<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 9, 1997
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
OUTDOOR SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7312 86-0736400
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation) Classification Code Number)
</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> <C>
ARIZONA 7312 86-0638522
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation) Classification Code Number)
</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> <C>
TEXAS 7312 86-0638816
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation) Classification Code Number)
</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> <C>
ARIZONA 7312 86-0795338
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation) Classification Code Number)
</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)
DECADE COMMUNICATIONS GROUP, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
COLORADO 7312 84-1291420
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation) Classification Code Number)
</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
BENCH ADVERTISING COMPANY
OF COLORADO, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
COLORADO 7319 84-0862025
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation) Classification Code Number)
</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> <C>
ARIZONA 7319 86-0443845
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation) Classification Code Number)
</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 BUS, INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
GEORGIA 7319 86-0878376
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation) Classification Code Number)
</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 (NEW YORK), INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEW YORK 7312 11-1821182
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer Identification No.)
incorporation) Classification Code Number)
</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
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:
GABRIEL DUMITRESCU, ESQ.
WILLIAM B. SHEARER, JR., ESQ.
POWELL, GOLDSTEIN, FRAZER & MURPHY LLP
191 PEACHTREE STREET, N.E., 16TH FLOOR
ATLANTA, GEORGIA 30303
(404) 572-6600
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
------------------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
<PAGE> 3
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================================================
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF EACH CLASS AMOUNT OFFERING AGGREGATE
OF SECURITIES TO BE PRICE OFFERING AMOUNT OF
TO BE REGISTERED REGISTERED PER NOTE PRICE(1) REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
8 7/8% Senior Subordinated Notes due
2007.................................... $500,000,000 100% $500,000,000 $151,515
Guarantees of 8 7/8% Senior Subordinated
Notes due 2007.......................... (1) (1) (1)
==============================================================================================================
</TABLE>
(1) 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 REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 4
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
the 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 JULY 9, 1997
PROSPECTUS
[OUTDOOR SYSTEMS LOGO]
OFFER TO EXCHANGE ITS 8 7/8% SENIOR SUBORDINATED NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, FOR ANY AND ALL OF ITS OUTSTANDING
8 7/8% SENIOR SUBORDINATED NOTES DUE 2007.
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON
, 1997, UNLESS EXTENDED.
------------------------
Outdoor Systems, Inc., a Delaware corporation (the "Company" or "Outdoor
Systems"), hereby offers to exchange up to $500,000,000 aggregate principal
amount of its 8 7/8% Senior Subordinated Notes due 2007 (the "Exchange Notes"),
which have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), pursuant to a Registration Statement of which this Prospectus
is a part, for a like principal amount of its 8 7/8% Senior Subordinated Notes
due 2007 outstanding on the date hereof (the "Existing Notes") upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal (which together constitute the "Exchange
Offer"). The terms of the Exchange Notes are identical in all material respects
to those of the Existing Notes, except for certain transfer restrictions and
registration rights relating to the Existing Notes. The Exchange Notes will be
issued pursuant to, and entitled to the benefits of, the Indenture, dated as of
June 23, 1997 (the "Indenture"), among the Company, the Guarantors (as defined
herein) and The Bank of New York, as trustee, governing the Existing Notes. The
Existing Notes and Exchange Notes outstanding under the Indenture at any time
are referred to collectively as the "Notes."
Interest on the Exchange Notes will be payable in cash semi-annually on
each June 15 and December 15, commencing December 15, 1997. The Exchange Notes
will be redeemable at the option of the Company, in whole or in part, on or
after June 15, 2002, 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 June 15, 2000 at a redemption price equal to 108.875% 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 $325.0 million of the
aggregate principal amount of the Notes originally issued remain outstanding
after any such redemption. Upon a Change of Control (as defined herein), each
holder of Exchange Notes will be entitled to require the Company to purchase
such holder's Exchange Notes at 101% of the principal amount thereof, plus
accrued and unpaid interest thereon to the date of purchase.
The Exchange 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 Exchange Notes will rank pari passu in
right of payment with the Company's outstanding $250.0 million aggregate
principal amount of 9 3/8% Senior Subordinated Notes due 2006 (the "1996 Notes")
and all other future unsecured senior subordinated indebtedness of the Company.
The Exchange Notes will be unconditionally guaranteed, on an unsecured senior
subordinated basis and pari passu with the 1996 Notes, as to payment of
principal, premium, if any, and interest, jointly and severally, by all of the
Company's domestic subsidiaries. As of March 31, 1997, after giving effect to
the 3M Media Acquisition, the Van Wagner Acquisition, the Bank Financing and the
Offerings (each as defined herein), the Company would have had approximately
$785.1 million of Senior Indebtedness outstanding.
(continued on inside cover)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 15 FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY 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.
------------------------
The date of this Prospectus is , 1997.
<PAGE> 5
The Exchange Notes are being offered hereunder in order to satisfy certain
obligations of the Company and the Guarantors contained in the Registration
Rights Agreement, dated as of June 17, 1997 (the "Exchange Offer Registration
Rights Agreement"), among the Company, the Guarantors and CIBC Wood Gundy
Securities Corp., Alex. Brown & Sons Incorporated and Donaldson, Lufkin &
Jenrette Securities Corporation, as the initial purchasers (the "Initial
Purchasers") of the Existing Notes.
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all of the expenses incident to the Exchange Offer. Tenders of
Existing Notes pursuant to the Exchange Offer may be withdrawn at any time prior
to the Expiration Date (as defined herein) of the Exchange Offer. The Company
expressly reserves the right to terminate or amend the Exchange Offer and not to
accept for exchange any Existing Notes not theretofore accepted for exchange
upon the occurrence of any of the events specified under "The Exchange
Offer -- Conditions to the Exchange Offer." If any such termination or amendment
occurs, the Company will notify the Exchange Agent and will either issue a press
release or give oral or written notice to the holders of the Existing Notes as
promptly as practicable. The Exchange Offer will expire at 5:00 p.m., New York
City time, on , 1997, unless the Company, in its sole discretion,
has extended the period of time for which the Exchange Offer is open. In the
event the Company terminates the Exchange Offer and does not accept for exchange
any Existing Notes with respect to the Exchange Offer, the Company will promptly
return such Existing Notes to the holders thereof. See "The Exchange Offer."
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivery of a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Existing Notes where
such Existing Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company and the
Guarantors have agreed that, for a period of 180 days after the consummation of
the Exchange Offer, they will make this Prospectus available to any
broker-dealer for use in connection with any such resale. See "Plan of
Distribution."
Prior to the Exchange Offer, there has been no public market for the
Existing Notes. Holders of the Existing Notes whose Existing Notes are not
tendered and accepted in the Exchange Offer will continue to hold the Existing
Notes. Following consummation of the Exchange Offer, the holders of the Existing
Notes will continue to be subject to the existing restrictions upon transfer
thereof and, except as provided herein, the Company will have no further
obligation to such holders to provide for registration under the Securities Act
of the Existing Notes held by them. To the extent Existing Notes are tendered
and accepted in the Exchange Offer, the trading market for untendered and
tendered but unaccepted Existing Notes could be adversely affected.
The Company currently does not intend to list the Exchange Notes on any
securities exchange or to seek approval for quotation of the Exchange Notes
through any automated quotation system. There can be no assurance that an active
public market for the Exchange Notes will develop.
The Exchange Offer is not conditioned upon any minimum principal amount of
Existing Notes being tendered for exchange pursuant to the Exchange Offer.
i
<PAGE> 6
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus and in documents incorporated by
reference into this Prospectus. The discussion below includes certain
acquisitions (the "Acquisitions") consisting of the Completed Acquisitions (as
defined) and the pending acquisition (the "3M Media Acquisition") of the outdoor
advertising operations ("3M Media") of Minnesota Mining and Manufacturing
Company ("3M"). The "Completed Acquisitions" means, collectively, the Van Wagner
Acquisition, the Gannett Outdoor Acquisition, the Houston Acquisition, the
Denver Disposition, the CSX Assets Acquisition, the Villepigue Acquisition, the
Scadron Acquisition, the Reynolds Acquisition, the Burlington Northern and Santa
Fe Assets Acquisition and the Other Completed Acquisitions (each as defined).
The "Completed 1997 Acquisitions" means the Completed Acquisitions consummated
following December 31, 1996. The information in this Prospectus gives effect to
a three-for-two stock split of the Common Stock effected in the form of a stock
dividend paid on July 3, 1997 to stockholders of record on June 23, 1997. 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 operations to be acquired in the 3M Media Acquisition, 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. "3M Media" is a trademark of
Minnesota Mining and Manufacturing Company.
THE COMPANY
Outdoor Systems is the largest outdoor advertising company in North America
and upon completion of the 3M Media Acquisition will operate approximately
96,500 bulletin, poster, transit, mall and other advertising display faces in 46
states, including 65 metropolitan markets in the United States and seven
metropolitan markets in Canada. The Company also operates approximately 125,000
subway advertising display faces in New York City. Upon completion of the 3M
Media Acquisition, the Company will have operations in 20 of the 25 largest U.S.
markets, as well as six of the 10 largest Canadian markets. Giving effect to the
Acquisitions, as if each occurred at the beginning of the period, the Company
had pro forma net revenues of $601.4 million and pro forma EBITDA of $256.7
million for the year ended December 31, 1996 and pro forma net revenues of
$140.9 million and pro forma EBITDA of $58.0 million for the three months ended
March 31, 1997.
Through the Acquisitions, the Company will have significantly increased its
presence in North America and diversified into additional major metropolitan
markets. The Company believes that there are significant opportunities for
revenue enhancement and cost reduction in the integration of its combined
operations. The increased presence in North America resulting from the
Acquisitions should provide the Company with an increased opportunity to
effectively convey advertisers' marketing messages locally, regionally and
nationally. In addition, the Company believes that its operating and sales
strategies will allow it to continue to improve utilization of the acquired
advertising display faces. The following table sets forth certain information
with respect to the Company's outdoor markets as of December 31, 1996 after
giving effect to the Acquisitions.
1
<PAGE> 7
<TABLE>
<CAPTION>
MALL AND TOTAL
MARKET 30-SHEET 8-SHEET AIRPORT DISPLAY
MARKET RANK BULLETINS POSTERS POSTERS POSTERS TRANSIT FACES
- --------------------------------------------------- ------ --------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
UNITED STATES:
New York-New Jersey(1)............................. 1 864 2,979 262 -- 2,710 6,815
Los Angeles........................................ 2 1,587 2,961 -- -- 2,912 7,460
Chicago............................................ 3 756 -- 640 -- -- 1,396
Philadelphia....................................... 4 23 -- -- -- 498 521
San Francisco...................................... 5 213 1,005 563 -- 1,528 3,309
Dallas............................................. 8 849 -- -- -- -- 849
Detroit............................................ 9 1,099 1,342 91 -- 1,000 3,532
Houston............................................ 10 1,316 -- -- -- -- 1,316
Atlanta............................................ 11 1,234 1,679 -- -- 650 3,563
Cleveland.......................................... 13 70 -- -- -- -- 70
Minneapolis........................................ 14 54 -- -- -- -- 54
Miami-Ft. Lauderdale............................... 15 404 -- -- -- -- 404
Tampa-St. Petersburg-Sarasota...................... 16 881 -- -- -- -- 881
Phoenix............................................ 17 807 1,516 659 -- 1,490 4,472
Sacramento-Stockton-Modesto........................ 18 506 1,271 -- -- -- 1,777
Denver............................................. 19 399 784 -- -- 5,266 6,449
St. Louis.......................................... 20 466 833 1 -- -- 1,300
San Diego.......................................... 23 109 541 -- -- 680 1,330
Orlando............................................ 24 466 -- -- -- -- 466
Portland, OR....................................... 25 17 -- -- -- -- 17
Indianapolis....................................... 26 137 -- -- -- -- 137
Hartford-New Haven................................. 27 151 831 -- -- -- 982
Cincinnati......................................... 28 104 -- -- -- -- 104
Salt Lake.......................................... 29 61 -- -- -- -- 61
Charlotte.......................................... 30 145 -- -- -- -- 145
Raleigh-Durham..................................... 32 33 -- -- -- -- 33
Nashville.......................................... 33 248 -- -- -- -- 248
Kansas City........................................ 34 432 840 -- -- -- 1,272
Columbus, OH....................................... 35 104 -- -- -- -- 104
San Antonio........................................ 36 85 -- -- -- -- 85
Grand Rapids....................................... 38 120 568 -- -- 180 868
New Orleans........................................ 40 458 1,042 428 -- 214 2,142
Memphis............................................ 41 77 -- -- -- -- 77
Buffalo............................................ 42 116 -- -- -- -- 116
Albuquerque........................................ 43 99 -- -- -- -- 99
Fresno............................................. 46 125 892 -- -- -- 1,017
Louisville......................................... 49 329 1,052 243 -- 224 1,848
Winston-Salem...................................... 50 35 -- -- -- -- 35
Birmingham......................................... 51 154 -- -- -- -- 154
West Palm Beach.................................... 52 219 -- -- -- -- 219
Dayton............................................. 53 123 -- -- -- -- 123
Jacksonville....................................... 55 178 -- -- -- -- 178
Charleston, SC..................................... 57 181 -- -- -- -- 181
Flint.............................................. 59 86 423 32 -- -- 541
Knoxville.......................................... 63 78 -- -- -- -- 78
Roanoke............................................ 70 49 -- -- -- -- 49
Rochester.......................................... 73 -- -- -- -- 3,715 3,715
Shreveport......................................... 74 41 -- -- -- -- 41
Omaha.............................................. 75 52 -- -- -- -- 52
Tucson............................................. 78 170 6 338 -- 10 524
Rio Grande......................................... 82 316 -- -- -- -- 316
Columbia, SC....................................... 83 158 -- -- -- -- 158
El Paso............................................ 84 81 -- -- -- -- 81
Chattanooga........................................ 85 63 -- -- -- -- 63
Jackson, MS........................................ 87 76 -- -- -- -- 76
Ft. Myers.......................................... 96 108 -- -- -- -- 108
Colorado Springs................................... 99 62 -- -- -- -- 62
Ft. Wayne.......................................... 106 69 -- -- -- -- 69
Tyler, TX.......................................... 110 87 -- -- -- -- 87
Eugene............................................. 123 77 382 -- -- -- 459
Bakersfield, CA.................................... 124 50 -- -- -- -- 50
Reno............................................... 126 104 -- -- -- -- 104
Columbus, GA....................................... 127 190 412 100 -- -- 702
Beaumont........................................... 135 110 -- -- -- -- 110
Midland-Odessa, TX................................. 144 47 -- -- -- -- 47
Non-Metro Markets.................................. N/A 12,439 175 -- -- -- 12,614
Mall Advertising Displays.......................... N/A -- -- -- 6,700 -- 6,700
------ ------ ----- ----- ------ ------
UNITED STATES TOTAL(1)........................... 30,347 21,534 3,357 6,700 21,077 83,015
------ ------ ----- ----- ------ ------
</TABLE>
2
<PAGE> 8
<TABLE>
<CAPTION>
MALL AND TOTAL
MARKET 30-SHEET 8-SHEET AIRPORT DISPLAY
MARKET RANK BULLETINS POSTERS POSTERS POSTERS TRANSIT FACES
- --------------------------------------------------- ------ ------ ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
CANADA:
Toronto............................................ 1 157 1,491 -- 408 3,202 5,258
Montreal........................................... 2 77 793 -- 297 1,788 2,955
Ottawa............................................. 6 8 188 -- 61 -- 257
Winnipeg........................................... 7 107 247 -- 56 349 759
Quebec City........................................ 8 184 333 -- 125 241 883
Hamilton........................................... 9 19 303 -- 80 598 1,000
Halifax............................................ 14 15 173 -- 28 214 430
Other.............................................. N/A 145 1,247 -- 278 301 1,971
------ ------ ----- ----- ------ ------
CANADA TOTAL..................................... 712 4,775 0 1,333 6,693 13,513
------ ------ ----- ----- ------ ------
TOTAL(1)(2)...................................... 31,059(3) 26,309 3,357 8,033 27,770 96,528
====== ====== ===== ===== ====== ======
</TABLE>
- ---------------
(1) Display faces do not include 125,000 subway advertising display faces in New
York City.
(2) The Company may be required to make divestitures in certain markets in order
to receive antitrust clearance for the 3M Media Acquisition. If the 3M Media
Acquisition is not consummated, the Company will have 8,405 bulletins,
23,880 30-sheet posters, 3,357 8-sheet posters, 1,333 mall and airport
posters, and 27,770 transit display faces, for a total of 64,745 display
faces. See "Risk Factors -- Possible Non-Consummation of the 3M Media
Acquisition."
(3) Includes 141 wall murals and 51 "Spectacular" signs.
RECENT DEVELOPMENTS
On June 23, 1997, the Company completed the offering (the "Offering") of
the Existing Notes to the Initial Purchasers for net proceeds of approximately
$485.8 million. The Initial Purchasers subsequently sold the Existing Notes to
qualified institutional buyers in reliance on Rule 144A under the Securities Act
and to a limited number of institutional "accredited investors" as defined in
Rule 501(a)(1), (2), (3) or (7) under the Securities Act. Pending completion of
the 3M Media Acquisition (see "-- Pending Acquisition -- 3M Media Acquisition"
below), the Company has used approximately $187.0 million of the net proceeds of
the Offering to repay amounts outstanding under the Senior Credit Facility (as
defined herein) and has invested the balance of such net proceeds in short-term
interest bearing securities.
On May 28, 1997, the Company completed an offering (the "Common Stock
Offering" and, together with the Offering, the "Offerings") of 20.25 million
shares of its Common Stock for net proceeds of approximately $392.1 million.
Pending the completion of the 3M Media Acquisition, the Company used such net
proceeds to repay amounts outstanding under the Senior Credit Facility.
Since the Company's initial public offering on April 24, 1996, the Company
has completed 16 acquisitions of outdoor advertising businesses or assets for an
aggregate of more than $1.0 billion, including the Gannett Outdoor Acquisition
for approximately $700.0 million and the Van Wagner Acquisition for
approximately $170.0 million. In addition, the Company has entered into an
agreement to purchase 3M Media, which has operations in 56 metropolitan markets
and non-metropolitan locations in the United States, for approximately $1.0
billion. There is no assurance that the 3M Media Acquisition will be consummated
or that it will not be delayed due to required antitrust clearance or other
factors. The Offering is not conditioned on the consummation of the 3M Media
Acquisition. See "Risk Factors -- Possible Non-Consummation of the 3M Media
Acquisition."
Completed Acquisitions
- - Van Wagner Acquisition. On May 22, 1997, the Company purchased the stock (the
"Van Wagner Acquisition") of Van Wagner Communications, Inc. ("Van Wagner")
for approximately $170.0 million in cash. The Van Wagner operations include
approximately 50 "Spectacular" signs in Times Square, as well as 105 bulletins
and 172 posters and eight wall murals in New York City, 372 bulletins and 16
wall murals in Los Angeles, four bulletins in San Francisco, and additional
transit displays and transit management agreements in New York, Los Angeles,
Northern California and Las Vegas.
The Van Wagner Acquisition provides the Company with high profile display
faces in Times Square and west Los Angeles which complement its pre-existing
display inventory. The Company will eliminate certain duplicative
administrative, sales and production functions in connection with the
integration of Van Wagner's operations into the Company's existing operations,
which the Company believes will result in pro forma annualized cost savings of
approximately $8.6 million.
3
<PAGE> 9
- - Gannett Outdoor Acquisition. On August 22, 1996, the Company purchased
substantially all of the assets of the outdoor advertising division ("Gannett
Outdoor") of Gannett Co., Inc. ("Gannett"), including the stock of certain
indirect subsidiaries of Gannett, for approximately $700.0 million in cash
(the "Gannett Outdoor 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 and approximately
125,000 subway advertising display faces in New York City.
Upon consummation of the Gannett Outdoor Acquisition, the Company immediately
began implementing its cost savings and integration strategy, which included
the consolidation of certain administrative, sales management and leasing
management functions. This strategy has resulted in the reduction and
consolidation of duplicative functions in: (i) production and sales overhead;
(ii) production and administrative support; (iii) national sales and marketing
support; and (iv) accounting and administrative areas. In addition, the
Company has eliminated certain duplicative operations by closing a billboard
production facility in Canada, consolidating sales offices in Toronto and
closing Gannett Outdoor's corporate office.
The Company had estimated that these measures would result in annual cost
savings of approximately $33.0 million. Based upon the results of the
Company's consolidation and cost savings efforts to date, the Company believes
that annual cost savings will exceed the original estimate. The Company also
believes that it has increased revenues generated by the Gannett Outdoor
assets primarily through changing the sales compensation system from one that
was predominantly salary-based to one that is commission-based. The Company
has also increased revenues through streamlining the sales approval process
and improving utilization of the Gannett Outdoor billboard inventory. The
Company believes that opportunities still exist to improve the operations
acquired in the Gannett Outdoor Acquisition.
- - Houston Acquisition and Denver Disposition. In connection with the Gannett
Outdoor Acquisition, on November 14, 1996, the Company acquired Gannett's
outdoor operations in Houston, Texas (the "Houston Acquisition") for $10.0
million in cash plus the net book value of working capital and certain other
specified assets. Also in connection with the Gannett Outdoor Acquisition, on
August 8, 1996, the Company sold substantially all of its then 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 9% promissory note for the balance of the purchase price.
- - CSX Assets Acquisition. On May 22, 1996, the Company acquired permanent
easements for 1,360 plots of land in 17 eastern states for $21.5 million (plus
future consideration estimated to be payable 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.
- - Villepigue Acquisition. On January 9, 1997, the Company completed the
acquisition of Villepigue Outdoor Advertising (the "Villepigue Acquisition")
and related entities, consisting of approximately 110 bulletin display faces
in the New York metropolitan area, for a purchase price of approximately $27.0
million in cash, subject to working capital adjustments.
- - Scadron Acquisition. On February 14, 1997, the Company purchased a portion of
the assets of Scadron Enterprises (the "Scadron Acquisition") consisting of
approximately 100 wall and bulletin display faces in the Chicago metropolitan
area, for a purchase price of approximately $24.5 million in cash, subject to
working capital adjustments. In addition, the Company agreed to acquire
certain other assets of Scadron Enterprises for aggregate additional
consideration of up to $3.5 million upon the satisfaction of certain
conditions, which may or may not be satisfied.
- - Reynolds Acquisition. On February 28, 1997, the Company acquired the assets
of Reynolds Outdoor, L.P. (the "Reynolds Acquisition") and certain related
joint ventures, consisting of approximately 325 bulletin faces in the
Dallas/Ft. Worth metropolitan area, for a purchase price of approximately
$31.6 million in cash, subject to working capital adjustments.
4
<PAGE> 10
- - Burlington Northern and Santa Fe Assets Acquisition. On March 26, 1997, the
Company purchased from The Burlington Northern and Santa Fe Railway Company
(the "Burlington Northern and Santa Fe Assets Acquisition") permanent
easements for approximately 1,350 plots of land located in 26 western and
midwestern states and the rights to signboard licenses with respect to
advertising displays located on the plots of land covered by the easements.
The purchase price for the assets consists of approximately $17.0 million in
cash which was paid on March 26, 1997 and approximately $12.5 million in cash
payable no later than July 11, 1997 upon delivery by the seller of additional
easements and assignments of license agreements.
- - Other Completed Transactions. In addition to these acquisitions, the Company
has acquired certain outdoor advertising assets in Denver, Chicago, Atlanta,
Louisville, Toronto, Montreal, and Halifax for aggregate consideration of
approximately $19.6 million (the "Other Completed Acquisitions").
On May 29, 1997, the Company acquired certain transit advertising assets in
British Columbia for approximately $800,000 and, on June 3, 1997, the Company
disposed of certain mall posters in Toronto and Montreal for approximately
$935,000.
Pending Acquisition -- 3M Media Acquisition
On April 30, 1997, the Company entered into an Agreement of Purchase and Sale
(the "3M Media Purchase Agreement") to acquire 3M Media, through the purchase
of the capital stock of National Advertising Company, a subsidiary of 3M, for
approximately $1.0 billion in cash. In the 3M Media Acquisition, the Company
will acquire from 3M a total of approximately 31,700 advertising display faces
consisting of 22,600 bulletins, 2,400 posters and 6,700 mall advertising
display faces in 56 metropolitan markets and non-metropolitan locations in the
United States.
The operations of 3M Media will be integrated into the Company principally as
an acquisition of advertising display inventory in locations that can be
administered from existing Company offices. Accordingly, the Company believes
that the consolidation of certain functions will result in certain cost
savings, including the elimination of duplicative administrative, sales and
production overhead positions in the 3M Media corporate headquarters and in
operating locations. The Company believes that the pro forma annualized cost
savings attributable to the elimination of such functions will be
approximately $41.7 million. In addition to these cost savings, the Company
believes that it may be able to achieve additional cost savings arising from
reductions in facility costs through renegotiated rents or reduced space, the
reduction of expenses associated with a reduced work force, and other
reductions in administrative expenses associated with the integration of the
combined businesses.
The Company also believes that there are significant opportunities for revenue
enhancement in 3M Media's operations upon completion of the 3M Media
Acquisition. The Company believes that its local market operating and sales
strategies will allow it to improve utilization of the 3M Media advertising
display faces.
The 3M Media Acquisition is subject to various conditions, including clearance
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"). The Company believes that Department of Justice ("DOJ")
clearance of the 3M Media Acquisition will be forthcoming, but there can be no
assurance that this will be the case. In order to obtain such clearance, it is
likely that the Company will be required to divest assets in certain markets
in which both the Company and 3M Media currently conduct business. There is no
assurance that the 3M Media Acquisition will be consummated or that it will
not be delayed due to required antitrust clearance or other factors.
The Company will finance the purchase price of the 3M Media Acquisition and
the fees and expenses associated with the 3M Media Acquisition and the
financing thereof through (i) the net proceeds of the Common Stock Offering,
(ii) the net proceeds of the Offering, and (iii) borrowings under its senior
credit facility (the "Senior Credit Facility") which is expected to be amended
to provide for a revolving credit facility and term loans of up to
approximately $1.1 billion (the "Bank Financing").
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,
5
<PAGE> 11
President and Chief Executive Officer, Wally C. Kelly, Senior Vice President of
Sales, Bill M. Beverage, Chief Financial Officer, and Robert M. Reade, Vice
President, Real Estate, together possess over 105 years of sales and management
experience in the outdoor advertising industry.
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.
THE EXCHANGE OFFER
Securities Offered............ Up to $500,000,000 aggregate principal amount
of 8 7/8% Senior Subordinated Notes due 2007
which have been registered under the Securities
Act. The terms of the Exchange Notes and those
of the Existing Notes are identical in all
material respects, except for certain transfer
restrictions relating to the Existing Notes.
The Exchange Offer............ The Exchange Notes are being offered in
exchange for a like principal amount of
Existing Notes. Existing Notes may be exchanged
only in integral multiples of $1,000. The
issuance of the Exchange Notes is intended to
satisfy obligations of the Company under the
Exchange Offer Registration Rights Agreement.
Expiration Date; Withdrawal
Rights...................... The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1997, or
such later date and time to which it is
extended by the Company. Tenders of Existing
Notes pursuant to the Exchange Offer may be
withdrawn at any time prior to the Expiration
Date. Any Existing Notes not accepted for
exchange for any reason will be returned
without expense to the tendering holder thereof
as promptly as practicable after the expiration
or termination of the Exchange Offer.
Conditions to the Exchange
Offer....................... The Exchange Offer is subject to certain
customary conditions, which may be waived by
the Company. The Company currently expects that
each of the conditions will be satisfied and
that no waivers will be necessary. See "The
Exchange Offer -- Conditions to the Exchange
Offer."
Procedures for Tendering
Existing Notes.............. Each holder of Existing Notes wishing to accept
the Exchange Offer must complete, sign and date
a Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions
contained herein and therein, and mail or
otherwise deliver such Letter of Transmittal,
or such facsimile, together with such Existing
Notes and any other required documentation, to
the Exchange Agent (as defined) at the address
set forth herein. See "The Exchange
Offer -- Procedures for Tendering Existing
Notes."
Use of Proceeds............... The Company will not receive any proceeds from
the exchange of Notes pursuant to the Exchange
Offer.
Certain Federal Income Tax
Considerations.............. The exchange pursuant to the Exchange Offer
should not be a taxable event for federal
income tax purposes. See "Certain Federal
Income Tax Considerations."
Exchange Agent................ The Bank of New York is serving as the Exchange
Agent (the "Exchange Agent") in connection with
the Exchange Offer.
6
<PAGE> 12
CONSEQUENCES OF EXCHANGING EXISTING NOTES
PURSUANT TO THE EXCHANGE OFFER
Based on certain interpretive letters issued by the staff of the Securities
and Exchange Commission (the "Commission") to third parties in unrelated
transactions, the Company believes that Exchange Notes issued pursuant to the
Exchange Offer may be offered for resale, resold or otherwise transferred by
holders thereof (other than any holder who is an "affiliate" of any of the
Company and the Guarantors within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of the holders' business and such holders have no arrangement or
understanding with any person to participate in a distribution of such Exchange
Notes and are not participating in, and do not intend to participate in, the
distribution of such Exchange Notes. By tendering, each holder will represent to
the Company in the Letter of Transmittal that, among other things, the Exchange
Notes acquired pursuant to the Exchange Offer are being acquired in the ordinary
course of business of the person receiving such Exchange Notes, whether or not
such person is the holder, that neither the holder nor any such other person has
an arrangement or understanding with any person to participate in the
distribution of such Exchange Notes, that neither the holder nor any such other
person is participating in or intends to participate in the distribution of such
Exchange Notes and that neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the Securities Act, of any of the
Company and the Guarantors. Each broker-dealer that receives Exchange Notes for
its own account in exchange for Existing Notes must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. See
"Plan of Distribution." In addition, to comply with the securities laws of
certain jurisdictions, if applicable, the Exchange Notes may not be offered or
sold unless they have been registered or qualified for sale in such jurisdiction
or an exemption from registration or qualification is available and complied
with. The Company has agreed, pursuant to the Exchange Offer Registration Rights
Agreement and subject to certain specified limitations therein, to register or
qualify the Exchange Notes for offer or sale under the securities or blue sky
laws of such jurisdictions as any holder of the Exchange Notes reasonably
requests in writing. If a holder of Existing Notes does not exchange such
Existing Notes for Exchange Notes pursuant to the Exchange Offer, such Existing
Notes will continue to be subject to the restrictions on transfer contained in
the legend thereon. In general, the Existing Notes may not be offered or sold,
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. See "The Exchange Offer -- Consequences of Failure to
Exchange; Resales of Exchange Notes."
The Existing Notes are currently eligible for trading in the Private
Offerings, Resales and Trading through Automated Linkages ("PORTAL") market.
Following commencement of the Exchange Offer but prior to its consummation, the
Existing Notes may continue to be traded in the PORTAL market. Following
consummation of the Exchange Offer, the Exchange Notes will not be eligible for
PORTAL trading.
COMPARISON OF EXCHANGE NOTES WITH EXISTING NOTES
Transferability............... Generally, the Exchange Notes will be freely
transferable under the Securities Act by
holders thereof other than any holder that is
an affiliate of any of the Company and the
Guarantors. The Exchange Notes otherwise will
be substantially identical in all material
respects (including interest rate and maturity)
to the Existing Notes. See "The Exchange
Offer."
Registration Rights........... The holders of Existing Notes currently are
entitled to certain registration rights
pursuant to the Exchange Offer Registration
Rights Agreement. However, upon consummation of
the Exchange Offer, subject to certain
exceptions, holders of Existing Notes who do
not exchange their Existing Notes for Exchange
Notes in the Exchange Offer will no longer be
entitled to registration rights and will not be
able to offer or sell their Existing Notes,
unless such
7
<PAGE> 13
Existing Notes are subsequently registered
under the Securities Act (which, subject to
certain limited exceptions, the Company will
have no obligations to do), except pursuant to
an exemption from, or in a transaction not
subject to, the Securities Act and applicable
state securities laws. See "Risk
Factors -- Adverse Consequences of Failure to
Adhere to Exchange Offer Procedures."
Absence of a Public Market for
the Exchange Notes............ The Exchange Notes are new securities and there
is currently no established market for the
Exchange Notes. Accordingly, there can be no
assurance as to the development or liquidity of
any market for the Exchange Notes. The Company
does not intend to apply for listing of the
Exchange Notes on any securities exchange or
for quotation of the Exchange Notes through any
automated quotation system.
THE NOTES
Except as otherwise indicated, the following description relates both to
the Existing Notes issued pursuant to the Offering and to the Exchange Notes to
be issued in exchange for Existing Notes in connection with the Exchange Offer.
The Exchange Notes will be obligations of the Company evidencing the same
indebtedness as the Existing Notes, and will be entitled to the benefits of the
same Indenture. The form and terms of the Exchange Notes are the same as the
form and the terms of the Existing Notes, except that the Exchange Notes have
been registered under the Securities Act and therefore will not bear legends
restricting the transfer thereof. Throughout this Prospectus, references to the
"Notes" refer to the Exchange Notes and the Existing Notes collectively.
Issuer........................ Outdoor Systems, Inc.
Amount........................ $500,000,000 aggregate principal amount.
Maturity Date................. June 15, 2007.
Interest Rate................. The Notes bear interest at a rate of 8 7/8% per
annum.
Interest Payment Dates........ Interest is payable semi-annually on each June
15 and December 15, commencing December 15,
1997.
Ranking....................... The Notes are 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,
pari passu in right of payment with the 1996
Notes and all other future unsecured senior
subordinated indebtedness of the Company and
senior in right of payment to all subordinated
indebtedness of the Company. At March 31, 1997,
after giving pro forma effect to the 3M Media
Acquisition, the Van Wagner Acquisition, the
Bank Financing and the Offerings, the Company
would have had approximately $785.1 million of
Senior Indebtedness outstanding.
Guarantees.................... The Notes are unconditionally guaranteed, on a
senior subordinated basis and pari passu with
the 1996 Notes, 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
are subordinated to all Senior Indebtedness of
the respective Guarantors.
8
<PAGE> 14
Optional Redemption........... The Notes are redeemable at the option of the
Company, in whole or in part, at any time on or
after June 15, 2002 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 the Notes
at any time prior to June 15, 2000, at a
redemption price equal to 108.875% 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 (as defined herein); provided,
however, that at least $325.0 million aggregate
principal amount of the Notes remain
outstanding after any such redemption 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.
Certain Covenants............. The Indenture contains 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."
For more complete information regarding the Notes, including the
definitions of certain capitalized terms used above, see "Description of the
Notes."
RISK FACTORS
Holders of Existing Notes and prospective purchasers of Exchange Notes
should consider carefully the information set forth under the caption "Risk
Factors," and all other information set forth in this Prospectus, in evaluating
the Exchange Offer.
9
<PAGE> 15
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"). When used in this Prospectus, the words
"estimate," "expect," "anticipate," "believe" and similar expressions are
intended to identify forward-looking statements. 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 Acquisitions and achievement of cost savings
in connection therewith. Investors 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 herein. See "Risk Factors." 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.
10
<PAGE> 16
SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS)
The following sets forth summary unaudited consolidated pro forma financial
information derived from the Unaudited Consolidated Pro Forma Financial
Information included elsewhere in this Prospectus. The summary unaudited
consolidated pro forma statement of operations data combines the historical
financial information of the Company and the businesses acquired and to be
acquired in the Acquisitions for the year ended December 31, 1996 and for the
three months ended March 31, 1997, giving effect to (i) the Bank Financing, (ii)
net reductions in operating expenses associated with the Acquisitions, and (iii)
the Offerings, as if each had occurred at the beginning of the period. The
summary unaudited consolidated pro forma balance sheet data as of March 31, 1997
has been prepared as if the 3M Media Acquisition, the Van Wagner Acquisition,
the Bank Financing and the Offerings had occurred on March 31, 1997.
The summary unaudited consolidated pro forma financial information does not
purport to present the actual financial position or results of operations of the
Company had the Acquisitions 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
consolidated pro forma 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
"Unaudited Consolidated Pro Forma Financial Information" and "Management's
Discussion and Analysis of Results of Operations and Financial Condition,"
included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA(1)
---------------------------------------
THREE MONTHS
YEAR ENDED ENDED MARCH 31,
DECEMBER 31, 1996 1997
----------------- ----------------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues(2).............................................. $ 601,409 $140,901
Direct advertising expenses.................................. 310,163 74,066
General and administrative expenses.......................... 34,502 8,798
Depreciation and amortization................................ 111,726 26,662
Gain on Denver Disposition................................... 7,344 --
-------- --------
Operating income............................................. 152,362 31,375
Interest expense............................................. 139,600 34,900
Income (loss) before extraordinary loss...................... 7,271 (2,138)
Net loss..................................................... (10,509) (2,138)
OTHER DATA:
EBITDA(3).................................................... $ 256,744 $ 58,037
EBITDA margin(4)............................................. 42.7% 41.2%
Cash interest expense........................................ $ 132,349 $ 33,087
Capital expenditures......................................... 39,146 11,421
Number of advertising displays(5)............................ 96,528 96,528
Ratio of EBITDA to cash interest expense(6).................. 1.94x --
Ratio of total debt to EBITDA(6)............................. 5.96x --
</TABLE>
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
---------------------------------------
ACTUAL PRO FORMA
----------------- ----------------
<S> <C> <C>
BALANCE SHEET DATA:
Working capital.............................................. $ 25,601 $ 49,804
Total assets................................................. 1,038,845 2,279,525
Total debt(7)................................................ 706,428 1,531,053
Stockholders' equity......................................... 288,456 673,928
</TABLE>
(see footnotes on the following page)
11
<PAGE> 17
NOTES TO SUMMARY UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
(1) If the 3M Media Acquisition is not consummated, net revenues would have been
$390.1 million and $91.4 million, interest expense would have been $73.7
million and $18.4 million and EBITDA would have been $155.4 million and
$34.1 million, in each case for the year ended December 31, 1996 and the
three months ended March 31, 1997, respectively.
(2) Net revenues are gross revenues minus agency commissions, plus other income
of $12.8 million for the year ended December 31, 1996 and $4.4 million for
the three months ended March 31, 1997.
(3) "EBITDA" is defined as operating income before depreciation and amortization
expense and excludes the gain on the Denver Disposition. 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.
(4) "EBITDA margin" is EBITDA stated as a percentage of net revenues.
(5) Does not include approximately 125,000 subway advertising display faces in
New York City.
(6) The ratio of total debt to EBITDA reflects the pro forma total debt as of
March 31, 1997 divided by the year ended December 31, 1996 EBITDA. If the 3M
Media Acquisition is not consummated, the ratio of EBITDA to cash interest
expense and the ratio of total debt to EBITDA would have been 2.28x and
4.80x, respectively, in each case for the year ended December 31, 1996.
(7) If the 3M Media Acquisition is not consummated, pro forma total debt as of
March 31, 1997 would have been $746.0 million.
12
<PAGE> 18
SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS)
The following table sets forth summary historical financial data for the
Company and 3M Media 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 Consolidated Financial and Other Data" and the
consolidated financial statements and notes thereto of the Company and the
financial statements and notes thereto of 3M Media contained herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------------- ------------------------
OUTDOOR SYSTEMS(1) 1994 1995 1996 1996 1997
- ------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues(2)...................................... $ 52,077 $ 64,813 $ 173,116 $ 16,945 $ 80,080
Operating expenses:
Direct advertising................................. 24,433 30,462 87,593 7,859 44,615
General and administrative......................... 3,357 4,096 13,458 1,078 6,717
Depreciation and amortization...................... 9,165 9,970 22,384 2,561 11,635
Gain on 1994 disposal and the Denver Disposition..... 4,325 -- 7,344 -- --
Operating income..................................... 19,447 20,285 57,025 5,447 17,113
Interest expense..................................... 16,393 17,199 32,489 4,152 15,922
Income before extraordinary loss(3).................. 1,333 2,768 14,336 777 691
Net income (loss)(3)................................. 1,333 2,768 (3,444) 777 691
OTHER DATA:
EBITDA(4)............................................ $ 24,287 $ 30,255 $ 72,065 $ 8,008 $ 28,748
EBITDA margin(5)..................................... 46.6% 46.7% 41.6% 47.3% 35.9%
Capital expenditures................................. $ 4,924 $ 7,070 $ 9,046 $ 1,194 $ 5,140
Number of advertising displays....................... 11,900 12,700 61,600(6) 12,700 63,900(6)
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED DECEMBER 31, MARCH 31,
-------------------------------------- ------------------------
3M MEDIA 1994 1995 1996 1996 1997
- ------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues(2)...................................... $ 196,948 $ 205,418 $ 211,310 $ 49,261 $ 49,505
---------- ---------- ---------- ---------- ----------
Operating expenses:
Direct advertising(7).............................. 131,422 137,131 139,223 35,007 33,197
General and administrative......................... 12,024 11,790 12,406 2,912 3,139
Depreciation and amortization...................... 18,061 17,144 15,382 3,857 3,785
Loss (gain) on disposal of property and
equipment........................................ 343 (806) 21 (638) (395)
---------- ---------- ---------- ---------- ----------
Operating income..................................... $ 35,098 $ 40,159 $ 44,278 $ 8,123 $ 9,779
========== ========== ========== ========== ==========
</TABLE>
(see footnotes on the following page)
13
<PAGE> 19
NOTES TO SUMMARY CONSOLIDATED FINANCIAL AND OTHER DATA
(1) During 1996, the Company completed certain acquisitions, including the
Gannett Outdoor Acquisition on August 22, 1996. See "--Recent
Developments." In addition, in 1994 the Company completed certain
acquisitions and dispositions. Accordingly, operating results are not
necessarily comparable on a year-to-year basis.
(2) Net revenues are gross revenues minus agency commissions and for the
Company include other income of $1.0 million, $0.4 million and $6.1 million
for the years ended December 31, 1994, 1995 and 1996, and $0 and $2.9
million for the three months ended March 31, 1996 and 1997, respectively.
(3) Deferred financing costs of $17.8 million associated with the early
redemption of borrowings were charged as an extraordinary loss during 1996.
(4) "EBITDA" is defined as operating income before depreciation and
amortization expense and, in 1994 and 1996, before the gain on the 1994
disposal and the Denver Disposition, respectively. 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.
(6) Does not include approximately 125,000 subway advertising display faces in
New York City and the Van Wagner Acquisition and the 3M Media Acquisition
and, with respect to the year ended December 31, 1996, does not give effect
to the Completed 1997 Acquisitions.
(7) Direct advertising expenses for 3M Media include direct advertising and
selling and marketing expenses.
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<PAGE> 20
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an exchange of or
investment in the Notes. Holders of Existing Notes and prospective purchasers of
Exchange Notes should carefully consider these risk factors, as well as the
other information set forth elsewhere in this Prospectus, in making any decision
in connection with the Exchange Offer or to otherwise acquire Exchange Notes.
For a discussion of certain potential tax consequences of such investment, see
"Certain Federal Income Tax Considerations."
Substantial Leverage. Upon completion of the 3M Media Acquisition and the
Bank Financing, the Company's total indebtedness will be approximately $1.5
billion, 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 and of the indenture governing the 1996 Notes (the "1996 Notes
Indenture") 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 available 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 its 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 are 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 March 31,
1997, on a pro forma basis, after giving effect to the 3M Media Acquisition, the
Van Wagner Acquisition, the Bank Financing and the Offerings, the aggregate
outstanding principal amount of all Senior Indebtedness would have been
approximately $785.1 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 and the 1996 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 and the 1996 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,
15
<PAGE> 21
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.
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 holders 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) are 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 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) 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 have been 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, after giving effect to the incurrence of the Notes, are solvent,
have sufficient capital for carrying on their business and are 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 the 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
16
<PAGE> 22
the validity of the Notes, counsel for each of the Company and the Initial
Purchasers have expressed no opinion as to federal or state laws relating to
fraudulent transfers.
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 and will constitute a change of control
under the 1996 Notes Indenture. 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."
Possible Non-Consummation of the 3M Media Acquisition. The consummation of
the 3M Media Acquisition is subject to various conditions, including clearance
under the HSR Act. There is no assurance that the 3M Media Acquisition will be
consummated or that it will not be delayed due to required antitrust clearance
or other factors. The Company believes that DOJ clearance will be forthcoming,
but there can be no assurance that this will be the case. In order to obtain
such clearance, it is likely that the Company will be required to divest assets
in certain markets in which both the Company and 3M Media currently conduct
business. There can be no assurance that the purchase price payable in respect
of any such divestiture will be comparable to the purchase price paid for such
assets in the 3M Media Acquisition. Any such divestitures, as well as other
conditions which may be imposed in connection with the antitrust clearance, may
adversely affect the operations of the Company and may reduce the expected
return from the 3M Media Acquisition. If the Company is unable to consummate the
3M Media Acquisition because of failure to receive antitrust clearance or
otherwise, the Company will forfeit a $20 million purchase price deposit and may
become subject to claims for damages for breach of its obligations under the 3M
Media Acquisition Agreement. Furthermore, if the Company is unable to consummate
the 3M Media Acquisition, the Company will have excess cash on hand of
approximately $228.2 million as a result of the Offering. Pending the Company's
use of such excess cash on strategic acquisition opportunities and for general
corporate purposes, the Company will invest a substantial portion thereof in
government securities and cash equivalents. The Company estimates that, based
upon current interest rates, interest expense on the Notes will exceed interest
income on such government securities and cash equivalents. Such a "negative
spread" would have an adverse effect on the Company's results of operations.
Challenges of Business Integration. The Company faces significant
challenges in integrating the operations of the Acquisitions with those of the
Company. The continued integration of Gannett Outdoor and the integration of 3M
Media will require substantial attention from the Company's management team.
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 successfully
integrate the operations of the Acquisitions with those of the Company. In
addition, 3M Media and Van Wagner have historically operated with higher cost
structures than that of the Company and the pro forma financial statements
assume that the Company will be able to achieve significant cost reductions
following the closing of the 3M Media Acquisition and the Van Wagner
Acquisition, including cost reductions associated with employee reductions. 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 3M
Media and Van Wagner or other acquisitions, 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.
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<PAGE> 23
Restrictions on Tobacco Advertising. 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. Tobacco
advertising accounted for 8.2% of the net revenues for the Company and 5.9% of
the aggregate net revenues for 3M Media and Van Wagner for fiscal 1996. In
addition, the Food and Drug Administration recently promulgated rules which,
among other things, would limit certain types of outdoor advertising by tobacco
companies. While certain of these regulations have been declared invalid by a
lower court ruling, appeals are likely and there can be no assurance that
further developments resulting in a validation or implementation of these or
similar regulations will not occur. Outdoor advertising of tobacco products also
may be affected by city or state regulations. For example, in 1995, the Court of
Appeals for the Fourth Circuit upheld the validity of a Baltimore city ordinance
restricting the placement of outdoor advertisements of cigarettes and alcohol in
publicly visible locations, such as billboards, signboards and sides of
buildings. Subsequently, the United States Supreme Court declined to review an
appeal of the case. In addition, the City Council of New York City, following
the Baltimore ordinance, introduced legislation to ban outdoor tobacco
advertising near schools and other locations where children are likely to
assemble. Restrictions similar to the Baltimore ordinance are also being
contemplated or introduced in other states or municipalities around the country,
including New Jersey and Los Angeles. While Baltimore is not a municipality in
which the Company conducts business, there can be no assurance that additional
local or state governments will not enact similar ordinances or statutes to
limit outdoor advertising of tobacco in the future in markets in which the
Company operates.
It also recently has been reported that certain cigarette manufacturers who
are defendants in numerous class action suits throughout the United States have
reached agreement with Attorneys General of various states for an out of court
settlement with respect to such suits that would, among other things, prohibit
all outdoor advertising by the tobacco industry. The settlement is subject to
various conditions, including approval and implementing legislation by the
United States Congress. There can be no assurance as to the effect of this
settlement agreement and potential legislation on the Company's business and on
its net revenues and financial position. A reduction in billboard advertising by
the tobacco industry would cause an immediate reduction in the Company's direct
revenue from such advertisers and would simultaneously increase the available
space on the existing inventory of billboards in the outdoor advertising
industry. This could in turn result in a lowering of outdoor advertising rates
in each of the Company's outdoor advertising markets or limit the ability of
industry participants to increase rates for some period of time. Any such
consequence could have a material adverse effect on the Company.
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. The Company has benefitted from
special events in the past, such as the 1996 Olympic Games in Atlanta. However,
there can be no assurance that the Company will continue to benefit to the same
degree in the future from special events, and results in a particular market,
year or period could be adversely affected by the lack of such special events.
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.
