes except as provided in the
A-6
<PAGE> 114
Indenture. The Trustee may require indemnity satisfactory to it before it
enforces the Indenture or the Notes. Subject to certain limitations, Holders of
a majority in aggregate principal amount of the Notes then outstanding may
direct the Trustee in its exercise of any trust or power. The Trustee may
withhold from Holders of Notes notice of any continuing Default or Event of
Default (except a Default in payment of principal or interest) if it determines
that withholding notice is in their interest.
15. TRUSTEE DEALINGS WITH THE COMPANY.
The Trustee under the Indenture, in its individual or any other
capacity, may make loans to, accept deposits from, and perform services for the
Company, any Guarantor or their Affiliates, and may otherwise deal with the
Company, any Guarantor or their Affiliates, as if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS.
As more fully described in the Indenture, a director, officer,
employee or stockholder, as such, of the Company or any Guarantor shall not have
any liability for any obligations of the Company or any Guarantor under the
Notes or the Indenture or for any claim based on, in respect or by reason of,
such obligations or their creation. The Holder of this Note by accepting this
Note waives and releases all such liability. The waiver and release are part of
the consideration for the issuance of this Note.
17. DEFEASANCE AND COVENANT DEFEASANCE.
The Indenture contains provisions for defeasance of the entire
indebtedness on this Note and for defeasance of certain covenants in the
Indenture upon compliance by the Company with certain conditions set forth in
the Indenture.
18. ABBREVIATIONS.
Customary abbreviations may be used in the name of a Holder of a
Note 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).
19. CUSIP NUMBERS.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company has caused CUSIP Numbers to be
printed on the Notes and has directed the Trustee to use CUSIP numbers in
notices of
A-7
<PAGE> 115
redemption as a convenience to Holders of the Notes. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
20. GOVERNING LAW.
THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE
AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF
CONFLICTS OF LAW. EACH OF THE PARTIES TO THE INDENTURE AGREES TO SUBMIT TO THE
JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THE INDENTURE OR THIS NOTE.
THE COMPANY WILL FURNISH TO ANY HOLDER OF A NOTE UPON WRITTEN
REQUEST AND WITHOUT CHARGE A COPY OF THE INDENTURE. REQUESTS MAY BE MADE TO:
OUTDOOR SYSTEMS, INC., 2502 N. BLACK CANYON HIGHWAY, PHOENIX, ARIZONA 85009,
Attention: Chief Financial Officer.
A-8
<PAGE> 116
ASSIGNMENT
I or we assign and transfer this Note to:
(Insert assignee's social security or tax I.D. number)
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
and irrevocably appoint:
________________________________________________________________________________
________________________________________________________________________________
Agent to transfer this Note on the books of the Company. The Agent may
substitute another to act for him.
Date: ____________________ Your Signature:_____________________________
____________________________________________
(Sign exactly as your name
appears on the other side of
this Note)
Signature Guarantee: ____________________________________________
A-9
<PAGE> 117
[FORM OF NOTATION ON NOTE RELATING TO GUARANTEE]
GUARANTEE
Each Guarantor (the "Guarantor", which term includes any successor
Person under the Indenture) has unconditionally guaranteed, on a senior
subordinated basis, jointly and severally, to the extent set forth in the
Indenture and subject to the provisions of the Indenture, (a) the due and
punctual payment of the principal of and interest on the Notes, whether at
maturity, by acceleration or otherwise, the due and punctual payment of interest
on overdue principal, and, to the extent permitted by law, interest, and the due
and punctual performance of all other Obligations of the Company to the
Noteholders or the Trustee all in accordance with the terms set forth in Article
10 of the Indenture, and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other Obligations, that the same will be
promptly paid in full when due or performed in accordance with the terms of the
extension or renewal, whether at stated maturity, by acceleration or otherwise.
The obligations of each Guarantor to the Noteholders and to the
Trustee pursuant to this Guarantee and the Indenture are expressly set forth in
Article 10 of the Indenture and reference is hereby made to the Indenture for
the precise terms of this Guarantee.
This Guarantee shall not be valid or obligatory for any purpose
until the certificate of authentication on the Note upon which this Guarantee is
noted shall have been executed by the Trustee under the Indenture by the manual
signature of one of its authorized signatories.
Guarantors:
OUTDOOR SYSTEMS PAINTING, INC.
OS ADVERTISING OF TEXAS
PAINTING, INC.
A-10
<PAGE> 118
OS BASELINE, INC.
DECADE COMMUNICATIONS GROUP,
INC.
BENCH ADVERTISING COMPANY OF
COLORADO, INC.
NEW YORK SUBWAYS ADVERTISING
CO., INC.
By:________________________________
Name:
Title:
A-11
<PAGE> 119
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have all or any part of this Note purchased
by the Company pursuant to Section 4.15 or Section 4.24 of the Indenture, check
the appropriate box:
/ / Section 4.15 / / Section 4.24
If you want to have only part of the Note purchased by the Company
pursuant to Section 4.15 or Section 4.24 of the Indenture, state the amount you
elect to have purchased:
$_________________
Date: ____________
Your Signature:_______________________________________________
(Sign exactly as your name appears on the face
of this Note)
___________________________
Signature Guaranteed
A-12
<PAGE> 1
[POWELL, GOLDSTEIN, FRAZER & MURPHY LETTERHEAD]
October 3, 1996
EXHIBIT 5.1
Outdoor Systems, Inc.
2502 North Black Canyon Highway
Phoenix, Arizona 85009
Re: Outdoor Systems, Inc., Amendment No. 1 to Registration
Statement on Form S-3 (Reg. No. 333-9713)
Ladies and Gentlemen:
We have acted as special counsel to Outdoor Systems, Inc., a Delaware
corporation (the "Company"), and Outdoor Systems Painting, Inc., an Arizona
corporation, OS Advertising of Texas Painting, Inc., a Texas corporation, OS
Baseline, Inc., an Arizona corporation, Decade Communications Group, Inc., a
Colorado corporation, Bench Advertising Company of Colorado, Inc., a Colorado
corporation, and New York Subways Advertising Co., Inc., an Arizona corporation
(collectively the "Subsidiary Guarantors"), in connection with the public
offering of $150,000,000 aggregate principal amount of the Company's Senior
Subordinated Notes due 2006 (the "Notes") which are to be guaranteed on a
senior subordinated basis by the Subsidiary Guarantors (the guarantees of the
Subsidiary Guarantors are collectively referred to herein as the "Subsidiary
Guarantees") pursuant to an Indenture (as defined herein). The Notes and the
Subsidiary Guarantees are collectively referred to herein as the "Securities."
The Securities are to be issued pursuant to an indenture (the
"Indenture") to be entered into between the Company, the Subsidiary Guarantors,
and The Bank of New York, as Trustee (the "Trustee").
This opinion is being furnished in accordance with the requirements of
Item 601(b)(5) of Regulation S-K under the Securities Act of 1933, as amended
(the "Act").
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) the Registration
Statement on Form S-3 (Reg. No. 333-9713) as filed with the Securities and
Exchange Commission (the "Commission") on August 7, 1996 under the Act (the
"Registration Statement"); (ii) the form of Amendment No. 1 to the Registration
Statement ("Amendment No. 1") as proposed to be filed with the Commission on
October 4, 1996; (iii) the form of the Underwriting Agreement (the
"Underwriting Agreement") proposed to be entered into between the Company, as
issuer, the Subsidiary Guarantors, CIBC Wood Gundy Securities Corp., and Alex.