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<PAGE> 24
Increase in Interest Rates. All of the indebtedness under the Senior
Credit Facility, as expected to be amended, will bear interest at variable
rates. While the Company will be required by the Senior Credit Facility, as
expected to be amended, to enter into interest rate cap agreements to reduce its
exposure to increases in such interest rates with respect to a portion of its
indebtedness, 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."
Acquisition Strategy. The Company's growth has been facilitated by
strategic acquisitions that have substantially increased the Company's inventory
of advertising display faces, and the Company intends to continue to pursue such
acquisitions. 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. The Company's
indebtedness will increase as a result of the 3M Media Acquisition and debt
covenants may constrain the Company's ability to complete significant
acquisitions in the future. 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. The process of
integrating such acquired businesses may involve unforeseen difficulties and may
utilize a significant portion of the Company's financial, managerial and other
resources.
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.
Regulation of Outdoor Advertising. Outdoor advertising displays are
subject to governmental regulation at the federal, state and local levels. These
regulations, in some cases, limit the height, size, location and operation of
billboards and, in limited circumstances, regulate the content of the
advertising copy displayed on the billboards. Some governmental regulations
prohibit the construction of new billboards or the replacement, relocation,
enlargement, material repair, material alteration or upgrading of existing
structures. Some local government entities, including municipalities or
townships in Denver, Houston, Jacksonville, Kansas City and St. Louis, have
adopted amortization ordinances or regulations under which, after the expiration
of a specified period of time, certain 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.
Because outdoor advertising displays are typically located adjacent to
roads and highways, they are also subject to the risk of being removed through
condemnation actions or other actions by governmental entities in the event of
road or highway improvement or expansion projects. While compensation is
generally available for such actions, there can be no assurance that the Company
would be permitted to relocate these displays under existing state and local
regulations.
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In recent years, there have been efforts 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.
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 rights 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 outdoor advertising of
tobacco. While that legislation has not been passed, the proponents have
publicly stated they will continue to attempt to have such proposals enacted. It
is uncertain whether additional legislation of this type will be enacted at the
national level or in any of the markets in which the Company operates.
Outdoor advertising in Canada is subject to regulation at the federal,
provincial and municipal levels. These regulations may prohibit advertising of
certain products on outdoor signs 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. Additionally, Canadian federal legislation was
enacted in April, 1997, which effectively prohibits substantially all outdoor
tobacco advertising. While a challenge to this legislation is being made, there
can be no assurance that such challenge will be successful.
A reduction in billboard advertising by the tobacco and alcohol industries
in the United States or Canada would cause a reduction in the Company's direct
revenue from such advertisers. Such a reduction would increase the available
space on the existing inventory of billboards in the outdoor advertising
industry and could result in a reduction of outdoor advertising rates in markets
affected by this type of legislation.
Transit Business. A portion of the business acquired from Gannett Outdoor
(pro forma net revenues of approximately $31.4 million in 1996) 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. Most of these contracts
are subject to termination upon short notice by the applicable governmental
authority, 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. In addition, upon scheduled termination of such contract, the Company
must meet competitive bidding and other requirements for renewal. There can be
no assurance that these various obligations and conditions will not adversely
affect the Company or that the Company will be awarded renewals in the future.
The subway 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
the Company. However, a number of the properties acquired in the Completed
Acquisitions or to be acquired in the 3M Media Acquisition have existing
environmental conditions relating primarily to underground storage tanks for
which the Company has assumed responsibility. In addition, certain properties
and facilities are on, in the vicinity of, or classified as, hazardous waste
sites (including Superfund sites). Of the properties adjacent to Superfund sites
or in the vicinity of hazardous waste sites, at least one is believed to be
contaminated by such site. There can be no assurance that environmental
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 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.
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Control by Executive Officers and Directors. The Company's executive
officers, directors and their respective affiliates 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
34.9% 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."
Nature of Acquisition Agreements; Limited Recourse to Sellers. The
representations and warranties made by 3M in connection with the 3M Media
Acquisition relating to the assets to be acquired and the associated indemnities
are limited and qualified. The Company's recourse to 3M is extremely limited.
Agreements related to other acquisitions, including the Gannett Outdoor
Acquisition, have been, and agreements for future acquisitions may be, similar
to the 3M Media and Gannett Outdoor acquisition agreements with respect to
representations, warranties and indemnification provisions. Accordingly,
unanticipated events or liabilities related to the Gannett Outdoor and 3M Media
businesses or other businesses acquired or that may be acquired in the future
could materially and adversely affect the Company.
Absence of Public Market for the Notes. Prior to the Exchange Offer, there
has been no public market for the Existing Notes, although the Existing Notes
are eligible for trading in PORTAL by "qualified institutional buyers" as
defined in Rule 144A under the Securities Act ("QIBs"). The Initial Purchasers
have acted as market makers for the Existing Notes and have advised the Company
that they currently intend to make a market in the Exchange Notes. However, the
Initial Purchasers are not obligated to do so and any market making may be
discontinued at any time without notice. The Company does not intend to apply
for listing of the Exchange Notes on any securities exchange or for quotation of
the Exchange Notes through any automated quotation system. Accordingly, there
can be no assurance that an active public market for the Exchange Notes will
develop and as to the liquidity of any markets that may develop, the ability of
holders of Exchange Notes to sell their Exchange Notes or the price at which
holders would be able to sell their Exchange Notes.
Adverse Consequences of Failure to Adhere to Exchange Offer
Procedures. Issuance of the Exchange Notes in exchange for Existing Notes
pursuant to the Exchange Offer will be made only after a timely receipt by the
Exchange Agent of such Existing Notes, a properly completed and duly executed
Letter of Transmittal and all other required documents. Therefore, holders of
Existing Notes desiring to tender such Existing Notes in exchange for Exchange
Notes should allow sufficient time to ensure timely delivery. Neither the
Company nor the Exchange Agent is under any duty to give notification of defects
or irregularities with respect to the tenders of Existing Notes for exchange.
Existing Notes that are not tendered or are tendered but not accepted will,
following the consummation of the Exchange Offer, continue to be subject to the
existing restrictions upon transfer thereof and, upon consummation of the
Exchange Offer, certain registration rights under the Exchange Offer
Registration Rights Agreement will terminate.
Receipt of Restricted Securities under Certain Circumstances. Any holder
of Existing Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and, if so, will be required to comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. See "The Exchange Offer -- Consequences
of Failure to Exchange; Resales of Exchange Notes."
Adverse Effect on Market for Existing Notes. To the extent that Existing
Notes are tendered and accepted in the Exchange Offer, the trading market for
the untendered and tendered but unaccepted Existing Notes could be adversely
affected. See "The Exchange Offer."
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USE OF PROCEEDS
The Company will not receive any proceeds from the Exchange Offer. The net
proceeds to the Company from the sale of the Notes in the Offering was
approximately $485.8 million, after deducting Initial Purchasers' discount and
offering expenses.
The Company intends to use such proceeds to pay a portion of the purchase
price of the 3M Media Acquisition. Pending completion of the 3M Media
Acquisition, the Company has used approximately $187.0 million of such net
proceeds to reduce indebtedness outstanding under the Senior Credit Facility and
has invested the balance of such proceeds in short-term interest bearing
securities. If the 3M Media Acquisition is not consummated, the Company will use
the net proceeds of the Offering to repay existing indebtedness under the Senior
Credit Facility, to finance strategic acquisitions and for general corporate
purposes. 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
The following table sets forth the consolidated capitalization of the
Company (i) as of March 31, 1997, (ii) as adjusted giving effect to the Van
Wagner Acquisition and the Common Stock Offering and (iii) pro forma giving
effect to the 3M Media Acquisition, the Bank Financing and the Offering. See
"Use of Proceeds" and "Unaudited Consolidated Pro Forma Financial Information."
<TABLE>
<CAPTION>
AS OF MARCH 31, 1997
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ACTUAL AS ADJUSTED(1) PRO FORMA(2)
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(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current maturities of long-term debt................. $ 31,700 $ 31,700 $ 31,700
-------- ---------- ----------
Long-term debt:
Senior Credit Facility(3).......................... 424,667 225,922 753,372
1996 Notes......................................... 250,000 250,000 250,000
Notes, net of discount............................. -- -- 495,920
Other.............................................. 61 61 61
-------- ---------- ----------
Total long-term debt............................ 674,728 475,983 1,499,353
-------- ---------- ----------
Common stockholders' equity:
Common Stock, $0.01 par value...................... 402 539 539
Additional paid in capital......................... 316,988 709,096 709,096
Accumulated deficit................................ (24,584) (24,584) (31,357)
Treasury stock (at cost) 17,213,331 shares......... (4,053) (4,053) (4,053)
Foreign currency translation adjustment............ (297) (297) (297)
-------- ---------- ----------
Total common stockholders' equity(4)............ 288,456 680,701 673,928
-------- ---------- ----------
Total capitalization....................... $994,884 $1,188,384 $2,204,981
======== ========== ==========
</TABLE>
- ---------------
(1) As adjusted to give effect to the Van Wagner Acquisition, the Common Stock
Offering and a $20.0 million non-refundable deposit for the 3M Media
Acquisition.
(2) Pro forma to give effect to the 3M Media Acquisition, the Bank Financing and
the Offering.
(3) If the 3M Media Acquisition is not consummated, the Company intends to use
the net proceeds of the Offering to repay amounts outstanding under the
Senior Credit Facility, to finance strategic acquisitions and for general
corporate purposes. In such case, on a pro forma basis, there would be no
amounts outstanding under the Senior Credit Facility as of March 31, 1997.
(4) Actual amounts exclude 9,654,746 shares of Common Stock issuable upon
exercise of options outstanding at March 31, 1997, of which 6,988,821 were
exercisable, and 372,588 shares of Common Stock issuable in settlement of
Incentive Units outstanding at March 31, 1997. Pro forma amounts reflect the
exercise of options to purchase 262,500 shares of Common Stock sold by one
of the selling stockholders in the Common Stock Offering.
22
<PAGE> 28
UNAUDITED CONSOLIDATED PRO FORMA FINANCIAL INFORMATION
The following unaudited consolidated pro forma statement of operations
combines the historical financial information of the Company and the businesses
acquired and to be acquired in the Acquisitions for the year ended December 31,
1996 and the three month period ended March 31, 1997 giving effect to (i) the
Bank Financing, (ii) the net reduction in operating expenses associated with the
Acquisitions and (iii) the Offerings, as if such events had occurred at the
beginning of the period. The unaudited consolidated pro forma balance sheet as
of March 31, 1997 has been prepared as if the 3M Media Acquisition, the Van
Wagner Acquisition, the Bank Financing and the Offerings had occurred on March
31, 1997.
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
Acquisitions.
Pro forma adjustments for the Acquisitions 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 that actually would have resulted had the
Acquisitions occurred as of the dates indicated, nor should it be taken as
indicative of the future results of the operations or future financial position
of the Company. 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 3M Media which are contained elsewhere herein.
23
<PAGE> 29
OUTDOOR SYSTEMS, INC.
UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1997
(DOLLARS IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------------- PRO FORMA
VAN WAGNER 3M MEDIA ACQUISITIONS TOTAL
COMPANY ACQUISITION ACQUISITION ADJUSTMENTS PRO FORMA
----------- ---------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS...................................... $ 95,471 $ 7,985 $ 46,771 $ 30 (1) $ 150,257
PROPERTY AND EQUIPMENT -- Net....................... 849,653 7,978 128,771 675,123 (1) 1,661,525
INTANGIBLE ASSETS -- Net............................ 60,825 12,288 -- 331,200 (1) 404,313
DEFERRED FINANCING COSTS............................ 23,157 -- -- 33,763 (1) 45,632
(11,288)(2)
OTHER ASSETS........................................ 9,739 13,880 1,946 4,515 (2) 17,798
(12,282)(1)
----------- -------- -------- ---------- ----------
TOTAL............................................... $ 1,038,845 $ 42,131 $177,488 $1,021,061 $2,279,525
=========== ======== ======== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES................................. $ 69,870 $ 9,489 $ 19,444 $ (3,850)(1) $ 100,453
5,500 (1)
----------- -------- -------- ---------- ----------
LONG-TERM DEBT:
1993 Notes........................................ 15 -- -- -- 15
Senior Credit Facility............................ 424,667 -- -- 328,705 (1) 753,372
1996 Notes........................................ 250,000 -- -- -- 250,000
Notes, net of discount............................ -- -- -- 495,920 (1) 495,920
Other............................................. 46 40,420 -- (40,420)(1) 46
----------- -------- -------- ---------- ----------
Total long-term debt............................ 674,728 40,420 -- 784,205 1,499,353
----------- -------- -------- ---------- ----------
OTHER LONG-TERM LIABILITIES......................... 3,734 1,720 -- (1,720)(1) 3,734
----------- -------- -------- ---------- ----------
DEFERRED INCOME TAXES............................... 2,057 110 9,763 (9,873)(1) 2,057
----------- -------- -------- ---------- ----------
Total liabilities............................... 750,389 51,739 29,207 774,262 1,605,597
----------- -------- -------- ---------- ----------
NET ASSETS (LIABILITIES) TO BE ACQUIRED............. -- (9,608) 148,281 (138,673)(1) --
----------- -------- -------- ---------- ----------
COMMON STOCKHOLDERS' EQUITY:
Common stock...................................... 402 -- -- 137 (1) 539
Additional paid-in capital........................ 316,988 -- -- 392,108 (1) 709,096
Accumulated deficit............................... (24,584) -- -- (6,773)(2) (31,357)
Treasury stock at cost............................ (4,053) -- -- -- (4,053)
Foreign currency translation adjustment........... (297) -- -- -- (297)
----------- -------- -------- ---------- ----------
Total common stockholders' equity............... 288,456 -- -- 385,472 673,928
----------- -------- -------- ---------- ----------
TOTAL............................................... $ 1,038,845 $ 42,131 $177,488 $1,021,061 $2,279,525
=========== ======== ======== ========== ==========
</TABLE>
24
<PAGE> 30
OUTDOOR SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF MARCH 31, 1997
(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 3M Media Acquisition, the Van Wagner
Acquisition, the Bank Financing and the Offerings.
<TABLE>
<CAPTION>
DEBIT
(CREDIT)
---------
<C> <S> <C>
1. Entry records the 3M Media Acquisition, the Van Wagner Acquisition, the Bank
Financing and the Offerings:
Sale of 20,250,000 shares of Common Stock at $20.17 per share and the exercise
of options to purchase 262,500 shares:
Common Stock................................................................... $ (137)
Additional paid in capital..................................................... (392,108)
Increase of debt as follows:
Senior Credit Facility......................................................... (328,705)
Notes.......................................................................... (495,920)
Elimination of historical net assets (liabilities) of the 3M Media Acquisition
and the Van Wagner Acquisition............................................... 138,673
Change in assets and liabilities resulting from allocation of purchase price:
Intangibles.................................................................... 331,200
Property and equipment......................................................... 675,123
Increase in deferred financing costs........................................... 33,763
Increase in current assets..................................................... 30
Accrual for estimated severance costs related to the 3M Media Acquisition and
the Van Wagner Acquisition................................................... (5,500)
Deferred income taxes.......................................................... 9,873
Assumption of long-term debt by Van Wagner selling shareholders................ 40,420
Assumption of current portion of long-term debt by Van Wagner selling
shareholders................................................................. 3,850
Assumption of liabilities by Van Wagner selling shareholders................... 1,720
Joint venture assets retained by Van Wagner selling shareholders............... (12,282)
---------
$ 0
=========
2. Entry records the write-off of bridge commitment fees and the related tax
effect:
Write-off of deferred financing fees............................................ $(11,288)
Tax effect at a blended rate of 40%............................................. 4,515
Increase in accumulated deficit................................................. 6,773
--------
$ 0
========
</TABLE>
25
<PAGE> 31
OUTDOOR SYSTEMS, INC.
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED ACQUISITIONS
------------------------------------------------
GANNETT
VAN WAGNER OUTDOOR OTHER 3M MEDIA
COMPANY ACQUISITION ACQUISITION(1) TRANSACTIONS(2) ACQUISITION
----------- ----------- -------------- --------------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES:
Outdoor advertising -- net............. $ 167,047 $29,894 $156,896 $23,447 $ 211,310
Other income........................... 6,069 652 201 5,893 --
----------- ------- -------- ------- --------
Net revenues..................... 173,116 30,546 157,097 29,340 211,310
----------- ------- -------- ------- --------
OPERATING EXPENSES:
Direct advertising..................... 87,593 18,012 106,205 12,174 139,223
General and administrative............. 13,458 4,502 22,126 6,942 12,427
Depreciation and amortization.......... 22,384 2,541 11,369 814 15,382
----------- ------- -------- ------- --------
Total operating expenses......... 123,435 25,055 139,700 19,930 167,032
----------- ------- -------- ------- --------
GAIN ON DENVER DISPOSITION.............. 7,344 -- -- -- --
----------- ------- -------- ------- --------
OPERATING INCOME........................ 57,025 5,491 17,397 9,410 44,278
INTEREST EXPENSE (INCOME)............... 32,489 2,792 -- 363 (2,059)
----------- ------- -------- ------- --------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS..................... 24,536 2,699 17,397 9,047 46,337
INCOME TAXES (BENEFIT).................. 10,200 -- -- -- --
----------- ------- -------- ------- --------
INCOME (LOSS) BEFORE EXTRAORDINARY
LOSS................................... 14,336 2,699 17,397 9,047 46,337
EXTRAORDINARY LOSS...................... (17,780) -- -- -- --
----------- ------- -------- ------- --------
NET (LOSS) INCOME....................... (3,444) 2,699 17,397 9,047 46,337
LESS STOCK DIVIDENDS, ACCRETIONS AND
DISCOUNT ON REDEMPTIONS................ 3,461 -- -- -- --
----------- ------- -------- ------- --------
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON
STOCKHOLDERS........................... $ (6,905) $ 2,699 $ 17,397 $ 9,047 $ 46,337
=========== ======= ======== ======= ========
NET (LOSS) INCOME PER COMMON AND
EQUIVALENT SHARE:
Income (loss) before extraordinary
loss................................. $ 0.21
Extraordinary loss..................... (0.34)
-----------
NET (LOSS) INCOME PER COMMON SHARE...... $ (0.13)
===========
WEIGHTED AVERAGE NUMBER OF SHARES....... 52,895,004
===========
RATIO OF EARNINGS TO FIXED CHARGES(8)...
<CAPTION>
SUPPLEMENTAL ADJUSTMENTS
PURCHASE ----------------------------
ACCOUNTING COMPLETED 3M MEDIA PRO
ADJUSTMENTS TOTAL ACQUISITIONS ACQUISITION FORMA
----------- ----------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
REVENUES:
Outdoor advertising -- net............. $ 588,594 $ 588,594
Other income........................... 12,815 12,815
----------- -----------
Net revenues..................... 601,409 601,409
----------- -----------
OPERATING EXPENSES:
Direct advertising..................... 363,207 $(18,836)(6) $(34,208)(6) 310,163
General and administrative............. 59,455 (17,476)(6) (7,477)(6) 34,502
Depreciation and amortization.......... $ 59,236(3) 111,726 111,726
---------- ----------- --------- --------- -----------
Total operating expenses......... 59,236 534,388 (36,312) (41,685) 456,391
---------- ----------- --------- --------- -----------
GAIN ON DENVER DISPOSITION.............. 7,344 7,344
---------- ----------- --------- --------- -----------
OPERATING INCOME........................ (59,236) 74,365 36,312 41,685 152,362
INTEREST EXPENSE (INCOME)............... 106,015(4) 139,600 139,600
---------- ----------- --------- --------- -----------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS..................... (165,251) (65,235) 36,312 41,685 12,762
INCOME TAXES (BENEFIT).................. (35,908)(5) (25,708) 14,525(7) 16,674(7) 5,491
---------- ----------- --------- --------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY
LOSS................................... (129,343) (39,527) 21,787 25,011 7,271
EXTRAORDINARY LOSS...................... (17,780) (17,780)
---------- ----------- --------- --------- -----------
NET (LOSS) INCOME....................... (129,343) (57,307) 21,787 25,011 (10,509)
LESS STOCK DIVIDENDS, ACCRETIONS AND
DISCOUNT ON REDEMPTIONS................ 3,461 3,461
---------- ----------- --------- --------- -----------
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON
STOCKHOLDERS........................... $(129,343) $ (60,768) $ 21,787 $ 25,011 $ (13,970)
========== =========== ========= ========= ===========
NET (LOSS) INCOME PER COMMON AND
EQUIVALENT SHARE:
Income (loss) before extraordinary
loss................................. $ (0.59) $ 0.05
Extraordinary loss..................... (0.24) (0.24)
----------- -----------
NET (LOSS) INCOME PER COMMON SHARE...... $ (0.83) $ (0.19)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES....... 73,145,004 73,145,004
=========== ===========
RATIO OF EARNINGS TO FIXED CHARGES(8)... 1.07x
===========
</TABLE>
26
<PAGE> 32
OUTDOOR SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 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 for the year ended December 31, 1996.
<TABLE>
<C> <S> <C>
(1) Represents the operations of Gannett Outdoor excluding the
Houston Acquisition, for the period from January 1, 1996
through August 23, 1996.
(2) Represents 1996 revenues and expenses associated with the
CSX Assets Acquisition and the Houston Acquisition prior to
the respective dates of their acquisition and the 1996
historical results of the Completed 1997 Acquisitions (other
than the Van Wagner Acquisition) less revenues and expenses
associated with assets sold in the Denver Disposition.
(3) Entry records the increase in depreciation and amortization
expense arising from purchase accounting adjustments as
follows:
</TABLE>
<TABLE>
<CAPTION>
AMORTIZATION
ASSETS PERIOD
------------------------------------------------------------------ ------------
<C> <S> <C> <C>
Advertising structures............................................ 20 years $ 76,990
Goodwill.......................................................... 30 years 12,352
--------
Total depreciation and amortization expense..................................... 89,342
Less amount recorded in historical financial statements......................... 30,106
--------
Purchase accounting adjustment.................................................. $ 59,236
========
(4) Entry records interest expense and amortization of deferred
financing fees as if the pro forma capital structure as
reflected in the unaudited consolidated pro forma balance
sheet as of March 31, 1997 were in existence for the year
ended December 31, 1996:
</TABLE>
<TABLE>
<CAPTION>
<C> <S> <C>
Interest expense:
Senior Credit Facility........................................................ $ 65,161
1996 Notes.................................................................... 23,438
Notes......................................................................... 43,750
Amortization of deferred financing costs...................................... 6,843
Amortization of debt discount................................................. 408
--------
Total interest expense..................................................... 139,600
Less amount recorded in historical financial statements....................... (33,585)
--------
Purchase accounting adjustment............................................. $106,015
========
</TABLE>
27
<PAGE> 33
OUTDOOR SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS --
(CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<C> <S> <C> <C> <C>
(5) Entry records the income tax effect on the income of the
Acquisitions and purchase adjustments at a blended rate of
40%....................................................... $ (35,908)
========
(6) Entry records a) a decrease in payroll and payroll related
costs in direct advertising and general and administrative
expense categories due to termination of employees in the
following functions; and b) the elimination of general
corporate allocations not considered attributable to
operations sold, as follows:
</TABLE>
<TABLE>
<CAPTION>
ACQUISITIONS
--------------------
COMPLETED 3M MEDIA
--------- --------
<C> <S> <C> <C> <C>
Direct Advertising:
Elimination of production and sales
overhead functions................................... $17,795 $14,460
Consolidation of Canadian production facility........... 1,041 --
Elimination of national sales and marketing costs....... -- 15,748
Elimination of general corporate overhead allocation.... -- 4,000
------- -------
Total direct advertising............................. 18,836 34,208
------- -------
General and Administrative:
Elimination of national office function, accounting and
administrative personnel............................. 17,476 6,377
Elimination of corporate facility rent allocations...... -- 1,100
------- -------
Total general and administrative..................... 17,476 7,477
------- -------
Total........................................... $36,312 $41,685
======= =======
</TABLE>
<TABLE>
<CAPTION>
ACQUISITIONS
--------------------
COMPLETED 3M MEDIA
--------- --------
<C> <S> <C> <C> <C>
(7) Entry records the income tax effect of pro forma
adjustments at a blended rate of 40%...................... $14,525 $16,674
======= =======
(8) 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.
</TABLE>
28
<PAGE> 34
OUTDOOR SYSTEMS, INC.
UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
COMPLETED ACQUISITIONS
--------------------------------- PURCHASE
VAN WAGNER OTHER 3M MEDIA ACCOUNTING
COMPANY ACQUISITION TRANSACTIONS(1) ACQUISITION ADJUSTMENTS
----------- --------------- --------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES:
Outdoor advertising -- net.................. $ 77,216 $ 7,390 $ 2,353 $49,505
Other income................................ 2,864 426 1,147 --
----------- ------- ------- -------
Net revenues.......................... 80,080 7,816 3,500 49,505
----------- ------- ------- -------
OPERATING EXPENSES:
Direct advertising.......................... 44,615 4,711 1,621 33,197
General and administrative.................. 6,717 1,390 1,158 2,744
Depreciation and amortization............... 11,635 626 118 3,785 $ 10,498(2)
----------- ------- ------- ------- ---------
Total operating expenses.............. 62,967 6,727 2,897 39,726 10,498
----------- ------- ------- ------- ---------
OPERATING INCOME............................. 17,113 1,089 603 9,779 (10,498)
INTEREST EXPENSE (INCOME).................... 15,922 591 91 (464) 18,760(3)
----------- ------- ------- ------- ---------
INCOME (LOSS) BEFORE INCOME TAXES............ 1,191 498 512 10,243 (29,258)
INCOME TAXES (BENEFIT)....................... 500 -- -- -- (7,202)(4)
----------- ------- ------- ------- ---------
NET (LOSS) INCOME............................ $ 691 $ 498 $ 512 $10,243 $ (22,056)
=========== ======= ======= ======= =========
NET (LOSS) INCOME PER COMMON AND EQUIVALENT
SHARE:
NET (LOSS) INCOME PER COMMON SHARE........... $ 0.01
===========
WEIGHTED AVERAGE NUMBER OF SHARES............ 69,046,020
===========
RATIO OF EARNINGS TO FIXED CHARGES(7)........
<CAPTION>
SUPPLEMENTAL ADJUSTMENTS
----------------------------
COMPLETED 3M MEDIA
TOTAL ACQUISITIONS ACQUISITION PRO FORMA
----------- ------------ ------------ -----------
<S> <C> <C> <C> <C>
REVENUES:
Outdoor advertising -- net.................. $ 136,464 $ 136,464
Other income................................ 4,437 4,437
----------- -----------
Net revenues.......................... 140,901 140,901
----------- -----------
OPERATING EXPENSES:
Direct advertising.......................... 84,144 $ (1,526)(5) $ (8,552)(5) 74,066
General and administrative.................. 12,009 (1,342)(5) (1,869)(5) 8,798
Depreciation and amortization............... 26,662 26,662
----------- ------- -------- -----------
Total operating expenses.............. 122,815 (2,868) (10,421) 109,526
----------- ------- -------- -----------
OPERATING INCOME............................. 18,086 2,868 10,421 31,375
INTEREST EXPENSE (INCOME).................... 34,900 34,900
----------- ------- -------- -----------
INCOME (LOSS) BEFORE INCOME TAXES............ (16,814) 2,868 10,421 (3,525)
INCOME TAXES (BENEFIT)....................... (6,702) 1,147(6) 4,168(6) (1,387)
----------- ------- -------- -----------
NET (LOSS) INCOME............................ $ (10,112) $ 1,721 $ 6,253 $ (2,138)
=========== ======= ======== ===========
NET (LOSS) INCOME PER COMMON AND EQUIVALENT
SHARE:
NET (LOSS) INCOME PER COMMON SHARE........... $ (0.11) $ (0.02)
=========== ===========
WEIGHTED AVERAGE NUMBER OF SHARES............ 89,296,020 89,296,020
=========== ===========
RATIO OF EARNINGS TO FIXED CHARGES(7)........ --(7)
</TABLE>
29
<PAGE> 35
OUTDOOR SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(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 for the three months ended March 31, 1997.
<TABLE>
<C> <S> <C>
(1) Represents revenues and expenses associated with the Completed 1997
Acquisitions (other than the Van Wagner Acquisition) prior to the respective
dates of their acquisition.
(2) Entry records the increase in depreciation and amortization expense arising
from purchase accounting adjustments as follows:
</TABLE>
<TABLE>
<CAPTION>
AMORTIZATION
ASSETS PERIOD
---------------------------------------------------------------- ------------
<C> <S> <C> <C>
Advertising structures.......................................... 20 years $ 12,257
Goodwill........................................................ 30 years 2,770
-------
Total depreciation and amortization expense..................................... 15,027
-------
Less amount recorded in historical financial statements......................... 4,529
-------
Purchase accounting adjustment.................................................. $ 10,498
=======
(3) Entry records interest expense and amortization of deferred
financing fees as if the pro forma capital structure as
reflected in the unaudited consolidated pro forma balance sheet
as of March 31, 1997 were in existence for the three months
ended March 31, 1997:
Interest expense:
Senior Credit Facility........................................................ $ 16,290
1996 Notes.................................................................... 5,859
Notes......................................................................... 10,938
Amortization of deferred financing costs...................................... 1,711
Amortization of debt discount................................................. 102
-------
Total interest expense..................................................... 34,900
Less amount recorded in historical financial statements....................... (16,140)
-------
Purchase accounting adjustment............................................. $ 18,760
=======
(4) Entry records the income tax effect on the income of the Acquisitions and
purchase adjustments at a blended rate of 40%.................................... $ (7,202)
</TABLE>
30
<PAGE> 36
OUTDOOR SYSTEMS, INC.
NOTES TO UNAUDITED CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS --
(CONTINUED)
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ACQUISITIONS
--------------------
COMPLETED 3M MEDIA
--------- --------
<C> <S> <C> <C> <C>
(5) Entry records a) a decrease in payroll and payroll related
costs in direct advertising and general and administrative
expense categories due to termination of employees in the
following functions; and b) the elimination of general
corporate allocations not considered attributable to
operations sold, as follows:
Direct Advertising:
Elimination of production and sales
overhead functions.................................... $ 1,526 $ 3,615
Elimination of national sales and marketing costs........ -- 3,937
Elimination of general corporate overhead allocation..... -- 1,000
------- -------
Total direct advertising.............................. 1,526 8,552
------- -------
General and Administrative:
Elimination of national office function, accounting and
administrative personnel.............................. 1,342 1,594
Elimination of corporate facility rent allocations....... -- 275
------- -------
Total general and administrative...................... 1,342 1,869
------- -------
Total............................................ $ 2,868 $10,421
======= =======
</TABLE>
<TABLE>
<CAPTION>
ACQUISITIONS
--------------------
COMPLETED 3M MEDIA
--------- --------
<C> <S> <C> <C> <C>
(6) Entry records the income tax effect of pro forma
adjustments at a blended rate of 40%....................... $ 1,147 $ 4,168
======= =======
(7) 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 expended or capitalized; and (iii) a
portion of rental expense representing the interest factor.
Earnings would have been inadequate to cover fixed charges
by $3.5 million for the three months ended March 31, 1997.
</TABLE>
31
<PAGE> 37
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
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, 1996. The financial statements of the Company for the three
years in the period ended December 31, 1996 and as of December 31, 1995 and 1996
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 March 31, 1996 and 1997 and statement of operations data for the
three months ended March 31, 1996 and 1997 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, 1997. 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>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
-------------------------------------------------------- ----------------------
1992 1993 1994 1995 1996 1996 1997
-------- -------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA(1):
Net revenues(2)...................... $ 44,886 $ 49,151 $ 52,077 $ 64,813 $173,116 $ 16,945 $ 80,080
Operating expenses:
Direct advertising................. 21,781 23,721 24,433 30,462 87,593 7,859 44,615
General and administrative......... 2,238 2,777 3,357 4,096 13,458 1,078 6,717
Depreciation and amortization...... 12,350 10,421 9,165 9,970 22,384 2,561 11,635
Gain on 1994 disposal and the Denver
Disposition........................ -- -- 4,325 -- 7,344 -- --
Operating income..................... 8,517 12,232 19,447 20,285 57,025 5,447 17,113
Interest expense..................... 9,526 11,894 16,393 17,199 32,489 4,152 15,922
Income (loss) before extraordinary
loss and change in accounting
principle(3)....................... (955) 111 1,333 2,768 14,336 777 691
Net income (loss)(3)................. 5,775 (3,176) 1,333 2,768 (3,444) 777 691
OTHER DATA:
EBITDA(4)............................ $ 20,867 $ 22,653 $ 24,287 $ 30,255 $ 72,065 $ 8,008 $ 28,748
EBITDA margin(5)..................... 46.5% 46.1% 46.6% 46.7% 41.6% 47.3% 35.9%
Capital expenditures................. 5,382 4,387 4,924 7,070 9,046 1,194 5,140
Number of advertising displays....... 10,700 10,800 11,900 12,700 61,600(6) 12,700 63,900(6)
Ratio of earnings to fixed
charges(7)......................... -- 1.02x 1.15x 1.14x 1.58x 1.20x 1.06x
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital...................... $ 5,218 $ 13,967 $ 15,022 $ 8,221 $ 36,142 $ 10,492 $ 25,601
Total assets......................... 129,651 129,433 151,260 138,213 933,455 135,863 1,038,845
Total debt........................... 109,283 129,812 155,204 142,269 606,409 142,479 706,428
Common stockholders' equity
(deficiency)....................... (23,769) (28,811) (29,074) (28,767) 288,179 (28,898) 288,456
</TABLE>
(See footnotes on the following page)
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<PAGE> 38
NOTES TO SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
(1) During 1996, the Company completed certain acquisitions, including the
Gannett Outdoor Acquisition on August 22, 1996. See "Prospectus
Summary -- Recent Developments." In addition, in 1993 and 1994 the Company
completed certain acquisitions and dispositions. Accordingly, operating
results are not necessarily comparable on a year-to-year basis.
(2) Net revenues are gross revenues minus agency commissions, plus other income
of $1.0 million, $0.4 million and $6.1 million for the years ended December
31, 1994, 1995 and 1996, and $0 and $2.9 million for the three months ended
March 31, 1996 and 1997, respectively.
(3) Deferred financing costs of $3.3 million and $17.8 million associated with
borrowings which were retired or redeemed were charged as an extraordinary
loss during 1993 and 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.
(4) "EBITDA" is defined as operating income before depreciation and amortization
expense and, in 1994 and 1996, before the gain on the 1994 disposal and the
Denver Disposition, respectively. 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) Does not include approximately 125,000 subway advertising display faces in
New York City and the Van Wagner and the 3M Media Acquisitions and, with
respect to the year ended December 31, 1996, does not give effect to the
Completed 1997 Acquisitions.
(7) 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 $1.0 million for
the year ended December 31, 1992.
33
<PAGE> 39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
CERTAIN EFFECTS OF THE GANNETT OUTDOOR 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 $700.0 million in cash. 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 and
approximately 125,000 subway advertising display faces in New York City.
Upon consummation of the Gannett Outdoor Acquisition, the Company
immediately began implementing its cost savings and integration strategy, which
included the consolidation of certain administrative, sales management and
leasing management functions. This strategy has resulted in the reduction and
consolidation of duplicative functions in: (i) production and sales overhead;
(ii) production and administrative support; (iii) national sales and marketing
support; and (iv) accounting and administrative areas. In addition, the Company
has eliminated certain duplicative operations by closing a billboard production
facility in Canada, consolidating sales offices in Toronto and closing Gannett
Outdoor's corporate office.
The Company had estimated that these measures would result in annual cost
savings of approximately $33.0 million. Based upon the results of the Company's
consolidation and cost savings efforts to date, the Company believes that annual
cost savings will exceed the original estimate. The Company also believes that
it has increased revenues generated by the Gannett Outdoor assets primarily
through changing the sales compensation system from one that was predominantly
salary-based to one that is commission-based. The Company has also increased
revenues through streamlining the sales approval process and improving
utilization of the Gannett Outdoor billboard inventory. The Company believes
that opportunities still exist to improve the operations of Gannett Outdoor.
While management believes that additional cost savings and revenue
increases are achievable, the Company's ability to achieve such cost savings and
revenue increases 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 such additional cost savings and revenue increases or that the
realization of such cost savings and revenue increases will not be delayed over
an extended period of time. See "Risk Factors -- Acquisition Strategy".
CERTAIN EFFECTS OF THE 3M MEDIA AND THE VAN WAGNER ACQUISITIONS
3M Media Acquisition. On April 30, 1997, the Company entered into the 3M
Media Purchase Agreement pursuant to which it agreed to purchase 3M Media for
approximately $1.0 billion in cash. In the 3M Media Acquisition, the Company
will acquire from 3M a total of approximately 31,700 advertising display faces
consisting of 22,600 bulletins, 2,400 posters and 6,700 mall advertising display
faces in 56 metropolitan markets and non-metropolitan locations in the United
States.
The operations of 3M Media will be integrated into the Company principally
as an acquisition of advertising display inventory in locations that can be
administered from existing Company offices. Accordingly, the Company believes
that the consolidation of certain functions will result in certain cost savings,
including the elimination of duplicative administrative, sales and production
overhead positions in the 3M Media corporate headquarters and in operating
locations. In addition to these cost savings, the Company believes that it may
be able to achieve additional cost savings arising from reductions in facility
costs through renegotiated rents or reduced space, the reduction of expenses
associated with a reduced work force, and other reductions in administrative
expenses associated with the integration of the combined businesses.
Van Wagner Acquisition. On May 22, 1997, the Company purchased all of the
capital stock of Van Wagner for approximately $170.0 million in cash. The Van
Wagner operations include approximately 50 "Spectacular" signs in Times Square,
105 bulletins and 172 posters and eight wall murals in New York City, 372
bulletins and 16 wall murals in Los Angeles, four bulletins in San Francisco,
and additional transit
34
<PAGE> 40
displays and transit management agreements in New York, Los Angeles, Northern
California and Las Vegas. The Van Wagner operations are being integrated as an
acquisition of advertising display inventory. The Company is eliminating certain
duplicative administrative, sales and production functions in connection with
the integration of the Van Wagner operations with those of the Company.
Certain Cost Savings. The Company believes that had the cost savings
associated with the 3M Media Acquisition and the Van Wagner Acquisition been
implemented as of January 1, 1996 such annual savings would have been
approximately $50.3 million in the aggregate as detailed below.
<TABLE>
<CAPTION>
VAN
3M MEDIA WAGNER TOTAL
-------- ------ -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Elimination of production and sales overhead functions............ $14,460 $4,722 $19,182
Elimination of national sales and marketing costs................. 15,748 -- 15,748
Elimination of general corporate overhead allocation.............. 4,000 -- 4,000
Elimination of national office function, accounting and
administrative personnel........................................ 6,377 3,868 10,245
Elimination of corporate facility rent allocations................ 1,100 -- 1,100
------- ------ -------
$41,685 $8,590 $50,275
======= ====== =======
</TABLE>
Certain Costs Associated with the 3M Media Acquisition and the Van Wagner
Acquisition. The Company has and will incur significant additional costs as a
result of the 3M Media Acquisition and the Van Wagner Acquisition. The financing
of the 3M Media Acquisition and the Van Wagner Acquisition will significantly
increase the Company's interest expense, adding approximately $823.2 million to
the Company's total indebtedness after the Offerings. Depreciation and
amortization expense will also increase significantly. The Company will record
goodwill and other intangible assets of approximately $343.5 million in
connection with the 3M Media Acquisition and the Van Wagner Acquisition, which
will be amortized over a period of 30 years. In addition, the cost basis of
advertising display inventory to be acquired by the Company in the 3M Media
Acquisition and the Van Wagner Acquisition will increase the Company's cost
basis by approximately $811.9 million which will be amortized over 20 years.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital decreased to $25.6 million at March 31, 1997
compared to $36.1 million at December 31, 1996. This decrease resulted primarily
from cash used for the financing of the Completed 1997 Acquisitions (other than
the Van Wagner Acquisition) and the increase in accrued interest and the current
maturities relating to existing debt associated with the Gannett Outdoor
Acquisition and new debt associated with the Completed 1997 Acquisitions (other
than the Van Wagner Acquisition).
Net cash provided by operating activities increased by $13.7 million to
$15.5 million for the three months ended March 31, 1997, compared to $1.8
million for the three months ended March 31, 1996, primarily due to changes in
working capital accounts and the effect of a larger depreciation and
amortization expense as a component of net income. Net cash used in investing
activities increased to $123.0 million in the first quarter of 1997 from $1.2
million in the first quarter of 1996, primarily because of the Completed 1997
Acquisitions (other than the Van Wagner Acquisition). Net cash provided by
financing activities was $100.6 million for the first three months of 1997
compared to net cash used in financing activities of $107,000 for the first
three months of 1996, primarily because of borrowings under the Senior Credit
Facility used for the Completed 1997 Acquisitions (other than the Van Wagner
Acquisition).
The Company's working capital was $8.2 million at December 31, 1995 and
$36.1 million at December 31, 1996. The increase in working capital resulted
primarily from working capital acquired in the Gannett Outdoor Acquisition,
offset by an increase in accrued interest and current maturities relating to new
debt associated with the Gannett Outdoor Acquisition.
Net cash provided by operating activities increased by $29.6 million from
$18.6 million during 1995 to $48.2 million during 1996, primarily due to
increased net revenues resulting from the Gannett Outdoor
35
<PAGE> 41
Acquisition. Net cash used in investing activities increased from $6.3 million
in 1995 to $754.1 million in 1996, primarily due to the Gannett Outdoor
Acquisition, partially offset by proceeds from the Denver Disposition in 1996.
Net cash used in financing activities was $14.2 million in 1995 compared to net
cash provided by financing activities of $716.0 million in 1996, primarily due
to borrowings under the Senior Credit Facility used to finance the Gannett
Outdoor Acquisition, and net proceeds from the initial public offering ("IPO")
of Common Stock in April 1996, an offering of Common Stock in August 1996 (the
"1996 Common Stock Offering") and the offering of the 1996 Notes in October 1996
(the "1996 Notes Offering").
The Company made approximately $9.0 million of capital expenditures during
1996, an increase from approximately $7.1 million during 1995. Currently, the
Company has no material commitments for capital expenditures, although it
anticipates ongoing capital expenditures in the ordinary course of business,
other than for acquisitions, will be approximately $26.0 million to $30.0
million in each of the next two years.
The Company completed the IPO on April 24, 1996, resulting in net proceeds
to the Company of $36.6 million. The Company completed the 1996 Common Stock
Offering on August 22, 1996, resulting in net proceeds to the Company of $283.2
million. In addition, on August 22, 1996, the Company increased the revolving
credit facility and term loans under the Senior Credit Facility up to
approximately $530.0 million and incurred bridge loans of $140.0 million under a
subordinated credit facility. The proceeds from these financing activities were
used to purchase substantially all the assets of Gannett Outdoor, to pay the
related fees and expenses and to redeem the Company's $115.0 million 10 3/4%
Senior Notes due 2003.
In October 1996, the Company completed the 1996 Notes Offering. The net
proceeds from the 1996 Notes Offering of approximately $241.8 million were used
to repay the bridge loans under the subordinated credit facility and to repay a
portion of the term loans under the Senior Credit Facility.
The Company has received a written commitment from Canadian Imperial Bank
of Commerce ("CIBC") to increase the amounts that may be borrowed under the US
portion of its Senior Credit Facility to up to $325.0 million of revolving
credit loans and up to $715.0 million in term loans. See "Description of Senior
Credit Facility." The Company believes that the net proceeds of the Offerings,
available borrowings under the Senior Credit Facility, as expected to be
amended, and internally generated funds will be sufficient to fund the purchase
price of the 3M Media Acquisition, allow the Company to make required interest
and principal payments under the Senior Credit Facility, as expected to be
amended, and interest payments on the Notes and the 1996 Notes and to satisfy
its operating cash requirements for at least the next twelve to twenty-four
months. The Company may, however, require additional capital to consummate
significant acquisitions in the future and there can be no assurance that such
capital will be available. After giving effect to the Offerings and the
consummation of the 3M Media Acquisition, the Company will have approximately
$755.0 million and cdn$48.0 million (approximately $35.0 million based on
current exchange rates) of term loans outstanding under the Senior Credit
Facility, as expected to be amended. The term loans will require mandatory
amortization payments of $60.4 million and cdn$4.8 million in 1998 and $70.4
million and cdn$7.2 million in 1999. In addition, the Company would not have any
borrowings outstanding under the revolving credit portion of the Senior Credit
Facility. The revolving credit portion of the Senior Credit Facility, as
expected to be amended, will permit the Company to borrow up to $325.0 million
and cdn$35.0 million (approximately $25.0 million based on current exchange
rates).
THE EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange up to $500.0 million
aggregate principal amount of Exchange Notes for a like aggregate principal
amount of Existing Notes properly tendered on or prior to the Expiration Date
and not withdrawn as permitted pursuant to the procedures described below. The
Exchange Offer is being made with respect to all of the Existing Notes; the
total aggregate principal amount of Existing Notes and Exchange Notes will in no
event exceed $500.0 million.
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<PAGE> 42
The Existing Notes were issued in the Offering on June 23, 1997. As of the
date of this Prospectus, $500.0 million aggregate principal amount of the
Existing Notes was outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1997 to all holders
of Existing Notes known to the Company. The Company's obligation to accept
Existing Notes for exchange pursuant to the Exchange Offer is subject to certain
conditions as set forth under "-- Conditions to the Exchange Offer" below.
PURPOSE OF THE EXCHANGE OFFER
The Existing Notes were issued and sold by the Company to the Initial
Purchasers on June 23, 1997 (the "Issue Date"). The Initial Purchasers
subsequently sold the Existing Notes to qualified institutional buyers in
reliance on Rule 144A under the Securities Act and to a limited number of
institutional "accredited investors" as defined in Rule 501(a)(1), (2), (3) or
(7) under the Securities Act. Because the Existing Notes are subject to certain
transfer restrictions, as an inducement to the Initial Purchasers to purchase
the Existing Notes, the Company and the Guarantors entered into the Exchange
Offer Registration Rights Agreement with the Initial Purchasers, pursuant to
which the Company and the Guarantors have agreed (i) within 45 days after the
Issue Date, to file with the Commission the Registration Statement of which this
Prospectus is a part and (ii) within 120 days after the Issue Date, to use their
best efforts to cause the Registration Statement to become effective under the
Securities Act. Pursuant to the Exchange Offer Registration Rights Agreement,
the Company and the Guarantors also have agreed to (x) make the Exchange Offer
and keep it open for at least 20 business days (or longer if required by
applicable law) after the date that notice of the Exchange Offer is mailed to
the holders of the Existing Notes and (y) consummate the Exchange Offer on or
prior to the 180th day following the Issue Date. The Exchange Offer is being
made to satisfy these obligations under the Exchange Offer Registration Rights
Agreement.
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1997 unless the Company, in its sole discretion, has extended the
period of time for which the Exchange Offer is open (such date, as it may be
extended, is referred to herein as the "Expiration Date"). The Company expressly
reserves the right, at any time or from time to time, to extend the period of
time during which the Exchange Offer is open and thereby delay acceptance for
exchange of any Existing Notes, by giving oral notice (promptly confirmed in
writing) or written notice to the Exchange Agent and by giving written notice of
such extension to the holders thereof no later than 9:00 a.m. New York City
time, on the next business day after the previously scheduled Expiration Date.
During any such extension, all Existing Notes previously tendered will remain
subject to the Exchange Offer unless properly withdrawn.
In addition, the Company expressly reserves the right to terminate or amend
the Exchange Offer and not to accept for exchange any Existing Notes not
theretofore accepted for exchange upon the occurrence of any of the events
specified below under "-- Conditions to the Exchange Offer." If any such
termination or amendment occurs, the Company will notify the Exchange Agent and
will either issue a press release or give oral or written notice to the holders
of the Existing Notes as promptly as practicable.
For purposes of the Exchange Offer, a "business day" means any day other
than Saturday, Sunday or a date on which banking institutions are required or
authorized by New York State law to be closed, and consists of the time period
from 12:01 a.m. through 12:00 midnight, New York City time.
PROCEDURES FOR TENDERING EXISTING NOTES
The tender to the Company of Existing Notes by a holder thereof as set
forth below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal.
A holder of Existing Notes may tender the same by (i) properly completing
and signing the Letter of Transmittal or a facsimile thereof (all references in
this Prospectus to the Letter of Transmittal shall be
37
<PAGE> 43
deemed to include a facsimile thereof) and delivering the same, together with
the certificate or certificates representing the Existing Notes being tendered
and any required signature guarantees, to the Exchange Agent at its address set
forth below on or prior to the Expiration Date (or complying with the procedure
for book-entry transfer described below) or (ii) complying with the guaranteed
delivery procedures described below.
THE METHOD OF DELIVERY OF EXISTING NOTES, LETTERS OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO INSURE TIMELY DELIVERY. NO EXISTING NOTES OR LETTERS OF TRANSMITTAL
SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the Existing Notes surrendered for
exchange pursuant thereto are tendered (i) by a registered holder of the
Existing Notes who has not completed the box entitled "Special Issuance
Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or
(ii) for the account of an Eligible Institution (as defined below). In the event
that signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, are required to be guaranteed, such guarantees must be by a firm
which is a member of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc. or by a clearing agency, an
insured credit union, a savings association or a commercial bank or trust
company having an office or correspondent in the United States (collectively,
"Eligible Institutions"). If Existing Notes are registered in the name of a
person other than a signer of the Letter of Transmittal, the Existing Notes
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by the Company in its sole discretion, duly executed by the
registered holder with the signature thereon guaranteed by an Eligible
Institution.
The Exchange Agent will make a request promptly after the date of receipt
of this Prospectus to establish accounts with respect to the Existing Notes at
the book-entry transfer facility, The Depository Trust Company, for the purpose
of facilitating the Exchange Offer, and subject to the establishment thereof,
any financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of Existing Notes by causing such
book-entry transfer facility to transfer such Existing Notes into the Exchange
Agent's account with respect to the Existing Notes in accordance with the
book-entry transfer facility's procedures for such transfer. Although delivery
of Existing Notes may be effected through book-entry transfer into the Exchange
Agent's account at the book-entry transfer facility, an appropriate Letter of
Transmittal with any required signature guarantee and all other required
documents must in each case be transmitted to and received or confirmed by the
Exchange Agent at its address set forth below on or prior to the Expiration
Date, or, if the guaranteed delivery procedures described below are complied
with, within the time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Existing Note to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its address set forth below on or prior to the Expiration Date a letter,
telegram or facsimile transmission from an Eligible Institution setting forth
the name and address of the tendering holder, the names in which the Existing
Notes are registered and, if possible, the certificate numbers of the Existing
Notes to be tendered, and stating that the tender is being made thereby and
guaranteeing that within three business days after the Expiration Date the
Existing Notes in proper form for transfer (or a confirmation of book-entry
transfer of such Existing Notes into the Exchange Agent's account at the
book-entry transfer facility), will be delivered by such Eligible Institution
together with a properly completed and duly executed Letter of Transmittal and
any other required documents. Unless Existing Notes being tendered by the
above-described method are deposited with the Exchange Agent within the time
period set forth above (accompanied or preceded by a properly completed Letter
of Transmittal and any other required documents), the Company may, at its
option, reject the tender. Copies of a Notice of Guaranteed Delivery which may
be used by Eligible Institutions for the purposes described in this paragraph
are available from the Exchange Agent.
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<PAGE> 44
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Existing Notes (or a confirmation of book-entry transfer of
such Existing Notes into the Exchange Agent's account at the book-entry transfer
facility) is received by the Exchange Agent, or (ii) a Notice of Guaranteed
Delivery or letter, telegram or facsimile transmission to similar effect (as
provided above) from an Eligible Institution is received by the Exchange Agent.
Issuances of Exchange Notes in exchange for Existing Notes tendered pursuant to
a Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) by an Eligible Institution will be made only
against deposit of the Letter of Transmittal (and any other required documents)
and the tendered Existing Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Existing Notes tendered for exchange will be
determined by the Company in its sole discretion, which determination shall be
final and binding. The Company reserves the absolute right to reject any and all
tenders of any particular Existing Notes not properly tendered or to not accept
any particular Existing Notes which acceptance might, in the judgment of the
Company or its counsel, be unlawful. The Company also reserves the absolute
right to waive any defects or irregularities or conditions of the Exchange Offer
as to any particular Existing Notes either before or after the Expiration Date
(including the right to waive the ineligibility of any holder who seeks to
tender Existing Notes in the Exchange Offer). The interpretation of the terms
and conditions of the Exchange Offer as to any particular Existing Notes either
before or after the Expiration Date (including the Letter of Transmittal and the
instructions thereto) by the Company shall be the final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Existing Notes for exchange must be cured within such reasonable period of
time as the Company shall determine. Neither the Company, the Exchange Agent nor
any other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Existing Notes for exchange, nor
shall any of them incur any liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Existing Notes, such Existing Notes must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names of the registered holder or holders appear on the
Existing Notes.
If the Letter of Transmittal or any Existing Notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing and, unless waived by the
Company, proper evidence satisfactory to the Company of their authority to so
act must be submitted.
By tendering, each holder will represent to the Company in the Letter of
Transmittal that, among other things, the Exchange Notes acquired pursuant to
the Exchange Offer are being acquired in the ordinary course of business of the
person receiving such Exchange Notes, whether or not such person is the holder,
that neither the holder nor any such person has an arrangement or understanding
with any person to participate in the distribution of such Exchange Notes, that
neither the holder nor any such other person is participating in or intends to
participate in the distribution of such Exchange Notes and that neither the
holder nor any such other person is an "affiliate," as defined under Rule 405 of
the Securities Act, of any of the Company and the Guarantors.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Existing Notes, where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such Exchange Notes. See "Plan of Distribution."
WITHDRAWAL RIGHTS
Tenders of Existing Notes may be withdrawn at any time prior to the
Expiration Date. For a withdrawal to be effective, a written notice of
withdrawal sent by telegram, facsimile transmission (receipt confirmed by
telephone) or letter must be received by the Exchange Agent prior to the
Expiration Date at its address set forth below. Any such notice of withdrawal
must (i) specify the name of the person having tendered the
39
<PAGE> 45
Existing Notes to be withdrawn (the "Depositor"), (ii) identify the Existing
Notes to be withdrawn (including the certificate number or numbers and principal
amount of such Existing Notes), (iii) be signed by the holder in the same manner
as the original signature on the Letter of Transmittal by which such Existing
Notes were tendered or as otherwise described above (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee under the Indenture register the transfer such Existing Notes
into the name of the person withdrawing the tender and (iv) specify the name in
which any such Existing Notes are to be registered, if different from that of
the Depositor. All questions as to the validity, form and eligibility (including
time of receipt) of such notices will be determined by the Company in its sole
discretion, which determination will be final and binding on all parties. Any
Existing Notes so withdrawn will be deemed not to have been validly tendered for
exchange for purposes of the Exchange Offer. Any Existing Notes which have been
tendered for exchange and which are properly withdrawn will be returned to the
holder thereof without cost to such holder as soon as practicable after such
withdrawal. Properly withdrawn Existing Notes may be retendered by following one
of the procedures described under "-- Procedures for Tendering Existing Notes"
above at any time on or prior to the Expiration Date.
ACCEPTANCE OF EXISTING NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Existing Notes
properly tendered and will issue the Exchange Notes promptly after acceptance of
the Existing Notes. See "-- Conditions to the Exchange Offer" below. For
purposes of the Exchange Offer, the Company shall be deemed to have accepted
properly tendered Existing Notes for exchange when, as and if the Company has
given oral and written notice thereof to the Exchange Agent.
For each Existing Note accepted for exchange, the holder of such Existing
Note will receive an Exchange Note having a principal amount equal to that of
the surrendered Existing Note.
In all cases, issuance of Exchange Notes for Existing Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Existing Notes or
a timely confirmation of book-entry transfer of such Existing Notes into the
Exchange Agent's account at the book-entry transfer facility, a properly
completed and duly executed Letter of Transmittal and all other required
documents. If any tendered Existing Notes are not accepted for any reason set
forth in the terms and conditions of the Exchange Offer or if Existing Notes are
submitted for a greater principal amount than the holder desires to exchange,
such unaccepted or non-exchanged Existing Notes will be returned without expense
to the tendering holder thereof (or, in case of Existing Notes tendered by book-
entry transfer into the Exchange Agent's account at the book-entry transfer
facility pursuant to the book-entry transfer procedures described above, such
non-exchanged Existing Notes will be credited to an account maintained with such
book-entry transfer facility) as promptly as practicable after the expiration of
the Exchange Offer.
CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company
shall not be required to accept for exchange, or to issue Exchange Notes in
exchange for, any Existing Notes and may terminate or amend the Exchange Offer
if at any time before the acceptance of such Existing Notes for exchange or the
exchange of the Exchange Notes for such Existing Notes any of the following
events shall occur:
(i) any injunction, order or decree shall have been issued by any
court or any governmental agency that would prohibit, prevent or otherwise
materially impair the ability of the Company to proceed with the Exchange
Offer; or
(ii) the Exchange Offer shall violate any applicable law or any
applicable interpretation of the staff of the Commission.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole
40
<PAGE> 46
or in part at any time from time to time in its sole discretion. The failure by
the Company at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an ongoing
right which may be asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Existing Notes
tendered, and no Exchange Notes will be issued in exchange for any such Existing
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the indenture under the Trust Indenture Act of
1939, as amended (the "Trust Indenture Act"). In any such event the Company is
required to use every reasonable effort to obtain the withdrawal of any stop
order at the earliest possible time.
The Exchange Offer is not conditioned upon any minimum principal amount of
Existing Notes being tendered for exchange.
EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below. Questions and requests
for assistance, requests for additional copies of this Prospectus or of the
Letter of Transmittal and requests for Notices of Guaranteed Delivery should be
directed to the Exchange Agent addressed as follows:
<TABLE>
<S> <C>
By Mail: By Hand/Overnight Courier:
The Bank of New York
The Bank of New York 101 Barclay Street
101 Barclay Street 7 East Side
New York, NY 10286 New York, NY 10286
Attn: Enrique Lopez Attn: Enrique Lopez
</TABLE>
For information, call:
(212)815-2742
Fax (212) 815-6339
DELIVERY OF THE EXISTING NOTES, LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION
OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE
A VALID DELIVERY.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payment to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The solicitation will be made
principally by mail. Additional solicitations may be made in person or by
telephone by officers or employees of the Company.
The expenses to be incurred in connection with the Exchange Offer will be
paid by the Company. Such expenses will include fees and expenses of the
Exchange Agent and the Trustee, registration fees, accounting and legal fees and
printing costs and expenses.
TRANSFER TAXES
Holders who tender their Existing Notes for exchange will not be obligated
to pay any transfer taxes in connection therewith except that holders who
instruct the Company to register Exchange Notes in the name of, or request that
Existing Notes not tendered or not accepted in the Exchange Offer be returned
to, a person other than the registered tendering holder will be responsible for
the payment of any applicable transfer tax therefor.
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<PAGE> 47
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the carrying value of the Existing
Notes as reflected in the Company's accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company upon the exchange of Exchange Notes for Existing
Notes. Expenses incurred in connection with the issuance of the Exchange Notes
will be amortized over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF EXCHANGE NOTES
Holders of Existing Notes who do not exchange their Existing Notes for
Exchange Notes pursuant to the Exchange Offer will continue to be subject to the
restrictions on transfer of such Existing Notes as set forth in the legend
thereon as a consequence of the issuance of the Existing Notes pursuant to the
exemptions from, or in transactions not subject to, the registration
requirements of the Securities Act and applicable state securities laws.
Existing Notes not exchanged pursuant to the Exchange Offer will continue to
remain outstanding in accordance with their terms. In general, the Existing
Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Existing Notes under the
Securities Act. However, (i) if the Initial Purchasers so request with respect
to Existing Notes not eligible to be exchanged for Exchange Notes in the
Exchange Offer and held by them following consummation of the Exchange Offer or
(ii) if any holder of Existing Notes is not eligible to participate in the
Exchange Offer or, in the case of any holder of Existing Notes that participates
in the Exchange Offer, does not receive freely tradable Exchange Notes in
exchange for Existing Notes, the Company is obligated to file a registration
statement on the appropriate form under the Securities Act relating to the Notes
held by such persons.
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than any such holder which is an
"affiliate" of any of the Company and the Guarantors within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holders' business and
such holders have no agreement or understanding with any person to participate
in the distribution of such Exchange Notes and are not participating in, and do
not intend to participate in, the distribution of such Exchange Notes. If any
holder has any arrangement or understanding with respect to the distribution of
the Exchange Notes to be acquired pursuant to the Exchange Offer, such holder
(i) could not rely on the applicable interpretations of the staff of the
Commission for resale of Exchange Notes and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act in
connection with any resale transaction. A broker-dealer who holds Existing Notes
that were acquired for its own account as a result of market-making or other
trading activities may be deemed to be an "underwriter" within the meaning of
the Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of Exchange
Notes. Each such broker-dealer that receives Exchange Notes for its own account
in exchange for Existing Notes, where such Existing Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge in the Letter of Transmittal that it will deliver a
prospectus in connection with any resale of such Exchange Notes. See "Plan of
Distribution."
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the Exchange Notes may not be offered or sold unless they have
been registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company and
the Guarantors have agreed, pursuant to the Exchange Offer Registration Rights
Agreement and subject to certain specified limitations therein, to register or
qualify the Exchange Notes for offer or sale under the securities or blue sky
laws of such jurisdictions as any holder of the Exchange Notes reasonably
requests in writing.
42
<PAGE> 48
Participation in the Exchange Offer is voluntary, and holders of Existing
Notes should carefully consider whether or not to participate. Holders of the
Existing Notes are urged to consult their financial and tax advisors in making
their own decision on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Existing Notes pursuant to the terms of, the Exchange Offer,
the Company and the Guarantors will have fulfilled certain obligations under the
Exchange Offer Registration Rights Agreement. Holders of Existing Notes who do
not tender their Existing Notes in the Exchange Offer will continue to hold such
Existing Notes and will be entitled to all the rights, and limitations
applicable thereto under the Indenture, except for any such rights under the
Exchange Offer Registration Rights Agreement that by their terms terminate or
cease to have further effectiveness as a result of the making of the Exchange
Offer. See "Description of Notes." All untendered Existing Notes will continue
to be subject to the restrictions on transfer as set forth in the Indenture. To
the extent that Existing Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered Existing Notes could be adversely affected.
The Company may in the future seek to acquire untendered Existing Notes in
open market or privately negotiated transactions, through subsequent exchange
offers or otherwise. The Company has no present plan to acquire any Existing
Notes which are not tendered in the Exchange Offer.
43
<PAGE> 49
BUSINESS
GENERAL
The Company is the largest outdoor advertising company in North America and
upon completion of the 3M Media Acquisition will operate approximately 96,500
bulletin, poster, transit, mall and other advertising display faces in 46
states, including 65 metropolitan markets in the United States and seven
metropolitan markets in Canada. The Company also operates approximately 125,000
subway advertising display faces in New York City. Upon completion of the 3M
Media Acquisition, the Company will have operations in 20 of the 25 largest
United States markets and six of the 10 largest Canadian markets. Through the
Acquisitions, the Company will have significantly increased its presence in
North America and diversified into additional major metropolitan markets.
INDUSTRY OVERVIEW
The outdoor advertising industry has experienced increased advertiser
interest and revenue growth in recent years. Outdoor advertising generated total
revenues of approximately $2.0 billion in 1996, or approximately 1.1% of the
total advertising expenditures in the United States, while the out-of-home
advertising industry, consisting of transit and in-store advertising displays in
addition to outdoor advertising, generated revenues of approximately $3.8
billion in 1996, according to estimates by the Outdoor Advertising Association
of America ("OAAA"). Outdoor advertising's 1996 revenues represent growth of
approximately 7.3% over estimated total revenues for 1995.
Advertisers purchase outdoor advertising for various 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, magazine 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, the outdoor advertising industry 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> 50
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 600 companies in the outdoor advertising industry operating
approximately 396,000 bulletin and poster display faces. 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. The Company's 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. The Company 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 of the Company's
markets 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. The Company believes the 3M Media Acquisition will
result in increased sales efficiencies from the addition of new markets and
the implementation of the Company's sales compensation program in 3M Media's
markets.
- - 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. The Company has consolidated substantially all of
its administration, accounting, sales management and leasing management
functions 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
expenses. The Company expects to consolidate substantially all of the
administration, accounting, sales management and leasing management functions
of 3M Media into its existing headquarters and regional offices.
- - Strategic Acquisitions. The Company pursues 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> 51
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 so that advertisers in national
and regional campaigns can simplify their purchasing process while presenting
their messages in multiple markets. 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 certain information
with respect to the Company's outdoor markets as of December 31, 1996 after
giving effect to the Acquisitions:
<TABLE>
<CAPTION>
MALL AND TOTAL
MARKET 30-SHEET 8-SHEET AIRPORT DISPLAY
MARKET RANK BULLETINS POSTERS POSTERS POSTERS TRANSIT FACES
- --------------------------------------------------- ------ --------- -------- ------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
UNITED STATES:
New York-New Jersey(1)............................. 1 864 2,979 262 -- 2,710 6,815
Los Angeles........................................ 2 1,587 2,961 -- -- 2,912 7,460
Chicago............................................ 3 756 -- 640 -- -- 1,396
Philadelphia....................................... 4 23 -- -- -- 498 521
San Francisco...................................... 5 213 1,005 563 -- 1,528 3,309
Dallas............................................. 8 849 -- -- -- -- 849
Detroit............................................ 9 1,099 1,342 91 -- 1,000 3,532
Houston............................................ 10 1,316 -- -- -- -- 1,316
Atlanta............................................ 11 1,234 1,679 -- -- 650 3,563
Cleveland.......................................... 13 70 -- -- -- -- 70
Minneapolis........................................ 14 54 -- -- -- -- 54
Miami-Ft. Lauderdale............................... 15 404 -- -- -- -- 404
Tampa-St. Petersburg-Sarasota...................... 16 881 -- -- -- -- 881
Phoenix............................................ 17 807 1,516 659 -- 1,490 4,472
Sacramento-Stockton-Modesto........................ 18 506 1,271 -- -- -- 1,777
Denver............................................. 19 399 784 -- -- 5,266 6,449
St. Louis.......................................... 20 466 833 1 -- -- 1,300
San Diego.......................................... 23 109 541 -- -- 680 1,330
Orlando............................................ 24 466 -- -- -- -- 466
Portland, OR....................................... 25 17 -- -- -- -- 17
Indianapolis....................................... 26 137 -- -- -- -- 137
Hartford-New Haven................................. 27 151 831 -- -- -- 982
Cincinnati......................................... 28 104 -- -- -- -- 104
Salt Lake.......................................... 29 61 -- -- -- -- 61
Charlotte.......................................... 30 145 -- -- -- -- 145
Raleigh-Durham..................................... 32 33 -- -- -- -- 33
Nashville.......................................... 33 248 -- -- -- -- 248
Kansas City........................................ 34 432 840 -- -- -- 1,272
Columbus, OH....................................... 35 104 -- -- -- -- 104
San Antonio........................................ 36 85 -- -- -- -- 85
Grand Rapids....................................... 38 120 568 -- -- 180 868
New Orleans........................................ 40 458 1,042 428 -- 214 2,142
Memphis............................................ 41 77 -- -- -- -- 77
Buffalo............................................ 42 116 -- -- -- -- 116
Albuquerque........................................ 43 99 -- -- -- -- 99
Fresno............................................. 46 125 892 -- -- -- 1,017
Louisville......................................... 49 329 1,052 243 -- 224 1,848
Winston-Salem...................................... 50 35 -- -- -- -- 35
Birmingham......................................... 51 154 -- -- -- -- 154
West Palm Beach.................................... 52 219 -- -- -- -- 219
Dayton............................................. 53 123 -- -- -- -- 123
Jacksonville....................................... 55 178 -- -- -- -- 178
Charleston, SC..................................... 57 181 -- -- -- -- 181
Flint.............................................. 59 86 423 32 -- -- 541
Knoxville.......................................... 63 78 -- -- -- -- 78
Roanoke............................................ 70 49 -- -- -- -- 49
Rochester.......................................... 73 -- -- -- -- 3,715 3,715
Shreveport......................................... 74 41 -- -- -- -- 41
Omaha.............................................. 75 52 -- -- -- -- 52
Tucson............................................. 78 170 6 338 -- 10 524
Rio Grande......................................... 82 316 -- -- -- -- 316
Columbia, SC....................................... 83 158 -- -- -- -- 158
El Paso............................................ 84 81 -- -- -- -- 81
Chattanooga........................................ 85 63 -- -- -- -- 63
Jackson, MS........................................ 87 76 -- -- -- -- 76
Ft. Myers.......................................... 96 108 -- -- -- -- 108
Colorado Springs................................... 99 62 -- -- -- -- 62
Ft. Wayne.......................................... 106 69 -- -- -- -- 69
Tyler, TX.......................................... 110 87 -- -- -- -- 87
Eugene............................................. 123 77 382 -- -- -- 459
Bakersfield, CA.................................... 124 50 -- -- -- -- 50
Reno............................................... 126 104 -- -- -- -- 104
</TABLE>
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<TABLE>
<CAPTION>
MALL AND TOTAL
MARKET 30-SHEET 8-SHEET AIRPORT DISPLAY
MARKET RANK BULLETINS POSTERS POSTERS POSTERS TRANSIT FACES
- --------------------------------------------------- ------ ------ ----- ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
UNITED STATES (CONTINUED):
Columbus, GA....................................... 127 190 412 100 -- -- 702
Beaumont........................................... 135 110 -- -- -- -- 110
Midland-Odessa, TX................................. 144 47 -- -- -- -- 47
Non-Metro Markets.................................. N/A 12,439 175 -- -- -- 12,614
Mall Advertising Displays.......................... N/A -- -- -- 6,700 -- 6,700
------ ------ ----- ----- ------ ------
UNITED STATES TOTAL(1)........................... 30,347 21,534 3,357 6,700 21,077 83,015
------ ------ ----- ----- ------ ------
CANADA:
Toronto............................................ 1 157 1,491 -- 408 3,202 5,258
Montreal........................................... 2 77 793 -- 297 1,788 2,955
Ottawa............................................. 6 8 188 -- 61 -- 257
Winnipeg........................................... 7 107 247 -- 56 349 759
Quebec City........................................ 8 184 333 -- 125 241 883
Hamilton........................................... 9 19 303 -- 80 598 1,000
Halifax............................................ 14 15 173 -- 28 214 430
Other.............................................. N/A 145 1,247 -- 278 301 1,971
------ ------ ----- ----- ------ ------
CANADA TOTAL..................................... 712 4,775 0 1,333 6,693 13,513
------ ------ ----- ----- ------ ------
TOTAL(1)(2)...................................... 31,059(3) 26,309 3,357 8,033 27,770 96,528
====== ====== ===== ===== ====== ======
</TABLE>
- ---------------
(1) Display faces do not include 125,000 subway advertising display faces in New
York City.
(2) The Company may be required to make divestitures in certain markets in order
to receive antitrust clearance for the 3M Media Acquisition. If the 3M Media
Acquisition is not consummated, the Company will have 8,405 bulletins,
23,880 30-sheet posters, 3,357 8-sheet posters, 1,333 mall and airport
posters, and 27,770 transit display faces, for a total of 64,745 display
faces. See "Risk Factors -- Possible Non-Consummation of the 3M Media
Acquisition."
(3) Includes 141 wall murals and 51 "Spectacular" signs.
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,
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<PAGE> 53
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 42 years of
experience in the outdoor advertising industry, virtually all of which has been
spent in sales and management positions.
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 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 allows the
Company 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 believes the 3M Media Acquisition will enhance its ability to package
displays in several existing markets as well as several new markets.
The Company also focuses its efforts on local sales. Local advertisers tend
to have smaller advertising budgets and require greater assistance from the
Company's production and creative personnel to design and produce advertising
copy. In local sales, the Company often expends more sales efforts on educating
customers regarding the benefits of outdoor media and helping potential
customers develop an advertising strategy using outdoor advertising. While price
and availability are important competitive factors, service and customer
relationships are also critical components of local sales.
Although 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 16.4% of the Company's net
revenues for 1996.
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<PAGE> 54
The following table sets forth the net revenues by advertising category for
the Company for the year ended December 31, 1996.
1996 NET REVENUES BY CATEGORY
<TABLE>
<CAPTION>
PERCENTAGE OF
NET REVENUES
-------------
<S> <C>
Retail/Consumer Products................................................ 16.4%
Travel and Entertainment................................................ 12.1
Tobacco................................................................. 8.2
Automotive.............................................................. 6.8
Health.................................................................. 6.1
Restaurants............................................................. 5.4
Beer.................................................................... 5.3
Media................................................................... 5.0
Banking................................................................. 4.2
Liquor.................................................................. 3.2
Beverages -- Soft Drinks................................................ 2.5
Hotels.................................................................. 2.1
Miscellaneous........................................................... 22.7
-----
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 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.
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<PAGE> 55
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 bulletin and poster display faces. 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 "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 which limit the construction, repair,
upgrading, height, size, location and/or operation of outdoor advertising
structures. Such regulations, often in the form of municipal building, sign or
zoning ordinances, specify minimum standards for the height, size and location
of billboards. In some cases, the construction of new billboards or relocation
of existing billboards is prohibited. Some jurisdictions also have restricted
the ability to enlarge or upgrade existing billboards, such as converting from
wood to steel or from nonilluminated to illuminated structures, and/or restrict
the reconstruction or repair 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 Denver, Houston, Jacksonville,
Kansas City and St. Louis, currently have amortization ordinances or
regulations. 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. In some cities,
amortization ordinances or regulations are not being enforced or have been held
unconstitutional. However, no assurance can be given as to the effect on the
Company of the enforcement of existing laws or regulations, or of new laws and
regulations that may be adopted in the future.
In recent years, there have been efforts 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. In
1996, the Food and Drug Administration promulgated rules which, among other
things, would limit certain types of outdoor advertising by tobacco companies.
While certain of these regulations have been declared invalid by a lower court
ruling,
50
<PAGE> 56
appeals are likely and there can be no assurance that further developments
resulting in a validation or implementation of these or similar regulations will
not occur. Outdoor advertising of tobacco products also may be affected by city
or state regulations. For example, in 1995, the Court of Appeals for the Fourth
Circuit upheld the validity of a Baltimore city ordinance restricting the
placement of outdoor advertisements of cigarettes and alcohol in publicly
visible locations, such as billboards, signboards and sides of buildings.
Subsequently, the United States Supreme Court declined to review an appeal of
the case. Restrictions similar to the Baltimore ordinance are also being
contemplated or introduced in other states or municipalities around the country,
including New Jersey, New York City and Los Angeles. While Baltimore is not a
municipality in which the Company conducts business, there can be no assurance
that additional local or state governments will not enact similar ordinances or
statutes to limit outdoor advertising of tobacco in the future in markets in
which the Company operates. 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 rights
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" existing sales contracts
through 2002. For each of the past three years, the California legislature has
considered proposed legislation which would ban, or substantially limit, all
outdoor advertising of tobacco. While that legislation has not been passed, the
proponents have publicly stated they will continue to attempt to have such
proposal enacted. It is uncertain whether additional legislation of this type
will be enacted on the national level or in any of the markets in which the
Company operates.
It also recently has been reported that certain cigarette manufacturers who
are defendants in numerous class action suits throughout the United States have
reached agreement with Attorneys General of various states for an out of court
settlement with respect to such suits that would, among other things, prohibit
outdoor advertising by the tobacco industry. The settlement is subject to
various conditions including approval and implementing legislation by the United
States Congress. There can be no assurance as to the effect of this settlement
agreement and potential legislation on the Company's business and on its net
revenues and financial position. A reduction in billboard advertising by the
tobacco industry would cause an immediate reduction in the Company's direct
revenue from such advertisers and would simultaneously increase the available
space on the existing inventory of billboards in the outdoor advertising
industry. This could in turn result in a lowering of outdoor advertising rates
in each of the Company's outdoor advertising markets or limit the ability of
industry participants to increase rates for some period of time. Any such
consequence could have a material adverse effect on the Company.
Canadian Regulations. Outdoor advertising in Canada is subject to
regulation at the federal, provincial and municipal levels. These regulations
may prohibit advertising of certain products on outdoor signs 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.
Additionally, Canadian federal legislation was enacted in April, 1997 which
effectively prohibits substantially all outdoor tobacco advertising. While this
legislation is being challenged, there can be no assurance that such challenge
will be successful. In addition, 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. See "Risk Factors -- Regulation of Outdoor Advertising."
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<PAGE> 57
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................ 65 Chairman of the Board and Director 17
Arthur R. Moreno................. 50 President, Chief Executive Officer and 13
Director
Wally C. Kelly................... 40 Senior Vice President 13
Robert M. Reade.................. 57 Vice President 5
Bill M. Beverage................. 46 Treasurer, Secretary and Chief Financial 6
Officer
Brian J. O'Connor................ 41 Director 4
Stephen F. Butterfield........... 44 Director 1
</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 17 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
24 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. Moreno is also a director of Ugly Duckling, Inc.
Mr. Kelly has been the Company's Senior Vice President since 1984. Mr.
Kelly has 18 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 18 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. Reade has been Vice President of the Company since May 1997. He served
as the Company's Director of Real Estate from April 1993 to May 1997 and was a
consultant to the Company from 1992 to April 1993. Mr. Reade has 28 years of
experience in the outdoor advertising industry. From 1987 to 1990, Mr. Reade
served as President and Chief Operating Officer of a major convenience store
chain and from 1985 to 1987 was Real Estate Manager of such chain. In 1985, Mr.
Reade served as Vice President, Sales and Marketing for Gannett Outdoor Group in
New York and from 1970 to 1985 he was General Manager for Gannett Outdoor and
its predecessor company in Phoenix.
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
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<PAGE> 58
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. 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.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding compensation
awarded to, paid to, or earned by, the Company's Chief Executive Officer, its
Chairman of the Board and each of the two executive officers of the Company, in
addition to the Chief Executive Officer, whose total annual salary and bonus
exceeded $100,000 for the fiscal year ended December 31, 1996 (together, these
persons are sometimes referred to as the "Named Executives").
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION -----------------------
NAME AND PRINCIPAL ----------------------- INCENTIVE STOCK ALL OTHER
POSITION YEAR SALARY BONUS UNITS OPTIONS COMPENSATION(1)
- ----------------------- ---- -------- ---------- --------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Arthur R. Moreno....... 1996 $475,000 $1,403,989(2) $ -- 1,029,429 $ 3,510
President and Chief 1995 375,000 311,614(2) -- -- 3,287
Executive Officer 1994 275,000 283,163(2) -- -- 3,206
William S. Levine...... 1996 450,000(3) -- -- -- --
Chairman of the Board 1995 350,000(3) -- -- -- --
1994 250,000(3) -- -- -- --
Wally C. Kelly......... 1996 329,389 -- -- 506,250 2,065
Senior Vice President 1995 283,987 -- -- -- 2,193
1994 244,890 -- -- -- 1,743
Bill M. Beverage....... 1996 101,327 -- 253,125 3,510
Treasurer, Secretary 1995 91,483 -- 25,000(4) -- 2,958
and Chief Financial 1994 76,613 -- 10,000 -- 2,412
Officer 7,500
</TABLE>
- ---------------
(1) The amounts in this column include the following: (i) Company contributions
to a 401(k) plan for fiscal years 1996, 1995 and 1994, respectively, as
follows: Mr. Moreno, $1,425, $1,386 and $1,305; Mr. Kelly, $1,155, $780 and
$330; and Mr. Beverage, $1,425, $1,057 and $511; and (ii) health insurance
premiums paid for fiscal years 1996, 1995 and 1994, respectively, as
follows: Mr. Moreno, $2,085, $1,901 and $1,901; Mr. Kelly, $1,450, $1,413
and $1,413; and Mr. Beverage, $2,085, $1,901 and $1,901.
(2) The bonus amount shown for 1996 includes (i) $1,025,804 paid subsequent to
the end of fiscal year 1996 by reference to operating results for fiscal
year 1996, and (ii) $378,185 paid in 1996 by reference to operating results
for fiscal year 1995. For 1995 and 1994, the amounts shown represent bonus
earned and paid in the fiscal year indicated in an amount determined by
reference to operating results for the prior year. The bonus is based upon
an understanding between the Company and Mr. Moreno that, for so long as Mr.
Moreno is the Chief Executive Officer and President of the Company, Mr.
Moreno may be
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<PAGE> 59
awarded an annual bonus in an amount equal to 1.25% of the Company's EBITDA
for the immediately preceding fiscal year as reflected in the Company's
audited financial statements. Pursuant to this understanding, the bonus for
a particular fiscal year was awarded at the discretion of the Board of
Directors following a review by the Compensation Committee after the audited
financial statements for the previous fiscal year had been released by the
Company's auditors. The terms of this understanding have been incorporated
into the Incentive Bonus Plan for the Chief Executive Officer approved by
stockholders at the 1997 Annual Meeting of Stockholders.
(3) Mr. Levine received no salary, bonus or other compensation from the Company
for his services as Chairman of the Board. The amounts shown as annual
compensation represent management fees paid by the Company to two entities
controlled by Mr. Levine for providing Mr. Levine's services to the Company.
(4) Represents the dollar value of incentive units awarded to Mr. Beverage,
which entitle Mr. Beverage to receive up to 1,632 shares of Common Stock,
based on the market price of the Common Stock on the date of the grant. The
incentive units were awarded pursuant to the Company's 1996 Omnibus Plan,
vest ratably over a period of four years from the date of grant or earlier
upon a change in control of the Company and entitle Mr. Beverage to receive
the shares of Common Stock subject to the vested incentive units immediately
following termination of employment because of a change in control of the
Company and over a four-year period following termination of employment for
any other reason.
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<PAGE> 60
PRINCIPAL STOCKHOLDERS
The table below sets forth the number and percentage of outstanding shares
of Common Stock beneficially owned by (i) each person known by the Company to
own beneficially more than 5% of the outstanding shares of Common Stock, (ii)
each director of the Company, (iii) each executive officer of the Company, and
(v) all directors and executive officers of the Company as a group. 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 OF PERCENT
NAME OF BENEFICIAL OWNER SHARES OF CLASS
- ----------------------------------------------------------------- ------------- ----------
<S> <C> <C>
William S. Levine................................................ 20,355,360 (1) 25.2%
1702 E. Highland, Suite 310
Phoenix, Arizona 85016
Arthur R. Moreno................................................. 16,901,980 (2) 19.4
2502 N. Black Canyon Highway
Phoenix, Arizona 85009
Stephen J. Haberkorn............................................. 7,365,922 (3) 9.1
1702 E. Highland, Suite 310
Phoenix, Arizona 85016
Putnam Investments, Inc.......................................... 6,011,746 (4) 7.4
One Post Office Square
Boston, Massachusetts 02109
Wally C. Kelly................................................... 430,518 (5) *
Bill M. Beverage................................................. 63,282 (6) *
Robert M. Reade.................................................. 46,690 (7) *
Stephen F. Butterfield........................................... 77,625 (8) *
Brian J. O'Connor................................................ 27,000 (9) *
All directors and executive officers as a group (7 persons)...... 30,536,533(10) 34.9%
</TABLE>
- ---------------
* Represents less than 1% of the number of outstanding shares of Common Stock.
(1) Includes 7,365,922 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 7,365,922 shares, 452,260 shares are subject to an option granted to
Mr. Levine (now held by Levine Investments Limited Partnership, Mr.
Levine's family partnership) and 2,990,127 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
452,260 shares subject to the option granted to Mr. Levine. The option for
the 452,260 shares of Common Stock of M-K Link and 12,851,438 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 option except
in his capacity as general partner and to the extent of his partnership
interest therein. The remaining 138,000 shares of Common Stock attributed
to Mr. Levine are held by William S. and Ina Levine Foundation (the "Levine
Family Foundation"), a charitable foundation of which Mr. Levine is
President and member of the Board of Directors. Mr. Levine disclaims
beneficial ownership of the shares held by the Levine Family Foundation.
(2) Includes 7,365,922 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 7,365,922 shares, 2,990,127 shares are subject to
an option granted to Mr. Moreno and 452,260 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 the shares owned by
M-K Link except to the extent of the 2,990,127 shares subject to the option
granted to Mr. Moreno. Also includes (i) 6,180,208 shares of Common Stock
that may be purchased by Mr. Moreno pursuant to options granted by the
Company that are currently exercisable; (ii) 1,524,176 shares of Common
Stock held by Mr. Moreno and his wife, as joint tenants; and (iii)
1,831,674 shares held by BRN Properties Limited Partnership, an Arizona
limited partnership of which Mr. Moreno is the sole general partner.
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<PAGE> 61
(3) Represents shares of Common Stock held by M-K Link, 1702 E. Highland, Suite
310, Phoenix, Arizona 85016, an Arizona limited partnership of which Mr.
Haberkorn is the sole general partner. Of such shares, 3,442,387 are
subject to options held by Levine Investments Limited Partnership and Mr.
Moreno. Mr. Haberkorn disclaims beneficial ownership of shares owned by M-K
Link, except in his capacity as general partner and to the extent of his
partnership interest therein, and both he and M-K Link disclaim beneficial
ownership of shares subject to options in favor of Levine Investments
Limited Partnership and Mr. 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, as amended, filed by the indicated person with the
Securities and Exchange Commission reporting beneficial ownership as of
December 31, 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 which, as amended, reports beneficial ownership of
5,636,865 shares and 374,881 shares, respectively, as of December 31, 1996.
(5) Represents options to purchase shares of Common Stock from the Company that
are currently exercisable. Does not include any shares of Common Stock that
Mr. Kelly may receive in settlement of Incentive Units.
(6) Represents shares of Common Stock subject to options that are currently
exercisable. Does not include any shares of Common Stock that Mr. Beverage
may receive in settlement of Incentive Units.
(7) Represents shares of Common Stock subject to options that are currently
exercisable. Does not include any shares of Common Stock that Mr. Reade may
receive in settlement of Incentive Units.
(8) Includes (i) 3,375 shares of Common Stock owned by Mr. Butterfield's
children, and (ii) 6,750 shares of Common Stock subject to options that are
currently exercisable.
(9) Includes 10,125 shares of Common Stock subject to options that are
currently exercisable.
(10) Includes (i) 452,260 and 2,990,127 shares of Common Stock that may be
acquired by Levine Investments Limited Partnership and Mr. Moreno,
respectively, upon the exercise of options held by them to purchase shares
held by M-K Link (see Notes 1 and 2 above), and (ii) 6,733,071 shares of
Common Stock that may be acquired upon the exercise of options granted by
the Company which are currently exercisable. Does not include shares of
Common Stock that may be issued in settlement of Incentive Units.
56
<PAGE> 62
DESCRIPTION OF CAPITAL STOCK
As of the date of this Offering Memorandum, the Company's authorized
capital stock consists of 200,000,000 shares of Common Stock, $.01 par value per
share, and 12,000,000 shares of preferred stock, $1.00 par value per share
("Preferred Stock"), the terms and provisions of which may be designated by the
Board of Directors in the future. The following summary of the Company's capital
stock is qualified in its entirety by reference to the Company's Fourth Amended
and Restated Certificate of Incorporation (the "Certificate of Incorporation")
and the Bylaws. See "Available Information."
COMMON STOCK
The Company is authorized to issue 200,000,000 shares of Common Stock, of
which 80,745,945 shares are issued and outstanding. Holders of Common Stock are
entitled to one vote per share on all matters on which the holders of Common
Stock are entitled to vote. Because holders of Common Stock do not have
cumulative voting rights and the Company has a classified Board of Directors,
the holders of a majority of the shares of Common Stock voting for the election
of directors can elect all of the members of the Board of Directors standing for
election at any particular meeting. The Common Stock is not redeemable and has
no conversion or preemptive rights. All of the outstanding shares of Common
Stock are fully paid and nonassessable. In the event of the liquidation or
dissolution of the Company, subject to the rights of the holders of any
outstanding shares of Preferred Stock, the holders of Common Stock are entitled
to share pro rata in any balance of the corporate assets available for
distribution to them. The Company may pay dividends if, when and as declared by
the Board of Directors from funds legally available therefor, subject to the
dividend provisions of any outstanding shares of Preferred Stock and
restrictions set forth in the Company's debt instruments.
PREFERRED STOCK
Holders of shares of Preferred Stock have no preemptive rights or
cumulative voting rights. In addition to specific prohibitions set forth in the
Certificate of Incorporation, under Delaware law holders of preferred stock are
entitled to vote as a class upon any proposed amendment, whether or not entitled
to vote thereon by the Certificate of Incorporation, if such amendment would
increase or decrease the par value of the shares of such class, or alter or
change the powers, preferences, or special rights of the shares of such class so
as to affect them adversely.
DESCRIPTION OF THE 1996 NOTES
The following summary of certain provisions of the 1996 Notes Indenture is
qualified in its entirety by reference to such document which is incorporated by
reference as an exhibit to the Registration Statement of which this Prospectus
is a part. Capitalized terms used below and not defined have the meanings set
forth in the 1996 Notes Indenture.
The 1996 Notes were issued under the 1996 Notes Indenture among the
Company, the Subsidiary Guarantors (as defined therein) and The Bank of New
York, as trustee. The 1996 Notes are general unsecured obligations of the
Company subordinate in right of payment to all existing and future senior
indebtedness of the Company. The 1996 Notes are 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 Subsidiary Guarantors.
The 1996 Notes mature on October 15, 2006.
The 1996 Notes are redeemable at the option of the Company, in whole or in
part, at any time on or after October 15, 2001, at the redemption prices set
forth in the 1996 Notes Indenture plus accrued and unpaid interest, if any, up
to but excluding the date of redemption. Also, on or prior to October 15, 1999,
the Company may redeem up to 35% of the principal amount of the 1996 Notes with
the net proceeds of one or more future public equity offerings, in cash, at 110%
of the principal amount thereof, together with accrued and unpaid interest, if
any, to the date of redemption; provided that 1996 Notes having an aggregate
principal amount of at least $162.5 million remain outstanding immediately after
any such redemption. Upon the
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occurrence of a Change of Control (as defined), the Company will be required to
make an offer to purchase all 1996 Notes then outstanding at a purchase price,
in cash, equal to 101% of the principal amount thereof, together with accrued
and unpaid interest, if any, to the date of purchase.
The 1996 Notes Indenture contains restrictive covenants, events of default
and other provisions substantially similar to those contained in the Indenture.
See "Description of the Notes."
DESCRIPTION OF SENIOR CREDIT FACILITY
The Senior Credit Facility provides for revolving credit loans, letters of
credit and term loans to the Company (the "US Facility") and for revolving
credit loans, letters of credit, bankers' acceptances and term loans to Mediacom
Inc., a wholly-owned Canadian subsidiary (the "Canadian Subsidiary") of the
Company (the "Canadian Facility").
US FACILITY
The US Facility provides for: (i) revolving credit loans of up to $400.0
million subject to reduction by the amount (up to $275.0 million) by which the
aggregate principal amount of any additional subordinated indebtedness issued by
the Company on or prior to June 30, 1997 exceeds $200.0 million and subject to
automatic reduction each year commencing in 1998 and continuing through 2002;
(ii) term loans in the aggregate amount of $350.0 million, payable in quarterly
installments with a final installment due in 2003; and (iii) letter of credit
commitments of $35.0 million (but only to the extent there is available US
revolving credit commitment which is not being utilized).
The US revolving credit loans and US term loans may be, at the option of
the Company, Eurodollar Loans, ABR Loans, or a combination 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 US dollar deposits with a term comparable to the interest period
applicable to the Eurodollar Loan being made are 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, at 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%.
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
The Canadian Facility provides for: (i) revolving credit loans to the
Canadian Subsidiary of up to cdn$35.0 million (the equivalent of approximately
$25.0 million at current exchange rates), subject to automatic reduction each
year from 1999 to 2002; (ii) term loans to the Canadian Subsidiary (A) payable
in Canadian dollars ("cdn$") in the aggregate amount of cdn$48.0 million (the
equivalent of approximately $35.0 million at current exchange rates) payable in
quarterly installments with the final installment due in 2002 and (B) payable in
US dollars ("US$") in the aggregate amount of $40.0 million payable in quarterly
installments with the final installment due in 2003; (iii) revolving credit loan
borrowings and certain term loan borrowings through the issuance of bankers'
acceptances in a minimum aggregate face amount of cdn$4.0 million and for a term
of 30, 60, 90 or 180 days; and (iv) letter of credit commitments of cdn$7.0
million (but only to the extent there is available Canadian revolving credit
commitment which is not being utilized).
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The Canadian revolving credit loans and the cdn$ 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. The US$ term loans may be, at the option
of the Canadian Subsidiary, Eurodollar Loans, ABR Loans or a combination
thereof. See "-- US Facility" above.
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.
GENERAL TERMS
The Senior Credit Facility contains various covenants that limit the
ability of the Company to, among other things, incur indebtedness, dispose of
assets, pay dividends or purchase or redeem any shares of capital stock, make
capital expenditures and make loans or investments.
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.
The Senior Credit Facility contains customary events of default, including,
without limitation, the Company's failure to pay principal or interest when due,
the Company's material breach of any covenant, representation or warranty or the
Company's bankruptcy. In addition, under the Senior Credit Facility, events of
default will occur if the Company's revenues from tobacco advertisements exceed
15% of revenues for four consecutive quarters, and upon a change of control of
the Company.
AMENDMENT TO THE SENIOR CREDIT FACILITY
The Company has received a written commitment from CIBC to increase the
amounts that may be borrowed under the US Facility to (i) up to $325.0 million
of revolving credit loans and (ii) up to $715.0 million of term loans. The
Senior Credit Facility is expected to be amended effective upon the consummation
of the 3M Media Acquisition to reflect such increase, to extend the maturity of
the loans by one year and to make certain other related changes. In addition,
under the Senior Credit Facility, as proposed to be amended, the applicable
margin: (i) for ABR Loans will range from 0% to 1.50% on up to $700.0 million of
US Facility revolving credit and term loans and from 1.25% to 1.75% on up to
$380.0 million of term loans under the US and Canadian Facilities; (ii) for cdn$
Prime Loans under the Canadian Facility will range from 0% to 1.50% on up to
approximately $60.0 million of revolving credit and term loans; (iii) for
Eurodollar Loans will range from 1.00% to 2.50% on up to $700.0 million of US
revolving credit loans and US term loans and from 2.25% to 2.75% on up to $380.0
million of term loans under the US and Canadian Facilities; and (iv) for cdn$
bankers' acceptances under the Canadian Facility will range from 1.00% to 2.50%
on up to approximately $60.0 million of revolving credit and term loans. The
actual applicable margin for each such loan within the ranges set forth above
will be determined based on the Company's total leverage ratio for each quarter.
Commitment fees under the Senior Credit Facility, as expected to be
amended, will be 0.375% per annum payable quarterly in arrears on the unused
portions of revolving credit loans under the US and Canadian Facilities. A
commitment fee of 0.125% per annum will be payable quarterly in arrears on
$400.0 million of the Senior Credit Facility if the 3M Media Acquisition is not
consummated by July 31, 1997, in which event such portion of the Senior Credit
Facility will be deemed unavailable and subject to this 0.125% fee unless and
until the 3M Media Acquisition is consummated prior to November 30, 1997. The
amortization
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schedule and covenants will be appropriately adjusted and readjusted with
respect to the deemed availability or unavailability of this portion of the
Senior Credit Facility.
The Company intends to use additional borrowings under the Senior Credit
Facility, as expected to be amended, to finance a portion of the purchase price
of the 3M Media Acquisition. There can be no assurance, however, that the
expected amendment will be entered into as currently contemplated.
DESCRIPTION OF THE NOTES
Except as otherwise indicated, the following description relates both to
the Existing Notes issued in the Offering and the Exchange Notes to be issued in
exchange for Existing Notes in connection with the Exchange Offer. The form and
terms of the Exchange Notes are the same as the form and terms of the Existing
Notes, except that the Exchange Notes have been registered under the Securities
Act and therefore will not bear legends restricting the transfer thereof. The
Exchange Notes will be obligations of the Company evidencing the same
indebtedness as the Existing Notes, and will be entitled to the benefits of the
same Indenture, dated as of June 23, 1997 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 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
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 are limited in aggregate principal amount to $500.0 million. The
Notes are general unsecured obligations of the Company, subordinated in right of
payment to Senior Indebtedness of the Company, pari passu in right of payment
with the 1996 Notes and all other future senior subordinated unsecured
indebtedness of the Company and senior in right of payment to any current or
future subordinated indebtedness of the Company.
The Notes are unconditionally guaranteed, on a senior subordinated basis
and pari passu with the 1996 Notes, 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 June 15, 2007. The Notes bear interest at a rate
of 8 7/8% per annum from the date of original issuance until maturity. Interest
is payable semi-annually in arrears on June 15 and December 15, commencing
December 15, 1997, to holders of record of the Notes at the close of business on
the immediately preceding June 1, and December 1, respectively.