Brown & Sons Incorporated, as underwriters (the "Underwriters"), being filed as
an exhibit to Amendment No. 1; (iv) the form of the Indenture being filed as an
exhibit to Amendment No. 1; (v) the form of the Securities; (vi) the
Certificate of Incorporation of the Company and the Subsidiary Guarantors, as
currently in effect; (vii) the By-Laws of the Company and the Subsidiary
Guarantors, as currently in effect; and (viii) certain resolutions of the Board
of Directors of the Company and the Subsidiary Guarantors, in each case,
relating to the issuance and sale of the Securities, the issuance of the
Subsidiary Guarantees and related matters. We have also examined originals or
copies, certified or otherwise identified to our satisfaction, of such records
of the Company and the Subsidiary Guarantors and such agreements, certificates
of public officials, certificates of officers or other representatives of the
Company, the Subsidiary Guarantors and others, and such other documents,
certificates and records as we have deemed necessary or appropriate as a basis
for the opinions set forth herein.
<PAGE> 2
Outdoor Systems, Inc.
October 3, 1996
Page 2.
In our examination, we have assumed the legal capacity of all natural
persons, 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 certified, conformed or photostatic copies and
the authenticity of the originals of such latter documents. In making our
examination of documents executed or to be executed by parties other than the
Company and the Subsidiary Guarantors, we have assumed that such parties had or
will have the power, corporate or other, to enter into and perform all
obligations thereunder and have also assumed the due authorization by all
requisite action, corporate or other, and execution and delivery by such
parties of such documents and the validity and binding effect thereof. As to
any facts materials to the opinions expressed herein which we have not
independently established or verified, we have relied upon statements and
representations of officers and other representatives of the Company, the
Subsidiary Guarantors and others.
Members of our firm are admitted to the bar in the State of New York,
and we do not express any opinion as to the laws of any other jurisdiction,
other than the laws of the United States of America to the extent specifically
referred to herein.
Based upon and subject to the foregoing, we are of the opinion that when
(i) the Registration Statement becomes effective and the Indenture has been
qualified under the Trust Indenture Act of 1939, as amended; (ii) the interest
rate, maturity, redemption and other terms of the Securities as well as the
price at which the Securities are to be sold to the Underwriters pursuant to the
Underwriting Agreement and other matters relating to the issuance and sale of
the Securities have been approved by the Board of Directors of the Company and
the Subsidiary Guarantors; (iii) the Indenture and the Underwriting Agreement
have been duly executed and delivered; and (iv) the Securities have been duly
executed and authenticated in accordance with the terms of the Indenture and
delivered to and paid for by the Underwriters as contemplated by the
Underwriting Agreement, the issuance and sale of the Securities will have been
duly authorized by the Company and the Subsidiary Guarantors, and the Securities
will be valid and binding obligations of the Company and the Subsidiary
Guarantors entitled to the benefits of the Indenture and enforceable against the
Company and the Subsidiary Guarantors in accordance with their terms, except to
the extent that (a) enforcement thereof may be limited by (1) bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance or other similar
laws now or hereafter in effect relating to creditors' rights generally and (2)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity) and (b) the indemnity provisions contained
in the Indenture may be deemed unenforceable. Certain of the remedial provisions
in the Indenture may be further limited or rendered unenforceable by applicable
law but such law does not in our opinion make the remedies provided in the
Indenture inadequate for the practical realization of the benefits provided
thereby.
We hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement. We also consent to the reference to
our firm under the caption "Legal Matters" in the Registration Statement. In
giving this consent, we do not hereby admit that we are included in the
category of persons whose consent is required under Section 7 of the Act or the
rules and regulations of the Commission.
Very truly yours,
POWELL, GOLDSTEIN, FRAZER & MURPHY
<PAGE> 1
EXHIBIT 12.1
OUTDOOR SYSTEMS, INC.