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OPTIONAL REDEMPTION
The Notes are redeemable at the option of the Company, in whole or in part,
at any time on or after June 15, 2002 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 June 15, of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
------------------------------------------------------------------ ----------
<S> <C>
2002.............................................................. 104.438%
2003.............................................................. 102.958%
2004.............................................................. 101.479%
2005 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 June 15, 2000 at a redemption price equal to 108.875% 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 $325.0 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.
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 March 31, 1997, after giving
pro forma effect to the 3M Media Acquisition, the Van Wagner Acquisition, the
Bank Financing and the Offerings, the principal amount of outstanding Senior
Indebtedness of the Company would have been approximately $785.1 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
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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 "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
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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 is, to the extent set forth in the Indenture, 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 is 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 agreed to be bound by such
provisions and authorizes and expressly directed 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 appointed the Trustee his
attorney-in-fact for such purpose.
CERTAIN COVENANTS
The Indenture contains, 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 June 15, 2000, (ii) 6.25 to 1 if such Indebtedness is
incurred after June 15, 2000 and on or prior to June 15, 2002 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
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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 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 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 or the Guarantees, as the case may be,
are subordinate to Senior Indebtedness.
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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
on the same collateral as that securing such Lien to the same extent as such
subordinated Indebtedness is subordinated to the Notes.
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 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.
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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, and the other existing and future Canadian Restricted Subsidiaries
will not execute Guarantees 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 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; 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"); (c) third, to the making of an Excess
Proceeds Offer (as defined in the 1996 Notes Indenture) with respect to the 1996
Notes to the extent required in the 1996 Notes Indenture; and (d) fourth, 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
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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."
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 a similar business news service in the United
States and (ii) send by first-class mail, postage prepaid, to the Trustee and to
each
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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 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
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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 provides 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.
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
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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.
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 provides 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
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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 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 that 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
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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
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 is 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 the 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 Indenture. 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.
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"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 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).
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"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 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
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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.
"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
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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.
"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.
"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 other Persons secured by a
lien to which the Property or assets owned or held by such Person are 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 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, or 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.
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"Issue Date" means June 23, 1997, the date the Notes were 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 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.
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"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 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 as 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
$425 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 and the 1996
Notes and their related guarantees as required under the 1996 Notes
Indenture;
(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;
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(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:
(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 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 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
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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.
"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
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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
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 Fourth Amended and Restated Credit
Agreement dated as of October 22, 1996, as amended, among the Company, Mediacom
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 and the 1996 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
reimburse-
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ment 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 Ratings Services 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.
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the Exchange Notes will be represented by one or
more notes in registered, global form without interest coupons (the "Global
Note"). The Global Note will be deposited upon issuance with the Trustee as
custodian for The Depository Trust Company ("DTC"), in New York, New York, and
registered in the name of DTC or its nominee, in each case for credit to an
account of a direct or indirect participant as described below.
Except as set forth below, the Global Note may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor of DTC or its
nominee. Beneficial interests in the Global Note may not be exchanged for Notes
in certificated form except in the limited circumstances described below. See
"-- Exchange of Book-Entry Notes for Certificated Notes."
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between the Participants through electronic
book-entry changes in accounts of the Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
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Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interest and transfer of ownership interest of each
actual purchaser of each security held by or on behalf of DTC are recorded on
the records of the Participants and the Indirect Participants.
DTC has also advised the Company that pursuant to procedures established by
it, (i) upon deposit of the Global Note, DTC will credit the accounts of
Participants with portions of the principal amount of the Global Note and (ii)
ownership of such interests in the Global Note will be shown on, and the
transfer of ownership thereof will be effected only through, records maintained
by DTC (with respect to the Participants) or by the Participants and the
Indirect Participants (with respect to other owners of beneficial interests in
the Global Note).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in the Global Note to such persons may be limited
to that extent. Because DTC can act only on behalf of the Participants, which in
turn act on behalf of the Indirect Participants and certain banks, the ability
of a person having beneficial interests in the Global Note to pledge such
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the lack
of a physical certificate evidencing such interests.
EXCEPT AS DESCRIBED BELOW, OWNERS OF INTERESTS IN THE GLOBAL NOTE WILL NOT
HAVE EXCHANGE NOTES REGISTERED IN THEIR NAMES, WILL NOT RECEIVE PHYSICAL
DELIVERY OF EXCHANGE NOTES IN CERTIFICATED FORM AND WILL NOT BE CONSIDERED THE
REGISTERED OWNERS OR HOLDERS THEREOF UNDER THE INDENTURE FOR ANY PURPOSE.
Payments in respect of the principal of (and premium, if any) and interest
on the Global Note will be payable to DTC or its nominee in its capacity as the
registered holder under the Indenture. Under the terms of the Indenture, the
Company and the Trustee will treat DTC or its nominee as the owner thereof for
the purpose of receiving such payments and for any and all other purposes
whatsoever. Consequently, neither the Company or the Trustee nor any agent of
the Company or the Trustee will have any responsibility or liability for (i) any
aspect or accuracy of DTC's records or any Participant's or Indirect
Participant's records relating to or payments made on account of beneficial
ownership interests in the Global Note, or for maintaining, supervising or
reviewing any of DTC's records or any Participant's or Indirect Participant's
records relating to the beneficial ownership interests in the Global Note, or
(ii) any other matter relating to the actions and practices of DTC or any of the
Participants or the Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the Exchange Notes (including principal
and interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security as
shown on the records of DTC. Payments by the Participants and the Indirect
Participants to the beneficial owners of Exchange Notes will be governed by
standing instructions and customary practices and will not be the responsibility
of DTC, the Trustee or the Company. Neither the Company nor the Trustee will be
liable for any delay by DTC or any of the Participants in identifying the
beneficial owners of the Exchange Notes, and the Company and the Trustee may
conclusively rely on and will be protected in relying on instructions from DTC
or its nominee as the registered owner of the Global Note for all purposes.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures and will be settled in same-day funds.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes only at the direction of one or more
Participants to whose account with DTC interests in the Global Note are credited
and only in respect of such portion of the aggregate principal amount of the
Exchange Notes as to which such Participant or Participants has or have given
such direction.
The Global Note is exchangeable for definitive Exchange Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depository for the Global Note and the Company thereupon
fails to appoint a successor depository or (y) has ceased to be a clearing
agency registered
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under the Exchange Act, (ii) the Company, at its option, notifies the Trustee in
writing that it elects to cause the issuance of the Exchange Notes in
certificated form or (iii) there shall have occurred and be continuing a Default
or an Event of Default with respect to the Exchange Notes. In all cases,
certificated Exchange Notes delivered in exchange for the Global Note or
beneficial interests therein will be registered in the names, and issued in any
approved denominations, requested by or on behalf of DTC (in accordance with its
customary procedures).
EXCHANGE OFFER; REGISTRATION RIGHTS
In connection with the issuance and sale of the Existing Notes, the Company
and the Guarantors have entered into the Exchange Offer Registration Rights
Agreement pursuant to which they have agreed, for the benefit of the holders of
the Existing Notes, that they will, at their cost, (i) within 45 days after the
Issue Date, file a registration statement (the "Exchange Offer Registration
Statement") with the Commission with respect to a registered offer to exchange
the Existing Notes for new notes, which will have terms substantially identical
in all material respects to the Existing Notes (except that the Exchange Notes
will not contain terms with respect to transfer restrictions), and (ii) within
120 days after the Issue Date, use their best efforts to cause the Exchange
Offer Registration Statement to be declared effective under the Securities Act.
Upon the Exchange Offer Registration Statement being declared effective, the
Company and the Guarantors have agreed to offer such new notes in exchange for
surrender of the Existing Notes. The Registration Statement of which this
Prospectus is a part has been filed with the Commission and the Exchange Offer
is being made to satisfy the Company's and the Guarantors' obligations under the
Exchange Offer Registration Rights Agreement.
In the event that applicable interpretations of the staff of the Commission
do not permit the Company to effect the Exchange Offer, or if for any other
reason the Exchange Offer is not consummated within 180 days after the Issue
Date, the Company and the Guarantors will, at their own expense, (a) as promptly
as practicable, file a shelf registration statement covering resales of the
Existing Notes (the "Shelf Registration Statement"), (b) use their respective
best efforts to cause the Shelf Registration Statement to be declared effective
under the Securities Act and (c) use their respective best efforts to keep
effective the Shelf Registration Statement until the earlier of the disposition
of the Existing Notes covered by the Shelf Registration Statement or two years
after the Issue Date (or such shorter period as is permitted by Rule 144(k)
under the Securities Act). The Company will, in the event of the Shelf
Registration Statement, provide to each holder of the Existing Notes copies of
the prospectus which is a part of the Shelf Registration Statement, notify each
such holder when the Shelf Registration Statement for the Existing Notes has
become effective and take certain other actions as are required to permit
unrestricted resales of the Existing Notes. A holder of the Existing Notes that
sells such Existing Notes pursuant to the Shelf Registration Statement generally
would be required to be named as a selling securityholder in the related
prospectus and to deliver a prospectus to purchasers, will be subject to certain
of the civil liability provisions under the Securities Act in connection with
such sales and will be bound by the provisions of the Exchange Offer
Registration Rights Agreement which are applicable to such a holder (including
certain indemnification rights and obligations). In addition, each holder of the
Existing Notes will be required to deliver information to be used in connection
with the Shelf Registration Statement within the time periods set forth in the
Exchange Offer Registration Rights Agreement in order to have their Existing
Notes included in the Shelf Registration Statement.
If the Company and the Guarantors fail to comply with the above provisions
or if such registration statement fails to become effective, then, as liquidated
damages, additional interest shall become payable in respect of the Existing
Notes as follows:
If (i) the Exchange Offer Registration Statement or Shelf Registration
Statement is not filed within 45 days after the Issue Date;
(ii) an Exchange Offer Registration Statement or Shelf Registration
Statement is not declared effective within 120 days after the Issue Date;
and
(iii) either (A) the Company has not exchanged the Exchange Notes for
all Existing Notes validly tendered in accordance with the terms of the
Exchange Offer on or prior to 60 days after the date on
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which the Exchange Offer Registration Statement was declared effective or
(B) the Exchange Offer Registration Statement ceases to be effective at any
time prior to the time that the Exchange Offer is consummated or (C) if
applicable, the Shelf Registration Statement has been declared effective
and such Shelf Registration Statement ceases to be effective at any time
prior to the second anniversary of the Issue Date (or such shorter period
as is permitted by Rule 144(k) under the Securities Act);
(each such events referred to in clauses (i) through (iii) above is a
"Registration Default"), the sole remedy available to holders of the Existing
Notes will be the immediate assessment of additional interest ("Additional
Interest") as follows: the per annum interest rate on the Existing Notes will
increase by .50% during the period the Registration Default exists and is not
waived or cured; and the per annum interest rate will increase by an additional
.25% for each subsequent 90-day period during which the Registration Default
remains uncured, up to a maximum additional interest rate of 2.0% per annum in
excess of 8 7/8%. Notwithstanding the foregoing, no Additional Interest will be
payable with respect to a Registration Default described in clause (iii) (C)
above if, pending a material corporate transaction, the Company issues a notice
that the registration is unusable, or such a notice is required under applicable
securities laws to be issued by the Company, and the number of days in any
consecutive twelve month period for which all such notices have been issued or
required to be issued has not exceeded 30 in the aggregate. All Additional
Interest will be payable to holders of the Existing Notes in cash on the same
original interest payment dates as the Existing Notes, commencing with the first
such date occurring after any such Additional Interest commences to accrue,
until such Registration Default is cured. After the date on which such
Registration Default is cured, the interest rate on the Existing Notes will
revert to the interest rate originally borne by the Existing Notes.
The summary herein of certain provisions of the Exchange Offer Registration
Rights Agreement does not purport to be complete and is subject to, and is
qualified in its entirety by reference to, all the provisions of the Exchange
Offer Registration Rights Agreement, a copy of which has been filed as an
exhibit to the Registration Statement of which this Prospectus is a part.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of certain of the anticipated federal income tax
consequences of an exchange of Existing Notes for Exchange Notes and of the
purchase, ownership, and disposition of the Exchange Notes is based upon the
provisions of the Internal Revenue Code of 1986, as amended (the "Code"), the
final, temporary, and proposed regulations promulgated thereunder, and
administrative rulings and judicial decisions now in effect, all of which are
subject to change (possibly with retroactive effect) or different
interpretations. This summary does not purport to deal with all aspects of
federal income taxation that may be relevant to a particular investor, nor any
tax consequences arising under the laws of any state, locality, or foreign
jurisdiction, and it is not intended to be applicable to all categories of
investors, some of which, such as dealers in securities, banks, insurance
companies, tax-exempt organizations, foreign persons, persons that hold Existing
Notes as part of a straddle or conversion transaction, or holders subject to the
alternative minimum tax, may be subject to special rules. In addition, the
summary is limited to persons that will hold the Exchange Notes as "capital
assets" (generally, property held for investment) within the meaning of Section
1221 of the Code. ALL INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISERS
REGARDING THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE
EXCHANGE AND THE OWNERSHIP AND DISPOSITION OF EXCHANGE NOTES.
TAXATION OF HOLDERS ON EXCHANGE
Although the matter is not free from doubt, an exchange of Existing Notes
for Exchange Notes should not be a taxable event to holders of Existing Notes
and holders should not recognize any taxable gain or loss as a result of such an
exchange. Accordingly, a holder would have the same adjusted basis and holding
period in the Exchange Notes, as it had in the Existing Notes immediately before
the exchange. Further, the tax consequences of ownership and disposition of any
Exchange Notes should be the same as the tax consequences of ownership and
disposition of Existing Notes.
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MARKET DISCOUNT
If a holder purchases a Note (other than in connection with the Offering or
the Exchange) for an amount that is less than its principal amount, the amount
of the difference will be treated as "market discount" for federal income tax
purposes, unless such difference is less than a specified de minimis amount.
Under the market discount rules, a holder will be required to treat any
principal payment on, or any gain on the sale, exchange, retirement or other
disposition of, a Note as ordinary income to the extent of the market discount
which has not previously been included in income and is treated as having
accrued on such a Note at the time of such payment or disposition. In addition,
the holder may be required to defer, until the maturity of the Note or its
earlier disposition in a taxable transaction, the deduction of all or a portion
of the interest expense on any indebtedness incurred or continued to purchase or
carry such Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the holder
elects to accrue on a constant interest method. A holder of a Note may elect to
include market discount currently as it accrues (on either a ratable or constant
interest method), in which case the rule described above regarding deferral of
interest deductions will not apply. This election to include market discount in
income currently, once made, applies to all market discount obligations acquired
on or after the first taxable year to which the election applies and may not be
revoked without the consent of the Internal Revenue Service (the "IRS").
AMORTIZABLE PREMIUM
A holder that purchases a Note for an amount in excess of the sum of its
principal amount will be considered to have purchased the Note at a "premium." A
holder generally may elect to amortize the premium over the remaining term of
the Note on a constant yield method. The amount amortized in any year will be
treated as a reduction of the holder's interest income from the Note. Premium on
a Note held by a holder that does not make such an election will decrease the
gain or increase the loss otherwise recognized on disposition of the Note. The
election to amortize premium on a constant yield method once made applies to all
debt obligations held or subsequently acquired by the electing holder on or
after the first day of the first taxable year to which the election applies and
may not be revoked with the consent of the IRS.
EXCHANGE OF AND INVESTMENT IN NOTES.
A holder's tax basis in a Note will, in general, be the holder's cost
therefor, increased by market discount previously included in income by the
holder and reduced by any amortized premium. Upon the sale, exchange or
retirement of a Note, a holder will recognize gain or loss equal to the
difference between the amount realized upon the sale, exchange or retirement
(less any accrued interest, which will be taxable as such) and the adjusted tax
basis of the Note. Except as described above with respect to market discount,
such gains or loss will be capital gain or loss and will be long-term capital
gain or loss if at the time of sale, exchange or retirement the Note has been
held for more than one year. Under current law, long-term capital gain of
individuals are, under certain circumstances, taxed at lower rates than items of
ordinary income. The deductibility of capital losses is subject to limitation.
BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal, interest and premium paid on Notes and to the proceeds of
a sale of a Note made to holders other than certain exempt recipients (such as
corporations). A 31% backup withholding tax will apply to such payments if the
holder fails to provide a taxpayer identification number or certification of
foreign or other exempt status or fails to report in full dividend and interest
income.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or a credit against such holder's U.S. federal income tax liability
provided the required information is furnished to the IRS.
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THE FOREGOING SUMMARY OF THE PRINCIPAL FEDERAL INCOME TAX CONSEQUENCES TO
HOLDERS DOES NOT DISCUSS ALL ASPECTS OF FEDERAL INCOME TAXATION THAT MAY BE
RELEVANT TO A PARTICULAR HOLDER OF NOTES IN LIGHT OF HIS PARTICULAR
CIRCUMSTANCES AND INCOME TAX SITUATION. EACH HOLDER OF NOTES SHOULD CONSULT SUCH
HOLDER'S TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES TO SUCH HOLDER OF THE
OWNERSHIP AND DISPOSITION OF THE NOTES, INCLUDING THE APPLICATION AND EFFECT OF
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS, OR SUBSEQUENT VERSIONS THEREOF.
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PLAN OF DISTRIBUTION
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, the Company believes that Exchange
Notes issued pursuant to the Exchange Offer may be offered for resale, resold or
otherwise transferred by holders thereof (other than any holder who is an
"affiliate" of any of the Company and the Guarantors within the meaning of Rule
405 under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of the holders' business and
such holders have no arrangement or understanding with any person to participate
in a distribution of such Exchange Notes and are not participating in, and do
not intend to participate in, the distribution of such Exchange Notes. In
addition, to comply with the securities laws of certain jurisdictions, if
applicable, the Exchange Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and complied with. The Company has
agreed, pursuant to the Exchange Offer Registration Rights Agreement and subject
to certain specified limitations therein, to register or qualify the Exchange
Notes for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the Exchange Notes reasonably requests in
writing.
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Existing Notes where such Existing Notes were acquired as a result
of market-making activities or other trading activities. The Company and the
Guarantors have agreed that, for a period of 180 days, they will make this
Prospectus, as amended or supplemented, available to any broker-dealer for use
in connection with any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at market prices prevailing at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers of any such Exchange Notes. Any
broker-dealer that resells Exchange Notes that were received by it for its own
account pursuant to the Exchange Offer and any broker or dealer that
participates in a distribution of such Exchange Notes may be deemed to be an
"underwriter" within the meaning of the Securities Act and any profit on any
such resale of Exchange Notes and any commission or concessions received by any
such persons may be deemed to be underwriting compensation under the Securities
Act. The Letter of Transmittal states that, by acknowledging that it will
deliver and by delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the close of the Exchange Offer the Company
will promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal. The Company has agreed to pay all expenses
incident to the Exchange Offer and will indemnify the holders of the Exchange
Notes (including any broker-dealers) against certain liabilities, including
liabilities under the Securities Act.
88
<PAGE> 94
LEGAL MATTERS
The validity of the Exchange Notes offered hereby will be passed upon for
the Company by Powell, Goldstein, Frazer & Murphy LLP, Atlanta, Georgia.
EXPERTS
The Consolidated Financial Statements of the Company as of December 31,
1995 and 1996 and for each of the three years in the period ended December 31,
1996 included in this Prospectus have been audited by Deloitte & Touche LLP,
independent auditors, as stated in their report appearing herein and are
included in reliance upon the report of such firm 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
incorporated in this Prospectus by reference from the Company's Prospectus
included in the Registration Statement on Form S-3 (File No. 333-9713) have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
The financial statements of National Advertising Company as of December 31,
1995 and 1996 and for each of the three years in the period ended December 31,
1996, included in this Prospectus have been included herein in reliance on the
report of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports and other information with the
Commission. Reports and other information filed with the Commission pursuant to
the Exchange Act may be inspected and copied, 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, 13th Floor, New York, New York 10007, 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. The Commission also
maintains an Internet Web Site at http://www.sec.gov. that contains reports and
other information about the Company.
89
<PAGE> 95
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or information filed by the Company with the
Commission are incorporated in this Offering Memorandum by reference and made a
part hereof: (i) Annual Report on Form 10-K for the fiscal year ended December
31, 1996 (File No. 0-28256); (ii) Quarterly Report on Form 10-Q for the quarter
ended March 31, 1997 (File No. 0-28256); (iii) Current Report on Form 8-K filed
on May 28, 1997 (File No. 0-28256); (iv) Current Report on Form 8-K filed June
4, 1997 (File No. 0-28256); (v) Current Report on Form 8-K filed on June 18,
1997 (File No. 0-28256); (vi) the Proxy Statement for the 1997 Annual Meeting of
Shareholders (File No. 0-28256); and (vii) the Gannett Outdoor Combined
Statements of Net Assets to be Acquired as of December 31, 1994 and 1995 and the
Gannett Outdoor Combined Statements of Revenues and Direct Expenses of Net
Assets to be Acquired for the years ended December 31, 1993, 1994 and 1995,
together with notes thereto and Independent Auditors' Report thereon, contained
in the Company's Prospectus dated October 9, 1996 included in its Registration
Statement on Form S-3 (File No. 333-9713).
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 made hereby 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 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.
90
<PAGE> 96
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE COMPANY:
Independent Auditors' Report.......................................... F-2
Consolidated Balance Sheets as of December 31, 1995 and 1996 and March
31, 1997............................................................ F-3
Consolidated Statements of Operations for the Years Ended December 31,
1994, 1995 and 1996 and the three months ended March 31, 1996 and
1997................................................................ F-4
Consolidated Statements of Common Stockholders' Equity (Deficiency)
for the Years Ended December 31, 1994, 1995 and 1996 and the three
months ended March 31, 1997......................................... F-5
Consolidated Statements of Cash Flows for the Years Ended December 31,
1994, 1995 and 1996 and the three months ended March 31, 1996 and
1997................................................................ F-6
Notes to Consolidated Financial Statements............................ F-7
NATIONAL ADVERTISING COMPANY:
Report of Independent Accountants..................................... F-22
Balance Sheets as of December 31, 1995 and 1996 and March 31, 1997.... F-23
Statements of Income for the Years Ended December 31, 1994, 1995 and
1996 and the three months ended March 31, 1996 and 1997............. F-24
Statements of Cash Flows for the Years Ended December 31, 1994, 1995
and 1996 and the three months ended March 31, 1996 and 1997......... F-25
Notes to Financial Statements......................................... F-26
</TABLE>
F-1
<PAGE> 97
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 1996,
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, 1996. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Outdoor Systems, Inc. and
subsidiaries at December 31, 1995 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Phoenix, Arizona
February 14, 1997, except for paragraph f of Note 1
and Note 16 as to which the dates are July 3, 1997
and March 26, 1997, respectively
F-2
<PAGE> 98
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- MARCH 31,
1995 1996 1997
-------- -------- ----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents............................................. $ 1,739 $ 11,887 $ 4,921
Accounts receivable -- less allowance for doubtful accounts of $1,010,
$5,398, and $5,940.................................................. 10,971 56,975 59,402
Prepaid land leases................................................... 1,691 10,938 11,745
Other current assets, including amounts due from related parties of
$62, $385, and $374 (Notes 2 and 14)................................ 613 15,737 17,766
Deferred income taxes (Note 11)....................................... 415 1,637 1,637
-------- -------- ----------
Total current assets........................................... 15,429 97,174 95,471
PROPERTY AND EQUIPMENT -- Net (Notes 2, 3 and 5)........................ 111,729 742,144 849,653
OTHER ASSETS (Note 2)................................................... 981 10,155 9,739
DEFERRED FINANCING COSTS -- Net (Notes 5 and 6)......................... 4,275 24,151 23,157
DEFERRED INCOME TAXES (Note 11)......................................... 5,255 -- --
GOODWILL -- Net (Note 2)................................................ 544 59,831 60,825
-------- -------- ----------
TOTAL................................................................... $138,213 $933,455 $1,038,845
======== ======== ==========
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable...................................................... $ 642 $ 8,323 $ 7,758
Accrued interest...................................................... 4,843 7,056 12,938
Accrued expenses and other liabilities (Notes 4 and 12)............... 1,173 17,653 17,474
Current maturities of long-term debt (Notes 3 and 5).................. 550 28,000 31,700
-------- -------- ----------
Total current liabilities...................................... 7,208 61,032 69,870
LONG-TERM DEBT (Notes 3 and 5).......................................... 141,719 578,409 674,728
OTHER LONG-TERM OBLIGATIONS (Note 2).................................... 984 3,552 3,734
DEFERRED INCOME TAXES (Note 11)......................................... -- 2,283 2,057
-------- -------- ----------
Total liabilities.............................................. 149,911 645,276 750,389
-------- -------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 2, 9, 10, 12 and 16)
COMMON STOCK -- Subject to put option (Note 8).......................... 3,420 -- --
-------- -------- ----------
REDEEMABLE PREFERRED STOCK (Note 8)..................................... 13,649 -- --
-------- -------- ----------
COMMON STOCKHOLDERS' EQUITY (DEFICIENCY) (Notes 2, 9 and 18):
Common stock, $.01 par value -- authorized, 200,000,000 shares; issued
and outstanding, 31,644,569, 60,233,447 and 60,233,447 shares....... 316 602 602
Additional paid-in capital............................................ (312) 316,788 316,788
Accumulated deficit................................................... (24,718) (25,275) (24,584)
Treasury stock at cost -- 17,213,331 shares........................... (4,053) (4,053) (4,053)
Foreign currency translation adjustment............................... -- 117 (297)
-------- -------- ----------
Total common stockholders' equity (deficiency)................. (28,767) 288,179 288,456
-------- -------- ----------
TOTAL................................................................... $138,213 $933,455 $1,038,845
======== ======== ==========
</TABLE>
See notes to consolidated financial statements
F-3
<PAGE> 99
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------ -----------------------
1994 1995 1996 1996 1997
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
REVENUES:
Outdoor advertising (Note 13)..................... $ 59,150 $ 74,690 $ 194,183 $ 19,722 89,713
Less agency commissions........................... 8,073 10,294 27,136 2,777 12,497
---------- ---------- ---------- ---------- ----------
Total...................................... 51,077 64,396 167,047 16,945 77,216
Lease, printing and other revenues................ 1,000 417 6,069 -- 2,864
---------- ---------- ---------- ---------- ----------
Net revenues............................... 52,077 64,813 173,116 16,945 80,080
---------- ---------- ---------- ---------- ----------
OPERATING EXPENSES:
Direct advertising -- including $139, $139, $139,
$35 and $35 to related parties (Note 14)........ 24,433 30,462 87,593 7,859 44,615
General and administrative -- including $354,
$385, $450, $113 and $113 to related parties
(Note 14)....................................... 3,357 4,096 13,458 1,078 6,717
Depreciation and amortization..................... 9,165 9,970 22,384 2,561 11,635
---------- ---------- ---------- ---------- ----------
Total operating expenses................... 36,955 44,528 123,435 11,498 62,967
---------- ---------- ---------- ---------- ----------
GAIN ON ATLANTA AND DENVER DISPOSITIONS (Note 2).... 4,325 -- 7,344 -- --
---------- ---------- ---------- ---------- ----------
OPERATING INCOME (Note 13).......................... 19,447 20,285 57,025 5,447 17,113
INTEREST EXPENSE (Note 5)........................... 16,393 17,199 32,489 4,152 15,922
---------- ---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY LOSS... 3,054 3,086 24,536 1,295 1,191
INCOME TAXES (Note 11).............................. 1,721 318 10,200 518 500
---------- ---------- ---------- ---------- ----------
INCOME BEFORE EXTRAORDINARY LOSS.................... 1,333 2,768 14,336 777 691
EXTRAORDINARY LOSS (Note 6)......................... -- -- (17,780) -- --
---------- ---------- ---------- ---------- ----------
NET (LOSS) INCOME................................... 1,333 2,768 (3,444) 777 691
LESS STOCK DIVIDENDS, ACCRETIONS AND DISCOUNT ON
REDEMPTIONS (Note 8).............................. 1,596 2,461 3,461 907 --
---------- ---------- ---------- ---------- ----------
NET (LOSS) INCOME ATTRIBUTABLE TO COMMON
STOCKHOLDERS...................................... $ (263) $ 307 $ (6,905) $ (130) $ 691
---------- ---------- ---------- ---------- ----------
NET (LOSS) INCOME PER COMMON AND EQUIVALENT SHARE
(Note 1):
Income (loss) before extraordinary loss........... $ (.01) $ .01 $ .21 $ (.01) $ .01
Extraordinary loss................................ -- -- (.34) -- --
---------- ---------- ---------- ---------- ----------
NET (LOSS) INCOME PER COMMON SHARE.................. $ (.01) $ .01 $ (.13) $ (.01) $ .01
========== ========== ========== ========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES................... 31,644,569 38,136,117 52,895,004 38,049,216 69,046,020
========== ========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 100
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMMON STOCKHOLDERS' EQUITY (DEFICIENCY)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------- THREE MONTHS ENDED
1994 1995 1996 MARCH 31, 1997
----------- ----------- ---------- ------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
COMMON STOCK OUTSTANDING: Shares:
Balance, beginning of year.................... 397,119 31,644,569 31,644,569 60,233,447
Stock splits.................................. 31,247,450 17,221,488 --
Initial public offering (Note 2).............. -- -- 2,677,390 --
Secondary offering............................ -- -- 8,690,000 --
----------- ----------- ---------- ----------
Balance, end of year.......................... 31,644,569 31,644,569 60,233,447 60,233,447
=========== =========== ========== ==========
COMMON STOCK OUTSTANDING: Amount:
Balance, beginning of year.................... $ 4 $ 316 $ 316 $ 602
Stock splits.................................. 312 -- 172 --
Initial public offering (Note 2).............. -- -- 27 --
Secondary offering (Note 2)................... -- -- 87 --
----------- ----------- ---------- ----------
Balance, end of year.......................... $ 316 $ 316 $ 602 $ 602
----------- ----------- ---------- ----------
ADDITIONAL PAID-IN CAPITAL:
Balance, beginning of year.................... $ -- $ (312) $ (312) $ 316,788
Stock splits.................................. (312) -- (172) --
Initial public offering (Note 2).............. -- -- 36,617 --
Secondary offering (Note 2)................... -- -- 283,135 --
Common/preferred stock accretion.............. -- -- (2,480) --
----------- ----------- ---------- ----------
Balance, end of year.......................... $ (312) $ (312) $ 316,788 $ 316,788
----------- ----------- ---------- ----------
ACCUMULATED DEFICIT:
Balance, beginning of year.................... $ (24,762) $ (25,025) $ (24,718) $ (25,275)
Common/preferred stock accretion.............. (714) (1,507) (688) --
Dividend on exchangeable preferred stock...... (82) (82) (293) --
Cash dividends................................ (800) (872) -- --
Cancellation of put option on common stock.... -- -- 3,868 --
Net income (loss)............................. 1,333 2,768 (3,444) 691
----------- ----------- ---------- ----------
Balance, end of year.......................... $ (25,025) $ (24,718) $ (25,275) $ (24,584)
----------- ----------- ---------- ----------
COMMON STOCK IN TREASURY: Amount:
Balance....................................... $ (4,053) $ (4,053) $ (4,053) $ (4,053)
----------- ----------- ---------- ----------
FOREIGN CURRENCY TRANSLATION ADJUSTMENT......... $ -- $ -- $ 117 $ (297)
----------- ----------- ---------- ----------
TOTAL COMMON STOCKHOLDERS' EQUITY
(DEFICIENCY).................................. $ (29,074) $ (28,767) $ 288,179 $ 288,456
=========== =========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 101
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------- --------------------
1994 1995 1996 1996 1997
-------- -------- --------- ------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net (loss) income................................................... $ 1,333 $ 2,768 $ (3,444) $ 777 $ 691
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
Extraordinary loss................................................ -- -- 27,615 -- --
Gain on sale of land.............................................. -- (417) -- -- --
Gain on disposals................................................. (4,325) (7,344) -- --
Deferred taxes.................................................... 1,324 90 (1,714) -- (364)
Depreciation and amortization..................................... 9,165 9,970 22,384 2,561 11,635
Allowance for doubtful accounts................................... 792 761 2,492 178 957
Other............................................................. 383 363 3,664 100 395
Changes in net assets and liabilities -- net of effects from
acquisitions and disposals (Note 2):
Accounts receivable............................................... 1,092 4,539 (767) 984 (3,045)
Other current assets.............................................. 704 2,486 74 279 (293)
Accrued interest.................................................. 187 (84) 2,216 (3,091) 5,884
Accounts payable and other liabilities............................ 850 (1,924) 3,023 (28) (346)
--------- -------- -------- ------- ---------
Net cash provided by operating activities..................... 11,505 18,552 48,199 1,760 15,514
--------- -------- -------- ------- ---------
INVESTING ACTIVITIES:
Acquisition of Gannett Outdoor, net of cash overdraft acquired...... -- -- (712,545) -- --
Acquisition of Gannett Houston...................................... -- -- (12,174) -- --
Capital expenditures................................................ (4,924) (7,070) (9,046) (1,194) (5,140)
Proceeds from sale of land.......................................... -- 769 -- -- --
Other acquisitions.................................................. (44,347) -- (1,817) -- (117,903)
Net proceeds from disposals......................................... 21,715 -- 3,049 -- --
Acquisition of perpetual easements.................................. -- -- (21,525) -- --
--------- -------- -------- ------- ---------
Net cash used in investing activities......................... (27,556) (6,301) (754,058) (1,194) (123,043)
--------- -------- -------- ------- ---------
FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt............................ 39,252 10,679 846,853 5,000 110,563
Tender for 10.75% notes............................................. -- -- (128,205) -- --
Principal payments on debt and capital leases....................... (20,726) (23,977) (269,893) (4,889) (10,000)
Increase in deferred financing fees................................. -- -- (35,952) -- --
Cash dividends paid on preferred stock.............................. (800) (872) (293) (218) --
Redemption of preferred and exchangeable preferred stock............ -- -- (16,369) -- --
Issuance of common stock............................................ -- -- 319,866 -- --
--------- -------- -------- ------- ---------
Net cash provided by (used in) financing activities........... 17,726 (14,170) 716,007 (107) 100,563
--------- -------- -------- ------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................. 1,675 (1,919) 10,148 459 (6,966)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD........................ 1,983 3,658 1,739 1,739 11,887
--------- -------- -------- ------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD.............................. $ 3,658 $ 1,739 $ 11,887 $ 2,198 $ 4,921
========= ======== ======== ======= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest.......................................................... $ 14,095 $ 16,162 $ 27,519 $ 7,067 $ 8,649
========= ======== ======== ======= =========
Income taxes...................................................... $ 343 $ 227 $ 275 $ 91 $ 21
========= ======== ======== ======= =========
SUPPLEMENTAL DISCLOSURES 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 $ -- $ 728,848 $ -- $ 117,903
Cash paid......................................................... (42,636) -- 707,980 -- (117,903)
--------- -------- -------- ------- ---------
Liabilities assumed and incurred and issuance of notes payable...... $ 3,060 $ -- $ 20,868 $ -- $ --
========= ======== ======== ======= =========
Accretion of common and preferred stock............................. $ 714 $ 1,507 $ -- $ -- $ --
========= ======== ======== ======= =========
Accrued dividends on exchangeable preferred stock................... $ 82 $ 82 $ -- $ -- $ --
========= ======== ======== ======= =========
Additional obligation on CSX transaction (Note 2)................... $ -- $ -- $ 2,198 $ -- $ --
========= ======== ======== ======= =========
Write-off of deferred financing costs (Note 6)...................... $ -- $ -- $ 14,073 $ -- $ --
========= ======== ======== ======= =========
Note receivable on Denver Disposition............................... $ -- $ -- $ 6,440 $ -- $ --
========= ======== ======== ======= =========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 102
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996
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 22 metropolitan markets in the United States and seven
metropolitan markets in Canada.
Principles of consolidation -- The consolidated financial statements
include the accounts of Outdoor Systems, Inc. and its subsidiaries
(collectively, the "Company"), including its Canadian subsidiary Mediacom, Inc.
("Mediacom"). All significant intercompany accounts and transactions have been
eliminated in consolidation.
Significant accounting policies are as follows:
a. Cash and cash equivalents -- 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....................................................... 25-32 years
Advertising structures.......................................... 5-20 years
Vehicles........................................................ 3-5 years
Furniture and fixtures.......................................... 5 years
Perpetual easements............................................. 40 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 15 to 30 year periods. Amortization expense was $47,000,
$47,000 and $713,000 in 1994, 1995 and 1996, 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. Other revenue represents license fees from perpetual
easements and revenues from a printing operation.
f. Net income (loss) per share -- Primary income (loss) per common and
common equivalent share is computed based on the weighted average number of
common and common equivalent shares outstanding during each year and includes
shares issuable upon exercise of stock options. Such amounts have been adjusted
to reflect the 36.4535 for 1 stock split on April 17, 1996 and the 3 for 2 stock
splits on July 22, 1996, November 22, 1996 and July 3, 1997 respectively.
g. Impairment of long-lived assets -- On January 1, 1996, the Company
adopted Statement of Financial Accounting Standards ("SFAS") No. 121, Accounting
for the Impairment of Long-Lived Assets and of Long-Lived Assets to Be Disposed
Of. In accordance with the provisions of SFAS No. 121, the Company reviews the
carrying values of its long-lived assets and identifiable intangibles for
possible impairment whenever events or changes in circumstances indicate that
the carrying amount of assets to be held and used may not be recoverable. The
adoption of SFAS No. 121 had no effect on the December 31, 1996 consolidated
financial statements.
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
F-7
<PAGE> 103
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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.
i. Stock-based compensation -- In October 1995, the Financial Accounting
Standards Board issued SFAS No. 123, Accounting for Stock-Based Compensation. As
permitted by SFAS No. 123, the Company uses the intrinsic value based method
prescribed by the Accounting Principles Board ("APB") Opinion No. 25, Accounting
for Stock Issued to Employees, and related interpretations in accounting for its
plans. Accordingly, no compensation expense has been recognized for its
stock-based compensation plans. A summary of the pro forma effects on reported
income from continuing operations and earnings per share for 1996, as if the
fair value based method of accounting defined in SFAS No. 123 had been applied
is included in Note 9 to these consolidated financial statements. Such
information is not presented for 1995 and 1994 because no options were issued in
such years.
j. Environmental remediation costs -- The Company accrues for losses
associated with environmental remediation obligations when such losses are
probable and reasonably estimable. Accruals for estimated losses from
environmental remediation obligations generally are recognized no later than
completion of the remedial feasibility study. Such accruals are adjusted as
further information develops or circumstances change. Costs of future
expenditures for environmental remediation obligations are not discounted to
their present value.
k. New accounting pronouncement -- Beginning in 1997, the Company will be
required to implement SFAS No. 128 "Earnings Per Share" which requires, among
other matters, presentation of basic earnings per share, which is calculated
utilizing only weighted average common shares outstanding. Basic earnings (loss)
per share would have been $0.01 and $(0.18) and fully diluted earnings (loss)
per share would have been $0.01 and $(0.13), respectively for the years ended
December 31, 1995 and 1996 under SFAS 128.
l. Reclassifications -- Certain reclassifications were made to the 1994 and
1995 financial statements to conform with the 1996 presentation.
2. OFFERINGS AND ACQUISITIONS
COMPLETION OF INITIAL PUBLIC OFFERING
On April 24, 1996, the Company completed its Initial Public Offering
("IPO") by selling 9,036,198 shares of its common stock. The Company received
proceeds of approximately $36,644,000 net of underwriting discounts and
commissions and offering expenses of approximately $3,517,000.
GANNETT OUTDOOR ACQUISITION
On August 22, 1996, the Company purchased substantially all of the
billboard and transit advertising operations of the Outdoor Advertising Division
("Gannett Outdoor" or the "Gannett Outdoor Acquisition") of Gannett Co., Inc.,
for approximately $712,545,000 ($707,980,000 before cash overdraft acquired of
$4,565,000). The Company also acquired an option to acquire the Gannett Outdoor
operations in Houston ("Gannett Houston"), which option was exercised on
November 14, 1996 for $12,174,000. The principal assets of Gannett Outdoor and
Gannett Houston were approximately 40,000 advertising display faces consisting
of bulletins, posters and transit advertising displays (the Company also
acquired approximately 125,000 subway advertising display faces in New York
City) in and around New York, Los Angeles, Chicago, Philadelphia, San Francisco,
Detroit, Sacramento, St. Louis, Denver, San Diego, New Haven, Houston, Kansas
City, Grand Rapids, Flint and Rochester and in various locations in New Jersey
and Canada.
The Company financed the acquisition through a Senior Credit Facility, a
Subordinated Credit Facility ("Bridge Loan") and the sale on August 22, 1996 of
19,327,500 shares of common stock for which it received proceeds of
approximately $283,222,000 net of underwriting discounts and commissions and
offering expenses
F-8
<PAGE> 104
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of approximately $13,133,000. In October 1996, the Company sold $250,000,000 of
9 3/8% Senior Subordinated Notes due 2006 (the "1996 Notes"). The proceeds from
this offering were used to repay all borrowings under the Bridge Loan and to
partially repay amounts outstanding under the Senior Credit Facility (Note 5).
The acquisition was accounted for using the purchase method of accounting
and the results of operations have been included in the consolidated financial
statements subsequent to the date of acquisition. The acquisition resulted in
goodwill of $60,000,000 which represents the excess of the purchase price over
the fair value of the assets which amount will be amortized on a straight-line
basis over 30 years. The Company is continuing its evaluation of the fair value
of the Gannett Outdoor Acquisition and further adjustments to the purchase price
may be made.
DENVER DISPOSITION
In connection with the Gannett Outdoor Acquisition, on August 8, 1996, the
Company sold substantially all of its existing billboard assets in Denver
("Denver Disposition") to an unrelated party for $2,760,000 in cash and a
$6,440,000 9% promissory note due November 8, 2006, which is included in other
assets. The Denver Disposition resulted in a gain of $7,344,000.
OTHER 1996 ACQUISITIONS
On May 22, 1996, the Company completed the acquisition of perpetual
easements located on real property and leased to independent outdoor advertising
companies from CSX Realty Development Corporation ("CSX") for $21,525,000 in
cash and certain future payments in an aggregate amount not to exceed
$10,000,000 payable over a period of ten years beginning no later than the year
2006. The exact amount and timing of such payments is to be determined based
upon the results of the Company's operation of the easements. The cost of the
perpetual easements is included in property and equipment and will be amortized
on a straight-line basis over 40 years.
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 $1,817,000. The acquisition was accounted for as a
purchase and the results of operations of the Bench Ad Acquisition are included
in these financial statements from the date of acquisition.
ATLANTA ACQUISITION AND DISPOSITION
On December 19, 1994, the Company acquired the assets of Capitol Outdoor
Advertising, Inc. (the "1994 Acquisition") located in Atlanta, Georgia for cash
of $44,347,000. This acquisition has been accounted for using the purchase
method of accounting, and the results of operation have been included in the
consolidated financial statements subsequent to the acquisition. 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 "Atlanta Disposition"). This disposal was effective
December 19, 1994 and the resulting gain on sale of $4,325,000 is included in
income for 1994.
UNAUDITED PRO FORMA INFORMATION
The following table summarizes unaudited pro forma operating results for
the Company for the two years in the two-year period ended December 31, 1996,
assuming that the Gannett Outdoor Acquisition and other 1996 acquisitions and
the Denver Disposition had occurred at the beginning of the applicable year and
after giving effect to financing costs and purchase accounting adjustments.
F-9
<PAGE> 105
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
<TABLE>
<CAPTION>
1995 1996
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Consolidated net revenues...................................... $ 314,386 $ 335,826
========= =========
Income before extraordinary loss............................... $ 5,005 $ 14,173
========= =========
Net income..................................................... $ 5,005 $ 13,329
========= =========
Income attributable to common stockholders..................... $ 2,544 $ 9,868
========= =========
Net income per common share.................................... $ .04 $ .15
========= =========
</TABLE>
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Advertising structures and display leases...................... $153,080 $736,731
Perpetual land easements....................................... -- 24,428
Vehicles....................................................... 1,832 5,796
Furniture and fixtures......................................... 2,654 8,859
Buildings...................................................... 4,747 15,934
Land........................................................... 6,628 15,881
Other.......................................................... 481 8,963
-------- --------
Total.......................................................... 169,422 816,592
Less accumulated depreciation.................................. 57,693 74,448
-------- --------
Property and equipment -- net.................................. $111,729 $742,144
======== ========
</TABLE>
Advertising structures include $163,704 allocated to display leases related
to such advertising structures.
The Company has granted a security interest in substantially all of its
assets to lenders in connection with the Senior Credit Facility.
4. ACCRUED EXPENSES AND OTHER LIABILITIES
Accrued expenses and other liabilities is comprised of the following at
December 31:
<TABLE>
<CAPTION>
1995 1996
------ -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Accrued payroll, payroll taxes and severance.................... $ 922 $ 7,118
Percentage lease payments....................................... -- 2,206
Other liabilities assumed in Gannett acquisition................ -- 3,272
Customer deposits............................................... -- 909
Unearned revenue................................................ -- 796
Taxes........................................................... 90 422
Other........................................................... 161 2,930
------ -------
$1,173 $17,653
====== =======
</TABLE>
F-10
<PAGE> 106
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
5. LONG-TERM DEBT
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1995 1996
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Senior Credit Facility......................................... $ 21,000 $356,348
9 3/8% Senior Subordinated Notes............................... -- 250,000
10.75% Senior Notes............................................ 114,670 15
Other.......................................................... 6,599 46
-------- --------
Total.......................................................... 142,269 606,409
Less current maturities........................................ 550 28,000
-------- --------
Long-term debt -- net.......................................... $141,719 $578,409
======== ========
</TABLE>
At December 31, 1996, the Company was in compliance with the covenants of
its debt agreements.
SENIOR CREDIT FACILITY
The Senior Credit Facility, dated October 22, 1996, consists of 1) a U.S.
Dollar senior revolving line of credit facility of up to $125,000,000 including
a $35,000,000 letter of credit subfacility ("United States Revolver"), and a
Canadian Dollar ("C$") senior revolving line of credit facility ("Canadian
Revolver") of up to C$35,000,000 including a C$7,000,000 letter of credit
sub-facility; 2) a $240,000,000 and $10,000,000 Senior Secured U.S. Dollar Term
Loans A and B, respectively; and, 3) C$48,000,000 and $40,000,000 Senior Secured
Canadian Term Loans A and B, respectively. The Company has issued letters of
credit totaling $28,876,000 at December 31, 1996. Availability under the Senior
Credit Facility totaled approximately $90,000,000 at December 31, 1996.
The commitment of the lenders under the United States Revolver will be
reduced annually on December 31st of each year by $20,000,000 during 1998 and
1999, $25,000,000 during 2000 and $30,000,000 during 2001 and 2002. The
commitment under the Canadian Revolver will be reduced annually on December 31st
of each year by C$5,000,000 during 1999-2001 and C$20,000,000 during 2002. The
United States Term Loan A commitment will reduce in equal quarterly installments
commencing on March 31, 1997, with annual amortization of $24,000,000 during
1997, $36,000,000 during 1998, $45,000,000 during 1999, $55,000,000 during 2000,
$50,000,000 during 2001, and $30,000,000 during 2002. The Canadian Term Loan A
commitment will reduce in equal quarterly installments commencing on March 31,
1997, with annual amortization of C$4,800,000 during 1997, C$7,200,000 during
1998, C$9,000,000 during 1999, C$11,000,000 during 2000, C$10,000,000 during
2001 and C$6,000,000 during 2002. The United States Term Loan B commitment will
reduce in equal quarterly installments commencing on March 31, 1997, with annual
amortization of $100,000 during 1997-2000, $1,000,000 during 2001, $3,100,000
during 2002, and $5,500,000 during 2003. The Canadian Term Loan B commitment
will reduce in equal quarterly installments commencing on March 31, 1997, with
annual amortization of $400,000 during 1997-2000, $4,400,000 during 2001,
$12,000,000 during 2002, and $22,000,000 during 2003.
The United States and Canadian Revolvers and United States and Canadian
Term Loans A bear interest at the bank's base rate (8.25% at December 31, 1996)
plus 0.125% to 1.75% or LIBOR (5.53% at December 31, 1996) plus 1.125% to 2.75%,
based on the Company's total leverage ratio. The United States and Canadian Term
Loans B bear interest at the base rate plus 1.75% to 2% or LIBOR plus 2.75% to
3%, based on the Company's total leverage ratio.
The Company's obligations under the Senior Credit Facility are secured by a
first perfected lien on substantially all of the present and future assets of
the Company and a pledge of the Company's equity interest
F-11
<PAGE> 107
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
in its subsidiaries provided that the United States facilities will only be
secured by two thirds of the stock of Mediacom. The Canadian facilities will be
guaranteed by Mediacom's subsidiaries, the Company and each of the Company's
subsidiaries.
Under the Senior Credit Facility, among other things, conditions of default
arise if tobacco advertisement revenues exceed 15% of consolidated gross
revenues for any four consecutive quarters. The credit facility also places
limitations on the Company's acquisitions, dispositions, asset swaps, stock
repurchases, and capital expenditures, and requires the Company to comply with
financial covenants concerning leverage, interest coverage, fixed charges and
minimum cash flows.
9 3/8% SENIOR SUBORDINATED NOTES
In October 1996, the Company completed the sale of $250,000,000 of 9 3/8%
Senior Subordinated Notes due 2006 (the "1996 Notes"). The net proceeds of the
1996 Notes were used to repay the Bridge Loan and to reduce amounts borrowed
under the Senior Credit Facility and to pay related fees and expenses. The 1996
Notes represent general unsecured obligations of the Company and are
subordinated to all existing and future senior indebtedness of the Company and
are senior to all subordinated indebtedness of the Company.
Under the 1996 Notes, among other things, the Company is restricted in its
ability to incur additional indebtedness, make certain investments, create
liens, enter into transactions with affiliates, issue stock of a restricted
subsidiary, enter into sale and leaseback transactions, merge or consolidate the
Company, and transfer or sell assets. The Company is prohibited from paying cash
dividends and distributions.
MATURITIES
The annual maturities of long-term debt at December 31, 1996 are as
follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
1997........................................................ $ 28,000
1998........................................................ 61,785
1999........................................................ 59,679
2000........................................................ 67,133
2001........................................................ 58,939
Thereafter.................................................. 330,873
--------
Total............................................. $606,409
========
</TABLE>
6. EXTRAORDINARY LOSS ARISING FROM EARLY EXTINGUISHMENT OF DEBT
The extraordinary loss arising from the early extinguishment of debt
consisted of the following:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
Redemption of subordinated debt subsequent to IPO........... $ 1,415
Redemption of 10.75% Senior Notes:
Tender offer.............................................. 13,542
Deferred debt costs....................................... 3,802
Bridge Redeemable Preferred Stock and Bridge Loan
financing costs........................................... 8,856
--------
Total....................................................... 27,615
Less related tax benefit.................................... (9,835)
--------
Total extraordinary loss.......................... $ 17,780
========
</TABLE>
F-12
<PAGE> 108
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the IPO, the Company redeemed $6,583,000 principal
amount of subordinated debt that had a carrying value of $6,099,000 for
$7,514,000 in cash, resulting in an extraordinary loss of $1,415,000.
In order to facilitate the financing of the Gannett Outdoor Acquisition,
the Company purchased, pursuant to a tender offer (the "Debt Tender Offer"), all
but $15,000 aggregate principal amount of its outstanding 10.75% Senior Notes
due 2003 (the "Senior Notes"). The aggregate consideration paid by the Company
in the Debt Tender Offer of $1,116.25 per $1,000 principal amount of Senior
Notes, plus expenses associated therewith, resulted in an extraordinary loss
from debt extinguishment of $13,542,000.
In connection with the Gannett Outdoor Acquisition, the Company entered
into long-term bridge financing commitments for the Bridge Loan and redeemable
preferred stock. Such commitment fees and bridge loan issuance costs aggregated
$8,949,000. The commitment on the redeemable preferred stock was canceled at the
date of the Gannett Outdoor Acquisition and the Bridge Loan was repaid with the
net proceeds of the offering of the 1996 Notes resulting in an extraordinary
loss of $8,856,000.
7. 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. The carrying amount of variable
rate long-term debt instruments is estimated to approximate fair values as
the underlying agreements have been recently negotiated and rates are tied
to short-term indices.
The 1996 Notes are estimated to approximate market value as the trade
price of those notes approximates par value at December 31, 1996. 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.
8. OTHER EQUITY MATTERS
Redeemable preferred stock at December 31, 1995 consisted of the following:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
Exchangeable Preferred Stock, 10% cumulative dividend, $1
par value -- authorized, issued and outstanding, 24,235
shares.................................................... $ 3,504
Class A Preferred Stock, $1 par value -- authorized, issued
and outstanding, 40,000 shares............................ 5,526
Class B Preferred Stock, 9% cumulative, $1 par
value -- authorized, 5,000 shares; issued and outstanding,
4,619 shares.............................................. 4,619
--------
Total redeemable preferred stock.................. $ 13,649
========
</TABLE>
In connection with the IPO, the Company redeemed all of its outstanding
preferred stock for approximately $16,369,000.
In 1990, the Company issued common stock in connection with the financing
of an acquisition under which the Company was 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 was subject to redemption
at the option of the holder, the Company accreted 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 was calculated on a
straight-line basis and was charged directly to stockholders' deficit. At the
date of the IPO, the common stock was sold by the holders and the related put
options were terminated. Accordingly, amounts aggregating $3,868,000 were
credited to paid-in capital.
F-13
<PAGE> 109
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. STOCK OPTIONS
The Company applies APB No. 25 and related interpretations in accounting
for its stock option plan. Accordingly, no compensation expense has been
recognized for its stock-based compensation plan. Had compensation cost for the
Company's stock option plan been determined based upon the fair value at the
grant date for awards under this plan consistent with the methodology prescribed
in SFAS No. 123, the Company's net income and earnings per share for the year
ended December 31, 1996 would have been reduced by approximately $1,366,200, or
$0.03 per share. The fair value of the options granted during 1996 is estimated
as $2,277,000 on the date of grant using an option-pricing model with the
following assumptions: dividend yield 0%, volatility of 62.0%, an average
risk-free interest rate of 6.0%, assumed forfeiture rate of 0%, and an average
expected life of three years.
The following is a summary of changes in outstanding options:
<TABLE>
<CAPTION>
NUMBER OF EXERCISE
SHARES PRICE
--------- ----------------
<S> <C> <C>
Outstanding at December 31, 1994......................... 6,714,306 $0.03 to $0.55
Granted.................................................. -- --
Cancelled or expired..................................... -- --
Exercised................................................ -- --
---------
Outstanding at December 31, 1995......................... 6,714,306 $0.03 to $0.55
Granted.................................................. 3,097,940 $4.44 to $15.33
Cancelled or expired..................................... -- --
Exercised................................................ (225,000) $0.55
---------
Outstanding at December 31, 1996......................... 9,587,246 $0.03 to $15.33
---------
Exercisable at December 31, 1996......................... 6,489,306 $0.03 to $0.55
---------
</TABLE>
The following table summarizes information concerning currently outstanding
and exercisable options:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------------------- OPTIONS EXERCISABLE
WEIGHTED AVERAGE --------------------------------
NUMBER REMAINING WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING CONTRACTUAL LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- --------------- ----------- ---------------- ---------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
$ 0.03 5,197,059 N/A $ 0.03 5,197,059 $ 0.03
$ 0.55 1,292,247 N/A $ 0.55 1,292,247 $ 0.55
$ 4.44 3,078,170 9.3 years $ 4.44 -- --
$ 15.33 19,770 9.7 years $15.33 -- --
--------- ---------
9,587,246 6,489,306
========= =========
</TABLE>
The options issued prior to January 1, 1996 are fully exercisable and have
no expiration date. Options issued during 1996 vest ratably over a four year
period and expire in 2006.
10. BENEFIT PLANS
The Company had established an Incentive Plan (the "Plan") covering certain
managers and key employees. Incentive Awards ("Awards") were made under the Plan
in the form of shares of phantom stock based on the individual's performance.
Awards were valued each year based upon the estimated value of the Company. The
awards are vested at the date of grant and any increases in value vested over a
four year period. For the years ended December 31, 1994, 1995 and 1996, the
Company charged earnings for compensation expense of $218,000, $304,000 and
$159,000, respectively. In connection with the IPO, effective January 1, 1996,
the Company ceased allocating amounts to the accounts maintained under the
Incentive Plan. The Company offered to each current employee who is a
participant in the Incentive Plan the alternative of having
F-14
<PAGE> 110
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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
elected to settle their accounts in common stock, the Company issued (subject to
the vesting requirements and distribution terms and conditions) to such
participants options to purchase common stock at the initial public offering
price.
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, 1994, 1995 and 1996, the Company's contributions to the
401(k) plan were $49,000, $56,000 and $63,000, respectively.
11. INCOME TAXES
The provision (benefit) for income taxes is comprised of the following for
the years ended December 31,
<TABLE>
<CAPTION>
1994 1995 1996
------- ---- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................ $ 179 $ 50 $ 108
State -- including franchise taxes..................... 218 177 182
------- ---- -------
Total current............................................ 397 227 290
Deferred................................................. 1,324 91 9,910
------- ---- -------
Total income tax provisions.............................. $ 1,721 $318 $10,200
======= ==== =======
</TABLE>
The Company has federal net operating loss carryforwards of approximately
$34,693,000 as of December 31, 1996. These net operating loss carryforwards
expire as follows: $1,189,000 (2003), $3,494,000 (2004), $4,308,000 (2005),
$4,104,000 (2006), $1,193,000 (2007), $3,243,000 (2008), $68,000 (2009) and
$17,094,000 (2011).
Although realization is not assured, the Company believes, based on
operating results in 1996, and its expectations for the future, that taxable
income of the Company will more likely than not be sufficient to utilize all of
the $34,693,000 net operating loss carryforwards prior to their ultimate
expiration in the year 2011. 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.
Significant components of the Company's net deferred tax asset (liability)
as of December 31 are as follows:
<TABLE>
<CAPTION>
1995 1996
------------------- --------------------
NON- NON-
CURRENT CURRENT CURRENT CURRENT
------ -------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Deferred taxes:
Financial statement expenses not currently
deductible for income tax purposes..... $ 415 $ 393 $ 1,637 $ 435
Tax loss and other credit carryforwards... -- 6,854 -- 13,059
Deferred tax liability -- Excess of tax over
book depreciation......................... -- (1,992) -- (15,777)
------ -------- ------ --------
Total asset (liability)........... $ 415 $ 5,255 $ 1,637 $ (2,283)
====== ======== ====== ========
</TABLE>
F-15
<PAGE> 111
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>
1994 1995 1996
---- ---- ----
<S> <C> <C> <C>
Statutory rate................................................... 34% 34% 35%
Impact of adjustment to valuation allowance...................... -- (34) --
State income taxes, franchise tax................................ 20 7 4
Other............................................................ 2 3 3
-- -
--- ---
Reported rate.................................................... 56% 10% 42%
=== === ===
</TABLE>
12. COMMITMENTS AND OTHER
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, 1996, minimum annual rentals under all
operating leases for the next five years are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
1997........................................................ $ 33,391
1998........................................................ 17,116
1999........................................................ 12,034
2000........................................................ 7,946
2001........................................................ 6,212
Thereafter.................................................. 11,970
--------
Total............................................. $ 88,669
========
</TABLE>
Operating lease expense was $9,969,000, $13,533,000 and $29,790,000 for
1994, 1995 and 1996, respectively.
TRANSIT AGREEMENTS
The Company has signed agreements which provide an exclusive right to sell
advertising space in various airports, transit shelters and transit systems.
Under the various agreements, the Company must make minimum guarantee payments
as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
1997........................................................ $9,393
1998........................................................ 2,810
1999........................................................ 1,397
2000........................................................ 1,397
2001........................................................ 1,397
</TABLE>
LITIGATION
The Company is party either as plaintiff or defendant to various actions,
proceedings and pending claims, in the ordinary course of business. Litigation
is subject to many uncertainties and it is possible that some of the legal
actions, proceedings or claims referred to above could be decided against the
Company. Although the ultimate amount for which the Company or its subsidiaries
may be held liable with respect to matters where the Company is defendant is not
ascertainable, the Company believes that any resulting liability should not
materially affect the Company's financial position or results of operations.
F-16
<PAGE> 112
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In connection with the due diligence procedures performed by the Company
for the Gannett Outdoor acquisition, it was discovered that certain sites had
been contaminated as a result of removing various underground storage tanks. The
Company has estimated the costs to remediate the contamination and such amount
has been accrued in the financial statements at December 31, 1996 and is
included in accrued expenses and other.
13. FOREIGN OPERATIONS
The assets and operations of Mediacom are included in these financial
statements subsequent to August 22, 1996 and are as follows:
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
----------------------
<S> <C>
Net revenues:
United States............................................. $150,970
Canadian.................................................. 22,146
--------
Total net revenues.......................................... $173,116
========
Income from operations:
United States............................................. $ 52,150
Canadian.................................................. 4,875
--------
Total income from operations................................ $ 57,025
========
Assets:
United States............................................. $800,184
Canadian.................................................. 133,271
--------
Total assets................................................ $933,455
========
</TABLE>
14. TRANSACTIONS WITH RELATED PARTIES
During 1994, 1995 and 1996, the Company entered into a number of
transactions with officers and/or stockholders of the Company, affiliated
companies and affiliated partnerships.
The following summarizes those transactions as of and for the years ended
December 31:
<TABLE>
<CAPTION>
1994 1995 1996
---- ---- ----
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Due from employees and related parties, included in other
current assets.............................................. $ 59 $ 62 $385
==== ==== ====
Rental income from affiliated company......................... $ 45 $ 24 $ 6
==== ==== ====
Land rent paid to affiliated company and related parties...... $139 $139 $139
==== ==== ====
Administrative services agreement............................. $104 $ 35 $ --
==== ==== ====
Services agreement............................................ $250 $350 $450
==== ==== ====
</TABLE>
F-17
<PAGE> 113
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
15. QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
QUARTER
----------------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER
SHARE DATA)
<S> <C> <C> <C> <C>
1995:
Net revenues................................... $13,758 $15,979 $16,886 $18,910
Operating income............................... 3,048 5,128 5,586 6,523
Net (loss) income.............................. (1,265) 425 1,400 2,208
Net (loss) income per common share............. (.05) (.01) .02 .05
1996:
Net revenues................................... $16,945 $19,582 $41,769 $94,820
Operating income............................... 5,447 7,457 18,153 25,968
Net income (loss).............................. 777 1,364 (7,220) 1,637
Net (loss) income per common share............. (.01) (.03) (.14) .05
</TABLE>
The fourth quarter of 1995 includes other income of $1,000,000 relating to
cash payments received from the early termination of agreements made in
connection with an acquisition in 1992.
The third and fourth quarters of 1996 include the operating results from
the acquisition of Gannett Outdoor and an extraordinary loss from the early
extinguishment of debt of approximately $12.4 million and $4.5 million,
respectively, net of tax.
16. SUBSEQUENT EVENTS
Subsequent to December 31, 1996, the Company has acquired outdoor
advertising assets in the following locations and for the following purchase
prices:
<TABLE>
<CAPTION>
DESCRIPTION
------------------------------------------------------------ PURCHASE PRICE
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Villepigue Outdoor -- New York City......................... $ 27,000
========
Atlanta Bus Shelters -- Atlanta............................. $ 6,000
========
Philbin & Coine, Inc. -- Louisville......................... $ 830
========
Scadron Enterprises -- Chicago.............................. $ 24,500
========
Murad Communications -- Toronto............................. $ 5,489
========
Reynolds Outdoor, L.P. -- Dallas............................ $ 31,600
========
Ad Outdoor -- Halifax....................................... $ 879
========
Burlington Northern/Santa Fe -- Western and Midwestern
States.................................................... $ 29,500
========
</TABLE>
Each of these acquisitions will be accounted for using the purchase method
of accounting. The purchase prices above do not include any working capital
adjustments. These acquisitions were financed, primarily, utilizing cash flows
and amounts available under the Senior Credit Facility.
17. CONSOLIDATING FINANCIAL STATEMENTS
The following represents consolidating condensed financial statements of
Outdoor Systems, Inc. and its subsidiaries (the "Subsidiaries") which are
presented because certain of the Subsidiaries have guaranteed the 9 3/8% Senior
Subordinated Notes due 2006 (the "1996 Notes") and the 8 7/8% Senior
Subordinated Notes due
F-18
<PAGE> 114
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2007 (the "1997 Notes"). The Subsidiaries included in the consolidating
condensed financial statements presented below are all wholly-owned and
constitute all of the Company's direct and indirect subsidiaries. The 1996 and
1997 Notes are guaranteed by all of the Company's domestic subsidiaries (the
"Guarantors"). The guaranties of the Guarantors of the 1996 and 1997 Notes are
full, unconditional, and joint and several. The Subsidiaries who have not
guaranteed the 1996 and 1997 Notes (the "Non-Guarantors") are located in Canada.
Separate financial statements of the Guarantors are not presented because
management has determined that they would not be material to investors. There
are no significant restrictions on the Company's ability to obtain funds from
the Guarantors. The Company did not have any foreign subsidiaries prior to 1996.
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1996
<TABLE>
<CAPTION>
THE GUARANTOR ELIMINATION
COMPANY SUBSIDIARIES NON-GUARANTORS ENTRIES CONSOLIDATED
---------- ------------ -------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash and cash
equivalents............. $ 9,566 $ 24 $ 2,297 $ -- $ 11,887
Accounts
receivable -- net....... 45,775 185 11,015 -- 56,975
Prepaid land leases........ 7,521 -- 3,417 -- 10,938
Other current assets....... 9,195 114 6,428 -- 15,737
Deferred income taxes...... 1,637 -- -- -- 1,637
-------- ------ -------- -------- --------
Total current assets.... 73,694 323 23,157 -- 97,174
PROPERTY AND
EQUIPMENT -- Net........... 622,675 9,355 110,114 -- 742,144
OTHER ASSETS................. 10,116 39 -- -- 10,155
DEFERRED FINANCING COSTS..... 24,151 -- -- -- 24,151
GOODWILL -- Net.............. 59,831 -- -- -- 59,831
INVESTMENT IN SUBSIDIARY..... 46,118 -- -- (46,118) --
-------- ------ -------- -------- --------
TOTAL.............. $836,585 $9,717 $133,271 $(46,118) $933,455
======== ====== ======== ======== ========
CURRENT LIABILITIES:
Accounts payable........... $ 6,686 $ 16 $ 1,621 $ -- $ 8,323
Accrued interest........... 6,806 -- 250 -- 7,056
Accrued expenses and other
liabilities............. 13,094 514 4,045 -- 17,653
Current maturities of long-
term debt............... 28,000 -- -- -- 28,000
-------- ------ -------- -------- --------
Total current
liabilities........... 54,586 530 5,916 -- 61,032
LONG-TERM DEBT............... 496,015 46 82,348 -- 578,409
OTHER LONG-TERM
OBLIGATIONS................ 2,349 1,203 -- -- 3,552
DEFERRED INCOMES TAXES....... (4,544) -- 6,827 -- 2,283
-------- ------ -------- -------- --------
Total liabilities....... 548,406 1,779 95,091 -- 645,276
-------- ------ -------- -------- --------
COMMON STOCKHOLDERS'
EQUITY..................... 288,179 7,938 38,180 (46,118) 288,179
-------- ------ -------- -------- --------
Total.............. $836,585 $9,717 $133,271 $(46,118) $933,455
======== ====== ======== ======== ========
</TABLE>
F-19
<PAGE> 115
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
THE GUARANTOR ELIMINATION
COMPANY SUBSIDIARIES NON-GUARANTORS ENTRIES CONSOLIDATED
-------- ------------ -------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
REVENUES:
Outdoor advertising............. $172,797 $744 $ 21,492 $ (850) $194,183
Less: Lease agency
commissions.................. 24,322 27 2,787 -- 27,136
-------- ---- -------- ------- --------
Total........................ 148,475 717 18,705 (850) 167,047
Lease, printing and other
revenues..................... 1,778 -- 4,291 -- 6,069
-------- ---- -------- ------- --------
Net revenues................. 150,253 717 22,996 (850) 173,116
-------- ---- -------- ------- --------
OPERATING EXPENSES:
Direct advertising.............. 74,015 278 14,150 (850) 87,593
General and administrative...... 11,768 71 1,619 -- 13,458
Depreciation and amortization... 19,894 138 2,352 -- 22,384
-------- ---- -------- ------- --------
Total operating expenses..... 105,677 487 18,121 (850) 123,435
-------- ---- -------- ------- --------
GAIN ON ATLANTA AND DENVER
DISPOSITIONS.................... 7,344 -- -- -- 7,344
-------- ---- -------- ------- --------
OPERATING INCOME.................. 51,920 230 4,875 -- 57,025
INTEREST EXPENSE.................. 31,240 2 1,247 -- 32,489
-------- ---- -------- ------- --------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY LOSS.............. 20,680 228 3,628 -- 24,536
INCOME TAXES...................... 8,273 91 1,836 -- 10,200
-------- ---- -------- ------- --------
INCOME BEFORE EXTRAORDINARY
LOSS............................ 12,407 137 1,792 -- 14,336
EXTRAORDINARY LOSS................ (17,780) -- -- -- (17,780)
-------- ---- -------- ------- --------
(LOSS) INCOME BEFORE INCOME FROM
SUBSIDIARY...................... (5,373) 137 1,792 -- (3,444)
INCOME FROM SUBSIDIARY............ 1,929 -- -- (1,929) --
-------- ---- -------- ------- --------
NET INCOME (LOSS)................. (3,444) 137 1,792 (1,929) (3,444)
LESS STOCK DIVIDENDS, ACCRETIONS
AND DISCOUNT ON REDEMPTIONS..... 3,461 -- -- -- 3,461
-------- ---- -------- ------- --------
NET (LOSS) INCOME ATTRIBUTABLE TO
COMMON STOCKHOLDERS............. $ (6,905) $137 $ 1,792 $(1,929) $ (6,905)
======== ==== ======== ======= ========
</TABLE>
18. UNAUDITED NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q of Regulation S-X.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments and reclassifications considered
necessary for a fair and comparable presentation have been included and are of a
normal recurring nature. Operating results for the three months ended March 31,
1997, are not necessarily indicative of the results that may be expected for the
year ending December 31, 1997. Such
F-20
<PAGE> 116
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Form 10-K filed
with the Securities and Exchange Commission on March 31, 1997.
PENDING ACQUISITIONS
Van Wagner Acquisition -- On April 11, 1997, the Company entered into a
Stock Purchase Agreement to purchase the stock of Van Wagner Communications,
Inc. ("Van Wagner") for approximately $170 million in cash.
3M Media Acquisition -- On April 30, 1997, the Company entered into an
Agreement of Purchase and Sale to acquire the outdoor advertising operations of
Minnesota Mining and Manufacturing Company ("3M") through the purchase of the
capital stock of National Advertising Company, a subsidiary of 3M ("3M Media")
for approximately $1.0 billion in cash.
Each pending acquisition is subject to various conditions, including
clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
The Company intends to finance the purchase price of the pending
acquisitions and the fees and expenses associated with the pending acquisitions
and the acquisition financing through (i) the proceeds from the offering of
20,250,000 shares of common stock (the "Common Stock Offering") to the public,
(ii) borrowings under the Company's senior credit facility which is expected to
be amended to provide for a revolving credit facility and term loans of up to
approximately $1.1 billion and (iii) proceeds of an offering of up to $500
million aggregate principal amount of senior subordinated notes.
The Company received written commitments from Canadian Imperial Bank of
Commerce ("CIBC") to increase the amounts that may be borrowed under its senior
credit facility to up to $325 million of revolving credit loans and up to $715
million of term loans. In addition, the Company received written commitments
from CIBC for a preferred stock facility of up to $335 million and a senior
subordinated credit facility of up to $300 million. If the Common Stock Offering
or the Notes Offering is not consummated, the Company will use proceeds from the
preferred stock and senior subordinated credit facilities to finance a portion
of the purchase price of the pending acquisitions.
COMMON STOCK
On May 29, 1997 the shareholders approved an increase in the authorized
number of shares of common stock to 200,000,000. On June 11, 1997 the Board of
Directors authorized a 3 for 2 stock split in the form of a stock dividend paid
on July 3, 1997 to holders of record on June 23, 1997. All share and per share
data in these financial statements have been adjusted to reflect the split.
F-21
<PAGE> 117
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Minnesota Mining and Manufacturing Company
We have audited the accompanying balance sheets of National Advertising
Company (the Company) as of December 31, 1995 and 1996, and the related
statements of income and cash flows for each of the three years in the period
ended December 31, 1996. These financial statements have been prepared on the
basis described in Note 1 and are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of National Advertising Company
as of December, 31, 1995 and 1996 and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1996, in
conformity with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
March 21, 1997, except for Note 10,
as to which the date is May 1, 1997
F-22
<PAGE> 118
NATIONAL ADVERTISING COMPANY
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------- MARCH 31,
1995 1996 1997
-------- -------- -----------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS
Current assets:
Trade receivables, net of allowances of $1,500,
$1,767 and $1,874.................................... $ 24,512 $ 21,896 $ 19,578
Inventories............................................. 3,508 4,047 3,876
Prepaid land rents, current portion..................... 13,994 15,189 16,438
Deferred income taxes................................... 5,492 5,702 5,702
Other current assets.................................... 1,237 1,411 1,177
-------- -------- ---------
Total current assets............................ 48,743 48,245 46,771
Property, plant and equipment, net of accumulated
depreciation and amortization........................... 128,436 127,362 128,771
Prepaid land rents, non-current portion................... 907 1,885 1,754
Other assets.............................................. 324 200 192
-------- -------- ---------
Total assets.................................... $178,410 $177,692 $ 177,488
======== ======== =========
LIABILITIES AND NET ASSETS
Current liabilities:
Accounts payable........................................ $ 2,856 $ 1,684 $ 1,067
Accrued payroll and related expenses.................... 6,191 6,149 6,146
Deferred revenue........................................ 736 1,053 919
Accrued legal........................................... 2,756 3,331 1,731
Accrued workers compensation............................ 2,970 2,540 2,540
Accrued property taxes.................................. 1,817 966 1,072
Other current liabilities............................... 6,163 6,478 5,969
-------- -------- ---------
Total current liabilities....................... 23,489 22,201 19,444
Deferred income taxes..................................... 6,931 9,763 9,763
-------- -------- ---------
Total liabilities............................... 30,420 31,964 29,207
Net assets................................................ 147,990 145,728 148,281
-------- -------- ---------
Total liabilities and net assets................ $178,410 $177,692 $ 177,488
======== ======== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE> 119
NATIONAL ADVERTISING COMPANY
STATEMENTS OF INCOME
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------------ ---------------------
1994 1995 1996 1996 1997
-------- --------- --------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues.......................... $221,540 $ 232,162 $ 239,469 $ 55,662 $ 55,995
Agency commissions.............. (24,592) (26,744) (28,159) (6,401) (6,490)
-------- --------- --------- -------- --------
Net revenues...................... 196,948 205,418 211,310 49,261 49,505
Operating expenses:
Direct advertising.............. (97,673) (102,485) (104,510) (26,114) (24,364)
Selling and marketing........... (33,749) (34,646) (34,713) (8,893) (8,833)
General and administrative...... (12,024) (11,790) (12,406) (2,912) (3,139)
Depreciation and amortization... (18,061) (17,144) (15,382) (3,857) (3,785)
(Loss) gain on disposal of
property and equipment....... (343) 806 (21) 638 395
-------- --------- --------- -------- --------
Operating income.................. 35,098 40,159 44,278 8,123 9,779
Interest income, net.............. 1,147 1,924 2,059 368 464
-------- --------- --------- -------- --------
Income before income
taxes................. 36,245 42,083 46,337 8,491 10,243
Provision for income taxes........ (14,967) (17,510) (19,122) (3,507) (4,230)
-------- --------- --------- -------- --------
Net income........................ $ 21,278 $ 24,573 $ 27,215 $ 4,984 $ 6,013
======== ========= ========= ======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-24
<PAGE> 120
NATIONAL ADVERTISING COMPANY
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
------------------------------ -------------------
1994 1995 1996 1996 1997
-------- -------- -------- ------- -------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income.............................. $ 21,278 $ 24,573 $ 27,215 $ 4,984 $ 6,013
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization........ 18,061 17,144 15,382 3,857 3,785
Loss (gain) on disposal of property
and equipment...................... 343 (806) 21 (638) (395)
Deferred income tax provision........ 2,121 562 2,622
Provision for doubtful accounts...... 628 840 694 252 225
Changes in operating assets and
liabilities:
Increase (decrease) in trade
receivables........................ (3,685) (2,566) 1,922 3,618 2,093
Decrease (increase) in inventories... 1,274 5,125 (539) (116) 171
Increase in other assets............. (394) (1,612) (2,347) (1,204) (884)
(Decrease) increase in accounts
payable............................ (190) 665 (1,172) (1,323) (617)
Increase (decrease) in accrued
payroll and related expenses....... 255 2,271 (42) 38 (3)
Decrease in other liabilities........ (2,277) (983) (74) (1,086) (2,137)
-------- -------- -------- ------- -------
Net cash provided by operating
activities.................... 37,414 45,213 43,682 8,382 8,251
-------- -------- -------- ------- -------
Cash flows from investing activities:
Purchases of property and equipment..... (26,142) (24,963) (17,497) (4,490) (5,787)
Proceeds from sales of property and
equipment............................ 1,956 3,608 3,292 1,554 996
Payment for non-compete agreement....... -- (312) -- --
-------- -------- -------- ------- -------
Net cash used in investing
activities.................... (24,186) (21,667) (14,205) (2,936) (4,791)
-------- -------- -------- ------- -------
Cash flows from financing activities:
Payments of dividends................... (13,000) (18,000) (20,000) -- --
Net change in net assets................ (228) (5,546) (9,477) (5,446) (3,460)
-------- -------- -------- ------- -------
Net cash used in financing
activities.................... (13,228) (23,546) (29,477) (5,446) (3,460)
-------- -------- -------- ------- -------
Net change in cash........................ $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-25
<PAGE> 121
NATIONAL ADVERTISING COMPANY
NOTES TO FINANCIAL STATEMENTS
(IN THOUSANDS)
1. BASIS OF PRESENTATION
The accompanying financial statements include certain accounts of National
Advertising ("NADCO" or "the Company"), that are primarily dedicated to the
outdoor media and mall advertising businesses in the United States. The Company
is a wholly-owned subsidiary of Minnesota Mining and Manufacturing Company
("3M"). The accounts of the Company have been adjusted to exclude the effects
and results of the following: (1) the Travel Center Advertising business and (2)
the In-Store Media program utilizing 3M Floorminder's Graphics.
The financial statements present the historical financial position, results
of operations and cash flows of the Company, on the basis described above. Other
than amounts related to the customary time lag in paying monthly charges, the
Company has excluded from the balance sheets assets and liabilities related to
its employees' participation in the 3M pension and other postretirement benefit
plans. Current federal and state income taxes payable have been recorded as a
component of net assets.
NADCO owns and operates advertising display faces in outdoor and other
out-of-home media, selling the advertising space to national, regional and local
advertisers throughout the United States.
The statement of income reflects an allocation of certain costs and
expenses from 3M based on services provided by 3M (see Notes 2, 6 and 8). The
accompanying financial statements may not necessarily be indicative of the
financial position, results of operations or cash flows of the Company in the
future or what the financial position, results of operations or cash flows would
have been had the Company been a separate, independent company during the
periods presented.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
NADCO's revenues are generated from contracts with advertisers generally
covering periods ranging from one to thirty-six months. NADCO recognizes
revenues ratably over the contract term and defers customer prepayments of
rental fees. Costs incurred for the production of outdoor advertising displays
are recognized in the initial month of the contract or as incurred during the
contract period.
PREPAID LAND RENT
Most of NADCO's advertising structures are located on leased land. Land
rents are generally paid in advance for periods ranging from one to twelve
months. Prepaid rents are expensed ratably over the related rental term.
INVENTORIES
Inventories consist principally of parts and materials for the construction
and replacement of outdoor and mall advertising signage. Inventories are stated
at the lower of cost of market, cost being determined using the first-in,
first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment are stated at cost. Depreciation is recorded
using the straight-line method over estimated useful lives of the assets.
Repairs and maintenance are charged to expense when incurred. Expenditures
for significant improvements are capitalized. Upon sale or retirement of
property, plant and equipment, the cost and accumulated
F-26
<PAGE> 122
NATIONAL ADVERTISING COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
depreciation are eliminated from the accounts, and the related gain or loss is
included in the statement of income.
IMPAIRMENT OF LONG-LIVED ASSETS
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of. The Company assesses the impairment
of its long-lived assets, including intangibles and property and equipment,
whenever economic events or changes in circumstances indicate that the carrying
amounts of the assets may not be recoverable. Long-lived assets are considered
to be impaired when the sum of the expected future operating cash flows,
undiscounted and without interest charges, is less than the carrying amounts of
the related assets. No adjustment was necessary as a result of the above
adoption.
PENSION AND POSTRETIREMENT PLANS
NADCO employees participate in 3M pension and other postretirement plans.
The Company has accounted for its participation in the 3M plans as a
participation in multi-employer plans. Accordingly, the statement of income
includes an allocation from 3M for the costs associated with the NADCO employees
who participate in these plans that is comparable to the Company's required
contribution to the plans for the periods presented. Additionally, no assets and
liabilities have been reflected in the balance sheets related to the overall 3M
pension and other postretirement benefit plans since it is not practicable to
segregate the amounts applicable to the Company.
INCOME TAXES
The Company is included in the consolidated income tax returns of 3M. The
Company has no tax-sharing agreement, formal or informal, with 3M. For purposes
of the accompanying financial statements, income taxes are determined on the
"separate return" method. The financial statements reflect the application of
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes, for all periods presented. Current federal and state income taxes payable
for the Company's operations are included in Net Assets as 3M pays all income
taxes and receives all income tax refunds on the Company's behalf.
Deferred income taxes are recognized for the future tax consequences of
differences between the bases of assets and liabilities and their
financial-reporting amounts at each year-end based on enacted laws and statutory
tax rates applicable to the periods in which the differences are expected to
affect taxable income. Valuation allowances are established when necessary to
reduce deferred tax assets to the amounts expected to be realized. Income tax
expense is the payable for the period and the change during the period in
deferred tax assets and liabilities.
ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from those estimates.
F-27
<PAGE> 123
NATIONAL ADVERTISING COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1995 and 1996 consists of the
following:
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Signs, principally outdoor advertising structures............ $ 262,766 $ 272,219
Land......................................................... 3,624 3,578
Buildings and leasehold improvements......................... 6,289 6,261
Machinery and equipment...................................... 1,261 1,138
Mobile equipment............................................. 5,951 5,457
Furniture and fixtures....................................... 8,711 9,762
Construction in progress..................................... 4,954 2,313
--------- ---------
293,556 300,728
Accumulated depreciation and amortization.................... (165,120) (173,366)
--------- ---------
Property, plant and equipment, net........................... $ 128,436 $ 127,362
========= =========
</TABLE>
4. NET ASSETS
Net assets is comprised of the following components at December 31, 1995
and 1996:
<TABLE>
<CAPTION>
1995 1996
-------- --------
<S> <C> <C>
Capital.......................................................... $ 4,000 $ 4,000
Retained earnings................................................ 163,671 170,886
Intercompany accounts with affiliates............................ (19,681) (29,158)
-------- --------
$147,990 $145,728
======== ========
</TABLE>
The authorized capital stock of the Company consists of 50,000 shares of no
par common stock, of which 40,000 shares are issued and outstanding.
As discussed in Notes 1 and 2, the intercompany accounts with affiliates
include net charges from 3M and other affiliates for various services and cost
allocations. In addition, the intercompany accounts with affiliates include
liabilities relating to current federal and state income taxes, and state sales
and use taxes.
5. OPERATING LEASES
Rental expense for operating leases totaled $35,441, $36,775, and $38,754
including contingent rental payments of $2,136, $2,802, and $3,251 for the years
ended December 31, 1994, 1995 and 1996, respectively. Contingent payments are
primarily based on related signage revenues. Land leases are generally entered
into for terms of 10 years or less.
Minimum future lease commitments at December 31, 1996 for the next five
years are as follows:
<TABLE>
<CAPTION>
OTHER LAND
LEASES LEASES TOTAL
------ -------- ---------
<S> <C> <C> <C>
1997...................................................... $ 95 $ 33,680 $33,775
1998...................................................... 29 33,733 33,762
1999...................................................... 19 33,819 33,838
2000...................................................... 5 33,846 33,851
2001...................................................... 33,860 33,860
---- -------- --------
Total minimum lease payments.............................. $148 $168,938 $169,086
==== ======== ========
</TABLE>
F-28
<PAGE> 124
NATIONAL ADVERTISING COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The total minimum lease payments for land leases assumes that the company
will continue to renew, at current lease rates, its existing leases which may
expire during the five years presented.
6. EMPLOYEE BENEFITS
PENSION PLANS
Substantially all of the Company's employees participate in defined benefit
pension plans sponsored by 3M. 3M's pension benefits are based principally on an
employee's years of service and compensation near retirement. 3M has allocated
pension expense to the Company of approximately $1,793 $1,711 and $1,861, in
1994, 1995 and 1996, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Under various 3M plans, the Company provides health care and life insurance
benefits to substantially all employees who reach retirement age while employed
by 3M, their covered dependents and beneficiaries. 3M has allocated to the
Company postretirement benefit expense of approximately $711, $768, and $949 for
the years ended December 31, 1994, 1995 and 1996, respectively.
DEFINED CONTRIBUTION PLANS
Employees of the Company also participate in a 3M sponsored Employee
Savings Plan under section 401(k) of the Internal Revenue Code. Under this plan,
3M matches employee contributions of up to 6 percent of compensation at rates
ranging from 10 to 85 percent depending upon 3M financial performance. 3M's
matching contributions to the employee savings plan are funded through an
employee stock ownership plan. The Company's allocation of the expense related
to the Employee Savings Plan was $425, $430, and $478 in 1994, 1995, and 1996,
respectively.
7. INCOME TAXES
The provision for income taxes for the years ended December 31, 1994, 1995
and 1996 is comprised of the following amounts:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------- -------
<S> <C> <C> <C>
Provision for income taxes:
Federal:
Current.......................................... $10,294 $13,582 $13,225
Deferred......................................... 1,699 450 2,100
------- ------- -------
11,993 14,032 15,325
State and local:
Current.......................................... 2,552 3,366 3,275
Deferred......................................... 422 112 522
------- ------- -------
2,974 3,478 3,797
------- ------- -------
Total provision for income taxes...................... $14,967 $17,510 $19,122
======= ======= =======
</TABLE>
The effective tax rate differs from the U.S. federal statutory rate
principally due to state income taxes and certain non-deductible expenses.
F-29
<PAGE> 125
NATIONAL ADVERTISING COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The tax effects of temporary differences which gave rise to deferred income
tax assets and liabilities consisted of the following:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------ ------
<S> <C> <C> <C>
Deferred income tax assets:
Accrued vacation...................................... $ 945 $1,017 $1,017
Lease acquisition costs............................... 677 868 1,153
Allowance for doubtful accounts....................... 570 603 711
Accrued legal......................................... 1,108 1,108 1,339
Accrued workers compensation.......................... 1,194 1,194 1,021
Other accrued liabilities............................. 1,510 1,570 1,614
------- ------ ------
Total deferred income tax assets.............. 6,004 6,360 6,855
------- ------ ------
Deferred income tax liabilities:
Property, plant & equipment........................... 6,734 7,656 10,773
Other................................................. 147 143 143
------- ------ ------
Total deferred income tax liabilities......... 6,881 7,799 10,916
------- ------ ------
Net deferred income tax liabilities..................... $ 877 $1,439 $4,061
======= ====== ======
</TABLE>
The deferred income tax assets and liabilities have been classified in the
balance sheet as follows:
<TABLE>
<CAPTION>
1994 1995 1996
------- ------ ------
<S> <C> <C> <C>
Net deferred income tax assets -- current............... $ 5,327 $5,492 $5,702
Net deferred income tax liabilities -- non-current...... 6,204 6,931 9,763
------- ------ ------
Net deferred income tax liabilities..................... $ 877 $1,439 $4,061
======= ====== ======
</TABLE>
8. TRANSACTIONS WITH RELATED PARTIES
3M provides the Company with various services, including certain corporate
accounting, finance and administration, facility management, human resource and
legal. The cost allocations to the Company for such services were approximately
$9,305, $9,058, and $9,183 for the years ended December 31, 1994, 1995 and 1996,
respectively. The amounts allocated are based on historical or actual usage of
services relative to the usage of the other participating affiliated businesses.
Additionally, 3M allocates charges to the Company for its share of the
annual self-insurance expense, consisting of workers' compensation, auto and
general liability claims. This expense allocation is based upon the ratio of
NADCO claims and loss development to the total amount of 3M claims and loss
development. The self-insurance expense allocated to the Company was $5,284,
$6,240, and $6,432 for the years ended December 31, 1994, 1995 and 1996,
respectively.
The Company also rents its corporate headquarters and is charged for the
use of other 3M facilities. The expense allocated to the Company was $4,537,
$4,281 and $5,227 for the years ended December 31, 1994, 1995 and 1996,
respectively.
Personnel of the Company use certain automobiles owned by 3M. The Company
recognized $956, $930 and $993 in rental expense for 1994, 1995 and 1996,
respectively, related to the use of these assets.
The Company invests its excess cash with 3M in a participation investment
account. Interest income earned was $1,249, $1,962 and $2,073 for the years
ended December 31, 1994, 1995 and 1996.
F-30
<PAGE> 126
NATIONAL ADVERTISING COMPANY
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
9. LITIGATION AND CLAIMS
The Company is a defendant in a 1995 Florida federal court suit, filed by
two former NADCO sales representatives who formed a company to compete with
NADCO. This suit seeks approximately $36 million in damages for lost profits and
punitive damages, allegedly arising out of violations of antitrust laws,
intentional tortious interference with business opportunities and defamation of
business reputation. Trial of this matter is scheduled to begin in April 1997.
The plaintiffs have made settlement demands for amounts significantly less than
the amount sought in the suit. Management believes it has adequate defenses,
however, if liability is found, management is not able, at this time, to
estimate the amount or range of potential loss.
In addition to the above matter, various legal actions and claims are
pending or may be instituted or asserted against the Company in the future,
including those arising out of alleged personal injury, discrimination and
antitrust violations, condemnation matters, permit appeals, property owner
disputes, amortization issues, permit violation questions, lease disputes,
foreclosures and property tax issues. Liabilities have been recorded for these
matters to the extent that it is probable that the Company will be found liable
and the minimum amount of liability is determinable.
Management believes that the ultimate outcome of all pending litigation,
after considering recorded liabilities, would not have a material adverse effect
on the Company's financial position or results of operations.
10. PENDING SALE OF THE COMPANY
On April 30, 1997, 3M agreed to sell all of the outstanding common stock of
the Company to Outdoor Systems, Inc. for approximately $1.0 billion cash.
11. UNAUDITED NOTE TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
The accompanying unaudited interim financial statements have been prepared
in accordance with generally accepted accounting principles applicable to
interim financial statements. Accordingly, they do not include all of the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all adjustments and
reclassifications considered necessary for a fair and comparable presentation
have been included and are of a normal recurring nature. Operating results for
the three months ended March 31, 1997, are not necessarily indicative of the
results that may be expected for the year ending December 31, 1997.
F-31
<PAGE> 127
===============================================================
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
REPRESENTATIONS IN CONNECTION WITH THE OFFER CONTAINED HEREIN OTHER THAN THOSE
CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF ANY OFFER TO BUY ANY SECURITY OTHER THAN THOSE TO WHICH IT
RELATES, NOR DOES IT CONSTITUTE AN OFFER TO SELL, OR THE SOLICITATION OF AN
OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR
SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING SUCH 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, UNDER ANY CIRCUMSTANCES, 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
Risk Factors.................................. 15
Use of Proceeds............................... 22
Capitalization................................ 22
Unaudited Consolidated Pro Forma Financial
Information................................. 23
Selected Consolidated Financial and Other
Data........................................ 32
Management's Discussion and Analysis of
Results of Operations and Financial
Condition................................... 34
The Exchange Offer............................ 36
Business...................................... 44
Management.................................... 52
Principal Stockholders........................ 55
Description of Capital Stock.................. 57
Description of the 1996 Notes................. 57
Description of Senior Credit Facility......... 58
Description of the Notes...................... 60
Certain Federal Income Tax Considerations..... 85
Plan of Distribution.......................... 88
Legal Matters................................. 89
Experts....................................... 89
Available Information......................... 89
Incorporation of Certain Documents by
Reference................................... 90
Index to Consolidated Financial Statements.... F-1
</TABLE>
===============================================================
===============================================================
[OUTDOOR SYSTEMS LOGO]
OFFER TO EXCHANGE ITS
8 7/8% SENIOR SUBORDINATED NOTES DUE 2007
WHICH HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933,
AS AMENDED, FOR ANY AND ALL
OF ITS OUTSTANDING 8 7/8% SENIOR
SUBORDINATED NOTES DUE 2007
, 1997
===============================================================
<PAGE> 128
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law (the "Delaware Law"),
Article VII of the Registrant's Fourth Amended and Restated Certificate of
Incorporation (the "Certificate of Incorporation"), and Article VI of the
Company's Amended and Restated 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.
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.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<C> <C> <S>
3.1 -- Fourth Amended and Restated Certificate of Incorporation (filed as Exhibit 99.2 to
the Registrant's Current Report on Form 8-K filed on June 4, 1997 (File No.
0-28256) and incorporated by reference).
3.2 -- Amended and Restated Bylaws (filed as Exhibit 3.2 to the Registrant's Amendment
No. 2 to Form S-1 Registration Statement No. 333-1582 and incorporated herein by
reference).
4.1 -- Indenture dated October 15, 1996, by and among the Registrant, its United States
subsidiaries and The Bank of New York, as trustee, relating to the 9 3/8% Senior
Subordinated Notes due 2006 (filed as Exhibit 99.1 to the Registrant's Current
Report on Form 8-K dated October 9, 1996 (File No. 0-28256) and incorporated
herein by reference).
4.2 -- Indenture dated as of June 23, 1997 among the Registrant, its United States
subsidiaries and The Bank of New York, as trustee, relating to the 8 7/8% Senior
Subordinated Notes due 2007.
4.3 -- Form of Note (included in Exhibit 4.2).
5.1 -- Opinion of Powell, Goldstein, Frazer & Murphy LLP.*
23.1 -- Consent and Report on Schedule of Deloitte & Touche LLP.
23.2 -- Consent of Coopers & Lybrand L.L.P.
23.3 -- Consent of Powell, Goldstein, Frazer & Murphy LLP (included in Exhibit 5.1).*
24.1 -- Powers of Attorney (included in signature pages hereof).
25.1 -- Statement of Eligibility of Trustee on Form T-1.*
27 -- Financial Data Schedule.
99.1 -- Purchase Agreement dated June 17, 1997 among the Registrant, its United States
subsidiaries, CIBC Wood Gundy Securities Corp., Alex. Brown & Sons Incorporated
and Donaldson, Lufkin & Jenrette Securities Corporation.
99.2 -- Registration Rights Agreement dated as of June 17, 1997 among the Registrant, the
Guarantors named therein, CIBC Wood Gundy Securities Corp., Alex. Brown & Sons
Incorporated and Donaldson Lufkin & Jenrette Securities Corporation.
</TABLE>
II-1
<PAGE> 129
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ----------------------------------------------------------------------------------
<C> <C> <S>
99.3 -- Form of Letter of Transmittal.*
99.4 -- Form of Notice of Guaranteed Delivery.*
</TABLE>
- ---------------
* To be filed by amendment.
(b) Financial Statement Schedules.
Schedule II -- Valuation and Qualifying Accounts.
ITEM 22. UNDERTAKINGS.
The undersigned Registrants hereby undertake:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply
if the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by the
Registrants pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(b) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(c) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrants hereby undertake that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrants' annual report pursuant to section 13(a) or 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 herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrants hereby undertake to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Item 4, 10(b), 11, or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
The undersigned Registrants hereby undertake to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions, or otherwise, the Registrants
have been advised that in the opinion of the Securities and Exchange Commission
such
II-2
<PAGE> 130
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 Registrants of expenses incurred
or paid by a director, officer or controlling person of any of the Registrants
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 Registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction to the questions 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-3
<PAGE> 131
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused 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 9th day of July, 1997.
OUTDOOR SYSTEMS, INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
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 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, amy lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ----------------------------------- ------------------------------------ -------------
<C> <S> <C>
/s/ ARTHUR R. MORENO President (Principal Executive July 9, 1997
- ----------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and Director July 9, 1997
- -----------------------------------
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief July 9, 1997
- ----------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial Officer)
/s/ BRIAN J. O'CONNOR Director July 9, 1997
- -----------------------------------
Brian J. O'Connor
/s/ STEPHEN F. BUTTERFIELD Director July 9, 1997
- -----------------------------------
Stephen F. Butterfield
</TABLE>
II-4
<PAGE> 132
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused 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 9th day of July, 1997.