RATIO OF EARNINGS TO FIXED CHARGES
($000 OMITTED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------- SIX MONTHS ENDED
1995 JUNE 30, 1996
---------------------- ----------------------
1991 1992 1993 1994 HISTORICAL PRO FORMA HISTORICAL PRO FORMA
------- ------- ------- ------- ---------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings (loss) before taxes
and extraordinary loss.... $(4,254) $(1,009) $ 338 $ 3,054 $ 3,086 $ 8,586 $ 4,975 $ 1,643
------- ------- ------- ------- ---------- --------- ---------- ---------
Fixed charges:
Interest.................. 7,657 9,526 11,894 16,393 17,199 53,139 7,929 26,570
Rent...................... 2,352 2,945 3,252 3,323 4,511 25,383 2,428 12,864
------- ------- ------- ------- ---------- --------- ---------- ---------
Total fixed
charges.......... 10,009 12,471 15,146 19,716 21,710 78,522 10,357 39,434
------- ------- ------- ------- ---------- --------- ---------- ---------
Adjusted earnings........... $ 5,755 $11,462 $15,484 $22,770 $ 24,796 $87,108 $ 15,332 $41,077
======== ======== ======== ======== ========= ========== ========= ==========
Ratio of earnings to fixed
charges................... .57x .92x 1.02x 1.15x 1.14x 1.11x 1.48x 1.04x
======== ======== ======== ======== ========= ========== ========= ==========
Deficiency in fixed charge
coverage.................. $ 4,254 $ 1,009
======== ========
</TABLE>
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement on Form S-3 of Outdoor
Systems, Inc. of our report dated January 31, 1996, except as to Note 12, the
date of which is April 17, 1996 and Note 13, the date of which is July 22, 1996,
on the financial statements of Outdoor Systems, Inc. and subsidiaries as of
December 31, 1995 and 1994 and for each of the three years in the period ended
December 31, 1995 appearing in the Prospectus, which is part of this
Registration Statement.
We consent to the use in this Registration Statement on Form S-3 of Outdoor
Systems, Inc. of our report dated January 16, 1995 on the consolidated
statements of operations of Capitol Outdoor Advertising, Inc. and Subsidiary and
its predecessor company Creative Outdoor Advertising of Atlanta, Inc. for the
seven month period ended July 30, 1993, the five month period ended December 31,
1993 and the nine month period ended September 30, 1994 appearing in the
Prospectus, which is part of this Registration Statement.
We consent to the use in this Registration Statement on Form S-3 of Outdoor
Systems, Inc. of our report dated July 25, 1996 on the Gannett Outdoor combined
statements of net assets to be acquired by Outdoor Systems, Inc. as of December
31, 1995 and 1994 and combined statements of revenues and direct expenses of net
assets to be acquired by Outdoor Systems, Inc. for each of the three years in
the period ended December 31, 1995 appearing in the Prospectus, which is a part
of this Registration Statement.
We consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
October 4, 1996
<PAGE> 1
EXHIBIT 24.2
NEW YORK SUBWAYS ADVERTISING CO., INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints WILLIAM S. LEVINE and BILL M. BEVERAGE, and each
of them, as his true and lawful attorneys-in-fact and agents, with full power of
substitution and resubstitution, for him or and in his name, place and stead, in
any and all capacities, to sign this Registration Statement and any and all
amendments (including post-effective amendments) to this Registration Statement,
to sign any related registrations statements pursuant to Rule 462(b) of the
Securities Act of 1933, and to file the same with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents, and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or either of them, for
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------- --------------------------------- -----------------
<C> <S> <C>
/s/ ARTHUR R. MORENO President (Principal Executive October 4, 1996
- ------------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and October 4, 1996
- ------------------------------------- Director
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief October 4, 1996
- ------------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial Officer)
</TABLE>
<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 OF A CORPORATION
DESIGNATED TO ACT AS TRUSTEE
------------------
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE
PURSUANT TO SECTION 305(b)(2) (3)___(3)
------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
13-5160382
(I.R.S. employer identification no.)
48 WALL STREET, NEW YORK, NEW YORK 10286
(Address of principal executive offices) (Zip Code)
-------------------
THE BANK OF NEW YORK
10161 CENTURION PARKWAY
TOWERMARC PLAZA, 2ND FLOOR
JACKSONVILLE, FLORIDA 32256
ATTN: MS. SANDRA CARREKER
(904) 998-4716
(Name, address and telephone number of agent for service)
--------------------
OUTDOOR SYSTEMS, INC.
(Exact name of obligor as specified in its charter)
DELAWARE 86-0736400
State or other jurisdiction of (IRS employer
incorporation or organization identification no.)
2502 N. BLACK CANYON HIGHWAY, PHOENIX, ARIZONA 85009
(Address of principal executive offices) (Zip code)
--------------------
SENIOR SUBORDINATED NOTES DUE 2006
(Title of the indenture securities)
<PAGE> 2
OUTDOOR SYSTEMS PAINTING, INC.
(Exact name of obligor as specified in its charter)
ARIZONA 86-0638522
State or other jurisdiction of (IRS employer
incorporation or organization identification no.)
2502 N. BLACK CANYON HIGHWAY, PHOENIX, ARIZONA 85009
(Address of principal executive offices) (Zip code)
--------------------
SENIOR SUBORDINATED NOTES DUE 2006
(Title of the indenture securities)
OS ADVERTISING OF TEXAS PAINTING, INC.
(Exact name of obligor as specified in its charter)
TEXAS 86-0638816
State or other jurisdiction of (IRS employer
incorporation or organization identification no.)
2502 N. BLACK CANYON HIGHWAY, PHOENIX, ARIZONA 85009
(Address of principal executive offices) (Zip code)
--------------------
SENIOR SUBORDINATED NOTES DUE 2006
(Title of the indenture securities)
OS BASELINE, INC.
(Exact name of obligor as specified in its charter)
ARIZONA 86-0795338
State or other jurisdiction of (IRS employer
incorporation or organization identification no.)
2502 N. BLACK CANYON HIGHWAY, PHOENIX, ARIZONA 85009
(Address of principal executive offices) (Zip code)
--------------------
SENIOR SUBORDINATED NOTES DUE 2006
(Title of the indenture securities)
<PAGE> 3
DECADE COMMUNICATIONS GROUP, INC.
(Exact name of obligor as specified in its charter)
COLORADO 84-1291420
State or other jurisdiction of (IRS employer
incorporation or organization identification no.)
2502 N. BLACK CANYON HIGHWAY, PHOENIX, ARIZONA 85009
(Address of principal executive offices) (Zip code)
--------------------
SENIOR SUBORDINATED NOTES DUE 2006
(Title of the indenture securities)
BENCH ADVERTISING COMPANY OF COLORADO, INC.
(Exact name of obligor as specified in its charter)
COLORADO 84-0862025
State or other jurisdiction of (IRS employer
incorporation or organization identification no.)
2502 N. BLACK CANYON HIGHWAY, PHOENIX, ARIZONA 85009
(Address of principal executive offices) (Zip code)
--------------------
NEW YORK SUBWAYS ADVERTISING CO., INC.
(Exact name of Registrant as specified in its charter)
ARIZONA 86-0443845
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
---------------------
2502 N. BLACK CANYON HIGHWAY
PHOENIX, ARIZONA 85009
(602) 246-9569
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
SENIOR SUBORDINATED NOTES DUE 2006
(Title of the indenture securities)
<PAGE> 4
1. General Information.
Furnish the following information as to the trustee--
Name and address of each examining or supervising authority to which
it is subject.
SUPERINTENDENT OF BANKS OF THE STATE OF NEW YORK
2 RECTOR STREET
NEW YORK, N.Y. 10006, AND ALBANY, N.Y. 12203
FEDERAL RESERVE BANK OF NEW YORK
33 LIBERTY PLAZA
NEW YORK, N.Y. 10045
FEDERAL DEPOSIT INSURANCE CORPORATION
WASHINGTON, D.C. 20429
NEW YORK CLEARING HOUSE ASSOCIATION
NEW YORK, N.Y.
Whether it is authorized to exercise corporate trust powers.
YES.
2. Affiliations with Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
NONE. (SEE NOTE ON PAGE 4.)
16. List of Exhibits.
Exhibits identified in parentheses below, on file with the Commission, are
incorporated herein by reference as an exhibit hereto, pursuant to Rule
7a-29 under the Trust Indenture Act of 1939 (the "Act") and Rule 24 of the
Commission's Rules of Practice.