OUTDOOR SYSTEMS PAINTING, INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
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 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.
Pursuant to the requirements of the Securities Act of 1933, this
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
- ----------------------------------- ------------------------------------ -------------
<C> <S> <C>
/s/ ARTHUR R. MORENO President (Principal Executive July 9, 1997
- ----------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and Director July 9, 1997
- -----------------------------------
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief July 9, 1997
- ----------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial Officer)
</TABLE>
II-5
<PAGE> 133
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused 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 9th day of July, 1997.
OS ADVERTISING OF TEXAS PAINTING, INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
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 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.
Pursuant to the requirements of the Securities Act of 1933, this
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
- ----------------------------------- ------------------------------------ -------------
<C> <S> <C>
/s/ ARTHUR R. MORENO President (Principal Executive July 9, 1997
- ----------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and Director July 9, 1997
- -----------------------------------
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief July 9, 1997
- ----------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial Officer)
</TABLE>
II-6
<PAGE> 134
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused 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 9th day of July, 1997.
OS BASELINE, INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
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 any and all amendments (including post-effective
amendments) to this Registration Statement, to sign any related registration
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.
Pursuant to the requirements of the Securities Act of 1933, this
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
- ----------------------------------- ------------------------------------ -------------
<C> <S> <C>
/s/ ARTHUR R. MORENO President (Principal Executive July 9, 1997
- ----------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and Director July 9, 1997
- -----------------------------------
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief July 9, 1997
- ----------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial Officer)
</TABLE>
II-7
<PAGE> 135
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused 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 9th day of July, 1997.
DECADE COMMUNICATIONS GROUP, INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
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 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.
Pursuant to the requirements of the Securities Act of 1933, this
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
- ----------------------------------- ---------------------------------- ----------------
<C> <S> <C>
/s/ ARTHUR R. MORENO President (Principal Executive July 9, 1997
- ----------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and Director July 9, 1997
- -----------------------------------
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief July 9, 1997
- ----------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial Officer)
</TABLE>
II-8
<PAGE> 136
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused 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 9th day of July, 1997.
BENCH ADVERTISING COMPANY OF
COLORADO, INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
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 any and all amendments (including post-effective
amendments) to this Registration Statement, to sign any related registration
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.
Pursuant to the requirements of the Securities Act of 1933, this
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
- ----------------------------------- ------------------------------------ -------------
<C> <S> <C>
/s/ ARTHUR R. MORENO President (Principal Executive July 9, 1997
- ----------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and Director July 9, 1997
- -----------------------------------
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief July 9, 1997
- ----------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial Officer)
</TABLE>
II-9
<PAGE> 137
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused 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 9th day of July, 1997.
NEW YORK SUBWAYS
ADVERTISING CO., INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
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 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.
Pursuant to the requirements of the Securities Act of 1933, this
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
- ----------------------------------- ------------------------------------ -------------
<C> <S> <C>
/s/ ARTHUR R. MORENO President (Principal Executive July 9, 1997
- ----------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and Director July 9, 1997
- -----------------------------------
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief July 9, 1997
- ----------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial Officer)
</TABLE>
II-10
<PAGE> 138
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused 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 9th day of July, 1997.
OS BUS, INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
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 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.
Pursuant to the requirements of the Securities Act of 1933, this
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
- ----------------------------------- ------------------------------------ --------------
<C> <S> <C>
/s/ ARTHUR R. MORENO President (Principal Executive July 9, 1997
- ----------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and Director July 9, 1997
- -----------------------------------
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief July 9, 1997
- ----------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial Officer)
</TABLE>
II-11
<PAGE> 139
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused 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 9th day of July, 1997.
OUTDOOR SYSTEMS (NEW YORK), INC.
By: /s/ WILLIAM S. LEVINE
------------------------------------
William S. Levine
Chairman of the Board
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 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.
Pursuant to the requirements of the Securities Act of 1933, this
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
- ----------------------------------- ------------------------------------ -------------
<C> <S> <C>
/s/ ARTHUR R. MORENO President (Principal Executive July 9, 1997
- ----------------------------------- Officer) and Director
Arthur R. Moreno
/s/ WILLIAM S. LEVINE Chairman of the Board and Director July 9, 1997
- -----------------------------------
William S. Levine
/s/ BILL M. BEVERAGE Secretary, Treasurer and Chief July 9, 1997
- ----------------------------------- Financial Officer (Principal
Bill M. Beverage Accounting and Financial Officer)
</TABLE>
II-12
<PAGE> 140
OUTDOOR SYSTEMS, INC. AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1994, 1995 AND 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
---------------------
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF PERIOD EXPENSES OTHER DEDUCTIONS OF PERIOD
- --------------------------------------- ---------- ---------- ------ ---------- ---------
<S> <C> <C> <C> <C> <C>
1994
Allowance for Doubtful Accounts...... $ 739 $ 792 $ -- $515(1) $ 1,016
====== ====== ====== ==== ======
1995
Allowance for Doubtful Accounts...... $1,016 $ 761 $ -- $767(1) $ 1,010
====== ====== ====== ==== ======
1996
Allowance for Doubtful Accounts...... $1,010 $2,492 $2,726(2) $830(1) $ 5,398
====== ====== ====== ==== ======
March 31, 1997
Allowance for Doubtful Accounts...... $5,398 $1,191 $ -- $649 $ 5,940
====== ====== ====== ==== ======
</TABLE>
- ---------------
(1) Represents accounts receivable write-offs.
(2) Amount represents reserve at date of acquisition related to accounts
receivable in the working capital of companies acquired.
<PAGE> 141
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------------------------------------------------------------------------
<C> <C> <S> <C>
3.1 -- Fourth Amended and Restated Certificate of Incorporation (filed as Exhibit
99.2 to the Registrant's Current Report on Form 8-K filed on June 4, 1997
(File No. 0-28256) and incorporated by reference).
3.2 -- Amended and Restated Bylaws (filed as Exhibit 3.2 to the Registrant's
Amendment No. 2 to Form S-1 Registration Statement No. 333-1582 and
incorporated herein by reference).
4.1 -- Indenture dated October 15, 1996, by and among the Registrant, its United
States subsidiaries and The Bank of New York, as trustee, relating to the
9 3/8% Senior Subordinated Notes due 2006 (filed as Exhibit 99.1 to the
Registrant's Current Report on Form 8-K dated October 9, 1996 (File No.
0-28256) and incorporated herein by reference).
4.2 -- Indenture dated as of June 23, 1997 among the Registrant, its United States
subsidiaries and The Bank of New York, as trustee, relating to the 8 7/8%
Senior Subordinated Notes due 2007.
4.3 -- Form of Note (included in Exhibit 4.2).
5.1 -- Opinion of Powell, Goldstein, Frazer & Murphy LLP.*
23.1 -- Consent and Report on Schedule of Deloitte & Touche LLP.
23.2 -- Consent of Coopers & Lybrand L.L.P.
23.3 -- Consent of Powell, Goldstein, Frazer & Murphy LLP (included in Exhibit 5.1).*
24.1 -- Powers of Attorney (included on signature pages hereof).
25.1 -- Statement of Eligibility of Trustee on Form T-1.*
27 -- Financial Data Schedule.
99.1 -- Purchase Agreement dated June 17, 1997 among the Registrant, its United
States subsidiaries, CIBC Wood Gundy Securities Corp., Alex. Brown & Sons
Incorporated and Donaldson, Lufkin & Jenrette Securities Corporation.
99.2 -- Registration Rights Agreement dated as of June 17, 1997 among the Registrant,
the Guarantors named therein, CIBC Wood Gundy Securities Corp., Alex. Brown &
Sons Incorporated and Donaldson Lufkin & Jenrette Securities Corporation.
99.3 -- Form of Letter of Transmittal.*
99.4 -- Form of Notice of Guaranteed Delivery.*
</TABLE>
- ---------------
* To be filed by amendment.
<PAGE> 1
EXHIBIT 4.2
================================================================================
OUTDOOR SYSTEMS, INC.
THE GUARANTORS
and
THE BANK OF NEW YORK, as Trustee
--------------------
INDENTURE
Dated as of June 23, 1997
--------------------
$500,000,000
8 7/8% Senior Subordinated Notes due 2007
================================================================================
<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.................................. 25
Section 1.03. Incorporation by Reference of
Trust Indenture Act.............................. 26
Section 1.04. Rules of Construction.............................. 26
ARTICLE 2
THE NOTES
Section 2.01. Form and Dating.................................... 27
Section 2.02. Execution and Authentication....................... 28
Section 2.03. Registrar and Paying Agent......................... 29
Section 2.04. Paying Agent To Hold Assets in Trust............... 29
Section 2.05. Noteholder Lists................................... 30
Section 2.06. Transfer and Exchange.............................. 30
Section 2.07. Replacement Notes.................................. 31
Section 2.08. Outstanding Notes.................................. 31
Section 2.09. Temporary Notes.................................... 32
Section 2.10. Cancellation....................................... 32
Section 2.11. Defaulted Interest................................. 33
Section 2.12. Deposit of Moneys.................................. 33
Section 2.13. CUSIP Number....................................... 33
Section 2.14. Book-Entry Provisions for Global Notes............. 34
Section 2.15. Special Transfer Provisions........................ 35
ARTICLE 3
REDEMPTION
Section 3.01. Notices to Trustee................................. 38
Section 3.02. Selection by Trustee of Notes To
Be Redeemed...................................... 38
Section 3.03. Notice of Redemption............................... 38
Section 3.04. Effect of Notice of Redemption..................... 39
Section 3.05. Deposit of Redemption Price........................ 40
Section 3.06. Notes Redeemed in Part............................. 40
ARTICLE 4
COVENANTS
Section 4.01. Payment of Notes................................... 41
Section 4.02. SEC Reports........................................ 41
Section 4.03. Waiver of Stay, Extension or Usury
Laws............................................. 42
Section 4.04. Compliance Certificate............................. 42
-i-
<PAGE> 4
Page
Section 4.05. Payment of Taxes and Other Claims................... 43
Section 4.06. Maintenance of Properties and
Insurance......................................... 43
Section 4.07. Compliance with Laws................................ 44
Section 4.08. Corporate Existence................................. 45
Section 4.09. Maintenance of Office or Agency..................... 45
Section 4.10. Limitation on Additional Indebtedness............... 46
Section 4.11. Limitation on Investments........................... 46
Section 4.12. Limitation on Capital Stock of
Restricted Subsidiaries........................... 46
Section 4.13. Limitation on Restricted Payments................... 46
Section 4.14. Limitation on Other Senior
Subordinated Debt................................. 49
Section 4.15. Limitation on Certain Asset Sales................... 49
Section 4.16. Limitation on Transactions with
Affiliates........................................ 52
Section 4.17. Limitations on Liens................................ 53
Section 4.18. Limitations on Creation of
Subsidiaries...................................... 53
Section 4.19. Limitation on Sale and Lease-Back
Transactions...................................... 54
Section 4.20. Limitation on Dividends and Other
Payment Restrictions Affecting
Subsidiaries...................................... 54
Section 4.21. Guarantees of Certain Indebtedness.................. 54
Section 4.22. Payments for Consent................................ 55
Section 4.23. Line of Business.................................... 55
Section 4.24. Change of Control................................... 55
ARTICLE 5
SUCCESSOR CORPORATION
Section 5.01. Limitation on Consolidation, Merger
and Sale of Assets................................ 58
Section 5.02. Successor Person Substituted........................ 59
ARTICLE 6
DEFAULTS AND REMEDIES
Section 6.01. Events of Default................................... 59
Section 6.02. Acceleration........................................ 61
Section 6.03. Other Remedies...................................... 62
Section 6.04. Waiver of Past Defaults and Events
of Default........................................ 62
Section 6.05. Control by Majority................................. 63
Section 6.06. Limitation on Suits................................. 63
Section 6.07. Rights of Holders To Receive Payment................ 64
Section 6.08. Collection Suit by Trustee.......................... 64
Section 6.09. Trustee May File Proofs of Claim.................... 64
Section 6.10. Priorities.......................................... 65
-ii-
<PAGE> 5
Page
Section 6.11. Undertaking for Costs............................... 65
ARTICLE 7
TRUSTEE
Section 7.01. Duties of Trustee................................... 66
Section 7.02. Rights of Trustee................................... 67
Section 7.03. Individual Rights of Trustee........................ 68
Section 7.04. Trustee's Disclaimer................................ 69
Section 7.05. Notice of Default................................... 69
Section 7.06. Reports by Trustee to Holders....................... 69
Section 7.07. Compensation and Indemnity.......................... 69
Section 7.08. Replacement of Trustee.............................. 70
Section 7.09. Successor Trustee by Consolidation,
Merger or Conversion.............................. 71
Section 7.10. Eligibility; Disqualification....................... 72
Section 7.11. Preferential Collection of Claims
Against Company................................... 72
Section 7.12. Paying Agents....................................... 72
ARTICLE 8
AMENDMENTS, SUPPLEMENTS AND WAIVERS
Section 8.01. Without Consent of Holders.......................... 73
Section 8.02. With Consent of Holders............................. 73
Section 8.03. Compliance with Trust Indenture Act................. 75
Section 8.04. Revocation and Effect of Consents................... 75
Section 8.05. Notation on or Exchange of Notes.................... 76
Section 8.06. Trustee To Sign Amendments, etc..................... 76
ARTICLE 9
DISCHARGE OF INDENTURE; DEFEASANCE
Section 9.01. Discharge of Indenture.............................. 77
Section 9.02. Legal Defeasance.................................... 77
Section 9.03. Covenant Defeasance................................. 78
Section 9.04. Conditions to Defeasance or Covenant
Defeasance........................................ 78
Section 9.05. Deposited Money and U.S. Government
Obligations To Be Held in Trust;
Other Miscellaneous Provisions.................... 80
Section 9.06. Reinstatement....................................... 81
Section 9.07. Moneys Held by Paying Agent......................... 82
Section 9.08. Moneys Held by Trustee.............................. 82
ARTICLE 10
GUARANTEE OF NOTES
Section 10.01. Guarantee........................................... 83
Section 10.02. Execution and Delivery of Guarantees................ 84
-iii-
<PAGE> 6
Page
Section 10.03. Limitation of Guarantee........................... 85
Section 10.04. Additional Guarantors............................. 85
Section 10.05. Release of Guarantor.............................. 85
Section 10.06. Guarantee Obligations Subordinated
to Guarantor Senior Indebtedness................ 86
Section 10.07. Payment Over of Proceeds upon
Dissolution, etc., of a Guarantor............... 86
Section 10.08. Suspension of Guarantee Obligations
When Guarantor Senior Indebtedness
in Default...................................... 88
Section 10.09. Subrogation to Rights of Holders of
Guarantor Senior Indebtedness................... 91
Section 10.10. Guarantee Subordination Provisions
Solely To Define Relative Rights................ 91
Section 10.11. Application of Certain Article 11
Provisions...................................... 92
ARTICLE 11
SUBORDINATION OF NOTES
Section 11.01. Notes Subordinate to Senior
Indebtedness.................................... 92
Section 11.02. Payment Over of Proceeds upon
Dissolution, etc................................ 93
Section 11.03. Suspension of Payment When Senior
Indebtedness in Default......................... 95
Section 11.04. Trustee's Relation to Senior
Indebtedness.................................... 97
Section 11.05. Subrogation to Rights of Holders
of Senior Indebtedness.......................... 97
Section 11.06. Provisions Solely To Define Relative
Rights.......................................... 98
Section 11.07. Trustee To Effectuate Subordination............... 99
Section 11.08. No Waiver of Subordination Provisions............. 99
Section 11.09. Notice to Trustee................................. 100
Section 11.10. Reliance on Judicial Order or
Certificate of Liquidating Agent................ 101
Section 11.11. Rights of Trustee as a Holder of
Senior Indebtedness; Preservation
of Trustee's Rights............................. 102
Section 11.12. Article Applicable to Paying Agents............... 102
Section 11.13. No Suspension of Remedies......................... 102
ARTICLE 12
MISCELLANEOUS
Section 12.01. Trust Indenture Act Controls...................... 102
Section 12.02. Notices........................................... 102
Section 12.03. Communications by Holders with
Other Holders................................... 104
-iv-
<PAGE> 7
Page
Section 12.04. Certificate and Opinion as to
Conditions Precedent............................. 104
Section 12.05. Statements Required in Certificate
and Opinion...................................... 104
Section 12.06. When Treasury Notes Disregarded.................... 105
Section 12.07. Rules by Trustee and Agents........................ 105
Section 12.08. Business Days; Legal Holidays...................... 105
Section 12.09. Governing Law...................................... 106
Section 12.10. No Adverse Interpretation of Other
Agreements....................................... 106
Section 12.11. No Recourse Against Others......................... 106
Section 12.12. Successors......................................... 106
Section 12.13. Multiple Counterparts.............................. 106
Section 12.14. Table of Contents, Headings, etc................... 106
Section 12.15. Separability....................................... 107
EXHIBITS
Exhibit A. Form of Note....................................... A-1
Exhibit B. Form of Legend for Global Note..................... B-1
Exhibit C. Form of Certificate to Be Delivered
in Connection with Transfers to
Non-QIB Accredited Investors .................... C-1
Exhibit D. Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S ........................ D-1
-v-
<PAGE> 8
INDENTURE, dated as of June 23, 1997, 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 8 7/8% Senior
Subordinated Notes due 2007 (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.
"Additional Interest" means additional interest on the Notes which the
Company and the Guarantors, jointly and severally, agree to pay to the Holders
pursuant to Section 4 of the Registration Rights Agreement. The amount of
Additional Interest will be stated in an Officers' Certificate, on which the
Trustee will be able to rely conclusively.
"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
<PAGE> 9
-2-
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 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 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
<PAGE> 10
-3-
(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 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), (iii)(b) or (iii)(c) of Section
4.15 and which have not been the basis for an Excess Proceeds Offer in
accordance with clause (iii)(d) 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.
<PAGE> 11
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"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.
"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
<PAGE> 12
-5-
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.
"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
<PAGE> 13
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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 first paragraph of Section 4.13, "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 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 Towermarc Plaza, 10161 Centurion Parkway, Jacksonville, Florida 32256.
<PAGE> 14
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"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.
"Depository" means, with respect to the Notes issued in the form of one
or more Global Notes, The Depository Trust Company or another Person designated
as Depository by the Company, which Person must be a clearing agency registered
under the Exchange Act.
"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
<PAGE> 15
-8-
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 4.24, 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.
"Exchange Notes" has the meaning provided in the Registration Rights
Agreement.
"Exchange Offer" has the meaning provided in the Registration Rights
Agreement.
"fair market value" means, unless otherwise specified, with respect to
any asset or property, the price
<PAGE> 16
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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, New York Subways Advertising Co., Inc., an Arizona
corporation, OS Bus, Inc., a Georgia corporation, and Outdoor Systems (New
York), Inc., a New York 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.
"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) 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
<PAGE> 17
-10-
(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.
"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
<PAGE> 18
-11-
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 other Persons secured by a lien to which
the property or assets owned or held by such Person are 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 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.
"Initial Purchasers" means CIBC Wood Gundy Securities Corp., Alex.
Brown & Sons Incorporated and Donaldson, Lufkin & Jenrette Securities
Corporation.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as that term is
<PAGE> 19
-12-
defined in Rule 501 (a)(1), (2), (3) or (7) promulgated under the Securities
Act.
"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, or 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 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
<PAGE> 20
-13-
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 June 15, 2007.
"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
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.
<PAGE> 21
-14-
"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).
"1996 Notes" means the $250,000,000 aggregate principal amount of the
Company's 9 3/8% Senior Subordinated Notes due 2006.
"1996 Notes Indenture" means the indenture, dated as of October 15,
1996, among the Company, the Guarantors and the Trustee, pursuant to which the
1996 Notes were issued.
"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.
"Non-U.S. Person" means a Person who is not a U.S. person, as defined
in Regulation S.
"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.
"Officer" means the Chief Executive Officer, the President, any Vice
President, the Chief Financial Officer or the Treasurer of the Company or a
Guarantor, or any other
<PAGE> 22
-15-
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
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
<PAGE> 23
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Subsidiaries, (c) arising under the Senior Credit Facility as 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
$425 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 and the 1996 Notes
and their related guarantees as required under the 1996 Notes Indenture;
(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;
<PAGE> 24
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(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 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 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 Sale that is otherwise
permitted under Section 4.15 hereof.
<PAGE> 25
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"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.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company,
<PAGE> 26
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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.
"Private Exchange" has the meaning set forth in the Registration Rights
Agreement.
"Private Exchange Notes" has the meaning set forth in the Registration
Rights Agreement.
"Private Placement Legend" means the legend initially set forth on the
Rule 144A Notes in the form set forth in Exhibit A.
"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 Securities 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.
"Qualified Institutional Buyer" or "QIB" shall have the meaning
specified in Rule 144A.
"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
<PAGE> 27
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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 (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.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of the Issue Date among the Company, the Guarantors and the Initial
Purchasers, as amended from time to time.
<PAGE> 28
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"Regulation S" means Regulation S promulgated under the Securities Act.
"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 Capital Stock) or in options, warrants or other rights to purchase
Capital Stock (other than Disqualified Capital 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
<PAGE> 29
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thereof and property other than cash shall be valued at its fair market value.
"Restricted Security" has the meaning set forth in the Rule 144(a)(3)
promulgated under the Securities Act.
"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.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"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.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw Hill Companies, 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 Fourth Amended and Restated Credit
Agreement dated as of October 22, 1996 among the Company, Mediacom 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
<PAGE> 30
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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 and the 1996 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.
<PAGE> 31
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"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 S&P
and A-2 by Moody's, 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).
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Sections
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
<PAGE> 32
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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:
Term Defined in Section
"Affiliate Transaction".................... 4.16
"Agent Members"............................ 2.14
"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
"Global Notes"............................. 2.01
"Guarantee Payment Blockage Period"........ 10.08
"Guarantor Representative"................. 10.08
"Initial Blockage Period".................. 11.03
"Initial Guarantee Blockage Period"........ 10.08
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"Legal Defeasance"......................... 9.02
"Legal Holiday"............................ 12.08
"Offer Period"............................. 4.15
"Offshore Physical Notes".................. 2.01
"Paying Agent"............................. 2.03
"Payment Blockage Period".................. 11.03
"Physical Notes"........................... 2.01
"Purchase Date"............................ 4.15
"Registrar"................................ 2.03
"Reinvestment Date"........................ 4.15
"Representative"........................... 11.03
"U.S. Physical Notes"...................... 2.01
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.
"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 and
not otherwise defined herein have the meanings therein assigned to them.
<PAGE> 34
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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;
(5) words used herein implying any gender shall apply to every gender;
and
(6) whenever in this Indenture there is mentioned, in any context,
principal, interest or any other amount payable under or with respect to
any Note, such mention shall be deemed to include mention of the payment
of Additional Interest to the extent that, in such context, Additional
Interest is, was or would be payable in respect thereof.
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; provided that the Exchange Notes shall not contain the Private
Placement Legend or Paragraph 9 of Exhibit A. 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 Notes offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent Global Notes in registered form,
substantially in the form set forth in Exhibit A ("Global Notes"), deposited
with the
<PAGE> 35
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Trustee, as custodian for the Depository, duly executed by the Company and
authenticated by the Trustee as hereinafter provided and shall bear the legend
set forth on Exhibit B. The aggregate principal amount of any Global Note may
from time to time be increased or decreased by adjustments made on the records
of the Trustee, as custodian for the Depository, as hereinafter provided.
Notes offered and sold in offshore transactions in reliance on
Regulation S shall be issued in the form of certificated Notes in registered
form set forth in Exhibit A (the "Offshore Physical Notes"). Notes offered and
sold in reliance on any other exemption from registration under the Securities
Act other than as described in the preceding paragraph shall be issued, and
Notes offered and sold in reliance on Rule 144A may be issued, in the form of
certificated Notes in registered form in substantially the form set forth in
Exhibit A (the "U.S. Physical Notes"). The Offshore Physical Notes and the U.S.
Physical Notes are sometimes collectively herein referred to as the "Physical
Notes."
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 the Secretary or 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 $500,000,000 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.
<PAGE> 36
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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.
In accordance with a separate agreement to be entered into among the
Company, the Guarantors and the Trustee, upon receipt of a Company Request and
an Officers' Certificate certifying that a registration statement relating to
the Exchange Offer is effective and that the conditions precedent to the
Exchange Offer have been met, the Trustee shall authenticate an additional
series of Notes in an aggregate principal amount not to exceed $500,000,000 for
issuance in exchange for the Notes tendered for exchange pursuant to the
Exchange Offer or pursuant to the Private Exchange. Exchange Notes or Private
Exchange Notes may have such distinctive series designations and such changes in
the form thereof as are specified in the Company Request referred to in the
preceding sentence.
All Notes issued under this Indenture shall vote and consent together
on all matters as one class and no series of Notes will have the right to vote
or consent as a separate class on any matter.
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 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
<PAGE> 37
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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 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
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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.
Any Holder of the Global Note shall, by acceptance of such Global Note,
agree that transfers of the beneficial interests in such Global Note may be
effected only through a book entry system maintained by the Holder of such
Global Note (or its agent), and that ownership of a beneficial interest in the
Global Note shall be required to be reflected in a book entry.
Each Holder of a Note agrees to indemnify the Company and the Trustee
against any liability that may result from the transfer, exchange or assignment
of such Holder's Note in violation of any provision of this Indenture and/or
applicable U.S. Federal or state securities law.
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
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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, 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.
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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, 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. The
principal and interest on Global Notes shall be payable to the Depository or its
nominee, as the case may be, as the sole registered owner and the sole holder of
the Global Notes represented thereby. The principal of Physical Notes shall be
payable at the office of the Paying Agent.
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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.
Section 2.14. Book-Entry Provisions for Global Notes.
(a) The Global Notes initially shall (i) be registered in the name of
the Depository or the nominee of such Depository, (ii) be delivered to the
Trustee as custodian for such Depository and (iii) bear legends as set forth in
Exhibit B.
Members of, or direct or indirect participants in, the Depository
("Agent Members") shall have no rights under this Indenture with respect to any
Global Note held on their behalf by the Depository, or the Trustee as its
custodian, or under the Global Note, and the Depository may be treated by the
Company, the Trustee and any agent of the Company or the Trustee as the absolute
owner of the Global Note for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Trustee or any agent of
the Company or the Trustee from giving effect to any written certification,
proxy or other authorization furnished by the Depository or impair, as between
the Depository and its Agent Members, the operation of customary practices
governing the exercise of the rights of a Holder of any Note.
(b) Transfers of Global Notes shall be limited to transfer in whole,
but not in part, to the Depository, its successors or their respective nominees.
Interests of beneficial owners in the Global Notes may be transferred or
exchanged for Physical Notes in accordance with the rules and procedures of the
Depository and the provisions of Section 2.15. In addition, a Global Note shall
be exchangeable for Physical Notes if (i) the Depository (x) notifies the
Company that it is unwilling or unable to continue as depository for such Global
Note and the Company thereupon fails to appoint a successor depository or (y)
has ceased to be a clearing agency registered under the Exchange Act, (ii) the
Company, at its option, notifies the Trustee in writing that it elects to cause
the issuance of such Physical Notes or
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(iii) there shall have occurred and be continuing an Event of Default with
respect to the Notes. In all cases, Physical Notes delivered in exchange for any
Global Note or beneficial interests therein shall be registered in the names,
and issued in any approved denominations, requested by or on behalf of the
Depository (in accordance with its customary procedures).
(c) In connection with any transfer or exchange of a portion of the
beneficial interest in any Global Note to beneficial owners pursuant to
paragraph (b), the Registrar shall (if one or more Physical Notes are to be
issued) reflect on its books and records the date and a decrease in the
principal amount of the Global Note in an amount equal to the principal amount
of the beneficial interest in the Global Note to be transferred, and the Company
shall execute, and the Trustee shall upon receipt of a written order from the
Company authenticate and make available for delivery, one or more Physical Notes
of like tenor and amount.
(d) In connection with the transfer of Global Notes as an entirety to
beneficial owners pursuant to paragraph (b), the Global Notes shall be deemed to
be surrendered to the Trustee for cancellation, and the Company shall execute,
and the Trustee shall authenticate and deliver, to each beneficial owner
identified by the Depository in writing in exchange for its beneficial interest
in the Global Notes, an equal aggregate principal amount of Physical Notes of
authorized denominations.
(e) Any Physical Note constituting a Restricted Security delivered in
exchange for an interest in a Global Note pursuant to paragraph (b), (c) or (d)
shall, except as otherwise provided by paragraphs (a) (i) (x) and (c) of Section
2.15, bear the legend regarding transfer restrictions applicable to the Physical
Notes set forth in Exhibit A.
(f) The Holder of any Global Note may grant proxies and otherwise
authorize any Person, including Agent Members and Persons that may hold
interests through Agent Members, to take any action which a Holder is entitled
to take under this Indenture, the Notes or the Guarantees.
Section 2.15. Special Transfer Provisions.
(a) Transfers to Non-QIB Institutional Accredited Investors and
Non-U.S. Persons. The following provisions shall apply with respect to the
registration of any proposed transfer of a Note constituting a Restricted
Security to any
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Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person:
(i) the Registrar shall register the transfer of any Note constituting
a Restricted Security, whether or not such Note bears the Private
Placement Legend, if (x) the requested transfer is after June 23, 1999 or
such other date as such Note shall be freely transferable under Rule 144
as certified in an Officer's Certificate or (y) (1) in the case of a
transfer to an Institutional Accredited Investor which is not a QIB
(excluding Non-U.S. Persons), the proposed transferee has delivered to the
Registrar a certificate substantially in the form of Exhibit C hereto or
(2) in the case of a transfer to a Non-U.S. Person (including a QIB), the
proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit D hereto; provided that in the case
of a transfer of a Note bearing the Private Placement Legend for a Note
not bearing the Private Placement Legend, the Registrar has received an
Officers' Certificate authorizing such transfer; and
(ii) if the proposed transferor is an Agent Member holding a beneficial
interest in a Global Note, upon receipt by the Registrar of (x) the
certificate, if any, required by paragraph (i) above and (y) instructions
given in accordance with the Depository's and the Registrar's procedures,
whereupon (a) the Registrar shall reflect on its books and records the date and
(if the transfer does not involve a transfer of outstanding Physical Notes) a
decrease in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in a Global Note to be transferred,
and (b) the Registrar shall reflect on its books and records the date and an
increase in the principal amount of a Global Note in an amount equal to the
principal amount of the beneficial interest in the Global Note transferred or
the Company shall execute and the Trustee shall authenticate and make available
for delivery one or more Physical Notes of like tenor and amount.
(b) Transfers to QIBs. The following provisions shall apply with
respect to the registration of any proposed transfer of a Note constituting a
Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):
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(i) the Registrar shall register the transfer if such transfer is being
made by a proposed transferor who has checked the box provided for on such
Holder's Note stating, or has otherwise advised the Company and the
Registrar in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on such Holder's Note stating, or has otherwise advised the
Company and the Registrar in writing, that it is purchasing the Note for
its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within the
meaning of Rule 144A, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such
information regarding the Company as it has requested pursuant to Rule
144A or has determined not to request such information and that it is
aware that the transferor is relying upon its foregoing representations in
order to claim the exemption from registration provided by Rule 144A; and
(ii) if the proposed transferee is an Agent Member, and the Notes to be
transferred consist of Physical Notes which after transfer are to be
evidenced by an interest in the Global Note, upon receipt by the Registrar
of instructions given in accordance with the Depository's and the
Registrar's procedures, the Registrar shall reflect on its books and
records the date and an increase in the principal amount of the Global
Note in an amount equal to the principal amount of the Physical Notes to
be transferred, and the Trustee shall cancel the Physical Notes so
transferred.
(c) Private Placement Legend. Upon the registration of transfer,
exchange or replacement of Notes not bearing the Private Placement Legend, the
Registrar shall deliver Notes that do not bear the Private Placement Legend.
Upon the registration of transfer, exchange or replacement of Notes bearing the
Private Placement Legend, the Registrar shall deliver only Notes that bear the
Private Placement Legend unless (i) it has received the Officers' Certificate
required by paragraph (a)(i)(y) of this Section 2.15, (ii) there is delivered to
the Registrar an Opinion of Counsel reasonably satisfactory to the Company and
the Trustee to the effect that neither such legend nor the related restrictions
on transfer are required in order to maintain compliance with the provisions of
the Securities Act or (iii) such Note has been sold pursuant to an effective
registration statement under the
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Securities Act and the Registrar has received an Officers' Certificate from the
Company to such effect.
(d) General. By its acceptance of any Note bearing the Private
Placement Legend, each Holder of such Note acknowledges the restrictions on
transfer of such Note set forth in this Indenture and in the Private Placement
Legend and agrees that it will transfer such Note only as provided in this
Indenture.
The Registrar shall retain for a period of two years copies of all
letters, notices and other written communications received pursuant to Section
2.14 or this Section 2.15. The Company shall have the right to inspect and make
copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable notice to the Registrar.
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 45 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
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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:
(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
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(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.
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, 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.
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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 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 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).
The Company shall, upon request, provide to any Holder of Notes or any
prospective transferee of any such Holder any information concerning the Company
(including financial statements) necessary in order to permit such Holder to
sell or transfer Notes in compliance with Rule 144A under
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the Securities Act; provided, however, that the Company shall not be required to
furnish such information in connection with any request made on or after the
date which is two years (or such other date as the Notes shall be freely
transferable pursuant to Rule 144) from the later of (i) the date such Note (or
any predecessor Note) was acquired from the Company or (ii) the date such Note
(or any predecessor Note) was last acquired from an "affiliate" of the Company
within the meaning of Rule 144 under the Securities Act.
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.
Section 4.04. Compliance Certificate.
(a) The Company and each Guarantor 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 or the Guarantors, as the
case may be, 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
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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 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,
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
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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 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,
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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.
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
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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 for presentment and payment of Notes 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 June 15,
2000, (ii) 6.25 to 1 if such Indebtedness is incurred after June 15, 2000 and on
or prior to June 15, 2002 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.
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
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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 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
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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 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 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
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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 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 or the
Guarantees, as the case 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 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
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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; 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"); (c) third, to the making of an Excess
Proceeds Offer (as defined in the 1996 Notes Indenture) with respect to the 1996
Notes to the extent required by the 1996 Notes Indenture; and (d) fourth, 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.
(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:
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(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 than 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 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
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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) 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
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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 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
on 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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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.
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
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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.
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
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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 a 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 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
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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 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
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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 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
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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.
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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 Responsible 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.
(g) The Trustee shall not have knowledge, or be deemed to have
knowledge, of any Default or Event of Default under this Indenture, other than
notice or knowledge of an Event of Default under subsections (a) or (b) of
Section 6.01 hereof during any period the Trustee is serving as Paying Agent for
the Notes, unless a Responsible Officer of the Trustee receives written notice
of such Default or Event of Default at the address for administrative services
set forth in Section
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12.02 hereof specifically referring to this Indenture and identifying with
particularity the Default or Event of Default.
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 resolution, certificate, statement,
instrument, opinion, report, notice, request, direction or other paper or
document reasonably believed by it to be genuine and to have been signed
or presented by the proper person. The Trustee need not investigate any
fact or matter stated in any such writing, but the Trustee, in its
discretion, may investigate any such fact or matter as it may see fit and,
if the Trustee shall determine to undertake such investigation, it shall
be entitled to examine the books, records and premises of the Company,
personally or by agent or attorney.
(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
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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.
(7) Any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request and any resolution of the
Board of Directors may be sufficiently evidenced by a Board Resolution.
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.
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 recital
or statement contained herein or 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.
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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 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.
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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;
(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.
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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 surplus of at least $50,000,000 as set forth
in its most recent published annual report of condition. The Trustee shall
comply with TIA 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
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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 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;
(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; or
(6) to provide for the issuance of the Exchange Notes and the Private
Exchange Notes in accordance with Section 2.02 in a manner that does not
adversely affect the rights of any Noteholder.
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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;
(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;
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(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 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.
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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
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
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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, 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.
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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.
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
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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
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);
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(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;
(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
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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, 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.
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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.
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
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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, 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 (including Additional
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
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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.
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
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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.
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 in form substantially the same as the Guarantees
executed by the initial Guarantors 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.
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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.
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.
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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 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 in accordance with
Section 5.01 hereof) 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, 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
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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
(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 in accordance with Section 5.01 hereof), 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
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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 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
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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, 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
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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 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
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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.
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
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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 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.
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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
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 in respect of the Notes. Notwithstanding the provisions of this
Article or any 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 a Representative or any
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trustee, fiduciary or agent therefor; and, prior to the receipt of any such
written notice, the Trustee shall be entitled in all respects to assume that no
such facts exist; provided, however, that if the Trustee shall not have received
the notice provided for in this Section at least two business days prior to the
date upon which by the terms hereof any money may become payable for any purpose
(including, without limitation, the payment of the principal of, premium, if
any, or interest on any Note), then, anything herein contained to the contrary
notwithstanding, but without limiting the rights and remedies of the holders of
Senior Indebtedness or any trustee, fiduciary or agent thereof, the Trustee
shall have full power and authority to receive such money to apply the same to
the purpose for which such money was received and shall not be affected by any
notice to the contrary which may be received by it less than two business days
prior to such date; nor shall the Trustee be charged with knowledge of the
curing of any such default or elimination of the act or condition preventing any
such payment unless and until the Trustee shall have received an Officers'
Certificate to such effect.
(b) Subject to the provisions of Section 7.01 hereof, the Trustee shall
be entitled to rely on the delivery to it of a written notice to the Trustee and
the Company by a Person representing itself to be a holder of Senior
Indebtedness (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.
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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 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.
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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:
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:
(a) For Presentment of Notes and for Payment:
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The Bank of New York
101 Barclay Street
7 East
New York, New York 10286
Attention: Bond Operations
(b) For General Trust Administration:
The Bank of New York
Towermarc Plaza
10161 Centurion Parkway
Jacksonville, Florida 32256
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.
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).
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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;
(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
<PAGE> 113
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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 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.
<PAGE> 114
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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.
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> 115
S-1
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date and year first written above.
OUTDOOR SYSTEMS, INC.
By: /s/ Bill M. Beverage
--------------------------
Name: Bill M. Beverage
Title: Secretary & C.F.O.
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.
OS BUS, INC.
OUTDOOR SYSTEMS (NEW YORK),
INC.
By: /s/ Bill Beverage
--------------------------
Name: Bill Beverage
Title: Secretary & C.F.O.
THE BANK OF NEW YORK,
as Trustee
By: /s/ Sandra Carreker
--------------------------
Name: Sandra Carreker
Title: Agent
<PAGE> 116
EXHIBIT A
(FACE OF NOTE)
[FORM OF NOTE]
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS,
EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS
THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) OR (B) IT IS AN "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT) (AN "ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS NOTE IN AN OFFSHORE
TRANSACTION, (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL
ISSUANCE OF THIS NOTE (OR SUCH SHORTER PERIOD AS IS PERMITTED BY RULE 144(k)
UNDER THE SECURITIES ACT) RESELL OR OTHERWISE TRANSFER THIS NOTE EXCEPT (A) TO
THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH
TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO
THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS NOTE (THE FORM OF WHICH LETTER
CAN BE OBTAINED FROM THE TRUSTEE), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT
TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT
(IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS NOTE
IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND, IN
CONNECTION WITH ANY TRANSFER OF THIS NOTE WITHIN TWO YEARS AFTER ORIGINAL
ISSUANCE OF THIS NOTE (OR SUCH SHORTER PERIOD AS IS PERMITTED BY RULE 144(k)
UNDER THE SECURITIES ACT), IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR,
THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY
SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER
THE SECURITIES ACT.
A-1
<PAGE> 117
CUSIP__________
No. $
OUTDOOR SYSTEMS, INC.
8 7/8% SENIOR SUBORDINATED NOTE DUE 2007
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 June 15, 2007.
Interest Payment Dates: June 15 and December 15, commencing December
15, 1997
Record Dates: June 1 and December 1
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-2
<PAGE> 118
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 8 7/8% Senior Subordinated Notes due 2007 referred to in the
within-mentioned Indenture
Dated:
THE BANK OF NEW YORK,
as Trustee
By: ___________________________________
Authorized Signatory
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<PAGE> 119
(REVERSE SIDE)
OUTDOOR SYSTEMS, INC.
8 7/8% SENIOR SUBORDINATED NOTE DUE 2007
1. INTEREST.
Outdoor Systems, Inc., a Delaware corporation (the "Company"), promises
to pay interest on the principal amount of this Note semiannually on June 15 and
December 15 of each year (each an "Interest Payment Date"), commencing on
December 15, 1997 at the rate of 8 7/8% 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 June 1 or December 1 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.
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<PAGE> 120
4. INDENTURE; RESTRICTIVE COVENANTS.
The Company issued this Note under an Indenture dated as of June 23,
1997 (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
$500,000,000 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 June 15, 2002 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 June 15, of each year listed below:
A-5
<PAGE> 121
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
2002...................................... 104.438%
2003...................................... 102.958%
2004...................................... 101.497%
2005 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 June 15, 2000 at a redemption price equal to 108.875% 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 $325.0 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. REGISTRATION RIGHTS.
Pursuant to the Registration Rights Agreement among the Company, the
Guarantors and CIBC Wood Gundy Securities Corp., Alex. Brown & Sons Incorporated
and Donaldson, Lufkin & Jenrette Securities Corporation, as Initial Purchasers
of the Notes, the Company and the Guarantors will be obligated to consummate an
exchange offer pursuant to which the Holder of this Note shall have the right to
exchange this Note for notes of a separate series issued under the Indenture (or
a trust indenture substantially identical to the Indenture in accordance with
the terms of the Registration Rights Agreement)
A-6
<PAGE> 122
which have been registered under the Securities Act, in like principal amount
and having substantially identical terms as the Notes. The Holders shall be
entitled to receive certain additional interest payments in the event such
exchange offer is not consummated and upon certain other conditions, all
pursuant to and in accordance with the terms of the Registration Rights
Agreement.
10. 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 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.
11. PERSONS DEEMED OWNERS.
The registered Holder of this Note may be treated as the owner of it
for all purposes.
12. 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.
13. 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,
A-7
<PAGE> 123
defect or inconsistency, or making any other change that does not materially and
adversely affect the rights of any Holder.
14. 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.
15. 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 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.
16. 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.
17. 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.
A-8
<PAGE> 124
18. 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.
19. 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).
20. 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 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.
21. 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-9
<PAGE> 125
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.
[Check One]
[ ] (a) this Note is being transferred in compliance with the exemption
from registration under the Securities Act provided by Rule 144A
thereunder.
or
[ ] (b) this Note is being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Note and the Indenture.
If none of the foregoing boxes is checked, the Trustee or Registrar shall not be
obligated to register this Note in the name of any person other than the Holder
hereof unless and until the conditions to any such transfer of registration set
forth herein and in Section 2.15 of the Indenture shall have been satisfied.
Date: __________________________ Your Signature: ____________________________
_____________________________________________
(Sign exactly as your name appears on the
other side of this Note)
Signature Guarantee: _____________________________________________
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<PAGE> 126
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED
The undersigned represents and warrants that it is purchasing this Note
for its own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act
and is aware that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the Company as the
undersigned has requested pursuant to Rule 144A or has determined not to request
such information and that it is aware that the transferor is relying upon the
undersigned's foregoing representations in order to claim the exemption from
registration provided by Rule 144A.
Dated: __________________ ___________________________________
NOTICE: To be executed by an
executive officer
A-11
<PAGE> 127
[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.
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<PAGE> 128
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.
OS BASELINE, INC.
DECADE COMMUNICATIONS GROUP, INC.
BENCH ADVERTISING COMPANY OF COLORADO, INC.
NEW YORK SUBWAYS ADVERTISING CO., INC.
OS BUS, INC.
OUTDOOR SYSTEMS (NEW YORK), INC.
By: _______________________________________
Name:
Title:
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<PAGE> 129
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
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<PAGE> 130
EXHIBIT B
[FORM OF LEGEND FOR GLOBAL NOTE]
Any Global Note authenticated and delivered hereunder shall bear a
legend (which would be in addition to any other legends required in the case of
a Restricted Security) in substantially the following form:
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A
NOMINEE OF A DEPOSITORY. THIS NOTE IS NOT EXCHANGEABLE FOR NOTES REGISTERED IN
THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE
LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS NOTE
(OTHER THAN A TRANSFER OF THIS NOTE AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF
THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (A NEW YORK CORPORATION) ("DTC") TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE
TO CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
B-1
<PAGE> 131
EXHIBIT C
Form of Certificate to Be
Delivered in Connection with
Transfers to Non-QIB Accredited Investors
___________, ____
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Outdoor Systems, Inc. (the "Company")
8 7/8% Senior Subordinated Notes due 2007 (the "Notes")
Dear Sirs:
In connection with our proposed purchase of $__________ aggregate
principal amount of the Notes, we confirm that:
1. We understand that any subsequent transfer of the Notes is subject
to certain restrictions and conditions set forth in the Indenture dated as
of June 23, 1997 relating to the Notes and we agree to be bound by, and
not to resell, pledge or otherwise transfer the Notes except in compliance
with, such restrictions and conditions and the Securities Act of 1933, as
amended (the "Securities Act").
2. We understand that the Notes have not been registered under the
Securities Act, and that the Notes may not be offered, sold, pledged or
otherwise transferred except as permitted in the following sentence. We
agree, on our own behalf and on behalf of any accounts for which we are
acting as hereinafter stated, that if we should sell any Notes, we will do
so only (i) to the Company or any subsidiary thereof, (ii) pursuant to an
effective registration statement under the Securities Act, (iii) in
accordance with Rule 144A under the Securities Act to a "qualified
institutional buyer" (as defined in Rule 144A), (iv) to an institutional
"accredited investor" (as defined below) that, prior to such transfer,
furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you
a signed letter containing certain representations and
C-1
<PAGE> 132
agreements relating to the restrictions on transfer of the Notes, (v)
outside the United States to persons other than U.S. persons in offshore
transactions meeting the requirements of Rule 904 of Regulation S under
the Securities Act, or (vi) pursuant to any other exemption from
registration under the Securities Act (if available), and we further agree
to provide to any person purchasing any of the Notes from us a notice
advising such purchaser that resales of the Notes are restricted as stated
herein.
3. We understand that, on any proposed resale of any Notes, we will be
required to furnish to you and the Company such certifications, legal
opinions and other information as you and the Company may reasonably
require to confirm that the proposed sale complies with the foregoing
restrictions. We further understand that the Notes purchased by us will
bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Notes, and we and any accounts for which we are acting each are able to
bear the economic risk of our or their investment, as the case may be.
5. We are acquiring the Notes purchased by us for our account or for
one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceeding or official inquiry with respect
to the matters covered hereby.
Very truly yours,
[Name of Transferee]
By: __________________________
Authorized Signature
C-2
<PAGE> 133
EXHIBIT D
Form of Certificate to Be Delivered
in Connection with Transfers
Pursuant to Regulation S
__________, ____
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
Re: Outdoor Systems, Inc.
(the "Company") 8 7/8% Senior Subordinated Notes due 2007
(the "Notes")
Dear Sirs:
In connection with our proposed sale of $__________ aggregate principal
amount of the Notes, we confirm that such sale has been effected pursuant to and
in accordance with Regulation S under the U.S. Securities Act of 1933, as
amended (the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Notes was not made to a U.S. person or to a person
in the United States;
(2) either (a) at the time the buy offer was originated, the transferee
was outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United States, or
(b) the transaction was executed in, on or through the facilities of a
designated off-shore securities market and neither we nor any person
acting on our behalf knows that the transaction has been pre-arranged with
a buyer in the United States;
(3) no directed selling efforts have been made in the United States in
contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act; and
D-1
<PAGE> 134
(5) we have advised the transferee of the transfer restrictions
applicable to the Notes.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: __________________________
Authorized Signature
D-2
<PAGE> 1
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT AND REPORT ON SCHEDULE
To the Board of Directors and Stockholders of
Outdoor Systems, Inc.
Phoenix, Arizona
We consent to the use in this Registration Statement of Outdoor Systems,
Inc. on Form S-4 of our report dated February 14, 1997, except for paragraph f
of Note 1 and Note 16 as to which the dates are July 3, 1997 and March 26, 1997,
respectively, appearing in the Prospectus, which is part of this Registration
Statement, and to the references to us under the headings "Selected Consolidated
Financial and Other Data" and "Experts" in such Prospectus.
Our audits of the financial statements referred to in our aforementioned
report also included the financial statement schedule of Outdoor Systems, Inc.,
listed in Item 21. This financial statement schedule is the responsibility of
the Company's management. Our responsibility is to express an opinion based on
our audits. In our opinion, such financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
We also consent to the incorporation by reference in this Registration
Statement of Outdoor Systems, Inc. on Form S-4 of our report dated July 25, 1996
relating to the financial statements of Gannett Outdoor appearing in the
Registration Statement on Form S-3 (File No. 333-9713).
DELOITTE & TOUCHE
Phoenix, Arizona
July 9, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement on Form S-4 of
Outdoor Systems, Inc. and the Guarantors of our report dated March 21, 1997,
except for Note 10 as to which the date is May 1, 1997, on our audits of the
financial statements of National Advertising Company as of December 31, 1995 and
1996 and for each of the three years in the period ended December 31, 1996
appearing in the Prospectus, which is part of this Registration Statement. We
also consent to the reference to our firm under the caption "Experts" in such
Prospectus.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
July 9, 1997
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 4,921
<SECURITIES> 0
<RECEIVABLES> 59,402
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 95,471
<PP&E> 849,653
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<BONDS> 0
0
0
<COMMON> 602
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<TOTAL-LIABILITY-AND-EQUITY> 1,038,845
<SALES> 0
<TOTAL-REVENUES> 80,080
<CGS> 0
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<OTHER-EXPENSES> 62,967
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<INTEREST-EXPENSE> 15,922
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<PAGE> 1
EXHIBIT 99.1
OUTDOOR SYSTEMS, INC.
$500,000,000
8 7/8% Senior Subordinated Notes due 2007
PURCHASE AGREEMENT
June 17, 1997
CIBC WOOD GUNDY SECURITIES CORP.
ALEX. BROWN & SONS INCORPORATED
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
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 "Initial Purchasers"), as set forth below.
1. The Securities. Subject to the terms and conditions herein
contained, the Company proposes to issue and sell to the Initial Purchasers
$500,000,000 aggregate principal amount of its 8 7/8% Senior Subordinated Notes
due 2007 (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 as of June 23, 1997, 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."
The Notes will be offered and sold to the Initial Purchasers
without such offers and sales being registered under the Securities Act of 1933,
as amended (together with the rules and regulations of the Commission
promulgated thereunder, the "Act"), in reliance on exemptions therefrom.
In connection with the sale of the Notes, the Company has
prepared a preliminary offering memorandum dated June 10, 1997 (including the
documents incorporated by reference therein,
<PAGE> 2
-2-
the "Preliminary Memorandum"), and a final offering memorandum dated June 17,
1997 (including the documents incorporated by reference therein, the "Final
Memorandum"; the Preliminary Memorandum and the Final Memorandum each herein
being referred to as a "Memorandum") each setting forth or including a
description of the terms of the Notes, the terms of the offering of the Notes, a
description of the Company and its subsidiaries and any material developments
relating to the Company and its subsidiaries occurring after the date of the
most recent historical financial statements included therein.
The Company and the Subsidiary Guarantors understand that the
Initial Purchasers propose to make an offering of the Notes only on the terms
and in the manner set forth in the Memorandum and Section 9 hereof as soon as
the Initial Purchasers deem advisable after this Agreement has been executed and
delivered, to persons in the United States whom the Initial Purchasers
reasonably believe to be qualified institutional buyers ("QIBs") as defined in
Rule 144A under the Act, as such rule may be amended from time to time ("Rule
144A"), in transactions under Rule 144A, and to a limited number of
institutional "accredited investors" ("Accredited Investors"), as defined in
Rule 501(a)(1), (2), (3) and (7) under Regulation D of the Act in private sales
exempt from registration under the Act, and outside the United States to certain
persons in reliance on Regulation S under the Act.
The Initial Purchasers and their direct and indirect
transferees of the Notes will be entitled to the benefits of the Registration
Rights Agreement (the "Registration Rights Agreement"), dated as of June 17,
1997 among the parties hereto pursuant to which the Issuers have agreed, among
other things, to file (i) a registration statement (the "Registration
Statement") with the Securities and Exchange Commission (the "Commission")
registering the Notes or the Exchange Notes (as defined in the Registration
Rights Agreement) under the Act or (ii) a shelf registration statement pursuant
to Rule 415 under the Act relating to the resale of the Notes, by holders
thereof or, if applicable, relating to the resale of Private Exchange Notes (as
defined in the Registration Rights Agreement) by the Initial Purchasers pursuant
to an exchange of the Notes for Private Exchange Notes.
2. Representations and Warranties of the Issuers. The Issuers,
jointly and severally, represent and warrant to and agree with the Initial
Purchasers that:
<PAGE> 3
-3-
(a) Neither the Preliminary Memorandum as of the date thereof
nor the Final Memorandum nor any amendment or supplement thereto as of
the date thereof and at all times subsequent thereto up to the Closing
Date (as defined in Section 3 below) contained or contains any untrue
statement of a material fact or omitted or omits to state a material
fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, except that
the representations and warranties set forth in this Section 2 do not
apply to statements or omissions made in reliance upon and in
conformity with information relating to the Initial Purchasers
furnished to the Company in writing by the Initial Purchasers expressly
for use in the Preliminary Memorandum, the Final Memorandum or any
amendment or supplement thereto. The documents incorporated or deemed
to be incorporated by reference in any Memorandum, 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 Securities
Exchange Act of 1934, as amended (together with the rules and
regulations of the Commission promulgated thereunder, the "Exchange
Act").
(b) Each of the Company and its subsidiaries set forth in
Exhibit B hereto (the "Subsidiaries") has been duly incorporated and
each of the Company 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 Final Memorandum (or, if the Final Memorandum is not in
existence, the most recent Preliminary Memorandum) 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 Final Memorandum (or, if the Final Memorandum is not in
existence, the most recent Preliminary Memorandum); except as set forth
in Exhibit B hereto, the Company does not have any subsidiaries or own
directly or indirectly any of the capital stock or other
<PAGE> 4
-4-
equity securities of any other person; all of 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;
except as set forth in the Final Memorandum (or, if the Final
Memorandum is not in existence, the most recent Preliminary
Memorandum), 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 Final
Memorandum (or, if the Final Memorandum is not in existence, the most
recent Preliminary Memorandum) and employee stock options granted by
the Company since March 31, 1997, 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.
(c) 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 Initial Purchasers 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 meets the requirements for
qualification under the Trust Indenture Act of 1939, as amended (the
"Trust
<PAGE> 5
-5-
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).
(d) 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.
(e) Each of the Issuers has the requisite corporate power and
authority to execute, deliver and perform its obligations under the
Registration Rights Agreement. The Registration Rights 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
<PAGE> 6
-6-
limited by federal and state securities laws and public policy
considerations.
(f) No consent, approval, authorization or order of any court
or governmental agency or body is required for the performance of this
Agreement, the Registration Rights 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
Final Memorandum (or, if the Final Memorandum is not in existence, the
most recent Preliminary Memorandum), except as may be required under
state securities or "Blue Sky" laws in connection with the purchase and
distribution of the Securities by the Initial Purchasers; 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 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 Registration Rights 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.
(g) The execution, delivery and performance by the Issuers of
this Agreement, the Registration Rights Agreement, the Securities and
the Indenture and the consummation by the Issuers of the transactions
contemplated hereby and thereby 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
<PAGE> 7
-7-
incorporation or bylaws of any of the Company or the Subsidiaries (or
any similar organizational documents) or (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.
(h) The audited consolidated financial statements included in
the Final Memorandum (or, if the Final Memorandum is not in existence,
the most recent Preliminary Memorandum) present fairly the consolidated
financial position, results of operations and cash flows of the
entities to which they relate 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 notes included in the Final Memorandum (or,
if the Final Memorandum is not in existence, the most recent
Preliminary Memorandum) 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 Final
Memorandum (or, if the Final Memorandum is not in existence, the most
recent Preliminary Memorandum) present fairly the information shown
therein and have been prepared and compiled on a basis consistent with
the audited financial statements included therein, except as otherwise
stated therein; and Deloitte & Touche LLP, which has examined certain
of such financial statements as set forth in its reports included in
the Final Memorandum, is an independent public accounting firm as
required by the Act.
(i) The pro forma financial statements and other pro forma
financial information (including the notes thereto) included in the
Final Memorandum (or, if the Final Memorandum is not in existence, the
most recent Preliminary Memorandum) (A) have been prepared in
accordance with applicable requirements of Regulation S-X promulgated
under
<PAGE> 8
-8-
the Exchange 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 Final Memorandum (or, if the Final
Memorandum is not in existence, the most recent Preliminary Memorandum)
are reasonable and the adjustments used therein are appropriate to give
effect to the transactions or circumstances referred to therein.
(j) Except as described in the Final Memorandum (or, if the
Final Memorandum is not in existence, the most recent Preliminary
Memorandum), 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 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 Final
Memorandum.
(k) 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 which liability or deficiency would,
individually or in the aggregate, have a Material Adverse Effect. With
respect to such plans, the Company and the Subsidiaries are in
compliance in all respects with all provisions of ERISA except for any
non-compliance that would not, individually or in the aggregate, have a
Material Adverse Effect.
(l) 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 Final Memorandum (or, if the Final
Memorandum is not in existence, the most recent Preliminary
<PAGE> 9
-9-
Memorandum) except to the extent the failure to own or possess such
licenses or other rights would, individually or in the aggregate, not
have a Material Adverse Effect.
(m) 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.
(n) 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.
(o) Subsequent to the respective dates as of which information
is given in the Final Memorandum (or, if the Final Memorandum is not in
existence, the most recent Preliminary Memorandum) and except as
described therein, (i) the Company and the Subsidiaries have not
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, except for a three-for-two stock split to be
effected by the Company as a stock dividend payable on July 3, 1997 to
shareholders of record on June 23, 1997, declared, paid or otherwise
made any dividend or distribution of any kind on any of their
respective capital stock or otherwise.
(p) There are no legal or governmental proceedings that would
be required to be described in a Registration Statement on Form S-3
under the Act that are not described in the Final Memorandum (or, if
the Final Memorandum is not in existence, the most recent Preliminary
Memorandum) nor are there any contracts or other documents that would
be required to be described in a Registration Statement on Form S-3
under the Act that are not described in the Final Memorandum (or, if
the Final Memorandum is not in existence, the most recent Preliminary
Memorandum). Except as described in the Final Memorandum (or, if the
Final Memorandum is not in existence, the most recent Preliminary
Memorandum), none of the Company or the Subsidiaries is in
<PAGE> 10
-10-
default under any of the contracts described in the Final Memorandum
(or, if the Final Memorandum is not in existence, the most recent
Preliminary Memorandum), has received a notice or claim of any such
default or has knowledge of any breach of such contracts 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.
(q) 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.
(r) Each of the Company and the Subsidiaries has good and
marketable title to all real property described in the Final Memorandum
(or, if the Final Memorandum is not in existence, the most recent
Preliminary Memorandum) as being owned by it and good 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 Final
Memorandum (or, if the Final Memorandum is not in existence, the most
recent Preliminary Memorandum) or such as would not, individually or in
the aggregate, have a Material Adverse Effect. All leases, contracts
and agreements, including those referred to in the Final Memorandum
(or, if the Final Memorandum is not in existence, the most recent
Preliminary Memorandum) 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, and are, to the knowledge
of the Issuers, valid and enforceable against the other party or
parties thereto and are in full force and effect with only such
exceptions as would not, individually or in the aggregate, have a
Material Adverse Effect.
(s) Each of the Company and the Subsidiaries has filed all
necessary federal, state and foreign income and franchise tax returns
and have paid all taxes shown as due thereon, except where the failure
to so file such returns or pay such taxes would not, individually or in
the aggregate, have a Material Adverse Effect; and other than tax
deficiencies which the Company or any Subsidiary is contesting in good
faith and for which adequate reserves have been provided, there is no
tax deficiency that has been
<PAGE> 11
-11-
asserted against the Company or any Subsidiary that would, individually
or in the aggregate, have a Material Adverse Effect.
(t) (i) Immediately after the consummation of the transactions
contemplated by the Agreement, the fair value and present fair saleable
value of the assets of each of the Company and the Subsidiaries will
exceed the sum of its stated liabilities and identified contingent
liabilities; and (ii) each of the Company and the Subsidiaries is not,
nor will it be, after giving effect to the execution, delivery and
performance of this 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.
(u) Except as disclosed in the Final Memorandum (or, if the
Final Memorandum is not in existence, the most recent Preliminary
Memorandum), 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
(as hereinafter defined), (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 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
<PAGE> 12
-12-
CERCLA, or on any comparable list maintained by any state or local
governmental authority.
For purposes of this Agreement, "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.
(v) 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.
(w) Except as stated in the Final Memorandum (or, if the Final
Memorandum is not in existence, the most recent Preliminary Memorandum)
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
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 Initial Purchasers).
(x) None of the Company, the Subsidiary Guarantors or any of
their respective Affiliates (as defined in rule 501(b) of Regulation D
under the Act) directly, or through any agent, (i) sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of,
any "security" (as defined in the Act) which is or could be integrated
with the sale of the Securities in a manner that would require the
registration under the Act of the Securities or (ii) assuming the
accuracy of the representations and warranties of the Initial
Purchasers in Section 9 hereof, engaged in any form of general
solicitation or general advertising (as those terms are used in
Regulation D under the Act) in connection with the offering of the
Securities or in any manner involving a public offering within the
meaning of Section 4(2) of the Act. Assuming (i) the accuracy of the
representations and warranties of the Initial Purchasers in Section 9
hereof,
<PAGE> 13
-13-
(ii) the due performance by the Initial Purchasers of the covenants and
agreement set forth in Section 9 hereof, and (iii) the compliance by
the Initial Purchasers with the transfer restrictions described under
the caption "Notice to Investors" in the Final Memorandum, it is not
necessary in connection with the offer, sale and delivery of the
Securities to the Initial Purchasers in the manner contemplated by this
Agreement to register any of the Securities under the Act or to qualify
the Indenture under the Trust Indenture Act.
(y) No securities of any Issuer are of the same class (within
the meaning of Rule 144A under the Act) as the Securities and listed on
a national securities exchange registered under Section 6 of the
Exchange Act, or quoted in a U.S. automated inter-dealer quotation
system.
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 Initial Purchasers, and each of the Initial Purchasers
severally agrees to purchase from the Company, at 97.309% 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
Initial Purchasers under this Agreement are several and not joint.
One or more certificates in definitive form for the Notes that
the Initial Purchasers have agreed to purchase hereunder, and in such
denomination or denominations and registered in such name or names, as the
Initial Purchasers request upon notice to the Company at least 48 hours prior to
the Closing Date (as defined) shall be delivered by or on behalf of the Company,
against payment by or on behalf of the Initial Purchasers, of the purchase price
therefor by wire transfer of immediately available funds to the account of the
Company previously designated by it in writing. Such delivery of and payment for
the Notes and the related Guarantees 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 June 23, 1997, or at such date as the Initial Purchasers and the
Company may agree upon, 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
Initial Purchasers at the offices in New York, New York of CIBC Wood Gundy
Securities Corp. at least 24 hours prior to the Closing Date.
<PAGE> 14
-14-
4. Offering by the Initial Purchasers. The Initial Purchasers
propose to make an offering of the Securities at the price and upon the terms
set forth in the Final Memorandum as soon as practicable after this Agreement is
entered into and as in the judgment of the Initial Purchasers is advisable.
5. Certain Covenants. The Issuers jointly and severally
covenant and agree with the Initial Purchasers that:
(i) The Issuers will not amend or supplement the Final
Memorandum or any amendment or supplement thereto of which the Initial
Purchasers shall not have been advised and furnished a copy for a
reasonable period of time prior to the proposed amendment or supplement
and as to which the Initial Purchasers shall not have given their
consent (which consent shall not be unreasonably withheld). The Issuers
will promptly, upon the reasonable request of the Initial Purchasers or
counsel for the Initial Purchasers, make any amendments or supplements
to the Preliminary Memorandum or the Final Memorandum that may be
necessary in connection with the resale of the Securities by the
Initial Purchasers for such Final Memorandum not to contain any untrue
statement of a material fact or omission of a material fact necessary
to make the statements therein, in the light of the circumstances under
which they were made, not misleading or to comply with applicable laws,
rules or regulations.
(ii) The Issuers will cooperate with the Initial Purchasers in
arranging for the qualification of the Securities for offering and sale
under the securities or "Blue Sky" laws of such jurisdictions as the
Initial Purchasers may designate and will continue such qualifications
in effect for as long as may be necessary to complete the resale of the
Securities by the Initial Purchasers; 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.
(iii) If, at any time prior to the completion of the resale by
the Initial Purchasers of the Notes or the Private Exchange Notes any
event shall occur as a result of which it is necessary, in the opinion
of counsel for the Initial Purchasers, to amend or supplement the Final
Memorandum in order to make such Final Memorandum not misleading in the
<PAGE> 15
-15-
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 Final Memorandum in order to comply with applicable
laws, rules or regulations, the Issuers shall (subject to Section 5(i))
forthwith amend or supplement such Final Memorandum so that, as so
amended or supplemented, such Final Memorandum 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 with applicable laws, rules or regulations,
and the Issuers will furnish to the Initial Purchasers, without charge,
a reasonable number of copies of such amendment or supplement.
(iv) The Issuers will, without charge, provide to the Initial
Purchasers and to counsel for the Initial Purchasers, as many copies of
each Preliminary Memorandum or Final Memorandum or any amendment or
supplement thereto as the Initial Purchasers may reasonably request.
(v) None of the Issuers or any of their respective Affiliates
will sell, offer for sale or solicit offers to buy or otherwise
negotiate in respect of any "security" (as defined in the Act) which
could be integrated with the sale of the Securities in a manner which
would require the registration under the Act of the Securities.
(vi) During the period of five years hereafter, the Company
will furnish to the Initial Purchasers (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
information concerning the Company as the Initial Purchasers may
reasonably request.
(vii) If this Agreement shall terminate or shall be terminated
after execution pursuant to any provisions hereof (other than by reason
of a default or omission by the Initial Purchasers of their obligations
hereunder) or if this Agreement shall be terminated by the Initial
Purchasers 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 the Initial Purchasers for
all reasonable out-of-pocket expenses (including fees and expenses of
counsel for the Initial
<PAGE> 16
-16-
Purchasers) incurred by the Initial Purchasers in connection herewith,
but in no event will the Company be liable to the Initial Purchasers
for damages on account of loss of anticipated profits from the sale of
the Securities.
(viii) In connection with Securities offered and sold in an
offshore transaction (as defined in Regulation S), the Issuers will not
register any transfer of such Securities not made in accordance with
the provisions of Regulation S and will not, except in accordance with
the provisions of Regulation S, if applicable, issue any such
Securities in the form of definitive securities.
(ix) The Company will not, and will not permit any of its
Subsidiaries to, engage in any form of general solicitation or general
advertising (as those terms are used in Regulation D under the Act) in
connection with the offering of the Securities or in any manner
involving a public offering within the meaning of Section 4(2) of the
Act.
(x) For so long as any of the Securities remain outstanding,
the Company will make available at its expense, upon request, to any
holder of Securities and any prospective purchasers thereof the
information specified in Rule 144A(d)(4) under the Act, unless the
Company is then subject to Section 13 or 15(d) of the Exchange Act.
(xi) The Issuers will use their best efforts to (i) permit the
Securities to be designated PORTAL securities in accordance with the
rules and regulations adopted by the NASD relating to trading in the
Private Offerings, Resales and Trading through Automated Offerings,
Resales and Trading through Automated Linkages market (the "Portal
Market") and (ii) permit the Securities to be eligible for clearance
and settlement through The Depository Trust Company.
(xii) The Company will apply the net proceeds from the sale of
the Securities as set forth under "Use of Proceeds" in the Final
Memorandum.
(xiii) Prior to the Closing Date, the Company will furnish to
the Initial Purchasers, 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 Final Memorandum.
<PAGE> 17
-17-
6. Expenses. Notwithstanding any termination of this Agreement
(pursuant to Section 11 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 of each Preliminary Memorandum, the
Final Memorandum 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 each Preliminary
Memorandum, the Final Memorandum 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 Securities and
trustees' fees; (iv) the reproduction and delivery of this Agreement, the
preliminary and supplemental "Blue Sky" 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 Initial Purchasers, relating to such registration and
qualification); (vi) the transportation and other expenses incurred by or on
behalf of Company representatives in connection with presentations to
prospective purchasers of the Securities; (vii) the fees and expenses of the
Company's accountants and the fees and expenses of counsel (including local and
special counsel) for the Issuers; (viii) fees and expenses of the Trustee
including fees and expenses of its counsel; (ix) all expenses and listing fees
incurred in connection with the application for quotation of the Securities on
the PORTAL Market and (x) any fees charged by investment rating agencies for the
rating of the Securities.
7. Conditions of the Initial Purchaser's Obligations. The
obligation of the Initial Purchasers 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 Initial Purchasers:
(i) The Initial Purchasers shall have received an opinion of
counsel to the Issuers in form and substance satisfactory to the
Initial Purchasers and Cahill Gordon & Reindel, counsel to the Initial
Purchasers, dated the
<PAGE> 18
-18-
Closing Date, of Powell, Goldstein, Frazer & Murphy LLP, substantially
in the form of Exhibit D hereto. In rendering such opinion, Powell,
Goldstein, Frazer & Murphy LLP 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 Initial
Purchasers and Cahill Gordon & Reindel, counsel to the Initial
Purchasers, as they may reasonably request to pass upon such matters.
(ii) The Initial Purchasers shall have received an opinion,
dated the Closing Date, of Cahill Gordon & Reindel, counsel to the
Initial Purchasers, with respect to the sufficiency of certain legal
matters relating to this Agreement and such other related matters as
the Initial Purchasers 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 its
opinion, Cahill Gordon & Reindel may state that its opinion is limited
to matters of New York, Delaware corporate and federal law.
(iii) The Initial Purchasers shall have received from Deloitte
& Touche LLP, independent public accountants for the Issuers, and from
Coopers & Lybrand L.L.P., independent public accountants for National
Advertising Company, "comfort" letters dated the date hereof and the
Closing Date, in form and substance reasonably satisfactory to the
Initial Purchasers and Cahill Gordon & Reindel, counsel to the Initial
Purchasers.
(iv) 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.
(v) 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 Final Memorandum 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 Final Memorandum.
<PAGE> 19
-19-
(vi) None of the issuance and sale of the Securities pursuant
to this Agreement or the Final Memorandum 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 the Initial
Purchasers relating to the issuance of the Securities or the Initial
Purchasers' activities in connection therewith or any other
transactions contemplated by this Agreement or the Final Memorandum.
(vii) 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 Final Memorandum that, in the opinion of the
Initial Purchasers, 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 Final Memorandum untrue or that, in the opinion
of the Issuers and their counsel or the Initial Purchasers and their
counsel, requires the making of any addition to or change in the Final
Memorandum in order to state a material fact required by any applicable
law, rule or regulation to be stated therein or necessary in order to
make the statements made therein not misleading.
(viii) The Initial Purchasers 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
Initial Purchasers), to the effect that:
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.
<PAGE> 20
-20-
b. None of the issuance and sale of the Securities
pursuant to this Agreement or the Final Memorandum
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 Initial Purchasers' activities
in connection therewith or in connection with any
other transactions contemplated by this Agreement
or the Final Memorandum.
c. 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 Final
Memorandum 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 Final Memorandum untrue or that requires the
making of any addition to or change in the Final
Memorandum in order to state a material fact
required by any applicable law, rule or regulation
to be stated therein or necessary in order to make
the statements made therein not misleading.
d. 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 Final Memorandum 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 Final Memorandum.
(ix) The Issuers shall have furnished or caused to be
furnished to the Initial Purchasers such further
<PAGE> 21
-21-
certificates and documents as the Initial Purchasers shall
have reasonably requested.
Any certificate or document signed by any officer of an Issuer
and delivered to the Initial Purchasers or to counsel for the Initial Purchasers
shall be deemed a representation and warranty by such Issuer to the Initial
Purchasers 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 Initial Purchasers and counsel to the Initial Purchasers. The
Issuers shall furnish to the Initial Purchasers such conformed copies of such
opinions, certificates, letters, schedules, documents and instruments in such
quantities as the Initial Purchasers shall reasonably request.
8. Indemnification and Contribution. (a) Each Issuer jointly
and severally agrees to indemnify and hold harmless each of the Initial
Purchasers, and each person, if any, who controls the Initial Purchasers 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 Initial Purchasers or
such controlling persons 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) any Preliminary Memorandum or the Final
Memorandum 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 any
Preliminary Memorandum or the Final Memorandum 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,
<PAGE> 22
-22-
and will reimburse, as incurred, the Initial Purchasers and each such
controlling person for any legal or other expenses reasonably incurred
by the Initial Purchasers 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 the Initial Purchasers or any controlling person of the Initial
Purchasers 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 Preliminary
Memorandum or the Final Memorandum 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 the
Initial Purchasers specifically for use therein; and provided, further,
that none of the Issuers will be liable to the Initial Purchasers or
any person controlling the Initial Purchasers with respect to any such
untrue statement or omission made in any Preliminary Memorandum that is
corrected in the Final Memorandum (or any amendment or supplement
thereto) if the person asserting any such loss, claim, damage or
liability purchased Securities from the Initial Purchasers in reliance
upon the Preliminary Memorandum but was not sent or given a copy of the
Final Memorandum (as amended or supplemented) that was made available
by the Issuers to such Initial Purchasers at or prior to the written
confirmation of the sale of the Securities to such person in any case
where such delivery of such Final Memorandum (as so amended or
supplemented) is required by the Act, unless such failure to deliver
such Final Memorandum (as amended or supplemented) was a result of
noncompliance by the Issuers with Section 5(iv) 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 Initial
Purchasers, 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 Initial Purchasers may be
sought hereunder (whether or not the Initial Purchasers or any person
who controls the Initial Purchasers 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 Initial Purchasers
<PAGE> 23
-23-
and each such controlling person from all liability arising out of such
claim, action, suit or proceeding.
(b) The Initial Purchasers will indemnify and hold harmless
the Issuers, their respective directors 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 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 any Preliminary Memorandum or the Final Memorandum 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 conformity with written information furnished to any of
the Issuers by or on behalf of the Initial Purchasers 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 Initial Purchasers may otherwise have to the indemnified
parties. The Initial Purchasers 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.
(c) 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
<PAGE> 24
-24-
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 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, representing the indemnified parties under such
paragraph (a) or paragraph (b), 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. 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 liable under this Section 8 for the costs and
<PAGE> 25
-25-
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.
(d) 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
Initial Purchasers on the other hand 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 discounts and
commissions received by the Initial Purchasers. 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 Initial Purchasers on the other hand, 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 Initial Purchasers 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 Initial Purchasers on the other hand were treated as one entity for
such purpose) or by any other method of allocation that does not take into
account the equitable considerations referred to in the first sentence of this
paragraph (d). Notwithstanding any other provision of this paragraph (d), the
Initial Purchasers shall not be obligated to make contributions hereunder that
in the aggregate exceed the
<PAGE> 26
-26-
total discounts and commissions received by the Initial Purchasers under this
Agreement, less the aggregate amount of any damages that the Initial Purchasers
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 (d), each person, if any, who controls the Initial Purchasers
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 Initial Purchasers, and each
director of any of the Issuers 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. Offering of Securities; Restrictions on Transfer. The
Initial Purchasers represent and warrant that they are QIBs. The Initial
Purchasers agree with the Issuers that (i) they have not and will not solicit
offers for, or offer or sell, the Securities by any form of general solicitation
or general advertising (as those terms are used in Regulation D under the Act)
or in any manner involving a public offering within the meaning of Section 4(2)
of the Act; and (ii) they have and will solicit offers for the Securities only
from, and will offer the Securities only to, (A) in the case of offers inside
the United States (x) persons whom the Initial Purchasers reasonably believe to
be QIBs or, if any such person is buying for one or more institutional accounts
for which such person is acting as fiduciary or agent, only when such person has
represented to the Initial Purchasers that each such account is a QIB, to whom
notice has been given that such sale or delivery is being made in reliance on
Rule 144A and, in each case, in transactions under Rule 144A or (y) a limited
number of other institutional investors reasonably believed by the Initial
Purchasers to be Accredited Investors that, prior to their purchase of the
Securities, deliver to the Initial Purchasers a letter containing the
representations and agreements set forth in Appendix A to the Final Memorandum
and (B) in the case of offers outside the United States, to persons other than
U.S. persons ("foreign purchasers," which term shall include dealers or other
professional fiduciaries in the United States acting on a discretionary basis
for foreign beneficial owners (other than an estate or trust); provided,
however, that, in the case of this Clause (B), in purchasing such Securities
such persons are deemed to have represented and agreed as provided under the
caption "Notice to Investors" contained in the Final Memorandum.
<PAGE> 27
-27-
10. Survival Clause. The respective representations,
warranties, agreements, covenants, indemnities and other statements of the
Issuers, their respective officers and the Initial Purchasers 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 Initial Purchasers 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 Initial Purchasers
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.
11. Termination. (a) This Agreement may be terminated in the
sole discretion of the Initial Purchasers 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 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 Final Memorandum
(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
<PAGE> 28
-28-
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 any material change in the financial
markets of the United States that, in the sole judgment of the Initial
Purchasers, makes it impracticable or inadvisable to proceed with the
delivery of the Securities as contemplated by the Final Memorandum, 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 11
shall be without liability of any party to any other party except as provided in
Section 10 hereof.
12. Notices. All communications hereunder shall be in writing
and, if sent to the Initial Purchasers, shall be mailed, delivered or telecopied
and confirmed in writing to 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 LLP,
191 Peachtree Street NE, 16th Floor, Atlanta, Georgia 30303, Attention: William
B. Shearer, Esq.
13. Successors. This Agreement shall inure to the benefit of
and be binding upon the Initial Purchasers 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
<PAGE> 29
-29-
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 Initial Purchasers
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act
and (ii) the indemnities of the Initial Purchasers contained in Section 8 of
this Agreement shall also be for the benefit of the directors of the Issuers 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 Initial Purchasers will be deemed a successor because of such purchase.
14. Joint and Several Obligations. All of the obligations of
the Issuers hereunder shall be joint and several obligations of each of them.
15. Information Supplied by the Initial Purchasers. The
statements set forth in the last paragraph on the front cover page of the Final
Memorandum and in the last two sentences of the third paragraph, the fourth and
fifth sentence of the fifth paragraph, the seventh paragraph, the first sentence
of the eighth paragraph and the ninth paragraph, in each case under the heading
"Plan of Distribution" in the Final Memorandum (to the extent such statements
relate to the Initial Purchasers) constitute the only information furnished by
the Initial Purchasers to the Issuers for purposes of Section 8 hereof.
16. Entire Agreement. This Agreement constitutes the entire
agreement among the parties hereto and supersedes all prior agreements,
understandings and arrangements, oral or written, among the parties hereto with
respect to the subject matter hereof.
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> 30
S-1
If the foregoing correctly sets forth our understanding,
please indicate your acceptance thereof in the space provided below for that
purpose, whereupon this Agreement shall constitute a binding agreement among the
Issuers and the Initial Purchasers.
Very truly yours,
OUTDOOR SYSTEMS, INC.
By: /s/ William S. Levine
------------------------------
Name: William S. Levine
Title: Chairman
OUTDOOR SYSTEMS PAINTING, INC.
By: /s/ William S. Levine
------------------------------
Name: William S. Levine
Title: Chairman
OS ADVERTISING OF TEXAS PAINTING,
INC.
By: /s/ William S. Levine
------------------------------
Name: William S. Levine
Title: Chairman
OS BASELINE, INC.
By: /s/ William S. Levine
------------------------------
Name: William S. Levine
Title: Chairman
DECADE COMMUNICATIONS GROUP, INC.
By: /s/ William S. Levine
------------------------------
Name: William S. Levine
Title: Chairman
BENCH ADVERTISING COMPANY OF
COLORADO, INC.
By: /s/ William S. Levine
------------------------------
Name: William S. Levine
Title: Chairman
<PAGE> 31
S-2
NEW YORK SUBWAYS ADVERTISING CO.,
INC.
By: /s/ William S. Levine
------------------------------
Name: William S. Levine
Title: Chairman
OS BUS, INC.
By: /s/ William S. Levine
------------------------------
Name: William S. Levine
Title: Chairman
OUTDOOR SYSTEMS (NEW YORK), INC.
By: /s/ William S. Levine
------------------------------
Name: William S. Levine
Title: Chairman
The foregoing Agreement is hereby
confirmed and accepted as of the date
first above written.
CIBC WOOD GUNDY SECURITIES CORP.
By: /s/ Neal Thomas
------------------------------
Name: Neal Thomas
Title: Managing Director
ALEX. BROWN & SONS INCORPORATED
By: /s/ Charles J. Carey
------------------------------
Name: Charles J. Carey
Title: VP
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Michael J. Connelly
------------------------------
Name: Michael J. Connelly
Title: Managing Director
<PAGE> 32
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.
OS Bus, Inc.
Outdoor Systems (New York), Inc.
<PAGE> 33
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.
OS Bus, Inc.
Outdoor Systems (New York), Inc.
Mediacom Inc.
C.D. Maintenance Services Limited
Outdoor Advertising Sales Limited
Transtop Manufacturing Limited
E.L. Ruddy Company (Ontario) Limited
Ad Outdoor Signs Limited
<PAGE> 34
Exhibit C
<TABLE>
<CAPTION>
Principal Amount
Initial Purchasers of Notes
<S> <C>
CIBC Wood Gundy Securities
Corp.............................................. $450,000,000
Alex. Brown & Sons Incorporated...................... $ 25,000,000
Donaldson, Lufkin & Jenrette
Securities Corporation............................. $ 25,000,000
------------
Total $500,000,000
============
</TABLE>
<PAGE> 35
Exhibit D
Form of Opinion of Powell, Goldstein, Frazer & Murphy LLP
Opinion, dated the Closing Date and addressed to the Initial
Purchasers, of Powell, Goldstein, Frazer & Murphy LLP, counsel to the Issuers,
to the effect that:
(i) The Company has been duly organized and is validly
existing as a corporation in good standing under the laws of the State of
Delaware, with corporate power and authority to own, and hold under lease, its
properties and conduct its business as described in the Final Memorandum. Each
of the Subsidiary Guarantors has been duly organized and is validly existing as
a corporation in good standing under the laws of the jurisdiction of its
incorporation with corporate power and authority to own, and hold under lease,
its properties and conduct its business as described in the Final Memorandum.
(ii) Each of the Company and the Subsidiary Guarantors is
duly qualified to transact business as a foreign corporation and is in good
standing under the laws of each of the jurisdictions in which the conduct of its
business requires such qualification, except to the extent that the failure to
qualify would not, in the aggregate, reasonably be expected to have a material
adverse effect on the business or financial condition of the Company and its
Subsidiaries, taken as a whole (a "Material Adverse Effect").
(iii) The outstanding shares of capital stock of each of the
Subsidiary Guarantors have been duly authorized and validly issued and are fully
paid and non-assessable, except that we express no opinion with respect to the
shares of Decade Communications Group, Inc. and Bench Advertising Company of
Colorado, Inc. To the best of our knowledge (a) the shares of capital stock of
each of the Subsidiary Guarantors are owned by the Company or one of the other
Subsidiary Guarantors free and clear of all liens, encumbrances and security
interests (other than any liens granted by the Company in connection with the
Senior Credit Facility (as defined in the Indenture)), and (b) no options,
warrants or other rights to purchase, agreements or other obligations to issue,
or other rights to convert any obligations into, shares of capital stock of or
ownership interests in any of the Subsidiary Guarantors are outstanding.
(iv) The Notes have been duly and validly authorized by the
Company and the Guarantees have been duly and validly authorized by each of the
Subsidiary Guarantors. When executed by the Company, as to the Notes, and the
Subsidiary Guarantors, as to the Guarantees, and authenticated by the Trustee in
accordance with the provisions of the Indenture, and delivered to
<PAGE> 36
-2-
and paid for by the Initial Purchasers in accordance with the terms of the
Purchase Agreement, the Notes and the Guarantees will have been duly executed,
issued and delivered and will constitute valid and legally binding obligations
of the Company, as to the Notes, and the Subsidiary Guarantors, as to the
Guarantees, entitled to the benefits of the Indenture and enforceable against
the Company, as to the Notes, and the Subsidiary Guarantors, as to the
Guarantees, in accordance with their respective 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). The foregoing opinion as to enforceability is further
qualified in that certain remedies, waivers, and other provisions of the
Securities may not be enforceable, nevertheless such unenforceability will not
render the Securities invalid as a whole or preclude the judicial enforcement of
the obligations of the Company and the Subsidiary Guarantors to pay the
principal of and interest on the Notes as provided in the Securities.
(v) 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 is in sufficient form for due qualification 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) 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). The foregoing opinion as to enforceability is further qualified in that
certain remedies, waivers, and other provisions of the Indenture may not be
enforceable; nevertheless such unenforceability will not render the Indenture
invalid as a whole or preclude the judicial enforcement of the obligations of
the Issuers to pay the principal of and interest on the Notes as provided in the
Indenture.
(vi) Each of the Issuers has the requisite corporate
power and authority to execute, deliver and perform its
<PAGE> 37
-3-
obligations under the Purchase Agreement. The Purchase 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.
(vii) Each of the Issuers has the requisite corporate power
and authority to execute, deliver and perform its obligations under the
Registration Rights Agreement. The Registration Rights 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.
(viii) No consent, approval, authorization or order of any
governmental agency or body is required for the performance of any of the
Purchase Agreement, the Registration Rights 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, except as described in the Final Memorandum and such as may be required
under state securities or "Blue Sky" laws in connection with the purchase and
distribution of the Securities and the federal securities laws in connection
with the transactions contemplated by the Registration Rights Agreement.
(ix) To our knowledge, none of the Company or any of the
Subsidiary Guarantors is (a) in violation of its certificate or articles 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,
<PAGE> 38
-4-
individually or in the aggregate, have a Material Adverse Effect or (c) in
breach of or in default under any of the Purchase Agreement, the Registration
Rights 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 identified
to us as being material to the Company and the Subsidiary Guarantors in a
certificate of the Chairman of the Board of Directors of the Company, a copy of
which is attached hereto, which breach or default would individually or in the
aggregate, have a Material Adverse Effect (collectively, the "Other Material
Agreements").
(x) The execution, delivery and performance by the Issuers
of the Purchase Agreement, the Registration Rights 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 or
articles of incorporation or bylaws of the Company or the Subsidiary Guarantors,
(b) any of the Other Material Agreements or (c) (assuming compliance with all
applicable state securities and "Blue Sky" laws) any statute, judgment, decree,
order, rule or regulation of any court or governmental agency or body known to
us to be applicable to any of the Company or the Subsidiary Guarantors 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.
(xi) Except as described in the Final Memorandum, we know
of no legal or governmental proceedings pending or threatened to which any of
the Company or the Subsidiary Guarantors is a party or to which the respective
properties or assets of the Company or the Subsidiary Guarantors are subject
which would be required to be described in a prospectus or registration
statement under the Securities Act and which are not described in the Final
Memorandum, or that seek to restrain, enjoin, prevent the consummation of or
otherwise challenge the issuance or sale of the Securities to the Initial
Purchasers or the consummation of the other transactions described in the Final
Memorandum; and we know of no legal or governmental proceedings and no contract,
agreement or other document required to be described in a prospectus or
registration statement under the Securities Act that is not described in the
Final Memorandum.
(xii) The statements set forth under the captions "Business
- -- Government Regulation," "Description of Senior Credit Facility," "Description
of the Notes" and "Exchange Offer;
<PAGE> 39
-5-
Registration Rights" in the Final Memorandum, insofar as such statements purport
to summarize legal documents are fair summaries of the documents so summarized
and, insofar as such statements are summaries of matters 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
under "Description of the Notes" in the Final Memorandum.
(xiii) None of the Company or the Subsidiary Guarantors 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.
(xiv) 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.
(xv) The Final Memorandum complies as to form in all
material respects with the requirements of the Securities Act applicable to
Registration Statements on Form S-3, and the documents incorporated by reference
in the Final Memorandum when filed complied in all material respects with the
requirements of the Exchange Act, except that in each case we express no opinion
as to the financial statements, schedules and other financial and statistical
data included therein. The Indenture complies as to form in all material
respects with the requirements of the Trust Indenture Act.
(xvi) Assuming (i) the accuracy of the representations and
warranties of the Initial Purchasers in Section 9 of the Purchase Agreement,
(ii) the due performance by the Initial Purchasers of the covenants and
agreements set forth in Section 9 of the Purchase Agreement, and (iii) the
compliance by the Initial Purchasers with the transfer restrictions described
under the caption "Notice to Investors" in the Final Memorandum, it is not
necessary in connection with the offer, sale and delivery of the Securities to
the Initial Purchasers under the Purchase Agreement or in connection with the
initial resale of the Securities by the Initial Purchasers in accordance with
Section 9 of the Purchase Agreement (i) to register the Securities under the
Securities Act or (ii) to qualify the Indenture under the Trust Indenture Act,
it being understood that no opinion is expressed as to any subsequent resale of
any of the Securities.
In our capacity as counsel to the Issuers, we have
participated in conferences with officers and other representatives of the
Issuers, representatives of the independent public accountants for the Issuers
and representatives of the Initial Purchasers at which the contents
<PAGE> 40
-6-
of the Memorandum 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 Memorandum or the documents incorporated by
reference therein (except as indicated in clause (xii) 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 the Final Memorandum as of its date and as of the
date hereof, or any amendment or supplement thereto as of its date and as of the
date hereof, contained or contains an untrue statement of 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 Final Memorandum).
<PAGE> 1
EXHIBIT 99.2
REGISTRATION RIGHTS AGREEMENT
Dated as of June 17, 1997
by and among
OUTDOOR SYSTEMS, INC.,
THE GUARANTORS
named herein
and
CIBC WOOD GUNDY SECURITIES CORP.
ALEX. BROWN & SONS INCORPORATED
and
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
as Initial Purchasers
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
1. Definitions...................................................................................... 1
2. Exchange Offer................................................................................... 5
3. Shelf Registration............................................................................... 6
4. Additional Interest.............................................................................. 10
5. Registration Procedures.......................................................................... 12
6. Registration Expenses............................................................................ 22
7. Indemnification.................................................................................. 24
8. Rules 144 and 144A............................................................................... 28
9. Underwritten Registrations....................................................................... 28
10. Miscellaneous.................................................................................... 28
a. Remedies................................................................................ 28
b. Enforcement............................................................................. 29
c. No Inconsistent Agreements.............................................................. 29
d. Adjustments Affecting Registrable Notes................................................. 29
e. Amendments and Waivers.................................................................. 29
f. Notices................................................................................. 30
g. Successors and Assigns.................................................................. 30
h. Counterparts............................................................................ 30
i. Headings................................................................................ 30
j. Governing Law........................................................................... 30
k. Severability............................................................................ 31
l. Entire Agreement........................................................................ 31
m. Joint and Several Obligations........................................................... 31
n. Notes Held by the Company, the Guarantors
or their Affiliates................................................................... 31
</TABLE>
-i-
<PAGE> 3
REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of
June 17, 1997, by and among OUTDOOR SYSTEMS, INC., a Delaware corporation (the
"Company"), the Guarantors named herein and CIBC WOOD GUNDY SECURITIES CORP.,
ALEX. BROWN & SONS INCORPORATED and DONALDSON, LUFKIN & JENRETTE SECURITIES
CORPORATION, as initial purchasers (the "Initial Purchasers").
This Agreement is entered into in connection with the Purchase
Agreement, dated as of June 17, 1997 among the Company, the Guarantors and the
Initial Purchasers (the "Purchase Agreement") relating to the sale by the
Company to the Initial Purchasers of $500,000,000 aggregate principal amount of
the Company's 8 7/8% Senior Subordinated Notes due 2007 (the "Notes") and the
guarantee of the Notes by the Guarantors (the "Guarantees"). In order to induce
the Initial Purchasers to enter into the Purchase Agreement, the Company and the
Guarantors have agreed to provide the registration rights set forth in this
Agreement to the Initial Purchasers and their direct and indirect transferees
and assigns. The execution and delivery of this Agreement is a condition to the
Initial Purchasers' obligation to purchase the Notes under the Purchase
Agreement.
The parties hereby agree as follows:
1. Definitions
As used in this Agreement, the following terms shall have the
following meanings:
Additional Interest: See Section 4(a).
Advice: See the last paragraph of Section 5.
Agreement: See the introductory paragraphs to this
Agreement.
Applicable Period: See Section 2(b).
Closing: See the Purchase Agreement.
Company: See the introductory paragraphs to this
Agreement.
Effectiveness Date: The 120th day after the Issue
Date.
Effectiveness Period: See Section 3(a).
Event Date: See Section 4(c).
<PAGE> 4
-2-
Exchange Act: The Securities Exchange Act of 1934, as
amended, and the rules and regulations of the SEC promulgated
thereunder.
Exchange Notes: See Section 2(a).
Exchange Offer: See Section 2(a).
Exchange Registration Statement: See Section 2(a).
Filing Date: The 45th day after the Issue Date.
Guarantees: See the introductory paragraphs to this
Agreement.
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., OS Bus, Inc., Outdoor Systems (New York), Inc. and any Person who becomes
a Guarantor by the terms of the Indenture (as defined herein).
Holder: Any holder of a Registrable Note or Registra-
ble Notes.
Indemnified Person: See Section 7(c).
Indemnifying Person: See Section 7(c).
Indenture: The Indenture, dated as of June 23, 1997, among the
Company, the Guarantors and The Bank of New York, as trustee, pursuant to which
the Notes are being issued, as amended or supplemented from time to time in
accordance with the terms thereof.
Initial Purchasers: See the introductory paragraphs to
this Agreement.
Initial Shelf Registration: See Section 3(a).
Inspectors: See Section 5(o).
Issue Date: The date on which the original Notes are
sold to the Initial Purchasers pursuant to the Purchase Agreement.
Lien: See the Indenture.
<PAGE> 5
-3-
NASD: See Section 5(t).
Notes: See the introductory paragraphs to this Agreement.
Participant: See Section 7(a).
Participating Broker-Dealer: See Section 2(b).
Person: An individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization or government (including any agency or political
subdivision thereof).
Private Exchange: See Section 2(b).
Private Exchange Notes: See Section 2(b).
Prospectus: The prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to completion
and a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective registration statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Notes covered by such Registration Statement, and all
other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
Purchase Agreement: See the introductory paragraphs to this
Agreement.
Records: See Section 5(o).
Registrable Notes: The Notes upon original issuance thereof
and at all times subsequent thereto and, if issued, the Private Exchange Notes,
until in the case of any such Notes or any such Private Exchange Notes, as the
case may be, (i) a Registration Statement covering such Notes or such Private
Exchange Notes has been declared effective by the SEC and such Notes or such
Private Exchange Notes, as the case may be, have been disposed of in accordance
with such effective Registration Statement, (ii) such Notes or such Private
Exchange Notes, as the case may be, are sold in compliance with Rule 144, (iii)
in the case of any Note, such Note has been exchanged for an Exchange Note or
Exchange Notes pursuant to an Exchange Offer or (iv) such
<PAGE> 6
-4-
Notes or such Private Exchange Notes, as the case may be, cease to be
outstanding.
Registration Default: See Section 4(a).
Registration Statement: Any registration statement of the
Company or the Guarantors, including, but not limited to, the Exchange
Registration Statement, which covers any of the Registrable Notes pursuant to
the provisions of this Agreement, including the Prospectus, amendments and
supplements to such registration statement, including post-effective amendments,
all exhibits, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.
Rule 144: Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 144A: Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
Rule 415: Rule 415 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC.
SEC: The Securities and Exchange Commission.
Securities Act: The Securities Act of 1933, as amended, and
the rules and regulations of the SEC promulgated thereunder.
Shelf Notice: See Section 2(c).
Shelf Registration: See Section 3(b).
Subsequent Shelf Registration: See Section 3(b).
<PAGE> 7
-5-
TIA: The Trust Indenture Act of 1939, as amended.
Trustee: The trustee under the Indenture and, if existent, the
trustee under any indenture governing the Exchange Notes and Private Exchange
Notes (if any).
Underwritten registration or underwritten offering: A
registration in which securities of the Company are sold to an underwriter(s)
for reoffering to the public.