(1) A copy of the Organization Certificate of the Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise corporate
trust powers. (Exhibit 1 to Amendment 1 to Form T-1 filed with
Registration Statement No. 33-6215, Exhibits 1a and 1b to
<PAGE> 5
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to
Form T-1 filed with Registration Statement No. 33-29637.)
(4) A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
(6) The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration No. 33-44051.)
(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.
NOTE
Inasmuch as this Form T-1 is filed prior to the ascertainment by the Trustee of
all facts on which to base a responsive answer to Item 2, the answer to said
Item is based on incomplete information.
Item 2 may, however, be considered as correct unless amended by an amendment to
this Form T-1.
<PAGE> 6
EXHIBIT 6 TO FORM T-1
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act of
1939, in connection with the proposed issuance of Outdoor Systems Senior
Subordinated Notes due 2006, The Bank of New York hereby consents 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.
THE BANK OF NEW YORK
By: /S/ Sandra Carreker
--------------------------
Sandra Carreker, Agent
<PAGE> 7
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a
corporation organized and existing under the laws of the State of New York, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Jacksonville and the
State of Florida, on the 4th day of October, 1996.
THE BANK OF NEW YORK
By: /S/ Sandra Carreker
-------------------------
Sandra Carreker, Agent
<PAGE> 8
EXHIBIT 7 TO FORM T-1
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries, a member of the Federal Reserve
System, at the close of business March 31, 1996, published in accordance with a
call made by the Federal Reserve Bank of this District pursuant to the
provisions of the Federal Reserve Act.
<TABLE>
<CAPTION>
Dollar Amounts
in Thousands
<S> <C>
ASSETS
Cash and balances due from
depository institutions:
Noninterest-bearing balances
and currency and coin $ 2,461,550
Interest-bearing balances 835.563
Securities:
Held-to-maturity securities 802,064
Available-for-sale securities 2,051,263
Federal funds sold and securities
purchased under agreements to resell
in domestic offices of the bank:
Federal funds sold 3,885,475
Securities purchased under
agreements to resell
Loans and lease financing receivables:
Loans and leases,
net of unearned income 27,820,159
LESS: Allowance for loan and
lease losses 509,817
LESS: Allocated transfer
risk reserve 1,000
Loans and leases, net of unearned
income and allowance and reserve 27,309,342
</TABLE>
<PAGE> 9
<TABLE>
<S> <C>
Assets held in trading accounts 837,118
Premises and fixed assets (including
capitalized leases) 614,567
Other real estate owned 51,631
Investments in unconsolidated
subsidiaries and associated
companies 225,158
Customers' liability to this bank
on acceptances outstanding 800,375
Intangible assets 436,668
Other assets 1,247,908
-----------
Total assets $41,558,682
===========
LIABILITIES
- -----------
Deposits:
In domestic offices $18,851,327
Noninterest-bearing 7,102,645
Interest-bearing 11,748,682
In foreign offices, Edge and
Agreement subsidiaries, and IBFs 10,965,604
Noninterest-bearing 37,855
Interest-bearing 10,927,749
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 1,224,886
Securities sold under agreements
to repurchase 29,728
Demand notes issued to the
U.S. Treasury 118,870
Trading liabilities 673,944
Other borrowed money:
With original maturity of one year
or less 2,713,248
With original maturity of more
than one year 20,780
</TABLE>
<PAGE> 10
<TABLE>
<S> <C>
Bank's liability on acceptances
executed and outstanding 803,292
Subordinated notes and debentures 1,022,860
Other liabilities 1,590,564
------------
Total liabilities 38,015,103
============
EQUITY CAPITAL
- --------------
Common stock 942,284
Surplus 525,666
Undivided profits and capital
reserves 2,078,197
Net unrealized holding gains (losses)
on available-for-sale securities 3,197
Cumulative foreign currency
translation adjustments (5,765)
Total equity capital 3,543,579
------------
Total liabilities and equity capital $ 41,558,682
============
</TABLE>
<PAGE> 11
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
J. Carter Bacot )
Thomas A. Renyi ) Directors
Alan R. Griffith)