2. Exchange Offer
(a) Each of the Company and the Guarantors jointly and
severally agrees to use its best efforts to file with the SEC as soon as
practicable after the Closing, but in no event later than the Filing Date, an
offer to exchange (the "Exchange Offer") any and all of the Registrable Notes
for a like aggregate principal amount of debt securities of the Company,
guaranteed by the Guarantors, which are identical to the Notes (the "Exchange
Notes") (and which are entitled to the benefits of the Indenture or a trust
indenture which is substantially identical to the Indenture (other than such
changes to the Indenture or any such identical trust indenture as are necessary
to comply with any requirements of the SEC to effect or maintain the
qualification thereof under the TIA) and which, in either case, has been
qualified under the TIA), except that the Exchange Notes shall have been
registered pursuant to an effective Registration Statement under the Securities
Act and will not contain terms with respect to transfer restrictions. The
Exchange Offer will be registered under the Securities Act on the appropriate
form (the "Exchange Registration Statement") and will comply with all applicable
tender offer rules and regulations under the Exchange Act. Each of the Company
and the Guarantors jointly and severally agrees to use its best efforts to (x)
cause the Exchange Registration Statement to become effective under the
Securities Act on or before the Effectiveness Date; (y) keep the Exchange Offer
open for at least 20 business days (or longer if required by applicable law)
after the date that notice of the Exchange Offer is mailed to Holders; and (z)
consummate the Exchange Offer on or prior to the 180th day following the Issue
Date. Each Holder who participates in the Exchange Offer will be required to
represent that any Exchange Notes received by it will be acquired in the
ordinary course of its business, that at the time of the consummation of the
Exchange Offer such Holder will have no arrangement or understanding with any
Person to participate in the distribution of the Exchange Notes, that such
Holder is not an affiliate of any of the Company or the Guarantors within the
meaning of Rule 405 promulgated under the Securities
<PAGE> 8
-6-
Act or if it is such an affiliate, that it will comply with the registration and
prospectus delivery requirements of the Securities Act, to the extent applicable
and that is not acting on behalf of any Person who could not truthfully make the
foregoing representations. Upon consummation of the Exchange Offer in accordance
with this Section 2, the provisions of this Agreement shall continue to apply,
solely with respect to Registrable Notes that are Private Exchange Notes and
Exchange Notes held by Participating Broker-Dealers, and the Company and the
Guarantors shall have no further obligation to register Registrable Notes (other
than Private Exchange Notes and Exchange Notes held by Participating
Broker-Dealers) pursuant to Section 3 of this Agreement.
(b) The Company and the Guarantors shall include within the
Prospectus contained in the Registration Statement a section entitled "Plan of
Distribution," reasonably acceptable to the Initial Purchasers, which shall
contain a summary statement of the positions taken or policies made by the staff
of the SEC with respect to the potential "underwriter" status of any
broker-dealer that is the beneficial owner (as defined in Rule 13d-3 promulgated
under the Exchange Act) of Exchange Notes received by such broker-dealer in the
Exchange Offer (a "Participating Broker-Dealer"), whether such positions or
policies have been publicly disseminated by the staff of the SEC or such
positions or policies represent the prevailing views of the staff of the SEC.
Such "Plan of Distribution" section shall also allow the use of the Prospectus
by all Persons subject to the prospectus delivery requirements of the Securities
Act, including all Participating Broker-Dealers, and include a statement
describing the means by which Participating Broker-Dealers may resell the
Exchange Notes.
Each of the Company and the Guarantors shall use its best
efforts to keep the Registration Statement effective and to amend and supplement
the Prospectus contained therein, in order to permit such Prospectus to be
lawfully delivered by all Persons subject to the prospectus delivery
requirements of the Securities Act for such period of time as such Persons must
comply with such requirements in order to resell the Exchange Notes; provided
that such period shall not exceed 180 days after consummation of the Exchange
Offer (or such longer period if extended pursuant to the last paragraph of
Section 5) (the "Applicable Period").
If, prior to consummation of the Exchange Offer, the Initial
Purchasers hold any Notes acquired by them and having, or which are reasonably
likely to be determined to have, the status as an unsold allotment in the
initial distribution, the Company
<PAGE> 9
-7-
and the Guarantors upon the request of the Initial Purchasers shall,
simultaneously with the delivery of the Exchange Notes in the Exchange Offer,
issue and deliver to the Initial Purchasers, in exchange (the "Private
Exchange") for the Notes held by the Initial Purchasers, a like principal amount
of debt securities of the Company guaranteed by the Guarantors, that are
identical in all material respects to the Exchange Notes except for the
existence of restrictions on transfer thereof under the Securities Act and
securities laws of the several states of the United States (the "Private
Exchange Notes") (and which are issued pursuant to the same indenture as the
Exchange Notes). The Private Exchange Notes shall bear the same CUSIP number as
the Exchange Notes. Interest on the Exchange Notes and Private Exchange Notes
will accrue from (i) the later of (A) the last interest payment date on which
interest was paid on the Notes surrendered in exchange therefor or (B) if the
Notes are surrendered for exchange on a date in a period which includes the
record date for an interest payment date to occur on or after the date of such
exchange and as to which interest will be paid, the date of such interest
payment date or (ii) if no interest has been paid on the Notes, from the Issue
Date.
In connection with the Exchange Offer, the Company and the
Guarantors shall:
(i) mail to each Holder a copy of the Prospectus forming
part of the Exchange Registration Statement, together with an
appropriate letter of transmittal and related documents;
(ii) utilize the services of a depositary for the Exchange
Offer with an address in the Borough of Manhattan, The City of New
York; and
(iii) permit Holders to withdraw tendered Notes at any time
prior to the close of business, New York time, on the last business day
on which the Exchange Offer shall remain open.
As soon as practicable after the close of the Exchange Offer
or the Private Exchange, as the case may be, the Company and the Guarantors
shall:
(i) accept for exchange all Registrable Notes tendered and
not validly withdrawn pursuant to the Exchange Offer or the Private
Exchange;
<PAGE> 10
-8-
(ii) deliver to the Trustee for cancellation all Registrable
Notes so accepted for exchange; and
(iii) cause the Trustee to authenticate and deliver promptly
to each Holder of Registrable Notes, Exchange Notes or Private Exchange
Notes, as the case may be, equal in principal amount to the Notes of
such Holder so accepted for exchange.
The Exchange Notes and the Private Exchange Notes may be
issued under (i) the Indenture or (ii) an indenture substantially identical to
the Indenture, which in either event will provide that the Exchange Notes will
not be subject to the transfer restrictions set forth in the Indenture and that
the Exchange Notes, the Private Exchange Notes and the Notes will vote and
consent together on all matters as one class and that none of the Exchange
Notes, the Private Exchange Notes or the Notes will have the right to vote or
consent as a separate class on any matter.
(c) If (1) prior to the consummation of the Exchange Offer,
the Company and the Guarantors or Holders of at least a majority in aggregate
principal amount of the Registrable Notes reasonably determine in good faith
that (i) the Exchange Notes would not, upon receipt, be tradeable by such
Holders which are not affiliates (within the meaning of the Securities Act) of
the Company or the Guarantors without restriction under the Securities Act and
without restrictions under applicable state securities laws, (ii) the interests
of the Holders under this Agreement would be materially and adversely affected
by the consummation of the Exchange Offer or (iii) after conferring with
counsel, the SEC is unlikely to permit the consummation of the Exchange Offer
prior to the Effectiveness Date, (2) subsequent to the consummation of the
Private Exchange, any holder of the Private Exchange Notes so requests or (3)
the Exchange Offer is commenced and not consummated within 180 days of the date
of this Agreement, then the Company and the Guarantors shall promptly deliver to
the Holders and the Trustee written notice thereof (the "Shelf Notice") and
shall file an Initial Shelf Registration pursuant to Section 3. Following the
delivery of a Shelf Notice to the Holders of Registrable Notes (in the
circumstances contemplated by clauses (1) and (3) of the preceding sentence),
the Company and the Guarantors shall not have any further obligation to conduct
the Exchange Offer or the Private Exchange under this Section 2.
<PAGE> 11
-9-
3. Shelf Registration
If a Shelf Notice is delivered as contemplated by Section
2(c), then:
(a) Initial Shelf Registration. The Company and the Guarantors
shall prepare and file with the SEC a Registration Statement for an offering to
be made on a continuous basis pursuant to Rule 415 covering all of the
Registrable Notes (the "Initial Shelf Registration"). If the Company or the
Guarantors shall have not yet filed a Registration Statement, each of the
Company and the Guarantors shall use its best efforts to file with the SEC the
Initial Shelf Registration on or prior to the Filing Date. In any other
instance, each of the Company and the Guarantors shall use its best efforts to
file with the SEC the Initial Shelf Registration within 30 days of the delivery
of the Shelf Notice. The Initial Shelf Registration shall be on Form S-1 or
another appropriate form permitting registration of such Registrable Notes for
resale by such Holders in the manner or manners designated by them (including,
without limitation, one or more underwritten offerings). The Company and the
Guarantors shall not permit any securities other than the Registrable Notes to
be included in the Initial Shelf Registration or any Subsequent Shelf
Registration. Each of the Company and the Guarantors shall use its best efforts
to cause the Initial Shelf Registration to be declared effective under the
Securities Act on or prior to the Effectiveness Date and to keep the Initial
Shelf Registration continuously effective under the Securities Act until the
date which is two years (or such shorter period as provided in Rule 144(k) under
the Securities Act) from the Issue Date (subject to extension pursuant to the
last paragraph of Section 5 hereof), or such shorter period ending when (i) all
Registrable Notes covered by the Initial Shelf Registration have been sold in
the manner set forth and as contemplated in the Initial Shelf Registration or
(ii) a Subsequent Shelf Registration covering all of the Registrable Notes has
been declared effective under the Securities Act (the "Effectiveness Period").
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period, each of the Company and the
Guarantors shall use its best efforts to obtain the prompt withdrawal of any
order suspending the effectiveness thereof, and in any event shall within 30
days of such cessation of effectiveness amend the Shelf Registration in a manner
reasonably expected to obtain the withdrawal of the order suspending the
effectiveness thereof, or file an additional
<PAGE> 12
-10-
"shelf" Registration Statement pursuant to Rule 415 covering all of the
Registrable Notes (a "Subsequent Shelf Registration"). If a Subsequent Shelf
Registration is filed, each of the Company and the Guarantors shall use its best
efforts to cause the Subsequent Shelf Registration to be declared effective as
soon as practicable after such filing and to keep such Registration Statement
continuously effective for a period equal to the number of days in the
Effectiveness Period less the aggregate number of days during which the Initial
Shelf Registration or any Subsequent Shelf Registration was previously
continuously effective. As used herein the term "Shelf Registration" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Company and the Guarantors
shall promptly supplement and amend the Shelf Registration if required by the
rules, regulations or instructions applicable to the registration form used for
such Shelf Registration, if required by the Securities Act, or if requested by
the Holders of a majority in aggregate principal amount of the Registrable Notes
covered by such Registration Statement or by any underwriter(s) of such
Registrable Notes.
4. Additional Interest
(a) The Company and the Initial Purchasers agree that the
Holders of Registrable Notes will suffer damages if the Company fails to fulfill
its obligations under Section 2 or Section 3 hereof and that it would not be
feasible to ascertain the extent of such damages with precision. Accordingly,
the Company agrees to pay additional interest on the Notes ("Additional
Interest") under the circumstances set forth below (each of which shall be given
independent effect):
(i) if the Exchange Registration Statement or the Initial
Shelf Registration has not been filed on or prior to the Filing Date;
(ii) if the Exchange Registration Statement or the Initial
Shelf Registration has not been declared effective on or prior to the
Effectiveness Date; and/or
(iii) if either (A) the Company has not exchanged the
Exchange Notes for all Notes validly tendered in accordance with the
terms of the Exchange Offer on or prior to 60 days after the Exchange
Registration Statement was declared effective or (B) the Exchange
Registration Statement ceases to be effective at any time prior to the
time that the
<PAGE> 13
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Exchange Offer is consummated or (C) if applicable, the Shelf
Registration has been declared effective and such Shelf Registration
ceases to be effective at any time during the Effectiveness Period;
(each such event referred to in clauses (i) through (iii) above is a
"Registration Default"), the sole remedy available to Holders of the Notes will
be the immediate accrual of Additional Interest as follows: the per annum
interest rate on the Notes will increase by .50% upon the occurrence of a
Registration Default; and the per annum interest rate will increase by an
additional .25% for each subsequent 90-day period during which the Registration
Default remains uncured, up to a maximum additional interest rate of 2% per
annum; provided, however, that (1) upon the filing of the Exchange Registration
Statement or the Initial Shelf Registration (in the case of (i) above), (2) upon
the effectiveness of the Exchange Registration Statement or a Shelf Registration
(in the case of (ii) above) or (3) upon the exchange of Exchange Notes for all
Notes tendered (in the case of (iii)(A) above), or upon the effectiveness of the
Exchange Registration Statement which had ceased to remain effective (in the
case of (iii)(B) above), or upon the effectiveness of the Shelf Registration
which had ceased to remain effective (in the case of (iii)(C) above), Additional
Interest on the Notes as a result of such clause (i), (ii) or (iii) (or the
relevant subclause thereof), as the case may be, shall cease to accrue and the
interest rate on the Notes will revert to the interest rate originally borne by
the Notes.
(b) Notwithstanding the foregoing, no Additional Interest will
be payable with respect to a Registration Default described in clause
(a)(iii)(C) above, if pending a material corporate transaction, the Company
issues a notice that the registration is unusable, or such notice is required
under applicable securities laws to be issued by the Company, and the number of
days in any consecutive twelve month period for which all such notices have been
issued or required to be issued has not exceeded 30 in the aggregate.
(c) The Company and the Guarantors shall notify the Trustee
within one business day after each and every date on which an event occurs in
respect of which Additional Interest is required to be paid (an "Event Date").
Any amounts of Additional Interest due pursuant to (a)(i), (a)(ii) or (a)(iii)
of this Section 4 will be payable in cash semi-annually on each June 15 and
December 15 to the Holders of record on the June 1 and December 1 immediately
preceding such dates), commencing with the first such date occurring after any
such Additional Interest
<PAGE> 14
-12-
commences to accrue, by depositing with the Trustee, in trust for the benefit of
such Holders, immediately available funds in sums sufficient to pay such
Additional Interest. The amount of Additional Interest will be determined by
multiplying the applicable Additional Interest rate by the principal amount of
the Registrable Notes, multiplied by a fraction, the numerator of which is the
number of days such Additional Interest rate was applicable during such period
(determined on the basis of a 360-day year comprised of twelve 30-day months),
and the denominator of which is 360.
5. Registration Procedures
In connection with the registration of any Registrable Notes
or Private Exchange Notes pursuant to Section 2 or 3 hereof, the Company and the
Guarantors shall effect such registrations to permit the sale of such
Registrable Notes or Private Exchange Notes in accordance with the intended
method or methods of disposition thereof, and pursuant thereto the Company and
the Guarantors shall:
(a) Prepare and file with the SEC, prior to the Filing Date, a
Registration Statement or Registration Statements as prescribed by
Section 2 or 3, and use their respective best efforts to cause each
such Registration Statement to become effective and remain effective as
provided herein; provided that, if (1) such filing is pursuant to
Section 3, or (2) a Prospectus contained in an Exchange Registration
Statement filed pursuant to Section 2 is required to be delivered under
the Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, before filing any
Registration Statement or Prospectus or any amendments or supplements
thereto, the Company and the Guarantors shall, if requested, furnish to
and afford the Holders of the Registrable Notes and each such
Participating Broker-Dealer, as the case may be, covered by such
Registration Statement, their counsel and the managing underwriter(s),
if any, a reasonable opportunity to review copies of all such documents
(including copies of any documents to be incorporated by reference
therein and all exhibits thereto) proposed to be filed (at least 5
business days prior to such filing). The Company and the Guarantors
shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto in respect of which the Holders must
be afforded an opportunity to review prior to the filing of such
document, if the Holders of a majority in aggregate principal amount of
the Registrable Notes covered by such Registration
<PAGE> 15
-13-
Statement, or such Participating Broker-Dealer, as the case may be,
their counsel, or the managing underwriter(s), if any, shall reasonably
object.
(b) Prepare and file with the SEC such amendments and
post-effective amendments to each Shelf Registration or Registration
Statement, as the case may be, as may be necessary to keep such
Registration Statement continuously effective for the Effectiveness
Period or the Applicable Period, as the case may be; cause the related
Prospectus to be supplemented by any prospectus supplement required by
applicable law, and as so supplemented to be filed pursuant to Rule 424
(or any similar provisions then in force) under the Securities Act; and
comply with the provisions of the Securities Act, the Exchange Act and
the rules and regulations of the SEC promulgated thereunder applicable
to them with respect to the disposition of all securities covered by
such Registration Statement as so amended or in such Prospectus as so
supplemented and with respect to the subsequent resale of any
securities being sold by a Participating Broker-Dealer covered by any
such Prospectus; the Company and the Guarantors shall be deemed not to
have used their best efforts to keep a Registration Statement effective
during the Applicable Period if any of them voluntarily takes any
action that would result in selling Holders of the Registrable Notes
covered thereby or Participating Broker- Dealers seeking to sell
Exchange Notes not being able to sell such Registrable Notes or such
Exchange Notes during that period unless such action is required by
applicable law or unless the Company and the Guarantors comply with
this Agreement, including without limitation, the provisions of clause
5(c)(v) below.
(c) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, notify the selling Holders
of Registrable Notes, or each such Participating Broker-Dealer, as the
case may be, their counsel and the managing underwriter(s), if any,
promptly (but in any event within two business days), and confirm such
notice in writing, (i) when a Prospectus or any prospectus supplement
or post-effective amendment thereto has been filed, and, with respect
to a Registration Statement or any post-effective amendment thereto,
when the same has become effective (including in such notice a written
statement that any Holder may, upon
<PAGE> 16
-14-
request, obtain, without charge, one conformed copy of such
Registration Statement or post-effective amendment thereto including
financial statements and schedules, documents incorporated or deemed to
be incorporated by reference and exhibits), (ii) of the issuance by the
SEC of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any
preliminary Prospectus or the initiation of any proceedings for that
purpose, (iii) if at any time when a Prospectus is required by the
Securities Act to be delivered in connection with sales of the
Registrable Notes the representations and warranties of the Company
contained in any agreement (including any underwriting agreement)
contemplated by Section 5(n) below cease to be true and correct, (iv)
of the receipt by any of the Company or the Guarantors of any
notification with respect to the suspension of the qualification or
exemption from qualification of a Registration Statement or any of the
Registrable Notes or the Exchange Notes to be sold by any Participating
Broker-Dealer for offer or sale in any jurisdiction, or the initiation
or threatening of any proceeding for such purpose, (v) of the happening
of any event or any information becoming known that makes any statement
made in such Registration Statement or related Prospectus or any
document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any
changes in, or amendments or supplements to, such Registration
Statement, Prospectus or documents so that, in the case of the
Registration Statement, it 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, and
that in the case of the Prospectus, it 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, in the light of the circumstances under which they were made,
not misleading, and (vi) of the Company's or any Guarantor's reasonable
determination that a post-effective amendment to a Registration
Statement would be appropriate.
(d) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, use their best efforts to
prevent the issuance of any order suspending the effectiveness of a
Registration Statement or of any order preventing
<PAGE> 17
-15-
or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Notes or
the Exchange Notes to be sold by any Participating Broker-Dealer, for
sale in any jurisdiction, and, if any such order is issued, to use
their best efforts to obtain the withdrawal of any such order at the
earliest possible moment.
(e) If a Shelf Registration is filed pursuant to Section 3 and
if requested by the managing underwriter(s), if any, or the Holders of
a majority in aggregate principal amount of the Registrable Notes being
sold in connection with an underwritten offering, (i) promptly
incorporate in a Prospectus supplement or post-effective amendment
thereto such information as the managing underwriter(s), if any, or
such Holders reasonably request to be included therein, (ii) make all
required filings of such Prospectus supplement or such post-effective
amendment thereto as soon as practicable after the Company has received
notification of the matters to be incorporated in such Prospectus
supplement or post-effective amendment thereto and (iii) supplement or
make amendments to such Registration Statement.
(f) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, furnish to each selling
Holder of Registrable Notes who so requests and to each such
Participating Broker-Dealer who so requests and to counsel and the
managing underwriter(s), if any, without charge, one conformed copy of
the Registration Statement or Registration Statements and each
post-effective amendment thereto, including financial statements and
schedules, and, if requested, all documents incorporated or deemed to
be incorporated therein by reference and all exhibits.
(g) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, deliver to each selling
Holder of Registrable Notes, or each such Participating Broker- Dealer,
as the case may be, their counsel, and the managing underwriter or
underwriters, if any, without charge, as many copies of the Prospectus
or Prospectuses (including each
<PAGE> 18
-16-
form of preliminary Prospectus) and each amendment or supplement
thereto and any documents incorporated by reference therein as such
Persons may reasonably request; and, subject to the last paragraph of
this Section 5, each of the Company and the Guarantors hereby consents
to the use of such Prospectus and each amendment or supplement thereto
by each of the selling Holders of Registrable Notes or each such
Participating Broker-Dealer, as the case may be, and the managing
underwriter or underwriters or agents, if any, and dealers (if any), in
connection with the offering and sale of the Registrable Notes covered
by or the sale by Participating Broker-Dealers of the Exchange Notes
pursuant to such Prospectus and any amendment or supplement thereto.
(h) Prior to any public offering of Registrable Notes or any
delivery of a Prospectus contained in the Exchange Registration
Statement by any Participating Broker-Dealer who seeks to sell Exchange
Notes during the Applicable Period, to use its best efforts to register
or qualify, and to cooperate with the selling Holders of Registrable
Notes or each such Participating Broker-Dealer, as the case may be, the
managing underwriter or underwriters, if any, and their respective
counsel in connection with the registration or qualification (or
exemption from such registration or qualification) of such Registrable
Notes for offer and sale under the securities or Blue Sky laws of such
jurisdictions within the United States as any selling Holder,
Participating Broker-Dealer, or the managing underwriter or
underwriters, if any, reasonably request in writing; provided that
where Exchange Notes held by Participating Broker-Dealers or
Registrable Notes are offered other than through an underwritten
offering, the Company and the Guarantors agree to cause their counsel
to perform Blue Sky investigations and file registrations and
qualifications required to be filed pursuant to this Section 5(h); keep
each such registration or qualification (or exemption therefrom)
effective during the period such Registration Statement is required to
be kept effective and do any and all other acts or things reasonably
necessary or advisable to enable the disposition in such jurisdictions
of the Exchange Notes held by Participating Broker-Dealers or the
Registrable Notes covered by the applicable Registration Statement;
provided that none of the Company or the Guarantors shall be required
to (A) qualify generally to do business in any jurisdiction where it is
not then so qualified, (B) take any action that would subject it to
general service of process in any such jurisdiction where it is not
then so subject or (C) subject
<PAGE> 19
-17-
itself to taxation in excess of a nominal dollar amount in
any such jurisdiction.
(i) If a Shelf Registration is filed pursuant to Section 3,
cooperate with the selling Holders of Registrable Notes and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Notes
to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with The Depository Trust
Company; and enable such Registrable Notes to be in such denominations
and registered in such names as the managing underwriter or
underwriters, if any, or Holders may reasonably request.
(j) Use their best efforts to cause the Registrable Notes
covered by the Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof or the managing underwriter or
underwriters, if any, to consummate the disposition of such Registrable
Notes, except as may be required solely as a consequence of the nature
of such selling Holder's business, in which case each of the Company
and the Guarantors will cooperate in all reasonable respects with the
filing of such Registration Statement and the granting of such
approvals.
(k) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, upon the occurrence of any
event contemplated by paragraph 5(c)(v) or 5(c)(vi) above, as promptly
as reasonably practicable prepare and (subject to Section 5(a) above)
file with the SEC, at the joint and several expense of each of the
Company and the Guarantors, a supplement or post-effective amendment to
the Registration Statement or a supplement to the related Prospectus or
any document incorporated or deemed to be incorporated therein by
reference, or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Notes being sold
thereunder or to the purchasers of the Exchange Notes to whom such
Prospectus will be delivered by a Participating Broker-Dealer, any such
Prospectus 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
<PAGE> 20
-18-
the circumstances under which they were made, not misleading.
(l) Use their best efforts to cause the Registrable Notes
covered by a Registration Statement or the Exchange Notes, as the case
may be, to be rated with the appropriate rating agencies, if so
requested by the Holders of a majority in aggregate principal amount of
Registrable Notes covered by such Registration Statement or the
Exchange Notes, as the case may be, or the managing underwriter or
underwriters, if any.
(m) Prior to the effective date of the first Registration
Statement relating to the Registrable Notes, (i) provide the Trustee
with printed certificates for the Registrable Notes in a form eligible
for deposit with The Depository Trust Company and (ii) provide a CUSIP
number for the Registrable Notes.
(n) In connection with an underwritten offering of Registrable
Notes pursuant to a Shelf Registration, enter into an underwriting
agreement as is customary in underwritten offerings of debt securities
similar to the Notes and take all such other actions as are reasonably
requested by the managing underwriter(s), if any, in order to expedite
or facilitate the registration or the disposition of such Registrable
Notes, and in such connection, (i) make such representations and
warranties to the managing underwriter or underwriters on behalf of any
underwriters, with respect to the business of the Company and its
subsidiaries and the Registration Statement, Prospectus and documents,
if any, incorporated or deemed to be incorporated by reference therein,
in each case, as are customarily made by issuers to underwriters in
underwritten offerings of debt securities, and confirm the same if and
when requested; (ii) obtain opinions of counsel to the Company and the
Guarantors and updates thereof in form and substance reasonably
satisfactory to the managing underwriter or underwriters, addressed to
the managing underwriter or underwriters covering the matters
customarily covered in opinions requested in underwritten offerings of
debt securities and such other matters as may be reasonably requested
by underwriters; (iii) obtain "cold comfort" letters and updates
thereof in form and substance reasonably satisfactory to the managing
underwriter or underwriters from the independent certified public
accountants of the Company and the Guarantors (and, if necessary, any
other independent certified public accountants of any subsidiary
<PAGE> 21
-19-
of any of the Company or of any business acquired by any of the Company
or the Guarantors for which financial statements and financial data
are, or are required to be, included in the Registration Statement),
addressed to the managing underwriter or underwriters on behalf of any
underwriters, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters in connection
with underwritten offerings of debt securities and such other matters
as may be reasonably requested by the managing underwriter or
underwriters; and (iv) if an underwriting agreement is entered into,
the same shall contain indemnification provisions and procedures no
less favorable than those set forth in Section 7 hereof (or such other
provisions and procedures acceptable to Holders of a majority in
aggregate principal amount of Registrable Notes covered by such
Registration Statement and the managing underwriter or underwriters or
agents) with respect to all parties to be indemnified pursuant to said
Section. The above shall be done at each closing under such
underwriting agreement, or as and to the extent required thereunder.
(o) If (1) a Shelf Registration is filed pursuant to Section
3, or (2) a Prospectus contained in an Exchange Registration Statement
filed pursuant to Section 2 is required to be delivered under the
Securities Act by any Participating Broker-Dealer who seeks to sell
Exchange Notes during the Applicable Period, make available for
inspection by any selling Holder of such Registrable Notes being sold,
or each such Participating Broker-Dealer, as the case may be, the
managing underwriter or underwriters participating in any such
disposition of Registrable Notes, if any, and any attorney, accountant
or other agent retained by any such selling Holder or each such
Participating Broker-Dealer, as the case may be (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate
documents and properties of the Company and the Guarantors and their
respective subsidiaries (collectively, the "Records") as shall be
reasonably necessary to enable them to exercise any applicable due
diligence responsibilities, and cause the officers, directors and
employees of the Company and the Guarantors and their respective
subsidiaries to supply all information in each case reasonably
requested by any such Inspector in connection with such Registration
Statement. Records which the Company and the Guarantors determine, in
good faith, to be confidential and any Records which they notify the
Inspectors are confidential shall not be disclosed by the Inspectors
unless (i) the disclosure of
<PAGE> 22
-20-
such Records is necessary to avoid or correct a material misstatement
or material omission in such Registration Statement, (ii) the release
of such Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction or (iii) the information in such
Records has been made generally available to the public. Each selling
Holder of such Registrable Notes and each such Participating
Broker-Dealer or underwriter will be required to agree that information
obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company unless and until such is
made generally available to the public. Each selling Holder of such
Registrable Notes and each such Participating Broker-Dealer will be
required to further agree that it will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give
notice to the Company and allow the Company to undertake appropriate
action to prevent disclosure of the Records deemed confidential at the
Company's expense.
(p) Provide an indenture trustee for the Registrable Notes or
the Exchange Notes, as the case may be, and cause the Indenture or the
trust indenture provided for in Section 2(a), as the case may be, to be
qualified under the TIA not later than the effective date of the
Exchange Offer Registration Statement or the first Registration
Statement relating to the Registrable Notes; and in connection
therewith, cooperate with the trustee under any such indenture and the
Holders of the Registrable Notes, to effect such changes to such
indenture as may be required for such indenture to be so qualified in
accordance with the terms of the TIA; and execute, and use its best
efforts to cause such trustee to execute, all documents as may be
required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable such indenture to be so
qualified in a timely manner.
(q) Comply with all applicable rules and regulations of the
SEC and make generally available to its securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder (or any similar rule promulgated under the
Securities Act) no later than 45 days after the end of any 12-month
period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in
which Registrable Notes are sold to underwriters in a firm commitment
or best efforts underwritten
<PAGE> 23
-21-
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of the Company
after the effective date of a Registration Statement, which statements
shall cover said 12-month periods.
(r) Upon consummation of an Exchange Offer or a Private
Exchange, obtain an opinion of counsel to the Company and the
Guarantors, in a form customary for underwritten offerings of debt
securities similar to the Notes, addressed to the Trustee for the
benefit of all Holders of Registrable Notes participating in the
Exchange Offer or the Private Exchange, as the case may be, and which
includes an opinion that (i) each of the Company and the Guarantors has
duly authorized, executed and delivered the Exchange Notes and Private
Exchange Notes and the related indenture and (ii) each of the Exchange
Notes or the Private Exchange Notes, as the case may be, and related
indenture constitute a legal, valid and binding obligation of each of
the Company and the Guarantors, enforceable against each of the Company
and the Guarantors in accordance with its respective terms (with
customary exceptions).
(s) If an Exchange Offer or a Private Exchange is to be
consummated, upon delivery of the Registrable Notes by Holders to the
Company and the Guarantors (or to such other Person as directed by the
Company and the Guarantors) in exchange for the Exchange Notes or the
Private Exchange Notes, as the case may be, the Company and the
Guarantors shall mark, or cause to be marked, on such Registrable Notes
that such Registrable Notes are being cancelled in exchange for the
Exchange Notes or the Private Exchange Notes, as the case may be; and,
in no event shall such Registrable Notes be marked as paid or otherwise
satisfied.
(t) Cooperate with each seller of Registrable Notes covered by
any Registration Statement and the managing underwriter(s), if any,
participating in the disposition of such Registrable Notes and their
respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc. (the "NASD").
(u) Use their respective best efforts to take all other steps
necessary to effect the registration of the Registrable Notes covered
by a Registration Statement contemplated hereby.
<PAGE> 24
-22-
The Company and the Guarantors may require each seller of
Registrable Notes or Participating Broker-Dealer as to which any registration is
being effected to furnish to the Company and the Guarantors such information
regarding such seller or Participating Broker-Dealer and the distribution of
such Registrable Notes or Exchange Notes to be sold by such Participating
Broker-Dealer, as the case may be, as the Company and the Guarantors may, from
time to time, reasonably request. The Company may exclude from such registration
the Registrable Notes of any seller or Participating Broker-Dealer who
unreasonably fails to furnish such information within a reasonable time after
receiving such request.
Each Holder of Registrable Notes and each Participating
Broker-Dealer agrees by acquisition of such Registrable Notes or Exchange Notes
to be sold by such Participating Broker-Dealer, as the case may be, that, upon
receipt of any notice from the Company of the happening of any event of the kind
described in Section 5(c)(ii), 5(c)(iv), 5(c)(v), or 5(c)(vi), such Holder will
forthwith discontinue disposition of such Registrable Notes covered by such
Registration Statement or Prospectus or Exchange Notes to be sold by such Holder
or Participating Broker-Dealer, as the case may be, until such Holder's receipt
of the copies of the supplemented or amended Prospectus contemplated by Section
5(k), or until it is advised in writing (the "Advice") by the Company that the
use of the applicable Prospectus may be resumed, and has received copies of any
amendments or supplements thereto. In the event the Company shall give any such
notice, each of the Effectiveness Period and the Applicable Period shall be
extended by the number of days during such periods from and including the date
of the giving of such notice to and including the date when each seller of
Registrable Notes covered by such Registration Statement or Exchange Notes to be
sold by such Holder or Participating Broker-Dealer, as the case may be, shall
have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 5(k) or (y) the Advice.
6. Registration Expenses
(a) All fees and expenses incident to the performance of or
compliance with this Agreement by the Company and the Guarantors, other than any
underwriting discounts and commissions or any broker fees or commissions, shall
be borne by the Company and the Guarantors, jointly and severally, whether or
not the Exchange Offer or a Shelf Registration is filed or becomes effective,
including, without limitation, (i) all registration and filing fees (including,
without limitation, (A) fees with respect to filings required to be made with
the NASD in connec-
<PAGE> 25
-23-
tion with an underwritten offering and (B) fees and expenses of compliance with
state securities or Blue Sky laws (including, without limitation, reasonable
fees and disbursements of counsel in connection with Blue Sky qualifications of
the Registrable Notes or Exchange Notes and determination of the eligibility of
the Registrable Notes or Exchange Notes for investment under the laws of such
jurisdictions in the United States (x) where the Holders of Registrable Notes
are located, in the case of the Exchange Notes, or (y) as provided in Section
5(h), in the case of Registrable Notes or Exchange Notes to be sold by a
Participating Broker-Dealer during the Applicable Period)), (ii) printing
expenses (including, without limitation, expenses of printing certificates for
Registrable Notes or Exchange Notes in a form eligible for deposit with The
Depository Trust Company and of printing Prospectuses if the printing of
Prospectuses is reasonably requested by the managing underwriter or
underwriters, if any, or, in respect of Registrable Notes or Exchange Notes to
be sold by any Participating Broker-Dealer during the Applicable Period, by the
Holders of a majority in aggregate principal amount of the Registrable Notes
included in any Registration Statement or of such Exchange Notes, as the case
may be), (iii) messenger, telephone and delivery expenses, (iv) fees and
disbursements of counsel for the Company and fees and disbursements of special
counsel for the sellers of Registrable Notes (subject to the provisions of
Section 6(b)), (v) fees and disbursements of all independent certified public
accountants referred to in Section 5(n)(iii) (including, without limitation, the
expenses of any special audit and "cold comfort" letters required by or incident
to such performance), (vi) rating agency fees, (vii) Securities Act liability
insurance, if the Company desire such insurance, (viii) fees and expenses of the
Trustee, (ix) fees and expenses of all other Persons retained by the Company,
(x) internal expenses of the Company and the Guarantors (including, without
limitation, all salaries and expenses of officers and employees of the Company
and the Guarantors performing legal or accounting duties), (xi) the expense of
any annual audit, (xii) the fees and expenses incurred in connection with any
listing of the securities to be registered on any securities exchange and (xiii)
the expenses relating to printing, word processing and distributing all
Registration Statements, underwriting agreements, securities sales agreements,
indentures and any other documents necessary in order to comply with this
Agreement.
(b) In connection with any Shelf Registration hereunder, the
Company and the Guarantors, jointly and severally, shall reimburse the Holders
of the Registrable Notes being registered in such registration for the
reasonable fees and disbursements of
<PAGE> 26
-24-
not more than one counsel (in addition to appropriate local counsel) chosen by
the Holders of a majority in aggregate principal amount of the Registrable Notes
to be included in such Registration Statement and other reasonable out-of-pocket
expenses of the Holders of Registrable Notes incurred in connection with the
registration of the Registrable Notes.
7. Indemnification
(a) Each of the Company and the Guarantors, jointly and
severally, agrees to indemnify and hold harmless each Holder of Registrable
Notes and each Participating Broker-Dealer selling Exchange Notes during the
Applicable Period, the officers and directors of each such Person, and each
Person, if any, who controls any such Person within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act (each, a
"Participant"), from and against any and all losses, claims, damages and
liabilities (including, without limitation, the reasonable legal fees and other
expenses actually incurred in connection with any suit, action or proceeding or
any claim asserted) caused by, arising out of or based upon any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) or any preliminary Prospectus,
or caused by, arising out of or based upon any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
relating to any Participant furnished to the Company in writing by such
Participant expressly for use therein; provided that the foregoing indemnity
with respect to any preliminary Prospectus shall not inure to the benefit of any
Participant (or to the benefit of any Person controlling such Participant) from
whom the Person asserting any such losses, claims, damages or liabilities
purchased Registrable Notes or Exchange Notes if such untrue statement or
omission or alleged untrue statement or omission made in such preliminary
Prospectus is eliminated or remedied in the related Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) and a copy of the related Prospectus (as so amended or supplemented)
shall have been furnished to such Participant at or prior to the sale of such
Registrable Notes or Exchange Notes, as the case may be, to such Person.
<PAGE> 27
-25-
(b) Each Participant will be required to agree, severally and
not jointly, to indemnify and hold harmless the Company and the Guarantors,
their respective directors and officers and each Person who controls any of the
Company or the Guarantors within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act to the same extent as the foregoing indemnity
from the Company and the Guarantors to each Participant and shall have the
rights and duties given to the Company and the Guarantors in paragraph (c) of
this Section 7 (except that if the Company and the Guarantors shall have assumed
the defense thereof, such Participant shall not be required to do so, but may
employ separate counsel therein and participate in the defense thereof but the
fees and expenses of such counsel shall be at the expense of such holder), but
only with reference to information relating to such Participant furnished to the
Company and the Guarantors in writing by such Participant expressly for use in
any Registration Statement or Prospectus, any amendment or supplement thereto,
or any preliminary Prospectus. The liability of any Participant under this
paragraph (b) shall in no event exceed the proceeds received by such Participant
from sales of Registrable Notes giving rise to such obligations.
(c) If any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be brought or
asserted against any Person in respect of which indemnity may be sought pursuant
to either paragraph (a) or (b) of this Section 7, such Person (the "Indemnified
Person") shall promptly notify the Person against whom such indemnity may be
sought (the "Indemnifying Person") in writing, and the Indemnifying Person, upon
request of the Indemnified Person, shall retain one counsel reasonably
satisfactory to the Indemnified Person to represent the Indemnified Person and
any others the Indemnifying Person may reasonably designate in such proceeding
and shall pay the reasonable fees and expenses incurred by such counsel related
to such proceeding; provided that the failure to so notify the Indemnifying
Persons shall not relieve any of them of any obligation or liability which any
of them may have hereunder or otherwise except to the extent it is materially
prejudiced by such failure. In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed in
writing to the contrary, (ii) the Indemnifying Person has failed within a
reasonable time to retain counsel reasonably satisfactory to the Indemnified
Person or (iii) the named parties in any such proceeding (including any
impleaded parties) include both the
<PAGE> 28
-26-
Indemnifying Person and the Indemnified Person and such Indemnified Person shall
have been advised by counsel that there may be one or more legal defenses
available to it which are different from or additional to those available to any
such Indemnifying Person. It is understood that the Indemnifying Person shall
not, in connection with any proceeding or related proceeding in the same
jurisdiction, be liable for the fees and expenses of more than one separate law
firm (in addition to any local counsel) for all Indemnified Persons, and that
all such fees and expenses shall be reimbursed as they are incurred. Any such
separate firm for the Participants and such control Persons of Participants
shall be designated in writing by Participants who sold a majority in interest
of Registrable Notes sold by all such Participants and any such separate firm
for the Company and the Guarantors, their directors, their officers and such
control Persons of the Company and the Guarantors shall be designated in writing
by the Company. The Indemnifying Person shall not be liable for any settlement
of any proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Indemnifying
Person agrees to indemnify any Indemnified Person from and against any loss or
liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have requested an
Indemnifying Person to reimburse the Indemnified Person for reasonable fees and
expenses incurred by counsel as contemplated by the third sentence of this
paragraph, the Indemnifying Person agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i) such
settlement is entered into more than 30 days after receipt by such Indemnifying
Person of the aforesaid request and (ii) such Indemnifying Person shall not have
reimbursed the Indemnified Person in accordance with such request prior to the
date of such settlement; provided, however, that the Indemnifying Person shall
not be liable for any settlement effected without its consent pursuant to this
sentence if the Indemnifying Party is contesting, in good faith, the request for
reimbursement. No Indemnifying Person shall, without the prior written consent
of the Indemnified Person, effect any settlement of any pending or threatened
proceeding in respect of which any Indemnified Person is or could have been a
party and indemnity could have been sought hereunder by such Indemnified Person,
unless such settlement includes an unconditional release of such Indemnified
Person from all liability on claims that are the subject matter of such
proceeding.
(d) If the indemnification provided for in paragraphs (a) and
(b) of this Section 7 is unavailable to an Indemnified Person in respect of any
losses, claims, damages or liabilities
<PAGE> 29
-27-
referred to therein, then each Indemnifying Person under such paragraphs, in
lieu of indemnifying such Indemnified Person thereunder, shall contribute to the
amount paid or payable by such Indemnified Person as a result of such losses,
claims, damages or liabilities in such proportion as is appropriate to reflect
the relative fault of the Company and the Guarantors on the one hand and the
Participants on the other in connection with the statements or omissions that
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company and the
Guarantors on the one hand and the Participants on the other 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 Company and the Guarantors
or by the Participants and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
(e) The parties agree that it would not be just and equitable
if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the Participants were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 7, in no event shall a
Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Notes or
Exchange Notes exceeds the amount of any damages that such Participant has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
(f) The indemnity and contribution agreements contained in
this Section 7 will be in addition to any liability which the Indemnifying
Persons may otherwise have to the Indemnified Persons referred to above.
<PAGE> 30
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8. Rules 144 and 144A
Each of the Company and the Guarantors covenants that it will
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the SEC thereunder in a
timely manner and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder of Registrable Notes, make
publicly available other information of a like nature so long as necessary to
permit sales pursuant to Rule 144 or Rule 144A. Each of the Company and the
Guarantors further covenants that so long as any Registrable Notes remain
outstanding to make available to any Holder of Registrable Notes in connection
with any sale thereof, the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales of such Registrable Notes pursuant to
(a) such Rule 144A, or (b) any similar rule or regulation hereafter adopted by
the SEC.
9. Underwritten Registrations
If any of the Registrable Notes covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Holders of a majority in aggregate principal amount of such
Registrable Notes included in such offering and shall be reasonably acceptable
to the Company and the Guarantors.
No Holder of Registrable Notes may participate in any
underwritten registration hereunder unless such Holder (a) agrees to sell such
Holder's Registrable Notes on the basis provided in any underwriting
arrangements approved by the Persons entitled hereunder to approve such
arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
10. Miscellaneous
(a) Remedies. In the event of a breach by the Company or any
Guarantor of any of its obligations under this Agreement, each Holder of
Registrable Notes, in addition to being entitled to exercise all rights provided
herein, in the Indenture or, in the case of the Initial Purchasers, in the
Purchase Agreement or granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Agreement. Each of the
Company and the Guarantors jointly and severally agrees that monetary damages
would not be adequate compensation for any
<PAGE> 31
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loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees, jointly and severally, that, in the event
of any action for specific performance in respect of such breach, it shall waive
the defense that a remedy at law would be adequate.
(b) Enforcement. The Trustee shall be authorized to enforce
the provisions of this Agreement for the ratable benefit of the Holders.
(c) No Inconsistent Agreements. None of the Company or the
Guarantors has, as of the date hereof, and the Company and the Guarantors shall
not, after the date of this Agreement, enter into any agreement with respect to
any of its securities that is inconsistent with the rights granted to the
Holders of Registrable Notes in this Agreement or otherwise conflicts with the
provisions hereof. None of the Company or the Guarantors has entered or will
enter into any agreement with respect to any of its securities which will grant
to any Person piggy-back rights with respect to a Registration Statement.
(d) Adjustments Affecting Registrable Notes. Neither the
Company nor the Guarantors shall, directly or indirectly, take any action with
respect to the Registrable Notes as a class that would adversely affect the
ability of the Holders of Registrable Notes to include such Registrable Notes
in a registration undertaken pursuant to this Agreement.
(e) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, unless the Company and the Guarantors have obtained the
written consent of Holders of at least a majority of the then outstanding
aggregate principal amount of Registrable Notes. Notwithstanding the foregoing,
a waiver or consent to depart from the provisions hereof with respect to a
matter that relates exclusively to the rights of Holders of Registrable Notes
whose securities are being sold pursuant to a Registration Statement and that
does not directly or indirectly affect, impair, limit or compromise the rights
of other Holders of Registrable Notes may be given by Holders of at least a
majority in aggregate principal amount of the Registrable Notes being sold by
such Holders pursuant to such Registration Statement; provided that the
provisions of this sentence may not be amended, modified or supplemented except
in accordance with the provisions of the immediately preceding sentence.
<PAGE> 32
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(f) Notices. All notices and other communications (including
without limitation any notices or other communications to the Trustee) provided
for or permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, next-day air courier or telecopier:
(i) if to a Holder of Registrable Notes, at the most current
address given by the Trustee to the Company; and
(ii) if to the Company or the Guarantors, 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 LLP, 191 Peachtree Street NE, 16th Floor,
Atlanta, Georgia 30303, Attention: William B. Shearer, Esq.
All such notices and communications shall be deemed to have
been duly given: (i) when delivered by hand, if personally delivered; (ii) five
business days after being deposited in the mail, postage prepaid, if mailed;
(iii) one business day after being timely delivered to a next-day air courier;
and (iv) when receipt is acknowledged by the addressee, if telecopied.
Copies of all such notices, demands or other communications
shall be concurrently delivered by the Person giving the same to the Trustee
under the Indenture at the address specified in such Indenture.
(g) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties, including without limitation and without the need for an express
assignment, subsequent Holders of Registrable Notes.
(h) Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(i) Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(j) GOVERNING LAW. THIS AGREEMENT 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.
<PAGE> 33
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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 AGREEMENT.
(k) Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction.
(l) Entire Agreement. This Agreement, together with the
Purchase Agreement and the Indenture, is intended by the parties as a final
expression of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein.
(m) Joint and Several Obligations. Unless otherwise stated
herein, each of the obligations of the Company and the Guarantors under this
Agreement shall be joint and several obligations of each of them.
(n) Notes Held by the Company, the Guarantors or their
Affiliates. Whenever the consent or approval of Holders of a specified
percentage of Registrable Notes is required hereunder, Registrable Notes held by
the Company, the Guarantors or their affiliates (as such term is defined in Rule
405 under the Securities Act) shall not be counted in determining whether such
consent or approval was given by the Holders of such required percentage.
<PAGE> 34
S-1
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
OUTDOOR SYSTEMS, INC.
By: /s/ William S. Levine
-----------------------------
Name: William S. Levine
Title: Chairman
Guarantors:
OUTDOOR SYSTEMS PAINTING, INC.
By: /s/ William S. Levine
-----------------------------
Name: William S. Levine
Title: Chairman
OS ADVERTISING OF TEXAS PAINTING, INC.
By: /s/ William S. Levine
-----------------------------
Name: William S. Levine
Title: Chairman
OS BASELINE, INC.
By: /s/ William S. Levine
-----------------------------
Name: William S. Levine
Title: Chairman
DECADE COMMUNICATIONS GROUP, INC.
By: /s/ William S. Levine
-----------------------------
Name: William S. Levine
Title: Chairman
<PAGE> 35
S-2
BENCH ADVERTISING COMPANY
OF COLORADO, INC.
By: /s/ William S. Levine
-----------------------------
Name: William S. Levine
Title: Chairman
NEW YORK SUBWAYS ADVERTISING CO., INC.
By: /s/ William S. Levine
-----------------------------
Name: William S. Levine
Title: Chairman
OS BUS, INC.
By: /s/ William S. Levine
-----------------------------
Name: William S. Levine
Title: Chairman
OUTDOOR SYSTEMS (NEW YORK), INC.
By: /s/ William S. Levine
-----------------------------
Name: William S. Levine
Title: Chairman
The foregoing Agreement is hereby
conformed and accepted as of the date
first above written.
CIBC WOOD GUNDY SECURITIES CORP.
By: /s/ Neal Thomas
-----------------------------
Name: Neal Thomas
Title: Managing Director
<PAGE> 36
S-3
ALEX. BROWN & SONS INCORPORATED
By: /s/ Charles J. Carey
-----------------------------
Name: Charles J. Carey
Title: Vice President
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By: /s/ Michael J. Connelly
-----------------------------
Name: Michael J. Connelly
Title: Managing Director
